Arizona Decision On Solar PVs Shows Tough Choices Ahead

A compromise decision leaves both sides disappointed


Two things Arizona has in abundance are sunshine and land. In the past few years, rooftop solar PVs could be added as growing number of customers, both residential and commercial, discovered the benefits of self-generation. That led to a fierce battle between the state’s biggest private utility, Arizona Public Service (APS) and the solar lobby over the state’s net energy metering (NEM) law.


APS claimed, as do virtually all utilities in the US and elsewhere, that customers with rooftop solar are not paying their fair share for the upkeep of the network – old story – and are imposing higher rates on non-solar customers – equity and fairness issues, also old story.


What keeps utility CEOs awake at night?




Energy Potential from Unsubsidized $3/W Commercial Solar (Capacity and % of Sales)


Source: Commercial Rooftop Revolution, Institute for Local Self-Reliance (ILSR), Dec 2012

Arizona experienced the second largest number of PV installations in the US during the 2nd Qtr 2013, roughly 500 per month in the APS service area alone. APS figures solar customers are currently passing $18 million in extra costs per annum to non-solar customers. With an advertising and lobbying budget estimated around $4 million, APS proposed that a monthly fix charge of $50 to $100 be applied to solar customers to plug what they characterized as a bypass hole.

The opposition, a coalition of solar PV installers, consumers and the solar lobby were the underdogs, spending roughly $400,000. After 2 days of contentious hearings, the Arizona Corporation Commission (ACC) decided to keep the net energy metering law intact but impose a fixed fee of $0.70 per kW for solar rooftop owners starting in 2014. Customers with existing contracts are exempt from the fixed fee.

Given the average size of rooftop PVs in Arizona is 7-8 KW, the fee would amount to $5-6/mo. It is not enough to break the camel’s back but it cuts into the attractiveness of PVs. ACC vote was 3-2, suggesting the outcome could have been different.


Sunny Grand Canyon State

Of 976 MW of new solar PV installations in 2nd Qtr. 2013, 53% are in California


Source: NPD Solarbuzz North America PV Markets Quarterly report

During the hearings, Bryan Miller, president of The Alliance for Solar Choice and VP at SunRun, a solar financing company, testified that even a $5/mo. charge would eliminate the ability of some customers to save money by leasing solar panels. He estimated that solar leasing companies, which dominate the market in Arizona as well as many other states, are able to save their customers between $5-10 a month, on average. He, and a number of others testifying, pleaded with the ACC not to impose any fixed fees.



Source: The Wall Street Journal, 3 May 2013, based on data from GTM Research, SEIA

At the end, ACC’s decision was a compromise that left both sides equally unhappy – the sign of a good compromise. Referring to the ACC decision, Bryan Miller said, "APS launched an unprecedented multimillion-dollar campaign to destroy the Arizona rooftop solar industry and failed." Barry Goldwater Jr., the chairman of the advocacy group Tell Utilities Solar won't be Killed (TUSK) agreed, stating, “The legacy of the Arizona net metering battle [is] a major loss for APS and its allies." 

"We applaud the ACC for cutting through the rhetoric and focusing on how the cost shift impacts non-solar customers," APS top executive Don Brandt said after the verdict, pointedly adding, "having determined that a problem exists, we would have preferred for the ACC to fix it."


More to come

Annual Solar PV Installed Capacity and Revenue by Region, World Markets: 2011-2020


Source: Solar PV Market Forecast, 3rd Qtr. 2013, Navigant Research

APS, one can surmise, did not gain many new friends among its customers, even the low income, non-solar customers it was trying to save from paying punitive higher bills. Solar advocates and their supporters reinforced the message that APS wanted to protect its centralized-distribution business model and revenue stream rather than the best interests of its customers.

In a prepared statement, Rhone Resch, the President of Solar Energy Industries Association (SEIA) said, "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."

If the Grand Canyon State’s decision is any indication, the 42 other states and the District of Columbia who are also looking into modifications in their NEM laws, are likely to face equally tough choices. 

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