Tucson Electric Power Company (TEP), the investor-owned electric utility serving the Tucson metropolitan area, started its own residential rooftop solar program in 2015. The Arizona utility has over 400,000 customers and is owned by Fortis, a Canadian utility holding company. Both TEP and Arizona Public Service Company (APS), another Arizona investor-owned electric utility, are among the first utilities in the U.S. to develop utility-led rooftop solar. We recently discussed the APS rooftop solar initiatives. In this post, we will examine the model used byTEP in its residential solar program.
The Role of Arizona’s Renewable Energy Standard
TEP is regulated by the Arizona Corporation Commission (ACC) and must comply with Arizona’s Renewable Energy Standard and Tariff (REST). REST requires that by 2025 all Arizona’s investor-owned utilities obtain 15% of their electricity from renewable sources. Both TEP and APS are using their rooftop solar programs as a component of their plans to meet the REST requirements.
In July 2014, TEP filed a request for approval of its 2015 REST Implementation Plan which included a proposal for a pilot utility-owned rooftop solar initiative, TEP Residential Solar Program. Under the proposal, TEP planned to spend about $10 million to develop the program which was estimated to result in a total capacity of 3.5 megawatts. The ACC approved the program in December 2014 despite some stakeholder objections to TEP’s ownership of a residential rooftop program.
The ACC’s Order limited the pilot program to 600 homes and capped the amount spent on the program at $10 million. The $10 million was to include the program’s operation and maintenance costs that may not exceed 3.5 cents a watt per year. This is smaller than the APS program which targeted approximately 1500 homes.The ACC also required TEP to prepare a report, including a cost/benefit analysis, on the residential solar program. It also asked TEP to create an advisory group to help TEP develop the program’s research goals and provide input on the program’s design.
TEP Residential Solar Program Design
The TEP Residential Solar Program is open to all customers who own standalone, one-family homes. The customer must be in good standing with TEP and will be eligible regardless of their credit score. TEP will install solar panels on a residential customer’s home after a local installer assesses the customer’s home for several factors, including the composition of roofing materials, an electric service entrance that permits the use of advanced inverters, and a roof that can safely support the photovoltaic system. Also, TEP will give priority to homes that are located near feeders that would benefit from an increased capacity resulting from distributed generation.
Customers are only responsible for a one-time $250 administrative fee for the program. In addition, participating customers will pay a fixed monthly rate for their electricity that is similar to their average billing rate during the 12 months prior to the solar installation. This rate will remain for the life of the system (up to 25 years) and protects customers against potential rate increases. If the customer changes their average annual electricity usage by more than 15 percent during the program, an adjustment will be made based on the average of the new consumption level.
TEP maintains ownership of the solar panels and uses three local solar companies to install and maintain all of the TEP-owned solar systems. The local companies were hired through a competitive bid process. Also, TEP used a competitive bid process to purchase the solar modules and inverters. The installers provide the other components themselves, such as the panel racking and conduit wire.
Proposal to Expand its Residential Solar Program and Add Community Solar
TEP filed its 2016 REST Implementation Plan Application (2016 REST Plan) on July 1, 2015, and the application included a request for approval to spend an additional $15 million on residential solar for 1000 more homes. The 2016 REST Implementation Plan also includes a proposal to create a TEP Residential Community Solar Program. Under the proposal, TEP will own a distributed solar facility that provides electricity to a number of TEP customers. TEP plans to build a five-megawatt facility costing approximately $10 million. Similar to customers of the TEP Residential Solar Program, the TEP Residential Community Solar Program participants will pay a fixed rate based on average use in the prior year.
Future of the Residential Solar Program Still to be Determined
It is unclear whether the ACC will approve TEP’s plan to expand its Residential Solar Program. A number of parties intervened in the 2016 REST Plan rate case and challenged TEP’s proposal to expand its residential solar program. The Energy Freedom Coalition of America (EFCA), an alliance of solar companies, is arguing that TEP cannot support the need to expand its residential solar program because TEP has not provided the reports and cost/benefit analysis required by the ACC in it’s 2015 REST Implementation Plan approval. Also, concerns are being raised about TEP becoming a community solar provider. The ACC held hearings and will be considering the testimony and submitted documents before making a final determination. We at Burnham will update you when the ACC reaches a decision on the expansion of TEP’s Residential Solar Program and its new Residential Community Solar Program.
