Power contract keeps third-party solar out of reach

Published January 29, 2021 by Tim Thornton

Rocky Mount Town Manager James Ervin leads negotiations with Appalachian Power on behalf of several local governments. Photo by Natalee Waters

More than 40 years ago, local governments in Appalachian Power’s service area banded together to negotiate rates. Now, Rocky Mount Town Manager James Ervin, chair of the steering committee that leads negotiations, says that’s worked out well. “We pay a rate that is considerably less than a comparable private sector business,” he says.

But there can be complications.

Last year, the General Assembly passed the Virginia Clean Economy Act, which allows Appalachian Power customers to pursue third-party power purchase agreements and limits third-party power generation to 40 megawatts.

However, a contract the local governments signed in 2016 prohibits third-party agreements and restricts the entire region to generating 4 megawatts. That contract expired in June 2020, but the parties are bound by it until they sign a replacement, which will likely be delayed until Appalachian Power resolves a dispute with the State Corporation Commission over a proposed rate increase. Appalachian Power has said it intends to appeal the SCC rejection to the Virginia Supreme Court.

Power generation wasn’t a hot topic in 2016, Ervin says. But now, he says, “It’s the perfect harmony of fiscal conservatism and environmental stewardship. You can save money and you can lower your carbon footprint, so it’s sort of a universal thing that they want to do.”

Even school boards in the coalfield counties of Wise and Tazewell passed a resolution supporting a new agreement that would accommodate solar power generation. One attraction is the possibility of a third party absorbing up-front costs for solar installation.

“At this time, schools cannot partner with anyone and would have to foot the bill for the entire cost of anything related to the transition to full or partial solar energy,” says Tazewell County Schools Superintendent Christopher Stacy. “We are not in the process of looking to move to solar energy. We would just like the ability if we ever decide to go in that direction.”

The complication on Appalachian Power’s side is that if customers generate more of their own electricity, they’ll buy less from the utility. “The major issue is how to keep rates low for the collective group, while accommodating more solar-generated electricity,” says Appalachian Power spokesperson Teresa Hamilton Hall.

Ervin expects the cost impact to be small.

“The rates we have now versus the rates we’re likely to get, they’re not going to be drastically different,” he says. “That’s the goal of a regulated utility market.”