Arizona Solar Center Blog

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The $500 Million Question

There’s an important struggle being waged over solar energy in Arizona. At issue is whether utilities can charge residents who've installed solar-power equipment substantial fees.

Utilities are required to purchase any excess electricity private solar producers create, but the state’s largest utility, Arizona Public Service Co., is asking the Arizona Corporation Commission (ACC) to allow it to levy fees for these residential customers’ “use” of APS transmission lines. In addition, APS wants to cut in half the rate it pays these independents for the energy they produce.

The stakes in the so-called “net-metering” battle are colossal. 

On Aug. 26 a notice was sent to a number of APS customers outlining an upcoming deadline to install solar before the new APS net-metering fees take hold. The notice was sent in error. No changes have been approved by the ACC. Any decision is months off, and there’s no guarantee the ACC will grant APS’s wish. 

Still, the notice and the prospects of new rules have alarmed solar homeowners.

APS’s plan would not only destabilize energy costs and undermine energy independence offered by the distributed-rooftop generators, it would also result in a direct hit on nearly $500 million in home values across the state.

While utility and solar advocates talk past one another on the wisdom of APS’s proposal, the issue of home values has yet to emerge as more than a footnote in the exchange.

That doesn’t sit well with Surprise residents Jon and Rita Wittig.  Last year the couple, both 67, locked into a 20-year lease for a rooftop solar system for which they pay $82.82 a month.

As part of the public-comment process on the net-metering proposal, Jon wrote to the ACC to explain that the new rules would make it hard to sell his home.  No buyer will want to assume the $82.82-a-month lease payment for a solar electric system whose value is offset by a “new” $50-100 surcharge imposed on solar-users only, on top of a 50 percent reduction the utility would be willing to pay for their excess clean energy.    

As a result, the value of the Wittigs' house could plunge by $20,000.

Harold Baas and his wife are retired and living on fixed incomes in Payson.  The couple recently spent $8,000 for a fully prepaid 20-year lease for a rooftop solar system.  Harold told the ACC that APS actively encouraged him and other customers to consider residential roof-top solar arrays.  He says up-front financial incentives in the form of rebates, continuing incentives in the form of net-metering and transferability to subsequent owners upon sale were heavily marketed to the customers of APS.

But, if new rules are passed, the Baas', Wittigs, plus many others, will find themselves in a 20-year trap with no way out. Although they could be grandfathered in under the "old" rules,  those rules would not be transferable upon the sale of their property.

Walter Urback Jr. is a 79-year-old retired Army colonel living in Sun City West. He tells the ACC he believed APS when the utility touted the benefits to the state and the homeowner with respect to the installation of rooftop solar panels for the generation of electricity.  He signed his contract in 2008 and had an out-of-pocket expense of nearly $35,000.

Walter knew he would never live long enough to see the system pay for itself, but an important factor in his decision was knowing that he was not only helping the state solve future energy needs, but whomever bought his home would have a substantial asset that would be reflected in the sales price.

Larry Blodgett , another rooftop solar energy producer, writes that he, too, was showered with information from APS encouraging him to install solar panels on his central Phoenix home.  He says he was told solar was good for the environment, that he would save money each month and it would increase the value of his home.  Less than a year ago, Larry and his wife decided to install solar panels on their roof. 

Unfortunately, he says, the proposed new rules would not only reduce his home’s overall value – it would make it much less desirable for a new buyer and more difficult for him to sell when the time comes.

Larry says he wouldn’t have bought the solar system had he known that APS could change the terms of the contract.

It is a story that is being repeated all over the state.    

Determining the increased home value of a solar rooftop system is not rocket science.  The National Remodelers Association and Wells Fargo Bank used to promote the same formula to determine value.  Multiply the annual energy savings by 20 – and you have the anticipated energy cost savings over the life of the system.  That is the increased value of the home. So, if as APS says the average system saves $1,000 a year – this number would be multiplied by 20 to establish the increased home value – which would be $20,000. Each year the multiplier would decrease by one to reflect one less year on the expected life of the system.

If the proposed rule changes are approved, Arizonans who’ve taken the solar leap would see their investment in rooftop solar-generating equipment gutted and the value of their homes diminish.  The nearly 25,000 new rooftop solar systems across the state would calculate to $500 million in potential stranded investments on Arizona rooftops. 

With this much at stake, one can anticipate that if the APS net-metering rule is instituted, class-action attorneys will pounce on the opportunity to remedy the injuries sustained by these property owners.

Jim Arwood
Communications Director
Arizona Solar Center

 

Question: Should the ACC consider the impact to property values when deliberating whether to change the net metering rules and impose new fees? Should the existing rules apply to the system and thus be transferable upon the sale of a house, or should "new" rules (if adopted) be applied to future owners of an existing rooftop solar system?

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