Solar system firms afraid Edison could overshadow them.

A controversy being characterized by some participants as a battle between David and Goliath for control of the sun is to be decided this week by the California Public Utilities Commission.

The battle involves a request by Rosemead-based Southern California Edison (Goliath) to enter the "off-grid photovoltaic" market. Off-grid photovoltaics are solar-panel systems not hooked into a utility's power grid, enabling power users in remote locations to generate their own power.

Most off-grid pv power users are homeowners in remote locations. However, such systems are also widely used by ranchers to power water pump stations, by broadcasters to power transmitters, by the government to power remote military installations, and by scores of other enterprises.

A number of the independent photovoltaic companies (Davids) are concerned that Edison and other big utilities are going to be allowed to waltz in and steal the market that these smaller firms have worked so hard and long to build up.

Opponents further argue that, not only would Edison's program threaten independent companies, but it would also threaten consumers' ability to be independent of large power monopolies and traditional fossil-fuel energy sources.

"Solar energy bespeaks independence, and the government doesn't like that," said Allen Carrozza, owner of Scholfield Solar Inc., a Ventura-based photovoltaic company. "The government gives nuclear, oil and coal companies very generous tax write-offs, and gets generous political contributions in return. But there's no way the government can keep a tag on you when consumers have self-sufficient power systems on their homes and businesses."

Edison and other California utilities are prohibited by section 2775.5 of the Public Utilities Code from engaging in any activities that would restrict competition or growth of an existing private-sector industry. But Edison officials insist the utility's proposed program is only a three-year experiment, is not anti-competitive and will, in fact, act as a catalyst for the industry's continued growth.

"What we tried to do is marry the interests of the industry with those of the utility and the potential customers," said Wayne Gould, Edison's manager of photovoltaic applications. "The actual component procurement, construction of the system and ongoing maintenance will be performed by pv contractors and suppliers, not by Edison itself. ... Each one of our projects will be individually bid by the pool of pv suppliers."

Edison would purchase the hardware as well as installation and maintenance services from independent non-utility low bidders and then bill the customer for the installed system. The customer's monthly Edison bill would equal 1.6 percent of the system's total installed cost, regardless of how much power is used.

Currently, those wishing to have a pv system installed typically must pay the independent pv company for the entire system prior to installation -- very little financing is available.

Most manufacturers and wholesale distributors of pv systems at least conditionally support Edison's proposed program, because it is expected to increase demand for their systems. But many pv contractors, installers and maintenance providers oppose the program.

Although the contractors, installers and maintenance providers also would likely see more business, at least in the short run, they are concerned that Edison's entry into the market would relegate them to being mere utility subcontractors. And they fear the utility, once it has its foot in the door and pv demand becomes sufficiently large, would take pv services in-house and drive independent companies into extinction.

"As a regulated utility, (Edison) does not have any right to move into this market. This market is being served very adequately by an active, experienced industry of small companies. ... But those of us who provide products and service are going to have our customers taken away from us, just as this industry is starting to catch on," argued Don Loweburg, owner of North Fork, Calif.-based Offline Independent Energy Systems, a seller and servicer of pv power systems in central California. He is also acting chairman of the Independent Photovoltaic Power Providers, a statewide coalition of 21 independent pv companies opposed to Edison's entry.

The U.S. market for pv systems consists primarily of an estimated 50,000 solar-paneled homes and businesses in remote locations, and that market has been growing at a robust 30 percent annual clip in recent years, industry sources said. Americans are now spending approximately $100 million on pv systems each year, industry sources estimated.

California is the pv industry leader, with far more pv companies and far more pv systems in use than any other state, industry sources said. But the exact size of the pv market in California, or in Edison's Southern California service area, are unknown. And that is something Edison hopes to discover through its three-year "pilot program."

The pv market has been nurtured along by more than 1,000 relatively small, independent U.S. companies and scores more foreign companies. But several large, regulated utilities, including Southern California Edison, are now looking to increase their involvement.

Edison is hardly a newcomer to photovoltaics. The utility has been conducting small-scale research and demonstration projects with photovoltaics and other "renewable" energy sources for about 15 years. In 1992, it used more solar power than any other utility in the world, purchasing 695 million kilowatt-hours, nearly 1 percent of the utility's customers energy needs.

And now the utility looking to further increase its participation in the renewable-energy niche markets, especially off-grid photovoltaics.

Edison's request, which the PUC is scheduled to vote on April 6, is for permission to conduct a three-year "pilot program" under which the utility would lease up to one megawatt of off-grid photovoltaic systems to owners of remote homes and businesses in its 50,000-square-mile service area.

Jay Morse, regulatory program specialist at the Public Utilities Commission's Division of Ratepayer Advocates, said using the term "pilot program" to describe Edison's proposal could be misleading.

"I shy away from calling it a pilot program; one megawatt of power is more than the entire annual statewide demand for off-grid pv," Morse explained. "And three years is a long time. A lot of these independent companies could be driven out of business in three years."

But that would not likely happen, Morse added, because Edison would likely "be on its best behavior" during the three-year trial because the utility has expressed a desire to install 10 megawatts of off-grid pv systems by the end of this century.

That plan may seem overly ambitious until one realizes that Edison's service area stretches up the coast from Orange County to about 45 miles north of Santa Barbara and inland to the Arizona and Nevada borders. It is one of the most sun-drenched regions of the nation -- encompassing the Los Angeles Basin, Mojave Desert and San Joaquin Valley -- making it prime territory for photovoltaic expansion.

Edison's proposed program would involve customers leasing a 1-kilowatt, 2-kilowatt or 5-kilowatt photovoltaic system from Edison for a monthly cost equal to 1.6 percent of the system's total installed cost. After making monthly payments for 15 years, the customer would own the system. The program calls for Edison to lease a total of 1 megawatt of photovoltaic systems over three years, which computes to between 200 and 1,000 installed systems.

Industry sources said the total installed cost of a 1-kw system is about $20,000; the cost of a 2-kw system is about $40,000; and a 5-kw system is about $100,000. So, a customer's monthly Edison bill would be $320, $640 or $1,600, respectively.

That is considerably more than the $63.27 monthly electric bill paid by Edison's average on-grid residential customer. But it is considerably less than the cost of a remote customer being connected to Edison's power grid. The approximate cost of having Edison lay new wire to connect a remote customer to its existing grid is $10 a foot, which translates to $52,800 per mile.

Some independent photovoltaic contractors pointed out that paying 1.6 percent of a system's total installed cost each month for 15 years would mean customers are paying 288 percent of the system's actual cost. That averages out to almost a 20-percent annual return on Edison's capital outlay.

Edison officials pointed out that customers would still be free to purchase photovoltaic systems from independent companies. But virtually no independent companies or mortgage lenders provide financing for photovoltaic systems, as Edison is proposing to do.

"(Edison) can't provide pv power as well as we (independent companies) can because we have the experience and lower overhead. But Edison is going to provide financing, which is the critical element in this industry," said Jim Trotter, a vice president of the California Solar Energy Industry Association, a trade group for photovoltaic contractors, distributors and manufacturers.

"Now, customers have to come up with $15,000 or $20,000 to buy a system," Trotter said. "Hopefully, the Edison program will demonstrate to the FHA (Federal Housing Administration) and mortgage lenders that (a pv system) is just another part of a house."

But critics and skeptics of the program expressed concern about the financing aspect of Edison's plan.

"There are signs that banks and independent pv companies themselves are getting ready to start offering financing. And we don't want the involvement of the utilities to discourage private-sector financing," said Morse of the PUC.