Limited government. Free enterprise. Choice and competition. These are bedrock values in Arizona.
But you might be surprised to learn that in one major area of life – the electricity that powers our homes and businesses – state law doesn’t reflect these values. That means electric bills are higher than they need to be, which is the last thing our state needs when U.S. inflation is surging to 40-year highs.
Here’s the good news – there is a growing movement to fix this problem so consumers in Arizona will benefit from more choice and competition. But the bad news is some state officials are dragging their feet in defense of the status quo.
For decades, the process for determining where, when, and how electricity is generated in Arizona has been tightly controlled by state regulators, along with the utilities themselves.
Working together in highly complex, difficult to follow legal proceedings, the regulators and utilities – which have monopoly status within their service territories – have determined which technologies should be used to generate our electricity and how much consumers should pay.
This top-down method for determining electricity sources and prices leaves very little room – if any – for market forces to shape the state’s power grid and how much we pay on our power bills.
Of course, some reforms over the years have loosened this grip. But the decision-making process is still a far cry from what most Arizonans expect and deserve. However, for the last four years, the Arizona Corporation Commission – the agency that regulates electricity sources and prices – has been looking at new rules to further reform this process in favor of greater transparency, choice and competition.
Proposed Integrated Resource Planning reform rules, which include all-source bidding and more transparency, were introduced as part of a larger energy modernization package. This larger package of energy reforms is no longer on the table, but the ACC still has the chance to enact the all-source bidding rules. Rather than simply trust the judgment of utility executives and members of the ACC staff, this proposal would open up the process to much needed outside scrutiny by requiring utilities and regulators to “show their work” and help the public compare the plans of utility companies with market trends across the broader electricity sector.
These “all-source bidding rules,” as they are now called, would shake things up in three major ways.
First, to prevent costly overbuilding, the ACC’s five-member commission would review and vote on the electricity demand forecast provided by a utility. The public would be able to examine the forecast and provide feedback to the ACC commissioners before their vote.
Next, the commissioners would review and vote on the utility’s Request for Proposals. In theory, an RFP is designed to find competing sources of electricity beyond the utility’s own power plants. These wholesale sources of electricity – such as wind farms, solar arrays or small-to-medium sized power plants that run on natural gas – can often be built and operated at a lower cost than utility-owned assets. An RFP can also identify energy efficiency measures to minimize electricity waste and higher costs.
In practice, it is possible for utilities to skew their RFPs to ignore some cost-effective power sources in favor of others that are more expensive. With more scrutiny from ACC commissioners and the public, however, the RFP process has a much better chance of serving the interests of consumers.
The all-source RFP will generate a true market response on the resources that could be utilized to meet energy demand, including everything from clean and renewable sources to nuclear to traditional sources of energy production.
Finally, once bids are submitted in response to an RFP, the all-source reform package would require the utility to develop an implementation plan. This plan would be subject to review and a third and final ACC vote – a further safeguard for electricity consumers.
These reforms are clear and simple, but unfortunately Commissioners Anna Tovar, Sandra Kennedy and Jim O’Connor have spent the past several months blocking their consideration by repeatedly pulling them from open meeting agendas. Finally, at the August 2022 open meeting, they voted in favor of freezing the item entirely until January 2023 when a new commission is seated, attempting to justify their vote in the interest of preserving staff time and resources.
But this delay was entirely unwarranted. Commissioners and stakeholders have already had months to review, consider, and weigh in on the stand-alone proposal, let alone years of review and consideration when the proposal was included in the commission’s Energy Rules package.
Chairwoman Márquez Peterson and Commissioner Justin Olson voted to move the item forward. If Commissioner O’Connor truly supported choice, competition and free-market energy solutions – as he says he does – he would have voted with them. Instead, he declined yet another opportunity to bring needed regulatory reform to Arizona consumers.
Arizona families and businesses need urgent relief from rising energy prices and every agency of state government – including the ACC – should be doing everything possible to provide it. Instead, they are putting it off for another day.
Doran Arik Miller is the Arizona director of The Western Way, a nonprofit that builds support for common sense, market-driven solutions to environmental challenges that support the economy and improve the environment.
No tags for this post.