On Wednesday, the Arizona Corporation Commission is scheduled to vote on a package of updated clean energy rules that is years in the making. The package now under consideration, which benefits from several recent amendments, is the product of an extensive and bipartisan stakeholder process with significant support from individuals and businesses large and small from across Arizona. Most importantly, these rules allow Arizona to remain competitive with other states by providing the type of robust clean energy commitment that businesses demand before bringing jobs and substantial investment into a state while at the same time providing key protections to make sure the public does not pay more for clean energy.
The current standard, set by the Arizona Corporation Commission back in 2006, only requires regulated electric utilities in Arizona to generate 15% of their energy from renewable sources by 2025. While Arizona’s standards may have been competitive when adopted, Arizona has since fallen behind neighboring states. Falling behind on this metric has real world consequences that make Arizona less competitive than other states at attracting key investments and jobs. More and more, the marketplace requires that a state provide access to robust clean energy options, or it will be left off the list for economic development projects and will be out of the running in the heated competition to attract the businesses of the future. That is why major corporations like Apple, Oracle, Microsoft, PayPal and others support updated clean energy standards.
The current package will give Arizona an advantage when competing for economic development opportunities by repositioning Arizona as a national leader with a 100% clean energy goal by 2070. To reach that goal, the new rules take a carbon-reduction approach, allowing utilities to meet the carbon-free requirement by using renewable energy as well as nuclear power and energy-efficiency measures, rather than a technology-based requirement, which would have required utilities to use a set amount of renewable energy to reach the goal. By setting a standard of 100% carbon-free by 2070, the rules package gives industry more time and flexibility to design their energy portfolios in a way that takes into consideration costs and externalities.
Importantly, the new energy rules will position Arizona for success in the ongoing competition for economic development while including safeguards to protect the public. Chief among these protections is a waiver provision that allows the Commission to excuse compliance with the energy rules if the Commission finds that there is good cause and that doing so will not harm the public. In practice, this means that if the Commission determines compliance with the rules will be too expensive or otherwise cause harm, it can issue a waiver.
In addition to the waiver provision, the amendments added by Commissioner James O’Connor provide an additional safeguard to ensure the Commission has a complete understanding of the cost of complying with the rules. This provision requires utilities to analyze and provide to the Commission information on the relative costs of installing clean energy resources in compliance with the rules as compared to an alternative “lowest-cost” portfolio developed without regard to the rules. If the Commission finds that the costs do not favor the clean energy resource portfolio, the Commission can utilize the waiver provision. While clean energy is currently the lowest cost energy option, this provision enables the Commission to ensure ratepayers are protected from unduly burdensome costs if necessary.
The proposed rules package also includes critical updates to the Integrated Resource Plan and purchased power agreement processes—including competitive bidding, all-source RFP processes, and prudency reviews—that will introduce more transparency and competition into the overall process. These modernizing changes will significantly benefit ratepayers by ingraining transparency, competition, and market forces in the resource planning process. These are important protections for ratepayers and will lead to a more efficient and effective power delivery system for the state of Arizona.
Perhaps most critically, the package will provide the necessary long-term market certainty to support utilities as they work to increase clean and renewable generation in Arizona and meet their own renewable energy goals, drive technology and innovation in the energy sector, and drive down costs for consumers. They also provide a guarantee that Arizona will be able to meet the clean energy demands of investors and businesses who want to locate in Arizona, spur critical rural economic development efforts, and reflect what Arizonans want to see from our state’s energy regulators.
The Arizona Corporation Commission now has a critical opportunity to accelerate clean energy innovation and adoption even further at a time when it would be particularly impactful to Arizona’s economy. The fact is that modern businesses do not consider investment in states that do not provide access to ample clean energy options. These rules, if adopted, will strengthen Arizona’s competitive advantage over its neighbors, keep energy costs low and predictable, and provide the long-term regulatory and market certainty businesses and utilities need. Arizona’s Corporation Commissioners should feel confident in voting to approve them.
Doran Arik Miller is the Arizona Director of The Western Way, a nonprofit organization that builds support for commonsense market-driven solutions to environmental challenges that support the economy and improve the environment.