AriSEIA Submits Recommendations on the SRP Pricing Proceeding

Salt River Project
1500 N. Mill Avenue
Tempe, AZ 85288
 RE: 2025 Pricing Proceeding Recommendations
 
Mr. President, Board Members, and Staff,
 
The Arizona Solar Energy Industries Association (AriSEIA) is the solar, storage, and electrification trade association for the State of Arizona. We advocate for pro renewables policies at every level of government. AriSEIA does not speak for or represent a single company. We represent nearly 100 companies in the State and we advocate for policies that we think are beneficial for the industry and the grid and best serve the public interest to the greatest extent possible.
 
As such, we agree with most of the proposals made by the other organizations, namely Southwest Energy Efficiency Project (SWEEP), Vote Solar, Wildfire, Arizona PIRG, Western Resource Advocates, and Sierra Club on February 6th. We also support many of the points made by Mr. Neil. We agree with an evidenced based approach to policy and ratemaking. We do not support or endorse comments or proposals that impede the clean energy transition, either by individual commenters or individual companies. Batteries are an essential and integral component to increased renewables on the grid, both at the distributed and utility scale levels. Misinformation about the safety or efficacy of batteries is unhelpful and shortsighted and we encourage the board and management to disregard such comments and proposals.
 
Correcting Battery Misinformation
While China is currently the world's leading manufacturer of battery cells, a diversified supply chain outside of China is rapidly developing, including manufacturing here in the U.S. The risk of China-only sourcing diminishes by the day.
 
Residential batteries do not fail at high rates; they work well when properly installed. Very few residential batteries fail. Like any other mechanical or chemical device, batteries degrade over time. The manufacturer maps, specifies, discloses, and guarantees this degradation. After 10 years, typical home batteries are guaranteed to still produce 70% (on average) of their original rated capacity. Capable installers consider this degradation when modeling system performance and expected savings and discuss these factors with their clients. Every home is different, uses different amounts of energy, and has different load profiles from other houses. Ethical, competent solar installers study the complexities of home batteries and design the best system for the home, the homeowner's usage, and savings goals. Batteries are often used to achieve these goals, and when designed and installed correctly, they will provide many years of reliable operation and savings.
 
There are very few fire risks associated with modern batteries. Manufacturers have incorporated numerous safety features designed to ensure safety, and data shows very few issues. Additionally, the best practice in Arizona is to install the battery inside of a home, in a garage or utility room, and not outdoors. Home batteries are widely available and can be ordered, delivered, and installed today. Out of half a dozen popular battery manufacturers, only one is experiencing supply issues.
  
Virtual Power Plants
Distributed batteries allow individual ratepayers to reduce their electric bills and increase their resiliency in the event of a power outage, while also benefiting the utility and other ratepayers, by providing valuable capacity when the grid needs it most. Valuing that capacity sends a price signal to a ratepayer who has used their own capital to install a battery to provide the stored energy to the grid, instead of their own home, when there is strain on the grid. This is a supply virtual power plant (VPP). SRP can call an event on a hot August afternoon and thousands of homeowners can respond by allowing SRP to use their batteries, instead of them using the stored power themselves.
 
According to the U.S. Department of Energy, there is currently 30-60 GW of VPP capacity on the grid today, but that amount needs to triple by 2030.[1] Arizona Public Service (APS) is in the process of adopting a VPP modeled off of AriSEIA’s proposal, which is derived from a very successful VPP program called ConnectedSolutions. Our proposal is a pay for performance only model that allows the utility to call up to 60 events in the summer season for up to three hours. A third party aggregator operates the program just like a smart thermostat program. Participants can lock in their rate for five years. While we understand that actual adoption of a VPP program within this pricing proceeding may not be possible, we recommend the Board direct management to engage with AriSEIA to develop a program to bring to the board for consideration by the end of the year.
  
Time of Use
64% of SRP’s customers are not on a time of use rate and 95% of SRP’s customers can opt out of a time of use rate. Only 5% of SRP’s customers are solar customers and, yet, they are the only customers required to be on a time of use rate. All customers should have the same rate plan options and all customers should be defaulted onto a time of use rate. Contrary to the comments of the board consultant, no one has argued for 100% participation on the time of use rates, but it should be the majority of customers and customers should have to opt out, rather than opt in. No current time of use customers should be defaulted to non-time of use rates in 2029. They should instead be defaulted to E-28. The differential between the on peak and off peak rates should be roughly 3:1 and that differential should be between on and off peak, not on and super off peak. The on peak time of use window should be three hours to maximize participation.
 
