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Nevada PUC ‘Contortionist’ Act Will Kill Rooftop Solar: Sunrun

Nevada regulators will vote Friday on a restructured net-metering scheme that increases rates over 12 years and doesn’t grandfather existing solar-energy customers — a decision sure to rile installers SolarCity ( SCTY ) and Sunrun ( RUN ). The draft order , released late Wednesday, stems from a week of hearings at the Public Utilities Commission, and pits billionaire CEOs Warren Buffett and Elon Musk in a battle over the sun. Buffett’s Berkshire Hathaway ( BRKA ) owns NV Energy, the utility pushing for a rate change, and Tesla Motors ( TSLA ) CEO Musk chairs SolarCity. SolarCity and Sunrun exited Nevada in December when the PUC first voted to cut payments to solar customers for excess energy fed back into the grid. Net-metering angers utilities because it forces them to buy energy from rooftop customers at the expensive retail rate. California regulators recently upheld net metering. Under the Nevada commission’s new proposal, the new rates won’t apply to existing solar customers for a period of 12 years. Over that time, the rates will step up five times until reaching a cost-based structure on Jan. 1, 2028. The PUC estimates that the 12-year time frame represents $81 million in costs shifted to non-solar customers. Solar Advocates Cry Foul In May, the Nevada Legislature voted to allow the PUC to create new solar-energy rates in exchange for lifting the 3% cap on customers eligible for net metering. On Dec. 23, the commission voted unanimously to cut net-metering payments. Solar-energy advocates immediately began calling for a reversal. “By eliminating net-metering, the order has discouraged private investment, which has led to layoffs and ensured that there will not be future applications to install (rooftop solar),” the Solar Energy Industries Association argued in a PUC filing. Not grandfathering existing solar-energy customers under the old net-metering rules was particularly egregious, the SEIA wrote. “The elimination of net-metering for existing customers makes their investment meaningless and creates a ‘financial catch 22’ of deciding between spending more every month or spending significantly to remove a (rooftop solar) system,” they wrote. “For potential customers, the decision is easier because there is no longer a financial incentive to invest in net-metering.” Bureau of Consumer Protection representatives argued for a 20-year grandfather clause that would allow existing solar customers to recoup the costs of their hefty investments. NV Energy, in turn, filed a proposal for a 20-year grandfathering period last month. Solar advocates also bashed the NV Energy rate study used to justify the net-metering cut, with the Southern Nevada Home Builders Association claiming it contained “logical and factual flaws.” The BCP argued that the study discounted medium- and large-scale users, which skewed the results. “No reasonable person would accept as reasonable the inference that Nevada Power Company’s ability to provide as much power to (rooftop solar) customers as they could need creates an obligation to pay for power not received,” the SNHBA wrote. Further, the SEIA argued the new rate structure ignores 9 of 11 rooftop solar values, and unfairly lets the utility buy solar energy at a wholesale price to sell it back at a retail price. “This decision denies their right to be fairly compensated,” The Alliance for Solar Choice (TASC) separately argued. ‘Kicking The Can Down The Road’ Net-metering was codified in 1997, the PUC wrote. Since then, rooftop installers have made big bucks by advertising set-in-stone solar rates and “unrealistic payback periods,” the commission argued. And as a result, non-solar customers are now paying $16 million annually to carry solar customers — a subsidy that “will cumulatively grow unreasonably larger over time,” said the PUC. Proposals to delay the necessary correction in rates to a cost-based structure only serve to kick “the can down the road,” it said. Over 40 years, the subsidy borne by non-solar customers would grow to $640 million. “These proposals do nothing to address the problem of antiquated rates that were instituted nearly 20 years ago to jump-start