Utilities must buy solar, renewable energy under long-term deals

Utilities are now required to enter into long-term contracts to buy power from solar and renewable energy generating stations under new policy established by the Arizona Corporation Commission.

Solar advocates and environmental groups hailed the commission’s unanimous vote December 11 as a new day that will bring jobs and cleaner energy to the state, while utilities said the new rule will cost customers more over the long haul.

The commission’s decision extended the contracts between the utilities and the generating stations, known as qualifying facilities, to 18 years from two.

Under the federally mandated Public Utility Regulatory Policy Act, monopoly utilities – the companies the commission regulates – are required to purchase power from qualified facilities at a rate fixed by regulators.

Arizona Public Service Co., the state’s largest utility, wanted these contracts to remain only in two-year durations, despite its own solar contracts lasting on average 28 to 30 years. APS was not alone in wanting the two-year deal to remain. Tucson Electric Power and UniSource Energy Services, the two other largest monopolies regulated by the commission, also did not want to extend the contracts longer. The unanimous vote gave them no choice.

Solar advocates balked at the APS position, saying it would be nearly impossible to create a $100-million solar station, for example, in just two years. In 2016, APS argued that doing two-year contracts would save customers money in the long run if the price of renewable energy increased. That’s something the advocates and even commissioners argued against.

“Utilities don’t want competition,” Commissioner Lea Marquez Peterson said before the December 11 vote. She said now that the cost of solar has dropped it has become affordable for other qualifying facilities to buy into solar and renewable energy, meaning it can be less-expensive than what utilities like APS, TEP and UNS are offering.

Plus, pointing to the long contracts utilities typically have in place, it would argue against their reasoning for only wanting two-year deals for the qualifying facilities.

APS spokeswoman Suzanne Trevino told Arizona Capitol Times via email that the decision to extend solar contracts to 18 years was “disappointing.”

“It ignored significant evidence presented during the hearings that demonstrated that extended contracts with qualifying facilities will cost utility customers more money over the long term,” Trevino said. “Development costs continue to decline for renewable energy resources, and this contract length will reduce our flexibility to respond to changes in technology and energy markets. APS is committed to delivering affordable, clean and reliable power to our customers, and we are reviewing next steps.” She did not respond to any further questions.

Despite APS’ disappointment that the commission opted to go against its wishes, advocates were elated with the unanimous vote.

Court Rich, an attorney with Rose Law Group who represents a qualifying facility, said this decision should bring a lot of new jobs and money to Arizona.

“The ACC’s decision is a homerun for the sunniest state in the country and it will hopefully lead to hundreds of megawatts of solar, thousands of jobs, and hundreds of millions of dollars in investment,” he said.

Likewise, The Sierra Club applauded the decision in a press release, saying that the two-year deals are “risky” when it comes to financing.

“Long-term contracts are therefore necessary to give renewable energy developers a reasonable opportunity to secure financing for these projects,” the release said.

Sandy Bahr, director of the Sierra Club’s Grand Canyon chapter, added that this should put an end to the utilities controlling the market for clean energy.

“The frustrating reality is that our utilities keep clinging to dirty, over-priced fossil fuels despite all the potential for low cost solar here in the state, but this decision makes it harder for them to keep delaying our clean energy future,” Bahr said.

Solar advocates were only asking for a 15-year requirement when they brought the issue to the commission, but a last minute amendment from Commissioner Sandra Kennedy extended it to 18 years.