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LIPA weighing a 'solar tax' on new home installations

Future home-solar energy customers across Long island could face a new charge on their electric bills of from $5 to $9 a month if LIPA adopts a charge handed down by the Public Service Commission for the rest of the state.

LIPA says the charge is needed to more equitably distribute costs for utility programs such as green energy and low-income bill discounts that are now chiefly borne by nonsolar customers. Many home solar customers pay as little as $14 a month for solar systems that produce 100% of their energy needs.

But the new charge, called a customer benefit contribution, is viewed by some local solar companies and activists as a "solar tax" that would benefit the utility more than customers, and stifle growth in the market as other incentives wane, at a time when the state says it wants to grow green energy to meet aggressive state mandates.

LIPA said it will conduct public hearings on the solar tax Nov. 29 before a full board vote by year’s end. It would take effect in January and affect only new solar customers, not the tens of thousands who already have home net-metered systems.

"We're trying to be fair to the rest of the customers," said LIPA chief Tom Falcone of the new charge, which will bring LIPA just under $300,000 in new fees its first year to offset charges for those programs paid by nonsolar customers. "It means a commensurate reduction for everybody else."

But solar installers plan to attend a meeting of LIPA’s board on Friday to urge trustees not to approve the charge, which they say will stall statewide solar sales that have dropped in the past five years, at a time when the federal tax credit is also decreasing to 22% in 2023, from a current 26%. LIPA did away with a rebate for solar systems several years ago.

"We're fighting it — we think it's wrong," said David Schieren, chief executive of EmPower Solar, one of Long Island’s largest installers. Solar customers, he said, already make sizable investments with systems that benefit the LIPA grid by injecting green power locally, reducing stress on the distribution network. Customers take out loans to pay for the bulk of their $20,000 to $30,000 systems, and incentives such as the federal tax credit have been dwindling for years.

In a letter to LIPA and the PSC, local and state solar groups and activists wrote the "solar tax" would "impede growth of the New York solar industry, reduce local clean-energy job opportunities, and make it even more difficult for New York to achieve its" clean-energy goals of a carbon-free grid by 2040.

"We feel [the charge] is premature," said Neal Lewis, executive director of Molloy College's Sustainability Institute, among the letter's signatories. "It's not the best timing in terms of the goal of growing the industry and making the transition to meet the state's goals" for green energy.

State Sen. Jim Gaughran (D-Northport), said if LIPA moves forward with the charge, he will consider legislation to "overturn" it.

"It doesn’t make sense at all," said Gaughran, who worries LIPA and other utilities will continually raise the charge, and perhaps even levy it on systems installed before 2022. "It contradicts the climate goals we’ve laid out," he said.

The Public Service Commission voted in August to approve the charge for regulated utilities across the state, but LIPA is not under the PSC’s jurisdiction and can opt not to institute it. LIPA, whose board is primarily controlled by appointees of the governor, has generally kept in step with such state edicts.

Solar installers expect the charge will amount to between 80 and 90 cents per kilowatt for systems that can range from 5 kilowatts to 20 kilowatts, resulting in average charges of under $10 a month. Falcone said it would average around half that.

PSC spokesman James Denn said, "Nothing will be decided by LIPA nor any decisions made" until after public hearings in late November. He described the PSC action, which applies to six investor-owned utilities in the state, as a "modest reform" to the existing solar compensation system for new customers designed to "make it more equitable for all customers." The statewide policy, which levies charges of from 92 cents to $1.33 per kilowatt for new systems, takes effect in January.

The solar groups noted that for various reasons annual residential solar installations in the state have declined by 46% from 2016 to 2020. "The addition of the customer benefit charge will only further impede the growth of solar," the companies wrote.

LIPA's Falcone acknowledged the new fee would increase the time it takes solar savings to recoup the cost of systems to an average 7.6 years from 7.3. "If that convinces a homeowner not to go with solar, they probably weren't there to begin with," he said.

The solar companies are calling for an independent assessment of the benefits of home solar systems on the electric grid. Solar installers say the benefits from home systems provide a net benefit to the utilities far in excess of the cost regulators say the systems pass off on other customers.

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