In sunny Arizona, a battle over solar power

October 16, 2013
A home on a hillside near Bisbee, Ariz., sports solar panels. (Jeff Topping/Reuters)
A home on a hillside near Bisbee, Ariz., sports solar panels. (Jeff Topping/Reuters)

An insider fight over how much a utility company must pay for electricity generated by solar panels on private rooftops is boiling over into a full-fledged campaign, complete with shadowy  money, expensive television advertising, calls for grass-roots action and some of the best pollsters and consultants money can buy.

The feud between the utility and solar panel industries revolves around net metering policies, which govern part of the relationship between utilities and their customers. If the customers have solar panels that generate surplus electricity, the customers can feed that power back into the electric grid; utilities are required to pay the consumer a set rate for the electricity they generate.

When those rates were first implemented, the nascent solar industry had few residential customers. But now, as more customers invest in solar panels for economic or environmental reasons, public utilities are starting to feel the pinch — and they want to stop paying rates they say are above market value for power they can’t always use (For more on net metering, read our colleague Lenny Bernstein’s look at the debate from June).

When the Arizona Corporation Commission holds its November meeting, commissioners will consider a request from Arizona Public Service Company, the state’s largest electric utility, to change those rates. The utility industry wants permission to pay rates below market value, and to charge customers who feed electricity back to the grid a monthly fee for maintenance costs.

On its face, the fallout from the battle of the special interests wouldn’t appear to have a big impact. Only a tiny percentage of homes in Arizona have solar panels. And APS reported revenues of more than $3.3 billion [pdf] and income of $382 million in 2012, meaning the potential impact on the bottom line from a rate decrease would be tiny.

Solar panels on residential rooftops generate just 181 megawatts of power, less than 2 percent of the more than 10,000 megawatts APS is capable of generating at coal, nuclear and natural gas plants around the state. About 27,450 homes use solar panels, according to the Solar Energy Industries Association; APS serves about 1.1 million customers around the state.

But the national ramifications, both sides say, could be huge. For the solar industry, if rates consumers can charge drop to a point at which solar panels aren’t economically viable in Arizona, sales could plummet. For the utility companies, a victory in Arizona would set the ball rolling in other states where net metering rules are up for debate.

“This is about fairness. It’s about addressing the cost shift that clearly exists,” said Jim McDonald, a spokesman for APS. “The current net metering structure creates a cost shift that unfairly burdens non-solar customers. We should fix that problem now before it gets worse.”

“If the utilities are able to upend rooftop solar in Arizona, the sunniest state, then imagine what they can do everywhere else,” said Jason Rose, a veteran Republican consultant working for the solar industry.

In advance of the ACC’s meeting in November, both sides have launched wall-to-wall campaigns in hopes of influencing the public, and the five voting members of the Corporation Commission, all of whom are Republicans.

The solar industry has hired Rose and Barry Goldwater Jr., the former congressman and conservative activist. Organizing for America, the offshoot of President Obama’s 2012 campaign, has created a Web site to encourage supporters to lobby the Corporation Commission on solar’s behalf. Rose’s firm hired Glen Bolger, of the Republican polling firm Public Opinion Strategies, to conduct surveys on their behalf.

The utilities have relied on several organizations run by Sean Noble, the Republican operative who helped funnel money through the conservative empire built by billionaire brothers Charles and David Koch. Two of those organizations, 60+ and Prosper, have run television advertisements comparing the solar industry to Solyndra, the green energy company that became a conservative rallying cry after it went under despite receiving more than $500 million in loans from the federal Department of Energy.

“We’ve seen this before,” a narrator says in an advertisement that began running this summer. “Connected companies getting corporate welfare.”

McDonald, the APS spokesman, hastened to point out that his utility isn’t against using solar energy. In fact, the utility has invested in a new 240-megawatt solar field that will help increase its generating capacity.

“In a lot of this battle, we’ve been portrayed as anti-solar,” McDonald said. “Solar power is essential to the energy future of America.”

Rose said in an interview his mission is to make “a very powerful Republican case” for solar. His group has tried to frame the debate as one of consumer choice, akin to school choice. “Republicans have in their DNA this Solyndra cell, which, courtesy of Mitt Romney and others, says all solar is bad,” Rose said.

To the utility industry, making the case to change rates is about fairness to all its ratepayers. APS has to maintain a massive electrical grid, and consumers who feed power back into that grid aren’t paying their fair share to keep it running. APS estimates it is losing about $18 million per year thanks to fees it has to pay to solar customers for energy it can’t always use.

“We’d like to see the rates around the wholesale rates, because that’s the rate the market will pay” for power, said Richard McMahon, the vice president of energy supply and finance at the Edison Electric Institute. “There’s a cost” to maintaining the grid, McMahon added, “and the cost isn’t being recovered.”

The solar industry, on the other hand, counters that higher rates are good for competition, and that thousands of solar panels on roofs around Arizona would actually reduce wear and tear on the electrical grid.

“Right now, the utilities aren’t listening to their customers. They’re listening to their shareholders,” said Rhone Resch, president of the Solar Energy Industries Association. “What they’re asking for, frankly, goes against what the public wants, what their rate-payers want.”

Currently, Arizona Public Service Co. pays about 15 cents per kilowatt-hour to consumers who feed power back into the grid. APS has offered two potential alternatives to the current rate structure, both of which would reduce the amount the utility pays for net metering to between 4 cents and 10 cents per kilowatt hour.

The debate over net metering was originally scheduled for the ACC’s October meeting, which begins Wednesday morning. But Susan Bitter Smith, one of the five ACC commissioners, told the Phoenix Business Journal last week that the debate will be pushed off until at least November.

Reid Wilson covers state politics and policy for the Washington Post's GovBeat blog. He's a former editor in chief of The Hotline, the premier tip sheet on campaigns and elections, and he's a complete political junkie.
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