Energy regulators approve smaller solar surcharge

In a blow to Arizona Public Service, energy regulators agreed late Thursday to a compromise proposal charging users of solar rooftop panels with a fixed fee of 70 cents per kilowatt.

The new charge, which will begin next year, is only a fraction of what Arizona Public Service sought – which was to reduce savings from the solar incentive by roughly half.

The decision was reached after a two-day deliberation that capped a months-long expensive campaign by Arizona’s biggest utility company to reduce a key subsidy for residential solar.

As adopted, the resolution comes out to a monthly surcharge of $7 for a 10 kilowatt residential solar system, and roughly $5 for the more typical 7 kilowatt system.

In the end, it was Commissioner Bob Burns’ amendment that became the vehicle to arrive at the new charge, which the regulatory agency adopted by a vote of 3-2. His motion was modified by an offer that was reached by the alliance of solar companies and the Residential Utility Consumers Office.

“If I were king, I would have written this differently,” Burns said, adding that, however, a consensus needed to be reached.

Burns, and Commissioners Bob Stump and Susan Bitter Smith supported the surcharge. Commissioners Gary Pierce and Brenda Burns opposed it.

Pierce said he doesn’t think the adopted proposal goes far enough to protect ratepayers.

APS opposed the motion.

The commissioners struggled to settle on a final surcharge amount, but they ultimately, the options were narrowed down to two – a $1 charge per kilowatt or 70 cents, which is what the solar alliance and the Residential Utility Consumers Office ultimately embraced.

Bryan Miller of SunRun, a residential rooftop solar panel installation company,  said the lower surcharge would translate to a big hit to his industry, but a $1 charge would simply be unsustainable. “[Cutting savings by] $7 will eliminate a huge segment of the market,” Miller said, referring to the estimated monthly charge for a typical 7 kilowatt solar system.

But APS counsel Thomas Loquvam said commissioners should pick the higher charge.

“It shouldn’t even be a dollar, it should be higher. The more the commission can address the cost shift, the better,” he said.

The solar industry backed away from forcefully resisting the idea of altering the current net metering scheme today, surprising commissioners by arriving at the compromise offer with RUCO.

Former Tempe Mayor Hugh Hallman, who represents the interest of the alliance of solar rooftop companies that’s fighting APS’ proposal, and Patrick Quinn, director of the Residential Utility Consumers Office, spelled out the compromise offer midway during the second day of hearing.

The offer is for solar rooftop consumers to be charged with a fixed amount of 70 cents per kilowatt, which amounts to monthly surcharge of $7 for a 10 kilowatt residential solar system, and roughly $5 for the more typical 7 kilowatt system.

Hallman said solar companies recognize that they operate in an era of great change and acknowledge their contributing to it.
The offer of compromise moves the solar industry away from its position that the current net metering system should be maintained.

“We’re at the cusp of that kind of creative destruction here. New technologies are coming online that will assist us all,” Hallman said. “With that caveat – that we will stand by our views of what is the proper approach here – we’ve been authorized to propose that the solar industry will assist in providing some support to help bridge through this creative destructive period.”

Hallman also suggested that, in order to clearly send a signal of certainty to the market, the commission adopt the fix fee for a long time, perhaps as long as 20 years, although he was quick to add that future commissioners are not bound to the current commissioners’ decisions.

The proposal also entails grandfathering-in today’s net metering rules for those who already have rooftop panels or those who will be installing one by December 31. Additionally, the proposal seeks a second grandfathering-in for those who would fall under the proposed surcharge, so any change in the charges resulting from a future rate case would only apply to new customers.

But APS seems inclined to reject the offer from RUCO and the solar coalition, Tell Utilities Solar won’t be Killed.

“In 2016, I don’t want to be the one standing before this commission trying to explain why all those customers who don’t have solar are going to have a three or five percent increase in their bills because of the cost-shifting that occurs with net metering,” said APS exec Jeff Guldner, adding that while such an increase may seem small, it would be concerning to elder Arizonans on a fixed income.

Guldner said APS is going to be protected in any case, since a mechanism exists to recover its losses. “[But] you have not protected the customers. That’s what we came in here for,” he told the commissioners.

Additionally, Gulder said it is one thing to grandfather in today’s roughly 20,000 residential solar customers, but it’s another issue to do the same for up to 70,000 customers.