Arizona is blessed with an abundance of sunshine. The renowned deserts of Arizona are a testament to the power of the region’s rays—and so are all the local teams with names like the Suns and the Sun Devils. This bountiful sunshine means Arizona is well-positioned to lead the nation in developing clean, renewable solar energy. And the state has largely lived up to that potential to date. The U.S. Energy Information Administration recently ranked Arizona third in the nation for installed rooftop solar capacity. Plus, the Solar Energy Industries Association ranked Arizona a top five solar state for 2014.
But rooftop solar in Arizona is now at a critical crossroads. Utilities throughout the state have proposed regressive policies and rate hikes that would severely undermine the continued growth of rooftop solar.
The Arizona utilities’ playbook for limiting rooftop solar growth involves a three-pronged attack:
1. Scrap Net Metering
Net metering gives rooftop solar customers the right to be paid retail rates for the energy they send to the grid. Net metering is a keystone solar policy that has been implemented in the vast majority of states, providing customers with a clean, economical alternative to electricity from fossil fuels. But Arizona utilities, including Tucson Electric Power and UNS Electric, are trying to eliminate net metering. The utilities have proposed to substantially cut the compensation rooftop solar customers receive for excess energy by crediting that energy at a much lower rate tied to utility-scale renewable wholesale prices. The result would be a nearly 50 percent cut in the compensation rooftop solar customers receive for the energy they send to the grid.
2. Increase Fixed Charges
In 2013, Arizona Public Service Company (APS) imposed a monthly fixed charge on rooftop solar customers averaging $5 a month. In 2015, APS asked the Arizona Corporation Commission to increase this fixed charge to an average of $21 a month. But after strong opposition from Vote Solar and other consumer and solar advocates, APS withdrew the proposal pending further commission proceedings. Now, both Tucson Electric Power and UNS Electric have proposed to double the fixed charges rooftop solar customers and other customers pay. These proposals would create disincentives for rooftop solar and energy efficiency, and would disproportionately harm low-income customers.
3. Impose Mandatory Demand Charges
Residential customers’ electric bills are typically based largely on the total kWh of electricity consumed over the prior month. But Tucson Electric Power and UNS Electric have proposed adding an additional bill component for rooftop solar customers, called a demand charge. A demand charge would charge customers based on how much electricity they consume during the time period of highest use. In other words, a demand charge for a typical residential customer might be based on how much electricity they use during an hour when they were watching TV, running the dishwasher or using the oven. Demand charges are common for large and sophisticated industrial customers. But they are very rare for residential customers because these customers are less able to manage and reduce their maximum demand. Not only have Tucson Electric Power and UNS Electric proposed mandatory demand charges for rooftop solar customers, but UNS Electric recently endorsed a mandatory demand charge for all residential customers. No other state-regulated utilities in the U.S. require all residential customers to pay mandatory demand charges.
These utility proposals pose a dire threat to rooftop solar in Arizona. They would severely undercut the economics of solar and diminish the value solar provides to customers. Recent experience shows just what’s at stake. When Arizona’s Salt River Project instituted a mandatory demand charge for rooftop solar customers last year, applications for new rooftop solar installations fell by more than 95 percent. And when Nevada recently decided to eliminate net metering and increase fixed charges for solar customers, local solar companies laid off hundreds of employees and reduced their investment in the state.
Over the course of the next year, the Arizona Corporation Commission is poised to make a series of decisions on these utility proposals that will very likely set the future trajectory of rooftop solar in Arizona—for better or worse. Earthjustice is working with Vote Solar and the Arizona Center for Law in the Public Interest to protect rooftop solar and to ensure that the thousands of Arizonans who support solar have a voice in the proceedings. The first case on the docket is the UNS Electric rate case, which will be heard beginning on March 1. Earthjustice and our partners will be in Tucson fighting to maintain a bright future for rooftop solar in Arizona.