The Arizona Corporation Commission (ACC) has decided to drastically reduce its export rates — what the utilities pay solar users for excess energy — to mitigate a utility-alleged “cost-shift” to non-solar ratepayers.
The two-day hearing adjourned at 9:25 pm ET, after almost 30 hours of public testimony, with a vote of 4-1 to implement significant changes to Arizona policy. The export rates were only one piece of this, and solar advocates are already suggesting that this could devastate the rooftop-solar industry in the state.
Commission Chairman Doug Little celebrated the end of a three-year, often-contentious value-of-solar docket, saying he hoped never have to do anything like it again during his time on the body. Around 30 groups took part in the deliberations, including solar advocates Vote Solar and The Alliance for Solar Choice, along with electric co-operatives, the state’s utilities.
The bruising battle seemed as if it would go on forever, even after the ACC ordered an evidentiary hearing in November 2015 to determine the value of solar based on discussions between the groups involved. That excruciating process led to last night’s vote, seemingly putting to rest once and for all questions about the future of net-metering in Arizona.
As pv magazine reported in October, the decision will value distributed solar based on the price of utility-scale solar generation, as evaluated each year with a five-year horizon.
In addition to the drastic reductions to the amount of money utilities will pay solar users for their excess energy, the commission also found that:
- declares that distributed-generation (DG) rooftop solar customers are considered a separate class of customers, with their status to be determined in each individual utility rate case moving forward, subject to a “fully vetted cost-of-service analysis” conducted by the utilities;
- establishes the resource-comparison proxy (RCP) — essentially the cost of utility-scale solar — as the basis for the initial DG export rate in rate-cases currently being adjudicated by the commission, with export rates in future cases being determined either by the RCP method, the avoided-costs method (ACM) or a combination of both.
- grandfathers current residential rooftop-solar customers in at the current rates for a period of 20 years from the date of interconnection;
- “grandfathers” new customers into initially established rates for a period of only 10 years; and
- eliminates “netting” or “banking” exported DG kWh once the new export rates are set.
After the vote, Commissioner Bob Stump said the ACC’s decision reflects the solar industry’s own rhetoric about self-reliance and independence and frees the solar industry from continued dependence on subsidies from non-solar users who, in his view, have picked up the tab for solar users’ “self-consumption.”
It should be noted that sixteen states have commissioned cost-benefit analyses on whether having solar consumers on the grid has a negative effect on non-solar customers. All have found that the “cost-shift” argument to be almost entirely illusory.
Louis Woofenden, engineering director for Net Zero Solar, a Tucson-based solar installer, said the rates as passed could end up with a 30-percent drop from current retail rate for exports and then a 10-percent step-down per year thereafter.
“This could be a horrific deal for solar,” Woofenden said. “Even before changes to net metering, many of these rate changes will push simple payback will likely to be significantly more than 10 years. Most potential solar adopters won’t install at that payback rate.”
“I’ve done some analysis on this in the past but have not run this with the new numbers,” he added. “But if what they approved comes to pass, it’s going to hit all installers from large to small.”
Woofenden said that while the decision will hit large installers the hardest, it will be a challenging environment for small installers too.
“This is going to hurt a lot of small businesses in Arizona, and I have no doubt there will be job losses associated with this decision,” Woofenden added. “It’s about small business, and job losses.”
Woofenden added that he will be interested in what large national installers like SolarCity and Sunrun say over the next 24 hours.
Both Vote Solar and The Alliance of Solar Choice (TASC), solar advocates who attended the meeting, were uncomfortable with calling this decision a compromise, saying the deal was simply cut between the utilities with little or no input from them.
“I flew here all the way from Baltimore to attend this meeting in the spirit of compromising with the Arizona utilities,” said Anne Hoskins, executive director for TASC. “I feel the voices of rooftop solar advocates haven’t been heard in this decision. I hope that in future discussions, we’ll be included more fully.”
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I wonder where the utility companies will be in five years when solar + storage has obliterated their revenues? People won’t forget this moment. Look to NEW in Australia if you want to see where this is heading.
Really? Did anyone think it would be any different? Corporate America, who is what they are because of the little guys money, and sweat, just keeps keeping us down. It will be interesting to see how many people will be buying batteries and Power Walls, albeit not yet cost effective, just to do their part in “sticking it to the man”. I would say the line in the sand has been drawn and the taunting has begun.
