Two-Year Battle in Arizona Concludes with Rooftop Solar Rout

After nearly two years of proceedings, including a two-day meeting ended late on December 20, the Arizona Corporation Commission has voted 4-1 to end retail rate net metering for rooftop solar customers (Docket No.E-00000J-14-0023) in the Grand Canyon State, according to a report by the Arizona Daily Star.

Under a policy decision expected to guide pending and future rate cases, the commission voted replace the present net metering system with reimbursement through an “export rate” much lower than retail rates, the local news outlet said.

Current customer-operators will be grandfathered – keeping their rates for 20 years from their original date of interconnection. However, new solar operators will receive lower compensation, which intervenors to the case from The Alliance for Solar Choice and from Vote Solar predicted would be 30 percent less than initial owners are paying.

The new export rates are supposed to vary by utility and to be stepped down annually, in increments limited to 10 percent each year. However, the commission has admitted that the gap is likely to be bigger during the first year. Rooftop solar customers under the new rules eventually will have their energy export rates locked in for 10 years.

Arizona utilities including Tucson Electric Power (TEP) and Arizona Public Service (APS). had urged the commission to eliminate net-metering.

Indeed the commission already was mulling requests by TEP (Docket No. E-01933A-15-0322 and other state-regulated utilities to increase charges on solar customers to offset an indicated cost shift to other ratepayers. The utilities said that, because rooftop solar customers use far less grid-supplied power, they impose unrecovered fixed costs on the utilities and non-solar customers.

TEP had proposed basing the solar expert rate on its most recent costs for utility-scale renewable energy projects — about 6 cents per kilowatt-hour (kWh) instead of the retail rate of about 11.5 cents per KWh. APS has advocated using its own proprietary cost studies to set an “avoided cost” rate for solar credits, at about 3 cents per KWh.

Meanwhile, the solar companies and advocacy groups countered that solar is worth far more than the utilities say in terms of reduced costs and pollution, and that any cuts to net-metering rates would devastate the industry.

The decision this week could augur a trend. Nevada already has ended net metering and at least 25 other states are considering that and other solar rate-design issues.

Solar advocates contended that anything other than full grandfathering of net-metering rates would be unfair and lead to litigation, noting that Nevada appears to be backing off its retroactive elimination of net metering in the face of public outcry and lawsuits, the local news outlet said.

Over the longer term, the utilities are required to develop solar valuation methodologies based on a five-year forecast of “avoided cost” of conventional generation, including such things as fuel costs, to be updated with each rate case.

“You’re going to have people who are going to sign up for solar with no idea what happens after 10 years,” said Court Rich, representing the solar-industry group The Alliance for Solar Choice.

Utility representatives countered that the 10-year export rate lock-in is roughly equal to the payback period for the typical home rooftop solar system, the newspaper said.

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