AriSEIA filed its opening brief in the TEP rate case on May 26th highlighting our recommendations on the revenue requirement (including return on equity (ROE) and common equity ratio), as well as rate design (including community solar, a bring your own device/virtual power plant proposal, tariff re-designs for R-TECH and LGST-SP, and ending the distributed generation (DG) meter fee). 

Arizona Corporation Commission
1200 W. Washington Street
Phoenix, AZ 85007
 
Re: Support for Approval of Revisions to Rate Schedule E-32 L SP, Docket No. E-01345A-22-0281
 
Chairman O’Connor and Commissioners,
 
Vote Solar and the Arizona Solar Energy Industries Association (AriSEIA) are supportive of the Arizona Public Service (APS) Company’s Application for the approval of revisions to rate schedule E-32 L SP and encourage the Commission to approve this rate.
 
APS’ proposed revisions are pursuant to Decision No. 78317 (November 9, 2021), which directed APS to engage in a collaborative with interested stakeholders to explore possible improvements to E-32 L SP (Large General Service Storage Pilot).[1] Following a series of collaborative meetings that took place from February to October 2022, APS has proposed revenue-neutral design changes that improve upon the Large General Service Storage Pilot rate.

The Large General Service Storage Pilot rate is a pilot rate available to large commercial customers who choose to adopt energy storage systems. The purpose of E-32 L SP is to promote the economic dispatch of customer-sited energy storage systems in a manner that aligns with high peak load. To date, no customers have chosen to take service on E-32 L SP. APS’ revisions to the rate include higher energy charges during all hours and months of the year, and significantly higher energy charges during summer on-peak periods between 4:00 and 9:00 PM. Demand charges have been reduced commensurately, resulting in a rate design that is overall revenue-neutral. 
 
APS’ revisions address a flaw in the current E-32 L SP by increasing the emphasis on volumetric energy rates. As a result, the revised Large General Service Storage Pilot will provide greater investment certainty for commercial customers. Demand charges present operational challenges for customers seeking to reduce their energy bills because they are calculated based on the customers’ highest 15-minute period of energy usage throughout the month. A customer who proactively dispatches their energy storage system during all but a single 15-minute period of the month will pay a demand charge equal to what they would have paid had they not adopted energy storage at all. Demand charges can penalize customers who adopt energy efficient technology, especially new and unfamiliar technology, because it is challenging to forecast savings and there is significant risk that small changes in operation of the energy storage system could threaten forecasted savings. In contrast, emphasis on volumetric rates gives customers the opportunity to save money on their utility bill in a manner that is proportional to the benefit they are providing through dispatch of energy storage during times of peak load. APS’ proposed revisions - particularly the increases in the summer on-peak energy rate from 6.5 cents per kilowatt-hour to 17.6 cents per kilowatt-hour - maintains a strong price differential that will encourage the dispatch of customer-sited storage during periods of high load in the summer.
 
We recommend one additional change to the E-32 L SP tariff. While the current tariff defines the on-peak period as 4:00 to 7:00 PM on weekdays, the revised tariff re-defines the on-peak period as 4:00 to 9:00 PM every day. We recommend narrowing the on-peak window to weekdays, as this better aligns with the hours when APS is most likely to experience high customer load and normal hours of business operations. The Commission could direct APS to evaluate this change as part of their current rate case in Docket No. E-01345A-22-0144. We do not wish this evaluation to delay approval of the revised tariff at the May 2 Open Meeting.
 
Arizona is poised to lead on the adoption of distributed battery storage through the development of rates that encourage economically efficient adoption of customer-sited batteries. Increased adoption of customer-sited batteries gives utilities an additional tool to flexibly and cost-effectively meet their customers’ energy needs and can provide significant cost and grid resilience benefits for all ratepayers. We appreciate APS’ efforts to work with stakeholders to improve the E-32 L SP tariff. We urge the Commission to approve APS’ Application today and consider whether changes to the on-peak hours are warranted through evaluation as part of APS’ rate case.
 
Thank you for your consideration of this important matter.
 
Respectfully,
 
Kate Bowman
Interior West Regulatory Director
Vote Solar
kbowman@votesolar.org
703-674-8637

Autumn Johnson
Executive Director
AriSEIA
autumn@ariseia.org
520-240-4757

[1] Decision No. 78317, November 9, 2021, page 441 lines 15 - 21.

AriSEIA filed the direct testimony of our two experts today in the Tucson Electric Power rate case. We are focusing on community solar and battery storage programs for residential and commercial customers. The testimony and exhibits exceed 400 pages. You can view the entire filing at the button above. TEP is due to file their response on February 15th.

Arizona Corporation Commission
1200 W. Washington Street
Phoenix, AZ 85007

Re: Arizona Public Service (APS) E-32 L SP Tariff, Docket E-01345A-22-0281

Madam Chair and Commissioners,

Pursuant to Decision No. 78317,1 APS was ordered to engage with stakeholders, namely the Arizona Solar Energy Industries Association (AriSEIA) and the Solar Energy Industries Association (SEIA), to redesign the E-32 L SP (Storage Pilot) rate tariff to increase customer adoption of the 35 MW commercial pilot program. AriSEIA appreciated the opportunity to provide constructive feedback and generally guide the tariff design process towards a solution that creates value for APS and the adopting customers.

Throughout the duration of 2022, AriSEIA met monthly with APS and reiterated that rate optionality and investment certainty are key components of behind-the-meter energy storage adoption as not all customer loads are created equal, and few customers are able to benefit from existing tariffs using 15-minute interval demand charges. To that end, we collaborated with APS on the proposed volumetric, time-of-use (TOU) rate including a substantial differential between on-peak and off-peak rates which de-risks the customer’s energy storage investment in terms of achieving monthly savings while creating grid support during the utility’s coincident peak periods. Our assessment of the new rate tariff is that it will encourage participation in the pilot energy storage program through market-competitive payback opportunities. This rate tariff may also provide a foundation to develop more value-stacking opportunities for utilities such as distributed virtual power plants or similar grid-response programs.

While the proposed E-32 L SP pilot revisions are a significant step in the right direction, we believe that further alignment with APS’ true coincident on-peak demand periods is important to creating an equitable program. To this end, we issued our recommendation to APS to limit the on-peak hours to Monday through Friday in lieu of across all seven (7) days of the week as the weekend load and marginal prices are typically much lower and do not merit the same TOU price differential. We look forward to continuing to work with APS as this program evolves.

Thank you for considering these comments and we encourage you to adopt this rate in the first quarter of 2023 and to continue promoting more grid-interactive programs for customer-sited distributed energy resources.

Respectfully,

Autumn Johnson
Executive Director
AriSEIA
520-240-4757
autumn@ariseia.org

John Mitman
President, Board of Directors
AriSEIA
480-251-2934
john@ariseia.org

1 Arizona Corporation Commission, Decision 78317, November 9, 2021, available here https://docket.images.azcc.gov/0000205236.pdf?i=1670984264693.

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.