SolarCity (SCTY) Stock: Should The Nevada PUC Concern You?


SolarCity Corp (NASDAQ: SCTY)

SolarCity has had an incredible time in the market as of late – that is, until this week. Recently, we’ve seen a couple pieces of positive news out of Paris and tax credits from the federal government. However, this week, a bit of negative news has sparked a slight sell off in SCTY. The negative news comes from the Nevada Public Utilities Commission (PUC). Today, we’ll talk about the news, how SCTY is reacting in the market and what we can expect to see from the stock moving forward.

Nevada PUC Proposed Policy Changes That Could Harm Solar

In Nevada, home owners who have installed solar panels currently receive credits through net metering in which the customers are paid for the electricity generated at retail rates. However, the Nevada PUC has proposed policy changes in a 113 page document that could lead to consumers seeing less benefit in solar. As a result, SCTY has seen big declines. Under the proposition, Navada customers would only receive credits at a wholesale rate, greatly reducing the benefit of solar for Nevada consumers. This would lead to lower sales volume for SCTY and other solar companies with a presence in the state. It would also effectively reduce the value of investments that so many consumers in Nevada have already made. In a statement, Lyndon Rive, CEO of SolarCity had the following to say about the reckless proposal:

The decision would retroactively sabotage the investments Nevadans have already made in solar, even though they were encouraged by their government to make those investments… If the PUC approves this proposal, it will force SolarCity to cease sales and installation operations in Nevada.”

How The Market Is Reacting To The News

As investors, we know that when negative news comes out with regard to a publicly traded company, we can expect to see declines in the value of the stock associated with the news. In this case, we have seen declines on SCTY. Yesterday, the stock closed at $51.32 per share after a loss of 6.84%. In pre-market trading today, things aren’t looking positive either. Currently (6:36), SCTY is trading at $51.05 per share after a loss of 0.53% so far today.

Should Investors Be Concerned About The PUC Proposal?

If the proposal to reduce credits for consumers with solar power is approved, it could have a negative effect on SCTY sales. So, concern is understandable. However, I believe that the probability that this change will be approved is relatively slim. Think about it, over the past several years, tons of consumers in Nevada have made investments in solar technology based on encouragement from their government. Now, the government is proposing to make a change that would make those investments lose value in a massive way. Even the proposal of this type of change is reckless, however, approval of the proposal would take this rash decision to the next level. With that said, I don’t believe that the proposal will be approved, nor that SCTY investors have anything to be concerned about in the long run.

What We Can Expect To See From SCTY Moving Forward

While the outlook may be a bit bearish in the short term, thanks to the ridiculous proposal offered up by the PUC, I have an incredibly positive opinion of what we can expect to see from SCTY in the long run. The reality is that with Paris pushing climate regulations around the world and the United States federal government extending tax credits for consumers and businesses that invest in solar, things are looking great for the long run potential of SCTY and other solar companies. All in all, the news with regard to the Nevada PUC is likely to be a short-term blip in long-term bullish activity!

What Do You Think?

Where do you think SCTY is headed moving forward? Let us know your opinion in the comments below!

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