After regulators put off key incentive and rate design decisions last year, rooftop solar issues in Arizona are coming to a boil again.
At issue in these debates is net metering, a policy that pays rooftop solar owners for the excess energy they send to the grid — typically at the retail rate.
Utilities claim such users fail to pay their fair share for grid upkeep, shifting the costs to non-solar customers. Solar advocates argue utilities — and sometimes regulators — fail to recognize the benefits solar offers to the grid, and that utility rate reforms designed to correct for this “cost shift” could kill their burgeoning industry.
Arizona, home to some of the nation’s best solar power potential, has found itself at the epicenter of such struggles. After lengthy debates over net metering last year, regulators decided not to rule on a proposal from Arizona Public Service to raise fixed fees, instead opening a generic value of solar docket to gather more information.
Proceedings in that docket are now coming to a head, as are arguments over rate design in a separate rate case for utility UES Electric. But political issues, dating back to charges of industry influence on the 2014 regulatory election, have distracted from the process and contributed to a general distrust among stakeholders.
One commissioner hopes to stem the rancor through the value of solar docket, where both utilities and the solar industry get to file evidence on the costs and benefits of distributed generation.
Arizona Corporation Commission Chair Doug Little, who himself faced accusations of utility support during the 2014 cycle, values fact and logic, he told Utility Dive. Through those values, he hopes to guide the commission to settle the recurring solar debates with information from the generic docket after it concludes in October.
“The idea is that what we want to be able to do, or what I want to be able to do as a regulator, is start to essentially put regulatory frameworks in place that will allow us to start to be able to take greater advantage of technology,” Little told Utility Dive.
Solar politicking in Arizona
Arizona’s debates over net metering stretch back to 2013, after Arizona Public Service Co. (APS) requested a grid access fee from rooftop solar customers to help recover fixed costs.
Doug Little announced his campaign in 2014, a year after regulators, utilities and solar advocates compromised on a $5 grid access fee, keeping the retail remuneration rates intact.
“Pretty much day one of my campaign, I realized that it was going to be challenging. And the reason it was going to be challenging was because one of the things I talked about really early on was how do we address some of these issues,” Little said. “Because my approach didn't sort of completely match that of the rooftop solar providers, they decided I was anti-renewables and anti-solar, and they were going to paint a target on my back.”
The 2014 election cycle was particularly acrimonious, as solar advocates questioned if Little and his fellow Commissioner Tom Forese, then also a candidate, held close ties with regulated utilities. That, Little said, set the tone for his first months in office.
“I knew I was going to see significant pushback from certain industries, especially the rooftop solar guys,” Little said. “ I worked very hard to show them I was not anti-solar and [would] be a willing partner. But whatever we did had to make economic sense for Arizona.”
Those heated debates made its way out of Arizona to a broader audience. Little recalled walking into a meeting in New York recently, and someone recognized him as “the anti-renewables guy.”
“I almost almost hesitate to say it, but it was almost like [they painted me as] the nasty Republican who likes dirty air and [will] push their grandmother out of her home because they'll make the rates go up.”
“That's completely not me.”
In 2015, the solar debates flared up again after APS filed requests to increase the grid access fee outside of a rate case. Political issues re-ignited as well, with two former ACC commissioners and a solar installer calling on Little and two other sitting regulators to recuse themselves from solar issues in a September filing.
The letter charged that APS and its parent company Pinnacle West had contributed money to outside political groups that in turn supported Little and Forese in their elections. APS has neither confirmed nor denied the accusation.
Though the election issues continue to bedevil the commission, Little stands by his longtime position that he ran a clean campaign.
“The way I like to describe it, I was a little soldier down in no-man's land working hard on my own campaign and there were all these aerial bombardments … I had no control over the aerial bombardments.”
Late in 2015, after APS and the other utilities withdrew their requests for increasing the grid access fee and cutting down remuneration rates, Little pushed for a separate docket to be opened to evaluate the full costs and benefits of solar — something solar advocates requested during these hearings.
“So for the first time [in Arizona], we’re going to have a factual record that will provide a framework for how we look at solar and how we look at integrating rooftop solar into the grid,” he said.
The year of the value of solar docket
The value of solar docket was supposed to bring a reprieve from some of the most acrimonious debates, but controversy has crept into 2016 as well.
While lingering suspicions from the election often cloud proceedings, Little says he is trying to bring the solar industry and utilities together for a kind of compromise. Right after the ACC opened the value of solar docket last year, Little traveled to San Francisco to meet with Lyndon Rive, the CEO of SolarCity, one of the main rooftop solar developers in the state.
