Solar in Danger: Arizona’s Battle for the Sun


With the future of Arizona’s solar industry and utility rates at stake, the race to fill two seats on Arizona’s Corporations Commission is turning out to be one of the most divisive in the state. The primaries have left Democrats Sandra Kennedy and Jim Holway facing down Republicans Doug Little and Tom Forese in an electoral battle strongly focused on solar energy. The issue has been a hot-button topic in the state since incentives for solar were drastically reduced in 2013, and this election may determine the direction of energy policies in the years to come.
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The Basics

Here are things you should know first:

1) Arizona Public Service (APS) is a private company that provides electricity for Flagstaff, Prescott, Yuma and about two thirds of the Phoenix metro area.

2) The Arizona Corporations Commission is a five-member regulatory board that oversees rates and policies for APS and other utility companies in the state.

3) Commissioners are elected during presidential election years and also serve four-year terms.

Solar’s Successes

Arizona is already a leader in the production of solar energy, second only to California in megawatt output. With about 300 sunny days every year, it is well positioned to achieve the state-mandated goal of producing 15% of Arizona’s electricity through renewable resources by 2025. As of now, APS services almost 18,000 rooftop solar customers.

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Part of the reason this transition has been so successful is that the Corporations Commission has previously maintained strong financial incentives for households and businesses to go solar. Residents can often lease (rather than purchase) their panels, making up-front costs minimal. In addition, “net-metering” policies have allowed excess electricity generated by solar panels to essentially be sold back to APS for a reduction in a customer’s own bill. If the goal of these policies was to increase the share of renewable energy production by providing financial incentives, Arizona succeeded.

In 2013 the Corporations Commission began rolling back these benefits dramatically, sparking a massive legislative and financial battle that has continued into the current election cycle.

In January, net-metering incentives for homeowners were dropped from 75 cents per watt to only 10 cents per watt. Commerical incentives for solar were cut entirely. APS claimed that solar customers were not paying enough to keep up infrastructure needed to power the grid as a whole, while the law allowed them to sell back their excess electricity at prices set far too high. Republican lawmakers suggested that since the state had already met its renewable energy goal for the next several years, the rate adjustments would be appropriate for a competitive marketplace.

The solar industry and environmental interests were outraged. Without being able to offer customers the considerable savings that net-metering had previously earned, converting households and commercial properties to solar would be a much harder sell. Advocates decried the move as an attempt by APS to cripple the industry. They pointed to studies like the one conducted by the Crossborder Energy consulting firm, which showed that net-metering had provided a considerable net gain to all APS users by providing excess energy for everyone during peak (sunny/midday) times, noting that every household using solar was one less household contributing to installation and maintenance requirements for infrastructure like transformers, power lines and other inherent costs of non-renewable energy sources.

The battle became a war in November of 2013, when APS submitted a proposal to the Corporations Commission that they either be permitted to charge solar users a $50-$100 fee every month, or that they be allowed to buy that excess net-metered energy from solar users at only 4 cents per kilowatt hour. Hundreds of demonstrators and passionate citizens, environmental and interest groups converged on a two-night hearing, expressing their anger and disappointment with the elimination of proven financial incentives for renewable energy. The Corporations Commission settled on a compromise in a 3-2 vote that would charge solar users a fee of only 70 cents per kilowatt hour, which amounts to less than $10 per month for most users. But the commission was not done yet.

In April of 2014, after a review by the Department of Revenue, it levied new property taxes (estimated at around $152/yr) on homes with leased solar panels. Customers who could afford to own their equipment were exempt from the tax, but leasing had been the first choice of residential, school and non-profit customers who couldn’t afford the startup for costs of expensive solar arrays. This further chipped away at potential savings. Solar advocates cited it as yet another attack on an industry that would eventually threaten the bottom line of utility companies like APS that provided coal, nuclear and natural gas almost exclusively.

