States look to Arizona to see how they resolve the net-metering issue.
PHOENIX -- Arizona finds itself as the national hot spot when it comes to
solar subsidies,
with utility executives and industry officials squaring off in a
showdown that could shape the future of residential solar use across the
country.
Hundreds of thousands of dollars in advertising have
been spent to influence a looming regulatory decision that in essence is
quite basic.
It's about affordability.
Arizona Public Service Co.
says credits to solar users are so high that current solar-panel
customers, many of them living in more-affluent areas, don't pay their
share for upkeep of the power grid. That, executives say, pushes that
cost to non-solar households, making their bills less affordable.
But
if solar customers' bills are increased, as the utility suggests, can
people who get panels installed on their houses still save money with
solar? And if not, can the solar-installation companies survive?
An estimated 9,800 people work in the solar industry in Arizona, and the majority of them install rooftop panels.
The
Arizona Corporation Commission will address the matter Nov. 13 as a variety of alternatives have been offered.
A decision could set a precedent for other utilities in Arizona and elsewhere.
Forty-three
states have net-metering policies. Several, including California, New
Mexico, Idaho and Louisiana, have looked at altering their policies, and
several others have requested studies on the net costs and benefits of
rooftop solar. Net metering gives customers with solar panels on their
homes credit for the excess power they send to the grid when their
houses are not using all the power from their roof.
The debate in Arizona has drawn national media attention and interest from the Washington, D.C.-based
Solar Energy Industries Association. It prompted a letter-writing campaign by President Barack Obama's non-profit advocacy group
Organizing for Action, which has flooded the regulators with letters, many from out of state.
Observers say Arizona's reputation as the country's solar capital is
at stake. About 200 Arizona Public Service customers a month are adding
solar to their houses now, and the commission decision could determine
whether tens of thousands of customers anticipated to use solar in the
future continue with those plans.
The company is well-known in the
industry for its solar investments, and CEO Don Brandt was named the
Solar Electric Power Association's Utility CEO of the Year in 2009. He
was honored for the company's deal to buy power from the
Solana Generating Station
near Gila Bend, Ariz., for its investments in its own solar plants and
for a program to put solar panels on Flagstaff, Ariz., houses.
But the new net-metering proposal has made the utility the bane of rooftop-solar installation companies such as
SolarCity Corp. and
Sunrun Inc., as well as solar advocates.
David
Wilson of Goodyear, Ariz., said he doesn't like the company's proposal,
even if officials say it would not affect existing customers like him.
"I
don't trust them," he said. "We make this huge investment, and they go
and change the rules. We would lose the benefits, and they would
continue to get the energy we are providing."
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The
Corporation Commission staff, which advises the five-member elected
commission, has rejected Arizona Public Service's proposals and
developed its own suggestions on solar credits. Commissioners recognize
the importance of the matter.
"The eyes of the country and the
energy world at least are on Arizona to see what we can come up with,"
said Commission Chairman Bob Stump. "It is a privilege to set a policy
that potentially can be a model for other states."
Stump said he
hopes to settle the matter this month, but debate could continue for two
more years. The company's next rate hearing will be in 2015.
Arizona Public Service: Change needed
The battle started last year, when Arizona Public Service signaled it wanted to change its net-metering program.
Brandt, who is also president and CEO of the parent company,
Pinnacle West Capital Corp.,
said that if the net-metering issue was not fixed, it could lead to a
much bigger problem down the road as more people use solar and non-solar
customers see bigger bill increases.
"Today, costs are being shifted unfairly from solar to non-solar customers in a way that cannot be sustained," he said.
The utility invited industry representatives to discuss the issue at
meetings earlier this year, then filed an official proposal with the
Arizona Corporation Commission in July that would increase the monthly
bill for solar customers by $50 to $100.
The proposal has many
moving parts. Utility executives said one element of the proposal is to
increase the up-front incentives they pay customers who purchase solar.
Utility executives said they want to reach a settlement on net metering that allows the industry to continue to grow.
"Our
proposal before the Arizona Corporation Commission includes support for
up-front incentives that will ensure that rooftop solar remains an
important part of our energy mix in Arizona," Brandt said.
When the proposal was submitted, it came under criticism from the rooftop-solar companies.
"It
is a fight we did not seek and would prefer to avoid. But we must set
the record straight," Brandt said. "We have an obligation to our
customers, our employees and our shareholders."
Industry backlash
SolarCity
and Sunrun of California, two of the biggest national solar-panel
installation companies operating in Arizona, formed a high-profile
alliance this year, presenting advertising critical of Arizona Public
Service through a non-profit called
TUSK, Tell Utilities Solar Won't Be Killed.
The
solar companies contend that rather than freeload on the power grid,
customers with solar panels save utilities and their customers money by
deferring the cost of new power lines and plants. The financial analyses
used by the utility and the solar industry differ widely on this
point.
Solar-industry executives, including SolarCity CEO Lyndon Rive, say
that the utility is less interested in protecting the non-solar
customers than it is in losing revenue.
"If you look at the rate
of adoption of customers, over next 20 years, that would roughly equal
$2 billion in lost profits," Rive said. "That is why they are so
passionate about this. They just don't want somebody else to service
their customer."
Ed Fenster, co-CEO of Sunrun, said fees paid by
utility customers helped incentivize the solar industry and allowed
Sunrun and other companies to grow. He said the utility fears the
strength of the solar industry now that those subsidies are not needed.
"Ratepayers
made an investment that with greater scale, solar would come at a lower
cost," he said. "That investment paid off. It is that exact fact that
is causing APS to halt the industry."
Fenster said the utility is putting up a big fight on the issue because solar is a legitimate threat to its business model.
"They've
tried to slowly boil the frog that is their ratepayer for years, and
now (solar) will place a cap on their prices," Fenster said. "They will
be held to a competitive standard for the first time in their history."
