Dive Brief:

• An Arizona administrative law judge for the Arizona Corporation Commission has recommended slashing UES Electric's proposed rate increase, meaning bills would rise just 2.7% rather than the almost 10% the utility requested, the Arizona Daily Star reports. 
• The judge also rejected the utility's request for demand charges on solar customers, saying much customer education would be needed before they could be fairly implemented. In another blow to UES' request, the judge also denied the company's bid to halve the rate it pays solar customers, saying they needed to keep the charges until a separate docket evaluating the value of solar is completed. 
• Tucson Electric Power Co., an affiliate of UES, has a similar application pending. Both utilities are owned by UNS Electric, which was purchased by Fortis in 2014. 

Dive Insight:

The UES rate case is one of most closely watched dockets right now, and how regulators rule on it could shape the direction they rule on other rate cases with similar requests fordemand charges and changes to the net metering policy for rooftop solar customers. 

The Arizona Corporation Commission (ACC) administrative law judge wants regulators to reduce UES' rate request, reject demand charges and instead begin moving small business customers over to time-of-use rates, in an effort to address the utility's peak demand.

Demand charges, according to Administrative Law Judge Jane Rodda, would require “a massive public education effort" in order to be effective and fair.  The Arizona Daily Star reports her recommendation to the commission would raise UES customer bills by $2.36/month, or about 2.7%, compared with the 9.5% increase the utility had requested.

In its original filing, UES told regulators its retail sales are down almost 8% from the last rate case period. Industrial and mining customer usage is down 50% and residential customer usage is down nearly 4% and expected to continue to decline.

The utility's proposal included a choice of two three-part rate plans for new rooftop solar customers, both of which include a demand charge. Net metering rates would drop from about $0.11/kWh to $0.06/kWh, roughly the price of solar from utility-scale facilities.

UES Electric serves 93,000 customers in Mohave County in the northwest and in Santa Cruz County in south central part of the state. A year ago, the utility filed a rate request seeking approval for a three-part tariffs – energy, fixed and demand charges – for new solar customers, with an opt-in feature for standard customers.