Same APS discrimination against solar customers 

Arizona Public Service likes to tout itself as somehow new and different. It is not the APS we remember involved in scandals at the Arizona Corporation Commission (ACC) or opposing renewable energy like with Proposition 127. They have new leadership and clean energy goals now. But if you are paying attention, APS consistently makes decisions that undermine renewable energy and hurt solar customers.

Last year, APS opposed the adoption of community solar in Arizona. Community solar is an option for customers that want rooftop solar, but cannot install rooftop solar either because they are renters, or live in multifamily housing, or have an older roof. It allows them to participate in the clean energy transition while also increasing a distribution grid resource and saving them money on their electric bills. The ACC ended up adopting a policy to kill any advancement of community solar in Arizona.

APS continues to ask for annual decreases in the export rate solar customers are paid for the extra solar power their rooftop panels produce and they sell back to the grid. APS buys it at a fraction of what it sells it to your neighbors for. APS has consistently fought against you having any options to sell that extra power elsewhere, including supporting HB2101 in 2022, which eliminated competition in the electric sector in Arizona.

APS simultaneously has advocated for increased fixed fees on solar customers. APS has nearly 200,000 customers with rooftop solar and it has advocated for all of them, every single one, to pay 15% more for the same power than their neighbors without rooftop solar. That new fee is the subject of ongoing litigation at the ACC and APS has most recently advocated for 74,000 of those customers to be completely excluded from the hearing entirely. These customers got solar years ago and are on rate plans called “Legacy Solar.” 

If APS is successful, not only will these customers be subject to APS’ discriminatory fees on solar, but they will be deprived of their due process rights, as well. APS has also argued (and won!) that the evidence used to substantiate this discriminatory fee on solar customers not be evaluated in the hearing. So, the evidence used to substantiate the fee is not part of the hearing in which the ACC decides if the fee is even legal.

Earlier this year, the ACC ordered APS to start a pilot program that aggregates the household batteries that customers pay for with their own money to offset energy APS needs when demand from customers is especially high. APS was ordered to undergo a stakeholder process and work collaboratively with the community to develop a fair program. Instead, APS has come up with a program that will almost certainly fail, because it inadequately pays for the resource it takes from customers. 

APS will continue to penalize solar customers unless the utility is held accountable. APS does not like solar customers because solar customers pay for their solar panels themselves. APS does not own them and does not earn a profit margin off of them. APS’ nearly 200,000 solar customers need to pay attention and need to tell the ACC that APS must stop its needless attacks on solar customers. 

Unfortunately, the ACC just sided with APS and determined that some solar customers may, indeed, be excluded from the rate case rehearing and that the underlying evidence APS provided to justify the discriminatory fees on solar customers will not be evaluated. This raises serious concerns about the validity of the rehearing. The public needs to reach out to the ACC in support of solar. You can file a comment with the ACC and be sure to reference Docket No. E-01345A-22-0144.
​
Autumn Johnson is executive director of the Arizona Solar Energy Industries Association.

Arizona Corporation Commission
1200 W. Washington Street
Phoenix, AZ 85007
 
RE: APS Virtual Power Plant (BYOD) Pilot Program, Docket No. E-01345A-22-0144
 
Chairman, Commissioners, and Staff,
 
Arizona Public Service (APS) is predicting unprecedented load growth over the next decade. To meet this rising need, the utility must aggressively add capacity which will put dramatic upward pressure on rates. One way to mitigate that upward rate pressure is to avoid direct utility investments where possible and to leverage customer owned assets to provide services that would otherwise require utility investment and risk ratepayer funds. To this end, the Commission ordered Arizona Public Service (APS) to implement the money-saving Bring Your Own Device (BYOD) program (also known as a virtual power plant (VPP)) which uses customer owned batteries to meet peak demand. The evidence in the rate case found that such a program could give APS access to batteries at a cost well below the cost of utility owned options.

AriSEIA/SEIA have raised several concerns about APS’s approach and its valuation methodology during the ongoing BYOD stakeholder process. APS has expressed consistent opposition to this program that could displace some utility investment opportunities from the start so it is unsurprising to AriSEIA/SEIA that APS’s methods and assumptions are designed to skew the outcome of this process in its favor. While we have some questions about the program implementation costs, the primary issue is with the value of avoided capacity and energy. The Company’s approach for valuing these categories does not reflect actual conditions on the ground and, as a result, produces avoided cost values that are substantially lower than justified.  Further, under the Company’s value, nearly all potential value from participating perfectly will be eaten up by the opportunity cost of forgoing peak time of use (TOU) reductions. Stated more plainly, APS’s proposal undervalues the important services BYOD can provide to such an extent that ratepayers will be unlikely to participate at all and would be better off simply reacting to the TOU rate. Rather than provide the appropriate price signal to customers to manage their battery for the broader good of the grid and all ratepayers, APS’s proposal will result in retrenchment to optimizing individual bill savings.

