In early summer 2016, Arizona Public Service Company (APS), Arizona’s largest investor-owned utility, filed an application with the Arizona Corporation Commission (ACC) for a rate increase of $3.6 billion over three years. If approved, the request will take effect in July 2017 and result in a 6-8% per year rate increase for residential customers.
Included in the request is a proposal to reduce net metered rooftop solar from its current retail rate (12.8 cents/kWh) to the ‘avoided cost’ or wholesale rate of less than 3 cents/kWh. APS’ 44,000 current net metered customers would be ‘grandfathered,’ i.e. allowed to keep the current retail rate.
APS is also proposing to add demand charges for residential customers — a tactic seldom used by utilities for residential ratepayers until rooftop solar became popular. APS states that adding demand charges will benefit customers, though the evidence seems clear that it will be highly damaging to rooftop solar growth. Indeed, rooftop solar installations plummeted by 95% over one year when another Arizona utility, the Salt River Project, added a $50 per month demand charge for residential solar customers.
APS also proposes to increase its profits on both energy efficiency and distribution expenditures by receiving greater recovery for lost fixed costs.
But what has been lost in the discussion is how much money APS plans to pour into both coal and natural gas, while short-changing solar.
APS currently operates 4,851 MW of coal and natural gas plants, with the oldest built in 1962, and the other coal plants built in the 1970s. APS owns 189 MW of solar, out of its total fleet of nearly 6,200 MW. In other words, 3% of APS’ total owned generation capacity is solar. In 2015, APS added a mere 52 MW of solar.
Meanwhile, APS plans to invest nearly $500 million in emissions control for the 45-year-old Four Corners coal plant, one of the Southwest’s oldest and dirtiest plants. And APS projects that its use of natural gas for electricity will increase from 26% today to 36% in 2031. Although APS has paid triple the current cost of natural gas ($2.50/MMBtu), they seem to believe that this won’t happen again, or that future supplies of natural gas, which are piped in from out of state, won’t become scarce or expensive. APS plans to nearly triple the size of the Ocotillo gas plant in Tempe, from its current 220 MW to 620 MW for $500 million.
Furthermore, APS plans to put $654 million into transmission costs, and $1.41 billion into the distribution grid, allowing it to charge more money from ratepayers, and profit more, without actually deploying distributed solar.
APS can talk a good game about how much it loves solar, but its rate case and Integrated Resource Plan pour billions into bandaids for coal plants and represent huge investments in current and future natural gas plants. APS has spent as much as $1 billion per year for coal and natural gas fuel costs.
APS has grounded its criticism of rooftop solar by saying that utility-scale solar farms that it could presumably build and own are cheaper for its customers than distributed solar installations owned by customers. APS’ argument gives short shrift to the values of distributed solar, but even if we take it at face value, APS’ paltry investment in centralized solar, compared to the billions it wants to spend on coal and gas, show that the utility is being disingenuous. APS is not attacking rooftop solar so that it can instead invest in utility-scale solar. APS is attacking rooftop solar, and nearly ignoring utility-scale solar, and running headlong into continued fossil fuel investment.
Once again, APS short-changes Arizona’s best asset – the sun – while maximizing its own profits and keeping out competitors.