This is the opportunity for Arizona Public Service leaders to have the conversation about net metering they told GTM they wanted.

APS VP Jeff Guldner said the utility wants to “make decisions based on what the costs are. But the solar leasing companies and TUSK, the Arizona activist organization led by Barry Goldwater, Jr., are trying to shut down that discussion.”

“It is not credible for them to say the solar industry doesn’t want a discussion,” responded Court Rich, Rose Law Group Renewables Chair. But APS (NYSE:PNW) wants to control the discussion, while the solar industry wants it in front of the Arizona Corporation Commission (ACC), which will ultimately decide the issue after a hearing before an administrative law judge, Rich explained.

The debate is over whether net metering creates new costs for utilities’ non-solar customers. Homeowners and businesses with solar are reimbursed at retail rates for the solar-generated electricity they send to the grid. But when their utility bills roll back to zero they escape most of the infrastructure surcharges that are part of other electricity users’ bills.

“To the extent that we don’t recover transmission and distribution fixed costs,” Guldner said, “we create a surcharge that assesses those costs to all customers. And the way metering works, that means non-solar customers.” APS insists this is a cost shift.

“Claiming that net metering is a ‘cost shift’ is disingenuous and completely ignores the benefits side of the equation,” responded SolarCity (NASDAQ: SCTY) Policy Director Meghan Nutting. “To have an honest discussion about this, we need to acknowledge and fairly value both the costs and benefits.”

Studies by Crossborder Energy of the California and Arizona markets and studies by Clean Power Research of the Austin Energy and CPS territories found benefits gained by the utilities from adding solar are worth more than the costs they would incur. An SAIC study conducted for APS found something different.

The analyses show net benefits to APS could be $34 million annually, VoteSolar Policy Director Annie Lappe said. And even the SAIC study shows net metering will not seriously hurt utility revenues, Lappe added. It could produce a 20 percent reduction in sales growth if it advances distributed generation as predicted. “Increases in sales more than overwhelm even an aggressive net metered market.”

Studies attempt to value future benefits, Guldner said, “like avoiding the future construction of a power plant or avoiding carbon taxes. We operate the biggest nuclear generating station in the U.S. and it has no carbon emissions. There is no value in our rates from future carbon avoidance at Palo Verde.”

“Nuclear has not proven to be the most reliable or safe source of power,” Sunrun Co-CEO Edward Fenster responded. The expense of fossil backup power for nuclear is one of the reasons solar reduces utilities’ costs. And, according to the APS 2012 Report, coal is APS’ largest energy source (31.8 percent), Fenster added.

When a home with a solar system turns on its air conditioning, Guldner said, “it pulls additional power from the grid to keep the lights on. If it wasn’t on the grid, it would go out of balance and trip off line. You still need the same poles and wires and transformers and system, whether the house has solar or not.”

Because solar shifts the need for delivering power from plants hundreds of miles away to neighborhood solar-generated electricity, Nutting said, it delays transmission and distribution upgrades. Because it provides power at peak times, it reduces strain on aging grid infrastructure and postpones the need to build new peaker plants, she added. “Given the services solar provides, it doesn’t make sense to talk about a fictitious ‘cost shift.’ We should be discussing how to compensate solar customers.”

“APS cost-shifts in their rates now,” Rich explained. Commercial customers, customers who live where it’s hot, and urban customers subsidize residential customers, those in milder climates, and rural customers. “Studies show net metering is not a cost-shift. APS is talking about it because solar causes people to buy less of what APS is selling.” The 18,000 APS customers who put solar on their rooftops invested their own money to build APS a power plant, Rich said. “That is good for APS ratepayers. It is not good for APS.”

“Cost-shifting is just math,” Guldner said. “If there are 100 customers paying for a $1,000 system, they each pay $10 per month. If half of them install solar and stop paying, there are 50 customers and they pay $20.”

“The math shows the benefits outweigh the costs,” Fenster said. And APS Renewables Program Manager Greg Bernosky acknowledged the transmission and distribution benefits at the recent GTM Solar Summit, Fenster added. “Let's address the math in a rate case,” he suggested.

Guldner understands the urgency. “Right now, APS has 18,000 customers with rooftop solar. We can talk about things like grandfathering them in to protect their investments, but it is going to be much harder to protect 100,000 customers and to institutionalize tens of millions of dollars of cost-shifting.”

“A rate case would give the ACC more tools to resolve the issue,” Rich said. “They could adjust rate classes and change rate designs.”

Solar advocates have responded. The ball is in APS' court.

Watch the exchange between Sunrun's Edward Fenster and APS's Gregory Bernosky at Solar Summit 2013:

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