The Koch Brothers' Dirty War on Solar Power

By Tim Dickinson, Rolling Stone

12 February 16

 

All over the country, the Kochs and utilities have been blocking solar initiatives — but nowhere more so than in Florida

fter decades of false starts, solar power in America is finally poised for its breakthrough moment. The price of solar panels has dropped by more than 80 percent since President Obama took office, and the industry is beginning to compete with coal and natural gas on economics alone.

But the birth of Big Solar poses a grave threat to those who profit from burning fossil fuels. And investor-owned utilities, together with Koch-brothers-funded front groups like American Legislative Exchange Council (ALEC), are mounting a fierce, rear-guard resistance at the state level – pushing rate hikes and punishing fees for homeowners who turn to solar power. Their efforts have darkened green-energy prospects in could-be solar superpowers like Arizona and Nevada. But nowhere has the solar industry been more eclipsed than in Florida, where the utilities' powers of obstruction are unrivaled.

The Sunshine State has the best solarity east of the Mississippi, and the third-best rooftop solar potential in America. Yet measured by solar production, it ranks just 16th in the nation. It's dwarfed by solar giants like California. Florida even lags behind Northern states like New Jersey, Massachusetts and New York. "It defies logic," says former Florida Gov. Charlie Crist. "It's absolutely absurd."

The solar industry in Florida has been boxed out by investor-owned utilities (IOUs) that reap massive profits from natural gas and coal. These IOUs wield outsize political power in the state capital of Tallahassee, and flex it to protect their absolute monopoly on electricity sales. "We live in the Stone Age in regard to renewable power," says state Rep. Dwight Dudley, the ranking Democrat on the energy subcommittee in the Florida House. "The power companies hold sway here, and the consumers are at their mercy."

The full political might of Florida's IOUs was on display in December, when a deceptive campaign, funded by the state's electric utilities, crushed a citizen-led effort to open Florida to solar competition through the 2016 ballot. "When your opponents have no ethical foundation, have unlimited resources and are willing to say and do anything to defeat you," says Stephen Smith, director of the Southern Alliance for Clean Energy, which led the pro-solar effort, "it's a tough hurdle to overcome."

It should come as no surprise that the utilities have fought so hard. The rise of cheap, distributed solar power poses a disruptive – and perhaps existential – threat to the traditional electric utility business.

Monopoly electric utilities used to make sense. Dirty power, generated at a distance from population centers, was carried over a set of transmission lines to homes and businesses. Consumers got reliable power from a single provider. IOUs were guaranteed a profit – both for building power plants and transmission lines as well as for the electricity itself.

But in recent years, the nation's IOUs have been abusing their monopoly powers to profit from massive infrastructure projects. Utilities more than doubled their capital expenditures last decade; costs were paid for by electric customers, whose power bills have soared nearly 40 percent. For investors, the formula is simple: More infrastructure equals more profit.

The rise of distributed solar power poses a triple threat to these monopoly gains. First: When homeowners install their own solar panels, it means the utilities build fewer power plants, and investors miss out on a chance to profit. Second: Solar homes buy less electricity from the grid; utilities lose out on recurring profits from power sales. Third: Under "net metering" laws, most utilities have to pay rooftop solar producers for the excess power they feed onto the grid. In short, rooftop solar transforms a utility's traditional consumers into business rivals.

The surge of solar competition has caught the nation's dirty-power generators flat-footed: The utility trade group Edison Electric Institute (EEI) warns that rooftop solar could do to the utility industry what digital photography did to Kodak, bringing potentially "irreparable damages to revenues and growth prospects."

Few industries are worse equipped to deal with disruption than power utilities. Their profits depend on infrastructure investments that pay off over a generation or more. "Utilities are structured to be in stasis," says Zach Lyman, partner at Reluminati, an energy consultancy in Washington, D.C. "When you get fully disrupted, you've got to find a new model. But utilities are not designed to move to new models; they never were. So they play an obstructionist role."

The Sunshine State is a gold mine for its monopoly IOUs. Air conditioning drives the second-highest electrical consumption in the nation; the average Florida household spends $1,900 a year on power – 40 percent more than the national average. Fossil fuel dominates electricity generation: Florida is 61 percent dependent on natural gas, followed by coal at 23 percent. Solar makes up less than one percent of the state's energy mix.

