Weeks before Supreme Court case, Tesla and utility draft deal

Source: Amanda Reilly, E&E News reporter • Posted: Friday, March 9, 2018

Less than two weeks before scheduled Supreme Court arguments, a Tesla company and an Arizona utility have made major progress toward resolving a lawsuit over solar installation fees.

Tesla Energy Operations Inc. and Phoenix-based Salt River Project Agricultural Improvement and Power District have reached a memorandum of understanding that they expect will form the basis of a settlement agreement.

Under the agreement, SRP would purchase a battery storage system from Tesla and give customers incentives for home energy storage systems.

“Tesla and SRP look forward to finalizing their agreement,” the companies said in a statement. “Both companies remain committed to providing value for their respective customers and providing renewable energy in Arizona.”

The Tesla unit, which was formally known as SolarCity Corp., sued SRP in 2015, alleging that solar installation fees imposed by the utility hurt it and its customers, lowering demand for panels.

SRP took the case to the Supreme Court when a lower court rejected its request to dismiss Tesla’s antitrust suit. SRP argued that it should have been immune from suit because it is a local government entity carrying out Arizona’s “clearly articulated” policy of displacing competition in the retail electricity market.

The Supreme Court agreed in December to take up the case and answer the question of whether SRP could immediately appeal the decision on its dismissal motion. The court is scheduled to hear arguments March 19 (E&E News PM, Dec. 1, 2017).

The agreement between the companies, which was first announced yesterday, could bring the litigation to a close and avoid a protracted court battle that could last for years.

According to its terms, SRP would install a 25-megawatt battery system from Tesla at its Agua Fria Generating Station in Glendale, Ariz. The system would come online in 2021.

SRP would also offer an incentive of up to $1,800 to residential customers who install qualifying energy storage systems. The incentive would be available to up to 4,500 of SRP’s customers beginning in May of this year. Twenty homes would have Tesla’s Powerwall 2 home batteries.

The companies said SRP’s generating station would be an “optimal location” for Tesla’s utility-scale battery storage system. SRP would in turn study how battery storage can enhance residential rooftop solar and share data from its home incentive program with Tesla, with the goal of using the program as a basis for widespread adoption of the technology.

“The business relationship with Tesla gives SRP the ability to work with and learn from a company whose experience and advancements with battery storage is well known,” the companies said.

SRP also agreed to put in place a pilot pricing program for solar and non-solar customers that it says would limit the effect of unusual spikes in demand on billing.

It’s yet unclear what effect the proposed agreement will have on the ongoing Supreme Court case and the scheduled arguments.

“The parties are working to reach a final resolution and have informed the Supreme Court of the MOU, but have not asked for a postponement at this time,” SRP spokesman Scott Harelson said today.

Green groups previously urged justices to reject SRP’s immunity claims. SRP is not “advancing the public interest” with fees that “improperly target distributed solar generation,” a coalition of environmental groups said in an amicus brief in the Supreme Court.

The Justice Department has also sided with Tesla in the Supreme Court fight (Greenwire, Feb. 21).

In an email today, Jean Su, associate director at the Center for Biological Diversity, expressed concerns with the proposed settlement terms.

“This settlement doesn’t address the heart of the problem. While it may be a positive step for battery storage, it fails to prevent utilities like the Salt River Project from continuing to set unfair rates for customers who want to embrace rooftop solar,” Su said.

She added: “In our era of runaway climate change, we can’t allow outdated utility monopolies to prop up their bottom line by restricting access to renewable power and obstructing our clean energy transition.”