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Arizona Public Service, solar companies reach settlement on solar rates

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Solar companies and Arizona’s largest utility have reached a long-sought rate design settlement that could hopefully bring an end to years of contentious policy debates.

The settlement between Arizona Public Service (APS) and solar installation companies includes a smaller net metering rate cut for rooftop solar customers than originally proposed, and includes rate design options for rooftop solar and non-rooftop solar customers, including time-of-use (TOU) rates and residential demand charges.

New solar customers would be paid 12.9 cents per kilowatt-hour (kWh) for excess energy exported to the grid.  Previously, these users were paid the full retail rate, which in Arizona is between 13-14 cents.  While the export rate would decline 10 percent annually for new rooftop solar systems, customers will be able to lock in their rates for 10 years when they sign up.

“This settlement was a compromise with a lot of different parties involved and a lot of different interests recognized,” said Stefanie Layton, director of revenue requirements at APS, to Greentech Media. “And it’s an agreement that’s a win for customers.”

“The term sheet provides an opportunity for continued investment in smarter and cleaner energy infrastructure,” she added. “It gives our customers more choices and control through new rate options and allows for continued solar leadership in Arizona.”

In a key change, the settlement drops APS’ preferred policy to implement a mandatory demand rate for all residential and small commercial customers.  Instead, it gives all new distributed solar customers the option to take a demand-based rate or a TOU rate.  Non-solar customers are also allowed to adopt a demand or TOU rate, but are not required to select an alternative.

Additionally, net metering will remain for existing rooftop solar customers, with a 20-year grandfathering period for those who have filed an interconnection application before an official decision is reached.

Solar industry advocates, though not thrilled that the new compensation structure will not reflect the retail value of rooftop solar in Arizona, were nonetheless pleased with the settlement’s net metering and grandfathering provisions.

“After weeks of discussion, we are pleased negotiations produced a settlement that all stakeholders, SEIA included, feel comfortable signing,” said Sean Gallagher, vice president of state affairs for the Solar Energy Industries Association (SEIA).

“While the solar industry didn’t get everything it had hoped for out of the settlement, Arizona’s current solar customers can rest assured they will be grandfathered into their existing rates, which was a priority for SEIA. Under the agreement, new solar customers will be able to sign up under initial rates that are as favorable as could be obtained under the Commission’s December 2016 Value of Solar decision, which creates longer term uncertainties for Arizona customers.”

Incentives for rooftop solar have been less generous over the years as the cost of solar installation has declined.  Utilities maintain that as more customers go solar, the costs of maintaining the grid gets levied on non-solar customers, which has prompted regulators to approve rate cuts for solar customers who send their energy back to the grid.  Last year, Nevada scrapped its net metering policy entirely, prompting many solar installers to abandon doing business in the state.

The settlement still needs to be approved by the Arizona Corporation Commission.  Once approved, it will allow APS and solar installers to steer clear of another rate case for at least the next three years.

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