California-based SolarCity Corp. filed an antitrust lawsuit in federal court on Monday against Salt River Project in an attempt to have the utility's new rates on solar be overturned.
Experts say the lawsuit, which might go on for years, could set a precedent for the solar debate happening nationwide.
SolarCity had threatened the lawsuit before SRP’s scheduled vote last Thursday on a 3.9 percent rate hike for all customers, which included additional charges on solar.
The approval of the rate hike, by way of a 12-2 vote by SRP’s board of directors, means new solar customers in SRP territory will pay an additional $50 per month on average. Existing solar customers were grandfathered into current rates for up to 20 years.
Fred Norton, SolarCity’s associate general counsel for litigation, said that’s anti-competitive because SRP is trying to protect its bottom line and discourage consumers from going solar.
“SRP doesn’t want to lose revenue and lose customers, and so what they’ve done is they’ve punished the customers who choose to generate some of their power,” Norton said.
SRP customers had until early December to file solar applications if they wanted to avoid the new charges.
Since then, solar applications at SRP went from roughly 500 a month to about 22 on average, a 96 percent plunge.
“It doesn’t make sense for a customer in SRP territory to choose to go solar now, those penalties are too high,” Norton said. “And because SRP is a monopolist, because customers have to get at least some of their power from SRP, they can’t get away, they don’t have any effective choice. So SRP is using its monopoly power here, the fact that customers have to get at least some power from SRP, to force those customers to pay extra when they choose to go solar.”
SolarCity is the largest solar company in the nation, in the business of selling, leasing and installing solar systems. The recent drop in new solar applications at SRP is of concern to SolarCity because it serves almost half of SRP’s 15,000 solar customers. During the last half of 2014, the company averaged nearly 400 installations per month, according to the complaint filed in the Arizona district court.
In a statement, SRP officials said the lawsuit is "meritless" and will be "aggressively defended." They said the new solar charges keep costs low for all customers, with or without solar.
“SRP firmly rejects SolarCity’s claims in the press and its newly-filed lawsuit that the new price process is improper or contrary to law,” the SRP statement said. “In fact, as SRP demonstrated throughout the public price process, the new price structure properly aligns costs and revenues with respect to the distributed generation customers. SolarCity’s lawsuit is without merit and will be aggressively defended. Solar City’s efforts to mischaracterize what the SRP Board approved are unfortunate, as is its filing of a meritless lawsuit.”
The debate as to whether solar customers are shifting costs to non-solar customers is happening nationwide and it’s put the solar industry and utilities at odds.
Tim Hogan is the executive director of the Arizona Center for Law in the Public Interest and he was previously chief counsel for the Arizona Corporation Commission, which regulates other utilities such as APS. SRP is self-governing and therefore not regulated by the Corporation Commission, which means it doesn’t need the state’s permission to raise costs for ratepayers.
Hogan said this is likely the first-ever antitrust lawsuit between a solar company and a public utility and it could set a precedent for the debate overall.
“I think it certainly has the potential to be precedent setting,” Hogan said. “Like I said, I don’t think it’s occurred before in this context. It’s going to raise a number of interesting questions. So yeah, I think a lot of people are going to be looking at this to see if it’s going to establish parameters for market entry by the solar industry.”
He said SolarCity will need a lot of evidence to prove SRP was trying to squash competition for its ratepayers’ money, but it won’t necessarily be impossible to accomplish.
“You’ve got competition for that revenue now and they’ve taken action that’s going to adversely affect that competition,” he said. “That smells like antitrust.”
