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Court: AZ utility can be held liable for charging higher rates to rooftop-solar customers

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A major Arizona utility can be held liable for violating antitrust laws through its policies of charging higher rates for electricity to customers who choose to install rooftop solar panels, a federal appeals court ruled Monday.

In a unanimous decision, a three-judge panel of the 9th Circuit Court of Appeals rejected arguments by Salt River Project that its activities — and its pricing structure — are protected by various state and federal laws.

The judges said there is sufficient evidence that could show the price structure was designed to deter the competitive threat of solar energy systems and to force consumers to exclusively purchase electricity from SRP.

Monday’s ruling does not end the matter but sends the case back to a trial judge who will determine the extent of the utility’s conduct and any damages to SRP customers.

The decision, by itself, does not directly affect most other utilities in the state such as Tucson Electric Power and Arizona Public Service. That’s because, unlike SRP, they have to get approval from the Arizona Corporation Commission for their rates.

But the ruling does make it clear that all utilities can be subject to anti-trust laws if their policies and practices not approved by the commission result in deterring customers from investing in solar, said Jean Su, director of the energy justice program for the Center for Biological Diversity.

“This is a game changer in the struggle to defend rooftop solar against utilities’ all-out war on clean, affordable, climate-resilient energy,’’ she said.

“For the first time, a federal court has said utilities can be liable under antitrust laws if they attack rooftop solar,’’ Su said. “The future for renewable energy just got a lot brighter.’’

An SRP spokesman, Scott Harelson, said the ruling was at least a partial victory, because certain claims were dismissed.

As to the rest, Harelson said the company is confident the rate plan "will be determined to have been rationally considered and adopted, and not in violation of any law or statute.''

According to court records, SRP at one time encouraged the use of solar energy systems, adopting a “net metering’’ system that gave customers credit for excess power they generated that could be sold to others.

That changed in 2014 when SRP adopted a new pricing plan that says solar customers who still need to be hooked up to the utility for times when solar is not available can be charged up to 65% more than under prior plans. Yet at the same time, rates for non-solar customers went up about 3.9%.

“Not surprisingly, applications for solar-energy systems in SRP territory decreased by between 50 and 96%,’’ wrote Judge Eric Miller for the appellate panel.

That resulted in a lawsuit by several SRP customers who said the utility discriminates against customers who use solar energy and makes it impossible for them to obtain any viable return on the solar systems they install, “thereby eliminating any competition from solar energy.’’

A lower court threw out the complaint, resulting in this appeal. Miller said that ruling was in error and flew in the face of what the trial judge herself decided.

“By the district court’s own logic, solar-energy systems are uneconomical, at least in part, because of SRP’s exclusionary conduct,’’ Miller wrote.

The utility argued that the customers could not allege antitrust injury because they still attempted to use the market alternative that they claim SRP tried to make uneconomical. Miller said that misstates the law.

“Coercive activity that prevents its victims from making free choices between market alternatives gives rise to antitrust injury,’’ the appellate judge wrote. He said it is not necessary for someone to first prove that all competition has been driven out of the market.

“Rather, the plaintiff need only show that diminished consumer choices and increased prices are the result of a less competitive market due to either artificial restraints or predatory and exclusionary conduct,’’ Miller said.

That, he said, is exactly what the customers claim: that they were directly and economically hurt by the SRP pricing scheme, which is aimed at suppressing competition by discouraging customers from installing solar-energy systems.

“SRP cannot escape liability by portraying (the customers’) injury as mere collateral damage of its exclusionary conduct,’’ the judge wrote.

The appellate court also rejected the company’s claim that it is entitled to immunity because of what is known as the “filed-rate doctrine.’’ It says if a rate has been approved by an agency, antitrust challenges cannot be brought.

That might be an issue for utilities that get their rates approved by the Arizona Corporation Commission, the court found.

“The problem for SRP, however, is that it does not file its rates with anyone other than itself,’’ Miller wrote. “SRP’s board of directs sets rates unilaterally, unlike other Arizona utilities.’’

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