Dive Brief:

• Arizona regulators voted 4-1 to eliminate retail rate net metering and replace it with a reduced compensation mechanism for new solar customers after a two-day proceeding over the value of solar docket, the Arizona Republic reports. 
• The compensation rate for new solar customers will be decided through a rate case, and existing solar customers would keep their original rates for 20 years from the date of interconnection. An administrative law judge recommended that utilities buy the excess rooftop solar at an avoided cost rate. 
• Representatives from Vote Solar and The Alliance for Solar Choice said such a reduction will trim the compensation about 30% for solar customers. The commissioners said they didn't want the reduced credit to fall more than 10% in a given year, but acknowledged the initial decline will likely be more than that.  

Dive Insight:

"I think we’ve accomplished something pretty historic today." 

That was Chairman Doug Little, who cast a vote in favor of eliminating the retail rate net metering program for Arizona's solar customers yesterday after two days of public comments and debate. He acknowledged that it wasn't a "perfect decision," but a step in the right direction, according to the Arizona Republic. 

The commissioners approved an administrative law judge's recommended order yesterday, with some amendments, which includes placing residential solar customers in a separate rate class and allows new solar customers to stay under the initial rates set during rate cases for 10 years. Under the ALJ proposal, Chief Administrative Law Judge Teena Jibilian recommended that utilities pay an avoided cost rate for excess solar generation, and that the rate be calculated with five-year forward forecast, not 20 or 30 years. 

Solar companies were not so enamored with the decision. 

"While we were hopeful that a compromise could be reached in this proceeding, the Commission has chosen to adopt a methodology that will systematically undercompensate Arizona families and businesses for their investment in homegrown solar energy, an investment that reduces the need for expensive and polluting centralized power plants,” Briana Kobor, program director for DG policy at Vote Solar, wrote in a statement to Utility Dive. 

It was the first time solar interests did not push for full retail rate net metering—a billing mechanism that usually credits customers at the full retail rate for any excess energy they export to the grid. Even so, they said their desire to reach a compromise was ignored.

"We are open to moving away from net metering [in Arizona]," said Anne Hoskins, a former Maryland regulator who now runs policy for solar installer Sunrun. But, she added, the solar sector is not being given a chance to come to the table with a compromise.

At issue was a late afternoon discussion where Little requested the ACC staff approach parties to record suggested tweaks to the recommended order.

Solar companies say they were excluded from the process and their changes not incorporated. But Little said their suggestions were too large to be considered "tweaks" and "would have materially changed the substance of the amendment completely."

Those solar proposals, he emailed Utility Dive after the decision, were discussed during the open meeting, but not adopted by the commission.

Arizona has long been a rancorous hotbed for rooftop solar issues dating back to 2013. In 2015, regulators voted to open a generic docket to examine the value of solar after a contentious year of debate. Arizona utilities sought to reduce net metering compensation or increase fixed fees. Even though the ACC voted to examine solar's value, utilities came back this year with proposed mandatory residential demand charges in rate cases. 

Regulators staved off a decision on those rates until the value of solar docket concluded this week, but they did not settle on a final compensation value. That, they said, would happen in upcoming rate cases. 

UES Electric, Tucson Electric Power and Arizona Public Service have pending cases before the Commission next year. In UES' case, regulators chose to delay a decision over its request to implement demand charges on residential solar customers until after the VOS docket decision.

The rate cases are widely anticipated in the power sector and could set a precedent for other states. 

Solar advocates have long been against residential demand charges because of their complexity. In addition, the demand charges can negate any savings from net metering compensation since it charges customers monthly for the day with the highest energy usage. Utilities prefer demand charges because they are more "tech-agnostic," and opens the door to other smart grid technologies like storage. 

APS, which also seeks to implement mandatory demand charges on all residents, applauded the decision, but warned subsidies and cost shifts still exist.

"“While today’s action was a step in the right direction, subsidies and a cost shift still exist," the company said in a statement. "We will work with the Commission and stakeholders in subsequent proceedings to continue to bring the benefits of solar to Arizona customers and to do so cost-effectively.” 

This article has been updated to reflect comments from ACC Chair Doug Little, who said after the decision that solar companies were not excluded from the late afternoon amendment discussion. The article has also been corrected to reflect it was late afternoon, not lunchtime. And the article has been updated to reflect clarifying comments from Anne Hoskins.