9th Circuit ruling a 'game changer' in rooftop solar charge battle

In a Jan. 31 ruling, a federal appeals court reversed a lower court's ruling and determined that a Salt River Project rooftop solar customer demonstrated that he suffered antitrust injury when the utility dramatically hiked the rates for its solar customers.

A three-judge panel for the U.S. Court of Appeals for the 9th Circuit determined that rather than increasing competition among power suppliers — a state policy preference — the rate hike decreased competition and, therefore, was exclusionary.

Jean Su, a senior attorney and energy justice director with the Center for Biological Diversity, tweeted that the ruling "is a game changer in the struggle to defend rooftop solar" as utilities across the U.S. seek to charge rooftop solar owners more for systems that effectively run billing meters in reverse. However, SRP's status as a federal utility that sets its own rates without oversight complicated the ruling.

At issue was a new pricing scheme introduced by SRP in 2015 that established separate rates for rooftop solar customers, allowing the utility to charge solar customers up to 65% more than earlier net-metering plans.

William Ellis, a rooftop solar customer, was joined by several other plaintiffs in suing SRP over the rate hikes. The plaintiffs alleged that the new program was designed to discriminate against customers who wish to use rooftop solar generation and stifle competition in the electricity market.

A district court dismissed the complaint on multiple grounds, including finding that the plaintiffs failed to comply with state statutory requirements and to show that the rate hike violated federal antitrust laws.

The 9th Circuit's Jan. 31 ruling upheld several of the lower court's findings, including the dismissal of Ellis's state-law claims. However, it reversed the lower court's ruling barring the antitrust claims, citing the court's "uncontested conclusion" that SRP's rate hikes were designed to discourage more rooftop solar installations by making them too expensive.

"By the district court's own logic, solar-energy systems are uneconomical, at least in part, because of SRP's exclusionary conduct," Judge Eric Miller wrote for the court. Ellis was "'directly and economically hurt by' SRP's exclusionary pricing scheme, which is aimed at suppressing competition by discouraging customers from installing solar-energy systems."

The court also shot down SRP's argument that the rate at issue cannot be challenged due to the filed-rate doctrine, which bars federal antitrust challenges to rates approved by federal and state agencies.

"The problem for SRP ... is that it does not file its rates with anyone other than itself," Miller noted. SRP's board sets the utility's rates, which are not reviewed by the Federal Energy Regulatory Commission or any state body.

"We have never extended the filed-rate doctrine to unilateral, unsupervised rate-setting by a market participant," Miller continued. "In that context, there is no reason to presume that 'rates are just and reasonable as a matter of law' and should be immune from collateral challenge."

The court similarly dismissed SRP's assertion that the displacement of competition "is a natural consequence" of its authority to set just and reasonable rates. Noting that Arizona has "clearly" stated the need for the state's power generation and supply to be competitive, the court found SRP's action is not entitled to so-called state action immunity because that action is inconsistent with state policy.

However, the court also concluded that the Local Government Antitrust Act, which precludes the recovery of antitrust damages "from any local government, or official or employee thereof acting in an official capacity," shields SRP from federal antitrust damages.

But because Ellis also sought declarative and injunctive relief, which is not barred by the Local Government Antitrust Act, the court remanded the case to the U.S. District Court for the District of Arizona for further proceedings.

Joining Miller in the opinion, Ellis v. Salt River Project (No. 20-15301), were Judges William Fletcher and Danielle Forest.

The Jan. 31 ruling comes as the California Public Utilities Commission considers a sweeping proposal that would effectively end the state's net-metering program as it has existed over the last 25 years. That proposal would add new fees to rooftop solar installations through a "net billing tariff" aimed at reducing the financial burden on ratepayers without rooftop solar facilities.

Opponents of the California PUC's proposal have claimed that it runs afoul of the Public Utility Regulatory Policies Act of 1978, a pro-renewables statute with implementing rules that were overhauled by the Federal Energy Regulatory Commission in July 2020.