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Across the U.S., utilities are squaring off against solar in what may be the dirtiest fight in clean energy. In one corner is the industry behind the electrical grid as we've known it, more or less, for a century. The challenger, still a pipsqueak in terms of market share—less than 1 percent of U.S. power—is rooftop solar. Those rooting for solar were historically environmentally conscious consumers willing to spend more to reduce their carbon footprint, but solar is now economically attractive to a broader base. Some utilities maintain this is because solar customers enjoy benefits at the expense of everyone else on the grid, and they're lobbying to have solar-incentivizing regulations eliminated or replaced.

A key policy being targeted is net metering, which credits rooftop solar users for their power contribution to the grid, a decades-old concept that enjoyed a big boost from the U.S. Energy Policy Act of 2005. The challenger, solar, won the latest skirmish in the war on Thursday, when an Arizona regulator rejected the utility industry's call for new fees of $50 to $100 a month for rooftop solar customers. David wins round v. Goliath

The decision Thursday by the Arizona Corporation Commission, which oversees utilities in the state, in a 3 to 2 vote, allowed for a new fee of about $5 a month for rooftop customers, which will be in effect until the next rate case by APS, Arizona's biggest utility company, in 2015. The $4.90 fee is not at a level that would impact the economic case in favor of rooftop solar installations. APS spokesman Jim McDonald told the Associated Press that the company was pleased the commission saw the need for fees for solar customers, but was disappointed at the small amount.

"Every utility across the country who wants to stop net metering is going to take note that APS lost despite spending millions and pulling out all the stops," said Bryan Miller, president of the Alliance for Solar Choice and CEO of San Francisco-based residential solar company Sunrun, who had testified before the commission earlier in the day.



We don’t bill a house outside of town more than the one in town, even though it costs more to deliver power to them. But now we’re saying people who self-generate, we’re going to punish them? Francis Hodsoll Founder, VA Advanced Energy Industries

(Read more: Energy mergers, yes. Neglected grid? Probably not) The rhetoric in the press in the wake of solar's regulatory victory masks what has been a much nastier war of words and ugly political tactics. APS has been the subject of unflattering stories detailing how the company has inserted itself into the politics of net metering. Spat on a hot tin roof

In the latest, an Arizona Republic investigation reported that APS money helped pay for a mailer in support of the three Republican candidates running for Arizona's utilities commission, just days before last year's election. The donations are not illegal and company officials denied knowledge of them, but APS has policies that prohibit involvement in commission elections. Sandra Kennedy, an incumbent Democrat who lost her 2012 commission race, told The Arizona Republic that it was difficult to believe APS did not know about the political expenditure in support of her opponent. "It's kind of hard to say after the fact and after you knocked off two incumbents that happened to be Democrats, 'That was a mistake,' " she said. "Anything the utility companies say I would have to take with a grain of salt." (Read more: Prairies vanish in push for green energy) Previously, APS admitted—after earlier denials—that it funded a conservative seniors' group, 60 Plus, that ran ads opposing net metering and characterizing the system as "corporate welfare." "Credibility is always the issue in a he-said-she-said contest," said Miller. "APS denied for months they were funding ads," he said. "Now they're admitted liars. You shouldn't lie to your customers and you shouldn't lie to your investors, but it's really serious to lie to your regulators."

APS spokesman McDonald said: "We haven't lied to anyone. We have disclosed what we've known when we've known it." He added that rooftop solar companies have "chosen to make this a political battle—an ugly political battle."

A kick in the head

As the war of words in the press escalated it prompted Arizona's utility commissioner, Robert Burns, to ask that utilities disclose resources spent on campaigns. APS responded last Wednesday that its parent company, Pinnacle West, spent $3.7 million and some 4,000 man-hours on public relations efforts relating to net metering. APS sought to justify the big spend by stating it had to defend itself against hostile attacks from solar leasing companies. The utility cited a statement made by Jigar Shah, former CEO of solar project developer SunEdison: "I love kicking people in the head. And this is going to be amazing with Arizona for us to practice this kicking style to see where it goes. ... We're not going to even acknowledge that [net-metering] has any cost to the people."

Shah told CNBC the "kicking in the head" comment didn't originate with him; in fact, it was a comment attributed to the APS that he was asked to respond to at a solar conference. Nevertheless, Shah said, "In hindsight. I probably should have just highlighted the fact that APS has skyrocketing rates and solar is a good solution for consumers ... many on fixed incomes. My words might be rough, but in light of APS using ratepayer money to inappropriately prevent their customers from accessing cost-effective solar, I felt completely justified in putting the conversation in the light of day." Burns voiced concerns about campaigning by APS, which he characterized as an energy-providing "machine" that should steer clear of policy debates. "Who is paying for what?" he recently asked in an Arizona Capitol Times article. "I mean, the bottom line is the ratepayers pay for it all, but I think there is a line that should be drawn between APS and Pinnacle West and what they do." (Read more: Utilities target solar's 'fair share')