Key policies that have spurred a rooftop solar revolution elsewhere in America are absent or actually illegal in Florida. Unlike the majority of states, even Texas, Florida has no mandate to generate any portion of its electricity from renewable power. Worse, the state's restrictive monopoly utility law forbids anyone but the power companies from buying and selling electricity. Landlords cannot sell power from solar panels to tenants. Popular solar leasing programs like those offered by SolarCity and Sunrun are outlawed. Rooftop solar is limited to those who can afford the upfront expense; as a result, fewer than 9,000 Florida homes have panels installed.

Florida's anti-solar policies are zealously defended in Tallahassee. "It's no secret we play an active role in public policy," says Mark Bubriski, spokesman for Florida Power & Light (FPL), the largest IOU in the state. FPL is the monopoly power provider for 4.8 million customers, whose electric bills generated $1.65 billion in profit for the company last year.

The utilities are top political donors in Florida. Since 2004, the state's four largest IOUs contributed at least $18 million to state politicians and political committees – a preponderance to Republicans, who now control state government. In addition, since 2007, the companies spent at least $12 million on lobbying, employing an average of one lobbyist for every two legislators in Tallahassee. "They've got a pretty good harness on the whole deal up there," says Crist.

The capital city of Florida is more "Southern Gothic" than "South Beach." Tucked away on Florida's panhandle, Tallahassee is a slow-walking city of whitewashed churches, wide verandas and dusky oaks, draped with Spanish moss. Nothing from its outward appearance would suggest this city of 190,000 is the seat of power for a state whose economy rivals Indonesia's.

A seven-hour drive from Miami, four hours from Tampa and another three from Jacksonville, Tallahassee sits at a far remove from the watchful eyes of voters in Florida's biggest cities. The business of the state transacts in a tiny three-block district in the shadow of Florida's modern Capitol building, a white 22-story tower flanked by a pair of low-slung domes that look – how to put this – happy to see you.

Florida is served by a part-time legislature. Lawmakers make less than $30,000 a year and are subject to strict term limits. The paltry pay and constant turnover combine to fill the capital with baby-faced lawmakers who run point on policy matters in which they have little expertise. Even Republicans say the model enhances the power of special interests. "Out in eight years?" says one GOP state representative, referring to term limits. "You're giving more power to lobbyists."  Florida's pay-to-play energy politics outrage honest conservatives. Nancy Argenziano is a 61-year-old firecracker of a politician with short dark hair and piercing eyes. She served as a GOP state legislator for more than 10 years. Until 2010, she chaired the state's Public Service Commission (PSC) – the arm of the legislature that regulates Florida's power companies. Argenziano is unsparing in her assessment: "The legislature is owned by the utilities. To me, it's extremely corrupt. The legislature takes millions from utilities, who make billions from [the decisions of] the PSC. They get what they pay for."

The utilities' political reach even extends to the governor's mansion, a stately brick building graced by a classical portico that – only in Florida – sits a 10th of a mile from a pawnshop where you can turn your gun into cash. Republican Gov. Rick Scott's narrow 2014 re-election was financed by more than $1.1 million in contributions from the IOUs.

The governor did not respond to interview requests. But Scott has earned ridicule for allegedly banning state officials from using the terms "global warming" and "climate change." Shortly after his re-election, he filled an open slot on the PSC with Jimmy Patronis, then-Florida state chair of ALEC, which fights renewable-energy mandates and climate regulations.

Bowing to the businesses the PSC is supposed to regulate, the commission recently scaled down Florida's energy-efficiency mandates and terminated a modest rebate program for the private purchase of solar panels. "I don't want to give handmaidens a bad name," says state Rep. Dudley, "but they're servants of the utility industry."

Even as it rolls back green initiatives, the PSC has rubber-stamped fossil-fuel boondoggles. In an unprecedented move, it approved FPL's proposal to frack for natural gas – in Oklahoma. FPL convinced the PSC that the project, financed by the electric bills of its customers, would save money. But after a rocky first year, the project has already cost ratepayers nearly $6 million. "It's a total rip-off," says Dudley.

Dudley has the fire of a reformer. A tall man who favors pinstripe suits, he has repeatedly introduced legislation to curb the abuses of the PSC and open Florida to solar competition. But he says he can't even get a hearing in the Republican-dominated capital. "From a legislative perspective," he says, "we've really been stonewalled."

