Prosper Arizona Enters Net-Metering Debate in Arizona

| July 16 2013
AZ News

A new group chaired by former Arizona Speaker of the House Kirk Adams has entered the net metering solar debate in Arizona. Prosper Arizona, a new advocacy group dedicated to promoting free market principles, released a new ad today titled “Fair.”

Prosper also released the following information on their website about net metering:

What is Net Metering?

Net metering is a term used by the power industry to describe the rates paid by individuals and businesses who generate their own power.  For Arizonans, this typically applies to people who have made the choice to install solar panels on their roof (or buy a house with solar panels already installed).   Under net metering, solar customers who create more power than they use send their excess power back to the electrical grid.  Utility companies pay these customers for that excess power, as they should, in the form of a credit that the customers can use to offset their consumption at other times, such as a cloudy day or at night.  In this manner, net metering allows the customer to use the grid as a sort of bank, where they make deposits when they have spare power and withdrawals when they need more power than their solar panels can provide.  Overall, this makes good sense in theory because the customer can benefit from lower power bills, the utility can benefit from reduced need to build new power plants, and we all benefit from a more efficient and more free market for energy where individuals can make choices about their energy consumption.

Why is Net Metering an Issue for Arizona?

While in theory net metering makes good sense, the equation is not so simple in Arizona and many other states around the country because of the extensive and varied statutory and regulatory framework surrounding electricity markets.  The combination of incentives and subsidies provided under various policies, including the net metering policy controlled by the Arizona Corporation Commission, have resulted in a system that is growing increasingly unfair for many Arizonans.

When net metering was first established in Arizona, the Commission chose to require utilities to compensate solar users at a premium price, much higher than the utility could otherwise buy power on the market, as an incentive to spur solar installations.  Combined with plummeting costs for solar panels and new long-term lease financing options for homeowners, this incentive structure has been very successful in building a large community of solar users in Arizona – over 18,000 in APS service territory alone.  This success does bring challenges, though, and does come at a cost.

All Arizonans benefit from a reliable electrical grid that sustains our economic and population growth and powers our critical infrastructure, such as water facilities, hospitals, schools, and more.  The successful adoption of solar in our community has not lessened the need for a reliable grid, and solar users continue to need access to the grid just like non-solar users.  The challenge we now face is that the net metering subsidies designed to spur the adoption of solar are outstripping their benefits, and the situation is only going to get worse unless the policy is realigned to meet Arizona’s current needs.

The more individuals who receive subsidized power, the fewer who remain to foot the bill for the grid.  An independent study conducted this year estimated that each new solar installation adds over $1,000 per year to the costs paid by non-solar users, amounting to over $20,000 over the typical life of the installation.  With several hundred new solar applications each week (and growing), this is not sustainable, is not fair to non-solar users, and is certainly not the product of a free market.

In a free market, individuals should be able to choose solar, and Prosper is strongly in support of preserving that choice.  But utilities subject to the existing net metering policy are being forced to pay their solar users more than five times the market price, and other Arizonans are left paying the bill.

This is NOT about solar.  It is about fairness and ensuring reliable power

Solar has a bright future in Arizona.  Arizona is number one in total installed solar capacity per capita, and ranks second, behind California, for total installed solar energy capacity.  Updating the state’s net metering policy will hardly damage our commitment to solar.  Not doing so would do greater damage to our commitment to all Arizonans of a reliable grid and to our future.

Prosper supports policies that encourage a free market approach to Arizona’s electricity sector and are focused on preserving choices, including solar, while still ensuring fair rates for all Arizonans and a strong, reliable electrical grid.  Updating the state’s net metering policy passes this test, and the Arizona Corporation Commission would be wise to do so.

48 comments
SolarRN
SolarRN

As a condition to putting up solar and feeding into the APS grid, APS mandated that we assign all the rights to our renewable energy credits over. These credits are a commodity that they made money off of by trading on the open market. This was the real reason for pushing "green" solar energy. They made lots of money by trading everyone's credits. It's not our fault that APS didn't choose to use that money to enhance infrastructure!!!! Now that the market is poor for this commodity, APS is trying to figure out how to offset. The cost of a bad business model is now (attempting) being passed on to the solar consumers.  SHAME ON THEM!!

azcaclark
azcaclark

If would be helpful if you provided facts and not opinions.  The utilities credit to individual solar power generators is the retail price of electricity, that is the same price they charge these customers.  The only reason this is an issue is because APS is selling less electricity and making less money. Oh, boo, hoo. 

