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8/18/2013 3:26:00 PM
Opposition grows against APS solar rate hike
Mayor Doug Von Gausig: “People who have put solar on their houses are making an investment that is far from the return they’ll get ...  They’re looking at the effect that having solar on their house will have on global warming.”
Mayor Doug Von Gausig: “People who have put solar on their houses are making an investment that is far from the return they’ll get ... They’re looking at the effect that having solar on their house will have on global warming.”

Yvonne Gonzalez
Staff Reporter


Clarkdale Town Council members voted Tuesday to oppose two Arizona Public Service proposals that would increase rates for rooftop solar customers.

The town joins Cave Creek, renewable energy activists, and Republican Barry Goldwater Jr.'s advocacy group, Tell Utilities Solar won't be Killed, in pushing back against the rate hike.

APS claims non-solar customers are unfairly carrying the financial burden of maintaining the power grid through fees that are automatically included in their rates, but that solar customers do not pay.

The council decided to send a letter to the Arizona Corporation Commission, the elected body considering the proposals, stating increased rates, while perhaps necessary in the long term, would eliminate most of the incentives that encourage customers to install distributed energy systems.

Bills for new solar customers would likely increase by between $50 and $100 per month, which Clarkdale Mayor Doug Von Gausig said is excessive and would stymie solar energy installations.

"We need renewable energy to be encouraged, and that kind of rate hike will have a discouraging effect," Von Gausig said. 

APS spokesman Greg Bernosky said solar customers are not paying for a grid that they are hooked into. The utility is required by law to provide all customers with a consistent source of power day and night, rain or shine.

Grid maintenance costs stay the same regardless of how many customers decide to go solar. By not paying into the maintenance of the grid, those infrastructure costs are passed off on other customers who do not want or cannot afford to install solar panels. 

W.P. Carey School of Business Dean Emeritus Robert Mittelstaedt and a group of ASU professors have been facilitating discussions with utility companies across the country to explore how to fairly distribute the costs of maintaining the power grid.

According to APS, the majority of people who have solar are more affluent, with larger homes. Mittelstaedt said as more people install distributed energy systems, this creates a socioeconomic issue where the grid is primarily providing for the people who can't afford solar. 

"If we're not careful, we might get to that point," he said. "It's quite reasonable to start with the premise that everyone who's connected to the grid has to support it."

Less than 2 percent of APS customers are using solar, but the company wants to correct this fee shift before that number climbs to the point where a small proportion of customers are being unfairly burdened.

"Setting our policies and addressing this issue now keeps that from being a significant cost impact to non-solar customers," Bernosky said. "The time is now to have the conversation and put us on the right path so that we don't have to make this an issue for customers."

Bernosky explained the proposals to the council during their regular meeting. The two plans would not impact commercial or current solar customers. 

The first policy makes changes to the net metering billing option that is currently used by about 10 percent of APS customers. 

When a solar customer produces more energy than they use, it flows back into the grid and goes to the next customer who needs it. As is, net metering compensates the customer at market value in the form of a bill credit. 

The new plan reduces the amount of compensation from market value to the wholesale price APS would pay any other energy provider for the same power. The difference between the two numbers is about 10 cents per kilowatt-hour.

"The rates just aren't designed appropriately to address the needs that exist," Bernosky said.

Solar industry advocates claim APS is undervaluing the power distributed energy producers contribute to the grid. 

Studies sponsored by APS value the energy produced by rooftop solar customers at about 4 cents per kwh, reflecting fuel and infrastructure savings. 

Research sponsored by solar companies, however, values rooftop solar power at about 22 cents per kwh by including benefits from added jobs in the renewable energy industry, impacts on commodity prices, and other qualitative benefits. In documents submitted to the corporation commission, APS describes this rate as "grossly inflated."

Von Gausig said solar customers are contributing to a more secure energy future and reducing the need for APS to build more power plants.

"People who have put solar on their houses are making an investment that is far from the return they'll get," he said. "Most of these people are doing this not just to have a lower bill. They're not looking to externalize their expenses on other people. They're looking at the effect that having solar on their house will have on global warming."

