After more than five years of wrangling, Arizona regulators are poised to approve new green-energy standards for state-regulated utilities that supporters say are needed to slow global warming and keep the air clean of unhealthy fossil-fuel emissions.
The Arizona Corporation Commission next week is expected to vote on final approval of new energy standards that will require the state’s regulated utilities, including Tucson Electric Power, to get 100% of their power from carbon-free sources like solar, wind and nuclear by 2070, with interim targets of reaching 50% carbon-free power by 2032, 65% by 2040 and 80% by 2050.
“By passing the energy rules, the commission will be giving TEP customers a gift that will result in lower electric bills, cleaner air and improved health,” said Diane Brown, executive director of the Arizona Public Interest Research Group Education Fund.
The Corporation Commission approved a new draft of the rules in May, and after a series of hearings, an administrative law judge issued a recommended order to the utility panel on Dec. 1 that left the proposed rules largely unchanged.
The commission is expected to consider the rules for a final vote at its last open meeting of the year on Wednesday, Dec. 15, and Thursday, Dec. 16, when the regulators also will vote on a statewide “transportation electrification plan” that encourages TEP and other utilities to provide infrastructure to support an expected surge in the adoption of electric vehicles.
The new clean-energy rules would replace Arizona’s existing renewable-energy mandate, which was adopted in 2006 and requires utilities to get 15% of the energy they sell from renewable sources by 2025.
But the proposed new standards fall short of rules drafted and approved in November 2020 by the previous Corporation Commission, which would have mandated a moved to 100% carbon-free energy by 2050.
And the roughly 48 years it will take before Arizona mandates 100% carbon-free energy is far longer than several other Western states that have adopted such requirements. Oregon has mandated reaching 100% clean power by 2040, while California, Washington and New Mexico have targeted 2045 and Nevada plans to reach that goal by 2050.
The proposed rules also increase requirements for energy-efficiency measures intended to reduce the need to generate power, while setting up a new resource-planning process for the utilities.
The rules would require utilities to adopt enough energy-saving measures by 2030 to offset 35% of their 2020 peak demand, up from an earlier requirement for 22% savings by 2020 which the utilities achieved.
Utilities on track
Arizona’s biggest state-regulated power companies – TEP, sister rural utility UniSource Energy Services and Arizona Public Service Co. – have said they support the new rules, noting they are already on track to meet the requirements under their own carbon-free transition plans.
TEP has announced plans to deliver more than 70% of its energy from solar and wind and cut carbon emissions by 80% by 2035.
APS – which can count power from its Palo Verde Nuclear Generating Station as carbon-free energy – has a goal of providing 65% carbon-free and 45% renewable energy by 2030, with a goal of 100% carbon-free by 2050.
“The companies believe that the Commission’s draft Energy Rules provide a flexible, cost-effective path forward to decarbonize Arizona’s generation portfolios,” TEP said on behalf of itself and UES in its latest filing on the matter.
Environmental advocates including The Sierra Club have pressed the utilities to retire their coal plants earlier, and to replace their generation with renewable energy paired with energy storage rather than adding new natural-gas generation.
But TEP said it will take more than a decade to cost-effectively build out and replace the nearly 5,000 megawatts of coal-fired capacity scheduled to retire in the desert Southwest by 2032.
“This 10-year glide path is a critical part of maintaining long-term system reliability while simultaneously providing for a thoughtful transition of coal-impacted communities,” TEP said in its filing, adding that its plan “delivers the best combination of cost, reliability and environmental performance” and is the result of a yearlong stakeholder-engagement process.
Opponents of clean-energy requirements – including many Republicans who doubt fossil fuels’ role in global warming – say the mandates and transition away from coal and later, natural gas, will unnecessarily cost ratepayers billions of dollars in higher energy costs.
Corporation Commissioner Justin Olson, a conservative Republican, cited a study showing the existing renewable-energy standard cost APS ratepayers $1 billion since it was adopted in 2006.
But green-energy proponents point to studies showing that utilities and their ratepayers will save billions of dollars, citing costs for utility-scale solar and wind that have dipped below that of coal and natural-gas generation, even when accounting for the intermittent output of the renewable resources.
Groups including the Arizona Public Interest Research Group Education Fund also cite a 2020 study showing that Arizona’s 2006 renewable-energy standard saved TEP and Arizona Public Service and their ratepayers about $2 billion combined, in avoided energy and generation costs, water savings, pollution reduction, technology cost reductions and new jobs.
The potential cost to ratepayers of the transition to carbon-free energy prompted Corporation Commission Chairwoman Lea Marquez Peterson and Olson to vote against the draft rules in May.
The proposed rules passed with Republican Commissioner Jim O’Connor joining Democrats Sandra Kennedy and Anna Tovar in support, after he and Tovar teamed up on an amendment to stretch the deadline for 100% carbon-free compliance to 2070, from 2050 in the draft rules adopted in November 2020.
At Marquez Peterson’s urging, the utility panel commissioned a study of what it would cost ratepayers to move to 100% carbon-free energy by 2050.
A study issued in August by Colorado-based Ascend Analytics found that if utilities achieve 100% zero-emission energy by 2050, TEP residential customers would see their bills rise by $15.61 per month on average, based on TEP’s projections.
Ascend’s own comparison against a “least cost” resource model, assuming lower future wholesale power and gas costs, showed rates could go up an average of more than $58 monthly.
Even so, Ascend found that reaching 80% carbon-free energy production cost-effectively by 2050 is achievable with today’s technologies, and TEP’s own model showed reaching that benchmark would increase average home bills by just $1.56 per month.
The Ascend report, which used modeling software provided by TEP and APS, was subsequently criticized as flawed by clean-energy supporters.
The Arizona Technology Council and the sustainability nonprofit Ceres released a technical analysis by another consulting firm that found the utility-provided modeling that guided Ascend’s estimates were “rife with inconsistencies and shortcomings, likely leading to inflated cost projections for the rules.”
Given the thin majority that passed the draft energy rules, it’s not clear the commission will approve the pending version, which if substantially amended would have to go through yet another rulemaking process.
As a rulemaking process that started in 2016 apparently reaches its end – or another turn – AzPIRG’s Brown said the time has come for the commission to act.
“The commission has had years of analysis and received thousands of comments in support of the energy rules from large and small businesses, advocacy organization and ratepayers,” she said. “The Commission needs to move forward and approve the energy rules in order for TEP customers and ratepayers across Arizona to enjoy savings.”
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