By Deb Lovig

Most street lights in the U.S. are owned by utilities companies. They provide use of these lights to cities on a sort of leasing system called tariff. The amount a city pays to “lease” the lights is meant to cover the installation, cost of electricity as well as the cost of the light fixture/pole and ongoing and periodic maintenance including replacement when necessary.

In most places, a city may pay a monthly rate per light of $7 to $53 depending on the fixture selected and the cost to service that fixture. Under this lease arrangement, the cost of this off-peak electricity is a small part of the overall monthly rate. Most of the cost goes to pay for the capital investment in the lighting equipment. A few utilities have a flat or average charge per light for all street light fixtures, regardless of the cost of the equipment, the amount of maintenance required or electricity used.

This rate structure has provided investor-owned utilities the necessary vehicle to earn an allowed rate of return, set by the utilities commission in each state, to be profitable and keep investors happy.

So this sexy new LED street lighting comes along and everyone, including the utilities, gets excited about saving a lot of energy, putting a lot less waste into the landfill and saving taxpayers a good chunk of change on maintenance avoidance. However, if LED lighting reduces by 50 percent or more the amount of electricity that will be used and therefore billed by the utility and maintenance costs go down to a bare minimum for the next 10-15 years, just how will the investor-owned utility pay for the higher cost of this new LED equipment, offer an attractive monthly rate to municipalities and make an allowed rate of return?

Progress Energy lineman James LeBlanc installs an LED fixture.

With these key questions looming, most utilities don’t yet offer any sort of lowered rate for LED street lights. And, this has been a major STOP sign for most municipalities that are investigating LED street lighting.

There’s no clear solution at this point but Raleigh’s own Progress Energy Carolina is taking a leadership role in trying to find a good solution or in this case, two good solutions. The North Carolina Utilities Commission and the Public Service Commission of South Carolina just approved a request from Progress Energy Carolinas to offer two new options for reduced rates on LED street lights.

Progress Energy Carolina’s Bob Henderson is quite pleased with this outcome. He tells us that the first option is a bundled all-in-one utility-owned rate where the municipality pays a month fee, like before, which includes purchase of the equipment, electricity used, installation, maintenance and replacement of the LED street light when necessary. The new rate differs from the past in that it is in two parts ─ a fixed basic rate and a variable section. As the prices of the LED fixtures decrease, Progress Energy Carolinas can adjust its pricing accordingly (that’s the variable part) without having to seek commission approval for the rate change.

The second option allows the city to purchase the same approved LED street lights directly from the manufacturer. Cities that qualify can use stimulus funds, grants or low-interest loans to purchase the fixtures and their monthly rate to cover installation, electricity used and maintenance will be roughly half of the cost of the first option. If a fixture replacement is required, the municipality will be responsible for providing another fixture to Progress Energy Carolinas (PEC) to be installed. City-owned fixtures will sport a special label and will be installed on PEC-owned poles. You can see which products are included now in the PEC new rate structure here.

The Clinton Climate Initiative (CCI) folks are providing financial assessment guidance to cities and towns in Progress Energy Carolinas’ service territory using the new LED street light rate structures. Their spreadsheet model can assist municipalities with determining which option is best for them and provide an idea of the payback offered by a switch to LED lighting. The CCI folks have been working steadily along helping the world’s largest cities, like Los Angeles, figure out how to pilot and then purchase and deploy LED street lights. They have put extra effort in assisting the industry with the biggest stumbling block to LED lighting  it costs more money up-front than conventional lights.

If you want to learn more about all this, the Progress Energy Carolinas lighting team is working with the local IES Raleigh chapter to provide a forum (workshop and webinar) April 14. At this event, they plan to share with other utilities and their vendor support personnel the “behind the scenes” details, considerations, experience and passion that went into developing these new rate structures, change-out procedures, specification standards with regard to the roll-out of LED lighting at PEC. Check it out:  http://www.iesraleigh.org/seminarevents.htm