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SolarCity Corp (SCTY) Case Against New SRP Rates Moves Forward

Elon Musk SolarCity Corp (NASDAQ:SCTY)

SolarCity Corp’s  lawsuit against Salt River Project is moving forward once again. The energy firm claims that the new rates established by SRP are a scheme devised to get rid of competition. SRP has denied such allegations, claiming that the rates in question are both economic and reasonable.

Elon Musk SolarCity Corp (NASDAQ:SCTY)

In Arizona, a federal court judge has concluded that the case filed by SolarCity against Salt River Project can finally move forward. The ruling disregards requests made by the Arizona public utility not to proceed with the case. The decision, made late last month, also overlooks SolarCity’s claims for antitrust damages. Claims for non-monetary subsidies against SRP have also been done away with.

SolarCity Corp Case Proceeds

Late February saw Salt River Plan approve a new pricing rate. The plan approves an additional charge of $50 per month to solar systems that are leased and owned. This is mainly based on a charge on new demand. Metering rates were reduced as well. They were brought down from 0.09c per KW-hour to 0.05c per KW-hour.

Systems installed before the new pricing plan are excluded from the changes. The new deal allows for a 20-year exemption period for all solar system install before the 8th of December 2014.

“We believe SRP designed the new terms to make rooftop solar uneconomical,” says SolarCity spokesperson Nate Watters. He explains that the terms were devised to “exclude competition” and “punish consumers who want to adopt rooftop solar.”

Advocates in the Midwest won another solar power-related case against We Energies. The victory comes three days after the ruling on the SolarCity battle. The company’s decision to introduce a new fee to solar users was reversed by Wisconsin’s Dane County circuit court. Users were previously subject t a $25 per month fee for every 6 KW unit.

Presiding over the case was Judge Peter Anderson. The judge ruled that the evidence offered in support of the area’s Public Service Commission was insufficient to allow the case to move forward. An uninfluenced study of the detriments and benefits of solar power may have resulted in the commision’s favour, commenters say.

The Impact Of SRP Rates

There seems to be no shortage of similar cases around the U.S. The Alliance for Solar Choice had just filed a case for review against regulators in Hawaii. TASC is against regulators’ decision to do away with the state’s metering tariffs. Again, the regulators have been called out on their lack of independent and unbias research.

SolarCity claims that SRP fees have caused solar adoption to drop by around 95 percent in Arizona. Though GTM studies have revealed that the situation is likely to be exaggerated. In SRP areas, a decline less than 75 percent was seen in the installation rate of solar systems during the second half of 2015, GTM reports.

This is mostly due to less pre-rate exclusions. However, the SRP insists that the changes in rates were essential in ensuring that solar users pay their fair share for electrical grid usage. Project also states that the fees accommodate for network maintenance and upgrades, too.

New Rates Could Be Beneficial

SRP states that the new demand charge lets solar users have more control over energy usage, allowing them to save money as well. The project has invested more than $1 billion in its electrical system. The organization is a non-profit, community-based initiative.

As such, it directs all income back into the grid. However, Chief Financial Executive Aidan McSheffrey has said that its income is not enough to cover costs. It is reported that SRP will see a net loss of $46 million in the next financial period.

Earlier this year, McSheffrey said that: “Rather than solve this cost shift in with an additional fixed charge – which does not provide flexibility to save money – our new plan sends a price signal [for] more efficient installations by the solar industry and behavior by the customer that maximize the value of their solar systems.”

This point may be difficult to counter by SolarCity. The firm would have to prove that no fair economic benefits can be derived from the adopted rate plan, and that is was created to get diminish its rivalries.

“Because SRP’s board adopted rate structures for all customers to pay their fair share of the costs of maintaining and improving the electrical grid, SRP is confident that it will prevail even on the limited claims the Court has allowed to proceed,” says SRP’s Scott Harelson.

“We look forward to showing that utilities cannot exploit their monopoly power to try to eliminate competition,” Watters stated.

SolarCity Corp Shares

SolarCity shares went down by 19.65 percent during Friday morning’s pre-market trading. The drop set the firm’s stock at $31.59, pre-market, and was due to the renewable energy entity’s unpleasing third quarter earnings.

SolarCity Corp held a non-GAAP net loss of $2.41 per diluted share. This surpassed analyst prediction of only a $1.95 loss. Looking ahead, SolarCIty stands to see a net loss of around $2.70 per share next quarter.

TheSteet has rated SCTY  shares as a Sell.

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