Arizona Eagletarian

Arizona Eagletarian

Friday, February 13, 2015

What REALLY happened at the SRP hearing this week?

Attorney Court Rich, whose practice includes advocacy on energy matters and the solar industry in particular, penned the following op-ed with specifics on problems that surfaced as a result of Salt River Project's ill-advised plan to tax the hell out of rooftop solar.*

If SRP's Board of Directors actually does vote on February 26 to assess an arbitrary fee (of ANY amount) on customers with rooftop solar, it will rightfully be characterized as a move to "kneecap" the industry.
It wasn’t a great week for SRP’s management. Not only were they confronted by a diverse group of 800 customers upset with the monopoly’s discriminatory attempt to kill the solar industry but they utterly failed to rebut the fact based defenses that solar representatives raised. Oh, yeah, there was also that little problem where the GM, Mark Bonsall completely undermined the monopoly’s entire case for levying punishing demand charges on residential customers. I will start with that last part first.
On Monday Mr. Bonsall took great pains to tell his Board and the throngs of angry solar supporters how utterly fair the proposed solar tax hike is for customers. Bonsall repeated the common SRP theme that demand charges are simple, and that they permit customers to simply “choose” to lower their demand in order to recognize even greater savings. Bonsall talked about the seeming effortlessness of this simple customer “choice” to lower demand. SRP even talked about how much more solar customers could save by lowering demand 20, 40, or even 60%.
This all changed in the follow up meeting on Thursday where the obvious question was asked: “if demand charges are the best way to recover utility costs, why wouldn’t SRP impose them on all 985,000 of its customers?” “Whoa there” said Bonsall and another management representative. Residential customers were said to have, “neither the desire nor inclination to manage or understand demand charges.” Bonsall, seemingly forgetting about the last two months of company spin and his presentation from Monday, went on to explain just how impossibly complicated it is for residential customers to manage demand. Poof! SRP management’s credibility was shot in a single instant as they were exposed as asking solar customers to abide by a set of rules that are impossibly complicated for any of their customers to follow.
This highlights just how disingenuous SRP’s claims all along have been that a solar customer could simply reduce demand by 60% to end up with the same savings they recognize today. It’s good to see Bonsall and SRP now admit what solar customers have been saying all along; that it is impossibly complicated to manage your demand and it is completely unfair to stick solar customers with something you would never foist upon others.
SRP management wasn’t satisfied simply outing themselves as being completely dishonest in their earlier assessment of the fairness of residential demand charges, but they then went on to attempt to deny ratemaking truisms. My presentation to the Board on Monday pointed out the relative hypocrisy of management’s claims to want to end an alleged $7 million solar “cost shift” while supporting $180 million in intra-class cost shifts baked into its E23 and E26 rate classes. Intra-class cost shifts (along with inter-class cost shifts) are an unavoidable and standard part of ratemaking. Rather than simply admit “okay, you got us, there are and always have been cost shifts in rates” SRP management attempted a defense akin to arguing the sky is not blue.
Management criticized me for not looking at cost of service by stratum within each rate class without mentioning to the Board that management itself doesn’t look at cost of service by stratum. In fact, during the interview process, SRP’s CFO told me three times they do not compute cost of service by strata in setting their rates. This disingenuous defense of their spin doesn't change anything. SRP’s rates include massive cost shifts from those paying less to those paying more. Hundreds of millions of dollars are shifted by hundreds of thousands of customers and management doesn't whisper one peep about the fairness of these structural shifts. This is pure hypocrisy and SRP was exposed badly as simply cherry picking an argument to try and harm solar unfairly.
The Board was also informed, and the management didn't deny, that management doesn’t actually know how many of its solar customers actually pay or don’t pay their cost of service. So, management is willing to launch a campaign based on the premise that solar customers don’t pay their fair share yet, has not even looked into what that fair share is.
On another obvious cost shift SRP tried to stick the landing on a complicated move of linguistic gymnastics to avoid saying the word “subsidy.” Apparently, when SRP’s electric customers transfer approximately $1.5 billion to subsidize the underperformance of its water service over the last 30 years this is not a “subsidy” but a “contribution from revenue.” You can argue the merits of this subsidy from electricity to water if you like but we all know a subsidy when we see it.
