LOS ANGELES Nov 14 (Reuters) - Proponents of solar power will face off with Arizona's biggest utility on Thursday in a last-ditch effort to sway regulators who are preparing to rule on the fate of a little-known solar subsidy that, if altered, would be a blow to the burgeoning U.S. rooftop solar industry in one of its biggest markets.
The Arizona Corporation Commission's expected vote will be watched closely by utility and solar players far beyond the Grand Canyon State. That's because the two industries are increasingly at odds over a policy known as net metering, which allows homeowners with rooftop solar systems to sell the power they don't use back to their utilities at retail rates.
The policy has buttressed the growth of rooftop solar because it helps reduce the cost of going solar for homeowners. But utilities say it has another impact: it shoulders citizens who don't have solar panels with an unfair share of the cost to maintain the electric grid.
The Arizona Commission's five-member panel kicked off a two-day hearing in Phoenix on the issue on Wednesday, listening to dozens of comments on the issue from members of the public. The commissioners, who are elected, will weigh various proposals on modifying net metering policies on Thursday before taking a final vote on the issue.
Arizona became the nation's top battleground over net metering when its biggest utility, Arizona Public Service, earlier this year sought approval from regulators to either add a charge to solar customers' bills or to lower the price at which it will buy the excess power their panels generate.
The utility argued that the dramatic growth of residential rooftop solar in its service territory - systems are being added at a rate of about 500 a month - has shifted $18 million in annual costs to non-solar customers.
Commission staff have recommended the panel take no immediate action on net metering and instead evaluate the issue during APS's next rate case in 2015 - a solution the solar industry supports.
If the Commission adopts either of APS's proposals, companies like SolarCity Corp, Sunrun and others who finance or install residential solar systems could see the critical part of their sales pitch - monthly payments on their solar panels that are less than what they were paying the utility company - erode significantly.
Not only would policy changes hurt the fast-growing market for financed solar systems, they would also either extend the payback period for consumers who lay out the roughly $20,000 to $30,000 to own their solar panels outright, or force installers of those systems to take a hit to their margins.
That would be a big setback to solar businesses in sunny Arizona, which was the No. 2 state for photovoltaic solar installations in the second quarter of this year. The state's solar industry employs about 10,000 people.
The hearing in Phoenix mainly featured testimony from solar system owners and company employees who said they were against the APS proposals. The chief executive of SolarCity, the nation's top solar panel installer, also made an appeal.
"The truth is APS is afraid of the competition and doesn't want to give consumers the control," CEO Lyndon Rive said.
Some people testified, however, that they were concerned about burdening low-income ratepayers who can't afford to go solar with all the costs of maintaining the grid.
Challenges to net metering have cropped up in several states, but it has yet to be rolled back in any of the 43 states with such policies.
In Arizona, the two sides in the last few months have waged high-profile ad campaigns to win over the public.
APS's parent company, Pinnacle West Capital Corp, said earlier this month it had spent $3.7 million on lobbying efforts tied to the net metering issue in Arizona.
The Alliance for Solar Choice (TASC), whose members include SolarCity, Sunrun, Sungevity, Solar Universe, Verengo Solar and REC Solar, had spent more than $335,000 as of Oct. 31 and planned to spend an additional $100,000.