They are saying the move is forced by Salt River Project, saying other states are more solar friendly.
SRP says this isn't about putting solar installers out of business, Solar City says installations have dropped 96%.
Rooftop solar has grown rapidly in the past few years, but now one of the largest installers is pulling 85 of its workers.
The utility has slapped new solar users with a fee that Solar City has called anti-competitive, designed to punish customers.
SRP disputes that.
"SRP's responsibility is to our customers, we don't create price plans that favor one industry or another, or create favorable climates to introduce some industry to make profits," said SRP spokesperson Scott Harelson.
SRP's fee changes are based on a solar customer's usage, but averages about $50 per month. In a blog on the company website, announcing the filing of a lawsuit, Solar City accuses SRP of sabotaging "the ability of Arizona consumers to make this choice if they happen to live in SRP territory."
SRP says customers with their lower bills and incentives, posed a problem for the non-profit utility company.
"They were not paying for all of their grid costs, and it was getting shifted to non-solar customers," said Harelson.
"SRP is a non profit public power utility. All of the revenues that we receive from our customers are reinvested into our system to keep it reliable and low cost for our customers," he said.
Citing the cost to maintain their infrastructure, SRP's board voted to enact the fee earlier this year. Solar City threatened to pull out back then and now they've made good on that promise, saying other states are more supportive of rooftop solar than sun drenched Arizona.
Solar City says the relocation of 85 installers represents about 35% of its installers in the valley.