Seeking to crack open Florida's energy market at the ballot box, the Southern Alliance for Clean Energy (SACE) mounted a $2 million campaign to qualify a "Solar Choice" amendment for the 2016 election. The constitutional amendment would have ended Florida's rare lock on electricity sales; only Kentucky, Oklahoma and North Carolina have similar prohibitions. It would have freed consumers to install leased solar panels on their rooftops at no upfront expense. Retailers could have installed solar arrays and sold power to tenants in the same shopping complex.

SACE is directed by Stephen Smith, a tall Tennessean with water-blue eyes who dresses like Tom Wolfe on casual Friday. To advocate for solar choice, SACE knit together an implausible "green tea" coalition – comprising Tea Party activists and environmentalists like the Sierra Club, in alliance with Florida's retail and restaurant federations, as well as religious groups like the Christian Coalition of America.

The campaign led with voices from the far right. Coalition member Debbie Dooley helped found the Tea Party and today directs Conservatives for Energy Freedom. The 57-year-old grandmother may run her shoestring outfit out of the back of a 2010 Hyundai Sonata, but she has an impressive track record, spearheading a two-year fight that overturned anti-solar restrictions in Georgia in 2015 – creating thousands of clean-energy jobs.

At a campaign luncheon in a Presbyterian church in downtown Tallahassee in November, Dooley is wearing a lime-green suit jacket and matching jeweled earrings, and lamenting that she had to leave her Chihuahuas – Chi Chi and Chico – back home in Buford, Georgia. With a delicious drawl, Dooley insists that her view is the right view: "Conservatives champion free-market choice, not government monopolies that stifle competition."

Dooley embodies a political trend that many environmentalists don't appreciate, says Jigar Shah, the former CEO of SunEdison who now runs his own investment firm, Generate Capital. A passion for solar has taken root among people who may not "give two shits" about the environment, Shah says. "The reason Debbie Dooley is involved is that the Tea Party people who support Ted Cruz believe very strongly that the electric utility company is every bit 'the man' as the government is."

Confronting a popular threat to their monopoly power, the utilities fought back – with a vengeance. But rather than campaign directly against the Solar Choice amendment – which polled at nearly 70 percent – the IOUs mounted a competing ballot initiative called the "Smart Solar" amendment. Despite the name, their amendment doesn't advance the cause of solar power. Quite the reverse: "It locks existing statute into the constitution," says a skeptical Republican Florida lawmaker.

"They've twisted the words around so that it keeps the monopolies in place," former Vice President Al Gore explained at a Climate Reality Project conference in Miami, blasting the utility initiative as the "dumb" solar amendment. Even Jack Abramoff, the infamous influence peddler, traveled to Tallahassee to denounce the utility amendment as "right out of the lobbyist playbook." Abramoff, who served four years in federal prison, is now seeking atonement by crusading against special-interest corruption. The Smart Solar campaign, he says, "reminds me very much of what we used to do in the old days ... Now it's a fight between two amendments – so they can obfuscate what's going on."

The Smart Solar amendment is financed, nakedly, by the state's top investor-owned utilities, which ponied up $4 million through December, more than half the campaign's total haul. "We are proud of who supports our campaign," says spokeswoman Sarah Bascom. Other supporters include conservative pressure groups funded by fossil-fuel interests. 60 Plus – a seniors group that has received $15 million from the Koch donor network – donated more than $1 million. The National Black Chamber of Commerce (NBCC), a tiny organization with an oversize name, added $100,000. The NBCC is funded by major polluters, including Exxon; its latest convention was sponsored by Koch Industries and Gulf Power. NBCC founder Harry Alford, unabashed, touts the "cozy, productive relationship we have with the fossil-fuel corporations." The Koch grassroots political group, Americans for Prosperity, does not appear on Smart Solar's donor rolls, but did issue a call to arms for its Florida activists to fight solar choice.

The Smart Solar campaign played dirty. In a seemingly transparent effort to confuse petition-signers, the utility-backed measure aped the "choice" language of the rival pro-solar campaign with its formal ballot title. Smart Solar called itself Rights of Electricity Consumers Regarding Solar Energy Choice. "It's pure deception," an exasperated Smith tells Rolling Stone. "Many, many people have been misled into signing their petition – it's fraud!" Bascom insisted there was no intention to mislead. "It would defy all logic," she tells Rolling Stone. "Why would we confuse ours with one that does not have public support?"