The second option would replace net metering with a bill credit. 

Distributed energy customers would purchase all of their power from APS under a rate plan they choose, just like any other customer. The power produced by their rooftop solar panels would flow into the grid and be credited to their bill at a rate set by the ACC based on wholesale prices.

"To say, here's a flat fee for all solar customers - the problem is the fact that not every customer is the same size," Bernosky said. "That fee may be too high or too low depending on energy consumption."

APS is also proposing an increase in the upfront cash incentive given to future distributed energy customers. As the price of solar panels has declined over time, the utility has lowered the incentive amount paid to customers from about $4 per kwh at the start of the program to about 10 cents today.

Arizona's Renewable Energy Standard Tariff has been in effect sine 2007 and requires APS to obtain 15 percent of its energy from renewable sources. A third of that percentage must come from distributed energy systems like rooftop solar. 

APS is currently ahead of schedule to meet this standard.

"Incentives are there to start a market," Bernosky said. "We had 6,000 solar installations last year. They've spurred innovation and cost management, and now we're ready to move on to the next level."

During the meeting, Councilman Bill Regner pointed to a 2009 study commissioned by APS that found as more distributed energy systems are installed, the utility company will realize increased savings in costs associated with fixed operation and maintenance, fuel, purchased power and energy lost through line transmissions. 

Von Gausig said this proves solar customers contribute to the public good, and increasing rates will only deter potential users. In as little as two months from now, rates for new solar customers could jump overnight.

"This isn't the right time to do this," he said. 

While sensitive to the position APS is in, Von Gausig said the ACC needs to do some creative thinking to solve the problem.

"We agree that at some point you're going to have to make some adjustments to all of the rates to maintain the grid," Von Gausig said. "Instead of collecting $50 to $100 per month from each solar user, collecting $3 to $5 from all customers could accomplish the same goal."

Vice Mayor Richard Dehnert compared APS's proposals to a 1950s Buick and a Prius at a gas station. The owner of the more fuel efficient vehicle should not be punished for purchasing less gas by paying more per gallon than the Buick owner.

"APS is hanging on to this gigantic generation and grid model," he said during the meeting. "(APS needs) to figure out a new way to make money."


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Reader Comments

Posted: Saturday, August 31, 2013
Article comment by: Gregory Aston

APS fees need to be fair & sustainable. Everyone should pay grid maintenance fees, buy electricity @ a retail price, & sell any excess electricity they generate back to APS @ a wholesale rate. Home Solar Generators need APS's grid unless they want to go off grid with batteries, etc..., but they should be based on their use of the grid (in & out) not a flat fee.

Posted: Wednesday, August 21, 2013
Article comment by: bill wright

Where in the equation is the $11mil salary for the top brass in this org.? or where are all the subsidies accounted for that APS currantly receives? This is how they really make their money. They are guaranteed and paid a profit from the gov. Tax revenue collected. Expanding and maintaining the infrastructure (grid) Is already paid for by the tax payer, rate payer. Look at your bill. Palo Verde nuck plant is collecting subs for Aps right now in the event it might have to be decommissioned. These subsidies range into the billions annually. Arizona should be leading the way in solar. incidentally, where is all this subsidy money banked and is it accounted for?

Posted: Wednesday, August 21, 2013
Article comment by: Peter, Yavapai County

Good article, Yvonne.

It is in everyone's best interest to increase energy efficiency. Efficient appliances and buildings use less energy to do the same job. This means that customers use less energy and save money - money that would have gone to APS. (Similarly, oil companies are not in favor of CAFE standards.)

Diversified sources of energy production increase the stability of everyone's grid. Rooftop solar is a kind of insurance for the grid during peak use hours.

When AC and industry use is maximum, so is solar energy production. So the coal fired plant which supplies our grid can handle power peaks more reliably with less coal. And the capacity which solar provide allows for increased usage in the future without the need to build an additional coal plant. The "problem" is that APS desires to run their coal plant at full power at all times, like any business would. Solar threatens that.

Now, under APS monopolistic logic, the more energy you save, the more you pay for each unit you use. This reminds one Soviet communism.

