Solar at schools may be ‘dead in the water’ as judge recommends regulation

By Patrick O’Grady
Phoenix Business Journal
Plans to put solar systems on school and government roofs through solar-service or power-purchase agreements may be placed on hold after an administrative law judge said companies offering such agreements should be regulated as public utilities.
Judge Jane Rodda has recommended to the Arizona Corporation Commission that SolarCity and others that supply power to schools, nonprofits and governments be subject to ACC regulation.
SolarCity had filed the case seeking to have the work it does at schools ruled not a utility operation.
“When SolarCity utilizes an SSA arrangement, it is selling electricity to the school, governmental entity or nonprofit and is ‘furnishing electricity’ as included in the definition of a ‘public service corporation’” in the Arizona Constitution, Rodda wrote.
The ruling means the ACC has a host of options in regulating the activity between companies that install solar systems and sell the power as third-party providers, and the buyers of that power.
School officials said this likely would end their foray into solar as a power source.
“If the commission goes along with this ruling, we’re dead in the water,” said David Peterson, associate superintendent of the Scottsdale Unified School District, which was at the heart of SolarCity’s case.
Foster City, Calif.-based SolarCity has used similar agreements in other states, but has not brought them to Arizona because of the constitutional requirement. the company petitioned the ACC to rule that providing the power to schools would not make it a public utility because it fell outside the boundaries of what the law considered.
SolarCity spokesman Jonathan Bass said the recommendation, if approved by the ACC, would end the company’s ability to supply solar to schools. It offers a lease program, but those likely would be cost-prohibitive for schools.
“It would eliminate a component of what we could do, and cost the state jobs,” he said.
Schools, nonprofits and governments in other states adopt solar agreements in which they buy energy from a third party that owns the system placed on their roofs, because it allows them to lower the cost by taking advantage of federal tax credits aimed at spurring solar development.
Other players, such as Tucson-based Solon Corp., have been partnering with schools on such agreements and looking at working in municipal areas. Arizona is the only state whose constitution defines what a public service corporation would be.
Jordan Rose, founder of Rose Law Group PC, said the recommendation could cost schools and governments millions to adopt solar. Rose Law represented SolarCity in its case.
“A PPA/SSA is simply a financing tool, used in every other state in the nation, to allow widespread proliferation of solar,” Rose said via e-mail. “Regulation of these PPA providers would thwart the free market and treat these start up solar companies like monopolies.”
http://bit.ly/c5oYnw for the entire order
Additional information from Rose Law Group
What happened?
The ACC’s administrative law judge made a proposal to the ACC that it is free to adopt, reject or modify, regarding SolarCity’s case before the ACC regarding whether offering a solar service agreement should classify SolarCity as a utility.
What did the administrative law judge propose?
The administrative judge proposes that SolarCity be regulated as an electricity utility, such as APS, SRP or TEP, even though SolarCity does not meet many of the criteria used to make such a determination. For instance, the judge agrees that SolarCity is not a monopoly, it’s pricing is determined by the market, it does not compete with utilities, etc.). As a regulated utility SolarCtiy would come under the full regulatory power of the ACC.
What is the timeline? When is the public hearing?
Interested parties now have the opportunity to weigh in in advance of the public hearing, which will be held on June 29th
What is the effect of the proposed decision?
Were the decision to be adopted by the full ACC, then SolarCity and other solar companies attempting to provide clean, renewable and affordable electricity to places such as schools and hospitals would have to significantly increase the cost of providing such services because of greater governmental regulation.
Furthermore:
- If upheld Arizona will be the only state in the nation to regulate solar PPA providers as utilities.
- We believe this is the only instance we can remember where the Sierra Club and Goldwater Institute not only agreed, but felt strongly enough to co-write a letter to The Arizona Republic saying regulation of these PPA’s is bad for Arizona.
- If upheld it will cost schools and governments millions.
- A PPA/SSA is simply a financing tool, used in every other state in the nation, to allow widespread proliferation of solar.
- Regulation of these PPA Providers would thwart the free market and treat these start-up solar companies like monopolies.
- PPA Providers are small businesses, not utility size monopolies. Regulation just piles on expense to the consumer for no added benefit in this case.
- With a utility service the homeowner generally has one choice of a provider and so the government regulates, with solar installation, the consumer has hundreds of choices. The regulation is the market – and that should be enough!
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