Arizona Corporation Commission Considers Scrapping Solar Incentives

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The Arizona Corporation Commission reviews a 2006 decision that requires utility companies to meet increasing renewable energy quotas through the year 2025. Hearings are now in progress that could reverse this decision and remove mandated minimums on renewable and distributed energy production. 

The current quota system

The Arizona Corporation Commission governs state-regulated power companies throughout Arizona, the largest of which include Arizona Public Service Co. (APS) and Tucson Electric Power (TEP). In 2006 the commission approved a series of mandated quotas designed to promote yearly increases in the percentage of energy generated through renewable resources. The target for 2014 is 4.5% generation from renewables; by 2025, the goal is 15%. Of the total renewable generation, at least 30% must come from distributed sources such as residential rooftop solar, as opposed to large-scale utility plants. As an incentive to homeowners and residential installers of PV systems, the ACC adopted the Renewable Energy Standard and Tarriff (REST) program, which allowed utilities to purchase renewable energy credits from homeowners. This rate-payer funded incentive program is one of a number of measures from 2006 that is now under scrutiny by the ACC.

Subsidy chopping block

While the REST program was originally designed to distribute the cost of subsidizing renewable energy, these days an increasing number of solar customers are bypassing incentives that are funded by ratepayers (although state and federal subsidies still exist independent of rate-funded incentives). Therefore, utilities under the current quota system are unable to claim credit for those customers who do not sell these renewable energy credits. In a bid to persuade the ACC to completely drop the distributed generation requirement, Arizona Public Service Co. is saying that under the current system it has been unable to get renewable energy credit for 20 megawatts of customer-installed solar on its grid. 

In Tucson, TEP has requested a waiver of the rooftop solar requirement. The Arizona Daily Star quoted TEP spokesman Joe Barrios as saying that  the quota requirement “did what it was supposed to do. It fostered the industry and encouraged the adoption of renewable energy.” Given the rapid growth in residential solar, it appears that incentives have been effective to a degree. TEP runs one of the state’s largest industrial-scale solar installations in Springerville, but under the current mandates, a large percentage of the renewable quota must consist of non-utility-owned residential generation. 

Proposed changes

The ACC has been discussing a number of potential changes to the current quota system. Among the possible revisions is the introduction of a yearly application process that could allow utilities to annually petition for exemption from distriubted generation requirements. The panel also considered a proposal that would enable utilities to track and quantify rooftop PV installations, presumably to supply market data that backs up the utilities’ request to waive these mandates.

But solar advocates oppose allowing state utility companies to monitor and track PV that is installed without state-funded incentives. Since a current market exists to sell or trade renewable energy credits, supporters fear that utilities could be tempted to double-dip their renewable credits by tracking non-state-funded PV installations. 

What’s next?

Regulators met on the morning of February 6 to discuss revisions to the current quota system. Until an official decision is reached, advocates of both sides continue to jockey for position. This new hearing indicates that APS is still aggressively pursuing policy reform in the aftermath of a 2013 ruling by the ACC that allowed it to charge a fee to net metering customers.