Capacity Value Issues

APS had indicated that it will use the Public Utility Regulatory Policies Act (PURPA) avoided capacity cost for the BYOD. Based on its Federal Energy Regulatory Commission (FERC) filing, this appears to be roughly $80/kW-year.  There are two key issues with using the PURPA avoided capacity value as a proxy for avoided capacity costs. 

First, the Company’s latest PURPA filing assumes that customer-sited microgrids are the capacity resource of choice. This is a non-conventional and inappropriate choice. APS was recently prevented by the Commission from pursuing additional customer-sited microgrid projects due to the impingement of its utility monopoly into a competitive market. This alone disqualifies this technology as the future capacity resource of choice, and any PURPA capacity costs based on this technology. Further, the Company has projected more than 4,000 MW of new capacity need over the following decade, and its integrated resource plan (IRP) shows that it will be procuring copious amounts of centralized generation and battery storage. Using a more conventional avoided resource such as a battery or gas combustion turbine (CT) or Company unit is more appropriate. AriSEIA/SEIA’s filing in this case used the annual revenue requirement of a utility-scale battery as a proxy, finding its avoided capacity value was north of $200/kW-year.

Second, PURPA is not driving investment in Arizona. The Company indicated that it has not signed any new PURPA contracts for years and the IRP filing does not rely on this financing mechanism for future procurements. Rather, it is procuring resources through competitive all-source contracts and through market-based purchases. Tying the value of this program to a moribund policy that is not producing new capacity is simply the wrong framework and should not be approved.

Energy Value Issues

The Company is using a simulated dispatch model to project avoided energy costs. This approach is necessarily tied to the input assumptions used and will necessarily not reflect actual real-world conditions, particularly during the scores of high-load/high-cost hours that the BYOD program will target. APS indicates that the average avoided energy cost is between $33/MWh and $52/MWh, a value that is simply inconsistent with historic market purchases during high-cost hours.

APS provided the quantity and price of its wholesale market purchases from 2018-2022 in the rate case.[1] An analysis of this data shows that the Company routinely paid in excess of $200/MWh for market purchases, with occasional purchases in excess of $1,000/MWh.  AriSEIA/SEIA’s analysis showed that the average weekday market purchase cost between 2019 and 2022 was over $100/MWh between 5 PM and 9 PM, the exact hours the BYOD program would target.[2] 

But if one looks at the actual highest-cost purchases, the avoided energy potential is much higher. AriSEIA/SEIA determined the 500 highest cost hourly purchases throughout the year and then analyzed the purchases that fell in the core summer months of June to September from 2018 through 2022.[3]  The results show that year after year, the avoided energy cost values during the highest cost hours are at times an order of magnitude larger than what APS proposes.

Even in 2019, which was an outlier in terms of the low quantity of high-cost market energy purchases, the average purchase during the high-cost hours was nearly $400/MWh. In 2021 and 2022 (and likely 2023), the price and quantity of high-cost purchases surged, with the average high-cost hour moving north of $800/MWh. 
Against this irrefutable historic purchase data, which has cost the Company’s customers tens of millions of dollars per year, the Company’s offer of as little as $33/MWh in avoided energy is simply unacceptable. AriSEIA instead recommends a minimum value of $500/MWh for avoided energy purchases for the BYOD program, a value which is roughly 1/3 of the highest cost purchase in recent years.

APS’s Proposal Is Eroded by TOU Opportunity Costs

By lowballing the avoided cost value on both the energy and capacity side, APS is setting the BYOD program to undercompensate customers for the real services they provide which will cause the program to fail. The residential value available to customers is only $40/kW-year based on the average reduction over the course of a program year.  The Company is authorized to call up to 60 events of up to 4 hours each between the hours of 4 PM and 10 PM.  Given that only half of these hours fall within the current peak TOU period (and fewer than half if events are called on weekends), customers participating in the BYOD event will have to consider the opportunity cost of peak TOU reductions. In other words, customers electing to participate in BYOD and give APS the ability to access the energy and capacity when they need it, may be inclined to simply participate in the TOU rate design thereby depriving APS and all its customers of the savings possible with BYOD.  

APS’s current peak and off-peak rates are roughly $0.34/kWh and $0.12/kWh, with a rate spread of $0.22/kWh.  Each kWh that a customer discharges their battery during an off-peak hour event call thus has an opportunity cost of $0.22. From this, it is possible to calculate the total opportunity cost that a BYOD customer faces by participating in the program.

