Background
In October 2022, Arizona Public Service Company (APS) initiated a rate case before the Arizona Corporation Commission seeking approval of a 22.8% uniform rate increase for all residential customers — solar and non-solar alike. Although the Commission had directed APS in its prior 2019 rate case to prepare and submit both a site-load and a delivered-load cost-of-service study (COSS) to support any future solar-specific charge, APS explicitly declined to propose such a charge in this proceeding. APS asked that the site-load COSS be considered only in future rate cases. The public notice APS issued likewise said nothing about a potential solar-specific charge.
After 24 days of evidentiary proceedings in August and September 2023, Administrative Law Judge Harpring recommended — sua sponte, with no party having proposed it — that the Commission reject the uniform residential increase and instead impose an additional charge applicable only to residential solar customers, equal to approximately 15% above the rate increase for non-solar customers. The Commission adopted that recommendation in its Rate Decision, despite acknowledging that the evidence of record showed APS does not actually provide unique additional services or equipment to residential solar customers. One commissioner dissented on due process grounds.
AriSEIA, Vote Solar, the State of Arizona, and individual solar customers sought rehearing, arguing they had been blindsided by a charge that no party proposed and that the evidentiary record never addressed. The Commission granted a limited rehearing focused on whether the solar charge was “just and reasonable,” but restricted the scope in ways that prevented parties from challenging the underlying site-load COSS or the related legacy solar adjustment. After six additional days of evidentiary proceedings, the Commission issued a Rehearing Decision affirming the solar-specific charges.
The Court’s Holding
The Court of Appeals vacated both the Rehearing Decision and the provisions of the Rate Decision authorizing the solar-specific charges, and remanded for further proceedings. The court agreed with appellants that the proceedings leading to the Rate Decision violated due process. Because no party ever proposed a solar-specific charge, affected residential solar customers had no meaningful notice that such a charge was under consideration and therefore no fair opportunity to present evidence against it — including evidence about the validity of the site-load COSS and the resource-adequacy theory on which the charge rested.
The court further held that the rehearing did not cure the due process violation. By restricting the rehearing’s scope to exclude re-examination of the site-load COSS — which was the entire evidentiary foundation for the solar charge — and by effectively excluding the legacy solar adjustment from review, the Commission denied parties the full and fair hearing that due process requires. Witnesses for the State, Vote Solar, and RUCO each testified that they did not fully develop or present alternative methodologies precisely because the Commission had placed those questions outside the scope of the rehearing.
Key Takeaways
- A utility commission violates due process when it imposes a new class-specific rate charge that no party proposed and that was not identified in public notice, leaving affected customers no opportunity to present evidence or argument against it before the record closed.
- A post-decision rehearing does not remedy a due process violation when the commission artificially limits the scope of the rehearing in a way that forecloses examination of the foundational evidence underlying the contested charge.
- The Commission is not foreclosed from reimposing a solar-specific charge on remand — but must do so through proceedings that provide proper advance notice and a full opportunity to litigate the evidentiary basis for such a charge.
- This decision is non-precedential under Arizona Rule of the Supreme Court 111(c) and may be cited only as authorized by that rule.
Why It Matters
The decision is a significant check on utility commission authority in Arizona. Even where a commission has broad constitutional and statutory rate-setting power, it may not spring a novel charge on a customer class at the tail end of proceedings in which that charge was never on the table. The ruling reinforces that the “higher or different than proposed” boilerplate in utility public notices cannot substitute for specific advance notice when the commission is considering a rate structure that no party — not even the utility — sought.
For Arizona’s rooftop solar industry and its hundreds of thousands of residential solar customers, the decision halts a charge that would have increased their bills by roughly 15% relative to non-solar neighbors. The remand leaves open the possibility that APS could eventually justify a solar-specific charge with a properly noticed proceeding and an evidentiary record that fully examines both the costs APS incurs and the benefits it receives from residential solar generation — a record that, the court found, was never actually built in the proceedings below.