Arizona homeowners take note: If you’re a customer of Tucson Electric Power (TEP) and are thinking about taking advantage of the utility’s SunShare solar rebates, now is the time to act.

Why? Faced with dwindling rebate funds, the Arizona utility has asked state regulators for permission to cut the rebate to $2.25 per watt from $3.00 per watt. The proposed cut would begin with rebate applications received after July 7. TEP says that its customers have already cashed in on $12.2 million of the $17.6 million available for this year. The Arizona utility notes that at this rate the rebate dollars will be gone by August, but scaling them back would allow more customers to benefit from the program.

This year, nearly 1,100 TEP customers have received the SunShare rebate for an Arizona solar home photovoltaic (PV) system — more than in the past nine years combined. As we’ve noted before, the Tucson Electric solar rebate has in 2010 been among the nation’s highest in per-watt terms. Couple this fact with falling solar PV costs, and you can begin to see why so many Arizona residents have been installing solar panels: it’s a great investment.

TEP says that since the cost of installing solar has dropped, it makes sense that the incentive be scaled down with it. The goal at the end of the day, according to Katharine Kent, president of The Solar Store, is for the solar industry to eventually stand on its own without government incentives.

Bottom line: even at $2.25 per watt, the TEP solar rebate will go a long way to offset the cost of installing solar in Arizona. If you’re a TEP customer who’s thinking about going solar, you best shake a leg: these rebates won’t last forever.