Tuesday, December 8, 2009

Arizona's Green Divide

There is a deep chasm in the Grand Canyon State. It is a chasm deepening so quickly as to shame the timeless workings of geology.

The Arizona Corporation Commission’s Renewable Energy Standards and Tariff (REST) rules are an inherently flawed attempt to animate a languid solar industry†. The major flaw is the process by which wealth is extracted and redistributed. Here is how it appears to operate:

Fees for the REST are assessed on each electric utility bill. All residential “ratepayers” are assessed equally based on monthly kilowatt-hour (kWh) consumption. The fee has a maximum limit. For example, a residential ratepayer is charged 0.3288 cents for each kWh consumed up to a maximum charge of $1.32 per billing period. This limit represents approximately 400 kWh of consumption.

The funds gathered by this scheme are distributed through a rebate program administered by the electric utilities. The funds are distributed to homeowners who possess the discretionary funds to purchase a solar electric energy system. These relatively wealthy homeowners gain the advantage of the rebate programs, escape electric utility costs, and therefore abandon the unfunded citizenry to pay for an ever greater portion of the increasingly expensive energy from the utilities. Furthermore, because they are escaping electricity costs, the solar overclass contributes less to future REST funding!

Can a strong, independent, sustainable solar energy industry be created based on a regressive economic scheme?

Why the Arizona solar industry has so long remained listless is explained elsewhere in the Rate Crimes energy blog.


  1. Forty two percent of housing in the Tucson metro area is renter occupied! The problem isn’t with the REST it is with our net metering policy and financing. We need aggregated net metering policy so people can have their systems off site. Then, we need a public finance model working in conjunction with a public\private lending institution that can extend capital to middle and lower income households - so it isn’t just the rich or the retired using up residential REST funds.

  2. Excellent points! The next Rate Crimes post will address one issue with respect to financing.

    I would argue that the REST fees should be progressive and without maximum limits: the more dirty energy you consume, the more you pay to develop clean, sustainable energy. Of course, the REST is only a weak attempt to correct for the repressive rate schedules.

  3. I agree with you about instituting a more progressive structure. I believe TEP has proposed a REST allocation scheme that would require more from large commercial and industrial users in their latest implementation plan.

    Speaking of repressive rates…do you know how much per kWh Arizona utilities pay for wholesale electricity from intermittent\peak combined cycle natural gas plants? We should price solar to AT LEAST that level. Right now utilities want to use REST funds to bring the price of solar they sell to costumers down to around 5 cents….which is what they claim to pay for wholesale electricity. Of course they will charge their customers a premium for that energy so they make a profit.

  4. That's the central point, isn't it? . . . the utilities taxing struggling Arizona citizens in order to pay for tardy retooling, while they pay their executives millions in compensation to serve first the stockholders rather than the stakeholder citizens.

  5. The wholesale price of electricity is a convenient illusion that omits a litany of hidden and unaccounted costs. One of the most blatant examples is the omission of the true costs of water needed to produce electricity from nuclear reactors.

  6. I like your idea to peg the value of solar to methane gas. First, the cost of methane will almost certainly continue to rise. Second, it is rational to associate the value of a clean, renewable energy source with at least the apparent market costs of a potent geenhouse gas.

  7. BTW, the term "natural gas" is misleading. I prefer to use the more scientifically accurate term, "methane gas", or simply, "gas".

  8. Thanks again, anon. Do you mean that 42 percent of Tucson's single-family dwellings are rented, or that 42 percent of all Tucson dwellings are rented? What is the source of these statistics?

  9. Hey RC, I believe it is from the census – that was a direct quote. Let me know if I need to dig it up for you.

    So do you happen to know how much wholesale electricity is from a combine cycle peak or even intermediate load gas plant in Arizona is? I am curious.

  10. Anon, price for electricity from burning methane gas varies dramatically in comparison with the price for electricity from nuclear generation. Hence, the "Power Supply Adjustment factor".

    "The bill is subject to the Power Supply Adjustment factor as set forth in the Company’s Adjustment Schedule PSA-1 pursuant to Arizona Corporation Commission Decision No. 67744 and Arizona Corporation Commission Decision No. 69663."

    Nothin' like magic numbers to keep the mandarins happy, and the peons in the dark.

  11. We might find the numbers in the thier IRP documents...

  12. Right so you claim that REST charges each house in the valley up to $1.32. This fee is then distributed to solar powered residences in the form of a rebate.

    Hence everyone is paying $1.32 to fund a few people with solar? Whats the flip side?

    Anyone purchasing solar must spend an up front cost of $20K plus. That person then removes their home from the peak load on the grid most days of the year.

    By removing themselves from the peak grid costs utilities save money, the cost of peak energy should be less because there is less demand.

    Solar owners are given incentives to pay $20K up front and remove themselves from the peak grid in exchange for up to $1.32 a month from the rest of us.

    Sounds like if more people used solar that $1.32 would be an awesome deal for the rest of us. Imagine if half your neighborhood switched to solar, your bill fell 25% and all you had to do was pay $1.32 a month.

    Sounds like a great deal.

    - Lord Solar