Arizona regulatory staff rejects APS bid to own rooftop solar

Dive Brief:

The Arizona Corporation Commission's (ACC) staff has recommended that its commissioners reject a controversial proposal from Arizona Public Service to install and own rooftop photovoltaic (PV) solar systems on 3,000 homes, saying the plans are too costly, according to SNL Energy.
The ACC staff concluded that APS had not reasonably shown that it needs to build an additional 20 MW of distributed solar to comply with renewable portfolio requirements established in 2009. A separate staff memo also recommended the commission reject APS' alternative proposal of a 20 MW utility-owned PV array at its Redhawk Power Station.
The ACC staff recommended that APS present additional information in its next renewable energy standard and tariff implementation plan, due July 1, 2015.

Dive Insight:

The staff recommendation does not constitute a final ACC decision on the APS solar plans, but is a strong indication of what the commissioners may decide.

Arizona Public Service's proposed expansion into rooftop solar has been controversial since its announcement in July. The plans call for APS to fund, install, own and maintain 3,000 distributed solar systems on customer rooftops, and then "rent" the rooftop space for a $30 per month credit on each customer's bill. APS said owning the solar arrays would allow it to install more west-facing panels, which could shift peak solar production later into the afternoon, closer to peak demand hours.

As Utility Dive reported after the APS announcement, $30 is "significantly higher than Arizona’s average $5 to $10 per month savings from a solar lease deal, according to [third-party owned solar] market leader SolarCity’s VP Jonathan Bass."

Distributed solar companies say the utility's proposed move into rooftop solar amounts to a monopolistic market-grab, since APS would rate-base the initiative, spreading costs over all its ratepayers. “They don’t have to think about whether they can do something profitably. It will be profitable because they can rate-base it,” SolarCity's Bass told Utility Dive at the time.

The ACC staff concluded the distributed generation program would cost between $94.5 million and $114 million, while the Redhawk solar facility would run between $55.2 million and $69.2 million. Both programs were considered too costly for the staff.

The ACC staff instead floated the idea that APS could offer an up-front customer incentive of $0.10 per watt for 20 MW of distributed solar, which would cost around $2 million. That way, they said, APS would avoid having to pay 30 years of rent payments at $30 per month to each customer. Under that plan, APS would not have to rate-base their solar, as the customers would own their own systems.

Solar groups expressed relief at the ACC staff recommendation. "There is no reason for utility-owned distributed solar," Court Rich, vice president of the Arizona Solar Energy Industries Association, told SNL Energy.