May 13, 2022
 
Arizona Corporation Commission
1200 W. Washington Street
Phoenix, AZ 85007
 
RE: Community Solar Support in Docket No. E-01345A-21-0240
 
Madam Chair and Commissioners,

The Arizona Solar Energy Industries Association (AriSEIA) very much supports the Commission in an effort to move forward with community solar. Community solar provides a unique opportunity for residential and small business customers to participate in the clean energy transition when they otherwise would not be able to. Community solar is a useful opportunity for those that cannot utilize rooftop solar for practical or financial reasons to be able to join together in projects that are at strategically valuable locations, still close to distribution opportunities. It also provides a way to utilize otherwise underutilized brownfield and agricultural sites.
 
AriSEIA has many member companies that are very interested in investing in Arizona. Community solar provides another avenue for the solar industry to encourage job creation and economic growth in our state. As noted by the Coalition for Community Solar Access (CCSA), several university studies have been conducted that reflect the job and revenue opportunities for states that adopt community solar policies.[1] Failure to act allows other states, including some of our neighbors, to seize those opportunities from us, including New Mexico, Colorado, and California. Arizona should be a leader in solar in the nation. We encourage the Commission to signal to the industry that Arizona very much wants those jobs and investment dollars.
 
We are eager to participate in the working group and feel confident that collaboration with other organizations, consumer advocates, Staff, and the utility will contribute to a better outcome. While there may not be consensus today on what the outcome of the group should be, Commissioner Kennedy’s Proposed Amendment No. 1 is an especially important step towards creating a thoughtful and workable program.[2] AriSEIA encourages the Commission to utilize the working group to explore all of these numerous benefits, as well as utilize the lessons learned from other states that have already adopted community solar policies. All of the details need not be fleshed out today, as that is the very purpose of the working group.
  
AriSEIA is aware that there are presently two different avenues put forward as to how to commence with community solar in Arizona. We do not feel these opportunities are incompatible with each other. We fully support moving forward with a working group in the Arizona Public Service (APS) Renewable Energy Standard and Tariff (REST) docket, as well as utilizing the new docket for fact finding and programs in other service territories if a REST docket is unavailable.
 
We urge the Commission to move forward with a working group in this docket at the May Open Meeting and recommend that a final vote on the outcome of the working group be scheduled for the October Open Meeting.
 
Respectfully,
 
/s/ Autumn T. Johnson
Executive Director
AriSEIA 
(520) 240-4757
autumn@ariseia.org
 
[1] Coalition for Community Solar Access, May 13, 2022 Letter, available here https://docket.images.azcc.gov/E000019242.pdf.

[2] Commissioner Kennedy Proposed Amendment No. 1, available here https://docket.images.azcc.gov/E000018712.pdf?i=1652155834150.

BEFORE THE ARIZONA CORPORATION COMMISSION
 
 COMMISSIONERS
Lea Márquez Peterson – Chairwoman
Sandra Kennedy
Justin Olson
Anna Tovar
Jim O’Connor
  
IN THE MATTER OF THE APPLICATION OF ARIZONA PUBLIC SERVICE COMPANY FOR A HEARING TO DETERMINE THE FAIR VALUE OF THE UTILITY PROPERTY OF THE COMPANY FOR RATEMAKING PURPOSES, TO FIX A JUST AND REASONABLE RATE OF RETURN THEREON, AND TO APPROVE RATE SCHEDULES DESIGNED TO DEVELOP SUCH RETURN.

Docket No. E-01345A-19-0236
 
Arizona Solar Energy Industries Association (AriSEIA) Comments on Arizona Public Service (APS) Efforts to Comply with Order Relating to Rate Schedule E-32 L Storage Pilot in Decision No. 78317
 
We appreciate the Commission’s decision to include AriSEIA/SEIA in collaborative discussions with APS on the rate design elements and intended success of the E-32 L Storage Pilot (SP) plan.[1]
 
Background
 
The E-32 L SP tariff was established in December 2017 as a result of APS’ previous rate case with the intention to evaluate the opportunity of large-scale, behind-the-meter energy storage solutions as a value-added benefit to the grid while allowing for high demand (as determined by 15-minute interval kilowatt readings) customers to benefit from peak shaving.[2] Due to several issues, including poor rate tariff mechanics and imbalanced Cost of Service (COS) formulas (notably with lower per-kW rates than the non-pilot, base E-32 L rate tariff), the pilot program offering did not facilitate subscription from any customers.
 
Decision No. 78318 and Current Status
 
AriSEIA/SEIA offered testimony that the E-32 L SP rate schedule required re-evaluation. The Commission ordered APS to do the following:
 

1. Remove the rate design flaws contributing to a lack of adoption while maintaining an identical basic service charge (BSC) to E-32 L,
2. File monthly updates with customer participation figures and commentary from required stakeholder feedback, and
3. Engage in a collaborative process with AriSEIA/SEIA, Staff, and other stakeholders concerning the effectiveness of the E-32 L SP plan. Additionally, if issues are identified, APS “may” apply for consideration of modifications based on evidentiary records in the subsequent 12-month period following the decision.

