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The Arizona Court of Appeals has ruled that efforts by Arizona utilities to impose extra fees on homes with residential solar systems violated due process, and has overturned a December 2024 decision that allowed such charges. According to the court’s ruling, reported by PV Tech, the decision means residential solar customers in Arizona will no longer face charges from the Arizona Public Service (APS) utility that are 1.15 times higher than those for non-solar residential customers.
The judgment was issued this week by presiding judge Daniel J. Kiley, alongside judges D. Steven Williams and Cynthia J. Bailey. Vote Solar, a community solar advocacy group that opposed the rate increase, described the fees as discriminatory. The organization estimated the charges amounted to an additional $2 to $3 per month for households.
A representative of Vote Solar commented that the decision marks progress toward a fairer and more affordable energy system, and stated that monopoly utilities should not be allowed to impose unjustified charges on households that choose to reduce their utility bills by installing solar.
The ruling is significant in Arizona, which has one of the largest residential solar sectors in the United States. According to figures from the Solar Energy Industries Association (SEIA), which also opposed the rate increase, Arizona currently ranks fourth among U.S. states in total solar PV capacity in operation and third in residential solar capacity. More than 15% of Arizona homes have solar panels installed. The state added more residential solar capacity than utility-scale capacity in 2021 and 2022, a period that coincided with APS efforts to impose higher fees on residential solar customers.
APS had previously been ordered in 2019 to remove a so-called grid access charge (GAC) for solar projects, which had been introduced in 2013. The utility introduced a new GAC in 2022. Arizona utilities have long argued that residential solar customers should pay higher rates, with APS seeking a specific charge for solar customers as early as 2013, alleging that those customers paid less than their fair share of the utility’s costs.
In 2019, the Arizona Corporation Commission (ACC), the state’s public utilities commission, instructed APS to remove the GAC, which was a charge on solar projects that paid less than their fair share of APS fixed costs. At that time, the ACC left open the possibility of future charges if APS could provide evidence of specific costs imposed by residential solar users on its system.
APS initiated a new rate case in October 2022, seeking to address an annual budget gap of $772 million by raising the base rate for all residential customers by 22.8%, regardless of whether they used solar. Neither the ACC nor APS attempted to reintroduce the GAC at that stage, instead focusing on increasing costs for all residential customers. The idea of imposing additional costs on residential solar customers came from administrative law judge Sarah Harpring, who, in a 2023 case, recommended something no one had requested.
During the 2023 case, APS witnesses distinguished between site-load COSS and delivered-load COSS, referring to a cost-of-service study (COSS) required for rate changes. The site-load COSS includes the total electricity to be delivered, including on-site generation from residential solar systems, and was said to better reflect costs incurred by the utility. APS did not ask the ACC to include its site-load COSS estimates in new rates, only referencing it to set a precedent for future proceedings. However, Harpring recommended that the ACC use the site-load COSS in rate calculations.
In March 2024, the ACC voted to adopt the recommendations, including the 22.8% base rate increase for all residential customers and Harpring’s recommendation to impose a charge on residential solar customers, increasing their bills by 1.15 times the average increase. Vote Solar and SEIA stated they were blindsided by the recommendations and the ACC’s decision.
The rate increase faced ongoing opposition. In a 2024 hearing, judge Belinda A. Martin called on the parties to address the site-load COSS issue, suggesting uncertainty remained about the utility’s cost-of-service study and the cost of serving residential solar customers. The Court of Appeals ruled this week that the ACC was aware that APS’s work in its 2022 rate case did not constitute the analysis of costs that the ACC had requested after the 2019 decision. The ACC noted that APS does not provide additional services or use additional equipment to serve residential solar customers, meaning those customers were to be charged more without receiving extra services.
Presiding judge Kiley wrote in the final ruling that although the commission determined APS does not provide unique services to residential solar customers, it nonetheless authorized a unique charge on those customers. The court’s decision does not reject the concept of grid access charges for residential solar projects in general, but rather finds that the legal process between 2019 and 2024 was flawed due to the absence of a cost-of-service study demonstrating higher costs for serving residential solar customers.
Vote Solar noted that the ACC is currently considering a separate APS proposal to increase fees for residential solar customers, which would raise costs to around $6 per month. The ongoing legal battles in Arizona highlight the uncertain policy environment facing the U.S. solar sector. Policy will be a topic of discussion at Solar Media’s PV CellTech USA Conference in San Francisco on October 13-14, 2026, particularly regarding government incentives for building more upstream manufacturing capacity in the United States.
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