(Bloomberg ) Arizona will permit the state's largest utility to charge a monthly fee to customers who install photovoltaic panels on their roofs, in a closely watched hearing that drew about 1,000 protesters and may threaten the surging residential solar market.
The Arizona Corporation Commission, which regulates utilities in the state, agreed in a 3-to-2 vote at a meeting yesterday in Phoenix that Arizona Public Service Co. may collect about $4.90 a month from customers with solar systems.
Arizona Public is required to buy solar power from customers with rooftop panels, and the commission agreed with its argument that the policy unfairly shifts some of the utility's costs to people without panels. Imposing a fee designed to address this issue may prompt power companies in other states to follow suit, and will discourage some people from installing new systems, according to the Sierra Club.
The "decision to add new charges to Arizona's main rooftop solar program will stifle the growth of our clean-energy economy," Will Greene, the organizing representative for the Sierra Club in Phoenix, said in a statement yesterday.
The fee will apply to solar systems installed or contracted after Dec. 31 and works out to 70 cents a kilowatt. A home with a typical 70-kilowatt solar system will pay $4.90 a month, and people with more panels will pay more.
Arizona Public has about 18,000 solar customers now who won't be affected. It's adding about 500 more a month and expects to have about 20,000 customers that won't pay the fee for sending excess solar energy to its system.
'Falls Short'
Arizona Public had requested a fee of $50 a month or more, and the commission's decision "falls well short of protecting the interests of the 1 million residential customers who do not have solar panels," Chief Executive Officer Don Brandt said in a statement.
The company was pleased the commission "determined that net metering creates a cost shift," Brandt said. Arizona Public is a unit of Phoenix-based Pinnacle West Capital Corp. (PNW)
Arizona is one of 43 states that require utilities to buy solar power from customers under a policy called net metering. This lowers the monthly power bills for people with solar systems and reduces revenue for the power companies. Arizona Public argued that the policy forces it to raise rates on all customers to cover the fixed costs of maintaining the grid.
Cost Shift
"We preserved customer choice in Arizona while recognizing that these cost shifts are real," said Bob Stump, chairman of the commission. "I think it's a fair outcome." The regulators overruled their staff, who recommended in September that the issue be taken up in the utility's next formal rate case in 2015.
The utility spent $3.7 million to promote its argument, compared with about $330,000 spent by the solar industry, according to documents filed with the commission.
An estimated 1,000 people were at the meeting, almost universally opposing the fee. They were joined by representatives from SolarCity Corp. (SCTY), Sunrun Inc. and other solar developers who said imposing additional costs on consumers would slow the adoption of renewable energy.
"Its totally unfair to put any charge on customers that are simply reducing demand," said Court Rich, an attorney with the Rose Law Group in Scottsdale, Arizona, who represents solar companies including SolarCity and Sunrun. "This is a new charge and we don't know yet how it will affect the market."
SolarCity and Sunrun are among the companies that offer rooftop systems to consumers at little to no upfront costs. They install the panels and the customers sign long-term contracts to buy the power, typically for less than they pay their local utilities.
Precedent Setting
A monthly fee may stifle demand, said Shayle Kann, vice president of research at GTM Research in Boston.
"If you were going to save 15 bucks, now all things being equal, you'd save 10 bucks," he said in an interview today. "Is ten bucks enough still to entice customers? If the answer is no, then it eats into SolarCity's business."
The amount of the fee may not be as important as the fact that the commission recognized that net metering is fundamentally changing the way utilities do business, Kann said.
"In the narrow context of what is happening in Arizona right now, it was a positive thing for solar. From a broader sense, it is precedent-setting as the first surcharge specifically for net metered customers."
Other States
The utility industry has been closely watching the Arizona case, which may lay the groundwork for similar fees in other states. California, the biggest solar state, approved legislation in September that would let regulators approve fees of as much as $10 a month for customers with solar power.
"There are a number of state commissions currently reviewing outdated and unsustainable net metering policies," Tom Kuhn, president of the utility trade group Edison Electric Institute, said in a statement. "The commission recognized that current net metering policies unfairly shift costs from solar homes to non-solar homes."
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