Salt River Project Rate Hikes Threaten Arizona Solar Viability

By John Kennedy
January 20, 2016
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With scorching temperatures and nearly year-round sunshine, Arizona seems to be an ideal location to implement a rooftop PV system. However, with the possibility of nearly statewide rate hikes for solar customers, this may not be the case for long.   As it stands, the economic viability of solar power in the state hinges on the success of SolarCity's lawsuit against utility service Salt River Project (SRP) over potentially unlawful rate increases.

Early last year, Arizona utility SRP proposed new rate structures and fees to be applied to their solar customers. This proposal came alongside a near halving of net metering rates, bringing them down from $0.09 to $0.05. The rate hike, amounting to about $50 per month for solar customers, ultimately strips solar power of its economic viability in SRP's territory. Understandably, the rate hike has been accompanied by a significant drop in new rooftop solar applications in the area, with estimates for the decrease ranging from over 50% to 96%. SRP justifies this increase for solar users by asserting that their additional fees account for their fair share of electrical grid maintenance costs, the bill for which is currently being footed entirely by non-solar customers.

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SolarCity, filed a lawsuit against SRP in response these proposed rate changes, contesting that the utility provider's behavior is anti-competitive in nature, or in other words, that the new rate structure was engineered specifically to stifle competition.   It is this argument that forms the core of the company's suit against SRP, which was recently allowed by an Arizona federal court judge to proceed in spite of SRP's best attempts to prevent it from continuing. While SolarCity calls the rate hike "unacceptable... unlawful" and an "abuse of monopoly power", SRP spokespersons are certain that SolarCity will have a difficult time establishing that SRP had no "reasonable business justifications for the current rate plans".

Arizona solar users, installers, and utility companies alike are eagerly awaiting the outcome of this landmark case. The ruling in regards to the lawfulness of SRP's rate hike will likely determine not only the viability of solar in their territory, but in the state as a whole. If judges rule in favor of SRP and determine their rate hikes to be legitimate, it is imaginable that the other major Arizona utilities Tucson Electric Power (TEP) and Arizona Public Service (APS) will follow suit. In fact, both TEP and APS have issued disclaimers notifying new solar customers that they will be subject to any future rate hikes these utilities choose to implement. As a result, it seems inevitable that if it is determined that raising rates in this manner is indeed lawful, that TEP and APS will raise their prices in a manner comparable to SRP. The result of such actions would be that rooftop solar applications would no longer be economically viable in any metropolitan area of the state.

However, with the federal court's recent decision to allow the case to proceed, the future is hopeful for SolarCity and solar energy in Arizona at large. SolarCity shares in the optimism, stating that they "look forward to showing that utilities cannot exploit their monopoly power" to stifle the competition they face from solar.

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Sources:

http://www.azcentral.com/story/money/business/2015/02/26/srp-board-oks-rate-hike-new-fees-solar-customers/24086473/

http://www.greentechmedia.com/articles/read/arizona-court-advances-solarcity-lawsuit-against-salt-river-project

http://blog.solarcity.com/our-response-to-anti-competitive-behavior-in-arizona

http://www.pv-magazine.com/news/details/beitrag/solarcity-lawsuit-against-arizona-utility-to-go-forward_100021896/#axzz3xutNVKko

John Kennedy

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John Kennedy

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