(Editor’s note: 12th in a series of articles reviewing 2014 news stories published by Rose Law Group Reporter that were most read and gained momentum throughout the year.)
STORY OF THE YEAR
Based on the multitude of stories and the issues’ impact on the state, Rose Law Group Reporter has selected “Solar Warfare” as its Story of the Year. Here it is, chapter and verse.
Two days before Christmas with little public notice, the Arizona Corporation Commission (ACC) took up whether to reconsider if electric companies still need to get a portion of their electricity from “distributed” renewable energy sources such as rooftop solar power as the state’s Renewable Energy Standard has required since the commission adopted it in 2006.
The distributed-generation requirement, or carve-out, has helped create a booming rooftop solar industry in the state, and the possible elimination of the carve-out furthers the alarm the solar industry has had in a year that spawned Solar Warfare.
The ACC decided to put off a decision on the matter until next year, when two newly elected commissioners will be on the board. In addition, the commission also punted a controversial issue about whether to overturn a previous decision and instead to start regulating solar providers as if they were monopoly utilities
Chapter 1. The War Begins
In this corner, Arizona Public Service (APS). In this corner, the solar industry. Your referees are the ACC and, at times, the courts.
The commission in November 2013 dealt a blow to APS, accepting a compromise proposal charging users of solar rooftop panels with a fixed fee of 70 cents per kilowatt per month, after APS had sought a knockout with a fee far beyond that.
The decision was reached after a two-day fight that capped a months-long expensive campaign by Arizona’s biggest utility company to attach a large charge to the use of residential solar.
“The utilities didn’t just get beat in the hearing room, they lost their credibility and wasted $4 million dollars to get nothing except customers, who are now furious at them,” Rose Law Group Partner Court Rich, who represented the solar industry in the brawl, said at the time.
Prophetically, the Vote Solar organization said in an e-mail, “There will be work left to do when the Commission considers the issue in greater depth through a workshop process in 2014, and in APS’s next rate case in 2015. You can bet that APS will be back to its anti-solar, anti-consumer tactics . . .”
In a letter obtained by Rose Law Group Reporter, a Pinnacle West attorney told ACC Commissioner Bob Burns $3.7M had been spent, and “the equivalent of four full-time employees (approximately 4,000 hours) on NEM [net metering] public relations.” APS first publicly denied it was spending to sponsor outside political groups only to later confirm the substantial spending to the media and in the letter to Burns.
Chapter 2. Government Moves In
The solar industry in February was fighting a bill introduced by Rep. John Allen, R-Scottsdale, that would tax solar panels that are leased by homeowners.
Current Arizona property tax law states rooftop solar panels used to generate electricity on site for a home or business are to be appraised as if they have no value for property tax purposes. But the Department of Revenue (DOR) last year issued an interpretation that leased solar panels, the fastest growing segment of the industry by far, should be assessed property tax. APS at first denied being behind the bill or lobbying for the tax increase.
Meanwhile, Salt River Project saw a 25 percent increase in the number of customers installing solar in January compared with last year, which was not the case at the biggest utility in the state.
APS saw 280 people in its territory add rooftop solar panels in January, less than half of the 583 customers who installed solar last January.
“These numbers are the clearest indicator of the impact of the new APS-backed solar tax. APS implements the tax and sees substantial market retraction, while SRP’s solar market grows where there is no tax,” Court Rich said at the time.
The five Arizona Corporation Commissioners voted to revisit the state’s renewable-energy rules to address how utilities recognize solar and count the renewable energy credits (RECs) but emphasized they do not intend to reduce the amount of renewable power used in the state.
Chapter 3. APS Denials Continue
Even after one of Brewer’s top policy advisors and a lawmaker said APS had been actively lobbying on the issue, the utility in March again denied involvement in the bill seeking to make law the Department of Revenue’s finding leased and financed rooftop solar should be assessed for property tax purposes.
“APS does not have a position on this issue and is not advocating for any particular outcome,” the company maintained in a statement to the Yellow Sheet Report.
Will Craven, communications manager for California-based SolarCity, said the Arizona fees could be as damaging to the sector as some of the net-metering proposals his company opposed.
Tell Utilities Solar Won’t Be Killed, or TUSK, cochaired by Barry Goldwater Jr., began its role in Solar Warfare, saying, APS is killing rooftop solar.
