Colorado stakeholders have filed a major settlement agreement that avoids the introduction of a new grid-use fee, which solar advocates feared would stall rooftop solar development in the state.

Xcel Energy Colorado proposed the grid-use fee earlier this year as part of its general rate case (16AL-0048E). The monthly fee is based on a customer’s average energy consumption over the previous 12-month period. The utility said the fee is necessary to ensure that all customers pay their fair share for use of the distribution grid, and proposed to offset the fixed cost increase by lowering customers’ volumetric charge.

Solar proponents argued that the rate proposal would undermine the economic benefits of installing residential solar by introducing an unavoidable fee and lowering the per-kilowatt-hour charge, which decreases the net metering credit solar customers receive for excess electricity sent back to the grid.

As a result of prolonged multi-party settlement talks, Xcel agreed to withdraw the grid-use fee. Instead, the utility “will institute time-of-use rates on a trial basis in anticipation of moving to time-of-use rates as the default rate design for residential customers,” according to the motion.

More than two dozen parties signed on to the deal, including staff of the Colorado Public Utilities Commission, the Office of Consumer Counsel, Wal-Mart Stores, the Colorado Solar Energy Industries Association (COSEIA) and several other clean energy, consumer and environmental groups.

"We must work with Xcel and other stakeholders to support the competitive solar industry,” said John Bringenberg, COSEIA board president, in a statement. “This settlement signals cooperation rather than confrontation, which COSEIA believes is the most productive way to advance solar, allow citizens and companies to own clean energy rather than rent dirty fossil fuel, and impact catastrophic climate change.”

Leading national solar installer Sunrun, which recently made a major expansion into Colorado, also welcomed the proposed resolution.

“Colorado is a top-10 state for solar jobs, and people are moving here specifically to work in the solar industry,” said Lauren Randall, senior manager of public policy for Sunrun. “Through collaboration between Sunrun, Xcel and other stakeholders, Coloradans who choose to invest in rooftop solar will avoid a confusing and unnecessary new charge. We are encouraged by this settlement, which shows the value of parties coming together, listening to consumers, and agreeing to test rate structures that promote consumer choice.”

Alice Jackson, regional vice president for rates and regulatory affairs at Xcel Energy Colorado, heralded the settlement as one of the most comprehensive and complex agreements of its kind. "It will allow us to meet our customers’ expectations by giving them more control over their energy choices. It will bring more renewable and carbon-free energy to Colorado through the use of new technologies, and it will be provide affordable and reliable energy to further power the state’s economy,” she said in a statement.

The settlement filed on Monday evening addresses issues raised in three separate proceedings -- Xcel’s electric rate-case proceeding, Xcel’s application to implement its Solar*Connect program, and Xcel’s 2017-2019 Renewable Energy compliance plan. The agreement requests that regulators consolidate the three proceedings, hear the consolidated proceeding en banc, and adopt a thorough review procedure that includes two rounds of testimony and a hearing on the settlement proposal.

The settlement agreement is supported by the majority of the parties in the three proceedings, but is not unanimous. Only eight of 26 signing parties support the settlement agreement in full. One party, the Interwest Energy Alliance, joined the motion even though it is taking a position of non-opposition, rather than choosing to endorse the proposal.

Groups that signed on to support Xcel’s Solar*Connect program requested that the name be changed to Renewable*Connect and be allowed to go forward. The program allows Xcel to build a solar facility up to 50 megawatts in size and sell shares of the installation to the public.

The settlement also modified Xcel’s Public Service’s 2017 Renewable Energy Plan to allow for the expansion of clean energy resources in a measured and “economically reasonable” way. The settlement adds 225 megawatts of solar capacity to Xcel’s Solar*Rewards program from 2017-2019, with 123 megawatts slated to come from small-scale solar projects. The deal also requests the development of up to 105 megawatts of community solar gardens over the same three-year period, with an additional 12-megawatt carve-out for low-income customers for a maximum of 342 megawatts of new solar between 2017 and 2019.

Xcel Colorado currently has about 370 megawatts of solar power on its system, roughly 230 megawatts of which comes from rooftop arrays.

The settlement agreement comes a year after a long debate over net metering in Colorado came to an end last August when regulators rejected Xcel’s request to reduce net-metering compensation because rooftop solar was causing harm.

Solar advocates believed the debate was over until Xcel introduced the grid-use fee this spring. The proposed fee was arranged on a sliding scale ranging from $2.62 per month for those using fewer than 200 kilowatt-hours of electricity per month to $44.79 for those consuming 1,401 kilowatt-hours or more. At the same time, the utility proposed lowering the volumetric charge from 4.6 cents to 3.37 cents.

The majority of Xcel Colorado's 1.1 million residential customers would see a bill increase under the new rate plan, but the average residential bill would only go up from an estimated $71.16 per month to $71.47 per month, Solar Industry Magazine reported in June. Because the grid fee is tiered and solar customers tend to buy less electricity, the utility argued that solar customers were likely to see one of the lowest bill increases.

This week’s settlement agreement does away with the grid fee and underscores that net metering is available to all solar customers in Colorado, whether or not they choose to participate in Xcel’s solar programs. At the same time, the proposed time-of-use rate pilot helps meet utility needs by putting a proper value on electricity produced when it is most valuable.

Xcel Energy would offer two new, voluntary programs for up 20,000 customers in 2017, 34,000 customers in 2018, and 48,000 customers in 2019. The new rates will be studied with an eye to introducing time-of-use rates more broadly some time in 2020.

Sunrun’s Randall said she sees time-of-use rates as a “beneficial compromise” versus net-metering changes and new fees.

“We think moving forward this could be a model for utilities and solar companies collaborating on rates that are good for consumers who want more energy choice,” she said. Randall added that time-of-use rates benefit all ratepayers “by producing energy when the grid needs it.”

The settlement filing now awaits a response from the commission. Parties anticipate hearings on the settlement to take place in October, with a decision by the end of 2016.

This story has been updated to include comments and additional insight from Xcel Energy.