Arizona’s Solar Fee – Two Forward, one back?
November 18, 2013
More on the closely watched recent change in Arizona utility regs.
I reported the other day on a new fee that will be charged against solar installations in Arizona. The picture is getting clearer as more comes in.
I’ve been confused by some of the reporting, but it appears from the overall reaction that this is a win for the Solar Industry, in that, while it establishes a small levy on new solar households, the net effect will not slow the explosive growth of rooftop solar in this sunniest state. Moreover, this may be a template for other states facing the same issue.
The original proposal by the local utility giant, Arizona Public Service, would have called for a $1oo/month charge on solar owners who are connected to the grid. The decision by the state’s utility regulatory agency, the Arizona Corporation Commission, will establish fees averaging less than $5/month.
The utilities argue that customers with solar panels, who generally use less grid power, and receive payment for electricity they produce and send onto the grid, (a process called “net metering”) should have to pay a fee to assist with the general upkeep of the grid that they still rely on . The solar industry argues that the adoption of solar rooftops lessen the need for building expensive new “peaking” plants, mostly gas turbines, which would assist to meet high power demands on the hottest, sunniest days.
With the growth of leasing programs that allow building owners to acquire rooftop solar at little to no upfront cost and without ownership responsibilities, rooftop solar is booming and utilities’ lost revenues are becoming noticeable. APS had approximately 900 rooftop solar systems in June 2009 and over 18,000 in June 2013. It added 500 in October.
The Commission kept the bill charge below all stakeholders’ proposals. TheResidential Utility Consumer Office (RUCO), Arizona’s ratepayer advocate, andthe Commission’s own staff recommended bill charges in the $3.00 per kilowatt range. APS recommended a charge in the $8.00 per kilowatt range.
Asked if such charges would impede Arizona’s solar industry, Solar Energy Industries Association (SEIA) Counsel Court Rich said the leasing programs that have driven 80 percent to 90 percent of Arizona’s skyrocketing rooftop solar growth in recent years save solar customers about $5.00 to $10.00 per month. “You do the math,” he said.
The average rooftop solar installation in Arizona is around 6 kilowatts.
“A $0.70 per kilowatt charge will hamper the industry,” explained Sunrun VP and The Alliance for Solar Choice (TASC) President Bryan Miller. “We cannot sustain a $1.00 per kilowatt charge.”
The RUCO-engineered compromise holds the $0.70 per kilowatt bill charge constant until the next rate case, when hearings can determine more precisely the costs and benefits of rooftop solar to ratepayers.
Throughout the proceedings, APS argued that net metering allows solar customers to avoid paying their fair share of the cost to maintain the electric grid – thereby passing $18 million in annual costs onto non-solar customers. The issue has come to a head recently because of the dramatic recent growth in rooftop solar. Systems are being added to APS’ service territory at a rate of about 500 a month, said APS, a unit of Pinnacle West Capital Corp. Arizona was the nation’s No. 2 state for solar installations in the second quarter of this year.
Company representatives at the hearing said a charge of 70 cents a KW was not nearly enough.
“We are very concerned with the cost impacts of this policy,” APS’ senior vice president of customers and regulation, Jeff Guldner, told the Commission ahead of the vote. “We don’t think this proposal is in the best interest of our customers.”
The compromise was hammered out between representatives for the solar industry and the state’s ratepayer advocate, the Residential Utility Consumer Office, during the hearing on Thursday in Phoenix. APS, however, never agreed to the terms.
The Alliance for Solar Choice, which represented a coalition of solar financing and installation companies including SolarCity Corp, Sunrun and Sungevity, had initially pushed for any decision to be delayed until APS’ next rate case in 2015.
APS had proposed a new $50-100 monthly charge for solar customers, a discriminatory fee that would have wiped out any savings these customers would currently receive from their solar investment. APS justified the solar fee by saying that net metering – a program that ensures solar customers receive full retail credit for power they deliver to the grid for their neighbors to use – is a bad deal for Arizonans – but that’s just not true: private investment in reliable, local power generation benefits all ratepayers. Full retail net metering credit is a simple and proven way for customers and utilities to assign value to that power.
A study conducted this year for SEIA showed that these net metered systems actually deliver much more: $34 million in annual net grid benefits for APS customers alone. That’s before accounting for the social and environmental benefits: cleaner air and thousands of local jobs. APS’s proposals were clearly not grounded in a fair accounting for DG solar’s real value, and our allies argued strongly in favor of undertaking that fair accounting in the appropriate venue: the next rate case.
Despite millions of dollars on spent on a misleading campaign by the utility and its proxies, public outcry against the APS proposal was overwhelming. A poll conducted last week found that, even after months of being blanketed by utility ads, a whopping 81% reject APS’s solar fee and 77% would be less likely to vote for a candidate who ends solar savings. Over the course of this long campaign, more than 30,000 Arizonans emailed the ACC in support of rooftop solar.