In the long run this distributed solar power users will same the utilities billions by avoiding the building of additional electrical generating stations, especially for peak power. 


tg7211
tg7211

I love the libertarian orientation, but believe the belief and trust in free markets is misplaced and naive. Business is for the purpose of making money which is fine, however left unchecked we end up with Love Canals, Enrons, and Wall Street atrocities. Individual citizens have no power when compared to large corporations. Unions used to provide leverage for labor, however they have been effectively squashed. Government of the people is supposed to provide a buffer between individuals and those who might rule as dictators, but has become a tool of oligarchs rather than "Everyman" We

the people have effectively been turned against each and are fighting over the crumbs left by "free enterprise" as it exists today. Yes we citizens need to wake up, however we need to take care and be clear about where our interests lie.

tg7211
tg7211

all energy industries are subsidized, some in the name of national security others as, job engines. Bottom line is residential solar is the one area in which individual tax payers derive the greatest benefit, rather than the large corporations. APS isn't whining because of "fairness for all rate payers" it is because their cash cow is being milked by someone other than their top execs (40mill/yr in salaries), and board members.

Talk about picking winners, how does a guaranteed customer base of 3 million rate payers, no competitors, and rate plans based on a guaranteed profit sound like for a business plan.

Jason_Dbacks
Jason_Dbacks

Where did all of joero111's comments go?

dleeper47
dleeper47 moderator

I own a SolarCity system (installed 2009), and I'm having trouble finding this ongoing "premium" compensation that I'm supposed to be getting.  

In any month, I only generate more power than I use during "peak" demand hours when the sun is highest.  The extra kilowatt-hours I generate do indeed become a credit I can use on a rainy day as the article says, but only during peak hours, not at night.  

If there are kWh credits still on my bill at the end of the year, APS *does* give me a cash credit for them on my bill, but they only pay the wholesale value for each kWh, which is about *half* the price I pay when I buy them at retail.

I don't know where this "five times" overpayment is showing up in my bill.  I suspect it's buried somewhere in the infrastructure usage charges, which are pro-rated on how many kWh I actually consume from APS, and not those I generate for my neighbors to use(?).

While this is one of the best articles I've seen on the subject (the video is far too cursory to be helpful), I'd sure like to see an actual accounting with real numbers on a real bill.

If someone out there would like a real bill with real data to work the math accounting out, I can supply one.

Jason_Dbacks
Jason_Dbacks

Survival of the fittest? Are you kidding? These solar companies couldn't exist without billions of dollars in tax subsidies from the Treasury Dept, stimulus grants, and local incentives like they're being paid now. Yes, let's look to survival of the fittest with no govt. handouts and no stimulus grants from Uncle Obama. The companies would fail miserably!

I agree - solar is a good idea and should be invested in. But let's call the solar market for what it really is -- rich, well-connected companies who have a nice profit model set up here in Arizona and this is nothing more than a turf war. You use the term "energy game" in your response. This isn't a game. If people want to put a solar panel on their roof and reduce their energy bills they should be able to. Completely agree with you. But I shouldn't be paying higher rates because of those who can afford the investment in panels and those who have panels shouldn't be reimbursed at a rate higher than market value. That seems fair to me.

joero111
joero111

This is an absolutely ridiculous group posing as a pro free market non-profit.  Dig a bit deeper and I will bet money you will find utility ties to this group.  The argument is absurd.  Yes the grid needs to be maintained so maybe the utilities take all of the saved money from not building new power plants and not having to fire up diesel generators during the summer to handle demand.    This is just a way for the utility companies to maintain there high profit margins and battle against solar.  They say they want free market so shouldn't it be survival of the fittest?  If solar is winning the energy game maybe the utilities need to invest in a different model that they have had for the last 50 years.  Unngghhh  this is a terrible cause and argument.

dleeper47
dleeper47 moderator

@azcaclark 

Good note, but more precisely:

When my SolarCity system generates a kWh in January that I don't use, APS immediately sells it to my neighbor at full retail price, and it cost them nothing to produce it. I then get one kWh credit that I can use on a rainy day when the panels aren't producing much.

If I get all the way to end of the year without using that kWh credit, APS gives me a cash credit for it on my bill, but they pay me the wholesale value, not the retail price.  That's about half the price my neighbor paid for it nearly a year earlier.

Sounds like a good deal for APS, no?  They get paid full price for a kWh they didn't produce, OR, they get to wait a full year to pay me *half* what they collected from my neighbor for that kWh.

I'm sure this doesn't include all the accounting, but I'm not sure at all how APS is getting hurt by my solar PV system.

dleeper47
dleeper47 moderator

@tg7211

It sounds like you'd favor bigger government and tighter regulations, no?  To protect smaller businesses and the "little guy", no?

