PHOENIX — An expert witness for APS confirmed during sworn testimony that large utilities oppose customer-sided energy policies because they cut into shareholder profits.
Renewable energy advocates say the “refreshingly candid” acknowledgement by Dr. Roger Morin reveals a reality about for-profit utilities.
“The APS witness here is saying the quiet part out loud, a rare example caught in the wild of a utility witness acknowledging that a primary reason they are so opposed to technologies like rooftop solar and other things their customers can own is because it threatens their business model and it threatens their profits,” said David Pomerantz of the Energy and Policy Institute, a nonprofit energy watchdog that advocates for renewables.
APS has stated in the past that it is “absolutely committed” to customer-sided renewable programs, and that the company’s past resistance to such programs is the result of administrative prudence. They cite safety concerns and the potential for cost-shifting consequences. Critics question whether those justifications are genuine.
Why utilities oppose customer-sided technologies
Morin’s testimony on Aug. 25 is part of a multi-week hearing over a new APS rate hike request before the Arizona Corporation Commission. Morin is a longtime consultant who specializes in corporate finance and utilities.
He was answering questions about prosumers; homeowners who have rooftop solar and, in some cases, accompanying batteries. Prosumers generate excess power that alleviates demands on the power grid. The Department of Energy says the distributed generation model, if implemented correctly, is crucial to the green energy transition.
Morin was answering questions from attorney Court Rich who represents solar companies.
Rich: “Do you believe that a growing number of prosumers is a business risk to utility’s shareholders and company profits, correct?”
Morin: “Yes, it’s what we refer to as a bypass risk.”
Rich: “And would you agree that one of the dangers to utility shareholders from the increasing growth of the prosumer is that the investments made by the prosumers with their own money may supplant investments that the utility may otherwise have been able to make and earn a return on, for the benefit of their shareholders?”
Morin: “It makes it a lot riskier and it’s even much harder to forecast demand, given the uncertain impact of prosumers.”
Rich: “Okay so you agree with my statement?”
Morin: “Yeah, I agree.”
Rich: “Okay. And in fact, this is one of the many reasons that we’ve seen utilities around the country oppose many customer-sided technologies, correct?”
Morin: “That is correct.”
APS declines to discuss Morin’s comments
Asked about Morin’s comments on Monday, a spokesperson for APS did not address them directly.
“I will emphasize APS is committed to serving our customers with energy that is reliable, affordable and clean,” said Jill Hanks of APS. “We are providing customers energy that is 51% clean today and growing on our path to 100% percent carbon-free by 2050.”
APS: distributed energy could have 'adverse impact' on finances
Pomerantz said Morin’s testimony presents “a more honest version” of what’s happening in the utility industry.
“I think it’s useful to have a clip like this because it can help people cut through talking points and cynical, disingenuous things that utilities tend to say,” Pomerantz said. “Customers can do whatever they want with that knowledge.”
The utility has previously stated that distributed energy technologies pose a potential threat to its profits.
In a federally required 2022 Securities and Exchange Commission report, APS wrote under the "Operational Risks" section the following: “Energy efficiency requirements, distributed energy requirements and other emerging technologies, unless substantially offset through ratemaking mechanisms, could have a material adverse impact on APS’s financial conditions, results of operations and cash flows.”
Critics point to 2 Commission decisions this year
Earlier this year, APS successfully convinced a majority of the Commission give the utility full control over whether outside companies should be allowed to build Competitive Community Solar programs in APS territory. APS cited an expert opinion, saying the program would cause a cost-shift to customers.
Rich, representing the solar industry, asked the Commission to independently evaluate the impact of Competitive Community Solar before making their decision. The Commission sided with APS.
APS also requested commissioners allow the company to push back deadlines in the testing phase of a program intended to ramp up home battery storage and distribution, known as the DDSR Aggregation Tariff.
APS requested two deadline extensions beginning in 2020. APS told commissioners in February of this year the program would create a cost-shift burden to other consumers. However, a lab run by the U.S. Department of Energy that was hired by the commission to evaluate APS’s cost analysis determined APS ignored 95% of the program’s financial value. APS now has an Oct. 1st deadline to redraft a tariff.
'Getting the tariff right is more important than speed'
12News asked Commissioner Lea Márquez Peterson, sponsor of the DDSR Aggregation Tariff, if she was satisfied with the pace at which APS was working to develop the tariff.
In its September 2022 report, the Lawrence Berkeley National Laboratory said the lack of information provided by APS “raise questions about the validity, completeness, and certainty of the APS benefit cost analysis and bidder selection.”
No stakeholder objected to a timeline extension for APS, Márquez Peterson said by email to 12News in May.
“Some stakeholders stated that getting the tariff right is more important than speed,” Márquez Peterson said.
Asked if she believes APS is fully committed to developing the tariff in a timely manner, Márquez Peterson said based on progress reports it appeared APS had worked collaboratively with LBNL.
“I cannot speak regarding whether APS is ‘fully committed’ to developing this in a timely manner,” Márquez Peterson said.
APS has also been ordered by the Commission to work hand-in-hand with the Lawrence Berkeley National Laboratory, leading up to the October deadline. 12News has asked LBNL, APS and a contractor for LBNL if the utility is working with the lab. None of the entities have responded.
Customer-related programs offered by APS
APS currently offers a Cool Rewards smart thermostat program and a “Solar Communities” program that facilitates 3rd-party construction of solar panels on rooftops of lower-income homeowners. Participating homeowners of Solar Communities receive a $600 annual credit to their energy bill. 12 News asked APS about current participation rates in that program. APS has not yet responded.