The elected Corporation Commission is supposed to be looking out for the voters (energy user's), best interest.


Posted: Wednesday, August 21, 2013
Article comment by: Ashland Oregon

Since when is APS a progressive, socialist leaning monopoly worried about the poor shouldering unfair costs? APS is a capitalist, money sucking, anti solar and wind government monopoly that can't sustain a guaranteed revenue stream if people become efficient users of their single product and or solarize.

So when the APS spokesman says,

"According to APS, the majority of people who have solar are more affluent, with larger homes. Mittelstaedt said as more people install distributed energy systems, this creates a socioeconomic issue where the grid is primarily providing for the people who can't afford solar.

"If we're not careful, we might get to that point," he said. "It's quite reasonable to start with the premise that everyone who's connected to the grid has to support it."

Less than 2 percent of APS customers are using solar, but the company wants to correct this fee shift before that number climbs to the point where a small proportion of customers are being unfairly burdened."

The actual reason is that NOW APS has the ability to fly any BS past the Arizona Corporation Commission, an oversight commission made up of its well-funded flunkies all who rubber stamp monopoly requests.

Electrical monopolies profits have decreased since the mid-80s. APS is the kind of monopoly that wants energy LESS efficient appliances, no solar buy backs, teeny eeny dribbles of capital funding for grid security and etc...and APS would gouge the poor as fast as the rich. They don't give a damn about who pays, they want all to pay, and pay big.

BTW, schools have solar - I'm not sure in AZ that our schools are havens of affluence...and in our neighborhood it's a retired guy on a fixed income that went solar because he is retired and on a fixed income...his utility bill he proudly proclaims is $7.

That's what APS hates.


Posted: Tuesday, August 20, 2013
Article comment by: Not For Me Yet

Hold on for a second and see if I got this right. APS sells me electricity for (estimate) 20 cents a kilowatt hour but will only buy electricity from me (if I had solar panels) for (estimate) 10 cents a kilowatt hour. If this is correct, who is getting screwed here? Another fallacy here states people are looking at the effect that having solar will help with global warming. Everyone I know who has them just wants to save money in the long run.

Posted: Tuesday, August 20, 2013
Article comment by: Slater Slater

I couldn't agree more.Got enough money to go
Solar and then try to charge those who don"t?
Just go for the planet first and not the GREEN.


Posted: Tuesday, August 20, 2013
Article comment by: robin potter

While I agree that ALL customers should (perhaps) SHARE the burden of "grid maintenance", this only works if the burden is shared equally. APS, with ACC support, has buried this component of their cost structure into their rates - no one, not even the ACC (or perhaps even APS) knows what the actual cost per connection is. Until that is established, there is no way that APS should be allowed to ARBITRARILY asses solar uses any amount for this purpose.
It seems to me that what needs to happen if that APS needs to segregate their operating costs between production, distribution and grid maintenance. Perhaps then there can be a reasonable discussion of what solar customers should be assessed for grid maintenance, and this amount would be, necessarily, the same for all connections. IMHO


Posted: Tuesday, August 20, 2013
Article comment by: nutso fasst

APS buys electricity at wholesale rates and delivers it to end users. End users buy the electricity at rates high enough to pay APS's business expenses, wages, and a reasonable return for investors. It's understandable that APS wants to make it clear that they are, in effect, buying back electricity at retail rates from consumer solar energy generators and that no business can survive with that model. But they are being disingenuous.

Is four to five cents per kWh really the wholesale cost APS pays for solar-generated electricity?

Abengoa Solar, subsidiary of a Spanish multi-national corporation, got $1.45 billion in federal loan guarantees to build the $2 billion Solana solar generating plant now nearing completion. APS contracted to buy all the electricity the new plant produces at a rate of about fourteen cents per kWh (which is artificially low due to the 30% investment tax credit subsidy). Why is the 'renewable' electricity from consumer solar installations worth so much less?

It makes sense for APS to want the cost of delivery borne fairly by customers with grid-tie solar, but the current proposals are unreasonable.