The irony is that the bigger the govt and the more byzantine the regulations, the greater the opportunity for those big corrupt corporations to buy carve-outs and exemptions for themselves.  There are plenty of Big Govt Republicans as well as Democrats who cultivate that kind of crony capitalist system. 

This is a prime reason that Milton Friedman spoke forcefully against Big Government -- because Big Business inevitably abuses it to hobble their competition. His intellectually lazy critics liked to characterize him as favoring *no* government.

It's also the reason that Friedman *did* favor a powerful federal government in *one* area: *antitrust*.  His view of government's role was that it should protect us from force and fraud, while fostering competition at every turn.

He also believed strongly in protection for innocent 3rd-parties in cases like air and water pollution, but the challenge was the same -- how to avoid a govt agency with so much power that big businesses can steer the regulations toward hobbling their competition while buying themselves indulgences.

WesternFreePress
WesternFreePress moderator

@tg7211 @Jason_Dbacks  Why should ANY industry be subsidized? That is not a rhetorical question; I'd love an answer. Why are we taking money from individuals and companies and giving  it for the exclusive use of other individuals or companies? Why is that ever justified?

WesternFreePress
WesternFreePress moderator

@Jason_Dbacks I see a few below. (We didn't do anything with them on this end.)

azcaclark
azcaclark

@Jason_Dbacks Ok, what about the external costs to individual and public health of fossil fuels? 

tg7211
tg7211

You are paying higher rates in part because aps pays their top 4 execs in excess of 40 million per year

joero111
joero111

@Jason_Dbacks Like the utility, oil, coal, gas, etc doesn't get federal subsidies and always have.  The solar industry only subsidy is the  federal tax credit which is a benefit to buyers and businesses.  The recent explosion in residential solar is because private investors have figured out a business model that is not only profitable but sustainable for the environment utilizing the same opportunities utility companies have had in place for years.  It benefits homeowners, the companies involved in the electricity generation, (including the utility for the reasons I listed in my previous comment as well as adding the necessary renewable energy to their portfolios to meet federal mandates)  The only thing it does it brings profitability down.  If the utilities want to stop offering rebates, fine.  That is already happening but don't complain when you can't keep up with the competition.  Again I would like to see what utility goes bankrupt because of the loss of revenue.

Casey White
Casey White

@joero111 APS has no diesel generators that are used to supply the grid.  Also The only reason solar is "winning" is because of handouts. You and I both know that.  A residential grid tie system (2500 sq/ft home) is 70 thousand dollars with out hand outs.  Once the inverter and dies (it will its electronics and has a life) you need to reinvest ( bust out your wallet) The best panels have a life expectancy of 20 years. They will need replacement './

WesternFreePress
WesternFreePress moderator

@joero111 @Jason_Dbacks Great point, Jason, and quite right, but I believe it goes even further than that. Any time that government takes one person's or entity's money and gives it another person or entity for his/her/its exclusive use, it has done a wrong thing. If one company is getting government subsidies, that means that other people and companies (who aren't getting those subsidies) are paying for it. That isn't right. We (the people) create government to serveus and do the things we cannot as easily do for ourselves. We did not create the government to take from some of us to give goodies to others of us.

tg7211
tg7211

The conclusion you reach is one of the biggest problems I have with most of what I see on this website, Intellectually weak responses to very complex issues. Trying to distill the problems and potential solutions we face into binary boxes with labels like Big gov vs small gov, freedom vs enslavement, liberal vs conservative only simplifies the process of division. To paraphrase the great warrior chief george bush the younger, "yur wit us or agin us".

azcaclark
azcaclark

@WesternFreePress @tg7211 

Industries are legitimately subsidized because the goods or services are beneficial and the benefits outweighs the costs of the subsidies.  For example orphan drugs or patents.

Less legitimately are those subsidies provided simply because of political clout in the form of campaign contributions or other clout.


tg7211
tg7211

None should be but until all are not then it is best to try and level the field.

Jason_Dbacks
Jason_Dbacks

@joero111 Who installed your panels? Just asking. I know there's scores of companies, but let's pick one. SolarCity. It took me 30 seconds on Google: http://www.washingtontimes.com/news/2013/feb/21/mr-musk-comes-to-washington-again/

$275 million in federal stimulus dollars. That doesn't include the subsidies each state provides. Correct me if I'm wrong, but APS (and maybe SRP?) aren't saying "no subsidies." They're just reducing the amount. What's wrong with that? If it's such a viable option, solar should be able to survive with less "priming the pump."

