The first battle between a large electrical utility and consumers dedicated to choice,
competition and clean energy ended this week with a bunt by Arizona Power Services (APS) and the
Arizona Corporation Commission. The commission in a 3-2 decision opted to lower APS requested
rate of almost $7.00/KW/Month to $0.70/KW/Month as a grid maintenance and support fee.
The commission also agreed to revisit this issue in 2015. This is generally a success for solar
and ultimately the utilities also.
Traditional business models for utilities have been to either be vertically integrated and provide
residential power at a flat rate keyed to a ROI for relevant expenses, investment and service goals
or to provide local grid and metering and provide power on a time of use market marked up from
power purchase agreements (PPA) from generating companies (GENCO).
APS following Arizona policy towards net metering, is finding more and more customers buying less and
less electricity per month and effectively buying back their excess power production at retail price.
as more and more customers install arrays large enough to zero out their consumption becoming “Grid-Neutral”,
the business model for utilities is breaking. Utilities are finding it harder to cover their grid costs
as that variable quantity of electricity sold is declining. Imagine a city where half the population installs
10 KW of solar capacity while the other half installs none. electricity consumption falls leaving half the customers
to shoulder the costs of grid maintenance, while the other half pays very little and still uses the grid
at night, during bad weather.
The business models of utilities must evolve to match the relative costs of each element of a utility
and thus allow stabiity of the service. Utility business models must evolve to a “Grid Maintenance”
fee, a voltage and frequency reference fee, an “Amp Available” fee and then an energy fee at Time of day.
That would mean each customer would pay a flat fee for grid maintenance, a scaled fee for the number of amps
on their service drop and a fixed fee for voltage/Frequency (Ancillary service) fee and then a time of use
fee for the actual cost of electricity they consume.This means the utilities must move to smart meters, smart tariffs and a smart grid.
APS has taken a first step with a grid fee tied to array size, which would nicely match an ancillary service fee,
if the commission can place a flat rate fee on all users for the size of their service drop and begin charging users
to time of use cost, they can evolve to a sustainable model. if APS does not follow this first step but seeks to go to
war against solar they will find themselves warring against a technology shift that will still destroy their
business much as many new technologies have.