In Alabama, a years-long battle over one of the nation’s highest backup fees for residential solar customers may have finally come to an end.

A federal judge ruled last week that Alabama Power can continue charging its small solar customers one of the highest standby charges in the nation, dismissing a lawsuit that argued the fee was illegal under the Public Utility Regulatory Policies Act.

“I am frustrated that Alabama Power solar customers like me have to pay an extra monthly fee in order to reduce our power bills,” Mark Johnston, one of the plaintiffs, said in a news release after the ruling.

Solar advocates in Alabama say the fee, which charges customers with an average residential solar array around $39 per month, significantly stifles the residential solar market in the state by nearly doubling the payback time for a solar installation.

Alabama ranks 51st in residential solar capacity among U.S. states plus Puerto Rico and the District of Columbia, trailing only North Dakota, according to the Solar Energy Industries Association, a solar industry trade group. Per capita, Alabama ranks last.

Alabama Power, which provides power to roughly two thirds of the state, charges its customers that generate their own electricity a monthly fee of $5.41 per kilowatt of capacity installed.

The average size of a U.S. residential solar array in 2024 was 7.2 kilowatts, according to the Lawrence Berkeley National Laboratory. The fee would add $38.95 each month to the customer’s bill regardless of how much electricity the customer consumes or puts back on the grid.

Alabama Power says the fee is needed to cover costs of maintaining the grid when the solar panels aren’t producing, at night or in cloudy weather.

“Customers who rely on the grid must help pay for the grid,” the company said in an emailed statement. “We are pleased the court agreed with the Public Service Commission’s determination that customers who choose to use Alabama Power for backup service should pay their share of costs to maintain the grid.”

Johnston, an Episcopal priest and retired executive director of Camp McDowell, pays about $32 per month for his 6 kW system.

“This charge discourages additional residential solar systems in the state, a source of clean, renewable power that decreases the use of fossil fuels,” Johnston said. “I want lower electricity bills and a better environment for my children and grandchildren.”

The Southern Environmental Law Center and Ragsdale LLC filed the lawsuit on behalf of customers paying the charge and environmental groups that argued the fee was unlawfully stifling the small-scale solar industry in Alabama.

The Alabama Public Service Commission and Alabama Power filed a motion to dismiss the challenge, granted Wednesday by Judge Annemarie Carney Axon, in the U.S. District Court for the Middle District of Alabama.

The SELC said it is examining the decision and its clients’ legal options.

“This is a disappointing day for Alabama Power customers who want to use solar energy to get relief from some of the highest electricity bills in the nation,” said Christina Tidwell, a senior attorney in SELC’s Alabama office, in a news release. “Not only are we missing out on the bill savings that could be realized through installing rooftop solar, but we’re also missing out on opportunities for job creation and economic development.”

Alabama Power has come under increased scrutiny for its high power bills in recent months.

An Inside Climate News investigation found that Alabama Power had the highest total residential power bills in the country in 2024, and the highest electricity rates in the Southeast.

A Long Road of Challenges

Environmental advocates have continuously challenged Alabama Power’s capacity reservation charge since it was approved by the Public Service Commission in 2013. The decision was appealed to the Alabama PSC and then to the U.S. Federal Energy Regulatory Commission.

Though FERC did not agree to initiate an enforcement action regarding the fee when it examined the case in 2021, Chairman Richard Glick and Commissioner Allison Clements issued a concurrence to express “concern” that the fee may be in violation of federal utility law, and said the petitioners had “presented a strong case that the Alabama Commission failed to adhere to the regulations set forth in FERC Order No. 69.”

The commissioners were concerned about the way Alabama Power calculated the costs for back-up power, saying company had not demonstrated that a solar customer’s profiles were different enough from a non-solar customer to justify the charge, and the company’s methods had “combined apples and oranges” by relying on actual data and projections to determine the cost difference between solar and non-solar customers.

The District Court judge ruled otherwise, dismissing the plaintiffs’ suit, saying “the plaintiffs have not presented any evidence from which a factfinder could conclude that Alabama Power violated [PURPA].”

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The fee is not the only policy in Alabama that advocates say is holding back solar in the state. Alabama does not offer net metering, where solar customers are credited the same amount for electricity they put on the grid as the electricity they use.

Instead, customers who feed excess energy back onto the grid are only credited the amount of money it would cost Alabama Power to generate the same amount of electricity at one of its power plants, an amount much lower than retail rates.

“Alabama communities are dealing with harmful impacts of our state’s reliance on fossil fuels; meanwhile, Alabama Power and the PSC are chilling clean, bill-reducing solar power,” Jilisa Milton, executive director of the Greater-Birmingham Alliance to Stop Pollution (GASP), said in a news release. “Solar energy offers a unique opportunity for residents of Alabama to take control of their energy costs, reduce their carbon footprints, and contribute to a cleaner environment.”

An Unusual Fee

Alabama Power’s solar fee has long stood out as one of, if not the, highest in the country for small-scale solar users.

Some utility regulators have rejected fees outright, while others have allowed such fees in much lower amounts or have limited fees to systems larger than a certain size.

Georgia Power, also owned by Alabama Power’s parent Southern Company, proposed a fee similar to Alabama’s in 2013. Georgia Power withdrew its proposed fee as opposition mounted in the Georgia Public Service Commission. Alabama’s Public Service Commission approved the fee.

In Virginia, solar customers only pay a standby charge if their array is larger than 15 kilowatts, and that limit is likely to increase soon.

Earlier this month, the Virginia General Assembly passed a bill to increase the threshold for projects that require customers to pay the standby charge to 20 kilowatts, meaning larger projects would be eligible for the standby charge exemptions. The bill is awaiting a signature from Democratic Gov. Abigail Spanberger.

That average standby charge for residential customers amounts to between $25 to $75 a month, but sometimes can be more than $100 a month, according to the Virginia League of Conservation Voters.

“Overall—this model creates a disincentive for Virginians to invest in larger systems that meet their full energy needs, which is how this bill can help,” said Lee Francis, Chief Program and Communications Officer of the Virginia League of Conservation Voters.

Alabama Power said its fee is intended to prevent other customers from bearing costs of infrastructure required to serve solar customers when the panels are not producing.

“Alabama Power supports customers who want to install solar or other onsite generation, and we do not charge customers for using rooftop solar,” the company said. “However, if those customers want to stay connected to Alabama Power’s grid to meet their electricity needs when their system cannot, they must pay their share of grid costs so other customers are not unfairly burdened.”

Inside Climate News Virginia reporter Charles Paullin contributed to this report.