 
Subsequent to the order, APS filed its revised rate tariff on December 1, 2021, and held its first stakeholder engagement meeting on February 23, 2022. AriSEIA/SEIA maintains that while APS is complying with the letter of the order, the spirit of the decision is being left to stakeholders to enforce.
 
Key Issues on Proposed E-32 L SP Rate Plan and Discussion
 
It is AriSEIA’s understanding that the intent of this pilot program is to facilitate adoption of energy storage for APS’ large commercial customer class up to 35 megawatts (MW) of installed capacity, and to that end, we submit the following feedback for consideration:
 

1. Under the value proposition of demand charge reduction for any large commercial customer (relying on monthly demand charge savings to justify the investment), it is critical that the rate tariff be rebalanced more toward demand charges (in excess of $20/kW) to provide for appropriate returns relative to risk on performance.[3] AriSEIA requests that an ‘Option A – Demand Reduction’ rate plan be established to provide appropriate return on investment value for all large commercial customers seeking energy storage by increasing the demand rate during the on-peak period.
2. As a preferred alternative to a demand-focused rate plan, AriSEIA requests that APS establish an alternative E-32 L SP ‘Option B – Time of Use’ rate plan including high-spread, time-of-use (TOU) energy pricing to reward energy storage systems on an ongoing basis in lieu of relying on singular 15-minute interval demand peaks for savings. This tariff should be structured similarly to Southern California Edison’s TOU-8 Option E tariff whereby on-peak energy prices are more akin to ‘super peak’ multipliers.[4]
3. AriSEIA requests that APS also include provisions for demand response as an additional value stacking opportunity for distributed energy storage solutions. Studies[5] show that distributed energy storage can provide significant value outside of a customer’s non-coincident peak demand or time-of-use pricing window which would support additional energy storage investment through ancillary benefits.

 
Due to the nature of variability between customer load profiles (predictability of peaks depending on facility type), the economics of energy storage vary significantly from project-to-project. Furthermore, the value proposition (i.e., return on investment), depends on whether or not a customer can monetize federal tax incentives directly. Although pending federal legislation includes a change which provides tax credits to ‘storage only’ projects, the current Internal Revenue Code only allows energy storage customers to claim available tax incentives when the storage systems are charged by solar energy (at least 75%) throughout the operational year.[6]  Given that many APS E-32 L customers are tax-exempt and the fact that this tariff is unlikely to support solar projects in conjunction (i.e. tax credits will not be available), we believe it is critical that the tariff be designed in a way that provides sufficient economic incentive to pursue pilot projects for all interested customers.
 
Conclusion
 
Energy storage systems represent significant investments and require a precise and reliable method for return on investment. We submit that the spirit of the Order requires that APS demonstrate a thoughtful and comprehensive approach to the design of the E-32 L SP rate tariff, and we recommend an approach that leverages optionality and increased on-peak vs. off-peak differentials.
 
As it stands, it is AriSEIA’s position that the current E-32 L SP rate plan will not facilitate any adoption toward the cap of 35 MW without substantial changes, and we recommend the Commission direct APS to issue revised rate tariff options that will provide further opportunities for customer adoption.
 
We thank the Commission and its staff for the opportunity to submit these comments.
 
Respectfully submitted this 6th day of May, 2022.
 
/s/ Autumn T. Johnson
Executive Director
Arizona Solar Energy Industries Association (AriSEIA)
autumn@ariseia.org
520-240-4757
 
/s/ John Mitman
Board President
Arizona Solar Energy Industries Association (AriSEIA)
john@ariseia.org
480-251-2934

[1] See APS 2019 Rate Case, Docket No. E-01345A-19-0236, Decision No. 78317, available here https://docket.images.azcc.gov/0000205236.pdf?i=1650001754509.

[2] See APS 2017 Rate Case, Docket No. E-01345A-16-0036, available here https://edocket.azcc.gov/search/docket-search/item-detail/19348.

[3] National Renewable Energy Laboratory, Identifying Potential Markets for Behind-the-Meter Battery Energy Storage: A Survey of U.S. Demand Charges, available here https://www.nrel.gov/docs/fy17osti/68963.pdf.

[4] Southern California Edison, Schedule TOU-8 Time-of-Use - General Service – Large (Option E), available here https://www.sce.com/regulatory/tariff-books/rates-pricing-choices and included as Attachment A.

[5] National Renewable Energy Laboratory, Storage Futures Study, available here https://www.nrel.gov/analysis/storage-futures.html.

[6] National Renewable Energy Laboratory, Federal Tax Incentives for Energy Storage Systems, available here https://www.nrel.gov/docs/fy18osti/70384.pdf.