Oregonians who install solar panels will soon be eligible to receive checks from utility companies at premium rates for the power they generate.

A pilot program unveiled Friday -- the first of its kind in the nation -- is designed to guarantee homeowners and businesses a long-term stream of income to cover their costs. Ratepayers of participating utilities will fund the program through higher monthly bills; that spooks utility-customer advocates who say expanding the program could push rates to unaffordable levels.

Overseen by the

, the system will increase electricity rates by an undetermined amount for customers of

and

-- and Oregon customers of

. The five-year program is limited to a maximum 25 megawatts of production, roughly enough energy to serve 2,500 homes. It draws from approaches in Europe, where demand for solar systems soared as a result.

"For the first time, we won't be trying to fund renewable energy from state tax credits, which make renewables compete for the same dollars that fund schools and public safety," said Judith Barnes, a co-founder of

. The organization helped shape a bill in the Legislature last year adopting the approach.

Advocates say the system will help Oregon lead the nation in democratizing solar energy, allowing homeowners to cover the costs of bank loans they might need to pay for residential systems. It will also reward energy production instead of subsidizing installation.

But ratepayer representatives, who in many cases welcome trial projects to boost renewable energy, say solar-equipment prices remain too high to make such programs universal. "You can't expand this at broad levels at those prices and still have affordable electricity for folks," said Bob Jenks, executive director of the

.

The new system, which goes into effect July 1, does not replace an existing Oregon program that offers state tax credits and cash incentives for installing solar equipment. In the current program, homeowners and businesses can claim the benefits, as well as a federal tax credit, and then save money by generating power.

Under the new program, utility customers can still claim the 30 percent federal tax credit. But it's an either-or situation with the previous and new Oregon programs. They can't join the new program and still be eligible for the state tax credit and cash incentive.

Instead, they'll receive payments as high as 65 cents a kilowatt hour -- minus residential retail rates of about 10 cents a kilowatt hour -- for the energy they generate and use themselves.

The checks from a utility company are designed to help a customer pay off a loan and at least break even within 15 years. Churches and other nonprofits -- which haven't been able to benefit directly from tax credits, because they don't pay taxes -- are among those planning to apply for the program.

"We believe a lot of customers will be attracted to the program," said Bruce Barney, PGE project manager in customer energy resources. "It's a pretty neat thing to receive a premium check for energy that you produce yourself, rather than just say, 'Oh, my bill went down by $20 a month.'"

Pacific Power, which is also gearing up for the program, will work to make it easy to understand, said Pat Egan, the company's vice president for customer and community affairs.

That could be a challenge. The program comes with so many unknowns that the Public Utility Commission, mandated by the Legislature to iron out the details, won't estimate how much rates will rise to fund it.

"There are too many variables," said Bob Valdez, commission spokesman. "It's a mandate from the Legislature. The commission is trying to do it in what we hope is the most cost-effective manner."

Valdez said Commission Chairman Ray Baum could not comment Friday because he was taking a furlough day. The other commission members could not comment, Valdez said, because only the chairman speaks for the commission.

A key variable is the amount utilities will pay customers for each kilowatt hour generated. The rate for an individual customer will be guaranteed for 15 years. But every six months, the commission will re-evaluate the rates, which will also differ among four regions of the state.

At the outset, a Portland-area homeowner, for example, can sign up to receive 65 cents per kilowatt hour. But a resident of sunny Central Oregon will receive less: 55 cents per kilowatt hour.

The staggered rates are designed to avoid overcompensating owners of systems in sunny areas, where panels are more productive. A typical 2,000-watt residential solar system can cost roughly $15,000, installers say.

Adding to the variables of the new system, utilities will pay customers differing amounts for energy according to the size of solar systems. Owners of medium-size systems will get less per kilowatt hour than owners of small-scale installations. Rates for large-scale systems will be determined by competitive bidding.

The Public Utility Commission has yet to determine what the program will cost utilities. Barnes said her Renewable Energy policy organization will argue during public proceedings that the new system will actually save utilities money by cutting costs of building power plants and transmitting electricity.

"We'll be making the case that distributed generation brings large savings to the utilities," Barnes said, "so ratepayers shouldn't pay for those."

Oregon is the first state to launch a system of this type that sets aside capacity for smaller-scale projects, advocates say, and that finances the program without state tax credits.

Vermont recently introduced a similar system, which will mainly be used for large solar-panel arrays. Washington and California use aspects of the approach.

Ontario leads governments in North America in pioneering the strategy. The Canadian province operates its program as part of an initiative to eliminate traditional coal-fired power generation by the end of 2014.

In Oregon, the approach is so new that banks in the forefront of lending for green projects have yet to gear up for the system.

"We're just learning about this program as of, like, today," Steve Rice,

commercial-banking executive vice president, said Thursday. "We would love to hear more. The whole concept makes a lot of sense."

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