You probably don't want to open the tax structure RE: oil / gas / coal. They are more heavily taxed than almost any other industry. In fact, Obama's budget currently proposes to tax them even further.

tg7211
tg7211

Your facts are way off, sort of like the ones APS are citing, perhaps you should consider expanding the scope of your research beyond someone else's talking points. An average home of 2500 sq ft uses about 2500$/ yr or about 17000 kwh/ yr of electricity. That could be supplied in its entirety by a 10-11 kw solar generator. Total cost without credits or incentives would be around 29- 30 k$. Most panels are warranted for 25 yrs, with the better quality products having documented lifespans in excess of 40 years.

Time to stop being a sheep and simply baaing along as you wait to be shorn, and act like the free market believer you claim to be in this forum.

WesternFreePress
WesternFreePress moderator

@Casey White @joero111 Well said. Government handouts are unfair to the taxpayers that pay them, the businesses that don't get them, and the businesses that are squeezed or never launch at all because of the uneven playing field.

Laserweb
Laserweb

I find it very interesting that APS is the only utility company in AZ that is is currently pushing this issue. SRP and Tucson Electric don't seem to be supporting APS's proposal. The sudden success in residential solar is because we are tired of being held hostage to a utility company who keeps increasing their rates each year. We live in a state with an ample supply of sunshine, and I'm glad to see we are finally moving in the right direction.

WesternFreePress
WesternFreePress moderator

@tg7211 Yes, and it also helps us to hone our arguments and refine our understanding of issues.

tg7211
tg7211

The examples you cited were reasoned and valid, and provided hope that there is some common ground from which solutions are possible. If we only talk with members of one tribe we miss the opportunity to learn from the experiences of others. Eskimos have a very deep and nuanced understanding of snow from which we can all learn something and even though may not know much about the workings of a semi conductor they can add to our understanding of the world.

WesternFreePress
WesternFreePress moderator

@azcaclark @WesternFreePress @tg7211 Since taxation is the act of taking property by force----generally speaking, from a social contractarian outlook, the only things for which taxes should be taken should be things from which all persons generally benefit. Nonexcludable, nonrivalrous public goods like defense, courts, police, roads, etc.

WesternFreePress
WesternFreePress moderator

@azcaclark @WesternFreePress @tg7211 I do not agree with your use of the term "legitimately" at all. However, stipulating for the moment that your former scenario is less odious than your latter . . . if we allow for any such transfer for the former purpose, we will inevitably end up with the latter. The grey areas are just too great, and public choice theory is inescapable. Cronyism will out!

tg7211
tg7211

A point on which we have agreement, there should be no public funding for individual or corporate benefit. So in the case of solar the federal tax credits are certainly a subsidy. They were put into place to facilitate public benefits like energy indepence, a means of transitioning from combustion based energy to harvested, and a path for innovation vs stagnation. So in the end we all benefit though it is also true that some benefit more than others initially. However we should keep in mind that those individuals who are installing solar now have skin in the game and are in fact helping subsidize emerging technologies from which we all will ultimately benefit.

These subsidies however will end soon and are not the source of APS's whining. They are squealing because they do not like the fact that they are being forced to pay for some power at the same rate as they charge. And instead of making a valid case for what would be fair in terms of their compensation for maintaining the grid, they produce a report filled with questionable assumptions, incomplete data, and inflamatory statements designed to create fear and incite battles between neighbors.

One quick example is their appraised value for their avoided costs when using the excess energy generated by rooftop solar installations. They are proposing that the difference between peak and off peak energy is 4 one thousanths of a cent (.032/ kwh off peak and .036 on peak) whereas the differential when selling this energy to their consumers is close to eighteen cents(.07 vs .25/kwh). So either we are being severely fucked over or they are intentionally misleading. My conclusion in this case is both are true.

So perhaps the answer is to make these municiple operations after all electricity is as essential as an army. But until the time comes when all is made transparent and we know exactly where all the money flows, my choice is to side with individuals over corporate entities when the opportunity exists.

WesternFreePress
WesternFreePress moderator

@tg7211 Well it probably would, since subsidies for solar are a more recent phenomenon. But this is a data set we actually have before us; it is something we can address concretely. Solar gets far and away more subsidies than any other source, based on the amount of energy it is producing. Some may argue that that is a worthy "investment" that will pay dividends over the long term. Others may respond that it is not. Those are consequentialist arguments. My argument is deontological: I believe it is a violation of the social contract, and of fundamental human rights, to tyake any money from anyone (or any business) for the exclusive use of any other individual or business. Period. No subsidies for anyone. Public spending only for things from which we all benefit: nonrivalrous, nonexcludable public goods like defense, courts, roads, etc. No tax breaks, no goodies, no corporate welfare, no welfare. None of it. Ever.

tg7211
tg7211

One chart reporting on a single bit of dated data doesn't make a compelling case. I would bet if the numbers were considered in total, that is over time vs snapshot, the chart would look very different.

azcaclark
azcaclark

@Casey White @tg7211 Don't forget that transitors and solid state electronics industries were subsidized and by the defense and space industries.  I suggest you read Malcom Gladwell's book Outliers. 

