In the fight for net metering in Arizona, which many in thesolarindustry believe to be the most important fight for solar in the U.S., the state’s biggest utility wants a revision that could significantly change the cost of solar.

Arizona Public Service (APS) filed a proposal with the Arizona Corporation Commission (ACC), the state regulators, to offer future residential solar customers two options, either of which would reduce returns for the electricity their systems produce.

“The plan is built around two options, either of which would ensure that APS customers who choose rooftop solar in the future will be compensated fairly for the electricity they generate and pay a fair price for their use of the electricity grid,” according to the APS statement about the filing.

Net metering supports the growth of solar by requiring regulated utilities like APS to reimburse home and business owners at retail rates for the electricity they send to the grid.

One option proposed by APS would allow new residential customers to continue being reimbursed in the same way but would require them to pay a charge “for their use of the grid, based on how much electricity they use.”

The other option, which APS calls a “bill credit,” allows new system owners a small bill reduction, set by the ACC and “based on the market rates APS pays other generators for power.”

In a conference call with stakeholders ahead of the filing, APS' Chuck Miessner said the current average net metering return is between $0.15 and $0.16 per kilowatt-hour and saves the average net metered customer approximately 70 percent of their bill.

The first option would lower the customer’s return to between $0.06 and $0.10 per kilowatt-hour, Miessner said. The second option would likely reduce a solar system owner’s savings by about 50 percent to approximately 30 percent to 40 percent of the monthly bill, on average.

Current solar owners and those who contract for a system by October 15 and interconnect within 180 days after that would be grandfathered into the existing net metering plan for twenty years.

The plan applies only to residential customers. Business customers’ rates, APS acknowledged, already “reflect their use of the grid.” 

The 44 net metering policies across the U.S. are becoming controversial because when solar owners’ utility bills roll back to zero, they escape most of the infrastructure surcharges that are part of other electricity users’ bills.

“To the extent we don’t recover transmission and distribution fixed costs,” APS Customers/Regulations Sr. VP Jeff Guldner recently told GTM, “we create a surcharge that assesses those costs to all customers. And the way metering works, that means non-solar customers.”

Meanwhile, APS argues, residential solar customers benefit from a reliable electricity grid but use it “essentially for free.”

”As the number of customers installing solar goes up, it drives rates even higher for non-solar customers, making the problem more difficult to solve,” the APS statement said.

“Right now, APS has 16,000 or 18,000 customers with rooftop solar,” Guldner explained, “but it is going to be much harder to protect 60,000 or 100,000 customers and to institutionalize tens of millions of dollars of cost-shifting.”

Net metering is a key component of the third-party ownership (TPO) business model with which Sunrun, SolarCity, Clean Power Finance, NRG Energy, Sungevity, SunEdison, and SunPower have led a boom in distributed solar growth in Arizona and other states over the last two years.

The TPO companies argue net metering should be left in place because there are quantifiably more benefits than costs from adding net metered solar, including reduced stress on the transmission and distribution system and the creation of revenues and jobs in an industry that boomed in Arizona, even during the recession.

“The proposal allows the ACC to create a backdoor tax on solar owners that will either severely curtail or kill solar in Arizona,” said Jason Rose, a spokesperson for the Barry Goldwater, Jr.-led Tell Utilities Solar Won’t Be Killed (TUSK) group.

“Solar is a disruptive technology and APS can’t compete,” Rose added. “They are trying to maintain their profits and protect their shareholders’ stock price. We have spent a lot of time talking with them and they fear for their future.”

Procedurally, Rose explained, the next step is an open hearing before an Administrative Law Judge (ALJ). That hearing will include expert testimony on the costs and benefits of solar and of net metering.

The ALJ’s decision will go to the ACC, which will make the final determination on whether to implement the APS proposal, leave net metering in place, or take another way.

“After conservative states like Idaho and Louisiana rejected proposals to change net metering,” Rose said, “it would be a travesty for Arizona, the sunniest state in the union, to do it.”