The rate request for a small, rural utility in Arizona could set a precedent for how electricity tariffs are designed throughout the state, and possibly in other parts of the country.
UniSource Energy Services, with roughly 90,000 customers, is seeking to implement a three-part rate with a mandatory demand charge of about $5 per month for all residential electricity customers. Demand charges are based on a customer’s highest average usage over a given period of time, and are typically offset by lower volumetric rates at other times.
Demand charges are common among commercial ratepayers, but no utility in the U.S. currently requires residential customers to pay them.
In addition to the demand charge, UniSource has requested to increase fixed charges from $10 to $15 per month. The utility is also seeking to lower the net-metering credit for rooftop solar customers to roughly half of its current value.
The UniSource case unfolds as solar advocates and lawmakers agreed last week to drop competing ballot initiatives on net metering. Solar companies and Arizona’s largest utility, Arizona Public Service (APS), have agreed to launch separate talks to try to settle on a mutually acceptable tariff structure going forward.
Net metering credits aren’t the only issue up for discussion. Like UniSource, APS plans to file a request for mandatory demand charges in June. Tucson Electric Power, UniSource’s sister utility, could introduce demand charges in its rate case too. Both utilities are closely monitoring developments in the UniSource proceeding, which is the first to go before the commission.