In a best-case scenario, every event would be as short as possible (perhaps 2 hours) and fall during the peak TOU period.  In this case, discharges from the battery would not incur an opportunity cost and the customer could capture the full $40/kW-year benefit the Company proposes. In a worst-case scenario, every event would be 4 hours long and fall on weekends. This means that 100% of the event hours would incur the opportunity cost. A middle of the road scenario might assume event calls from 6 PM to 9 PM weekdays, with 2/3 of the hours occurring off-peak.
Suppose one analyzes an 11.5 kWh battery. The results of the three different scenarios are tabulated below. Even in the middle scenario, so much of the value of the program is eaten up by the opportunity cost that it is hardly worth the effort for a customer to sign up for the program. And in a worst-case scenario, it actually costs the BYOD customer money to participate in the program.

APS’s Stakeholder Process Violates Order No. 79293

Order 79293 (the “Rate Case Decision”) orders APS to “meet with AriSEIA/SEIA and any other interested parties to discuss collaboratively and attempt to reach agreement on the language of the BYOD Pilot POA.”[4] APS has held several stakeholder meetings in which it has told the stakeholders what it plans to do. AriSEIA requested an additional meeting to walk through the concerns identified above. APS sent out the proposed valuation that same afternoon. At the following stakeholder meeting, several stakeholders pointed out that the APS methodology was flawed and the valuation was too low and would make the program unsuccessful. APS requested stakeholders provide feedback in writing. Stakeholders asked for the Company’s workpapers. Stakeholders received two spreadsheets with two business days to review before the date in which APS asked for written feedback.

To date, it does not appear that APS plans to consider any stakeholder feedback in the plan of administration (POA) it intends to file within a month. APS is going through the motions of a stakeholder process, but there is nothing to indicate they intend to discuss collaboratively or attempt to reach agreement with stakeholders.

Respectfully,
 
Autumn T. Johnson
Executive Director
AriSEIA 
(520) 240-4757
[email protected]

[1] AriSEIA 4.03_ExcelAPS22RC03362_Hourly Market Purchases 2018-2022

[2] Lucas Direct at 59.

[3] This is twice as many as are allowed in the BYOD program, which authorizes 60 event days with events up to 4 hours.

[4] APS Rate Case Decision, Order No. 79293, 452:17-18, available here https://docket.images.azcc.gov/0000210704.pdf?i=1722230808744. 

FOR IMMEDIATE RELEASE
Contact:
Autumn Johnson
[email protected]
520-240-4757

Phoenix, AZ - Yesterday, the Arizona Corporation Commission (ACC) voted 4-1 to impose a new and discriminatory fee on rooftop solar customers in APS service territory. The new fee imposes a 15% greater increase on solar customers, over and above the rate increase that all customers will see starting on March 8th. The fee will show up on most customers' bills as a "grid access charge" and will be approximately $2-3 a month in addition the the rate increase everyone will get of approximately $10-12 a month, per APS. AriSEIA opposed the fee and offered an amendment to eliminate it from the rate case, which was not adopted. 

AriSEIA championed a Virtual Power Plant (VPP) program that was adopted 5-0 as a pilot program to commence next year. This program will save all ratepayers money, by allowing customers with batteries to opt in and share their battery capacity with APS when there is high demand on the grid, thereby limiting the need to build new, replacement resources.

The ACC also voted 5-0 to prohibit APS from competing with private industry in the microgrid space and voted 5-0 to correct on-peak hours for a commercial storage tariff called E-32 L SP, both upon AriSEIA's request. AriSEIA's request to stop disproportionately negative impacts from increased demand rates over energy rates on the E-32 M and E-32 L rate plans was not adopted.

"Yesterday was a challenging day for solar in Arizona. In a state with more than 300 days of sunshine, almost 400 solar companies that employ more than 8.250 people and contribute more than $1.5 billion to the state annually, we should be looking at ways to foster the sector, not penalize it. An unsubstantiated and discriminatory fee on solar customers is a step in the wrong direction," said Autumn Johnson, Executive Director of AriSEIA.

AriSEIA plans to file a Motion for Reconsideration on the solar charge and will engage with APS on the VPP program implementation.

AriSEIA is the state's solar, storage, and electrification trade association. It is the only trade association in the state that focuses on all scales of solar at every level of government, doing both regulatory and legislative work, and has boots on the ground.

While AriSEIA was successful in adding a Virtual Power Plant (VPP) pilot program in the course of the rate case, other aspects of the Recommended Opinion and Order (ROO) warrant changes. AriSEIA requested three changes. The most significant of which eliminates a brand new charge on solar customers that was not requested by APS or any other party in the case. You can read the comments at the link above. The vote is February 22nd.

