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Rooftop Solar Companies and Utility Regulation

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Former Partner
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by Raymond S. Heyman

Rooftop solar companies and their trade associations are intervening in a variety of state utility regulatory proceedings around the country. In Arizona, for example, in the past two years they have intervened in three rate cases for investor owned electric utilities and two rate cases for member-owned electric cooperatives. Additionally, rooftop solar advocates have intervened in dockets that examine the value and cost of solar energy and net metering. Similar interventions have notably taken place in Nevada, Utah, California and Hawaii.

Generally, these rooftop solar advocates ask regulators to preserve net metering (payments to rooftop solar system owners for power they send to the utilities), set the way net metering is calculated to be at the utilities’ full retail rate and reject changes in rate design that would impact rooftop solar customers.

The rooftop solar companies, while relying on utility regulators to make rulings that sustain their industry and to dictate the practices of the electric utilities, are not themselves under the same regulatory umbrella as the utilities. For example, regulators can order electric utilities to engage in or refrain from certain business practices, but cannot do so for rooftop solar companies. Regulators set the prices that electric utilities charge customers for services but have no similar authority over rooftop solar companies. And, regulators establish the return on investment that electric utilities achieve, but rooftop solar companies’ profits are unregulated. The disparity can even extend to the amount and type of information that must be disclosed to the regulators by rooftop solar companies versus electric utilities.

Some see this situation as an impediment to the regulators’ ability to provide holistic solutions to the ongoing issues that divide rooftop solar and electric utility companies. Their argument is that until rooftop solar companies and electric utilities are under the same regulatory paradigm, a regulator’s ability to resolve their conflicts will be impossible at worst and incomplete at best.

Recently, the Federal Trade Commission conducted a workshop addressing, among other issues, the role it might play in regulatory oversight of the solar industry. (“Something New Under the Sun: Competition and Consumer Protection Issues in Solar Power”, A Federal Trade Commission Workshop, Solar Electricity Project No. P161200). However, if the battles between the rooftop solar companies and electric utilities are going to continue to play out in the utility regulatory arena, then the merits of state public utility commissions regulating rooftop solar companies becomes a seminal question that must be answered.