Xcel Energy has backed off its proposal to raise rates on new solar customers — for now.

The solar fee hike was part of a larger increase in electricity rates that Xcel is asking for to recover the cost of bringing a new coal-fired generator on line in Pueblo.

Xcel dropped the solar fee — which would have charged solar-panel owners for the costs the utility says are associated with their homes being hooked up to the grid — because the proposal “caused significant customer confusion.” But the company isn`t ready to give up on the idea altogether.

“We still believe we`re on the right side of the discussion here,” said Xcel spokesman Mark Stutz. “But sometimes, being on the right side of the discussion isn`t enough.”

The proposed solar fee was based on the principle that it costs Xcel money to maintain a grid connection — and keep a reserve of electricity available — for solar-panel customers even when the customers are “net zero” during a year, ultimately producing as much electricity as they use.

“Even if you net out in a year, it`s immaterial,” Stutz said. “We still have to maintain the delivery systems to get electricity to the house when you`re not generating yourself.”

Solar advocates in Boulder, who helped organize a quick and vigorous opposition to the proposal, cheered Xcel`s short-term decision, but took exception to the utility`s reasons for its change of mind.

“We are not excited that they believe that we are confused,” said RJ Harrington, director of legislative and regulatory affairs for Boulder-based Simple Solar.

Employees at Simple Solar clearly understood the proposal, Harrington said. They just disagree with Xcel about whether it`s necessary or even fair.

The heart of Xcel`s argument in favor of the fee is that solar customers are getting a free ride, enjoying the benefits of grid backup without paying for it. Solar energy supporters, on the other hand, say that the benefits of having solar panels scattered on rooftops across Colorado — a concept called distributed generation — are greater than the costs.

“We are concerned that Xcel still doesn`t seem to recognize the benefits of distributed generation,” Harrington said.

Solar panels can help reduce the utility`s peak demand in the summer when air conditioners are running full throttle, and solar customers allow Xcel to add renewable energy generation to its portfolio without having to build a new transmission network, solar advocates say.

Studies performed at other state utilities seem to bear out the solar industry`s claim. A study released in January by Arizona Public Service compared the benefits and the costs of small-scale solar generation and found that “solar distributed energy brings value to Arizona Public Service in both the near term and, increasingly, over time.”

In Colorado, no such study exists, but on Tuesday, the Governor`s Energy Office announced its intention to launch a comprehensive analysis of distributed energy so that the Public Utilities Commission, which regulates Xcel, can make an informed decision on the costs and benefits of distributed generation in the future.

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