Rate Case Reckoning

Update, 12:50 pm, June 5th.  The Arizona Corporation Commission has scheduled consideration of Phase II of the TEP and Unisource Energy rate cases for their June 12th Open Meeting. At least until the ACC makes their decision, TEP and UNSE customers can have their contractor submit a complete interconnection application to be “grandfathered” on net metering for twenty years.

April 26th, 2018. The day is almost upon us. After years of legal wrangling and public discussion, our elected Arizona Corporation Commissioners are expected to make their decision on the future of rooftop solar for Tucson Electric Power customers. Chairman Tom Forese and commissioner Andy Tobin will weigh in on the policies they approved in the December 2016 decision on the value of solar. Commissioner Bob Burns, who dissented in the value of solar docket will express his preferences. Newer commissioners Boyd Dunn and Justin Olson will also vote.

What will they be considering? A “Recommended Opinion and Order” (ROO) from the ACC’s Chief Administrative Law Judge, Jane L. Rodda. This 134-page document provides background on the case, including the position of TEP, solar companies, ACC staff, and other parties. More critically, it includes Judge Rodda’s careful conclusions regarding how each issue in the case should be resolved. However, the Commissioners can modify any aspect of the ROO at the planned hearing.

The Good, the Bad, and the Unknown

Based on the decisions made in the Value of Solar Docket, we have known for some time that most Commissioner’s support for increased renewable energy is lukewarm at best. This is puzzling in a state like Arizona with an excellent solar resource, where the public overwhelmingly supports increased solar energy. I have found Judge Rodda to be an extremely thoughtful and intelligent public servant. Her duty is to evaluate the legal and policy issues raised in the value of solar and rate case dockets, and implement the ACC’s policy decisions. 

In her ROO, Judge Rodda made the following main recommendations:

▶TEP should submit revised rate calculations that more accurately reflect the costs that solar may impose on the utility grid.

▶TEP residential customers with new solar electric systems can take service under any currently available time-of-use rate (for most customers, this would be the TRREST rate).

▶New solar customers should be compensated for any solar electricity that they send back to TEP at a rate of 9.64 cents per kWh. For perspective, most TEP residential customers currently pay about 10-11 cents per kWh. For Unisource customers, the proposed “export rate” is 11.5 cents per kWh. This export rate would be locked in for a new solar electric system for ten years. Each year, the export rate would be reduced by up to 10% for new customers installing solar in that year.

▶New solar customers will not pay a monthly “grid access fee” based on system size.

▶New solar customers will be required to pay a modest monthly solar meter fee of $2.33. They will no longer be able to make one-time upfront payment instead of paying an ongoing monthly fee.

▶TEP should allow customers easy online access to their hourly electricity load data. Currently, getting access to this data requires submission of a PDF form, waiting for TEP personnel to procure the data, and a $34.15 fee.

So where does this leave folks who want to go solar in Tucson? The lack of a grid access fee, modest increase in the meter fee, and push for data accessibility are positive developments, as is Judge Rodda’s detailed analysis of TEP’s rate calculations, and her skepticism regarding unfounded utility claims. A starting export rate of 9.64 cents per kWh is more troubling, as the lower starting point for this rate means customers will receive less value from their solar electric system exports for years to come.

As part of my testimony in the case on behalf of solar advocate Bruce Plenk, I calculated the simple payback for thirteen real solar customers under the proposed rates. Although simple payback is well, simple, it can be a good first step in the decision to install solar or not. In contrast to TEP’s modeling, I used actual hourly load and electrical data for accuracy. The results from that initial modeling showed that all thirteen of the customers modeled would experience a simple payback of over ten years, making solar uneconomic, even for those who want to purchase solar with cash.

If the ACC adopts Judge Rodda’s ROO as written, some customers who purchase solar with cash should be able to realize a simple payback less than ten years. About 20% of the thirteen customers I modeled would have a payback of less than nine years in the rest of 2018, while an additional 45% would have a simple payback of less than ten years in 2018. The simple payback time would increase over time, with payback time for all cash purchases well over ten years by 2022.

From my standpoint, the big question is how consumers will respond to this fundamental change in the economic proposition of solar. In the past, net metering provided a stable, easy to understand framework, which assured at least some benefit from solar for twenty or more years. Under the new export rate system, that rate is only locked in for ten years. Also, changes in individual energy use in the home can affect how much solar energy is used in the home versus how much is sent to TEP at a lower rate, changing the savings amount. It is my hope that customers will continue to choose clean energy even under these circumstances, but it’s not a foregone conclusion that most will.

When we look toward future customers who want to finance solar electric systems, it’s a different, sadder, story. Money costs money, whether the finance method is a loan, lease, or a power purchase agreement. With the addition of financing costs, it is extremely unlikely that the payback time will be low enough for these customers to choose to go solar. In effect, the ACC has decided to limit access to solar electric systems to those who have cash on hand, or other funding readily available. Because many systems are financed, the total number of solar installations is likely to drop by 50-70%. This is a very unfortunate step in the wrong direction. 

Other Items

In addition to the main items mentioned above, Judge Rodda weighed in on the following:

▶The Residential Utility Consumers Office (RUCO) proposed a “time-of-generation rate,” which provides incentive for solar customers to install their system so as to help with the late afternoon peak of energy usage by installing west-facing solar arrays. The ROO directs TEP and UNSE to file a proposal for a pilot program, based on RUCO’s proposed rates.

▶TEP’s so-called “Residential Community Solar” program was approved. This program allows TEP to build or contract for utility-scale solar, and sell it to customers under a special rate.

▶The ROO directs TEP to propose a new rate that encourages residential battery storage, similar to Arizona Public Service’s R-Tech rate.

What’s Next

Although the open meeting schedule has not been finalized, we expect that this issue will be decided by the Commission at their open meeting on April 26th, 2018, starting at 10:00am. Open meetings are held at the ACC’s Phoenix offices, 1300 W. Washington St. We don’t yet have a sense of what time of day the issue will be considered, as there may be a number of other items on the agenda for the day.

There will be an opportunity to provide 3-minute public comments in person. We hope there will also be an opportunity to provide comment via phone. Follow us on Facebook or Twitter for updates.

What You Can Do to Help

It will be important for the Commission to hear from TEP ratepayers. If you can, come up to Phoenix, and make a public comment. We’d encourage you to highlight what’s good about the ROO, while noting how big an impact these policy changes would have on the ability of TEP customers to go solar, especially those who want to finance their installations. If you can’t make it in person, try to call in with your comment.

You can also still make comments to the docket, online, at http://eservice.azcc.gov/Utilities/PublicComment, referencing Docket E-01933A-15-0322. You can also mail a comment referencing the same docket number to:

Arizona Corporation Commission

Docket Control Center

1200 West Washington

Phoenix, AZ 85007

We’d recommend submitting comments by the end of the day on Monday, April 23rd, if you want to make sure they are docketed and read before the open meeting.

The Future is Still Bright?

Despite these challenges, we’re consistently working to improve our processes, be more efficient, and provide better solutions for our customers. After the rush of installations scheduled for the next few months, we don’t exactly know how our industry will look, but we’ve been through tough times before. You can be sure that if there’s a way to innovate, solve problems, and build more clean energy infrastructure, we’ll be out there doing it!