Arizona regulators to review solar power buyback rate

Future rooftop solar customers of Tucson Electric Power and other Arizona utilities could find it harder to make their panels pencil out as state regulators look to revisit what utilities pay them for the excess energy they send to the grid.

The Arizona Corporation Commission voted Wednesday to formally review the reimbursement rate that future rooftop solar customers of state-regulated utilities will get for excess power they send to the grid, despite vehement opposition from solar supporters.

After more than four hours of public comment, the commission voted 3-2 to open a new case to discuss the state’s current 10% annual limit on the amount utilities can cut so-called solar export rates, as well as an associated 10-year rate lock-in period.

But the commission dropped from the planned discussion a proposed examination of the “grandfathering” of the rooftop-solar customers who installed solar before 2018 and still get the full retail rate for their energy exports for 20 years, promising that any potential changes would only apply to customers installing solar in the future.

The commission moved to proceed despite a parade of solar supporters who said the change would disrupt a carefully crafted compromise in the ACC’s landmark 2017 “Value of Solar” decision.

That decision replaced customer export credits at the full retail price, known as net metering, with solar-export credits based on what the utilities pay for solar power and adjusted annually with reductions capped at 10%.

Challenging change

Representatives of the state Residential Utility Consumer Office, TEP and sister utility UniSource Energy Services, and Arizona Public Service Co. said the solar export rate has been working well for all parties and opposed reopening the solar decision, calling it unnecessary and potentially problematic.

Solar-industry officials said changing the export rules was unfair and will raise solar costs while potentially triggering layoffs and closures in the solar installation industry.

“Even reopening this case is the wrong move,” Court Rich, an attorney representing the Arizona Solar Energy Industries Association, told the commission. “Because what you tell all these employees and all these business owners, and anyone who’s looking to get solar in the future, is that they don’t know what the future is gonna hold, and that’s just not fair. And so if it’s not broke, don’t fix it.”

Commissioner Nick Myers, a Queen Creek Republican who proposed reopening the solar decision, withdrew the grandfathering issue from his discussion proposal amid opposition from solar supporters as well as his commission colleagues.

“Even though I believe it’s unfair to customers to be compensated beyond what their energy is worth, any changes we make should be prospective only,” said Myers, who in August pushed for deeper cuts to solar export rates paid by TEP, Arizona Public Service Co. and UniSource Energy.

All were granted maximum 10% cuts to their solar export rates in August, with TEP’s dropping to 6.33 cents per kilowatt hour starting Oct. 1, from a rate of 7.03 per kWh in the prior year.

Subsidy issue

Rich and other solar advocates have protested any cuts to export rates, and argued that they should be much higher based on what utilities pay for wholesale power, citing an APS filing showing it paid an average of just over 8 cents per kilowatt-hour for wholesale power in 2022 while its export rate is 7.6 cents.

“When you have solar and you’re selling it to your utility for less than they are turning around and selling it to your neighbor for, that’s not a subsidy,” said Autumn Johnson of AriSEIA.

TEP, which has said it could justify a solar export rate of about 3 cents per kWh, said in a financial filing it paid an average 6.9 cents per kWh for renewable power it purchased in the quarter ended June 30 and about 4.3 cents for non-renewable purchased power.

Commission Chairman Jim O’Connor agreed that the upcoming discussion of the solar export rates should not affect existing rooftop-solar customers.

“Nothing this commission will investigate in the new docket will change anybody’s deal,” said O’Connor, a Phoenix Republican. “A contract is a contract, and it will be honored as written through the terms.”

Stability valued

Lea Marquez Peterson, a Tucson Republican, joined Democrat Anna Tovar in voting against opening a formal discussion of the solar export rate reduction cap and lock-in, citing the compromise reached in 2017 after three years of debate, as well as concerns that deeper export cuts could cause job losses in the state’s solar industry.

“I believe, and I’ve heard, that we have a system that works. I question the subsidy claim and believe that any change that would be made would have little impact on the affordability for our ratepayers,” Marquez Peterson said, adding that she is also concerned about the impact on the state’s solar industry and “the message it will send to the nation about Arizona’s support for solar.”

“Solar is a huge part of Arizona’s growing economy and it’s the largest green source of power in our state,” Tovar said. “The Value of Solar (decision) isn’t perfect, as we’ve heard from many, but it’s a predictable regulatory landscape that customers are depending on to make their investments pencil out.”

