Rooftop solar company SolarCity on Mar. 2 filed suit in federal court in Arizona seeking to overturn a new rate structure approved by the Salt River Project (SRP) that levies additional charges on customers with rooftop solar panels.
On Feb. 26, the SRP board voted to approve a change in how it bills customers who installed solar panels after Dec. 8, 2014. The change, which will levy a demand charge on their peak usage (regardless of whether the power is purchased from SRP or taken from a solar system), will add about $50 a month to the average bill. The charge will apply no matter how much electricity customers produce from their solar panels. After protests, SRP agreed to let existing customers keep their current rate plan for 20 years. The change will take effect in April.
The fees apply not just to solar panels but also to other technologies, such as batteries and fuel cells, that involve customer self-generation.
SRP says it needs the new rate structure to balance its books—it was facing a $46 million shortfall this year—and to ensure that customers with solar panels pay their share of infrastructure costs. Solar advocates and installers such as SolarCity assert that the move is an attempt to protect SRP’s revenues and deter further growth in rooftop solar.
Observers expect that the changes will destroy economic incentives to install a rooftop solar system. SolarCity said it had seen applications for new systems in SRP territory fall 96% since the plan was announced last fall.
The lawsuit that SolarCity filed on Tuesday asserts that the new plan violates federal and state antitrust laws because of its anticompetitive effects. “SRP effectively requires customers who must buy any of their electricity from SRP (which is all or virtually all customers) to do so on terms that effectively require those customers to buy all of their power from SRP,” it argues.
SolarCity also blasted the move in a blog post on Tuesday. “What SRP claims now is inconsistent with years of the utility’s own policies regarding the solar industry and its own investments in solar power,” it said. “[I] in America, we expect companies to respond to competition and innovation with better service, lower costs, and increased efficiency. What SRP has done instead is unacceptable and unlawful.”
The dramatic growth of rooftop solar has challenged utility finances across the country. The approach of levying additional fees for customers with solar panels has drawn increasing attention and controversy, but just how much such fees may be justified is hotly debated.
Utility advocates have argued that traditional rate structures designed to recover fixed costs via kilowatt-hour charges do not anticipate substantial self-generation, which results in shifting those fixed costs onto other customers. However, it is not clear how significant this effect actually is. A study prepared for the Nevada Public Utilities Commission last year found that NV Energy’s net metering program did not significantly impact homeowners without rooftop solar.
Similar fees have been considered or enacted in other states, though SRP’s is among the largest. APS sought to levy a $50-per-month fee on its customers last year, but the Arizona Corporation Commission (ACC) reduced it to $5. As an agricultural improvement district (it supplies both power and water), SRP is not subject to ACC oversight and can impose the plan on its own initiative.
The lawsuit argues that SRP’s electricity operations are not threatened by rooftop solar, and that it is using the profits from power generation to subsidize its water operations. SRP said the subsidy amounted to about $52 million in 2014, though the lawsuit argues that the true amount may be twice that.
—Thomas W. Overton, JD is a POWER associate editor (@thomas_overton, @POWERmagazine).