SolarCity Corporation v. Salt River Project Agricultural Improvement and Power District, a case currently pending in the United States District Court for the District of Arizona, presents some interesting antitrust issues.
Using well-know antitrust counsel Boies Schiller, SolarCity recently sued a utility in Arizona on a variety of antitrust grounds. The dispute stems from additional fees that the utility, Salt River Project (SRP), will charge to customers with rooftop solar panels. Those fees could total up to $600 annually, which SolarCity asserts effectively eliminates the benefit of rooftop solar for residential customers. This could be part of a very broad and prolonged fight throughout the country between rooftop solar companies and utilities.
With various subsidies and the mandated ability to sell excess electricity back to the utility at peak rates, rooftop solar was quite a boon for companies like SolarCity and for homeowners. The utilities, however, contended that they’re not covering fixed costs because they have to pay the top rate for the excess electricity even though it typically isn’t produced during peak demand time. Many solar arrays face directly south, so they produce the most energy from 11:00 – 1:00 or so. The peak demand in the desert in the summer, however, is about 3:00 – 7:00, when it is the hottest. Of course, SRP can’t really store the electricity until later in the day due to technological constraints.
SRP enacted the special fees in February 2015, and SolarCity filed suit only days later. SolarCity contends the fees are anticompetitive and designed to protect SRP from having to compete with customers who generate electricity with rooftop solar arrays provided by companies like SolarCity. SRP argues that the 98% of customers without rooftop solar are effectively subsidizing the 2% with it. From SRP’s perspective, the solar customers use the electrical grid to buy and sell electricity, but they don’t bear their share of the grid’s fixed costs.
Making this even more unusual is the fact that SRP isn’t a traditional utility. It is a creation of federal and state law and is considered a political subdivision of the state. Its board (elected by the landowners in the power district) may set rates, etc., without going through the state’s corporation commission (the utility regulator). Thus, it isn’t clear that the eventual resolution will affect similar disputes among more traditional utilities and the rooftop solar industry. It will, however, present some interesting issues regarding the state action doctrine of antitrust immunity. We don’t yet know who is representing SRP, but we know Boies Schiller is an antitrust heavyweight, so the case should present top-notch lawyers. It also seems inevitable that we’ll see a putative class action by solar panel customers affected by the fees and those who contend they wanted to become solar customers.
A copy of the complaint in the case is available on the federal Pacer/CM-ECF system, District of Arizona, Civil Action No. 15-374, Rec. Doc. 1. Additionally, those who are interested may email Mr. Smith at his email address below and receive a PDF copy of the complaint.
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James D. Smith
Bryan Cave LLP
2 North Central Avenue
Suite 2200
Phoenix, Arizona 85004
Office: (602) 364-7011
Mobile: (602) 793-3746
Fax: (602) 716-8011
jdsmith@bryancave.com