I work for a solar contractor in Tucson and realize this isn’t the best outcome for the VOS decision and I’m still quite anxious about potential demand charges now its been formalized that pv customers are a separate rate class.
But, you really can’t expect anything different. In the near future personal energy and load management will become much more critical for residential customers AND the utility, their business model will have to shift to integration of massive storage and efficiency measures too.
It’s time grid tied residential installers evolved into energy auditors and efficiency experts, we can’t just continue to plow ahead like the solar city’s of the world and expect net metering to pick up the tab anymore.
So to play the utilities at their own game out in a medium Off GRID Solar system at the home. Use new non toxic long life Lithium batteries, or Nickle Iron long life batteries. Don’t use old lead acid toxic short life batteries. Then move as many things as you can to that system and you bill is lower right away AND you have power back up.
Next use Utility Off Peak Power when it’s low cost. Get a plugin car and get even lower night rates to charge.
Since you don’t Net-Meter they can’t get you with charges or net rates. You are as much Off GRID as saves you money. Take advantage of them like they want to take advantage of you.
Utilities are the major chronic professional and successful cost shifters; it appears that Pinnacle West’s modest multi-million$ investment in Stump, Forese and Little’s political campaigns provided great ROI for Shareholders, not so good for Ratepayers.
Current ACC Rates provide the AZ Utility industry with the highest average wage of any industry in AZ, including Management as an industry, many utilities 50% or more IBEW Union, and annual increases, WITHOUT requiring or directly connecting Continuous Improvement, cost REDUCTIONS as key performance metrics. Although new technology enables cost reduction-stabilization, current rate design will not incite improvements in costs…..primary responsibilities of the ACC/AZ Constitution include the setting or rates that allow recovery of REASONABLE costs, and actions that optimize benefit to RATEPAYERS…ACC is serving utilities, not Ratepayers.
Wait to see if the formula in the final decision includes ALL AVOIDED Costs identified by ratepayer comments & intervenors, including time-of-use, provided by solar, are added to the PPA rates of utility solar to calculate the purchase price of exported DG energy…TEP’s current 100MW RFP for PV is expected to received bids at less than 4c/kWh….
Stop all the craziness and do the math! Wake up and small the roses. Not all demand rates are bad. SRP’s new E-27 Demand Time-Of-Use Rate is hugely successful for customers with solar. SRP Solar Customers are saving substantially more now that they are on the E-27 Demand Rate with a Demand Management Computer. A well-designed demand rate gets rid of the cross-subsidization problem and rewards a customer for their good electrical use behaviour. It penalizes them for bad electrical use behaviour. This is exactly what you want in a well designed rate — a good strong price signal, and provides fair and equitable fixed cost recovery for the utility. And most importantly, this gives customers a way to save substantially on their bills.
SRP doesn’t allow new customers without a huge /complicated charge. Unfortunately, APS has no intention of a similar Rate plan like the E-27. They are raising all their customer’s rates for the next 2-3 years 8% (not to include TAX or FEES). I bet they add a HUGE solar demand charge like SRP has.
William, I agree. Lets stop the craziness and do the math….
Here are total number of installations for the 12 month period ending in Q3 each year since 2009.
Not only have installations declined dramatically, but average system size is down as the E-27 program only makes PV cost effective when you offset less than half your power. Installation sizes used to be 7 kW average size, but they are now more in the 3-4 kW range.
SRP’s E-27 is far from successful. A well designed demand rate only slows the PV market. Cross subsidization is still under way, but we are subsidizing poor utility system infrastructure that is not as cost effective as solar in the long run.
Stop all the craziness and do the math indeed!
I was hoping you’d weigh in. One of the smartest solar people I know, and an Arizona resident to boot. I appreciate your input.
It’s still interesting to figure your electric bill 10, 20, 30 years.
Say your bill is $100 month $1200 year, $12,000 10 year and
$36,000 in 30 years, yes, best to defect and save hundreds
No mater what you do ! A tax free investment and returns!
So if your bill is $200 month that’s $52,000 you paid
In AFTER federal and state taxes taken out in 30 years !
What a gain going solar! Hum?
Agreed, except I would note that given the long-term trend of rising electricity rates, it’s generally considered an even better deal.
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