“Because utilities have no control over (rooftop solar), they don’t like it,” Goldwater said, adding, “they don’t like competition.”
An APS spokesman countered with the claim, “APS is totally and completely pro-solar, and our track record proves that. We have done more to bring solar to the forefront. We are leaders in the nation.”
Chapter 4. Rooftop Solar Dodges Legislature
Like the Allen Bill, the innocuously titled “2014 Tax Corrections” (SB 1031) would have implemented a tax increase on people who finance rooftop solar systems. Financing with leases equates to 80 percent of the residential solar installed in Arizona reaching more than 20,000 homes. The tax increase would have been implemented had it not been for a 13th hour amendment offered by Rep. J.D. Mesnard (R-Chandler) during debate in April.
The amendment struck the implementation of the rooftop solar tax from the bill, which later passed without it.
Solar industry and home solar owners now turned to overturning a Department of Revenue ruling that reinterprets the state’s longstanding policy against the tax and unilaterally declared such a tax must be implemented.
The tax would have resulted in roughly $15 per month of new taxation on an average-sized solar system for the life of the system. It would not have affected systems purchased outright, creating a disparity among neighbors with rooftop solar.
At a March committee hearing, Chris Wahl from SolarCity testified solar energy provides 8,500 jobs in Arizona, and the tax could “decapitate” the industry.
“Let’s keep decapitation of the solar industry at bay,” Wahl said.
Meanwhile, Salt River Project announced lower solar prices for direct customer purchase of solar energy from one of its remotely located solar farms would kick in May, giving customers an inexpensive way to use solar power without having to install panels on their homes or businesses.
In April, APS expanded its scope of political involvement to include involvement in the election of SRP’s board of directors, with a substantial contribution to Connie Wilhelm, president and executive director of the Home Builders Association of Central Arizona. SRP board member Bill Arnett said he was “stunned” at APS’ decision to get involved in election.
Chapter 5. Things Get Even More Political
On June 5, representatives of the rooftop solar industry and scores of seniors who would be unfairly and disproportionately burdened by the new DOR solar tax gathered at the State Capitol, asking Brewer to do the right thing and instruct the DOR to get the tax off the books.
Goldwater said that if Brewer wants to call herself the “Solar Queen,” a moniker she’s used to tout the state’s growing solar industry, she needs to address the tax issue.
“That is not going to happen,” the governor’s spokesman Andrew Wilder told The Arizona Republic. He said there’s nothing the governor can do at this point, since the Legislature didn’t approve a bill that would eliminate the taxes on leased solar panels.
Goldwater and TUSK aired a television ad to blast the never-before-imposed tax on those who choose to install leased solar panels on their homes.
Arizona Capitol Times reported that in a letter to ACC candidates Lucy Mason and Vernon Parker, APS executive president and chief operating officer Mark Schiavoni said his company has not waded into races for the commission, even when nothing legally prohibits it from electioneering.
Schiavoni was responding to a set of pointed questions Mason and Parker posed to APS Chief Operating Officer Don Brandt. The two candidates were wary APS might be secretly aiding their primary opponents in the race — Rep. Tom Forese, R-Chandler, and Doug Little of Scottsdale. They told Brandt it would be “highly inappropriate for APS or its parent company Pinnacle West to influence the elections of its regulators in any way.”
Parker said he views Schiavoni’s letter as a confirmation of their fear — that APS is now engaged in the race.
The Yellow Sheet Report reported Parker called out ACC Chairman Bob Stump for tweeting endorsement of Tom Forese and Doug Little.
“I have not singled you out for criticism, and I look forward to campaigning vigorously for you and my friend Lucy, should you win the primary,” Stump replied.
Parker and Mason opposed solar taxes.
At the end of June, companies that offer solar leases sued the DOR over its decision to tax leased solar panels. Two companies sought a declaratory judgment as they face millions of dollars in taxes, though the companies have said most of their leasing contracts could pass that liability to the homeowners, businesses, schools and nonprofits that lease the panels.
Chapter 6. New APS Warfare Tactic
APS announced it plans to spend between $57 million and $70 million to install about 3,000 solar systems it would own. The plan was submitted July 28 to the ACC
as part of the utility’s AZ Sun program, which was installing 200 megawatts of utility owned solar. Up to this point, APS had installed only utility-scale systems.
