For years the net metering fights have been getting uglier and uglier with utilities demanding increasingly higher connection fees while they fight to phase out net metering or have the payments significantly reduced.

So it may surprise many that the summer saw utility Arizona Public Service (APS), which has been pretty aggressive in its fight against net metering, float a proposal to develop 20 megawatts of solar systems on 3,000 rooftops over the next 15 moths. The systems would be under utility control (utility side of the meter), feeding power onto the grid. In exchange for use of their roofs, customers would get a $30 monthly credit on their for twenty years.

Is this a case of, if you can’t beat them, join them? Maybe.

To understand what’s going on one has to look at the entire competitive landscape. Utilities are facing a difficult competitor in rooftop solar that is, albeit very slowly, eroding revenue. And I don’t think APS will be the only utility that attempts to get into rooftop solar. The declining cost of solar is a real problem for utilities. Rooftop installation companies are getting very good at lowering costs and making their product more competitive, doing everything from vertically integrating into panel manufacturing to offering easy financing/leasing products.

The response from utilities has been to try and extract higher and higher connection fees from rooftop solar customers. But that’s not always the easiest road to hoe, even if I think there’s a reasonable case to be made that connection fees should cover distribution and transmission costs for utilities. The flip side of this argument, however, is de facto legitimization of the future of a utility as one where its role may or may not include power generation. Additionally it points to effective deregulation of utilities as generation is being split off from distribution and transmission by the market.

At the very least APS’ move is an acceptance that at least one utility feels it needs to hedge its bets. And it’s in a pretty good position because it has a guaranteed rate base from which to generate returns from its solar investments.

It’s this last point that has solar advocates unhappy, claiming that solar companies shouldn’t have to compete against utilities, which have regulated returns on equity. More skeptical solar competitors believe the move is a ploy to slow solar growth by driving out solar installers. In effect, if you could just get a $30 monthly credit instead of going through the hassle of assuming the risk of installing your own solar system, might you rather do that? Also, $30 may well be more than the monthly savings you’re going to get from SolarCity or Sungenevity.

APS has asked regulators for a decision on the project by September, which means things could move pretty quickly. The interesting question is whether APS can generate power at a lower rate by putting panels on roofs rather than generating it by utility scale farms and dealing with associated transmission costs. The irony there of course would be that if APS can generate power competitively through its rooftop program, then it would actually be a massive vote of confidence for rooftop solar as a competitive power option. The reality is that one of the competitive problems for utilities is that there are no distribution and transmission costs associated with rooftop solar.

Last year, APS asked regulators in Arizona for an $8 per kilowatt of installed capacity connection fee. That’s $56 a month on an average 7 kilowatt residential system. The commission came back with a $0.70 per kilowatt fee, about 5 bucks. $5 to $10 is about what most utility commissions are handing out these days in terms of connection fees. And if it stays that way, it stands to reason that all utilities with high rooftop solar penetration are going to have to figure out another strategy.