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AZ faces costly energy infrastructure needs over next 25 years

We all are painfully aware of the dramatic rise in energy prices. The effect is felt most immediately at the gasoline pump every time we fill up.
Less obvious, but looming right around the corner, is a similar situation brewing in Arizona’s electricity markets.
Over the past 10 years, the demand for electricity from Arizona’s power producers increased by 41 percent, reflecting both increased population and rising per-capita electricity usage. Looking ahead, electricity demand in Arizona is projected to increase an additional 85 percent over the next 25 years.
Arizona power companies must build or acquire new capacity to meet the growing level of customer demand. Depending on the type of new generation facilities to be built, the total costs of adding generation, transmission and distribution facilities are projected at $65 billion to $77 billion through the year 2032.
If the cost of materials and labor to construct future power facilities continue to escalate faster than the overall rate of inflation — as it has over the past several years — the final bill could rise by another $10 billion or so.
Future efforts to control greenhouse gas (GHG) emissions through market mechanisms such as cap-and-trade programs, or carbon-capture technologies will add even more to the price of electricity for SRP, APS and Tucson Electric Power, all of which rely on coal for a significant portion of their diversified fuel mix.
Rising demand for renewable sources of power will further place upward pressure on electricity prices as Arizona power companies seek to comply with renewable portfolio mandates.
The Arizona Investment Council (AIC) commissioned Arizona State University consultants to undertake an extensive study of infrastructure needs over the next 25 years. One conclusion from the study is that the price of electricity in Arizona will need to increase annually at a rate greater than the general inflation rate to finance the cost of infrastructure necessary to meet Arizona’s growing power needs.
This means that for Arizona to secure its electricity future, prices will need to increase by 2.5 percent to 3.9 percent annually. It’s not surprising that the three largest retail providers of electricity in Arizona are each seeking rate increases to cover the costs of constructing new infrastructure.
It’s time our government, business leaders and citizens work together to address these important issues. If we don’t begin planning for the future now, we face the prospect of power brownouts or blackouts, thus endangering our health and lifestyle, and negatively impacting our economy.
Our policy-makers must be forthright with consumers and tell them that the costs of investments to keep the lights on will be reflected in higher prices for power. If necessary, they must construct appropriate safety nets for the most disadvantaged families. The CEOs of our power companies must think creatively about ways to meet our growing demand for power that reduces precipitous price increases. 
Consumers must be willing to use energy more efficiently and alter consumption patterns. With capable leadership and collaboration at all levels, we can make the critical investments in essential energy infrastructure while mitigating the impact to consumers. Working together and armed with good information and data, we can harmonize the economics of energy use and production with our environment.
— Gary M. Yaquinto is president of the Arizona Investment Council.

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