“After attacking rooftop solar companies in Arizona relentlessly for more than a year, this latest tactic by APS has a ‘Trojan horse’ smell to it,” said Ken Johnson, spokesman for the Washington-based Solar Energy Industries Association. “The Arizona Corporation Commission needs to think this through very carefully.”
Chapter 7. APS’ GOP Candidates Take Primary Election
Republicans Tom Forese and Doug Little won the GOP August primary election for two ACC seats.
Robert Robb, a columnist at The Arizona Republic followed with the question of whether APS was funding attack ads in the campaign for two open seats on the ACC was “all the evidence necessary to conclude that APS is playing a very dumb political game.,” and he asserted commissioners should be appointed.
The newspaper’s editorial board opined “[T]he ACC usually devotes itself to important but mundane matters such as how much you’ll pay for water or electricity. But this year, it can do much more: It can protect democracy. It would do this by requiring Arizona Public Service Co. to come clean on whether it is trying to choose who regulates it.”
Chapter 8. Arizona Solar Pays the Price for Solar Warfare
The U.S. Solar Market Insight report for the second quarter of 2014 released Sept. 5 by GTM Research and the Solar Energy Industries Association showed Arizona ranked seventh in the nation for solar panel installations. This was a drop from third during the first quarter.
“Today’s SEIA Q2 Report shows a real collapse in Arizona’s solar numbers,” said Harvey Bryan, an Arizona State University professor in the School of Sustainability. “I believe the changes to net metering and the proposed DOR (Department of Revenue) ruling are beginning to have a big negative impact on the state’s solar industry.”
Chapter 9. APS Declares War on Renewable Standards
The ACC released a proposal in October that would eliminate the state’s hugely successful energy efficiency standards, a move that would “deprive consumers of billions of dollars in energy savings and kill thousands of jobs.” Those were the words of former ACC Chairwoman Kris Mayes.
“The proposal would decimate the Arizona Energy Efficiency and Resource Standard,” which requires electric utilities to reduce their overall energy usage by 22 percent by the year 2020 through the implementation of energy efficiency measures at homes and businesses across the state, she wrote.
“By eliminating energy efficiency, the commission would be giving a green light to big utilities to build expensive power plants rather than implement less costly energy efficiency measures.”
Chapter 10. APS Wins and Losses
Republicans Tom Forese and Doug Little defeated Democrats Jim Holway and Sandra Kennedy in the race for the two open seats on the Arizona Corporation Commission in the November General Election. Forese and Little benefited from more than $3.2 million in political advertising by independent groups during their primary- and general election campaigns.
Later, ACC staff recommended against the controversial proposal from Arizona Public Service to install and own rooftop photovoltaic (PV) solar systems on 3,000 homes, saying the plans are too costly. The staff concluded APS had not reasonably shown it needs to build an additional 20 MW of distributed solar to comply with renewable portfolio requirements established in 2009.
A separate staff memo also recommended the commission reject APS’ alternative proposal of a 20 MW utility-owned PV array at its Redhawk Power Station. In late December the commission approved a scaled down version of the APS proposal permitting it to own 10MW of rooftop solar, but limited to doing technical study and serving low-income customers.
Chapter 11. What’s Next?
Rose Law Group Reporter asked Rose Law Group Partner and SolarCity attorney for his thoughts on what has transpired in Solar Warfare since 2013 and what he expects to take place in 2015. Here are his thoughts:
“Utilities across the country are continuing their coordinated attacks against their own customers. Customer choice is the kryptonite to their monopolies, and utilities are fighting at every single level to make it more difficult, more expensive, or even illegal, for customers to generate any of their own electricity, or just to simply buy less of what the monopoly is selling.
“Expect more of the same in 2015. More anti-solar legislation sponsored by utilities, more proposals at the commission aimed at stymying the growth of rooftop solar and more deceit from utilities who don’t really want their customers to know just how hostile the utility really is to their interests.
“Big news locally will center around SRP’s proposed massive solar tax and how the its board deals with that proposal.
“We expect a tax court ruling on DOR’s new property tax and a host of other happenings at the ACC. It is another key year in the advancement of solar.”
Previous Year-end summaries for 2014