APS Proposes Demand Charges for One Million Residential Customers

2016 will go down in Arizona solar history as the “Year of the Rate Case.”  Rate cases for Unisource Electric and Tucson Electric Power (two utilities owned by the same parent company UNS Energy, which is a subsidiary of Fortis) are already underway.

Arizona’s largest utility, Arizona Public Service (APS), joined the party this month by filing their own rate case with the Arizona Corporation Commission (ACC), seeking to change its demand charge program from voluntary to mandatory for its one million residential customers.

For those not familiar with demand charges, these are charges that are determined by a customer’s highest electricity usage over an entire monthly billing period, even if that peak is just for a few minutes. This means that an unlucky coincidence of events – your air conditioner automatically cycles at the same time that your daughter is using the hair dryer and bread is in the toaster – and the result is an unexpected bill increase. In fact, because these charges are so difficult for residential customers to predict and manage, they’re usually only applied to commercial and industrial customers.

The APS filing marks the beginning of a yearlong rate case that the utility hopes will result in new rate hikes by next summer, which are expected to net the utility $166 million annually. APS claims that the proposed demand charge will cost the average consumer $11 per month. The reality is that many customers will see much larger increases, and those cost will disproportionately impact Arizonans with low and fixed incomes.

The rate hike would also undermine APS customers with solar power. The utility wants to end retail rate net metering, and instead pay only wholesale market rates – an approximate 78% cut in value for solar customers sending power to the grid.  Under the APS proposal, systems installed or connected to the system after July 1, 2017 would go onto the new proposed rate structure, while existing rooftop solar customers will keep their current rates for 20 years after they are connected. APS currently has 44,000 rooftop solar customers, and the number is growing.

APS is joining the utility choir by justifying its rates proposal in part with misinformation about the cost of serving solar customers – customers who, let’s be clear, are investing their own dollars in local power infrastructure that reduces costs and delivers benefits to their community.  The APS calculation is not only based on shaky math – this latest filing is an attempt to skirt around another Commission process that is currently underway to more thoroughly assess the costs and benefits of solar. The ACC should consider those results before making any changes to net metering.

This rate proposal from APS is bad for solar customers. It’s bad for customers with low or fixed incomes.  In fact, it’s just plain bad rate design.  Vote Solar will be filing to intervene in the case and will be providing expert testimony to demonstrate that APS’s proposal is not in the best interest of Arizona ratepayers.