WesternFreePress
WesternFreePress moderator

@tg7211 yeah, the utility industry is a tough one, because the infrastructural issues make competition harder. Still, a free market should operate. Right now, I only have one choice of cable company. I am sure others would be happy to get into the mix. No industry should be protected.

tg7211
tg7211

I agree that an entrepreneur is worth what he or she earns as the result of their innovations and effort, be it a buck or billions of them. Problem here is the guys at APS do not fall into any of those categories.

They are hirelings employed by a company with the same business model they have used for the past 100 years. They operate in a protected environment without competitors, they have a guaranteed profit, and their customers build the Infrastructure for them so the path to riches is paved before an ounce of energy is delivered.

The company is anything but an entrepreneurial enterprise. Read the report

WesternFreePress
WesternFreePress moderator

@Casey White @tg7211 Amen. Enough with the envy already. If someone is being paid a lot of money and it is somehow at my expense---say, a CEO of a favored company that is receiving government largesse---that is wrong. But if someone is making a lot of money working for a company that is providing goods and/or services that people want, what do I care? Heck, if someone inherits a bunch of money and fritters it away clubbing and driving blonds around in convertibles and playing baccarat in Monaco-----what do I care? It's not my money. It's their money. Unless they stole it from me, I don't care. If I don't like a product or service, I don't buy it. If the price point is too high, then they'll go out of business and then the CEO won't have his big salary anymore. 

To all those out there in the world who whine about rich people, please understand, you sound greedy, envious, and pathetic all at once.

Casey White
Casey White

@Jason_Dbacks @tg7211We all seem to have computers. However,  no one here is complaining that Bill Gates is worth 50 Billion. Yes i spoke correctly Billion not million.  Don't say well I use an apple Steve Jobs was worth in the neighborhood of 7 Billion when he died. My point being honestly in the corporate world what the APS executives make is  chump change   APS's execs make less than some pro athletes.  Still more than probably anyone on this forum.  Personally I would want the utility to have a good business model.  (How would you like the utility supplying hospitals to have a bad business model?).This new rate plan is to introduce fairness in maintaining a reliable grid, nothing more. I am also against any kind of a kickback for solar.  If you want it that's fine but you need to pay for it. 

Casey White
Casey White

@Jason_Dbacks @tg7211  We all seem to have computers. However,  no one here is complaining that Bill Gates is worth 50 Billion. Yes i spoke correctly Billion not million.  Don't say well I use an apple Steve Jobs was worth in the neighborhood of 100 Billion when he died. My point being honestly in the corporate world what the APS executives make is  chump change   APS's execs make less than some pro athletes.  Still more than probably anyone on this forum.  Personally I would want the utility to have a good business model.  (How would you like the utility supplying hospitals to have a bad business model?).This new rate plan is to introduce fairness in maintaining a reliable grid, nothing more. I am also against any kind of a kickback for solar.  If you want it that's fine but you need to pay for it.

tg7211
tg7211

I call bullshit on this post

azcaclark
azcaclark

@tg7211 The installed costs are irrelevant to this discussion since they are paid by the customer not the utility. While the total amount of electricity sold by APS may be reduced so is the cost of fuel, and new power plants  and power purchased on the wholesale market to cover peak demand. 

tg7211
tg7211

From aps for the requirement and cost of energy ( 1$/ sq ft ave cost of energy in az and .14/kwh ave billed cost per unit of energy) Pvwatts for the system production amounts based on average panel specs, az irradiance at Phoenix's latitude and other physical factors, and quote from 3 installers ranging from $2.7-$3.2/watt gross cost installed for a system.

Casey White
Casey White

@Laserweb  Solar in its current form is not the right direction.  With out subsidies from the Federal and State Governments and the utilities solar does not work in Arizona.(or anywhere for that matter)  APS also is being effected the most by the current system. (because they have more solar customers than the other two).  They also have the largest amount of grid to maintain. The grid is very expensive i might add, Think about the transformer that supplies your home.  It  is in the neighborhood of 18-20 thousand dollars.  If we all want power 24 hours a day we need to do our share to pay its maintenance cost.  That includes people with solar panels on their roofs.