That support was demonstrated in person earlier this week when 1,000 Arizonans gathered in front of the ACC this week to protest APS’s proposed fee. Inside a steady stream of about 100 citizens — solar workers, solar customers, non-solar customers, environmental advocates, retirees, veterans, even one passionate 11-year old girl — urged the Commissioners to stand up against the utility for the good of Arizonans. Yesterday’s vote is a resounding demonstration that the peoples’ support of solar trumps corporate money. It showed just how out of step APS’s anti-solar efforts are with the needs and demands of its own customers, and we were pleased to see Commission acting on behalf of the public they serve.
“While we applaud the ACC’s decision to keep net energy metering in place – and appreciate the Commission’s last-minute efforts to find a middle ground when it comes to new fees on solar customers – we are deeply troubled by today’s precedent-setting action.
“Imposing punitive fees on Arizona consumers — without first proving the need and demonstrating the fairness of these charges through a comprehensive, transparent rate case where due process is afforded — is patently unfair, jeopardizing future solar growth and job creation statewide.
“Despite having some of the best solar resources in the nation, Arizona now has one of the shakiest policies for encouraging its development. Hopefully, we can reverse this course in the future by working closely together. In the months ahead, we will continue our efforts to educate the ACC, as well as public officials all across the state, as to the true market value of solar, and the benefits it provides to local economies, grid reliability, consumer choice and environmental quality.
“We are also very troubled by the public campaign of misinformation, manipulation and distortion engineered by Arizona Public Service (APS). This has never been a ‘subsidy’ problem as claimed by APS.
“Unfortunately, the utility exploited this debate and then used it as an opportunity to stymie competition, ‘stick it’ to consumers and bolster its bottom line. No one should be surprised. This is what monoplies do.”
In making its decision, the ACC determined that the current net metering program creates a cost shift, causing non-solar utility customers to pay higher rates to cover the costs of maintaining the electrical grid. The cost shift to non-solar customers is what prompted APS to propose net metering reforms earlier this year. ACC professional staff and the state’s Residential Utility Consumer Office (RUCO), among other organizations, also agreed that a cost shift exists.
The fixed charge does not increase APS revenue, but instead will modestly reduce the impact of the cost shift on non-solar customers. The ACC acknowledged that the new charge addresses only a portion of the cost shift.
“The Arizona Corporation Commission has taken an important step in reforming the state’s net metering policy,” said Don Brandt, APS Chairman, President and CEO. “The ACC determined that net metering creates a cost shift. We applaud the ACC for cutting through the rhetoric and focusing on how the cost shift impacts non-solar customers.
“Of course, having determined that a problem exists, we would have preferred for the ACC to fix it. The proposal adopted by the ACC, and surprisingly championed by the state’s consumer advocate RUCO, falls well short of protecting the interests of the one million residential customers who do not have solar panels. We will continue to advocate forcefully for the best interests of our customers and for a sustainable solar policy for Arizona.”
Current solar customers and those who submit an application and a signed contract with a solar installer to APS by Dec. 31, 2013, are not subject to the new fixed charge.
Arizona Public Service (APS) had lobbied for a far higher charge, amounting to $50-$100/month for solar homeowners, as part of its challenge to the current net metering structure. Its argument then and still: customers who add solar and get reimbursed for it are essentially being subsidized by non-solar customers.
On the solar industry side of the aisle victory was quickly trumpeted. The ACC’s decision keeps intact the current net metering program against which APS had lobbied hard, both directly and secretly supporting some anti-solar nonprofits’ efforts. “APS launched an unprecedented multimillion-dollar campaign to destroy the Arizona rooftop solar industry and failed,” Bryan Miller, president of The Alliance for Solar Choice (TASC) and VP at SunRun. “The legacy of the Arizona net metering battle [is] a major loss for APS and its allies,” echoed advocacy group Tell Utilities Solar won’t be Killed (TUSK) and its chairman Barry Goldwater Jr.
Less clear is who wins with the ACC-approved $0.70 per kW fixed fee, but also what one local report called a “surprising” compromise between local solar advocates and the state’s Residential Utility Consumer Office (RUCO). APS grumbles that the deal “surprisingly championed” by RUCO “falls well short of protecting the interests” of non-solar residents. On the other hand, while a fraction of what APS had sought, it’s “a sacrifice by solar proponents” according to TUSK. During Thursday’s hearings, TASC representative Hugh Hallman reportedly acknowledged that there is indeed a cost shift that the solar sector needs to help address, and “we’ve been authorized to propose that the solar industry will assist in providing some support to help bridge through this creative destructive period.” That’s likely to be especially true for third-party-owned solar (SolarCity does business in Arizona, Vivint does not) whose promises of monthly savings for customers are likely to be largely or entirely wiped out.