AriSEIA Opposes Anti-Solar Amendments in the APS Rate Case

READ THE LETTER

Arizona Corporation Commission
1200 W. Washington Street
Phoenix, AZ 85007
 
RE: APS Rate Case, Docket No. E-01345A-22-0144
 
Chairman and Commissioners,
 
In advance of the vote on this matter on February 22nd, the Arizona Solar Energy Industries Association (AriSEIA) submits these additional comments regarding:
 
1.      Chairman O’Connor’s Proposed Amendment No. 3 and Commissioner Myers Revised Proposed Amendment No. 3
2.      Hearing Division Proposed Amendment No. 2
3.      ROO Resolution on E-32 M and E-32 L
 
        I.            Chairman O’Connor Proposed Amendment No. 3 and Commissioner Myers Revised Proposed Amendment No. 3
 
We appreciate the Chairman’s thoughtful consideration of our BYOD proposal. As we mentioned in our briefs, BYOD (or Virtual Power Plants (VPP)) are an innovative way to deploy the capacity already available with distributed batteries, paid for by individuals’ private capital, in an aggregated way, at a rate lower than the utility would pay to build new utility scale resources.[1] The batteries are aggregated together to create a capacity resource that the utility controls and only pays for when it uses it. There are no subsidies or incentives. Ratepayers pay for their own batteries and APS pays to use them only when needed. The evidence was uncontested that the cost to ratepayers of the proposed BYOD program is significantly less than the cost to ratepayers of utility-owned batteries. In fact, APS agreed that when it owns a battery, it costs ratepayers $208/kW every year for 20 years[2] while the cost of the BYOD program is only $150/kW for 5 years. Every single kW of batteries deployed via BYOD with private investment saves all ratepayers money. These savings can begin as soon as this program commences.   
 
VPPs are being deployed all over the country and have been found to save billions in capital investments over the next decade.[3] Our proposal is modeled off of a successful program already in operation and carefully modified to be useful to APS.[4]
 
Our proposal was uncontroverted in the record. Indeed, no stakeholders filed amendments to the ROO regarding the BYOD program. And the ROO cautiously adopts the proposal with a few changes as a modest, pilot program. The ROO specifically acknowledges APS expects significant load growth and the proposal’s value as a capacity resource.[5] Capacity resources like a VPP are critical tools for reliability. The ROO orders APS to file a POA as a compliance item in this docket within 90 days of the decision. A stakeholder process to develop the POA is to commence within 30 days of the decision. Staff already has the opportunity to review the POA within 60 days after it is filed and then is to file a Staff Report and Proposed Order. We have already spent more than a year on the APS rate case. We spent the entirety of 2023 writing testimony, in hearing, and briefing. It is unnecessary and not in the best interests of ratepayers, the utility, or the grid to delay a resource that is currently being squandered for another six months. APS has not filed exceptions asking for more time for the stakeholder process or to file a POA.
 
Similarly, doubling the time frame for Staff to review the POA that is the result of a year of rate case litigation and an additional three-month stakeholder process is unnecessary. Staff also did not file exceptions on this matter. The additional six months of delay included in the Chairman’s amendment was not requested by anyone and will result in ratepayers paying more for equivalent resources, as the utility has an obligation to keep the lights on and will do so with more expensive resources in the interim. It is uncontroverted that the BYOD program costs less than building the same new utility scale resources.
 
Further, the merits of our proposal were already vetted at length in the hearing and rehashing whether the pricing should be based on kWh or kW, whether there should be differences in on-peak vs. off-peak pricing, and whether any on-peak or off-peak times used for pricing should be different than those established for TOU customers would utilize extensive Staff time and resources unnecessarily.
 
Therefore, we respectfully oppose the Chairman’s Proposed Amendment No. 3 and Commissioner Myers Revised Proposed Amendment No. 3. Ratepayers and the grid will benefit and save money from thoughtful deployment of a VPP and the program as proposed is already only a pilot. A year of delay is not in the public interest and will cost ratepayers money. If the program needs tweaks, the Commission can revisit the issue at the conclusion of the pilot. If the Commission does vote to move forward with the Chairman’s Proposed Amendment No. 3, please modify the time frame to be consistent with that outlined in the ROO. An additional six (6) months of delay is unwarranted and costly.
 
