Arizona utility TEP wants to add solar fee, reduce net metering credit

Dive Brief:

  • Arizona utility Tucson Electric Power (TEP) filed a rate case last week with the Arizona Corporation Commission (ACC) to approve a 7% increase in revenues, which would boost the average residential customer's monthly bill by $12, the Arizona Daily Star reports.
  • As part of the rate case, TEP wants to raise the interconnection fee, downsize the existing net energy metering (NEM) credit, and implement fixed demand charge for solar customers.   
  • TEP is also seeking to double the fixed monthly charge for residential customers from $10 to $20, as well as increasing business customers' fixed and variable usage-based charges. The utility said these rate hikes are necessary to cover $1.3 billion in new infrastructure investments made since 2011, which were largely made to help the utility move away from coal. 

Dive Insight:

TEP's new rate case is causing controversy over its request to place new fees on new rooftop solar users even as the utility commits to 30% renewables by 2030.

TEP's already grid-connected 8,500 solar-owning customers will be unaffected by any changes, which could include a reduced NEM credit (from approximately $0.11 per kWh to about $0.06 per kWh), a higher interconnection fee, and a special fixed demand charge. But the new rates would, at a minimum, change the economics of rooftop solar for new solar users in TEP's region. 

The reduction in the NEM credit brings the reimbursement for rooftop solar down to TEP's cost for utility scale solar. The new demand charge for solar owners would be based on the customer's peak power usage and cover infrastructure costs that a current solar owner's bill allegedly doesn't cover, according to the Arizona Daily Star. Previously, there had been no demand charge built into TEP's rates.

“These are discriminatory charges and discriminatory rates that make it uneconomical to go solar,” said Court Rich, an attorney for The Alliance For Solar Choice and an Arizona Solar Energy Industries Association board member.

The most important part of the filing is that it targets 30% renewables by 2030, according to TEP Energy Supply Sr. Director Carmine Tilghman. “That is triple our current renewables installed capacity and twice the 15% renewables required by the state’s 2025 mandate."

The rate request comes after TEP withdrew its application requesting that they pay NEM users a wholesale rate for their excess energy instead of the standard retail rate. The ACC ruled in August that TEP must wait for its 2016 rate case before altering the NEM credit. 

The move by TEP echoes recent moves to increase fees on rooftop solar customers from other utilities in the state, Arizona Public Service Co. and Salt River Project. 

TEP requested the charges begin in January 2017.

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Filed Under: Solar & Renewables Distributed Energy Regulation & Policy
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