The clash between residential solar companies and utilities continues to heat up in courts and public utility commissions. As solar technology continues to improve, more households are installing rooftop solar systems. This trend can cause problems for utilities, which still have the same fixed costs to service those households. This Legal Alert reports on disputes that have arisen as utilities look for ways to address this problem. 

Litigation 

In a high-profile case in Arizona, SolarCity Corporation claims that the Salt River Project Agricultural Improvement and Power District (SRP) has engaged in anticompetitive conduct by charging home solar customers certain fees that are not charged to other customers. SolarCity Corp. v. Salt River Project Agricultural Improvement and Power District, Case No. 2:15-cv-00374 (U.S.D.Ct. Ariz. 2015). SolarCity alleges that the new rates established by SRP are attempts to monopolize the solar power market and restrain trade.

According to the complaint, filed in federal court in Arizona, SRP used to have certain incentives for its customers to install rooftop solar. These benefits included net metering credits on customers’ bills for excess solar energy production that is returned to the grid. Recently, SRP announced it was establishing a new pricing plan for solar customers. This new pricing plan, according to SolarCity, effectively penalizes home solar customers by charging additional solar fees that are not charged to non-solar users, including a distribution charge that is much higher than that for non-solar users and a demand charge based on a customer’s peak usage. In addition, the net metering credits have been reduced. According to SolarCity, the effect of these changes is to eliminate the ability of customers to install solar at their homes. SolarCity has brought claims for monopolization and restraint of trade under the Sherman Act, the Clayton Act, and state antitrust statutes, as well as state law tortious interference claims.

SRP has moved to dismiss the complaint on numerous grounds, including that it is immune from antitrust claims based on its status as a governmental entity. SRP frames the case as arising from a “national policy debate over how to integrate rooftop solar systems into the electrical grid, who should bear the cost of subsidizing the rooftop solar industry, and how the costs of maintaining the grid should be recovered from those who benefit from it.” SRP states that its new pricing structure is designed to “effectuate the basic bargain [SRP] has with all of its customer classes: that customers in each class pay their fair share of the costs of service.” In addition to its antitrust immunity defense, SRP asserts that because its rates were approved by its governing body, the filed rate doctrine precludes a court from judicial second-guessing. SRP also asserts lack of standing and other defenses. 

SRP’s motion to dismiss is now pending before the court.

Regulatory Challenges

Residential solar companies are also battling with utilities at the regulatory level. In Arizona, three utilities have sought to change their net metering charges to solar users through petitions to the Arizona Corporation Commission. These utilities filed applications seeking to increase their net metering tariffs, which would allow them to shift some of their costs back to home solar users. In each of these cases, the commission took the position that the applications should be heard in a rate case, finding that a rate case would provide the commission with more analytical tools and provide a more complete solution to the problems raised by the utilities. Subsequently, all of the utilities (Tucson Electric Power, UNS Electric, and Trico Electric Cooperative) have filed rate cases to address these issues. Sulphur Springs Valley Electric Cooperative also recently filed both a net metering application and a rate case raising similar issues. All of these cases are pending.

In Nevada, NV Energy recently filed an application with the Nevada Public Utilities Commission seeking approval of new net metering schedules and demand charges that would apply to rooftop solar customers. NV Energy states that the new schedules are designed to address the unique load and cost characteristics of these customers, who “are partial requirements customers requiring a standby aspect to their electrical service, have different metering and customer service and customer accounting requirements, and have different load factors and load levels.” Numerous solar entities have intervened. On September 1, 2015, the Commission approved the new schedules on an interim basis and set the matter for hearings in November.

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As more utilities change their rates and tariffs to address the impact of rooftop solar installations, it is expected that lawsuits and regulatory challenges will grow. The litigation and regulatory disputes in Arizona and Nevada could be important bellwethers for the industry.