By David Wichner 5/4/10
ARIZONA DAILY STAR
State regulators are recommending approval of $14 million worth of new solar-energy projects proposed by Tucson Electric Power Co., including expansion of the company’s massive photovoltaic array at Springerville.
If the plan wins final approval later this month, it could result in increases starting next year in surcharges customers pay monthly to pay for renewableenergy projects. But longer term, the plan represents a shift to long-term funding of such renewable-energy projects through basic electric rates.
The utilities staff of the Arizona Corporation Commission has recommended that the panel approve construction of two company-owned solar projects — 1.8 megawatts of additions to TEP’s photovoltaic plant near the coal-fired Springerville Generating Station, and a new, 1.6megawatt solar array at Tucson International Airport.
The Springerville project would cost $7.3 million and add to the existing 4.6-megawatt photovoltaic array, already one of the nation’s biggest utility-owned solar plants. The airport project, with solar panels that track the sun, will cost $6.7 million.
Like other renewable-energy projects, the Springerville solar array was funded through surcharges on customers’ electric bills.
The plan proposed by TEP and recommended by the commission staff would fund the projects initially through the surcharge.
When TEP files its next rate case, after its currently capped rates expire at the end of 2012, the plan would shift funding to the company’s rate base — costs for the array of generating assets, including coal- and gas-fueled power plants, on which rates are based.
The plan would spread the costs over 20 years, while the surcharge is adjusted annually to pay for pending projects or programs like customer rebates. “It represents a transition of sorts in the way utilities handle renewables now,” TEP spokesman Joe Salkowski said.
Figures on the effect TEP’s latest plan would have on monthly bills were not immediately available, but funding major projects through the surcharge alone canbecostly.
TEP originally proposed a combination of companyowned and third-party renewables projects and asked to boost the cap on the usage- based renewables surcharge to $9 from $4.50 monthly for residential customers, along with increases in surcharges for business customers.
In January, the commission delayed consideration of TEP’s company-owned projects. To pay for other renewable- energy efforts, the panel raised the surcharge rate and cap on commercial customers substantially — to $160 from $75 monthly for small businesses — but cut the residential cap to $3.20 from $4.50.
When spread over three years through the renewable surcharge alone, the $14 million in proposed TEPowned projects would cost ratepayers more than $5 million per year, including financing costs, according to documents filed in the case. Spread over five years, the cost would top $3 million annually.
In contrast, initial funding through the surcharge would cost about $1.8 million next year, $1.7 million in 2012 and $1.6 million in 2013. Added to base rates over the next 17 years, the increase in rates would likely amount to fractions of cents per kilowatt-hour.
Corporation Commission Chairman Kris Mayes said that while she couldn’t comment specifically on the pending TEP case, she generally supports the move to include renewables in utilities’ rate bases.
“It’s important to mainstream renewable energy into the utilities’ portfolios,” Mayes said. “It’s important for the utilities to have that mindset that this is a form of generation like the others.”
She noted that the commission has allowed Arizona Public Service Co., the state’s largest regulated power utility, to include 50 megawatts of renewableenergy generating capacity in its rate base.
But Mayes also plans to propose an amendment to TEP’s plan that would require the company to buy additional power from independent owners of renewable- energy plants.
“We need a good mix of independent solar-energy producers and companyowned projects,” she said.
The commission plans to take up the issue May 13.
Contact Assistant Business Editor David Wichner at 573-4181 or dwichner@azstarnet.com
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