Are $50 demand charges for rooftop solar owners an unfair monopoly practice, or simply the utility’s way of recovering costs?
This may be the big-picture question in the two-year legal battle between Arizona utility Salt River Project and Tesla solar subsidiary SolarCity. But it’s not the question the utility is now asking the U.S. Supreme Court to decide.
Instead, Salt River Project's petition for a writ of certiorari filed on Thursday is asking the high court to review a narrower question -- whether, as a state-regulated entity, it’s immune from antitrust lawsuits in the first place. SRP says yes, SolarCity says no, and last year, the U.S. Ninth Circuit Court of Appeals agreed with SolarCity.
SRP’s argument is that the state immunity doctrine, which allows state governments to displace private competition without facing antitrust claims, should extend to it as a provider of energy under strict state government control. But the Ninth Circuit upheld a lower court’s rejection of that claim, preventing the utility's countersuit from halting SolarCity’s original case.
SolarCity sued in March 2015, soon after SRP implemented a demand charge on rooftop solar customers. SolarCity, which had about half of the 15,000 or so solar customers in SRP territory, said the new plan constituted an anti-competitive action to bolster SRP's revenues -- and its own growing solar portfolio -- at the expense of its customers and the private sector.
SRP, in turn, justified the the fees as a way to make up for solar customers’ reduced per kilowatt-hour charges, which rob it of funds for maintenance and upgrades on the network. The same argument has been made by utilities in states across the country to justify proposals for fixed charges, demand charges and other fees for net-metered solar systems.
But SRP's fees were some of the highest in the country, and their effects were felt immediately. SolarCity saw new installations fall by 96 percent in SRP territory after the policy was launched. According to its calculations, the new demand charges and other fees amounted to a 65 percent penalty on new solar customers, compared to the much more modest 3.9 percent rate increase SRP had proposed for residential customers at large. Credit Suisse weighed in that this made the economics of solar in SRP’s area “effectively non-viable.”
Since then, data shows that not all solar customers are doing as badly as expected. SRP reported in March 2016 that the average customer would pay $122 a month with solar on the demand rate, compared to $93 for customers grandfathered in for 20 years under the old net metering rate -- a $29 difference. Even so, rooftop solar installations remain in the doldrums.
Arizona utilities have led the charge on rates and fees for solar customers, with solar and environmental groups in strident opposition to a similar plan from Tucson Electric Power. But the state’s largest utility, Arizona Public Service, reached a settlement in February with solar groups and others to make demand charges optional, rather than mandatory.
At the same time, Arizona is also pushing its utilities to adopt time-of-use (TOU) rates that will apply to solar and non-solar customers alike. The APS settlement includes the move to TOU rates for all customers as a default by May 2018, and TEP won approval in February for a more sophisticated TOU rate design to be rolled out as default for new customers starting next year.
Other states have been far less supportive of increased costs for net-metered solar. This summer, Nevada passed a law reversing state regulators’ decision to eliminate solar net metering, and enshrining the right of customers to self-generate energy. Last year, Massachusetts regulators rejected additional access fees for community solar projects.
It's unclear whether or not the Supreme Court will take up SRP's petition, or how the Trump administration may act in regards to the case. In June 2016, the U.S. Department of Justice under the Obama administration weighed in with an amicus brief in favor of SolarCity's position on the state immunity doctrine issue, noting that Arizona’s state government has generally directed utilities toward increasing the opportunities for energy competition, not limiting or displacing it.