Arizona Regulators Vote To End Net Metering

In a 4-1 decision, the Arizona Corporation Commission (ACC) has decided to end the state’s net energy metering (NEM) program, which compensates distributed solar customers for the excess electricity they deliver back to the utility grid.

Solar advocates, including Vote Solar and Earthjustice, argue the decision will hurt the state’s solar market and put jobs in danger. Meanwhile, in a press release, the ACC says its choice to replace NEM is a landmark decision that protects existing customers while restructuring the methodologies to determine a fair export rate for the future.

Under the newly approved plan, NEM will be replaced with a lower “export rate” to be determined in the investor-owned utilities’ pending rate cases. In a blog post, Sean Gallagher, vice president of state affairs for the Solar Energy Industries Association, explains, “Compensation under the new methodology would initially be set at around 11 cents per kilowatt-hour for most customers, close to the current retail rate net metering credit. But that rate will decrease in future rate cases, and new solar customers aren’t protected over the longer term.”

One silver lining is that Vote Solar and Earthjustice say the ACC has re-affirmed its intention to grandfather in solar customers that interconnect prior to the decision in the upcoming rate cases, likely mid-2017. Grandfathering has been a major issue in other states, namely Nevada.

“Existing solar customers can rest assured that their investment is safe,” says Commissioner Andy Tobin in the ACC release. “Our decision recognizes those customers while taking the next step by determining rates which take into account advancements in solar and other renewable technology which helps us push forward proactively.”

According to the ACC, the decision comes after a three-year investigation into the value and cost of solar, which included input from a broad coalition of solar, utility, consumer advocates and customers.

“While we were hopeful that a compromise could be reached in this proceeding, the commission has chosen to adopt a methodology that will systematically undercompensate Arizona families and businesses for their investment in homegrown solar energy, an investment that reduces the need for expensive and polluting centralized power plants,” says Briana Kobor, program director for distributed generation (DG) policy at Vote Solar. “Arizona has such plentiful sunshine, it simply does not make sense for regulators to restrict local solar power production and job creation in this way.”

Earthjustice attorney Michael Hiatt adds, “Unfortunately, Arizona has numbered the days left for people to participate in a successful solar program. This decision casts serious doubts on the long-term viability of rooftop solar in Arizona.”

Kim Malfacini, spokesperson for The Alliance for Solar Choice, comments, “We are deeply disappointed that the Arizona Corporation Commission disregarded the full, long-term value that rooftop solar brings to Arizona and the long-term certainty that Arizonans need when contemplating a solar investment. We will continue to advocate for rates and policies that fairly compensate solar customers in Arizona.”

In ACC’s release, Chairman Doug Little says, “In passing this policy, we have accomplished something historic. We have taken a very important step down a path that I hope will accomplish twin goals. The first is addressing the cost shift that has previously burdened non-DG customers and begin bringing the compensation rates for DG customers in line with current market economics versus the economics of 10 years ago. Second, to do this in such a way that we protect the investment of existing rooftop solar customers, making sure that we do not change the rules on them in the middle of the game.”

Little continues, “What we have done is probably not perfect. The issues are far too complex and divergent to reach a decision that will satisfy everyone, but I believe that we have worked very hard to find a reasonable balance. We now have a meaningful first step that we can build on in the future.”


    • I am not familiar with what Chairman Little may have cited, but it is pretty simple. When a utility generates or buys power to then sell to it’s customers, it does so trying to find the lowest cost acceptable power that it can. That power is purchased at wholesale rates, which benefits all the ratepayers even the customers with NEM. Under the existing rules electric utilities have been forced by law to buy the excess power from folks with NEM at RETAIL RATES. No company can afford to keep it’s prices low if it is forced to purchase those products at retail rates. Also under the old rules NEMs were not paying anything for the distribution system that they use to transfer their “product” to the utility. Thus they also receive the benefit of having the Utility pay for the shipping/delivery of their product. That is not fair to the utility, nor all the other rate payers. NEMs have just enjoyed an artificially subsidized environment created by our government to encourage growth and progress in the alternative/renewable energy market. NEMs should be thankful they got what you did, but not complain if it goes away. Doing so makes them sound selfish and self centered to all the other ratepayers.

  1. Well, they’ve done something historic all right, but probably not what they were thinking.

    First, they’ve postponed the day when the Arizona public utilities will have to confront the reality that their Business As Usual model is breaking, and by the time they find out, solar PV will be just that much farther down the cost curve, and that much harder to deal with.

    Second, by creating a gap between the retail rate and the export rate, they’ve created an economic foundation for behind the meter battery systems. More assets they won’t own, see Point One.

    And last, they will damage, but not likely kill the Arizona solar industry. When the economic tide turns in a few years, expect them to compete an attitude. None dare call it vengeance, but payback is a bitch.

    • Exactly Jan,

      This ACC decision means I will be installing solar immediately, and will then jump on the evolving battery technology as soon as is practicable. It’s obvious TEP is ACC’s main customer, whereas the public and the environment are an afterthought. I look forward to canceling my relationship with TEP sooner than later; my appointment with Technicians for Sustainability is around the corner.

  2. If you have installed solar on your home, the reality is the power the system generates first has to flow through the electrical grid. The grid then supplies your home with the power. Without the grid, your home could not use the power generated by the solar system. Nor could you have power at night. Unless you have a huge battery system, which is not feasible yet.

    This is the core of the utility companies argument. Net metering provides credit for both the generation of the power and the distribution of the power through the grid. The generation of the power (that they avoid under solar) is only part of their cost, but they have to give a credit for all their cost (and their profit by the way!).

    Full credit forever was just too good to be true. Seems like a reasonable compromise.


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