March 1 (Reuters) - Solar installation companies and Arizona's largest utility said on Wednesday that they had reached a long-sought deal under which new rooftop solar systems would be compensated at a lower rate for the energy they send to the grid.
The settlement agreement between Arizona Public Service, a division of Pinnacle West Capital Corp, and solar installers including Sunrun Inc, must be approved by state utility regulator the Arizona Corporation Commission.
Sunrun said the deal would enable it to continue to do business in the state, but said it should not be a model for other states.
"We still think that the settlement doesn't fully value solar," Sunrun vice president of public policy Alex McDonough said in an interview.
Under the deal, new solar systems will receive 12.9 cents per kilowatt-hour for the excess electricity sent back to the utility. Previously, they had received the full retail rate, which in Arizona ranges from 13 cents to 14 cents, according to Sunrun. The bill credit for excess energy, a policy known as net metering, is key to making an investment in solar panels work financially.
Last year, Nevada scrapped its net metering policy, prompting solar installers including Sunrun and Tesla's SolarCity to abandon doing business in the state.
APS customers will also be able to choose between a rate structure that varies depending on the time of day, or on a traditional structure that includes a charge calculated based on a household's electricity demand. The solar industry had fought a mandatory "demand charge" for customers.
Broadly speaking, incentives for rooftop solar have become less generous as the cost of solar panels has declined, ushering in dramatic industry growth.
Utilities have argued that as more customers go solar, it leaves the burden of maintaining their systems on a smaller number of customers. Solar advocates, however, have said that increased levels of rooftop solar allow utilities to avoid making major new investments in their distribution systems that would cause rates to rise.
(Reporting by Nichola Groom)