Arizona Corporation Commission
1200 W. Washington Street
Phoenix, AZ 85007
 
Re: TEP Rate Case, Customer Storage Program Stakeholder Meeting, Docket No. E-01933A-22-0107
 
Chairman and Commissioners,
 
AriSEIA submits these comments in response to the compliance filing that TEP filed on December 7, 2023, in response to the stakeholder process they were ordered to commence regarding a Bring Your Own Device (BYOD) program (also known as Virtual Power Plant (VPP)) and revisions to the R-TECH and LGST-SP tariffs.[1] These stakeholder processes are the result of Order 79065.[2]
 
Because some of the utilities have recently been using their compliance filings as evidence in other proceedings and have also asserted that stakeholder silence is agreement, AriSEIA makes this filing to detail our numerous concerns about how TEP has so far engaged on BYOD, R-TECH, and LGST-SP. AriSEIA put forth a robust proposal to implement a BYOD program, as well as specific modifications to the R-TECH and LGST-SP in the course of the last rate case. Those proposals are the reason this stakeholder process was ordered. Further, TEP stated multiple times in the course of the last rate case proceeding that they had not had time to review the proposals. January will be one year since AriSEIA filed those proposals and TEP still seems unfamiliar with them.
 
BYOD is a win/win for AZ ratepayers and the utilities. AriSEIA’s BYOD proposal leverages private investment in distributed battery storage to provide much needed capacity to the grid at a price that is less than the cost of utility-owned, utility scale battery storage.[3] Further, any costs associated with the program are pay for performance only. There is no upfront payment, no subsidy, no cost shift.
 
At the stakeholder meeting held by TEP on November 17, 2023, TEP had no substantive content prepared, had no response to the AriSEIA proposals, had no proposals of its own, did not have the correct people at the meeting to discuss policy, nor did they articulate any plan for how to manage this process going forward. Further, despite the fact that the Order is clear as to what these stakeholder processes are meant to do, TEP was not clear in its direction to participants as to what we were even there to discuss. TEP permitted the meeting to devolve into a tangent conversation about wholly unrelated technologies or whether or not storage should even be considered, despite the fact that storage is the very reason the stakeholder process was ordered.
 
AriSEIA makes the following recommendations to the Commission and TEP:
 
1.      TEP should have the correct personnel at the stakeholder meetings to discuss policy and regulatory issues;
2.    The AriSEIA proposals on BYOD, R-TECH, and LGST-SP should be the basis on which the process unfolds. TEP should come to the meetings prepared to suggest components of these programs they can or cannot support;
3.     R-TECH and LGST-SP are separate issues and while they are to be discussed concurrently with BYOD, need not be discussed simultaneously;
4.     TEP needs to provide a capable facilitator of the meetings and process, either internal or external;
5.    If TEP wishes to host additional stakeholder meetings on unrelated topics or technologies, it can do so, but these processes should remain consistent with and adherent to the Order and the issues discussed in the last rate case; and
6.   TEP needs to articulate a process and timeline for this work. We suggest monthly meetings of one hour, which should be scheduled in advance with a stakeholder list, like TEP does for its other “collaborative” meetings.
 
AriSEIA’s proposal on all three matters can be found in Kevin Lucas’ direct testimony, filed on January 27, 2023, starting at page 314.[4] An excerpt of that testimony is attached herein.
 
/s/ Autumn T. Johnson
Executive Director
AriSEIA 
(520) 240-4757
[email protected]

[1] TEP, Notice of Filing-Tucson Electric Power Company’s Customer Storage Program Stakeholder Meeting Summary, Dec. 7, 2023, Docket. No. E-01933A-22-0107, available here https://docket.images.azcc.gov/E000032546.pdf.

[2] ACC, Opinion and Order No. 79065, Pg. 149, Lines 11-27, Aug. 25, 2023, Docket No. E-01933A-22-0107, available here https://docket.images.azcc.gov/0000209684.pdf?i=1701984045033.

[3] Kevin Lucas in APS rate case, hearing test., Sept. 1, 2023, Docket No. E-01345A-22-0144, 00:04:31 (this is also applicable in the TEP rate case).

[4] AriSEIA, Direct Testimony of Kevin Lucas, Jan. 27, 2023, Docket No. E-01933A-22-0107, available here https://docket.images.azcc.gov/E000023835.pdf?i=1701984045030. 

AriSEIA filed its final brief in the APS rate case today. The brief addresses false and misleading statements in APS' opening brief related to VPP, microgrids, community solar, E-32L SP, and its solar cost of service study. You can read the brief at the link above. A decision is expected in Q1.