Arizona’s Largest Utility Plans Tax On Solar Leases

This headline on solar leases from an investment site caught my eye: “Solar Leases Set To Become Toxic in Arizona.”

Drawing free renewable energy from the sun sounds like a grand idea to many – but not if you happen to be a utility company operating with a business model based on the selling energy.

Solar, which once had giant utilities standing tall as a champions of renewable energy, now no longer looks so good in the executive offices of the Salt River Project Agricultural Improvement and Power District, Arizona’s largest utility, known in short form as SRP.

It is widely anticipated the utility will adopt changes on self-generated electricity, taxing solar lease providers and consumers.

Large solar companies such as SolarCity and Vivint Solar, among others, will feel the negative effects. Add solar leasing consumers to the list, as they will be paying more for the renewable energy they use, when a new proposed rate sheet for customers takes effect from the April 2015 billing cycle.

Bad News for Residential Self-Generated Energy

According to SRP, a noticeable increase in distributed customer generation in the form of residential rooftop solar units and alternative on-site generation such as fuel cells “presents challenges for integrating these unconventional and sometimes intermittent generating resources into the electric grid.” Here’s some more context for what it is challenged with:

Electric utilities face two types of costs: fixed and variable. Fixed costs are costs that are incurred irrespective of customer energy usage (kilowatt-hour usage) and which are necessary to make a safe and reliable grid possible. Examples of fixed costs are generating unit capacity, transmission lines, certain distribution system components and costs associated with providing customer service, metering, billing and payment processing. Variable costs are associated with the actual electricity that is supplied to customers, which is measured by the customer’s meter. Examples of variable costs are fuel and purchased power charges.

Historically, SRP, like all other electric utilities, recovers a large portion of their fixed costs through the variable (per kilowatt-hour) portion of their price plans. The growing emphasis on energy efficiency and energy conservation and the increasing installations of distributed generation (primarily rooftop solar) reduces energy sales without a commensurate reduction in SRP’s fixed costs currently being paid by other customers who do not have distributed generation. During this price process, SRP plans to address this issue by introducing a price plan for residential customers who generate a portion of their energy. Details on this proposed price plan can be found in other sections of this document.

The problem is, this is only part of the equation. Solar power and energy efficiency also provide great societal and grid benefits. Solar energy and energy efficiency are not “problems” and should not be punished. The pricing system may need to change, and the business structure of these utilities certainly needs to, but taxing exactly the cleantech solutions we need right now is not helpful for society as a whole.

News of the rate increase has some crying foul, of course. The list includes Court Rich, an attorney for the Alliance for Solar Choice. Quoted on Daily Kos, he said.

“SRP might as well simply outlaw solar within its service territory if it is going to hit people with a $50 to $100 charge for their right to use the sun.”

“This proposal means that as of December 8, there will be no more solar industry in SRP’s service territory, and they make this decision without public input and without a board vote,” he said. “Do the members of the SRP board really want to be known for taxing solar out of existence in the sunniest state in the country?”

Photo: Business document being signed from Shutterstock