Discriminatory rooftop solar charges may violate antitrust law

When his electric bill went up by about 65% because he has solar panels on his roof, William Ellis joined three others to file an antitrust lawsuit against their Arizona utility, Salt River Project (SRP), in federal district court. They alleged that SRP aimed “to stifle and eliminate all competition from the growing solar energy market.”
“Applications for solar energy systems in the SRP territory fell by more than 90%” after the new pricing went into effect, the lawsuit said. Under that pricing, customers adding solar would need to pay a higher distribution charge plus a peak demand charge, totaling an average of $600 per year.
When the federal district court dismissed the case, the plaintiffs appealed to the U.S. Court of Appeals for the Ninth Circuit, where they gained support last week from the U.S. Department of Justice. The Department’s Antitrust Division pursues antitrust cases for the federal government, and occasionally offers legal analysis in private antitrust cases.
“Unlawful”
The Justice Department took the side of the rooftop solar owners in a “friend of the court” brief filed with the federal appeals court.
Quoting from the district court’s holding, the Justice Department argued that “when SRP adopts pricing practices that ‘penalize solar energy investments,’ and ‘force consumers to exclusively purchase electricity from [SRP] by making solar energy system installation uneconomical,’ SRP engages in unlawful exclusionary conduct by foreclosing competition.”
The federal district court had found no “antitrust injury” from these practices.
“The district court made analytic errors in its decision” on antitrust injury “that warrant reversal and remand,” the Justice Department argued, urging the federal appeals court to direct the federal district court to consider the case anew, and to follow this guidance.
Moving to competition
The Justice Department acknowledged the well-known fact that a state may grant an electric utility the right to a monopoly in a given service area—a fact that SRP used in arguing a “state-action defense.”
But the Justice Department agreed with the district court that SRP did not meet its burden to “show a plain and clear state policy to displace competition.” Rather, “Arizona statutes express a state policy to transition from a regulated monopoly system for the retail sale of electricity to a competitive one,” said the Department’s brief, citing a 1998 Arizona law.
That 1998 law, the brief explained, specifies that “public power entities” such as SRP “shall allow any provider of electric generation service access to [their] electric power transmission and distribution facilities” under rates and conditions that are “comparable to the rates charged for the public power entity’s own use of the same facilities.”
A second “friend of the court” brief filed by citizens’ groups took a different tack to reach the same conclusion, arguing that Arizona’s “strong support for renewable energy and rooftop solar expansion refutes SRP’s argument that its discriminatory rates are state-authorized.” That brief was filed by the Center for Biological Diversity and four other citizens’ groups.
Equal Protection
Beyond alleging a violation of antitrust law, Ellis and the three other rooftop solar owners also argued that SRP’s practice of charging solar owners more for their electricity violates the Equal Protection Clause of both the U.S. Constitution and the Arizona Constitution.
The solar owners said in their lawsuit that customers have “the right to be charged for services equally based on the amount of electricity consumed, regardless of whether a customer chooses to supplement their supply of electricity with solar technology.”
While the federal district court dismissed this claim, the “friend of the court” brief from the citizens’ groups supported this equal protection argument. Jointly submitting the brief with the Center for Biological Diversity, whose attorneys wrote the brief, were Food and Water Watch, Friends of the Earth, Institute for Local Self-Reliance, and NC Warn.