an industry,” the commission wrote. “The old net-metering rates are not reflective of accurate price signals or actual costs to serve.” And while the PUC understands the desire to “lock in rates and structures . . . electric utility rate-making cannot work in this manner.” Over time, new ratepayers would be forced to take up increasing incremental costs as new customers join the grid. By gradually shifting costs, solar customers can avoid “rate shock.” The structure also allows solar customers time to customize their usage to benefit from time-of-use policies. Currently, NPC and Sierra Pacific Power Company solar customers still rely on the grid 42% and 49% of the time. Under the new proposal, solar customers will save about a third on their electric bills, according to TASC estimates. That’s in line with the cost of service, the PUC wrote. The PUC also took issue with SolarCity, Sunrun and TASC’s “all-out campaign to influence public perception” by claiming the commission was in NV Energy’s pocket. Customers are now unlikely to accept the new rates. “However, this commission will not allow such actions by TASC, SolarCity, Sunrun and other rooftop vendors to dictate a certain outcome in this proceeding,” the PUC wrote. ‘Contortionist Twisting Of The Law’ Sunrun executives blamed Commissioner Dave Noble and Gov. Brian Sandoval for the ultimate death of Nevada’s solar industry, in an emailed statement to IBD. “Every party to the case, including NV Energy, recommended grandfathering these customers for a period of 20 years,” they wrote. “Once again, Noble proposes to give NV Energy more than it asked for.” As presiding officer, Noble has received a fair amount of online flak since the commission’s decision in December. Bryan Miller, TASC president and senior vice president of public policy and power markets at Sunrun, accused Noble of contorting the law to “kill” the industry. “Noble’s contortionist twisting of the law belongs in a Vegas Cirque du Soleil show, not the halls of government,” he wrote in the email to IBD. “Brian Sandoval’s legacy will be letting his hand-picked commissioners eliminate a booming industry while he complicitly stays silent.” SolarCity didn’t respond to an email seeking comment.

Tesla Motors Soars After Predicting Up To 90,000 Deliveries In 2016

Tesla Motors ( TSLA ) reported a surprise fourth-quarter loss late Wednesday but shares spiked as the electric car maker was bullish on deliveries and said it would unveil its Model 3 mass-market car on March 31. Analyst consensus in a Thomson Reuters poll had called for Q4 earnings per share of 10 cents excluding various items. But Tesla reported an adjusted loss of 87 cents instead, deepened from 13 cents a year earlier. Tesla revenue rose 59% to $1.75 billion in Q4, short of the $1.79 billion Wall Street view. However, Tesla expects to deliver 80,000 to 90,000 new Model S and Model X vehicles in 2016. Stifel analyst James Albertine had said in a research note Sunday that guidance might come in lower than the 80,000-85,000 vehicles that Tesla had previously anticipated. Tesla delivered 50,658 vehicles in 2015. That includes 17,478 vehicles in Q4, with 206 of the new Model X crossover SUV. Albertine said in a research note late Wednesday that he was “positively surprised” by Tesla’s reiteration of guidance. He noted that “customer deposits ticked higher sequentially, perhaps suggesting demand intact.” Tesla stock spiked 9% to 156.50 in late trading. Shares had closed down 3.1% to 143.67 in Wednesday’s regular session. “I think these are very strong numbers,” Global Equities Research analyst Trip Chowdhry told IBD Wednesday after Tesla’s report. “The guidance is very, very strong: 80,000 to 90,000 of the new Model S and Model X will be delivered in this fiscal year … growth of 60% to 80% a year.” Tesla’s ‘Loss Is A Positive’ The reason, he says, is that customers “want to buy innovative products” — which Tesla excels at making. Chowdhry added: “The loss is a positive. Why? Because they are investing in the future.” A demand chart that Tesla provided with its shareholder letter, on sales of large luxury vehicles “bodes extremely well for the future,” Tesla CEO Elon Musk said on a conference call with analysts. “The Model S was the