Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Utility’s pricing plans alleged to penalize solar energy customers, exclude competition, (Mar 4, 2015)

By Linda O’Brien, J.D., LL.M.

New pricing plans implemented by an electricity and water utility, which imposed substantial penalties on customers who generated their own electricity using distributed solar energy systems, excluded competition and allowed the utility to unlawfully maintain its monopoly over the retail sale of electricity in the metropolitan Phoenix area, according to a complaint filed on March 2 in the federal district court in Phoenix by SolarCity Corporation, a seller of solar energy systems (SolarCity Corp. v. Salt River Project Agricultural Improvement and Power District, Case No. 2:15-cv-00374-DLR).

According to the complaint, Salt River Project Agricultural Improvement and Power District (SRP)—one of the nation’s largest power utility and provider of electricity and water to most of the metropolitan Phoenix area—made substantial investments in solar power and provide customers incentives to encourage the installation of distributed solar systems. In 2011, as distributed solar systems increased in popularity, SRP began to recognize it as a competitive threat in the long term. In response, SRP developed its "Community Solar" program in direct competition to distributed solar.

SRP introduced in 2014 new pricing plans, Standard Electric Price Plans (SEPPs), under which customers who choose to obtain some of their own power from solar energy systems must pay a substantial penalty to SRP, it was alleged. The new rate plans that apply only to self-generating customers have the purpose and effect of eliminating future distributed solar installations. The plans also dramatically increase the costs of switching to distributed solar.

Because solar customers still need power in the evening hours and at other times when their energy demands exceed what their solar energy systems produce, they cannot easily escape the penalty. The penalty is so significant that it eliminates the economic value to customers of generating their own power. Customers recognize that SRP’s new pricing plans leave them no choice. After the effective date of SRP’s new plan, applications for distributed solar energy systems in SRP’s territory fell by 96 percent. Numerous potential solar customers have complained to SRP that corroborate that the new plans eliminate their ability and incentive to install solar systems, the complaint charges.

The complaint also alleges that the SEPPS place no similar penalties on other categories of SRP customers who have similar characteristics with respect to their use of the SRP grid, including customers who make relatively low or reduced electricity purchases from SRP for other reasons. Additionally, the penalties do not correspond to any unique characteristics of distributed solar systems. Although the SEPPs state that the penalties would apply to other technologies such as battery storage or fuel cells which may be viable in the future, they were imposed without regard to any actual impact of such technologies on SRP’s cost recovery. SRP’s new self-generation price plans manifestly exclude competition and unlawfully maintain SRP’s monopoly over the retail sale of electricity within its territory.

The plaintiff asserts claims for monopolization, attempted monopolization, and restraint of trade in violation of Sections 1 and 2 of the Sherman Act and the Arizona Uniform State Antitrust Act, as well as intentional interference with prospective economic advantage and intentional interference with contract.

The case is No. 2:15-cv-00374-DLR.

Attorneys: Richard J. Pocker, William A. Isaacson, Karen L. Dunn, Steven C. Holtzman, John F. Cover, Jr., and Kieran P. Ringgenberg (Boies Schiller & Flexner LLP) for SolarCity Corp.

Companies: SolarCity Corp.

News: Antitrust ArizonaNews