SRP settlement with Tesla could make solar, batteries more affordable

Salt River Project could settle its three-year-old lawsuit with SolarCity by buying a massive battery from the company, now owned by Tesla Inc., and giving incentives to customers who want to put batteries on their homes.

SRP's board of directors voted Monday to negotiate a deal to end the lawsuit, which dates to 2015 when SRP OK'd new rates for customers with solar panels. The U.S. Supreme Court was scheduled to hear oral arguments on the case this month.

SolarCity sued SRP in Arizona District Court, accusing the utility of "anticompetitive and tortious conduct designed to eliminate solar competition."

SRP tried unsuccessfully to dismiss the case on grounds of immunity — arguing that as a public utility it can't be charged with antitrust laws meant to deter monopolies. It appealed to the 9th Circuit Court of Appeals and then to the U.S. Supreme Court.

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The settlement would have Tesla drop its challenge to the solar rates and SRP drop its Supreme Court appeal of the immunity issue.

"I would like to request approval from you today to resolve this matter and resolve this litigation, moving forward to a more constructive relationship with Tesla on behalf of customers, both theirs and ours," Michael O'Connor, SRP's chief legal executive, said to the board of directors before the vote.

Tesla and SolarCity

Electric car maker Tesla merged with SolarCity in 2016. Its products include a Powerwall home battery that can pair with rooftop solar panels to supply most of a home's electricity. The price is about $7,000 to $9,000 with installation.

The settlement requires Tesla's approval, though the companies already have agreed to the broad terms, O'Connor said.

Tesla officials did not respond to requests for comments Monday.

"We've had advanced discussions with Tesla and their attorneys in terms of a potential resolution," O'Connor said following about 20 minutes of private discussions with board members. "I'm not going to divulge what was discussed in executive session. There are several details that need to be worked out in terms of a settlement agreement."

The deal could make it cost effective for customers in SRP's electric utility area to install solar. While hundreds of customers were installing solar in SRP's area before 2015, the rate changes reduced the rate of solar installations to a trickle because customers could not save as much money if they installed panels to generate their own power.

Solar customers on the rise

SRP had about 15,000 customers with solar when the new rates were approved in 2015. The next year, few people in the territory installed solar, but last year about 1,700 SRP customers did so. It has more than 17,000 solar customers now.

"We have been experiencing a steady increase in the number of applications for rooftop (solar), and with the potential for increased battery storage for residential customers, we would anticipate that trend continuing," spokesman Scott Harelson said.

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Specific settlement details won't be available until Tesla approves the deal. The broad terms approved by the SRP board call for:

SRP to purchase a 25-megawatt battery that will be installed at the Agua Fria Generating Station in Peoria. O'Connor said SRP would pay market price. A battery that size can power about 6,000 homes at once and costs about $10 million, based on public statements from Tesla on pricing of other projects.

SRP to launch a "limited" incentive program for residential batteries. O'Connor said incentives would be given to customers, not Tesla, but did not cite a dollar figure.

SRP to launch a limited program for customers to test new demand rates. The rates, which are the subject of the litigation, charge customers a fee for the peak amount of electricity they draw from the utility each month.

The litigation to be dismissed with prejudice.

Each side to pay their own legal fees.

Notably, the settlement does not involve SRP repealing its demand rates, which spurred the litigation and prompted hundreds of protestors to attend SRP's hearings in 2015.

Frustration with the demand rates solar customers must pay has prompted new candidates to run for SRP's elected board of directors. Two solar advocates won election to the board in 2016 and five more are running this year.

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