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Arizona will consider changes to rooftop solar rates in move opposed by utilities, solar industry

In a 3-2 vote Wednesday, the commission that regulates most Arizona utilities decided it will consider some changes to the way rooftop solar customers are compensated for excess power generation. Solar energy advocates say the move will cause major instability in the industry.

When homeowners with solar panels produce more energy than they use, the excess goes back to the grid. Arizona utilities compensate customers a few cents per kilowatt hour for that power.

The Arizona Corporation Commission, which regulates most of the state’s utilities, decided on those rates in 2017, following years of hearings. The rates are based on how much it might cost providers to produce that energy if they were to generate it through a utility-scale solar project. The utilities are allowed to lower the rates by up to 10% per year.

But now, Commissioner Nick Myers says, even with 10% reductions, the rates are higher than utilities’ actual costs. Myers has argued the rate solar customers are paid is artificially high, so other energy customers are essentially having to subsidize solar users.

In the Corporation Commission meeting Wednesday, Myers proposed the regulators should launch new hearings to reconsider the 10% cap on annual rate reductions for new solar customers and another rule that locks solar customers into agreed-upon rates for 10 years. He said the debate would not bring about changes to rates for current solar customers.

“I don’t see any harm in having a discussion and that’s all I’m advocating for at this point,” Myers said during the meeting.

But members of the solar industry told Commissioners they would be directly harmed by opening such a debate.

About 8,000 Arizonans work in solar jobs. Donald Duir, who has a solar design business, testified that the industry is so unpredictable, he calls it the “solar coaster.” During Wednesday’s meeting Duir, and many others, argued that any amount of regulatory uncertainty in Arizona will scare business away.

“This will send us back down that solar coaster in a very steep decline. It might even come off the rails completely. People will lose their jobs,” Duir said.

Commissioners said they received about 3,000 letters from the public in response to the issue. About 50 people, including dozens of solar customers, industry workers, and clean energy advocacy groups gave public comments during Wednesday’s meeting. Only four commenters supported reopening a debate around rates.

Representatives for utilities APS and Tucson Electric Power spoke against reopening solar compensation rates for debate. Both utilities said they were satisfied with the rules set in 2017.

Commissioners said they will not consider changes to rates for existing solar customers. But Commissioner Ana Tovar pointed out, if the new round of hearings lasts beyond the next election cycle, a new set of commissioners may decide to broaden the discussion.

Potential changes to solar compensation rates would not impact SRP customers since SRP is not regulated by the Arizona Corporation Commission. 

Katherine Davis-Young is a senior field correspondent reporting on a variety of issues, including public health and climate change.