SolarCity relocating 85 Arizona workers, cites solar fees

In the wake of Salt River Project's recent solar rate hike, SolarCity Corp., the largest rooftop solar installer in the state, is relocating at least 85 of its 900 Arizona workers out of state, with more to come.

SolarCity CEO Lyndon Rive said Wednesday the SRP fees approved in February are too restrictive and eliminate the potential to save money with solar for nearly all customers.

"That is bad for the economy," Rive said. "Arizona is the state with all the sun. All the other states (where we operate) are doubling their solar capacity, and Arizona is shrinking, which makes no sense."

Rive said last week the company met with 275 installers in the company's five Phoenix offices and offered them relocation packages to other states where the company is expanding. As of Wednesday, 85 took the offer to move.

Rive said more transfers are likely from the company's sales department, and layoffs are a possibility, depending on business the rest of the year.

SRP officials in February approved a new rate plan for any new customers installing solar under which they will pay a monthly "demand charge" based on their highest 30-minute average demand of power from the grid during peak hours.

The demand charges would average $80 a month for the average solar customer with a peak demand of about 8.5 kilowatts each month, according to SRP.

That charge could be lowered to $32 for a customer with a peak demand of 4 kilowatts. A 14-kilowatt peak brings a fee approaching $200 for the month.

SRP solar customers also will pay less for the power they take from the utility, about 4 cents per kilowatt-hour compared with about 10 cents on most residential rate plans. That discount, however, also reduces the value of the power solar customers send to the grid for credit from SRP.

Only 61 SRP customers have applied to install solar since the Dec. 8 deadline to avoid the new fees, according to data from the utility posted on a public website that tracks statewide installations. Several hundred a month were installing solar each month last year before the new fees.

Rive said the move won't hurt SolarCity's finances.

"Strange enough, it actually ends up better for SolarCity," he said.

Because of Arizona's low cost of electricity, combined with the $5 average fee that Arizona Public Service Co. implemented last year on solar customers, SolarCity's profit margins in this state are low. Shifting resources to other states will increase the percentage of the company's workload in higher-margin states, he said.

"Financially, it's not a bad thing for the company," Rive said.

Most of the Arizona workers will transfer to California, but SolarCity is expanding in several markets. This week, SolarCity announced an expansion into New Hampshire, the 17th state in which the company offers service.

One company, American Solar and Roofing of Scottsdale, said earlier this month that it could pair batteries with solar panels to offset the demand charges in SRP territory, but Rive was dismissive of the idea.

SolarCity has been testing solar arrays with batteries in California, but Rive said they will not help make a business case for installing solar in SRP territory.

"Batteries are a solution, but they are not a solution to SRP's problem," he said. "Maybe 100 customers in the next 12 months will go solar with batteries in SRP. That is not a market, that is an innovators group. ... Batteries are a solution, but they are not a solution to SRP's problem."

Rive said he is not concerned other states will follow SRP's lead in charging higher fees on solar.

"In most cases there is a (public utilities commission) that reviews rates," Rive said. "SRP is unique there. There is no governing body that oversees that."

He said Arizona, with the APS fee last year and the SRP demand fee today, is the most challenging for his company.

"Arizona is the most hostile state to operate our business in the country," he said, "which is strange, because Arizona is known as a business-friendly state."