But Commissioner Kevin Thompson, a Mesa Republican, said costs not borne by solar customers impact all customers’ rates, and while he would not change the terms for existing solar customers, he supported the limited review of the export rates.

“The 2017 decision was made in the spirit of compromise,” Thompson said. “It was a different era then and they did what they thought was best at the time. From time to time we have to tweak and recalibrate.”

Casting the deciding vote, O’Connor said ratepayers who can’t afford to install solar shouldn’t have to subsidize solar customers, rattling off a list of other available solar subsidies including a 30% federal rebate and the state’s $1,000 maximum rebate and sales- and property-tax breaks for solar.

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“We’re not now back in 2014, looking to help an emerging industry gain a foothold,” he said, noting that California regulators cut solar export rates by about 75% earlier this year.

The state’s member-owned electric cooperatives were excluded from the discussion case approved Wednesday, after an industry representative noted that the commission gave co-ops special leeway in setting solar export rates in its 2017 decision.

Concerns remain

O’Connor noted that the commission was not reopening the Value of Solar decision but instead would launch a specific inquiry on the narrow issues of the 10% annual rate reduction cap and rate lock-in.

Before Wednesday’s final vote, AriSEIA’s Rich applauded the removal of grandfathering from the discussion but said he couldn’t see how any action on the narrower issues could be considered without changing the 2017 decision.

In response, O’Connor reiterated the focus on the narrower issues, finally asked Rich to sit down and called for a vote on the matter.

Myers’ proposal to re-examine solar export rates, and particularly his original plan to review the commission’s grandfathering policy, drew a huge backlash from the solar industry and its supporters as soon as it appeared on the ACC agenda last week.

Groups including Vote Solar, United Solar Neighbors and the Sierra Club urged members to file public comments and testify against changes to solar export rates, while conservative activists rallied in support of cutting solar buyback rates.

The Arizona Solar Energy Industries Association held a rally and press conference outside the ACC offices before Wednesday’s commission meeting, and the commission received more than 3,000 public comments on the matter, both pro and con, within days.

Representatives of several solar companies said the uncertainty over prospective changes to the solar export rate has sown uncertainty among homeowners looking to install solar.

Solar installers told the commission that Arizona’s solar industry is already seeing a slowdown in sales in financed systems amid surging interest rates for solar loans, and any further disruption could cause layoffs and closures among the more than 300 solar businesses that employ more than 8,000 people in the state.

Solar contributed $1.5 billion to the state’s economy in 2022, with a total market of $16.8 billion, AriSEIA says.

Louis Woofenden of Tucson-based Net Zero Solar told the commission that even raising the issue of changes has created tremendous uncertainty for the company, which was founded in 2009, and he worries for the future of his company and its 16 employees.

“When the Value of Solar decision was made by the ACC, it was not a win for us, not for solar, it’s made everything a lot more complex, it’s reduced the savings available to folks in Arizona. But it really did provide some certainty.”

Tweet trouble

Wednesday’s open meeting, which included dozens of people who appeared in person or online for public comment, started with a call for Myers to recuse himself from the matter by the Sierra Club Grand Canyon Chapter.

The environmental group filed a letter with the commission urging Myers to recuse himself because he had posted his position on the solar-export issue on the social media site X (formerly Twitter) in possible violation of commission rules that prohibit so-called ex parte communications outside of official proceedings.

Myers improperly tagged fellow commissioners and reposted tweets containing “misinformation,” the Sierra Club’s Sandy Bahr told the commission.

But Myers said he intended his tweet simply to encourage public participations and didn’t see any reason to recuse himself. No other commissioner made a motion for recusal.

“I made no comment on the reposted tweet, and this agenda item is relating to if and how we’re going to discuss the topic further,” Myers said. “I don’t see any reason to recuse myself.”

Bahr said Myers also was openly hostile to solar supporters, and tweeted a link to an article that described people who want the commission to preserve the value of solar decision as “radical leftists” who are “ freaking out,” adding that the commissioner’s actions are a violation of the constitutional right to due process.

“I don’t think that is just encouraging people to participate, that’s taking a clear position,” she said. “It goes without saying that judges don’t post on social media about their cases.”

Two former commissioners who sat on the ACC that approved the Value of Solar decision, Andy Tobin and former commission chairman Bob Burns, urged the current commission not to reopen the decision in opinion pieces published in the past week.

Burns, who dissented in the 2017 decision on the belief that rooftop solar customers deserved more credit for their grid exports than utilities claimed, said the reopening the careful compromise “could break a promise to ratepayers and ruin the solar industry.”