The Arizona Corporation Commission staff issued its highly anticipated recommendations in response to APS’s proposed rule changes directed at residential solar customers. ACC recommended that the Commission not approve either of APS’s proposed Net Metering cost-shift solutions.
Net Metering is the mechanism that allows residential customers the right to offset energy purchases from the utility with self-generation on a one-to-one basis.
The ACC staff proposals, like those from APS, are only recommendations. Any changes to the existing rules must be voted on by the Arizona Corporation Commissioners. The Commissioners are scheduled to take up the issue at its Oct. 16 and 17 hearing.
ACC staff further recommended that should any changes be granted, existing rooftop solar customers should be grandfathered under the old rules, and that those rules should apply to the rooftop equipment and premises where the equipment is installed. In other words, the net metering rules should “run with the land,” versus being a “right” that resides with a specific customer.
Although ACC staff recommended that no changes be made at this time, it did suggest that this issue be evaluated during APS’s next rate case. They said it was their belief that any cost-shift issue created by Net Metering is fundamentally a matter of rate design and that the appropriate time for designing rates that equitably allocate the costs and benefits of Net Metering is during APS’s next general rate case.
ACC staff further recommended that the Commission hold workshops with all stakeholders to help inform future Commission policy on the value that Distributed Generation (rooftop solar) installations bring to the grid. In addition, Staff recommended that within the workshops, the Commission investigate the currently non-monetized benefits of Distributed Generation with the goal of developing a methodology for assigning a values to the non-energy benefits of rooftop solar.
ACC staff believes this recommended course of action is the most effective and appropriate method of dealing with the Net Metering cost-shift issue APS outlined in its July 12 filing. However, since it is not yet clear whether the Commission will decide to deal with this issue immediately, staff offered two alternative recommendations as bridge solutions in an effort to at least begin gradually addressing the Net Metering cost-shift issue until the matter can be more comprehensively resolved in a future general rate case.
The first interim proposal is a Lost Fixed Cost Recovery (LFCR) Flat Charge provision for all new APS solar rooftop customers, unless the customers choose the ETC-2 rate which relies on a demand-based charge to partially collect fixed costs. The LFCR is designed to recover a portion of costs arising from transmission and distribution, and other miscellaneous fixed costs.
The recommendation would have new solar customers pay into the LFCR account at a flat rate, thereby reducing the impact on non-solar customers. The estimated impact of this flat charge would amount to an estimated monthly increase between $2 and $3 for new solar customers compared to the $50 to $100 a month charge under APS’s proposal.
ACC staff’s recommendation also included a second alternative in the event the Commissioners wanted to implement an immediate rule change before the next rate case, proposing a Distributed Generation (DG) Premium could be implemented on a gradual basis so as to minimize the immediate impact on future solar customers. The proposal said this could be done by initially setting the DG Premium at $2.75/kW. The DG Premium would be the cap for the monthly charge under this alternative. The Commission could lower or increase the DG Premium annually based on the effect it has on new solar installations. The Commission could also adopt an approach wherein the DG Premium is initially set at a lower amount than that recommended by Staff, and phased-in over a period of years.