More Affordable Solar for Everyone
Tucson Electric Power’s plan to provide 30 percent of our community's power from renewable resources by 2030 will be more affordable if we update rates for new users of private rooftop solar arrays.
The Arizona Corporation Commission (ACC) has directed TEP and other utilities to reduce the costs customers pay to subsidize service for new users of rooftop power systems. In response, TEP has proposed updated rates that would reduce subsidies while still allowing significant savings for going solar.
Key Benefits of TEP’s Solar Proposals
- Provide fair, affordable pricing plans for new solar customers
- Reduce costs for all TEP customers
- Direct additional renewable energy investments to larger, more cost-effective systems that benefit our entire community
In addition to preserving generous savings for users of private solar arrays, TEP is proposing new and improved ways for customers to go solar with power from TEP’s large, cost-effective community-scale solar arrays.
Customized Solar Rates
Under TEP’s current rates, customers with private solar arrays don’t pay enough to cover the cost of their electric service. While many people assume it costs TEP much less to serve customers with solar panels, that isn’t true because most service costs are fixed – they don’t vary with usage.
TEP’s standard pricing plans seek to cover these fixed costs through usage-based kilowatt-hour (kWh) charges. But solar customers don’t cover an equitable share of these costs because they don’t pay for most of the power they use from TEP’s system.
Even customers with large solar arrays draw power from TEP’s grid at night and whenever their systems can’t keep up with their energy use. But they avoid paying for that power through credits they receive in exchange for the excess power their systems send to the grid – an exchange known as “net metering.”
To address this problem, the ACC ordered TEP and other utilities to replace net metering with a new energy export rate. The ACC also said solar customers should be provided with customized rates that reflect their unique characteristics.
New Pricing Plans
In response to the ACC’s order, TEP has developed two new rate options for new users of rooftop solar arrays and other distributed generation (DG) equipment:
- Time-of-Use DG: Customers would pay lower energy charges during most weekday hours, on weekends and on major holidays; higher prices would apply during on-peak hours when customers typically use the most energy. This plan also includes a grid access fee based on the size of the customer’s DG system. This $2.50 per kilowatt (kW) fee is designed to cover service costs that cannot be recovered from such customers through standard rates.
- Demand Time-of-Use DG: This pricing plan would combine even lower usage-based Time-of-Use rates with a “demand” charge based on the highest individual hour of usage during on-peak time periods. This pricing plan does not include a grid access fee because the demand charge would help recover service costs that cannot be collected with standard rates.
TEP also has proposed updated meter fees to more accurately reflect the higher cost of bi-directional meters used to measure excess solar production. If approved, the monthly fees would be $3.50 for residential customers and $5.62 for small commercial customers.
Revised Energy Export Rate
TEP has proposed paying new solar customers 9.73 cents per kWh for their systems' excess power, a price that reflects average market costs over a recent five-year period. When combined with other bill savings, these payments would allow a residential customer to recoup the cost of a new solar array in less than nine years – the same “payback” that was in place during a thriving rooftop solar marketplace in 2015*.
Rooftop solar advocates have proposed a rate of about 12.5 cents per kWh for excess solar energy, which is higher than the price customers pay TEP for energy and more than four times the price TEP recently agreed to pay for solar energy from a large community-scale system.
* Based on simple payback for a 6.3 kW DC system sized to offset 100 percent of average monthly usage of 964 kWh. Costs and savings will vary based on usage and installed system size.
No Impact on Current Solar Customers
The new rules and requirements would only affect customers who request interconnection of new rooftop systems after new rates and rules take effect.
Customers who already use private solar arrays and those who request to connect a new system before ACC-approved changes take effect will be "grandfathered" under current rate designs and net metering rules for 20 years from the date they applied to be interconnected to TEP’s system.
New Community Solar Options
TEP wants to reduce the cost of participating in our Bright Tucson Community Solar program, which allows customers to purchase some or all of their power from large local solar arrays on a flexible, month-to-month basis. Because large-scale solar power has grown even more cost-effective since the program was launched, TEP has proposed reducing the cost of participation by half, to about one cent per kWh.
TEP also has asked the ACC to approve a new community solar option that would let customers buy all of their power from our local solar arrays for a fixed monthly price that would remain fixed for 10 years. Participating customers could essentially lock in their current average electric costs for a decade by committing to take service from the company's cost-effective solar energy resources.
Both community solar programs would provide affordable, attractive solar options for customers who might not be willing or able to install rooftop photovoltaic arrays.
Current Status of TEP’s Solar Proposal
TEP’s proposal is under review by the ACC, a panel of five elected officials that regulates TEP and most other electric utilities in Arizona. That review has included input from ACC staff and other key stakeholders, including the Residential Utility Consumer Office, customer groups, rooftop solar installers and TEP customers.
In April 2018, an administrative law judge who has overseen the review issued a recommended opinion and order for consideration by the ACC, which must vote to approve TEP’s proposal before any changes take effect. If approved, the order would:
- Delay the introduction of customized pricing plans for new solar customers until after TEP submits additional details about their service costs. If that recommendation is approved by the ACC, new solar customers would be required to choose an existing Time-of-Use pricing plan instead of customized rates that reflect their unique characteristics.
- Authorize compensation of new solar customers for their systems' excess power at an export rate of 9.64 cents per kWh. The rate would be updated annually to reflect market prices for solar power, but new solar customers would lock in for 10 years the rate in effect at the time they apply to connect their system to TEP’s electric facilities.
- Update the monthly fees that solar customers must pay to cover the costs of bi-directional meters required to serve them.
- Approve TEP’s plan to reduce the cost of its existing community solar program and create a new, second program that provides homeowners with solar energy and a fixed monthly electric bill for up to 10 years. More details will be provided later this year if these changes are approved.
TEP and other parties involved in the proceeding submitted comments on the proposed order for the consideration of the ACC, which is expected to review the matter at an upcoming public meeting.