We recommend that E-16 and E-28 have the same on peak period. To alleviate management’s concern about the shifting on peak window and the need to cover more than just 3 hours, we recommend customers have the option of one of two staggard on peak windows. We recommend a 4-7pm on peak option and a 6-9pm on peak option. This alleviates strain on the grid, allows families to select which plan works best for their schedule, and does not penalize solar owners.
 
We also recommend that the super off peak window be 10-3pm in the winter. This aligns with both the costs experienced by SRP and with what other utilities, such as APS, are currently offering. This will reduce customer confusion, creates an evidence and cost based program, and does not unnecessarily penalize solar customers.
 
Fixed Fees
AriSEIA agrees with the other organizations that made comments on February 6th. Fixed fees should be as low as possible, as volumetric charges better align price signals with behaviors that improve efficiency. However, to the extent SRP has fixed fees, there should be parity between solar and non-solar residential customers. Solar customers should not be singled out for punitive and discriminatory fees.
 
Export Rate
SRP’s export rate is significantly below the other large utilities in Arizona. The valuation of the avoided cost is not correct. That methodology has not been highly scrutinized by the Arizona Corporation Commission or stakeholders because the Resource Comparison Proxy (RCP) framework has not yet rendered it necessary; however, SRP’s proposed export rate methodology in this case is inadequate. AriSEIA met with SRP extensively about our concerns with the value of solar study in 2024. The current cost allocation study does not correctly assign value to capacity costs and avoided transmission and distribution costs. We recommend that SRP adopt an export rate closer to that of Tucson Electric Power (TEP) to be evaluated on an annual basis and locked in for existing customers for a period of ten years, not one year. Even though SRP is three times larger than TEP, their current number of solar customers are comparable. Therefore, TEP is a reasonable starting place for an export rate that is fair to solar customers, but is closer to the current SRP proposal.
 
Additionally, any customers on a net metered rate should be allowed to stay on that rate until 2034 and not be inadvertently bumped in 2029, as is currently proposed.
  
If SRP provided more than two months to process this pricing proceeding, AriSEIA could provide a more detailed analysis and recommendation as to solar rate design. Organizations need time to hire an expert, have the expert review the workpapers, run their own analyses, and make a detailed recommendation. Therefore, we recommend the board set a vote on this pricing proceeding this summer, since the rate will not take effect until November of 2025, so that the best possible recommendations can be brought forward.
 
Commercial Rates
SRP seems to want to move to more plans with a storage component, but not in a way that will increase the adoption of storage. We recommend SRP adopt a pilot storage rate similar to the E-32L SP rate that APS adopted in 2024. APS developed that tariff in 2023 as a result of the prior rate case in a stakeholder process with AriSEIA. A copy of that tariff is included as Attachment A.
 
Recommendations
As such, AriSEIA recommends the Board offer amendments that accomplish the following:
 
1.      Move the final vote on the pricing proposal until summer of 2025, with new rates to still take effect in November of 2025;
2.      Open all four proposed rate plans to solar and non-solar customers;
3.      Default all new customers to E-28 with an opportunity to opt out;
4.      Have the super off peak time be 10-3pm in winter, instead of 8-3pm year round;
5.      Have the same on peak time of 4-7pm or 6-9pm on both E-28 and E-16 with the ability of the customer to choose which of those periods works better for their family;
6.      Move the export rate closer to that of TEP with a 10 year lock in, evaluated annually by SRP;
7.      Adopt a pilot commercial storage rate similar to APS’ E-32L SP;
8.      Grandfather all net metered customers on their current rate until 2034, if so desired by the customers; and
9.      Management should be directed to work with AriSEIA via a stakeholder process to develop a VPP program to be presented to the board by the end of the year.
 
Respectfully,
 /s/ Autumn T. Johnson
Executive Director
AriSEIA 
(520) 240-4757
[email protected]

[1] U.S. Department of Energy, Pathways to Commercial Liftoff: Virtual Power Plants, Sept. 2023, available here https://liftoff.energy.gov/wp-content/uploads/2023/10/LIFTOFF_DOE_VVP_10062023_v4.pdf. 

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