The solar barbarians are at the gates of the utility empire.
A report issued by the Edison Electric Institute early this year prodded utilities executives to go on the offensive. "Disruptive Challenges" compared utilities today to the airline and telecom industries before deregulation and technological advances wreaked havoc on them.
Rhone Resch, head of the main solar lobby, the Solar Energy Industries Association, referred to the paper at a conference in October:
"EEI's report singles out distributed generation and solar energy as its No. 1 long-term threat. And since that report was published, utility CEOs around the country have been singing from the same song sheet—roll back net metering, institute fixed monthly charges for solar customers, protect us from consumer choice. They are aligned in their approach to dismantle net metering laws in this country."
Utilities also had an important victory this year: the California Public Utilities Commission released a much-anticipated draft report in September that lent support to the utilities' basic argument: that rooftop solar users are getting more than they're giving through the net metering arrangement, and the result is that nonsolar users (i.e. everyone else in the Golden State) will pay a collective $1.1 billion more a year by 2020.
Fair solar share
Currently there are around 20,000 rooftop solar customers, APS spokesman McDonald said, and it has been "manageable" for the rest of the grid's customers to pick up the financial slack. But with continued rapid adoption, "When we have 50,000, 100,000 or 200,000 rooftop customers, eventually we'll have half the customers not paying and the other half unable to pay," McDonald said. "We need to fix the cost-shifting problem before it becomes so big that it can't be fixed. Rooftop customers are not paying their fair share for the grid," he said.
Bernard Weinstein, an economist with Southern Methodist University's Cox School of Business, said tax credits are fueling the rush into solar, and that net metering is another "implicit subsidy" that shifts costs on to other consumers.
But clean energy backers see the question of fairness differently.
Francis Hodsoll, founder of Virginia Advanced Energy Industries, a business-based clean energy advocacy group in Virginia, said: "We don't bill a house outside of town more than the one in town, even though it costs more to deliver power to them. But now we're saying people who self-generate, we're going to punish them?"
Hodsoll also said that rooftop solar customers reduce the demands on assets throughout the system, and thus reduce the need for grid infrastructure.
(Read more: Sell Treasurys, buy solar bonds?)
Some utilities are taking a more progressive approach than others. NRG Energy, for instance, has put some $1 billion in solar and green-tech investments. Duke Energy has bought into Clean Power Finance, a residential solar financing and design company, and in 2009 invested directly in 10 megawatts of solar distributed across North Carolina rooftops.
Shah also said many utilities have taken a fair and balanced view including Georgia Power, Austin Energy, CPS (San Antonio) and PSEG.
McDonald even said that APS is pro-solar, and has invested billions in solar technologies. But "what the rooftop solar companies are doing is hurting the cause of renewables," he said.
"Do the books completely balance for solar versus utilities? I don't know," Hodsoll said. "But there's a net benefit to the system by having these distributed resources. And if you get rid of net metering, you'd be denying that benefit."
Andrew Ricci, formerly an aide to two congressmen—one a solar advocate, the other from coal country—said both sides are guilty of oversimplifying the issues and playing to the lowest common denominator. He said the playing field has shifted in more ways than one, not just with the rapid adoption of solar and its improving economics, but through the advent of social media—the old monopoly doesn't have quite the advantage it used to.
"People are able to call out APS for lying, and turn what might have been a one-day story into a refrain in the echo chamber" within blogs, columns, comments and tweets, said Ricci, who is now a director with Washington-based public relations firm Levick.
"It really allows individuals to be the new trustbusters," he said.
A CBS affiliate reported that nearly a thousand people had packed the Arizona Corporation Commission's parking lot for a pro-solar rally on Wednesday, and around 300 signed up to speak at the hearing, most of them against the APS plan.
—By Matt Twomey, Special to CNBC.com. Follow him on Twitter @Matt_Twomey.