The Arizona Public Service Co. (APS) and solar industry representatives and advocates have reached a settlement on rooftop solar compensation and rate design, following years of heated policy debate. The settlement, which the Arizona Corporation Commission (ACC) is expected to vote on this summer, required compromise from both sides on a variety of issues.

Future Rate Design

The settlement nixes APS’s request for a mandatory demand charge on all residential and small business customers. Instead, the settlement gives new solar distributed generation customers the option to choose between a time-of-use or demand-based rate. Under the settlement, APS would compensate solar customers with an export credit rate of 12.9 cents per kWh. APS initially proposed to cut compensation from the retail rate, which is approximately 13 to 14 cents per kWh, to the wholesale rate, which is only 3 cents per kWh. The export credit rate will decrease by up to 10 percent annually. However, customers will be able to lock in their rates for 10 years, providing some long-term certainty.

Current Net Metering Customers

The settlement will preserve existing net metering benefits for distributed generation customers who file an interconnection application before the ACC issues a decision in the case. Those customers will be grandfathered in and continue to receive the full retail rate for a period of twenty years from the date of interconnection.

Utility-Owned Generation

The settlement allows APS to invest $10 to $15 million per year in AZ Sun II, a new program for utility-owned rooftop solar for low- to moderate-income customers. The agreement puts a moratorium on new self-build generation by APS until 2022, excepting distributed generation, microgrids, and renewable generation.

What’s Next?

The settlement moves Arizona away from retail rate net metering and towards value-based solar rate design. While solar advocates do not believe the settlement fully recognizes the value of solar, the settlement preserves benefits for existing customers and allows the state’s solar industry to move forward with more certainty. APS, industry representatives, and many solar advocates committed to stand by the settlement agreement and refrain from seeking to undermine it through ballot initiatives, legislation or advocacy at the ACC.