Battle Lines Drawn in Arizona Solar Rate Design Cases

Eversheds Sutherland (US) LLP

Electric utilities and residential solar companies continue to wrangle over charges applicable to rooftop solar customers. Recent filings in rate design cases involving Arizona Public Service Company (APS) and UNS Electric, Inc. (UNS) indicate that these battles will be hard-fought.

In the APS case (Docket No. E-01345A-13-0248), APS filed an application requesting that its “grid access charge” for rooftop solar customers be increased from $0.70 per month for each kW of a customer’s solar system to $3.00 per kW per month, which would be $21.00 for an average 7 kW system. Various solar intervenors argued that the request should be decided in the context of APS’s next rate case, scheduled to be filed in June 2016.

On August 31, 2015, the Arizona Corporation Commission, in a 3-2 decision, decided that it would hear APS’s application prior to its next rate case and directed that a hearing be scheduled.  This prompted some of the solar intervenors to file motions for rehearing on the ground that the three commissioners who voted in favor of APS are biased and should have recused themselves. The solar intervenors asserted that two advocacy groups “widely believed” to be funded by APS or its parent company spent more than $3 million in support of two of the commissioners in a recent election, and the third commissioner has made repeated anti-solar statements in speeches, tweets and Facebook posts.

In response, APS accused the solar intervenors of engaging in “political gamesmanship” with the goal of “paralyzing the Commission.” APS also offered to withdraw its request for an increase to the grid access charge if the Commission would narrow the hearing and simply address cost-of-service issues related to solar customers. APS stated that the facts found at such a hearing could be used to inform APS’s 2016 rate case. The Commission has not ruled on this request.

In the UNS case (Docket No. E-04204A-15-0142), UNS has requested Commission approval of several rate design changes to address the “cost shift” resulting from the “rapid expansion of rooftop solar” in its service area. In its application, UNS noted that net metering policies encourage customers to oversize their solar systems in order to “bank” as many credits as possible for later use. Also, as the aggregated amount of distributed generation becomes larger, it constitutes a generation source “that the utility cannot see, has no control over, provides no ancillary services for, and can create significant load to generation imbalances.”

Specifically, UNS seeks the following changes:

  • An increase in the basic service charge from $10 to $20 per month for residential customers;
  • Elimination of the third rate tier for residential customers (which has higher kWh charges); and
  • A mandatory three-part rate structure (service charge, demand charge and energy charge) for new distributed generation (DG) customers, including users of solar arrays.

UNS also proposes changes to its net metering rider for customers who submit applications after June 1, 2015. These changes include:

  • Eliminating the banking option for excess energy delivered to the grid (which can be used to offset consumption at a later time). Instead, new DG customers would receive bill credits for excess energy, which could be carried over to future months.
  • Re-pricing the compensation allowed to DG customers for excess energy. Instead of using a retail rate, these bill credits would be based on the rate UNS pays for the most recent utility-scale renewable energy connected to its distribution system (proposed to be 5.84 cents per kWh).

Numerous solar groups have filed motions to intervene. Direct and rebuttal testimony is due over the next few months, with a hearing scheduled for March 1, 2016.

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It is expected that the rate design proposals made by APS and UNS – and similar proposals filed in other states – will be vigorously contested by residential solar companies.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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