Harvard regulatory expert testifies in Arizona rate case

March 08, 2016

Ashley Brown, one of the foremost authorities on utility regulatory matters, testified March 8 on behalf of APS in the rate case for UNS Electric (UNSE), which serves Mohave and Santa Cruz counties in Arizona.

Brown is the Executive Director of the Harvard Electricity Policy Group (HEPG), which provides a forum for the discussion and analysis of electricity issues in the United States. He served as Commissioner of the Public Utilities Commission of Ohio for 10 years (1983-93), he has also worked as an advisor on infrastructure regulatory issues to governments around the world.

In his submitted written testimony, Brown addressed the impact of public policy on the long-term interests of solar as a technology and ramifications for Arizona’s economy. He also refuted objections to UNSE’s proposed pricing model that includes a demand charge for residential customers and discussed the negative impact of current net metering policy on the long-term prospects of rooftop solar. Among the highlights:

Current net metering policy

  • “What is critical to understand is that net metering, regardless of its profitability for solar DG vendors/lessors, is a subsidy so poorly designed that it actually runs contrary to the long run economic viability of distributed solar energy.” (p. 22)
  • “Current tariffs provide absolutely no incentive to improve the performance of a generating resource that already ranks last among renewables in efficiency and cost effectiveness, both in terms of economic efficiency and as a tool for reducing carbon emissions.” (p. 17)
Utility Customer Interest and Protection
  • Indeed, the real harm to low income customers, as already noted, is by perpetuating net metering.” (p. 7)
  • “Low income customers are beginning to notice and object to the financial burden they are bearing to support better-off households.” (p. 6)
Economic impact of net metering policy
  • “Indeed, electricity pricing in the U.S. has always been based on one of two highly disciplined foundations, cost (including avoided cost), and/or market. Every energy source in the country is priced on one of those foundations. Pricing one resource based on someone’s subjective view of “value,” while pricing every other resource based on a disciplined and systematic approach, is simply indefensible as a matter of public policy. The public deserves better than that.” (p. 30)
  • “If the cost of electricity is higher, jobs are likely to be lost elsewhere in the economy—there is no reason to assume that the net job impact of distributed solar power is positive.” (p. 18)
Exploitation of subsidies
  • “However, the primary divergence of interests relates to the massive profits made by these companies—profits that are effectively paid by utility customers.” (p. 10)
  • “Simply stated, it would be better if solar DG developers had to compete with other forms of energy, rather than chasing just subsidies for themselves.” (p. 10)
  • “For solar DG companies, however, as revealed in SolarCity’s most recent 10K filing with the SEC, the profits are derived by chasing subsidies and cross subsidies, including having the price to beat, unlike every other energy source, be retail rather wholesale. Beyond that, of course, since the price they compete against is the bundled, monopoly retail rate, they have the advantage of being paid a monopoly price without being subject to the discipline of cost based regulatory oversight.” (p. 11)
Need for policy change and demand charges
  • “(Demand charges) are revenue neutral since the demand costs are already embedded in tariffs. What demand charges do is make those costs transparent, and by doing so, enable all customers, low income included, to shape their demand in ways that can reduce their bill.” (p. 8)
  • “In fact, demand charges are a critical element in the movement in ratemaking toward unbundling prices, making prices more transparent, and providing customers with meaningful price signals in order to bring greater efficiency to the use of electric energy. Indeed, the position of the ACC Staff in this matter is a classic example of demand charges being at the center of regulatory thinking in the U.S. today.” (p. 34)
You can read more excerpts here.