The Arizona Corporation Commission and energy companies are maintaining a “business as usual” strategy in the pursuit of clean energy and energy reliability in Arizona, despite twin bills looking to strip the ACC’s power.
House Bill 2248, sponsored by Rep. Gail Griffin (R-Sierra Vista), would bar the Arizona Corporation Commission’s from adopting or enforcing policy that regulates electrical generation resources acquired by public service corporations (PSCs) without specific legislative authority. The bill passed the House on a vote of 31-28, with one “no vote” and will go to vote in Senate Appropriations.
The twin bill in the Senate (SB 1175), sponsored by Sen. Sine Kerr, is waiting for a vote from the full Senate.
The bills emerged this year following a ruling by the Arizona Supreme Court in July 2020 confirming the authority of the commission to regulate utilities for public health and safety, but also negating the commission’s authority to set clean energy rules under their ratemaking authority.
The immediate question before the court was whether the commission had the express authority to appoint a new interim manager for Johnson Utilities. While the court ruled with the commission, it clarified the authority granted to the commission by the Arizona Constitution, as well as the powers of the Legislature.
According to the opinion of the court, the ACC has an exclusive ratemaking authority, exempt from legislative interference, allowing it to prescribe rates, charges and classifications. Further, the commission has permissive authority under which it has the “authority to regulate PSCs to preserve and protect public health, safety, convenience, and comfort.” However the Legislature has police power to override regulations made by the ACC, as the Legislature has the duty to enact laws “reasonably necessary for the preservation of the public health, safety, morals, or general welfare of the public.”
“[It] kind of put some gray area related to our authority with the energy rules so it was important that the state Legislature tackle this through their particular bills, and we provide data and information,” said ACC Chairwoman Lea Marquez-Peterson.
If passed, the bills would block a proposal before the commission that would require electric utility companies produce half of the state’s energy through carbon free resources by 2032 and be completely carbon-free by 2050. Alternative energy sources would include solar, wind and nuclear energy, as well forest biomass and natural gas.
The proposal passed by the commission in November 2020 will be voted on again as the commission held elections the same month and now has two new members: Commissioner Jim O’Connor and Anna Tovar.
Previously the proposal passed with a vote of 4-1, with Commissioner Justin Olson as the one dissenting vote.
In his dissent, Olson said he believes the proposal would increase rates and that ratepayers had previously voted against 2018’s Proposition 127, a constitutional amendment that would require electric utilities to generate half of their annual sales from renewable energy sources by 2030.
Marquez-Peterson said it was important for her, when voting in support of the new clean energy rules, that they are an “affordable option for ratepayers in Arizona.”
“We need to understand the economic impact to each of the ratepayer’s families, not only in Phoenix and Tucson but also in rural Arizona and throughout the state,” said Marquez-Peterson. “By setting these energy rules by 2050, this allows kind of the guardrails, is how I describe it, for utilities to accomplish that goal and using whatever technology makes the most sense and is the least cost-option that limits carbon emissions.”
For Marquez-Peterson it is also important that the rules be updated, as the rules have not changed since 2006.
In 2006 the commission approved the Renewable Energy Standard and Tariff (REST), which requires electric utilities generate 15% of their energy from renewable resources by 2025 and that they file an annual implementation plan to show compliance to the rules.
Neither bill would change the renewable energy rule, as it was approved prior to June 30, 2020.
However, the commission has taken a neutral stance and continues in its plan to vote on the new clean energy rules, regardless of the Legislature.
“This to me isn’t about who does the energy rules, but that it’s thoroughly vetted and that it’s the right action for ratepayers,” said Marquez-Peterson. “It’s all about the ratepayers and the communities we serve.”
Marquez-Peterson said they have provided state legislators with information about the four-year process it took to create the clean energy bills and it would be up to the state Legislature to tackle and lead the effort if the bills pass.
Sen. Kirsten Engel (D-Tucson) agrees that the legislature has the responsibility to establish policy for the public health and welfare, but not authority nor the expertise to preempt the commission after the agency has spent four years working on the new rules with a large group of stakeholders.
Engel said the Legislature hasn’t spent time developing clean energy standards, unlike the Corporation Commission.
