APS and Solar Power

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A new poll shows that Arizonans support solar energy and want choices beyond utility-provided energy. Mark Schiavoni, the senior Vice President of Operations for Arizona Public Service, and Jeff Guldner, senior Vice President of Customers & Regulation for APS, will respond to the poll’s results.

Ted Simons: A recent poll shows widespread support for solar power and opposition to programs that limit choice for solar supporting energy consumers. Last week, we discussed the poll and heard criticism of APS regarding the future of solar energy. Tonight, we hear from Arizona Public Service. Joining me are Mark Schiavoni, executive vice president of operations for APS, and Jeff Guldner, APS senior vice-president for customers and regulation. Good to have you both here. Thanks for joining us.

Mark Schiavoni: Good to be here.

Jeff we'll start with you regarding this widespread support for solar choice and widespread opposition to some programs that APS seems to support. What do you see?

Jeff Guldner: Well, Ted, we know that our customers like and support solar energy. APS has been doing solar for 60 years. By the end of this year, we'll have 700 mega-watts of solar split between rooftop solar systems as well as large-scale solar plants like the one being built near Gila bend and smaller solar plants that APS owns. The issue we're really talking about is how to ensure that solar energy in Arizona is sustainable and part of that discussion involves a policy called net metering. It's one of the ways to subside size rooftop solar systems so it can be part of the energy mix in Arizona and that's really one of our strengths is we've got a diversified portfolio of nuclear, coal and natural gas as well as rooftop and larger-scale solar plants.

Ted Simons: Net metering, let's define it, that's basically where the rooftop customer basically sells power back to APS, correct?

Mark Schiavoni: That is correct.

Ted Simons: And what would be the problem here?

Mark Schiavoni: Well, the problem, it really is a cost issue. So you have a rooftop solar on your home. And you have a certain amount that your home consumes. If your system during that time frame generates more than what your home consumes, it goes back to the grid. When it goes back to the grid, you're being paid for that power going back to the grid and this is where the problem lies. You're not being paid for any of the wires, the transformers, the poles, the infrastructure for transferring that power back to the grid. You're not paying for us to be on standby, while you're self-supplying, if something happens, you still need our power to flow to you. You're not disconnected from the grid and what's happening is that cost, those fixed costs for the wires, the poles, the transformers are being paid for by the customer that doesn't have it. That is cost shifting which is a subsidy.

Ted Simons: So the thing that is taking place, how do you balance that out when we have folks like we did last week basically saying that what you're trying to do there is you're killing rooftop solar in Arizona.

Jeff Guldner: You're not killing rooftop solar. We haven't proposed anything in terms of resolving it. What we've got right now is a situation where the customers who are putting the rooftop solar on can avoid all of the costs of that infrastructure and as Mark said the rooftop panels don't work without all of that infrastructure being there from the transmission system back to the power plant. And so if they're not paying for it, then other customers are paying for it. It becomes an issue of balance. I think it would be tragic in Arizona with our solar resources for us to have the equivalent of a housing bubble burst because we didn't understand the cost implications of a policy like that metering. We just want to understand that, talk to the stakeholders about it, see what a potential solution would be going forward that could help make that sustainable.

Ted Simons: What would a potential solution be?

Mark Schiavoni: The solutions that have come to the table, let's stop the bickering and throwing of stones and let's have a dialogue. The real problem in our -- from our perspective is you have to understand what the costs of all those services are and I think once all the customers understand the cost of supplying electricity, they'll understand that there's a way to solve this problem. It may be how you look at transmission, it may be some of the distributions, there's some place where you can find net metering. We believe in paying for the service that that customer's providing to another customer or to the grid.

Ted Simons: How do you balance out those added costs and the cost shifting now with future avoided costs provided more people go solar, less demand for power plants and such down the road? It seems like a lot of folks are going solar and the argument is that the more that go solar, the less they need APS, APS will take the hit, that's what we're hearing.

Jeff Guldner: That's really the question because right now, you're not removing any of the infrastructure once you put the solar panels on. You may avoid some future infrastructure and value that now and should the policy makers give a value, we don't do that when we construct the resource today. But what we know is the cost for the existing system is all here, it's not going away. So it's really then about fairly allocating that cost between customers who put rooftop panels on, may benefit us in the future and customers that don't.