     II.            Hearing Division Proposed Amendment No. 2
 
The ROO’s conclusion in this rate case is completely inconsistent with precedent and a prior Commission decision on this very same matter in the last rate case. As our exceptions outline in detail, the ROO makes a 180 degree turn on this issue. The same judge found that there was “no evidence of any specific and unique costs that DG solar customers impose on APS’s system.”[6] That decision literally eliminated a charge unique to solar customers that this rate case then reimposes with the only justification being that somehow residential solar customers are equivalent to AG-X customers and not other residential customers and should have to pay for resource adequacy (RA) via some means other than through their base rates, which was never an issue addressed in the case. Indeed, the ROO says, “[t]he evidence in the record in this matter now makes it clear that APS does not truly provide additional services and does not use additional equipment to serve DG customers.”[7]
 
Additionally, all of this is predicated on accepting a flawed site Cost of Service Study (COSS), which was thoroughly litigated in the last rate case. Assuming the Commission prioritizes regulatory certainty and having no notice of the issue, we did not resubmit all of that testimony in this case, because it was resolved in the last case. Had we known this rate case was a do over for all issues settled in prior rate cases—even those that no party raised—we would have resubmitted all the testimony again. We posit that is not an effective way to process what are already lengthy, time consuming, and complex proceedings with dozens of intervenors.
 
Furthermore, the proposed amendment suggests via a footnote that a broad provision in the Public Notice should serve as sufficient legal notice to the public that, apparently, anything can happen in the rate case including approving a solar-specific charge, even though the issue was never once mentioned during the hearing. AriSEIA is confident that courts will not agree that a catchall in a public notice is sufficient to put the public on notice that literally all possible outcomes are open for adjudication in a rate case proceeding even if no parties so much as mention an issue during the pendency of an action. Such an interpretation undermines the entire purpose of public notice in the first place and is a clear deprivation of due process.  
 
The Hearing Division Amendment incorrectly states that there is a “sizable disparity” between residential solar customers and non-solar customers that results in a subsidy to rooftop solar customers. We have extensive testimony in the 2019 rate case and this rate case refuting that characterization, which the Commission agreed with in just the last decision. Indeed, the “resolution” section in the ROO orders APS to conduct additional analyses as to the solar COSS. It is illogical to both order APS to do additional analysis in the next rate case, but also rely on the apparently incomplete analysis in this case to impose a fee the Commission just eliminated only a couple of years before. This yo-yoing of policy is not in the public interest.
 
Further, APS provides RA to all customers, and all customers pay for that RA through their base rates. That is its fundamental job as a utility. Solar customers should not be the only residential customers having to essentially pay an extra fee solely for that. Singling out solar customers is what the same judge labeled as discriminatory in the last APS rate case.[8]
 
Not only does Hearing Division Proposed Amendment No. 2 include the forgoing deficiencies, but the Commission should also be concerned with the proposed amendment’s endorsing of COSSs introduced by commercial interests that suggest residential rates as a whole should be nearly 45% higher than they are today. In this sense, the proposed amendment appears to argue that solar customers should not complain because, in reality, residential rates should be much higher anyway.
 
AriSEIA respectfully opposes Hearing Division Proposed Amendment No. 2 and is prepared to appeal the rate case decision if the solar charge is not eliminated. AriSEIA continues to recommend adoption of AriSEIA Proposed Amendment No. 1.
 
  III.            ROO Resolution on E-32 M and E-32 L
 
AriSEIA agrees with APS that Kroger’s proposal on E-32 M and E-32 L is not consistent with the public interest. It disproportionately and negatively impacts lower load factor customers and uniquely benefits Kroger and only Kroger and similarly situated companies. An increase in demand charges over volumetric charges is extremely punitive to customers with distributed generation whose investments in such systems rely on financial returns predicated on the original rate design. Any rate increase applied to specific customer classes should be evenly spread across the existing rate components in accordance with their relative magnitude, not distributed in a manner that dramatically increases demand charges over energy charges. Please find AriSEIA Proposed Amendment No. 4 attached.
 
Respectfully,
 
/s/ Autumn T. Johnson
Executive Director
AriSEIA 
(520) 240-4757
[email protected]


[1] Kevin Lucas in hearing test., September 1, 2023, at 00:04:31.

[2] See id. at 00:15:28; See also Direct Testimony of Kevin Lucas, Docket No. E-01345A-22-0144, January 15, 2023, at 36:5–6, available here https://docket.images.azcc.gov/E000027777.pdf?i=1708454244009 [hereinafter Lucas Direct Testimony].

[3] Ryan Hledik, Virtual Power Plants (VPPs) Could Save US Utilities $15-35 Billion in Capacity Investment Over 10 Years, Brattle (May 2, 2023), available here https://www.brattle.com/insights-events/publications/real-reliability-the-value-of-virtual-power/.

[4] See Lucas Direct Testimony at 34:13.

[5] See Recommended Opinion & Order from the Hearing Division, Docket No. E-01345A-22-0144, January 25, 2024, at 363-64, available here https://docket.images.azcc.gov/E000033297.pdf?i=1707275118683 [hereinafter APS ROO].  

[6] Order No. 78317, Docket No. E-01345A-19-0236, November 9, 2021 at 358:5-10, available here https://docket.images.azcc.gov/0000205236.pdf?i=1707254089396  [hereinafter 2019 APS Rate Case].

[7] APS ROO at 272:27-273:1 (emphasis added).

[8] Id.
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