Ariz. is ‘ground zero’ in battle over rooftop solar
Most of the arguments circles around “cost-shift,” a problem manifesting as customers moving to rooftop solar arrays downshift their grid-sourced energy. Utilities in the state have argued that solar customers are pushing all grid costs onto the shoulders of customers who don’t use solar.
Arizona Public Service, an investor-owned utility in the state, filed an application earlier this month with the Arizona Corporation Commission, which oversees utility rates, requesting the state up the “grid access fee” from $5 to $21 per month for future solar customers.
In 2013, the commission approved a $5 grid access fee at APS’s behest as rooftop solar systems sprouted thanks to decreased costs, said ACC spokesman Rebecca Wilder. Though the commission agreed during that time frame that $21 was “reasonable,” according to the docket documents, they settled on $5.
Now APS thinks the commission should increase the fee, asserting the agency already thought it was reasonable.
APS’s move follows another Arizona utility, Salt River Project, whose board last month approved up to $50 per month in fees on solar customers as part of its revamped price plan, according to SRP spokesman Scott Harelson.
Harelson said the company’s decision was designed to recoup costs from solar customers decreasing their grid usage as a way to lower prices for customers who don’t use solar.
“SRP’s new price plan, E-27, does not include a fixed $50 ‘fee’ nor does it include a tax,” Harelson wrote in an email to EnergyWire. “Rather, the new price plan includes a demand component that includes increased charges to better recover fixed costs related to the solar customer’s service facilities and their use of the grid. Most importantly, the new price plan as designed, will give customers the tools to manage both their demand and energy use. The new plan actually reduces the price customers pay per kilowatt hour for energy.”
The restyled rate plan provoked a lawsuit from solar developer SolarCity Corp. last month (EnergyWire, March 5).
Aside from fees, Arizona’s net-metering policies — when customers sell excess green energy back to the grid — have drawn fire. Two Arizona utilities, Tucson Electric Power Co. and Trice Electric Cooperative Inc., submitted an application to the ACC in March requesting a new net-metering tariff. All three cases are pending and are not available for official comment from the ACC, Wilder said.
Let the sun shine in
Data compiled by the Advanced Energy Economy puts Arizona’s solar usage at 1.9 percent of its total power mix. And the Solar Energy Industries Association ranked Arizona just behind poster child California in installed solar capacity.
Yet fights over net metering cramped Arizona’s solar expansion in 2014, according to SEIA.
Solar industry advocates worry that the current resistance from the state’s utilities could stall growth even more.
“For whatever reasons, rooftop solar in Arizona is now under assault from one end of the state to the other,” said Ken Johnson, SEIA’s vice president for communications, in an email to EnergyWire. He described the current state of affairs as a “ground zero” as solar industries try to carve out a place in Arizona’s grid.
“To the best of my knowledge, Arizona is the only state where demand charges have been proposed for residential solar customers — so this is the front line of the battle against rooftop solar,” Johnson added. “While we are facing problems in other states, Arizona is ground zero.”
Meanwhile, Clean Finance Power’s vice president for strategy and government affairs, James Tong, alongside former Federal Energy Regulatory Commission Chairman Jon Wellinghoff, released a series of op-ed articles for the website Utility Dive blasting the utilities’ attempts to raise fees.
“The recent push for fixed fees is problematic for many reasons; for one, it does not rely on actual data or results, but rather on the faulty assumption that users of technologies that shift costs are necessarily not paying their fair share,” Wellinghoff and Tong wrote in the article.
“Arizona is leading the charge,” Tong added in an interview with EnergyWire. “The regulators tend to be more accommodating, let’s say, of utilities there. It’s not necessarily corrupt, [but] utilities in other states get questioned more.”
Solar’s advocates zeroed in on the cost-shift argument. Think of it like a high-cost premium rate in an airplane, Tong said, with customers swapping first-class seats for coach class. Customers leaving the grid probably chipped in their fair share since those costs are hard to quantify anyway, Tong said, and, even with their reduced costs, are probably still paying their fair share. The difference lies in whether or not utilities can recoup their profit margins.
“Utilities were expecting a high premium on customers, and that’s where they make their margins,” Tong said. “Now the margins are not there anymore; utilities have to sit back and figure out a new way to recover those margins.”
Cue the new fees. Tong also referred to a 2013 Edison Electric Institute study that said declining costs for renewables are among a cocktail of factors threatening the traditional utility business model.
“As a result of a confluence of factors … the threat of disruptive forces impacting the utility industry is increasing and is adding to the effects of other types of disruptive forces like declining sales and end-use efficiency,” the report read. Advances in battery storage, cheaper solar arrays and fuel cells were listed in the report.
APS manager for renewables Marc Romito acknowledged the report but said Tong’s and Johnson’s arguments represented only a small subset of solar developers. Romito pointed toward APS’s new program to install at least 1,500 rooftop solar arrays for APS customers that would add more sun to their fare of coal- and nuclear-dominated power resources. Adding renewables to their power mix is a desired course of action, Romito said, but tying intermittent energy to the grid at affordable costs is the main balancing act.
“All too often, a small subset of solar leasing and financing self-declared themselves to be the solar industry,” Romito said. “What’s behind that curtain is that they have short-term profits in mind. They are only interested in throwing as much rooftop solar on the roofs and take no long view. What we need to do in context of rates is foster an incremental and gradual approach.”
Both Tong and Romito have pushed revamping rate regulations as the pathway to iron out conflicts between solar developers, users and utilities.
Cloudy solutions
Revamping regulations regarding rates is the chosen solution from Tong and Romito, among other solar and utility officials. How exactly to do so is the question.
SEIA’s Johnson said the “fairest way to resolve these disputes — and others like them — is for the ACC to stick to its established rate case procedures. It’s hard to imagine that 42 other states all have it wrong.”
But Tong and Romito have argued in favor of changing the current rate system. “Time-varying rates,” as Tong defined, increases fluidity in rates alongside the energy market. Fixed fees, Tong added, are too rigid.
“As you move more to solar distribution generation, you need a more flexible pricing system,” Tong said. “[With] too rigid of a pricing, customers don’t respond to right pricing signals. The better way is more time bearing; pricing aligns better.”
Romito said the ideal rate structure “takes a look at the customers’ highest usage over a period of time that’s representative over what they require of their utility [along] with the price structure that takes a look at signaling to customers when they could use more energy or when they should less energy,” and then price accordingly.
Meanwhile, as renewables increasingly carve out their place in Arizona’s future grid, solar and utility officials agree a conversation about rates between customers, utilities and solar developers will need to happen.
“Simply put, these types of issues should be settled by state regulators as part of a comprehensive rate case,” SEIA’s Johnson said.