Sunniest state in U.S. turns its back on the sun

Arizona Corporation Commission (ACC) voted 5-0 to repeal the state’s nearly two-decade-old renewable energy standards for the state’s regulated investor-owned utilities.

The Renewable Energy Standard and Tariff Rules (REST) require Arizona’s regulated utilities to source at least 15% of the electricity they sell from renewable sources, 30% of which must come from rooftop solar or other distributed renewable sources.

Nineteen years since its implementation, the mandate has seemingly paid off, with renewable energy accounting for 20% of Arizona’s total net generation, two-thirds of which is from solar, according to the U.S. Energy Information Administration (EIA).

ACC Vice Chair Nick Myers said the renewable energy mandates are outdated and that utilities should be able to have the flexibility to choose their energy mix themselves without being burdened by government-imposed rules. He said renewable energy mandates drive up costs for customers, but he did not provide support to explain this conclusion.

REST generated gross benefits for utility customers and the public totaling over $1.5 billion for Arizona Public Service (APS) and over $469 million for Tucson Electric Power (TEP) from 2008 to 2018, a 2020 report by Ceres found. The study also found REST resulted in an estimated $12 billion in clean-energy investments.

“It is naive to think that repealing the REST will not have direct impacts on Arizona families,” said Itzel Rios-Vega, Vote Solar’s Interior West regional director. “We urge the commission not to surrender its responsibility to guide Arizona’s energy future.”

For arid regions like Arizona, solar is particularly important because it uses far less water than other forms of generation. From 2008 to 2018, REST played “a crucial role in reducing pollution and delivering substantial water savings of 7,129-acre feet annually- enough water to serve the needs of nearly 44,000 Arizonans each year, an invaluable resource in our arid state,” the Ceres report found.

Additionally, because Arizona has no significant gas reserves, it must import gas from out of state. However, Arizona is drenched in sunshine to tap for energy generation, so much so that it holds the Guinness Book of World Records for “most sunshine.”

The public’s concerns extend beyond clean energy, saving water and lowering costs.

The retirement of renewable energy credits (RECs) is Arizona’s only legal mechanism to ensure exclusive claims over renewable generation, said Lucas Grimes, a senior manager of policy at Center for Resource Solutions.

“Without REST there would be no enforceable REC retirement obligation for regulated utilities,” Grimes said. “Utilities could sell RECs while also marketing the same electricity to customers as ‘renewable’ or ‘clean,’ creating significant risk of greenwashing.”

The public comments that were opposed included:

- 220 individual public comments from consumers
- More than 150 petitions, with 369 signatures on Vote Solar’s petition alone
- Dozens of companies and advocacy groups
- Government entities and officials

APS was among only public comments explicitly in favor of the repeal. The investor-owned utility said many of its current contractual relationships that resulted from the mandate will still be in effect regardless of whether the standard is repealed. APS cited the payments it receives through rate riders, adjustors and renewable energy programs, authorized by many past commission orders, and said it will still be paid if the mandate is repealed.

Though Grand Canyon State Electric Cooperative Association (GCSECA) said it generally supports the repeal because the rule has burdensome filing requirements. However, it urged the commission to keep the current program, tariffs and surcharges in place and establish a replacement approval process.

The commission’s chair Kevin Thompson has ties to gas utilities, specifically in drumming up new business for gas and pipelines for the business. For over 12 years, he worked for Southwest Gas Corporation, where he was responsible for the gas company’s sale, design and installation of “billions of dollars of natural gas pipelines.”

APS has previously pointed to its ambitious goal for carbon-free electricity by 2050. The utility never made much progress beyond the state’s mandate, and the day before the commission’s decision to repeal the mandate, announced it was abandoning the goal. Instead, APS said it will aim for “carbon neutrality.”

That same day, APS announced a new gas project, which will involve a new transmission line to import gas. APS expects the imported gas will cost $7.3 billion over 25 years, APS parent company Pinnacle West said a filing with the U.S. Securities and Exchange Commission. Laying out the regulated utility’s financial developments and outlook, Pinnacle West noted the several actions APS and the ACC took that either increased how much consumers pay to APS or decreased how much APS pays to others, including, but not limited to, multiple rate increases onto consumers, changes to rate designs to reduce “cross-subsidization by certain customer classes (currently ongoing) and so forth.

“None of this should surprise anyone,” Arizona’s Public Health Association said in a statement. “Voters put commissioners in office who openly favor fossil fuels over clean energy.”

Arizona Attorney General Kris Mayes, who was on the ACC when it implemented REST in 2006, wrote a letter to the ACC, outlining the many implications that REST’s repeal would have on ratepayers. She noted the recent Lazard report that said utility-scale solar costs have fallen by 84% since 2009, and a Brattle report for PJM that found utility-scale solar and wind are cheaper to construct than new natural gas, coal and nuclear plants, and how relying on pipelines to important natural gas causes higher electric bills. She outlined the ACC’s failure to provide evidence in its statements that solar is more expensive than gas and increasing costs for its ratepayers, calling it “speculation at best.”

In a signal of a potential lawsuit to come, Mayes said, “In addition to being bad policy, repealing the REST Rules as proposed here is an unlawful abdication of the Commission’s duty to set just and reasonable rates,” she said.

“Ratemaking decisions must be just and reasonable, which means they must be supported by substantial evidence, not arbitrary, and lawfully made. The Commission’s decision must be based on high-quality evidence, not speculation and conjecture.”

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