Shell Game

In Arizona, with its abundant solar resource, supplemental solar electric energy has long been an extraordinary investment . . . at least, in the residential sector. In the commercial and industrial sectors, the electricity rate schedules are structured to defeat the value of solar energy and other energy management strategies.

It seems a strange twist to defeat the value of solar energy for the sectors that are most active - and therefore whose energy demand is highest - during the middle of the day when the Arizona sun is blazing.

It is a revealing twist. Residential consumers are terminal energy consumers. Unlike businesses, they cannot pass on their costs through increases in prices for goods supplied and services rendered.

Large commercial and industrial electricity consumers in Arizona enjoy a generous subsidy because their average cost of electricity is much lower than for the other sectors due to the declining block structures of the commercial rate schedules. Therefore, the largest electricity consumers have too little incentive to implement energy management strategies in order to avoid these low costs. Small businesses pay a much higher average cost for electricity. However, the rate plan structures still defeat the value of solar energy for them.

Furthermore, small businesses who might best take advantage of the benefits of solar energy, and subsequently lower the local grid infrastructure costs, suffer from greater constraints compared to larger businesses. Small businesses more often have limited freedom of action because they do not own their property; they have fewer man-hours to dedicate to special projects; they have less diversity of skills; and they have far less available capital. They are a captive energy market.

The illusion that residential energy costs are kept low has been reinforced by the presence of the Arizona Residential Utilities Consumer Office (RUCO). Despite the freedom of action and investment advantages enjoyed by homeowners, the real cost of electricity is hidden in the increased costs of goods and services provided by Arizona’s small businesses. Renters enjoy no advantages. Effectively, a hidden tax has been created.

Perhaps ironically, the presence of RUCO may be contributing to the delayed adoption of solar energy and energy conservation.