On Monday Mr. Bonsall demonstrated a willingness to simply ignore facts that are indisputable when he predicted to the Board that the solar industry would continue to grow under the new plan. The problem with Mr. Bonsall’s bold claim is that it has already been proven false. SRP saw less than two dozen applications for solar in the first month-plus under the new plan after having hundreds per month, every month, for years prior. The industry won’t thrive or grow under the new plan and is already dead today. Mr. Bonsall knows this but decided instead to make unsupportable claims to support their attempts to kill solar.
Management wasn’t alone in taking a hit to credibility as the Board’s own consultant was completely unaware of important studies he was to have reviewed and been advising the board on to guide its decision process. He was entirely unaware of the management’s deeply flawed value of solar analysis. His failure to even know about this important study calls into question all of his advice. In an uncomfortable moment, the Board’s consultant was rightly questioned by a Board Member about his independence in reviewing the management proposal. He had previously testified in the interview process that he was involved from the time of the creation of the pricing proposal itself and offered feedback and asked questions during the preparation of the document he was then hired to review and critically examine.
So, what did we learn this week? First, SRP management is asking solar customers to submit to a rate plan that is so impossibly complicated to manage and understand that it wouldn’t dream of asking any of its 985,000 residential customers to do the same. Second, we learned that management is so anxious to kill the solar industry that it is willing to try and obfuscate undeniable truths about how its rates work. Third, we learned that while SRP management is attempting to rally public feelings in opposition to alleged unfair “cost shifts,” it is proposing a rate plan that has more than 400,000 customers shifting hundreds of millions of costs onto others. Fourth, the Board really needs an advisor that: 1) is aware of the documents he should be reviewing and what they say; and 2) that is independent and was not involved in the creation of the documents he is then asked to independently review. Finally, we learned that the solar industry’s last hope is that the Board sees through the misdirection and changing stories they are being fed and rises up to demand fair treatment and quality analysis instead of discriminatory rates aimed at stalling a thriving industry. With all the leadership that SRP has shown in working to attract jobs to Arizona, I fully expect that at some point the Board will realize not just how unfair and unsupportable this plan is but just how bad this proposal is for the economy. (emphasis, throughout, added)
By Court Rich, Senior Partner, Rose Law Group, representing The Alliance for Solar Choice. This column first appeared in the Rose Law Group Reporter. 
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* NOTE: In the linked employer review, a former employee describes SRP,
Slow to adopt new technological advances. Some project leaders do not have a background in engineering or utility industry experience.
and gives this advice to management:
Harvest the abundant sunshine in solar power! Install solar-power rooftops in company car park areas!
Wouldn't you expect a forward thinking ARIZONA-based power generating utility would have already done that? WTF, Mr. Bonsall?

If SRP thinks it will get away with the kind of squandering of ratepayer cash that APS did with its recent Dark Money campaigns, it will be sorely disappointed. 800 protesters Monday is only the tip of the iceberg. The hearing auditorium was filled to capacity with overflow outside.

Let's suppose that SRP wants to save face (actually, I hope they do). Bonsall and his cronies are going to have to get resourceful and change course.

Conceptually, APS being a publicly traded corporation (or rather a subsidiary of publicly traded Pinnacle West), an IOU (investor-owned utility) has ways to hide or at least make it difficult for investigative journalists to find the juicy details of its clandestine political maneuvering. SRP is a political subdivision of the State of Arizona.

SRP has ways to obscure discovery also but its corporate structure (as a government agency) may make it subject to a citizens initiative. It really should watch what it asks for with this rate proposal. The people of Arizona have a long and ever deepening history of direct democracy. And I doubt Arizonans will take a cotton to SRP's efforts to kill the rooftop solar industry.

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Today it is a case of the grasshopper pitted against the elephant. But tomorrow the elephant will have its guts ripped outLe Loi, Vietnamese emperor, 15th Century

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