The long-term viability of independently produced solar power could hinge on who voters pick to serve as state utility regulators.
It’s not so much that members of the Arizona Corporation Commission are likely to rescind the decade-old mandate that electric companies get at least 15 percent of their power from renewable sources by 2025 and that a portion of that must come from solar. Former commissioner and current Democratic candidate Bill Mundell said that would be politically unacceptable, not just to users but to the utilities.
“They don’t want a headline that says, ‘Commission reduces it from 15 (percent) to 12, to 10,’” he said. Instead, Mundell contends, the utilities are hoping to hobble it – especially the part about getting power from rooftop solar.
“They’ve been doing it with their demand charges, with hookup fees, with looking at net metering,” he said, all of which could make individual installation unaffordable.
Some of this actually could be decided before the new commission takes office in January. The current all-Republican commission is tentatively set to review issues next month.
But it will be the makeup of the commission starting in January that is more likely to determine long-term policies.
It starts with the question of what role the government needs to play.
Incumbent Republican Andy Tobin said a lot of the questions of where utilities obtain their power will resolve themselves through the market, both from the perspective of lower costs for alternatives as well as consumer demand.
Tobin said the government has had a heavy hand in the process, particularly at the federal level with the U.S. Environmental Protection Agency and its various pollution regulations.
“They put on such restrictions onto our coal producers that were going to cost hundreds of millions of dollars, mostly hurting the poor because those are our base rates,” he said.
Democrat Tom Chabin said market forces only go so far.
“If the market says to dirty the sky and choke us all, I’m not for that,” he said.
Chabin said he does believe changes in technology will make cleaner sources of electricity more affordable. But he’s not sure that power companies are ready to go along.
“Are we going to have utilities that are going to obstruct it because it messes with their business model?” he asked.
The utilities want changes in the regulations.
One deals with the question of “net metering.” That goes to the issue of how much utilities have to pay customers who generate more power than they need.
The utilities also want “demand charges.”
Now, most residents pay a bill based on two components. The first is a flat fee for service. The second is based on usage, though the rate may vary on time of year and, for some, the time of day.
A demand charge would be based on the highest peak usage at any one time, no matter how brief, such as the air conditioner kicking on while the electric dryer is working.
Much of the contention of the utilities is that the current system results in an unfair subsidy, with customers who cannot afford rooftop solar paying the lion’s share of maintaining the whole system, effectively subsidizing solar customers.
“That’s the talking point of utilities,” Mundell said. “But what they don’t tell you is the other side of the coin is if people put solar on their homes, the utilities don’t have to build infrastructure.”
More to the point, the commission sets rates – and profits for utilities – based on a rate of return on their capital investment.
“If they build a fossil fuel plant … they get to put that in rate base and raise everybody’s rates, solar and non-solar alike,” he said. No construction, Mundell said, means nothing to charge back to customers with a profit markup.
“So solar rooftop benefits the non-solar customers,” he said.
Boyd Dunn said he’s a fan of the current net metering rules.
“Because of net metering, Arizona is now ranked third in terms of rooftop solar,” said Dunn, a former Chandler mayor and Superior Court judge who is now a Republican candidate for the commission.
“We have brought in 10,000 jobs, 36,000 rooftops have that, 450 different companies have been formed,” he continued “That’s the good news.”
Dunn said, though, he won’t commit to anything until he reviews the staff report and hears from all parties.
“I think net metering could continue,” he said, but adding it could be modified. “It can be whatever the vision is the Corporation Commission is of what that solar should be, weighing, again, the cost and the benefits and realizing that may have changed because of the success.”
“We can’t advance new technology until we figure out what the value of these rooftop solar units are,” he said.
Republican Bob Burns, like Dunn and Tobin, said he wants to study the recommendations further. And Burns, as an incumbent, said he does not want to be accused of prejudging the matter.
But Burns said there’s more to the issue of what incentives the commission requires utilities to provide to – or charges the panel allows utilities to charge them as disincentives – than questions of who might be subsidizing whom. And one is water.
“We are in a situation where a water shortage is about to be declared on the Colorado River,” said Burns, a former state senator who also had served on the board of the Central Arizona Project. “If that shortage is declared, Arizona’s the first one that has to take the cut.”
What makes that important, he said, is that generating power from coal, natural gas or even nuclear “uses a lot of water,” in each case creating steam to drive turbines.
“Solar, wind, fuel cells, a number of renewables don’t use water,” he said. “Those are the kind of things that go beyond the net metering viability question in my mind.”
Chabin said there’s another thing people need to keep in mind when looking at the question of net metering.
For most of the year, each extra kilowatt hour a homeowner with solar produces becomes a credit against the next month’s bill. Once a year there has to be a reconciliation, with the utility paying the homeowner for excess power generated.
Chabin said the utility pays the homeowner a wholesale rate.
“And when I produce the kilowatt hour that’s extra in that total, where does it go?” he said.
“It goes to my next-door neighbor,” Chabin continued. And the utility gets the check – at the retail rate.