Mark Schiavoni: It's a generation resource and you need to treat as a generation resource like we have generation, the Palo Verde Nuclear power plant, or Ocotillo Power Plant sitting in Tempe Arizona, one of our utility scale solars, it's a source of generation, and you have to treat it as a source of generation and pay for that generation as that source. We agree there may be some other costs in the future that you can look at, but we don't know what it looks like because we don't know where solar's going to be in the future, how many homes, what areas and so on. It's hard to understand infrastructure. On the distribution network, we don't believe there's going to be much savings in that respect. The savings we make if there's going to be savings will be in the transmission system. So if the dialogue that has to take place to come to closure on where do you think those may occur in the future--

Ted Simons: To get that dialogue started we talked about the poll last week, hear the sound bite-- the idea that APS is a monopoly and it wants to end consumer choice on how folks get electricity.

Court Rich: They've figured out that every time a consumer in Arizona puts solar panels on their roof, APS sells a little bit less electricity and that's doesn't work for a monopoly that never had to deal with that before so they're trying to take away that choice and that option.

Ted Simons: Respond please.

Mark Schiavoni: The word option I find interesting because customers have always had an option. People have been putting solar on their roofs long before net metering took place. It was there choice to do that. They absorbed the cost of that. Today, they're asking their neighbors to absorb the costs of what they're doing. It's a little bit different today than what you may have done years ago. I don't agree that they're losing choice. I think the customers still have choice. This is really a cost issue and it's who's going to subsidize the cost for that power that's returned to the grid. That is the simple part of the equation.

Ted Simons: And I hear subsidy also coming from the other side, basically saying that the more again the more they go solar, the less profit comes into APS, the less revenue that comes into APS, and then they're winding up thinking they are subsidizing APS when the whole world is going solar. How do you respond to that?

Jeff Guldner: As the revenues are reduced from people going into solar, the infrastructure doesn't change. If you still have that infrastructure, that's the critical thing to understand with rooftop solar systems and with net metering, the infrastructure has to be there for it to work. You get back into the fundamental fairness question that someone has to pay for that infrastructure. If you're a regulated utility, you are cost based, the infrastructure is paid for by the customers that don't have solar on their system. You can solve that by valuing the solar in a certain way and make it a sustainable policy. That's really the discussion that we're having.

Ted Simons: And I believe there was a California study looking at the future of distributed energy and they factored in future benefits, they factored in infrastructure, as well, they saw that there were benefits for all rate-payers, not just we hear a lot that the rich are benefiting from this and the poor will get hurt. They're saying because of these avoided future costs that things do tend to even out. Are you buying that?

Mark Schiavoni: There's many studies out there today, including the one you're talking about. There are benefits. There's no question, solar provides a benefit whether it's on a roof or sitting out in Gila bend. We wouldn't argue about the benefit. There's some environmental benefit. How do you put a cost on that? Benefits when you need new generations. You don't know that until you get to that point. That's part of the challenge you have. So I would disagree in concept with the outcome of that study because I think it's used as a predictor and we don't know yet what those costs will look like in the future.

Jeff Guldner: One of the things we're talking about in that study is simply the excess energy that's generated. They're not looking at the cost shift that occurs when customers that use the system aren't paying for the cost of that system. So in the California example, the utilities they're talking about a $1.2 billion per year shift in costs that's not being discussed in that particular study.

Ted Simons: And real quickly when you have that kind of added load to those that don't have solar, doesn't it become a perpetual machine? If I don't have solar and I am paying more cause my neighbor does--I'm going to want more solar and thus again, less comes -- does APS have to look at this in the future? Is this a business model that can sustain itself?

Mark Schiavoni: We don't think it's a model that can sustain itself, your rates will continue to increase for those that don't have solar and eventually, as Jeff mentioned earlier, the housing bubble is the great example, everything collapses around it. Now's the time to fix it. There's 16,000, roughly , customers that have it today. We've got to get ahead of it because to your point, as people see this, they're going to say I want it and somebody's got to pay for it.

Ted Simons: We have about 30 seconds left. If I'm thinking of putting rooftop solar on, if I've got it on, are an antagonist? Are my friend? Who are you?

Jeff Guldner: If you're a supporter of long term solar energy in Arizona, you've got to find a sustainable solution. You should follow the debate, you should watch what's happening, participate in the debate if you want, it's going to go from us to the corporation commission for discussion of the policy but we're looking for a solution to something so that this can sustained in the long term.

Mark Schiavoni: If I could, solar's an important part of our future. It's everything we provide to the Arizona corporation commission as far as our resource planning, we want solar to be sustained. We just have to find the right way to do this.

Ted Simons: It's good to have you both here, thanks for joining us.

Mark Schiavoni: Thank you.

Mark Schiavoni:Executive Vice President of Operations, Arizona Public Service (APS); Jeff Guldner:Senior Vice President of Customers & Regulation, Arizona Public Service (APS);

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