The Arizona Corporations Commission will hold another full hearing on rates in 2015 that could continue its current course of incentive-slashing or deviate dramatically. Both Democrats and Republicans see the upcoming election as an opportunity to staff the board with commissioners sympathetic to the interests of either the solar industry or utility companies. With the future of Arizona’s power grid at stake, neither is pulling any punches.

Whence the Laws and Money?

It is an oversimplification to identify the players in this saga with their party affiliation. In fact, much of the conflict throughout this election cycle has occurred within the Republican party itself.

The intrigue began when credentialed conservative Congressman Barry Goldwater Jr. became chair of the organization Tell Utilities Solar Won’t Be Killed (TUSK) specifically to fight APS on the issue of incentives. In his view, protecting the solar industry is consistent with conservative principles.

goldwater“Republicans want the freedom to make the best choice and the competition to drive down rates.That choice may mean they save money, and with solar that is the case. Solar companies have a track record of aggressively reducing costs in America. We can’t let solar energy – and all its advantages and benefits it provides us – be pushed aside by monopolies wanting to limit energy choice. That’s not the conservative way and it’s not the American way.”

The plot thickened during the primaries when two Republican candidates for the nominations, Vernon Parker and Lucy Mason, began voicing complaints that APS was secretly funding two of their Republican rivals, Doug Little and Tom Forese, through so called “dark money” contributions. They claimed that money was being funneled through “Arizona 2014”, a group openly campaigning for Little and Forese. APS declined to either confirm or deny the claim as Little and Forese won the Republican primary, saying only that they could no longer afford to sit elections out.

The implications of the accusation, for those who believe it, have more to do with ethics than legality. With Citizen’s United having opened campaign coffers to corporate donations, no laws would be violated by such behavior. (Another dark money non-profit, the Arizona Free Enterprise Club, contributed a half million dollars to Little and Forese, unprecedented in Corporations Commission history.) Nevertheless, many are questioning whether a private, regulated monopoly like APS should be able to financially influence who sits on the board that regulates it.

ALEC is Back

Both Tom Forese and APS itself are members of a group know as the American Legislative Exchange Council, or ALEC. The organization gained some notoriety during the international Occupy encampments as models of a supposedly toxic convergence of money and politics. ALEC is essentially a forum where conservative corporate lobbyists and lawmakers write “model legislation” together, which is then introduced in various cities and states all over the country. Last year ALEC exported the “Updating Net Metering Policies Resolution” to its more than 2,000 legislators, which recommended most of the recent cuts to solar incentives that APS and the Corporations Commission have conducted. APS publicly left ALEC in April of 2012 (along with other members) when its practices were first widely criticized. A few months later it quietly joined again, and is now spearheading what appears to be a rollback of solar incentives all across the country.

Alternatives

The single-issue controversy surrounding the campaign, especially in the Republican camp, has left Democratic candidates Sandra Kennedy and Jim Holway in a position to keep their message simple: Protect solar energy. “Let’s make Arizona the new solar capital!” says Holway’s campaign material, while Kennedy’s campaign website, sandraforsolar.com, is even less ambiguous.

Kennedy was already elected to one term on the Corporations Commission in 2008, but narrowly lost reelection in 2012. She claims that the attacks by the commission on solar and other renewable energies is what has spurred her to run again, and is clearly making the issue her priority. Holway has spent the last four years as Maricopa County’s elected representative to the Central Arizona Project, which diverts the Colorado river to Pima, Pinal and Maricopa counties, while simultaneously serving as director of the Western Lands and Communities Project.  He is calling for all dark money contributions to stop.

In what could be a final twist to the story, it now appears possible that Kennedy and Holway could win the election by default. The Arizona Democratic Party has filed an official complaint with the Clean Elections Commission, claiming that both Little and Forese violated campaign finance law by failing to properly report the money paid to companies for obtaining the signatures that got them on the ballot. If financial violations for either candidate end up totaling more than $24,000, Arizona state law will require them to be removed from the race altogether.

If not, the voters may determine the future of the state’s solar energy in November.

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