SRP board OKs rate hike, new fees for solar customers

New charges for solar customers that could influence the national debate on renewable energy were approved by Salt River Project's elected leaders Thursday.

The approval comes after a series of crowded, contentious public hearings this year pitting the utility's solar customers, solar-panel representatives and environmentalists against SRP executives, who said the charges were needed to ensure solar customers paid their fair share of maintaining the power grid.

The rate increase approved for all SRP power customers drew far less attention.

That rate hike will average 3.9 percent for all residential customers, raising bills about $5 a month for customers on the basic price plan and about $8 a month for those on the time-of-use plan.

The new solar charges will particularly affect any customer adding a rooftop system after Dec. 8, 2014.

Solar-rate changes will add about $50 to the average solar customer's monthly bill, mostly through a new "demand charge" based on their peak power demand during the month. The charge will be levied no matter how much the electricity the customers take from SRP is offset by production from their solar panels.

The rate changes will begin to take effect in April, with a basic service fee increasing again next year.

Without the overall increase, SRP managers said the public utility was facing a projected net loss of $46 million for the fiscal year that begins in May.

Twelve of the 14 directors voted for the rate increase and the new solar charges, with Stephen Williams, representing District 5 in the southwest Valley, and Keith Woods, from District 7 in the Scottsdale area, opposed.

The demand charge remained the most controversial portion of the complex rate changes, with about 200 concerned solar customers, those who hope to go solar, rooftop-solar workers and environmentalists attending Thursday's SRP board meeting.

A similar debate is taking place in several states. Last year, Public Service Co. of New Mexico proposed solar fees ranging from about $20 to $35 a month, and Wisconsin utility We Energies had similar fees approved last year.

The Alliance for Solar Choice and solar advocates filed a lawsuit over that Wisconsin case in circuit court in January, and SRP could face a similar challenge.

"SolarCity will have no choice but to challenge the decision in the courts," Thad Kurowski, director of policy and electricity markets for the rooftop-solar company, told the board. California-based SolarCity is the largest solar-panel installer in Arizona.

Kurowski said the SRP solar fees are the most aggressive in the nation. "You are eliminating the ability to go solar in SRP service territory and doing it in a way that can't be justified," he said.

Kurowski said SRP had not justified the increase, and a thorough financial analysis of SRP's costs related to solar would bring a ruling in favor of the solar industry.

"We are confident if we have to go through the courts, the courts will find the price plan cannot be defended and we will have to start this process all over again," Kurowski said.

Minor changes

SRP's rate proposal has seen minor revisions since it was introduced in early December.

Originally, the utility proposed the 15,000 people who already have solar would be "grandfathered," or keep their current rates, for a decade, then be transferred to the new rates.

After protests from customers who had used a 20-year calculation to estimate their savings from investing in solar, managers revised that ahead of the vote, suggesting that customers who owned their panels, but not those who leased, get as long as 20 years for grandfathered rates.

But in a rare move for the public utility, the board of directors approved an even more generous provision. At the suggestion of director Fred Ash, an at-large member who represents the entire territory, SRP will allow all 15,000 customers who have solar or signed a contract for it before Dec. 8 to keep their current rate plan without the demand charge for as long as 20 years.

That measure also passed on a 12-2 vote, with members Wendy Marshall, at-large, and Paul Rovey, West Valley, opposed.

SRP made other small concessions ahead of the vote. The company now charges a $17 basic service fee and had proposed raising that to $20 for all residential customers. Advocates for the utility's low-income customers don't like high basic service charges because customers can't do anything to reduce them. SRP revised its plan and will implement the $3 increase in two phases, $1.50 this summer and another $1.50 next year.

The utility also will base the demand charge for solar customers on their highest use during a 30-minute period during peak hours in the month, rather than a 15-minute period. The average for a 30-minute period will be lower and easier to manage, according to advocates of that change.

Fairness debated

One key point of contention in the rate hearing was whether it is fair to single out solar customers for special demand rates.

SRP officials say it was fair because solar customers have a unique interaction with the grid. Opponents said it was not fair to single out solar customers for special charges.

Many customers and solar advocates said the demand charge would be difficult to manage because customers are not accustomed to tracking demand, which requires managing what appliances are running simultaneously.

SRP managers contend the demand charge will be easy to control, if customers choose.

"The biggest driver of demand will be the largest appliances in the house," said Michael Lowe, SRP chief customer executive. "By putting those on timers, you will get a lot of (electricity) load off peak."

SRP cited support for the rate hike from several groups, including low-income advocates at the Arizona Community Action Association, Arizona Investment Council, Arizona Chamber of Commerce and Industry, and chambers of commerce in Buckeye, Chandler, Gilbert, Glendale, Phoenix, Mesa, Scottsdale and Tempe.

SRP also hired a consultant, John Chamberlin of Sussex Economic Advisors, who endorsed the rate hike and called the demand charge the "best solution" he has seen across the country.

He said Thursday that SRP's solar customers are shifting $9 million to $10 million annually in grid maintenance costs onto non-solar customers.

"It will only get bigger," without a change in rates, he said.

SRP customers at the meeting rejected Chamberlin's conclusions.

"How can you make a decision with limited and biased information you have been given," said Larky Hodges, a customer with solar on her home, while addressing the board. "There are many energy consulting companies that can provide a balanced report for you."

SRP's elected vice president, John Hoopes, explained his support for the demand charge.

"Demand charges are conceptually good," he said. "I believe price signals work."

He said he agreed with SRP critics who question why a demand charge is OK for solar customers but not for all customers.

"It might surprise you that I agree with that," Hoopes said. "The explanation from (SRP) management that it is too complicated is entirely unsatisfactory to me."

But he said it is "inescapable" that solar customers have a disparity between the amount of energy they consume and the capacity they require from the power grid during times of peak demand.

"That dynamic just doesn't exist in other residential customer classes," he said.

Reach the reporter at ryan.randazzo@arizonarepublic.com.

By the numbers

$4.61: Average monthly increase for customer on basic price plan.

$6.21: Average summer month increase for basic price plan.

$3: Average winter month increase for basic price plan.

$8.23: Average monthly increase for customer on time-of-use price plan.

$11.13: Average summer month increase for time-of-use price plan.

$5.33: Average winter month increase for time-of-use price plan.

$80: Average "demand charge" solar customers could see if they don't change timing of electricity use under new rate plan. (Would be partially offset by lower electricity prices.)

$50: Average increase for customers who added solar after Dec. 8, 2014.

20 years: Maximum time customers who have purchased solar before Dec. 8 will keep rate structure with no demand charge.

15,000: SRP customers with solar or contracts for it today.

Source: Salt River Project