Arizona regulators reject new clean-energy rules after years of debate 

Arizona regulators have again killed rules that would require Tucson Electric Power and other state-regulated power companies to reach 100% carbon-free energy generation by 2070.

The latest twist in the years-long effort by the Arizona Corporation Commission to revamp the state’s clean-energy rules drew fire from supporters who say the rules are crucial for Arizona’s future.

The commission voted 3-2 on Wednesday to reject the proposed energy rules, with all three Republican commissioners voting against the measure. The commission had advanced the rules to the final rule-making stage last May, a few weeks after initially rejecting the proposal.

Then, first-term Republican Commissioner Jim O’Connor voted in favor of the draft rules after he and Democrat Commissioner Anna Tovar forged a compromise to extend the date for compliance with the 100% carbon-free rule to 2070, from 2050 approved in an earlier draft.

On Wednesday, O’Connor said that after much reflection, he decided the rules were unnecessary because utilities such as TEP and Arizona Public Service already have made major commitments to shifting to carbon-free energy sources.

O’Connor said he supports clean energy and has voted in favor of things like battery-storage contracts to support renewable energy, but he said he now viewed the rules he had previously advanced as unneeded and risky.

“During this long process and after years of opposition, our state’s major electric utilities have embraced clean energy and our proposed rules,” said O’Connor, a retired Scottsdale businessman.

“I concluded that they do not need these state-level energy rules at this time, which can pose risks for ratepayers,” he said, citing pressures the utilities are facing from sources including Wall Street and the federal government to move to cleaner energy sources.

Officials of TEP and APS had reiterated their support for the proposed clean-energy rules, saying they were consistent with their own plans.

‘Huge setback’

O’Connor was joined in voting down the rules by fellow Republican Commissioner Justin Olson, a staunch conservative who has consistently opposed the rules on grounds they would raise costs to ratepayers, and ACC Chairwoman Lea Márquez Peterson, a Tucson Republican.

Some supporters of the rules, which were backed by an array of environmental, business, consumer and faith-based groups, denounced the commission’s action.

“The failure of the ACC to adopt a robust energy rule is a huge setback for clean energy and holding utilities accountable for their climate-harming pollution,” said Sandy Bahr, director of the Sierra Club’s Grand Canyon Chapter, specifically citing a “lack of leadership” by Márquez Peterson and O’Connor’s “about face.”

“Arizonans have repeatedly and frequently voiced their support for transitioning away from fossil fuels that harm our health and the climate to a clean, and sustainable energy system, including in communities most impacted by coal plants and their pollution,” Bahr said. “The commission just did not listen.”

Márquez Peterson said Wednesday she had agreed to move the rules along earlier pending cost studies and has supported nonbinding clean-energy goals, but she could not support a statewide mandate.

Democrat members Tovar and Sandra Kennedy said they were shocked and disappointed by the failure of the energy rules, which were initially drafted in 2020 after a process started in 2016 to replace the state’s renewable-energy standard and related rules on energy efficiency.

The failure of the rules leaves Arizona with the renewable-energy standard adopted in 2006, which requires utilities to get at least 15% of their energy from renewable sources like solar and wind by 2025.

In contrast, 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.

Efficiency rules orphaned

Tovar noted that after a lengthy process of stakeholder meetings, the rules had won bipartisan support from local officials, medical organizations and small and large businesses across the state, as a way to protect public health while supporting economic growth.

“We as commissioners should be ashamed because we let politics get in the way of doing what is right,” she said. “I’m disappointed for our state moving forward.”

Kennedy said she was shocked by the failure of the proposed rules, noting that TEP and other utilities have already complied with the current renewable-energy standard.

“Somewhere, we’ve lost our way; we’ve lost sight of why we’re here,” Kennedy said, adding that technology is expected to improve rapidly in the future and that accelerating the adoption of renewable energy will protect ratepayers from rapidly rising natural-gas prices.

“Achieving a clean-energy future in Arizona is cost-effective with today’s technology,” she said.

Officials of the nonprofit Southwest Energy Efficiency Project and the Arizona Public Interest Research Group Education Fund also denounced the commission’s action.

“The commission failed to advance key consumer protections to eliminate energy waste and make everyone’s bills more affordable,” said Ellen Zuckerman, utility program co-director for SWEEP.

Besides setting new clean-energy mandates, the proposed rules would have increased the state’s energy-efficiency standards, prompting utilities to adopt enough energy-saving measures by 2030 to offset 35% of their 2020 peak demand, up from an existing 22% requirement.

“After years of hard work and careful study, billions in potential cost savings and thousands of local jobs are now in jeopardy,” Zuckerman said, urging the Commission to immediately revisit its decision.

“By voting against the energy rules, the commission voted against providing certainty for businesses and ratepayers that want to see electric bills decrease and clean energy increase, and instead has put voluntary decisions in the hands of the utilities,” said Diane Brown, executive director of AzPIRG.

Planning rules advanced

After killing off the energy rules, the Corporation Commission voted to open a new case to formulate rules on a new integrated resource planning process, part of which was included in the rejected energy rules.

Under current rules, TEP and other utilities have developed their own resource plans based on expected demand and a mix to serve that demand cost-effectively. But the ACC rejected the last plans TEP and APS filed in 2018, citing an over-reliance on natural-gas generation.

In 2019, the commission chairman at the time, Republican Bob Burns, had proposed a new resource-planning process that relied less on utility demand forecasts and set up an “all-source” request for proposals process for new generating resources, which could include sources like natural gas as well as carbon-free renewables like solar.

Márquez Peterson said she supports the all-sources approach and wants to develop the resource-planning as part of a new rule-making process, which could take up to nine months to draft and another nine months to bring to a final vote, ACC staffers said.

Kennedy suggested that the panel strip the carbon-free energy mandates from the rejected energy rules and vote on the rest as a package including the new resource-planning process.

But the ACC’s chief legal counsel said that would require an unlikely reconsideration of the previous vote or launching a whole new rule-making process anyway, since stripping out the mandates would substantially change the rules as published.

The commissioners agreed to start a new rule-making process for resource planning, initially based on work by stakeholders as part of the energy-rules process.