The Arizona Corporation Commission (ACC) voted this month to explore possible changes to the compensation rate paid to future rooftop solar customers. The three-to-two vote to reconsider utility buyback rates could make rooftop solar less economical and accessible for many Arizonans.
The state’s compensation rates for homeowners who sell excess electricity from solar rooftops to their utility are already below the average wholesale price.
The ACC heard five hours of public comment on the question of whether to reconsider utility buyback rates with testimony from a broad coalition of businesses, employees, ratepayers, realtors, owners of rooftop solar and other stakeholders who said the commission was hostile to solar energy and would rather see Arizonans remain dependent on coal and natural gas.
The commission's three most conservative members voted to re-evaluate the export rates. The “Value of Solar” rates were last set in 2017 after a multi-year evaluation by the commission. The 2017 decision eliminated net metering for consumers with rooftop solar, replacing it with a much lower compensation rate.
At issue is the 10% annual reduction in how much utility companies must pay residential solar panel owners for extra energy produced by their home system. The decision reopens discussions about the 10-year export rate effective period and a grandfathering policy for net metering customers who installed their systems 20 years ago.
The new proposal from Commissioners Jim O’Connor (R), Nick Myers (R) and Kevin Thompson (R) could result in scrapping compensation for rooftop solar owners entirely in the future. A final decision isn’t expected for several months.
ACC Chair O’Connor said homeowners already enjoy federal and state tax credits for purchasing solar panels. He questioned why the commission should set prices that utilities pay homeowners for their electricity.
Opponents of the motion told the commission it would cause uncertainty for an industry with more than 300 companies and 8,400 employees in Arizona. That number is expected to roughly double by 2030, partly thanks to worker training opportunities and solar incentives by President Joe Biden’s 2022 Inflation Reduction Act.
APS and the state’s ratepayer advocacy group, RUCO, also testified against reopening the issue.
Changing compensation for customers who generate electricity and sell excess power to the grid would destroy the investment expectations of the roughly 270,000 Arizona homeowners who previously installed rooftop solar systems.
Homeowners and business owners expressed concerns about their investment in solar not paying off as promised if the commission further reduces what utilities pay for solar energy sold back to the grid.
Some solar advocates told the commission that installing battery storage to achieve energy freedom and avoid fluctuating prices is not affordable in Arizona due to low utility buyback rates.
Solar workers and small business owners testified the solar industry already faces high volatility in the state that complicates financial planning, growth trajectories and sales to homeowners.
Environmental advocates raised concerns that changing compensation rates could hamper the state’s transition to clean energy be removing an important incentive for its adoption.
As of 2022, the U.S. Energy Information Administration calculated that Arizona gets 42% of its total electricity net generation from natural gas, 12% from coal and only 10% from solar sources. Solar advocates blame high fees and stingy incentives as the leading cause of the low adoption rate.
The ACC docket is E-00000J-14-0023. Video of the ACC open meeting on October 11 is available here.
For more on the ACC meeting, see The Arizona Republic October 12 coverage and on 2016 rate discussions, Arizona utility regulators weigh the value of rooftop solar.