An Epic Battle Between Solar Firms and Power Utilities Could Leave One Side Unplugged

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In January, a report titled "Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business" placed net metering squarely in the crosshairs. The paper — prepared for the Edison Electric Institute, a think tank on energy policy, by Peter Kind of Energy Infrastructure Advocates — identifies the explosive growth in solar power as a probable future threat to utilities' business models and customers.

If the electricity sold declines by 10 percent, Kind warns, non-solar customers could face corresponding rate increases of up to 20 percent.

In a worst-case scenario, Kind states, a "vicious cycle" could develop in which the expansion of rooftop solar causes rates to rise, which would cause more people to become attracted to solar systems, which would cause rates to rise even higher. Soon, too few people would bear the costs of keeping the whole machine running.

Thus, the utilities' gravy train would run out of steam.

"Investors [in utility companies] have no desire to sit by and watch as disruptive forces slice away at the value and financial prospects of their investments," Kind wrote. By the time investors "start to witness significant customer and earnings erosion trends," it may be too late "to repair the utility business model."

Immediate changes need to be made to the "tariff structure" that subsidizes solar, Kind urges.

APS, with 16,000 net-metered solar customers now and new residential-solar applications coming in at the rate of 150 a week, is heeding the call with its pending request to change net-metering rules.

Bernosky, APS' renewable energy manager, admits that the problem hardly is "crisis scale" yet. He refers to a study showing that for every solar customer, $1,000 gets "shifted" to the overall customer base.

Doing the math, it sounds like a lot of money over 20 years: $320 million, just for existing customers. But APS has 1.1 million customers — so that breaks down to $14.55 per year. Just $1.21 a month for each customer.

That amount seems plenty palatable for most Arizonans.

Surveys show bipartisan support in Arizona for continued taxpayer-funded subsidies for renewable-energy sources, including solar power, and support for pro-renewable policies that result in higher power bills. The requirement that 15 percent of Arizona's electricity needs must be met with renewable energy by 2025, for example, means that each APS residential user is hit with a maximum monthly surcharge of $3.84 to help pay for subsidies for renewables, not including APS' estimated net-metering bump.

Not much money, for now. For all but the most impoverished ratepayers, it's seen as a relatively inexpensive way to help promote solar power.

Jobs are created. The product, though not totally free of the taint of pollution, produces cleaner kilowatts per hour than nearly any other generation source — as long as the sun's up.

But Bernosky notes that solar customers expect their power to be purchased for a retail-equivalent rate for as long as systems work, which may be more than 20 years. Right now, it's possible to lock in the current plan for existing solar customers, he says. Eventually, though, if rooftop keeps growing at a fast clip, too many solar customers will have sprung up to "grandfather" them all in, he says.

APS' solution is to have solar customers (new ones, anyway) pony up more money for the privilege of using the "virtual battery."

If that change helps thwart what APS calls a "disruptive technology," all the better from the perspective of the utility's investors. Customers can only trust that blowing up the rooftop-solar business will be good for them in the long run.

Still, nobody likes the winner in a game of Monopoly.

Clouding the debate on net metering is a contested question: Does the subsidy really cost money for utilities and, therefore, their ratepayers, or does the juice from rooftop panels actually make money for utilities?

Under the latter theory, backed up by a Crossborder Energy study commissioned by solar companies, utility execs are so greedy that they aren't sharing the bounty with all customers by lowering rates accordingly, and they want to game the system even more in their favor by slashing payments to customers who provide a source of clean power.

If true, APS is stealing from its 1.1 million customers, with the Corporation Commission as a willing accomplice.

This, in fact, is the position of solar advocates such as Michael Dee, publisher and editor-in-chief of Arizona Foothills Magazine, which publishes a Solar Style section on its website and columns blasting APS for its stance on net metering.

The site also produced a YouTube video for a song performed by Krystal Baker that takes a sarcastic bite at the utility to the tune of Bonnie Tyler's "Total Eclipse of the Heart."

A lyric goes: "We don't know what to do / They want to keep us in the dark / APS is a monopoly / That acts like a shark!"

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Ray Stern has worked as a newspaper reporter in Arizona for more than two decades. He's won numerous awards for his reporting, including the Arizona Press Club's Don Bolles Award for Investigative Journalism.