“It was a very cordial meeting,” Little recalled, describing Rive as highly intelligent and a “fantastic” entrepreneur. Little said he encouraged Rive to sit down with APS officials to reach a compromise on net metering.
“There has not been an apparent willingness that I have seen for compromise and find a middle ground to allow us to move forward with other types of proposals.”
But by the beginning of February, tensions started rising again. Solar advocates and utilities introduced dueling ballot initiatives, one to preserve net metering rates and the other to protect regulators’ rights to set net metering rates. That got Gov. Doug Ducey involved, who brokered a compromise to get each side to drop their proposals and enter negotiations.
For a moment, the deal inspired hope of a comprehensive agreement on rooftop solar incentives. But the talks broke down after one day with both sides “agreeing to disagree,” Little said, turning the attention back to pending rate cases. At the top of the queue was the one for UES.
The Arizona utility serves roughly 93,000 customers, and last year, filed its general rate case seeking to impose mandatory demand charges on all residents while trimming its net metering rates. Demand charges apply a fee for a customer’s peak usage over a certain period — typically a month — and are opposed by the solar sector.
After public backlash, UES withdrew its request to impose demand charges on all customers, opting to implement them as mandatory only for new rooftop solar customers.
When regulators met to vote on the proposal earlier this month, stakeholders expected their ruling to set a precedent for pending rate cases from larger utilities like APS and Tucson Electric Power, which are also seeking demand charges.
But in the end, regulators pushed off the most controversial topics, approving a modified version of the proposal but delaying a decision on demand charges and net metering rates until the separate value of solar docket concludes.
During the proceeding, Little pushed for the delay, saying the value of solar information would inform the best rate design for rooftop solar. But political issues soon distracted from the policymaking, with regulators meeting later the same day to discuss a new inquiry into the 2014 election.
Commissioner Robert Burns, who is up for re-election this year with the support of SolarCity, sought to hire an independent lawyer to investigate possible outside influence on the current ratemaking process. But his fellow commissioners, including Little, blocked the inquiry in a 3-1 vote.
"You've been basically impugning my integrity for a year," Little said to Burns before the vote, arguing the probe would be a waste of time and degrading to the commission.
Political issues aside, the decision in the UES case served to underscore the importance regulators, solar advocates and utility officials have pinned to the value of solar docket. The results of that docket will likely inform future rate design in Arizona and beyond.
“This thing is not going to come out with actual numbers, at least how I envision it,” Little said. “But what it will do, hopefully, is it's going to provide a framework that gives us a structured and consistent way to think about this particular issue when we're dealing with rate cases.”
The road ahead to new technology
While Little is focusing his attention on the docket and subsequent rate cases of TEP and APS, he hasn’t lost touch on his greater vision for Arizona’s energy landscape, which is to create a place for emerging technologies, like energy storage.
Just this week, he penned a letter to his colleagues requesting a docket to relook at the renewable energy portfolio standard.
“We don't have anything in our renewable portfolio standard that deals with things like storage,” Little told Utility Dive. “We don't have anything that addresses things like community solar. Perhaps it’s time we go back and look at how we encourage things like community solar.”
In his letter, Little sought to double the the amount of renewables under the RPS from 15% by 2025 to 30% by 2030. But he also proposed to eliminate the carve-outs for distributed energy resources, namely rooftop solar, which could incite more controversy.
While this is longer-term, Little is cognizant that the immediate debates surrounding rooftop solar will have an impact on the state’s renewables goals. What he doesn’t want to see is rooftop solar developers exiting the state because of a lack of compromise, as happened in Nevada after a controversial decision to cut remuneration rates and exclude a grandfathering provision.
“I don’t see any reason at all for rooftop solar or grid-scale solar owned or manage by utilities to not co-exist because they are different animals,” he told Utility Dive. “I don't think its economic for utilities to do rooftop solar. That's not their sweet spot, but on the flip side that's the exact sweet spot for a company like SolarCity and Sunrun because that's their core business model.”
His assertion comes as APS and TEP completing pilot programs designed to place rooftop solar on a select group of customers in their service territories. While they say the goal is simply to study distributed solar on the grid, the move has caused controversy among solar advocates who claim utilities’ owning distributed generation could undercut competition from private developers.
Any decision made on that issue will have to make “economic sense for the ratepayers,” Little said.
“What I don't want to do, I don't want to be essentially boxing off a whole lot of options at this point. As long as it's economic, I’m open either way.”