New Tucson Electric Power home solar customers relying on “net metering” to save on their electric bills would face a $22-per-month increase under a TEP proposal.
The utility asked the Arizona Corporation Commission Wednesday to approve what it calls a more equitable price for electric service, while still offering solar users significant savings. They say it would reduce the “subsidy” that other electric customers pay to cover costs incurred by solar customers.
The proposal is controversial. The Sierra Club opposes it, as do other local and state solar advocates. They see it as a measure that would chill the growing solar industry, which offers clean air and no greenhouse gas emissions compared to conventional coal-fired electricity.
Today, a TEP residential customer without solar panels pays an average of $117.60 monthly in electric bills, the utility says. A typical solar energy customer pays $15 a month. The new proposal would boost that to $37 a month, TEP says. About 7,900 homeowners served by TEP have solar panels today, compared to 600 in 2008, the utility says.
TEP is hopping aboard a growing statewide and national trend among utilities seeking to reduce the benefits of net metering, through which rooftop solar customers can exchange excess solar energy they produce and don’t need for free electricity at times when they need it.
The utility says this practice brings a $7 million annual subsidy for solar customers that will grow another $2 million to $3 million annually. Solar advocates, however, say studies from around the country have shown that in the long run, the widespread use of solar energy saves utilities money that otherwise would be spent expanding their infrastructure of transmission lines, generating stations and substations.
“It is a cutting-edge question. People around the country are actively looking at it,” and Arizona is one state where this issue is being watched closely, said Derek Lemoine, a University of Arizona economics professor who specializes in energy issues.
Lemoine didn’t take a position on TEP’s particular proposal but said utilities may or will need additional revenue from solar customers to cover short-term costs related to their existing grid network.
The Corporation Commission in 2013 approved a net metering plan for the Phoenix-based Arizona Public Service utility that reduced solar homeowners’ savings by $5 a month — after APS’ proposed $50-a-month charge drew loud protests.
The Salt River Project, an unregulated Phoenix utility, recently approved a “demand charge” adding about $50 monthly to the average rooftop solar customer’s bill. Closer to home, the suburban-rural Trico Electric Cooperative in Pima County is proposing a slight reduction in the rate at which customers with rooftop systems are credited for excess generated power.
Under TEP’s proposal, customers who install new solar arrays would not be allowed to offset the cost of their power from TEP with the excess energy their systems produce. Instead, TEP would credit them for that excess power. Customers would get a 5.84 cent per kilowatt hour credit. It would reduce but not eliminate subsidies for rooftop solar at other customers’ expense, TEP says.
“It’s important to consider whether or not the rooftop systems provide all the power that customer needs. The answer is no,” TEP spokesman Joe Barrios said. “They use the grid at night and when it’s cloudy. (At those times) they rely on it at least as heavily as other customers, if not more.”
The Sierra Club and local solar consultant Bruce Plenk, however, say the premise underlying TEP’s proposal is false.
“They claim rooftop solar customers are costing TEP. ... In fact, the opposite is true,” said Dan Millis, program coordinator for the Sierra Club’s Grand Canyon chapter. “Rooftop solar customers are investing millions in TEP infrastructure. They build power plants on their roofs — they are small power plants, but that’s one less power plant that TEP doesn’t have to build.”
Plenk cited independent studies done in the past two years in Nevada, Maine and Missouri that show net metering’s long-term benefits meet or exceed costs for utilities. The real subsidy at TEP goes to mines and other industrial customers who use about 21 percent of the utility’s total electric load but pay barely 7 percent of its revenues, Millis said.
Barrios, however, said the industries’ charges are lower because it costs much less to serve them than to serve homeowners because the industries build much of their own infrastructure, use power at consistent levels and use power at higher voltages.
If the ACC approves this proposal, it wouldn’t affect existing solar customers or those requesting to connect new arrays to TEP’s grid by June 1 of this year, the utility said.
“Our proposal will allow the continued expansion of Southern Arizona’s solar energy resources while preserving safe, reliable and affordable electric service at more equitable prices for all of our customers,” David Hutchens, TEP’s president and chief executive officer, said in a news release.
The solar subsidies were effective as short-term incentives. But now with solar far more popular and affordable, “we can achieve our renewable energy goals and preserve significant bill savings for solar power users without creating unmanageable cost burdens for our other customers,” Hutchens said.
Another UA economist, Stan Reynolds, found valid arguments on both sides.
“I think utilities have a reasonably good point that even with a net zero user of energy, there are still times they need to be hooked up to the grid and there are costs that have to be covered from somewhere. If they’re not from solar customers they’re likely to have to be covered by other customers. But it’s not clear to me that solar customers should really be singled out for that.”
Perhaps the utility should employ a different rate structure, with higher fixed fees to account for its fixed costs, Reynolds said. The higher proposed fees will diminish the incentive to install solar power but won’t kill it, he added. But couple that with the likelihood that Congress won’t continue the large solar installation tax credits much longer, and the effect could be much bigger, he said.
