PHOENIX — Arizona energy regulators continued a long-term trend Tuesday of voting against the wishes of the state’s residential ratepayer advocate.
By voting yes on two measures, the Arizona Corporation Commission reaffirmed a broad new policy regarding how rates are set in the future, and it kept an APS rooftop solar fee intact after outside groups challenged it.
The Residential Utility Consumer Office opposed both decisions.
Disagreement over accuracy of APS “Cost of Service” study
The Commission voted to keep in place a new fee for more than 180,000 APS rooftop solar owners, which amounts to a 15% higher rate increase than that of other residential customers.
Tuesday’s vote was the result of a re-hearing over the fee after The Arizona Attorney General’s Office and solar industry groups alleged the fee, known as a “Grid Access Charge,” was discriminatory.
The charge has been in place since March, amounting to a $2-3 average on typical solar homes, and could increase as soon as next year if APS files a new rate case.
APS contended residential solar customers pay rates below a threshold of 70% of the cost to serve them and therefore those customers were not paying their fair share.
Solar industry representatives attacked APS’ methodology for determining “cost of service” to customers and contended solar customers actually subsidize other residential customers with their contribution of energy generation to the grid.
“APS miscalculated,” said Autumn Johnson, attorney for ARISEA. “We provided 50 plus pages of analysis for all the things they (APS) did wrong.”
RUCO said they also analyzed the APS study and determined it did not provide sufficient evidence to support or refute the fee, according to a legal filing by the agency.
“RUCO’s testimony makes it less probable that the (study) can support continuation of the GAC (fee),” said attorney Dan Pozefsky.
APS argued the reliability of its study was already “exhaustively litigated” in the original rate case.
“APS’s cost of service study is well-reasoned, legitimate and reasonable,” said APS attorney Jeffrey Allmon.
Two administrative law judges who have reviewed the matter concluded the fee is appropriate but not necessary to ensure fairness.
The Commission could take it or leave it.
APS: Solar customers pose “unique circumstances"
APS also justified the fee, saying it pays for “standby” energy to ensure rooftop solar customers have reliable service when the sun goes down or when there is an emergency. Allmon added that as the utility with the fourth largest proportion of rooftop solar customers in the nation, the fee is needed.
“APS is unique. That means we do need special tools to deal with unique circumstances and challenges that the company faces by virtue of having this much-distributed generation on its system,” Allmon said.
Johnson argued APS selectively used a “hypothetical load” only for an imagined emergency involving rooftop solar customers.
What happens if, Johnson argued, all EV users charge their vehicles at the same time? What if demand response customers all refuse to participate in the program simultaneously?
Johnson said these hypotheticals were not costing those customers an extra fee and therefore solar customers were being discriminated against.
Solar customers pleaded for rejection of fee
Dozens of APS ratepayers filed written comments with the Commission in opposition.
“Rooftop solar customers are reducing the need for utilities to build dirty, water-intensive power plants,” said Norine Smiley in an email to the Commission. Smiley said she went solar in 2017 before two major policy changes at the Commission subsequently raised the amount she believed she would spend for power. “It appears that you are punishing someone like me for trying to be responsible to the environment and energy efficiency.”
Attorney Mary Curtin of the Attorney General’s Office told the Commission the public outcry is evidence the fee should not stand.
“Plainly, the public does not believe the grid access charge is in their interest,” Curtin said. “We all know rates must be just, reasonable, and non-discriminatory. But they must also be in the public interest.”
“Why is APS so aggressive in its support of the fee?”
Although APS did not publicly request the fee in its original rate application, it supported its inclusion and defended it in the re-hearing.
RUCO raised that point while sparring in legal filings with APS over RUCO’s role in the re-hearing.
“The better question is: why APS is so aggressive in its support of the GAC (fee)… when its underlying position in the rate case was an even allocation among the residential ratepayers?” Pozefsky wrote in a filing this month.
The fact APS is defending the fee is also relevant given the utility’s public image campaign over the years promoting itself as an advocate of sustainability with mottos like “Everyday Greener.”
The nonprofit advocacy group Vote Solar said the fee will discourage the public from adopting solar in the future and many consumers echoed those concerns.
“These unfair fees discourage rather than encourage clean energy alternatives that make the environment healthier for us all,” said Joyce Stoffers of Sun City.
12News asked APS President Ted Geisler by email if he shares those concerns.
Geisler did not answer the question.
APS spokeswoman Jill Hanks responded, saying the company believes such an assertion is false.
“Our message for Arizona is that APS supports fairness for all customers and is thoughtfully planning ahead to continue providing Arizonans with energy that’s reliable, affordable and clean,” Hanks said by email.
Ultimately, Commissioners Jim O’Connor, Kevin Thompson and Nick Myers voted to keep the fee. “I’m going to vote to support the majority of ratepayers in the interest of fairness,” Thompson said. Anna Tovar voted against it. Lea Marquez Petersen was not present for the vote.
“Beyond all the legal issues, it is simply bad policy to impose this charge,” Tovar said.
Commission also approves order for formula rate model
The Commission also voted to solidify a policy change that will make available a new ratemaking tool, known as formula rates. Critics say the model has not proven it benefits consumers where it’s been attempted in other states and it will cost ratepayers more. Supporters say it reduces red tape and prolonged legal hearings.
Before voting to approve the policy, Commission Chair Jim O’Connor said formula rates will modernize the commission. O’Connor claimed there were only six states in the country that still use the existing model at the Arizona Commission, which bases rates on a “historic test year. “
“That is antiquated technology,” O’Conor said.
However, Commission Staff released a report in April showing 23 states use a historical test year or “modified” historical test year, like Arizona.
Commissioner Anna Tovar said the policy statement lacked details and safeguards for consumers.
“Why would we want to wait until after something is put in place to find out the mistakes that could potentially happen?” Tovar said.
Myers said there would be opportunities next year for the Commission to refine the formula rate policies. O’Connor said formula rates represent “a new tool in the toolbox” for ratemaking and repeated a promise that formula rates will lead to more transparency and accountability. Opponents say the policy statement does not explain exactly how those goals would be met.
“We don’t see the evidence in the proposed order that shows there is increased transparency, that there is additional opportunity for stakeholder engagement,” said consumer advocate Diane Brown.
Tuesday’s votes come as the Commission’s 4-1 Republican majority winds down two years of a pro-utility, “deregulation” agenda promised by Thompson and Myers.
But that voting record has left consumer nonprofits and RUCO on the losing end of major decisions.
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