Dive Brief:
- The Arizona Corporation Commission on Feb. 6 initiated a proceeding to eliminate energy efficiency and renewable energy rules that conservative regulators say have cost the state’s electricity consumers billions of dollars but no longer provide much in system benefits.
- On a 4-1 vote commissioners directed staff to draft an order eliminating the Renewable Energy Standard and Tariff, or REST rules, and gas and electric energy efficiency and demand side management rules. A public comment period and second vote by the commission will be required to finalize the move.
- Clean energy advocates say the state’s efficiency programs provide more than $3 in benefits for every dollar spent. This is “a big step backward that's going to hurt Arizona customers and households ... particularly given the extreme heat that Arizona faces,” said Mark Kresowik, senior policy director for the American Council for an Energy-Efficient Economy, known as ACEEE.
Dive Insight:
Last Tuesday’s vote was a “necessary first step” in sunsetting the efficiency and renewable energy rules, but the full process may take upwards of a year, regulators said.
“We began the steps needed to repeal a rule that has cost ratepayers billions of dollars in out of market priced contracts. Mandates distort market signals and are not protective of ratepayers,” ACC Chairman Jim O’Connor said in a statement.
The efficiency and demand side management rules, requiring utilities to meet cumulative annual targets for electricity savings through 2020, were adopted by the ACC in 2010 and according to O’Connor have cost Arizona ratepayers nearly $1.1 billion dollars in monthly surcharges. The REST rules were adopted in 2006, requiring utilities to deliver at least 15% renewables by 2025, and have since added $2.3 billion to bills, he said.
Utility savings and renewables targets set under both rules have already been met, O’Connor said, but the surcharges remain.
Along with O’Connor, Commissioners Kevin Thompson, Lea Márquez Peterson and Nick Myers voted to support the rule repeals. All four are Republicans. Commissioner Anna Tovar, the ACC’s lone Democrat, voted against.
Commission staff would typically put forth proposed draft modifications to the efficiency and renewables rules, but last week’s vote directed staff to draft an order that would eliminate the rules, Tovar noted.
“Can we get staff proposals, hear comments and see what kind of changes the utilities and stakeholders want before just gutting the text?” Tovar asked. “I’m not going to see staff comments that typically would be done in the past. ... That is troublesome.”
The push to eliminate the REST rules “is baffling,” said David Jenkins, president of Conservatives for Responsible Stewardship. “Just because utilities are aiming much higher than the state’s meager 15% renewable standard is no reason to essentially rip out the floor by doing away with the standard.”
Arizona’s move is also troubling because energy efficiency helps to keep the state’s grid reliable, said ACEEE’s Kresowik.
Due to Arizona’s extreme heat, “customers and households desperately need investment in energy efficiency,” he said. Research published last year in the peer-reviewed journal Environmental Science & Technology found an extended blackout in Phoenix could result in hundreds of thousands of people needing medical care.
“Arizona utilities’ efficiency programs have actually been better than most of the other programs in the country at targeting peak demand,” Kresowik said. “These programs are contributing to meeting reliability and keeping the power on. ... Better insulation and air sealing can actually extend the amount of time that you're able to stay comfortable and safe inside your home in one of those extreme weather events, if the power does go out.”
Arizona Public Service, the state’s largest utility, said in a statement that it “will continue to work with the Commission on cost-effective energy efficiency and demand-side management programs to meet customers’ needs.” The utility also said it will continue to leverage all-source request for proposal processes “to ensure we procure the best fit, least cost resources for our customers.”
