Well, what many of us anticipated could happen, apparently has happened.

The marketing practices of the preeminent solar leasing company doing business in Arizona have apparently raised questions with the Arizona Corporation Commission Chairman.

In his March 12, 2014 letter to SolarCity CEO Lyndon Rive, ACC Chair Bob Stump expresses concern that SolarCity and other solar providers may have made misstatements to customers about what customers can expect from the ACC’s regulation of net metering provisions. The misstatements in question involve telling prospective customers that “the rates, rules, and regulations applicable to net metering are ‘grandfathered’ thereby implying that the rates, rules, and regulations…are not subject to change.” The Chair goes on to note that the rates and tariffs are subject to change. (Net metering is the mechanism that establishes the prices and conditions for selling excess solar power back to the grid and compensating the utility company for grid access – I wrote about it here, here and here).

Only a few months ago the rooftop solar industry in Arizona was in an epic battle with Arizona Public Service Company over net metering at the ACC. In November, the ACC imposed an additional fixed charge of 70 cents per kW on residential rooftop solar installations to partially lessen the shift of fixed grid-related costs onto non-solar customers. For the typical installation, this added a monthly charge of about $5 on new solar installations beginning January 1, 2014. In its decision, the Commission also grandfathered those solar installations in APS’ service territory installed prior to January 1, 2014 – these customers would not be required to pay the additional $0.70 per kW charge. However, the Commission made clear even these “grandfathered” customers could experience additional charges at a point in the future should the Commission decide additional charges are warranted. In fact, generally, “grandfathered” rates exist only until the ACC decides to change them.

Due to the level of rhetoric and rancorous public discourse accompanying the net metering debate, coupled with the complexity of the net metering mechanism itself, the Commission instructed APS to provide a disclaimer to customers with solar as part of their grid interconnection agreement. The point of the disclaimer was to more clearly inform prospective solar leasing customers that the rates and tariffs for their service under net metering arrangements are subject to change by the ACC – whenever the ACC decides to change them.

Understandably, Tucson Electric Power Company watched the APS net metering discussion closely since the Tucson power company faced similar cost shift issues and confusion among its customers. So, TEP adopted similar disclaimer language in its interconnection agreements with solar customers. Simply stated, TEP’s rooftop solar customers are at risk for changes in TEP’s rates that may be authorized by the ACC. SolarCity cannot unilaterally freeze, grandfather, or otherwise promise the rates will not change.

It now appears TEP customers considering solar installations are complaining about inconsistencies between the information provided by SolarCity and the TEP disclaimer that rates and tariffs could change. SolarCity marketers are allegedly telling prospective solar lease customers that their net metering arrangements under leasing contracts will be grandfathered.

To get to the bottom of customer complaints, Chairman Stump’s letter requests information from SolarCity regarding the company’s sales practices and training programs to ensure prospective solar customers are receiving accurate information about utility rates, charges and conditions of service.

Hopefully, Stump’s letter will help clarify what’s actually happening in the solar leasing market in Tucson and lead to improved communications with customers contemplating solar installations.

In the meantime, I found it interesting that in his letter Mr. Stump questioned a prior Commission decision issued in 2010 that exempted SolarCity from ACC regulation as a public service company. By choosing not to regulate SolarCity at that time, the ACC must rely on SolarCity’s voluntary submission of information, rather than requiring the company to comply with its directives as it would with APS, TEP or any other regulated utility. I suspect SolarCity will nevertheless be responsive to Chairman Stump’s inquiry, because the issue of net metering – which is important to SolarCity’s business model – will continue to be reviewed by the ACC for changes that may or may not be favorable to SolarCity’s bottom line.

We had a feeling that the ACC might, some day, regret its 2010 decision to cut SolarCity free of regulation – even if implemented with a light touch. The first inkling likely came with the over-the-top public relations campaign and carnival atmosphere orchestrated by TUSK (the rooftop solar industry’s front group) during the ACC’s consideration of net metering last year. Now, the marketing miscommunication in Tucson is further evidence that SolarCity and its solar licensing brethren might need additional oversight. Whether reconsideration of bringing SolarCity and others into the ACC’s regulatory fold has reached the tipping point for action by Commissioners remains an open question.

AIC continues to believe SolarCity’s leasing model in which it owns rooftop solar facilities and charges a fee for their output places it squarely under the category of public service corporations subject to regulation by the ACC. It is “furnishing electricity” and should therefore be regulated. Here is what I told the Commission in public comments back in 2010 when the Commission considered the question:

“AIC would not like to see a replay of what happened in the 1970s and 1980s when the solar industry suffered a severe setback and many customers had a very bad experience with the technology and unscrupulous or unqualified solar providers . . . [b]y exercising light-handed regulation, the Commission holds all options open to assure that solar development does proceed positively for: the providers; the customers; the utilities; meeting renewable energy goals; Arizona’s investment climate; and the State’s economy. If you declare at this very early stage that you have no jurisdiction, you have severely limited, if not terminated, your ability to step in and intervene should future events require that intervention.” (Public Comments of Gary Yaquinto, president, AIC, presented to ACC at Open Meeting on June 30, 2010, ACC Docket No. E-20690A-09-0346).

This is not a “told-you-so.” Clearly, Chairman Stump’s letter inquiry into alleged questionable sales tactics is a form of regulatory oversight, even if it does require voluntary compliance by SolarCity. However, absent a determination by the ACC that SolarCity is a public service corporation subject to its regulatory jurisdiction, the Commission is left with little authority to compel corrective actions or to act on resolving disputes between SolarCity and its customers.