In the end, the utilities crushed the Solar Choice campaign by spending it into submission. Qualifying an amendment for the ballot in Florida is onerous and expensive under the best of circumstances. It requires nearly 700,000 signatures, and any serious campaign hires paid gatherers.

By mounting a competing measure, the utilities sparked a financial arms race – with the utility-backed measure typically paying gatherers twice as much per signature. "When we were paying a dollar on the street, they were paying $2," says Smith. "When we were paying $2, they went to $4." Soon, the IOUs had forced solar proponents into a burn rate of $350,000 a week. It was unsustainable.

Solar Choice threw in the towel in January. The campaign is now regrouping, aiming to qualify instead for 2018, when more than 400,000 signatures it has gathered would still be valid. Smart Solar is pressing ahead for the November ballot. If it passes, the utilities will be entitled, under the constitution, to hit rooftop solar customers with high fees simply to maintain their connection to the grid.

But Florida Power & Light isn't waiting until November to take a brazen victory lap. In January, it submitted a proposal to the PSC, seeking to hike its electric rates by nearly 24 percent over the next three years and asking the commission to reward FPL investors with a higher guaranteed rate of return. If approved, FPL's electric consumers would typically pay an extra $13 a month.

"FPL spent millions fighting to deny consumers solar choice,"says Dooley, furious. "Now they have their hand out, asking for a subsidy."

Florida is an extreme example of utility-funded efforts to thwart the rise of solar power at the state level. But it's not unique. Major utilities across the nation are seeking to undermine competition from rooftop solar by hiking its cost. "The utilities have realized they're completely up a creek without a paddle," says Shah, who sees the utilities lashing out at solar not from a position of strength but of desperation. "They can certainly fight it. But they're going to lose."

The utilities are working from a playbook developed by ALEC – the Koch-funded group that promotes "model" bills, often adopted virtually wholesale by Republican legislatures – and the Edison Electric Institute, the utility trade group.

The political argument advanced by ALEC and EEI is that rooftop solar generators are freeloaders on the traditional grid infrastructure: They rely on conventional power when the sun isn't shining, but because they sell power back to the grid, they don't pay much on net. An ALEC report on rooftop solar implausibly holds up utilities as champions of the economically vulnerable, arguing that net metering creates a "regressive tax, subsidizing the rich by picking the pockets of the poor."

Such arguments ignore the clear value rooftop solar producers create for other customers on the grid – including producing power at times of peak demand and adding resiliency against outages. Most obvious: Rooftop solar producers pay for their own equipment and volunteer their real estate – avoiding expenditures by utilities that would otherwise get passed along to ratepayers. A 2013 study for Arizona's largest utility found the benefits of rooftop solar "exceed the costs by more than 50 percent."

After some initial legislative setbacks, the utilities and their allies are now working in the shadows – seeking to persuade utility regulators to put the brakes on solar by, in essence, taxing rooftop producers.

Arizona – a state that spends up to 85 percent of the year in sunshine, and stands second in the nation with a solar capacity of 1,800 megawatts – was ground zero for this approach. Last winter, the Salt River Project (SRP), the utility that serves Phoenix, hiked fees for rooftop solar customers and tacked on a murky "demand charge." The effect was to increase bills for customers with solar panels by a whopping $50 per month.

SRP touts itself as a "community-based nonprofit." But in an internal e-mail, an SRP director condemned solar advocates as "the enemy." (SRP would disavow the comment as a joke.) The utility's price hike puts into action policies long promoted by ALEC, which endorses "a fixed grid charge" for solar customers. SRP's new fees have throttled the local rooftop market: Solar lease applications are down as much as 96 percent, according to SolarCity. In a scathing open letter, CEO Lyndon Rive blasted SRP for working to "entrench" its monopoly by "shuttering the solar industry in one of the sunniest places in the United States." SolarCity is now suing SRP, alleging violation of federal antitrust laws.

Emboldened, for-profit utilities went for the jugular in America's solar giant, California. Other states measure solar output in megawatts; California produces more than 10 gigawatts – nearly half the nation's total. Rooftop solar has exploded thanks to bountiful sunshine and a generous net-metering
law. Today, nearly five percent of California's power is generated by rooftop solar. But this success also triggered a state review of the payments to rooftop producers – opening the door for utility monkey-wrenching.

