Let the market dictate how utilities do business. That was the message from Arizona utility regulators on Tuesday after they voted to begin the process of repealing the state’s energy efficiency and renewable standards.
Solar industry advocates expressed disbelief, saying while most states are expanding their renewable standards, Arizona is the only state they know of scrapping them altogether. Commissioners said the mandates had either served their purpose or were unnecessarily burdening ratepayers with extra costs.
‘Not under the threat of commission mandates’
The Arizona Corporation Commission’s four Republicans voted in favor in three separate motions to repeal standards first passed 15 years ago, which have since been updated periodically.
Such standards are designed to encourage gas and electric utilities to transition to renewable energy through long-term targets and energy efficiency programs for customers.
“Market principles should underlie all decisions our utilities make to serve their customers,” said Commission Chair Jim O’Connor (R).
Before casting one of his votes, Commissioner Kevin Thompson criticized what he called outdated mandates that involve “incentives and giveaways left and right.”
“I welcome utility programs that actually reduce energy consumption and meet avoided costs but not under the threat of commission mandates that can be easily hijacked by financially interested stakeholders,” Thompson said. He added that the current rules technically expired in 2020 and should have been addressed previously.
‘Sends the wrong signal to the industry’
Most states have renewable standards and efficiency policies for utilities that are updated periodically.
Autumn Johnson of the Arizona Solar Energy Industries Association said Tuesday she was unaware of any state repealing its existing renewable portfolio standards entirely, which she credited for boosting the solar energy economy which employs more than 8,000 Arizonans.
“I worry that being the only state in the country to repeal what is already an extremely modest RPS sends the wrong signal to the industry. It says ‘take your business, your jobs and your dollars elsewhere’,” Johnson said.
Commissioner Anna Tovar was the one dissenting vote and is the only Democrat on the Commission.
“Whenever Arizona is first in the nation in doing something, it’s usually for something that is horrendous. So I hope that our consumers will chime in and call their commissioners,” Tovar said.
Costs vs. benefits of mandates and standards
Commissioners Thompson and O’Connor cited statistics suggesting ratepayers have paid out a combined $3.5 billion for energy efficiency and renewable standards since 2005. However, they did not cite any numbers reflecting the return on those investments.
Caryn Potter of the Southwest Energy Efficiency Project claimed for every one dollar of ratepayer money spent on APS and TEP energy efficiency programs, the utilities have returned $3.64 in “total benefits” to ratepayers.
“The good news is there is substantial evidence in the past fourteen years in utility compliance reports and dockets demonstrating that the commission’s efficiency standard has delivered on its promise of saving Arizonans billions of dollars while avoiding costlier capital investments,” Potter said.
An energy efficiency report filed by APS in 2022 documented $1.3 billion in “net benefits” for energy efficiency programs since their inception in January 2005.
According to another report filed by APS, 15% of electricity sold to APS customers in 2022 came from renewable energy resources.
A 2020 independent study conducted by the sustainable energy nonprofit Ceres concluded that since 2006, renewable energy standards delivered “significant benefits” to utilities, companies and residents, including $1.5 billion and $469 million in “gross benefits for the public and customers of APS and TEP, respectively.”
Ceres cites other benefits such as $11 million in solar utility investments, a 3% reduction in statewide greenhouse gas emissions, and more than 7,000 acre-feet of water saved annually.
O’Connor says there is ‘a war on fossil fuel’
Current rules dictate that Arizona’s utilities meet a modest 15% renewable energy standard by 2030. Nevada and New Mexico have a much higher 50% renewable standard by 2030 and California’s is 60% by the same year.
O’Connor has made it clear he is not a champion of renewable energy, decrying what he called “the war on the fossil fuels industry” in a December memo filed with the commission. O’Connor said “Washington’s generous subsidies” are responsible for cheap renewable power and he alleged the EPA is “trying to shut down coal and natural gas.”
O’Connor left out of his memo any mention of U.S. subsidies for fossil fuels. He declined to answer questions to 12News about the issue after Tuesday’s meeting.
David Jenkins, President of the politically conservative nonprofit Conservatives for Responsible Stewardship, was critical of O’Connor’s position.
“If Chairman O’Connor is so worried about the fossil fuel industry, maybe he shouldn’t be representing Arizona ratepayers. Maybe he should go work for a fossil fuel company,” Jenkins said.
Jenkins said the Southwest is in a unique position to benefit from solar because the price of solar-plus-storage is more economical for a 20-year purchase agreement in Arizona compared to projected costs for natural gas and coal over the next 20 years.
“Why would Arizona, the sunniest state in the nation that doesn’t have its own fossil fuel industry, why wouldn’t it want the cheapest form of energy for Arizonans?” Jenkins said. “Arizona has the greatest solar potential of any state in the union and yet it’s dragging its feet more than any state in the union.”
APS: We are ‘committed’ to energy efficiency
Jeff Allmon, senior attorney for APS, told commissioners Tuesday the utility is looking forward to participating in the rulemaking process moving forward.
“Overall, the company is committed to implementing cost-effective energy efficiency and DSM programs including those that help reduce peak demand,” Allmon said. He added that existing programs will continue, regardless of decisions the commission makes.
Opportunities for public comment
Commissioner Nick Myers (R) said Wednesday through a written statement that the rules amount to government-imposed mandates that make rates more expensive. He said the public will have many opportunities to comment during the rulemaking process.
“I look forward to hearing from the utilities, stakeholders, and customers regarding these proposed changes,” Myers said.
One longtime citizen involved in previous deliberations at the commission said Tuesday’s votes amount to “vigilantism.”
“The corporation commissioners seem hellbent on killing the golden goose. Their misguided crusade will destroy rooftop solar and energy efficiency programs that have created tens of thousands of good-paying jobs, reduced harmful pollution, and generated billions in net benefits,” said Abhay Padgaonkar, a prominent advocate for utility ratepayers.