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Net Metering Axed, Huge Setback for Solar

Credit: Mamta Popat/Arizona Daily Star

By David Wichner for Arizona Daily Star

Arizona regulators voted last week to scrap so-called net metering for customers with rooftop solar systems in favor of a lower “export rate,” despite the objections of solar advocates.

After nearly two years of proceedings the Arizona Corporation Commission voted 4-1 to end so-called net metering, a process by which solar customers of Tucson Electric Power Co. and other state-regulated utilities are credited for excess power production at full retail rates.

“I think we’ve accomplished something pretty historic today,” Commission Chairman Doug Little said. “It’s not perfect but it’s a step in the right direction.”

Commissioner Bob Burns voted against the proposal.

Arizona utilities including TEP and Arizona Public Service Co. had sought to eliminate net metering, under which customers with rooftop solar are reimbursed their excess power generation, contending that solar customers aren’t paying their fair share of fixed grid costs.

Solar companies and advocacy groups counter that solar is worth far more than the utilities say in terms of reduced costs and pollution, and that any cuts to net metering rates would devastate the industry.

Two other states, Nevada and Hawaii, have ended net metering, and at least 25 other states are considering that and other solar rate-design issues.

Under a policy decision expected to guide pending and future rate cases, the Corporation Commission voted to end net metering and replace it with reimbursement through an “export rate” much lower than retail rates.

The export rates will be determined in each utility rate case and will initially be based on a “resource comparison proxy” based on a weighted, five-year average cost of power from utility-scale solar farms.

The new export rates will vary by utility and be stepped down annually, in increments limited to 10 percent each year.

TEP had proposed basing the solar export rate on its most recent costs for utility-scale renewable energy projects — about 6 cents per kilowatt-hour instead of the retail rate of about 11.5 cents per KWh.

Solar-industry experts say dropping the export rate significantly will essentially make solar uneconomical for many customers and devastate the industry, citing a huge drop off in demand in Nevada after that state cut net-metering.

Over the longer term, the utilities are required to develop solar valuation methodologies based on a five-year forecast of “avoided cost” of conventional generation, including such things as fuel costs, to be updated with each rate case.

Solar advocates wanted the value of solar to be considered over a longer time period, 20 years or more, to fully capture environmental and other long-term benefits.

Going forward, the utilities with commission approval could use either the resource proxy or the avoided-cost models to set an export rate, which would be updated in subsequent general rate cases.

Read more at Arizona Daily Star.

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