Power is money: HEC, city leaders to consider financial effects of city schools’ solar project

By Ryan Alessi

Nearly two months after the Harrisonburg City School Board announced its massive solar development, sealing the deal will require more talk between school leaders, the city and the Harrisonburg Electric Commission about how it could financially affect all three intertwined entities.

The project, which the school board approved at its Dec. 4 meeting, includes a partnership with energy company Secure Futures to construct the solar arrays at five schools with a generation capacity of 3.8 MW. But it’s not just a matter of setting up solar panels and simply plugging them into the grid.

In this case, power is money. And a project of this scale will create a fiscal ripple effect, illustrating the complexities of pursuing a seemingly popular project that affects the budgets of three public entities, each with its own priorities.

“I think we have to figure out how to make it work,” Hobey Bauhan, one of the five HEC members, said of the solar project during the group’s meeting Tuesday.

The HEC commissioners spent more than a quarter of their two-hour meeting Tuesday discussing the potential ramifications of the project in two main ways:

  • Policies the HEC would have to change to allow a new solar development of that scope;
  • And how to financially absorb the sudden change of having a major customer like the schools paying for far less electricity.

While they made no decisions Tuesday, HEC General Manager Brian O’Dell briefed commissioners on preliminary data showing short- and long-term projections of how the schools’ solar projects would alter HEC’s bottom line — and potentially by extension, the city’s as well.

O’Dell handed the commissioners a spreadsheet showing that in the first year after the solar project is operational,  the schools would be paying a half-million dollars less than they would have, which is good for the schools but not the power company. Even after factoring in that HEC would save some money by cutting back on electricity purchases from Dominion Energy, the calculations showed the utility would have a net loss of $236,000 in the first year, which would add up to millions over the 35-year life of the project, O’Dell said.

“Basically, what we’re talking about is a subsidy, plain and simple,” said David Frackelton, one of the commissioners. “How much are we going subsidize solar in the city? And typically the people who are at risk are low-income people because they’re the ones who are going to carry the burden” if the HEC raises rates on customers to make up the difference.

Commissioners didn’t discuss any plans for a rate increase. Instead, they encouraged O’Dell to talk with city leaders, who so far have taken a hands-off approach to the solar project.

Less money to the city?

The leverage the HEC has with the city is that, as a municipal utility, the city requires it to send 5% of its revenue to the city’s general fund. That works out to about $3 million, but the HEC currently goes beyond that by sending $5.2 million a year. The extra money allows the city to pay for more services without asking more from taxpayers.

Noting that HEC is already “$2 million beyond” its annual revenue obligation to the city, HEC Commissioner Bill Culbreth said that reducing that amount by the $236,000 that the solar project will cost HEC should be raised with city leaders.

O’Dell said he planned to meet with City Manager Eric Campbell in the coming days, and that perhaps the HEC and city might somehow share the difference in revenue.

Campbell told The Citizen he wasn’t aware of any potential effects on the HEC’s contribution to the city but confirmed that he and O’Dell were still working on setting up a meeting.

“Right now, I view that solar project as a school project,” he said. “I would have to talk to Brian and look at the long-term effects.”

Meanwhile, the school board’s lawyers are still working on finalizing the contract with the energy company Secure Futures, said Deb Fitzgerald, the school board’s chair.

School board members have met with O’Dell and HEC commissioners at several points over the last year in the run-up to December’s announcement, and O’Dell said he has been in talks with Secure Futures representatives.

Moving the cap?

Beyond the money, two other key issues to iron out are the HEC’s net-metering policy, which was adopted with a cap of 1% of the utility’s peak load, and a policy that bars any solar development of more than 500 kW.  The city schools project will push total solar installation well past that 1 percent threshold, at which point HEC may consider changing its net-metering policy, and the planned solar arrays at Harrisonburg High School alone will be 1 MW, double the current 500 kW limit..

Because the utilities still operate and maintain the infrastructure, such as power lines that energy from the solar arrays will travel on, many utilities have placed caps like that.

Currently 0.82% of electricity in Harrisonburg comes from customers with solar arrays, most of which generate 4-8 kilowatt-hours of electricity, O’Dell said.

‘Leading the way’

At the end of the day, though, the school’s solar project is aimed at being a benefit to the community by saving money for the schools, which will reduce the amount of city tax dollars the schools will ask for, as board members said during their Dec. 5 meeting.

Fitzgerald, the school board chair, told The Citizen she expects to have more discussions with HEC officials and city leaders in the coming weeks as well.

“I would hope that it’s not going to be a battle as we explain as many times as we need to why it’s a good idea for the schools and why it’s going to be a net benefit to the city,” she said. “This is the direction we’re going in. We’re kind of leading the way in the state of Virginia by doing this.”

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