best-selling premium sedan in the United States of any kind last year. Our sales increased by 51% and everybody else declined.” The 25,202 Model S sedans sold in 2015 topped Daimler ’s ( DDAIF ) Mercedes-Benz S-Class, which sold 21,934 units. The rest on the list all sold under 10,000 units: The BMW 6-Series and 7-Series, Mercedes-Benz CLS-Class, Volkswagen ’s ( VLKAY ) Audi A7 and A8, Tata Motors ’ ( TTM ) Jaguar XJ, Toyota ’s ( TM ) Lexus LS and the Porsche Panamera. Many analysts have questioned Tesla’s ability to ramp up production. For the current Q1 analysts had forecast 8 cents earnings per share, swinging from a year-ago loss, on revenue up 69% to $1.87 billion. Tesla Motors isn’t highly rated by IBD now and has fallen lately, with several analysts cutting views. Tesla stock was down 40% this year through Wednesday’s closing bell, in a market now in correction on concerns about the world economy and falling oil prices. The S&P 500 has fallen 9%, Ford ( F ) 20%, General Motors ( GM ) 19%, Toyota 13% and the biggest stock of all, Apple ( AAPL ) 10%. Ford, General Motors, Toyota and Apple shares all fell fractionally Wednesday. “For 2016, we are planning for even faster delivery growth than last year. We plan to be net cash flow positive and achieve non-GAAP profitability for the year, even after investing about $1.5 billion to add more production capacity, start cell production at the (battery) Gigafactory, and establish additional customer support infrastructure. Moderate GAAP profitability is expected in the fourth quarter. These investments will help prepare the way for Model 3, which is on schedule to be unveiled on March 31st and to start production and deliveries in late 2017,” Musk said in a letter to shareholders. “Tesla is approximately doubling its cumulative sales every year, I’m not sure if this has happened in the car industry for nearly a century,” Musk said on the call. But not everyone is so bullish on Tesla’s future. “Tesla likes to bill itself as a tech company, not an automobile company, but even tech companies have to turn a profit eventually,” said Karl Brauer, senior analyst at Kelley Blue Book. “While volume and revenue are both growing, costs continue to outpace both. Tesla can keep positioning itself for rapid future growth, and its investments in the battery factory and Model 3 suggest it might happen. Someday. The timing of the Model 3 also concerns me because it’s at least a year after the Chevrolet Bolt arrives, and additional pure electrics with a similar range could easily show up by late 2017.” Image provided by Shutterstock . RELATED: 3 Keys To Tesla Earnings As $35K Model 3 A Go: Low Ride, Ramp, View

3 Keys To Tesla Earnings As $35K Model 3 A Go: Low Ride, Ramp, View

Trading at a two-year low since last week, reeling from analyst target cuts and facing its Q4 earnings report after the close Wednesday, Tesla Motors ( TSLA ) stock rebounded more than 6% early Tuesday after guttering down 9% Monday and more than 7% Friday. The surge pared to a 0.18% gain for the trading day, and Tesla stock slipped about 2% after-hours. What’s ahead in Tesla’s fourth-quarter report? Here’s what to watch. 1. A Lowered Ride Several analysts have slashed price and other targets on Tesla ahead of the Q4 release, spurring some of the recent share declines. Tesla stock has fallen 38% this year, in a market now in correction on concerns about the world economy and falling oil prices. The S&P 500 has fallen 9%, Ford ( F ) 19%, General Motors ( GM ) 17%, Toyota ( TM ) 13% and the biggest stock of all, Apple ( AAPL ), 10%. Tesla holds a low IBD Composite Rating of 16 out of a possible 99, factoring in several metrics such as earnings growth and stock-price gains. With Tesla stock closing at 148.25 in the stock market today , the median long-term price target of analysts polled by Thomson Reuters stands at 282 and the average view slightly better than hold. But analyst opinions on Tesla vary drastically. Barclays cut its target to 165 from 180 Tuesday, with an underweight rating. Stifel analyst James Albertine, a long-term bull who rates Tesla stock a buy, said in a research report Sunday that “we see few catalysts to turn short-term bears bullish,” as Tesla concentrates on building its electric-car business (which requires “tremendous investment”) for the longer haul. Of 20 analysts polled, eight rate Tesla a hold, five underperform, four buy and three strong buy. That’s slightly lower than three months ago. How much do views on Tesla stock vary? StreetInsider reported on Tuesday that a Weiss, Harrington and Associates publication, Unit Economics, on Sunday re-initiated coverage of Tesla with just a 12 price target (and scathing commentary). That independent-research outfit, focused on energy, does not appear in the list of broker analysts tracked by Thomson Reuters. 