5 strong reasons NOT to alter net-metering in AZ

14 November 2013

Dear commissioners,

In this email, I present 5 strong reasons to oppose any current proposal regarding the APS request to alter net metering in Arizona (Docket # E-01345A-13-0248).

1) APS’ OWN FILING SHOWS SOLAR CUSTOMERS SUBSIDIZE THE GRID

Attachment CAM_3 (pp 7-12) of the original July APS net-metering filing, E-01345A-13-0248,  includes 6 APS-cherry-picked sample bills from residential customers before and after installing solar. In all of these “illustrative examples”, the solar arrays generate more on-peak electricity than the house consumes - both in winter and summer. That means the house is sending net on-peak electricity to the grid. And in all of these “illustrative examples”, the house is generating less off-peak electricity than it consumes. That means the house is receiving net off-peak electricity. All 6 of these example solar customers are trading, one-for-one, their own valuable on-peak hours for APS’ less-valuable off-peak hours. Thus, in all examples submitted by APS in this filing - and in complete contrast to APS claims - the solar customer is in fact subsidizing the utility.

I urge you all to review the 6 submitted cases in Attachment CAM_3 and see for yourselves.

2) THE SOLE STUDY SUPPORTING APS CASE IS SEVERELY FLAWED

APS’ entire net-metering filing is based upon a single 2012 study by Navigant Consulting. But all 5 of the study’s conclusions are flawed, unwarranted, or contrary to other recent Navigant studies.

The 1st - that DE customers appear to be cross-subsidized by non-DE customers, is false because the December 2012 study didn't include the already approved Lost Fixed-Cost Recovery (LFCR) adjustor, which took effect March 2013. The LFCR, paid by all customers, specifically provides for the fixed costs which this case claims are unpaid.

The 2nd conclusion - that DE customers avoid several actual costs incurred in use of APS’ service - also fails to attribute fixed cost payments to the LFCR. It further states that renewable energy customers aren't paying for environmental remediation, storage of spent nuclear fuel, and decommissioning programs. As absurd a claim as decreasing shade by planting trees.

The 3rd conclusion - that the cross-subsidy is especially pronounced for residential customers, whose per-kWh charges average 90% of their annual bills - humorously counters the study’s own claim that 22% of the annual bills are “avoided costs” by which APS claims the heavy cost shift.

The 4th conclusion - that "net-metering exacerbates the cross-subsidy", is not in fact another conclusion, but a rehashing of the first conclusion, only with the added word “exacerbate”. Akin to saying if you help me move it will take even less time when you help me move.

The 5th Navigant conclusion - that there is no limit on the total solar capacity participating in net-metering - is untrue according to Navigant’s own prior study for the National Renewable Energy Lab, which states that there is a maximum 27% availability of roof area for residential solar in arid climates. This is due to unfavorable roof orientations, shade from other buildings and trees, and structures incapable of supporting the weight, among other barriers. The fear of a utility “death spiral” in which every customer goes solar is severely overhyped. Policy should be guided by sound analysis, not by fear.

I urge you to critically assess the faulty conclusions of the only study that supports a residential cost-shift in APS territory.

3) CUSTOMER SPENDING and RESIDENTIAL PEAK DEMAND

If I go to Home Depot, buy a 30-foot canvas shade and stretch it out up above my home, I reduce my daytime energy consumption, but my 7pm peak (when I run my A/C and stove together) remains the same. For this $50 investment, I am able to purchase less electricity, thus have a reduced expense for consumption, but no fee for my peak usage.

Now, if I put down another $10,000 so the shade can generate electricity in excess of my daytime energy consumption, I return that electricity to the grid during daytime hours, but my 7pm peak remains the same. For this significantly greater investment on the same house, I likewise am able to purchase less electricity, thus have a reduced expense for consumption, but may now suddenly be charged fee for my peak usage.

All residential customers have energy peaks, regardless of what they chose to buy or not to buy. How can you rightly charge some for their demand and not others. And if I only run A/C from 9am to 4pm, should I still get charged because I have a peak, or get credited for avoiding the normal APS system peak? And why would putting solar on my roof affect that decision?

To clarify, peak demand - which determines the need for fixed-cost infrastructure investments - can never increase by through distributed generation or net metering. It is only ever possible to decrease peak demand with solar, and this is what actually happens, according to APS’ own filing (see #1 above).

4) USE OF “AVERAGE” IS A STATISTICAL MISTAKE

“Average customer”? For a group of financial analysts, it sure sounds like the APS team has forgotten its high school statistics. Tell you what: I’ll give 5 commissioners an average salary of $90,000. By that, I mean 4 of you will earn $35,000 while one receives $310,000. 

That’s what good an average is. And that’s the same way this non-rate case is attempting to analyze and pigeonhole every potential residential DG customer. First of all, where in this filing are the data, sample size, and true analysis? Can the rest of the state likewise submit graphs and numbers without any external audit to verify them? And secondly, if we’re really going to look at averages, it shouldn't matter WHAT a customer's peak demand is, it only matters WHEN. The system peak is at 7pm, but if a solar customer peaks demand at 11pm, he is not adding to the need for more transmission lines, distribution lines, transformers, or generation stations.

5) PRINCIPLES OF PUBLIC UTILITY RATES - by Bonbright (1961)

This book has been and continues to be a tome of wisdom for sound rate-making worldwide. It lists 10 attributes of a sound rate structure, of which a few are particularly relevant to net-metering:

• Revenue-related attributes - (#3) Stability and predictability of the rates themselves, with a minimum of unexpected changes seriously adverse to ratepayers and with a sense of historical continuity (Compare “The best tax is an old tax”).
• Cost-related attributes - (#5) Reflection of all the present and future private and social costs and benefits occasioned by a service’s provision (i.e. all internalities and externalities); (#8) Dynamic efficiency in promoting innovation and responding economically to changing demand and supply patterns.
• Practical-related attributes - (#9) understandability, public acceptability, and feasibility of application; (#10) freedom from controversies as to proper interpretation.

Please, commissioners and commission staff, postpone discussions on net metering until the above 5 issues are incorporated. Thank you.

Sincerely,

Jamie Michael Kern

APS non-solar customer