Massive solar fee increase to be considered this year

In a major victory for Arizona Public Service, energy regulators allowed the utility to move forward with its proposal to more than quadruple the monthly fee it charges homeowners with solar panels instead of waiting for a more comprehensive discussion about its rates next year.

The Arizona Corporation Commission voted 3-2 to set hearings in the coming months on the utility’s planned fee hike. Chairman Susan Bitter Smith and Commissioner Bob Burns both voted against the motion to tackle the solar fee outside of a rate case.

However, the commissioners also took pains to say the outcome of the hearing isn’t set – meaning they could decide to keep the current fee, raise it by a smaller amount or even defer a decision for later.

If ultimately approved, the higher solar fee will apply to APS customers who have bought solar panels from or contracted with third party vendors like SolarCity. The fee won’t apply to customers who take advantage of APS’s own rooftop solar program, which the commission also approved last year and which the utility is rolling out this year.

APS is asking the commission to increase the monthly fee it charges solar customers to an average of $21, up from $5, which the commission approved in 2013. APS contends that solar customers have not been paying their fair share of maintaining the electric grid, thereby burdening non-solar customers. The utility estimates that each rooftop solar customer shifts $67 each month to non-solar customers.

But solar advocates say other cost shifts exist, and a rate case is needed to fully address these cost shifts.

The commission’s decision contradicted a recommendation by Administrative Law Judge Teena Jibilian, who earlier concluded that a rate case, where the utility and stakeholders could address other cost shifts, is the best place to address solar cost shifts.

The vote sets up an evidentiary hearing process that will allow all parties to present and cross-examine expert witnesses on the solar cost shift in APS territory.

The Residential Utility Consumer Office supported moving forward with the hearing now, and then discussing the issue more fully in the 2016 rate case.

The Alliance for Solar Choice attorney Court Rich told the Arizona Capitol Times this morning that the group intended to file a motion to reconsider the issue.

PROVIDING A FRAMEWORK

As part of its decision, the commission adopted language to provide a framework on the cost shift discussion, promising to identify issues it wants to be addressed.

During the hearing, the commission also indicated an interest in reviving a discussion on the “value of solar.”

But the commissioners didn’t vote on the issue. Instead, they strongly suggested reviving the discussion, and will likely decide do so at a later staff meeting.

The commission’s Utility Division said the hearing process may take nine months, putting a resolution on the issue sometime in May 2016.

APS said it will file a rate case in June 2016, a process that will likely take a year or more to complete.

Commissioner Doug Little, who was elected in 2014, said he doesn’t want to wait for a solution until 2017.

“The best place might be in a rate case, but that doesn’t mean that’s the only place,” he said.

Commissioner Tom Forese, who was elected with Little in 2014, also supported moving forward now, though he didn’t explain his vote. Commissioner Bob Stump voted to move forward, saying he agreed with Little’s concerns.

During the 2014 campaign, Forese and Little benefited from hundreds of thousands of dollars in anonymous outside spending.

Though the true source of the money is unknown, it is widely believed that APS funded the independent expenditure campaign. The company has never categorically denied that it was the source of the money.

Burns said he believes a determination of the value and costs of solar needs to happen before a cost shift can be addressed. He said APS would have already filed a rate case if it were truly concerned about the cost shift affecting its finances.

Bitter Smith sided with Burns, but said her issue was with the timing. A hearing into APS’s rate fee hike application may not be finished until May 2016, and then a month later, the utility would come in for its scheduled rate case, she said.

“How valuable, at the end of the day, is that?” she said.

About 20 solar customers and employees spoke against APS’s application, saying it needed to be considered more fully in a rate case.

“We should be making solar energy affordable and accessible, not hindering access,” said Brandon Cheshire, the owner of SunHarvest Solar.

The ratepayers and solar advocacy groups also said they believe the intent of the fee isn’t to address cost shifts, but to kill the solar industry.

In a statement after the decision, APS spokesman Jim McDonald said the company agrees that a rate case will allow for a more comprehensive solution, but moving forward with the fee proposal now is a sound interim step.

“The (commission’s) decision means that Arizona will have an open, transparent, public discussion of how to continue our state’s leadership in solar power while still protecting average electricity customers,” McDonald said. “That’s important because when we get past the divisive rhetoric and the political theater, the facts are clear.”

Solar advocacy group Tell Utilities Solar won’t be Killed said the commission went against ratepayers by allowing the fee hike hearing to move forward. TUSK also said the commissioners and APS broke their promises, since they had previously said they would wait for a rate case.

“This decision bends to the whim of a utility monopoly that has gone to great lengths to try and tax and regulate the solar industry out of business,” TUSK said.

TUSK also noted the commission still hasn’t done an independent study on the cost and benefits that solar provides to the electric grid.

“The decision results in a repeat of the 2013 solar deliberations in which the proceeding lacked an unbiased, independent consultant,” TUSK said.

Meanwhile, APS’s own rooftop solar program kicked off earlier this year. APS customers will get a $30 credit on their bills for allowing the utility to rent their roofs.

Critics of APS’s program say the utility wants to cut the savings of third-party solar customers while offering a more attractive program to customers.

WHY NOT A RATE CASE?

During the hearing, Bitter Smith questioned why APS couldn’t just file a rate case. The commission voted last year to push out APS’s rate case, which was initially required to be filed by summer 2015.

APS attorney Thomas Loquvam said the interim step to address rooftop solar is designed to make incremental progress and would be revenue neutral.

“It’s not good public policy to begin that really massive rate case process to address one issue,” he said.

McDonald told the Arizona Capitol Times this morning that there is no need to file a rate case now because the rates “allowed us last year to recover our costs.”

But Kris Mayes, the former Corporation Commission chairman who’s now representing the Solar Energy Industries Association, said Loquvam didn’t really answer Bitter Smith’s question.

“They could file a rate case… Everybody else withdrew their applications (to address solar in a rate case), but not APS,” Mayes said, referring to Trico and Tucson Electric Power, which applies for higher solar fees and then withdrew the applications.

Mayes lamented that APS wants all the parties and the commission to go through the hearing, spend money on lawyers, and then just repeat the process again in its 2016 rate case.

RUCO director David Tenney told the Arizona Capitol Times this morning that pushing the solar issue to a rate case would lead to a cost shift that’s “even more astronomical and harder to address.”

“When we get to the rate case, that’s all the rate case would be about. That’s not fair to the other ratepayers to have net metering consume the rate case,” Tenney said.