“We’ve never had hearings on the matter,” said Engel. “Unlike the commission that it’s been working on these rules for four years of a stakeholder process with hearings and open docket, a lot of participation, the legislature has really done nothing. So, the sponsor seems to put out an amendment saying that this is now the state policy on energy. And it clearly doesn’t reflect anything close to the deliberative process that the ACC has used to come up with its revised rules.”
For Engel the bills are not only unconstitutional but also mean halting progress Arizona has made in pursuit of clean energy and economic progress.
“The legislature is intruding upon the role of the Arizona Corporation Commission and the impact of these bills will be to remove the authority of the commission to go forward with the process it’s engaged in now, which is to promulgate revised clean energy rules for the state,” said Engel. “Secondly, I believe that these bills will be harmful to Arizona’s economy and will prevent us from making an important contribution in mitigating climate change, which we are very clearly feeling the harmful effects of today.”
Over the past year neighboring states have experienced the effects of climate change through utility pitfalls, from the rolling blackouts and forest fires in California to the frozen and overwhelmed energy grid of Texas this winter. Over a six-month period from March to August 2020, Arizona had the warmest months to date, by an average increase of 3.6ºF, according to the National Centers for Environmental Information.
A 2017 study conducted by Climate Lab, a group of scientists, economists and computational experts, found that Arizona could see losses of 10 to 20% of the GDP per year by 2080 due to climate change.
However, Engel said Arizona has already seen the economic prospects of investing in clean renewable energy to mitigate the effects of climate change.
“This is a source of high-paying jobs and right now, with the COVID pandemic, it’s more important than ever that we get people back to work and the clean energy sector has been one of the growth sectors in terms of jobs,” said Engel. “This is clearly, I think, the future, and a very bright future for Arizona’s economy.”
Ceres, a nonprofit sustainability advocacy organization, estimates the current renewable energy standards (REST) have created $2 million in gross benefits for the public and customers of Arizona Public Service (APS) and Tucson Electric Power (TEP) combined. By expanding the rules to require 45% renewable energy by 2030, they project Arizona could generate an additional billion dollars in net benefits over the next 10 years.
Both utility companies have their own Integrated Resource Plan (IRP), setting clean energy rules. APS plans to generate energy through 65% clean energy and 45% renewable energy by 2030 and eliminate its use of coal by 2031 to reach the goal of 100% clean, carbon-free electricity by 2050. A similar goal as those proposed in ACC’s new clean energy rules.
TEP also submitted an Integrated Resource Plan (IRP) to build a cleaner energy grid over the next 15 years by providing over 70% of power from wind and solar resources, reducing 80% of carbon emissions by 2035 and expanding their energy storage resources as they transition away from coal. However, TEP has not committed to 100% clean, carbon-free energy by 2050.
“We’re focused on that 15-year span because we believe we can achieve those goals within that amount of time,” said TEP Supervisor of Media Relations Joseph Barrios. “Beyond 2035, we’ll continue to look for ways to improve the service we provide to customers.”
Like the commission, TEP says it will continue to pursue its energy plan, but “as a regulated utility, TEP will follow any new rules or requirements.”
Voters in Support of Climate Change action
On March 31, the Biden Administration unveiled the American Jobs Plan, a $2 trillion infrastructure and climate plan, part of the Build Back Better agenda, which includes an expansion of the country’s electricity transmission system, research and development to create new clean energy technologies, and investments in zero-emission vehicles, and energy-efficient electric appliances.
Climate Power 2020, an independent project created by the Center for American Progress Action Fund, the League of Conservation Voters, and the Sierra Club, polled voters and found that 3 out 5 of voters nationally have a favorable impression of the Build Back Better plan and the same number of voters consider climate change to be either a crisis or a very serious problem. After voters were told the estimated cost of $2 to $4 trillion, more than two-thirds of voters nationally say that Congress should pass President Biden’s Build Back Better plan.
Engel said her constituents are concerned about climate climate change and see clean energy, like solar power as a “real positive” for Arizona.
“We love this state. We love it’s rugged beauty and that’s at risk, as well as our health and our economy if we don’t take the climate crisis seriously,” said Engel. “It’s very discouraging to see, Republican leaders in the Legislature, rather than addressing the crisis and rather than also using it as an economic opportunity, instead, really undercutting the progress that many of us were very excited about when we saw that the Commission was coming out.”