Arizona Corporation Commission
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PHOENIX – Renewable energy technologies got a huge boost in an Arizona Corporation Commission vote this week. In a state known for its sunshine but not known for large, swiftly moving rivers and streams or large scale geothermal opportunities, state regulators set high standards for renewable energy, hoping to capitalize on Arizona’s sunshine and other “green energy” opportunities. On Monday, Commissioners Marc Spitzer, Bill Mundell and Kris Mayes voted to require regulated electric utilities to generate 15 percent of their energy from renewable resources by 2025. For 2006, utilities must generate 1.25 percent of retail energy sold from renewable resources. The Commission’s Renewable Energy Standards allow utilities to use solar, wind, biomass, biogas, geothermal and other similar technologies to generate “clean” energy to power Arizona’s future. The rules package outlines what technologies qualify and allow for new and emerging technologies to be added as they become feasible. In addition to utility-owned projects such as Tucson Electric Power’s large solar installation in Springerville, Arizona, the Commissioners also required a growing percentage of the total resource portfolio to come from distributed generation – residential or non-utility owned installations. The distributed energy requirement starts at 5 percent of the total portfolio in 2007 and grows to 30 percent of the total renewable mix after 2011. In many cases, distributed generation installations – such as a large solar installation on the roof of a shopping mall, or solar panels at someone’s home – qualify for utility rebates or state and federal tax breaks that offset some of the upfront costs. Unlike other states that set aggressive standards but “grandfather” or give credit for existing projects, Arizona’s Renewable Energy Standards are focused on adding new generation and taking advantage of emerging opportunities. If a utility does not meet the standard, it can apply for a waiver and go through a hearing but the Commission may still assess a penalty for non-compliance. To help offset the increased cost of meeting the more aggressive standard, the current Environmental Portfolio Surcharge amount will change. Currently, customers pay $0.000875 per kilowatt hour. The new surcharge amount is $0.004988 per kilowatt hour. There are monthly caps in place limit the total impact on customer bills. Currently, residential customers are capped at 35 cents. The new cap will be $1.05. Non-residential customers currently have a cap of $13 but that will increase to a maximum charge of $39.00. For extremely energy-intensive commercial accounts (mines, heavy-manufacturing, etc.) the surcharge is capped at $117, up from $39. The Renewable Energy Standards were formerly known at the Environmental Portfolio Standard that topped out at 1.1 percent in 2007. In February 2004, the Commissioners voted to review the rules and consider adopting a more aggressive standard.
The Commission convened a series of intensive workshops involving the Commissioners and staff, proponents of various technologies, environmental advocacy groups and the utilities. The Renewable Energy Standards rules package is the result of this collaborative process.
Before taking effect, the rules must go through a review by the Attorney General’s Office and a formal rulemaking process with the Arizona Secretary of State’s office. It could be late in the third quarter or early in the fourth quarter of 2006 before the regulations are binding.
### Comments from the Commissioners
Commissioner Marc Spitzer: “There has been a lot of discussion of the technical issues and economics of renewable energy. The numbers say that fossil fuels prices are going up, natural gas has tripled in three years and that means the future price of electricity is going up. Today we’re doing something that transcends numbers. Sick children hooked up to respirators because we’ve had another bad air day is not something you can quantify. And the people of this country are frustrated that the nation’s energy future is tied to unstable nations and natural disasters that threaten our energy infrastructure. We need to change the rules and strike a better balance. Today we’ve changed the rules. Tomorrow we may strike that better balance.”
Commissioner Bill Mundell: “In 2001, when we passed the current rules we were the first state to do so. Arizona was on the cutting edge. Now we’ve fallen behind. By passing these rules, we’ve put Arizona back in the forefront of renewable energy. Not only will we have cleaner air and conserve our water, we will create jobs and economic development in Arizona. This is a vote for our children and grandchildren.”
Commissioner Kris Mayes: “I proudly vote yes on these rules. We are taking our energy destiny into our own hands and making an investment in our state’s future. This is a vote for independence from high utility bills, from bad air and from terrorist sponsoring countries that produce oil. A recent poll showed that 75 percent of Arizona customers are willing to pay a little more to ensure our energy independence. This will reduce the need for additional power plants and power lines while allowing us to meet the power needs of the thousands of new people moving into the state each month.”
Commissioner Mike Gleason: Gleason voted against the rules. “This is going to get very expensive. The experts from the utilities say this is going to be very, very difficult to achieve. Years from now when the costs go through the roof, people will be asking ‘What were they thinking when they passed this?’ ”
Chairman Jeff Hatch-Miller was out of the country on previously planned travel. In a February 16 letter to his colleagues, Chairman Hatch-Miller signaled his opposition to the Renewable Energy Standards.
Find this case through the E-Docket link at www.azcc.gov. Search for docket number RE-00000C-05-0030 | ||||||||