2. Model X Ramp, Model 3 Plans One key to how investors view Tesla’s Q4 report and guidance is how production of the newly introduced Model X crossover SUV, with its falcon-wing doors, ramps up. Sales are still seen as very light vs. the Model S sedan. Both sell for north of $70,000. “Given management’s long-term focus, we suspect quality trumps speed with the new Model X,” Albertine wrote in his weekend research note. Tesla, with only two vehicles and a third on the way, “cannot afford major defects, recalls or further interruptions (bringing previously delivered vehicles in for service) in the same way that most OEMs (with far too many products, in our view) can announce recalls without suffering lost share.” Albertine expects that updated guidance may be lower than the 80,000-85,000 vehicles that Tesla has previously anticipated for 2016, “which could drive further sell-off in shares.” He also expects that management will deflect on cash-flow questions given the needs for ramping up the battery Gigafactory and the Model 3 sedan. “Will this matter once the Gigafactory is up and running and the Model 3 demonstrates it can be the (BMW) 3-Series killer bulls expect? Probably not,” he writes. “But it likely does not help valuation discussions near term.” @elonmusk $35k price, unveil in March, preorders start then. — Elon Musk (@elonmusk) September 2, 2015 After its luxury Model S and Model X, the design for Tesla’s smaller and more affordable — $35,000 — Model 3 is set for March, with pre-ordering beginning then, Tesla CEO Elon Musk said in September. A Bloomberg story Tuesday quoted Tesla spokeswoman Khobi Brooklyn as saying the company still plans a $35,000 price , before government green incentives. Those incentives could trim a buyer’s cost to about $25,000 in some places. Though details on how Tesla as a startup automaker will be able to achieve mass production with that price point — and eventually profit from it — remains to be seen, lowering the cost of batteries, via its Gigafactory, is one lever for that. 3. The View Thomson Reuters’ analyst poll calls for Tesla’s Q4 report to produce 10 cents earnings per share minus items, swinging from a 13-cent loss in the year-earlier quarter. Analysts see a $1.26 loss for 2015, then project EPS of $1.66 for 2016. Fourth-quarter 2015 sales are anticipated at $1.79 billion, up 64%, with 2015 coming in at $5.36 billion and 2016 at $8.58 billion. Over the last several days, average near-term projections have bounced back up — for instance, in Q4 EPS to a dime, after dipping as low as a view of 8 cents. But the longer-term analyst outlook has edged down. Tesla has interesting times ahead this year: That planned Model 3 unveil, for one thing. For another, scoping out some kind of partnership in China so it can set up a car manufacturing plant there. Last Tuesday, Tesla’s China blog announced a Model X debut for the Chinese market, and invited orders. In late January, Tesla CEO Elon Musk exercised options to buy and hold about $100 million more Tesla stock than he already had, while paying a hefty tax bill (and in effect diluting the stock outstanding). Analysts question how soon the Model 3 can roll off the assembly line. And there’s potential competition ahead from other automakers — such as GM’s long-range Chevrolet Bolt — and maybe at some point an Apple car. “We can’t overstate the importance of the March 29 Model 3 unveiling,” Pacific Crest Securities analyst Brad Erickson wrote in a Feb. 1 research note. RELATED: Self-Driving Cars On Ramp As Feds Tax Oil In New Obama Budget . CEO Elon Musk Adds Huge Tesla Stock Stake Ahead Of Earnings . With Tesla Earnings Ahead, Truck Could Follow Model 3 .