Environmentalists are pushing for the Federal Court to uphold its energy regulator's decision against a penalty tariff on South Australian households with rooftop solar.

SA Power Networks is challenging the Australian Energy Regulator after the authority rejected a pricing proposal that would have imposed a solar tariff and a social tariff.

SA Power Networks says the plan was designed to help low income earners who find it hard to pay their bills.

But the regulator said the solar tariff would cost the average solar-powered household about $100 each year

Environmental group the Total Environment Centre has now lodged submissions with the Federal Court arguing that the regulator's rejection must be upheld, as additional tariffs would be a disincentive for solar power.

“We've got half a million people living under solar roofs in South Australia already though and it's going to negatively impact on them as well as making it less advantageous for new customers to install solar,” spokesperson Mark Byrne told reporters..

“Obviously in the long run we want to see more solar because it helps reduce greenhouse emissions as well as household electricity bills.”

The Total Environment Centre says SA Power Networks’ argument is flawed.

“Their argument effectively is that solar customers should be paying more because they use less energy and the network is entitled to a fixed amount of revenue,” he said.

“The unfortunate thing about that is it discriminates against solar customers and will result in them paying about another $100 a year.

“What the network should be doing is introducing a tariff that affects everyone equally and recovers more of their revenue during those peaks, when they're worried about the impact on prices because they have to build more to meet peak demand.”

The lawyer for SA Power Networks, Peter Gray QC, told the court that while solar users consumed “significantly” less grid power, they still relied on the network in peak periods.

He argued that other households would effectively be subsidising costs for households that have solar panels.

“In terms of recovering, in effect, an amount of revenue from them to supply, augment and maintain the network capacity requirements, it's necessary to recalibrate the dollar-per-kilowatt-hour usage tariff,” he said.

“It should be reset slightly to achieve recovery of the same proportionate amount of revenue attributable to those capacity requirements.

“In the long run other consumers will be subsiding those solar customers.”

Kristen Walker QC, lawyer for the Australian Energy Regulator, said its decision to reject the solar pricing proposal was because the tariff discriminated against solar households, which is against the rules.

She said the court only had to consider whether the regulator was acting reasonably and within its authority when it rejected the SA Power Networks move.

She said the court did not have to consider whether the price increases were desirable.

“The question as to whether higher prices are less favourable, that is a matter for the regulator and it is not unreasonable for the regulator to conclude in the circumstances that there was less favourable treatment,” she said.

All arguments have now been submitted, and a decision is expected shortly.