Starting in April, solar users across Arizona will be subject to an additional rate charge of about $50 per month. This new “demand charge” will be based on a solar users’ peak power demand during the month and will be levied regardless of how much electricity is offset by their residential solar units.
The Salt River Project (SRP), one of the nation’s largest public power utilities, has been fighting for this and other renewable energy fees because of what the company argues is needed to cover grid infrastructure and maintenance costs. This final approval of the plan by the elected board, which also includes a 3.9 percent rate increase for all customers, actually dropped proposals to raise existing solar customers’ charges in ten years as well as a new charge on buyers of solar homes.
“Reliability is our most important product,” said Chief Financial Executive Aidan McSheffrey. “To retain the level of service our customers have come to expect from SRP, we must continue to invest in modernizing our energy grid to adapt to new technologies and that will improve reliability and allow for more customer choice.”
A crowd of around 500 gathered in and around a SRP meeting earlier this week in Tempe, AZ, most of them in protest of the new solar charges. In the end, 12 of the 14 directors voted for the rate increase and the new solar charges.
SolarCity, the largest rooftop solar installer in Arizona, has threatened to sue SRP over the charges, a scenario that is now all the more likely. Last week, SolarCity CEO Lyndon Rive sent a letter to SRP’s board stating that the company “has made all necessary preparations to file suit.”
In the letter, Rive says the new price plan is “unsupportable by any economic analysis” and that the “fundamental purpose of the plan is to undermine solar leasing companies in SPR territory.”
SRP is one of many utilities seemingly stifling the proliferation of distributed solar power due to concerns over business-model disruption and long-term revenue. Distributed solar advocates argue that solar can generate energy for the grid during peak demand hours when costs are highest, thus reducing strain on utilities and conventional power sources like coal, gas, and nuclear. In helping reduce the amount utilities rely on fossil fuel generation, renewables likes solar and wind also reduce emissions that may otherwise prove costly under new regulations such as the Clean Power Plan that aims to cut back on greenhouse gas pollution. A recent study found that rooftop solar systems can add add $15,000 to the value of a home, as well.
In 2013, Arizona installed 701 megawatts of solar electric capacity, placing it second in the country. With solar installation prices rapidly dropping and new finance mechanisms coming online regularly, SRP and the Arizona Public Service Co. have ended incentives for solar installers that were meant to encourage the switch. SRP currently gets about 500 applicants a month requesting solar hookups.
SRP’s new rate plan is only the latest setback for solar users in Arizona. In 2013, Arizona Public Service Co., the state’s largest utility, proposed a similar fee that was cut back drastically by state regulators. The utility wanted to charge customers between $50 and $100 per month to use solar, but the Arizona Corporation Commission (ACC) voted to charge a far-reduced 70 cents per kilowatt, meaning homeowners will pay about $5 a month. The SRP proposal was not be subject to such oversight.
As the Arizona Republic reports, SPR did make a number of small concessions to solar advocates in the final reworking of the plan. The utility originally proposed that the 15,000 current solar users be “grandfathered,” or keep their current rates, for a decade, before being transferred to the new rates. SRP extended that timeline to 20 years after major pushback from users who had calculated their savings on a longer timeline. In an even bigger retreat, SRP also decided to allow customers who signed solar contracts before December 8th of last year to keep their current rate plan without the new demand charge for up to 20 years.
SRP will also use a 30-minute period of peak power demand to determine the new demand charge rather than a 15-minute period, which would have been higher and harder to manage, according to advocates of the change.
Next door in New Mexico, PNM, the state’s largest utility, is pursuing a similar track. The company recently proposed a distributed solar generation fee that could cost new solar installers $30 a month to connect to the grid.