The closely watched decision, which came late Thursday after months of increasingly heated debate from both sides, preserves a credit system that has been a powerful incentive in attracting solar customers and adds less compensation than the utility, Arizona Public Service, had sought.
The compromise on the system, which is known as net metering — it credits residential and commercial customers for excess renewable energy they send back to the grid — allows it to continue. But it sets up a future battle over the value of decentralized solar power that will play out across the country.
More than 40 states offer some form of the incentive, according to the Energy Department, and the credit programs are under scrutiny in nearly all of them, advocates say.
In the Arizona case, as in others this year, regulators have told the utilities to re-examine their entire rate structure, not just net metering, said Bryan Miller, president of the Alliance for Solar Choice, a lobbying group, and vice president for policy at Sunrun, a residential installer.
“The commissions and the regulators are telling them to go fix them, but fix them for everyone, not just for solar customers,” he said. Referring to the utility, he added, “Those fees are real and they’ll have a real impact on the industry, but they do not accomplish A.P.S.’s goal of destroying the rooftop solar industry.”
The Arizona utility claimed a victory as well in the regulators’ recognition that solar customers put a financial burden on nonsolar customers, which solar advocates dispute.
“The distributed rooftop solar industry has just been pushing for so long, ‘There’s no cost shift, there’s no cost shift, there’s no cost shift,’ and I think increasingly you’re seeing people both in California and Arizona and in other places say, ‘No, this is a real issue and we’ve got to deal with it,’ ” said Jeff Guldner, senior vice president for customers and regulation of Arizona Public Service. “If we don’t do something to address it you’re going to have the system collapse.”
Solar advocates say the credits are fair compensation for the value of power delivered to nearby customers, often at times of peak demand. That extra power can in the short term reduce strain on the system and in the long term avoid the cost of building new power plants.
But utilities, which recoup capital expenses through the rates they charge, say that solar customers are not paying their fair share. That forces the utilities, they say, to shift system costs to nonsolar customers.
In a 3-to-2 vote, the regulators, the Arizona Corporation Commission, agreed that there was a shift and set a fixed charge, 70 cents per kilowatt of system capacity, to pay for it. That works out to roughly $5 a month for an average system, rather than the $40 or $50 month the utility wanted, though that would have included an upfront cash subsidy.
The case attracted attention from the electric power industry, which spent millions supporting the utility’s position and criticizing rooftop solar. Solar energy developers, whose businesses would be in jeopardy without the incentive, mounted a far less expensive campaign of their own, arguing that customers should be able to choose the power they prefer and that the electric companies were clinging to antiquated business models.
David Crane, chief executive of NRG, an independent power producer that is moving heavily into the rooftop solar business and ran a pro-solar ad in Arizona before the vote, said that the utilities were sowing the seeds of their own destruction.
“The more they charge people who are generating most of their own electricity for backing up that self-generation, they’re going to encourage those people to find a solution that doesn’t involve the grid at all,” he said.