The state's biggest utilities lobbied the California Public Utility Commission (PUC) last year to hit rooftop producers with Arizona-style fees. Southern California Edison sought increases averaging $800 a year for its rooftop solar customers. But in the Golden State, solar producers are now a formidable political constituency all their own. In November, advocates of preserving the state's net-metering program delivered 130,000 signatures to the PUC in wheelbarrows.

In December, the head of the PUC declared the utilities had failed to provide "a real basis" or "evidence" to justify the massive rate hikes on solar customers. In January, the PUC adopted only minor changes; the ruling was hailed as a huge win by the solar industry.

Nevada has some of the greatest solar potential in America; Senate Minority Leader Harry Reid touts his home state as the "Saudi Arabia of solar energy." But where California rejected the Arizona model, Nevada is taking it to the next level.

In late December, the state's PUC commissioners – all appointed by Republican Gov. Brian Sandoval – announced huge price hikes for rooftop solar customers. The changes will add nearly $40 a month to solar homeowner electric bills – wiping out the $15 a month in typical solar savings. The Nevada charges were put into effect despite the PUC's own admission, reported by Forbes, that rooftop solar customers "do not impose any significant additional costs" on other ratepayers. In an unprecedented move, the new charges were also made retroactive, punishing the state's 17,000 existing solar customers.

Until recently, Nevada was one of the fastest-growing solar markets, but providers are now fleeing the state: SolarCity, Sunrun and Vivint are winding down their operations. "This is the first state to close up a solar market, eliminating thousands of jobs as we speak," says Bryan Miller, vice president of public policy for Sunrun. His company is suing the state, promising to expose cronyism between Sandoval and the state's biggest utility, Nevada Energy. Noting that the governor's top two political advisers are lobbyists for the utility, Miller insists, "This is a story of political corruption." ("Of course, we reject this latest spurious and reckless charge against Nevada's state government," Sandoval spokeswoman Mari St. Martin tells Rolling Stone.)

Roiling the economy of an early-voting state in an election year, Nevada's solar politics have already become a growing issue in the presidential campaign. At a Las Vegas rally just before New Year's, Bernie Sanders called the PUC decision "just about the dumbest thing I have ever heard."

Even as the solar industry faces unprecedented regulatory obstruction at the state level, its future on the federal stage has rarely been brighter. In mid-December, Congress stunned activists, solar-industry executives and investors by cutting a deal to renew billions in federal support for solar power that had been slated to expire at the end of 2016 – avoiding a "solar cliff" that could have staggered the industry.

Signed into law with the $1.8 trillion year-end budget, the solar accord extends a tax credit that offsets up to 30 percent of solar project costs – even as those costs continue to plummet. The impact is projected to be massive: 20 gigawatts of new solar power added over the next five years, nearly doubling the nation's output.

But this freakish fit of solar bipartisanship is fragile. In no uncertain terms, the American solar industry will be on the 2016 ballot. Last year, the Obama Environmental Protection Agency finally unveiled its mechanism to curb the power sector's carbon emissions. By 2030, the Clean Power Plan would reduce national electricity sector emissions by one-third. Under the plan, the administration projects renewables like solar will rise to 28 percent of U.S. power generation.

Clean Power will be implemented – or not – depending on the will of Obama's successor. Republicans have made clear their ambition to dismantle the work of the current EPA. Donald Trump calls global warming "bullshit" and a "hoax." Ted Cruz calls the Clean Power plan a "radical attempt to destabilize the nation's energy system."

Hillary Clinton, by contrast, has promised to build on Obama's plan, vowing to treat it as the "floor, not the ceiling." Clinton has an ambitious plan for solar energy. She calls for the installation of half a billion solar panels in her first term – a move that she says would drive a sevenfold increase in U.S. solar-power production. For his part, Sanders has not detailed a specific solar policy, but has promised "massive" investments in clean power to drive an 80 percent reduction in emissions by 2050.

Over time, Dooley believes, solar power will win out, not only on the economics, but because there's nothing partisan about it. In fact, she says, solar power is one of the few things on which Democrats, Republicans and independents can find common ground. "Who doesn't want to be able to have solar panels on their rooftops?" Dooley asks. "Who doesn't want to become an entrepreneur – selling energy generated on their private property to their neighbors, and make a profit off of it?"

Other than the monopoly utilities and the Koch brothers, who have their backs, she asks, "Who doesn't want energy freedom?"