Arizona sun rises: Judge endorses APS, solar industry settlement

Could peace finally reign in Arizona’s Value of Solar docket?

For the past two years, an often brutal battle has raged between Arizona Public Service (APS), the Arizona Corporation Commission (ACC) and the solar industry over how much PV system owners should be compensated for the electricity they export to the grid. The battle appeared to reach a conclusion in December when the ACC slashed compensation rates, leading to uncertainty in the rooftop solar market.

The solar industry feared the new, substantially lower compensation rates would discourage people from installing solar because the payback times for the systems would be much longer. Solar companies and advocates further noted that the methodology that ACC had endorsed was out of step with other value of solar studies, including using very short timelines to calculate any benefits from distributed generation.

As it turned out, however, APS and the solar industry were negotiating out of the public eye to find a more equitable agreement, which they reached in March. This agreement still needs to be approved by the ACC, but it received an enormous boost yesterday when Administrative Law Judge Teena Jibilian issued a strong endorsement of the settlement and recommended passage by the full commission.

In the December decision, the commission decided that “export rates” (the amount paid to solar users for excess energy they export to the grid) should be determined using 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 before the commission. The negotiated settlement sets the rate at $0.129/kWh.

The rate was determined using 2015 as the base year and, according to Jibilian’s recommendation, should not be used to determine any future rates.

If the agreement is approved, current solar customers will be grandfathered for 20 years, as will customers who file interconnection applications with APS before its current rate case is finally decided. These groups will continue to be compensated at full retail rate.

Solar advocates applauded Jibilian’s recommendation, with the Solar Energy Industries Association’s (SEIA) Sean Gallagher, its VP of state affairs, noting in a statement that as SEIA was a party to the agreement and looked forward to it being approved by the ACC.

Vote Solar’s Briana Kobor, who worked closely on the settlement, applauded the judge’s recommendation

“Arizona’s families and businesses should be able to meet their own energy needs with the state’s plentiful sunshine if they so choose,” said Kobor, who is the distributed-generation regulatory policy program director with Vote Solar.

“While most certainly a compromise, we were glad to arrive at a settlement with APS that takes some steps to preserve this customer choice, keeps solar customers on the same rates as other customers and soundly rejects the idea of penalizing all residential customers with mandatory demand charges. We hope that the commission accepts that recommendation without modification.”

No date has been set yet for the commission to  vote on the deal.