Actually, I'm pretty sure they are perfectly happy not granting any rebates at all.
Lmaooo so true. So here in MA I have run into the scenario with municipalities who run their own power plants. Most of MA is serviced by either National Grid or Eversource, large utility corporations who service many towns across the Commonwealth and also in NH, RI, etc. For customers of these large utilities, the state rebate program is universal and anyone can apply. There are not strict restrictions on azimuth and tilt, and most often the rebate is on a per kWh basis. So it is most beneficial for the south facing, 42 degree tilted arrays who will produce the most amount of energy annually.
However the customers who live in and have a town or city owned municiple electric service, the municipality has it's own incentive program (if any at all). It sounds like this is what is going on for you. For smaller electric providers, the actual time of the day that your solar is feeding into the grid has a much larger impact on the demand curves that the utility has to deal with.
Thus, they will offer a larger incentive, or possible only incentivize, installations which are going to be lowering their demand when it is needed most. Usually this is early AM, but most often late afternoon / early evening when customers return from work and start firing up AC in summer, lights in winter, heat pump(s), etc.
For the utility, they factor in not only lowering instantaneous demand, but the entire demand curve. What is happening in California and states with massive penetration of solar PV is that most of this energy is being produced from 10 AM - 3 PM, when electrical demand is actually lowest (except nighttime). Once customers return home and start consuming more electricity, the East facing solar has pretty much shut off and the south facing solar is starting to drop in production. What the utility faces is a MASSIVE ramp in the electrical demand, and has to fire up expensive peaker plants (Natural Gas usually), to be able to match the ramp required from the electrical demand going up and the solar production dropping for the day.
This phenomenon is why municipalities want to incentivize West facing solar arrays at a higher tilt, as people have alluded to, as it helps the most with the utilities demand response. Late afternoon solar production is the most valuable, and the smaller the utility provider, the larger impact your residential installation will have on their demand curve.
For more reference, google search "Solar Duck Curve, Nessie Curve, utility Demand Response"
Finally, this is also why large scale battery storage of solar and wind energy is going to be EXTREMELY valuable in the coming years as more and more solar and wind gets deployed. We can somewhat predict when the sun will shine and what orientations are most valuable, but no one can predict the wind at a given time. Having methods to store and instantaneously release this energy will allow us to get to 100% renewable energy in our lifetime, despite what the narrow minded Republicans and Drumps have to say about clean coal and fossil fuel energy.
To the future!