As others have pointed out, this is not the time to hurt the budding on-site solar installation and maintenance industry, which has created many times more potentially-permanent jobs than the industrial-scale solar generators. On the other hand, perhaps this is a 'wake-up call' regarding the unsustainability of subsidies that will prompt advances in affordable on-site storage and have APS wishing they'd found a more palatable solution.

Can you say "off-grid neighborhood electrical generation cooperative?"

BTW, how many are aware that when you install a grid-tie inverter your solar power shuts down when the grid goes down?


Posted: Tuesday, August 20, 2013
Article comment by: Sami Bowen

While speaking of utility taxes, resident taxation for town water systems not used is unjust. Those on self-maintained, private wells should not be required to pay into town/city water systems.

Posted: Tuesday, August 20, 2013
Article comment by: David Bergeron

I studied solar/engineer in college and run a solar company in Tucson. Solar is too expensive to be viable today and probably will remain that way for decades. Sorry. I do these calculations every day. Solar only appears economic because of the high level of subsidies. ( >1/2 the total cost is subsidized)

Asking solar users to pay for the services of APS who must supply them power when they want it and must take their power when the solar users want to sell it is not free. APS is not a free "battery" for solar customers. The $100/mo charge is correct & fair.

As it is, solar customers are taking a free ride on their neighbors which is immoral.


Posted: Monday, August 19, 2013
Article comment by: Mary Heartman

@ Yvonne Gonzalez
Excellent article! I really enjoy reading a well-rounded presentation of all parties' point of view.


Posted: Monday, August 19, 2013
Article comment by: Mark Lyzwa

8/19/13
Bravo to Clarkdale (and Cave Creek)
Mark Lyzwa
CLE


Posted: Monday, August 19, 2013
Article comment by: Common Sense

I am in favor of solar, wind, etc etc. I am also in favor of everyone pays for infrastructure. I will not buy solar or wind until it is affordable with zero scams. When APS ask what I am going to do on my annual phone to save energy? meaning, am I going to buy solar, replace appliances, windows, etc etc. I said I would simply start unplugging unnecessary items and increase shade. So cavecreek and Clarkdale? You must pay your fair share of cost of maintaining the old and the cost of the new. Just like the rest of us.

Posted: Sunday, August 18, 2013
Article comment by: T. Hearn

I agree with Mayor Von Gausig. This is the worst possible time to decrease incentives to install and maintain private solar energy generation.

The Arizona Corporation Commission needs to hear from every concerned citizen immediately. Otherwise, APS's purchase of solar energy from the new Solana Generating Station and the debt servicing for this world-class facility will overshadow all other considerations.

Also, for those who really want their voices considered and their concerns addressed: Write to the Vice President and Chief Customer Officer, APS, Mail Station 8028, P. O. Box 53999, Phoenix, Az 85072. Be sure to include your address.

You'll receive a reply justifying APS's position up one side and down the other. BUT...the last time I took the time to tell APS how I thought it could have handled customer relations better, I saw every point improved within 8 months. It really helps to talk directly to the people whose job depends on your opinion of their company. It helps to make your position crystal clear. It helps to assume they want to keep their customers happy. Few ratepayers do.


Posted: Sunday, August 18, 2013
Article comment by: Low Cost Power, Maybe Yes.

1. The billing structure of a power company
should not be forced, by the heavy hand of gov,
for "government engineering" nor "social
engineering". Billing should based on the
pragmatic needs of supplying an infrastructure to
supply power to each customer...broken down
into two main components: (1) a monthly fixed
fee based on amperage service, and (2) a
variable fee based on consumption of electricity.

Now if the power company wants to encourage
"solar energy" it might/should be able to give a
deal to the customer by paying for the above two components for any electricity from the
customers solar source.

2. Interesting observation...when it comes to
the reality of residential solar systems well over
90% of home owners stay away from solar
because of high cost and low reliability of the
solar system.

3. In the last few years some home owners
have been buying into a 20 years lease type
contracts. Reason: the bulk of new install cost
and cost of maintenance is put on the back of
the installer. (I don't know if these 20 years
deals are gov backed...if they are, taxpayer...
beware.)

4. In life nothing is free...And all of us should
be pushing for conservation of all resources.



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