Earlier in December, the Arizona Corporation Commission took action to modernize how utility rates are set by adopting Formula Rate Plans (FRPs). This marks a significant step forward in tackling regulatory lag, a long-standing challenge that delays critical investments in Arizona’s energy infrastructure.

As one of the nation’s fastest-growing states, Arizona’s economy depends on energy reliability. With industries like advanced manufacturing, aerospace, and semiconductor production growing at a rapid clip, Arizona’s energy demands are soaring. To keep pace and stay competitive, we need a regulatory framework that supports investment, accountability, and efficiency. FRPs deliver on all three fronts.

For too long, the traditional utility rate process has been time-consuming and costly, often taking years to resolve. This delay, known as regulatory lag, makes it harder for utilities to recover the costs of vital infrastructure improvements in real time. The result? Arizona’s energy infrastructure risks falling behind, leaving consumers vulnerable to reliability issues and rate shocks when those deferred costs eventually catch up.

FRPs tackle this issue head-on by allowing utilities to make annual rate adjustments based on real, up-to-date cost data. This ensures that rates reflect current economic conditions and infrastructure investments, without forcing utilities or consumers to endure drawn-out and expensive hearings. At the same time, full rate cases will still be required every five years, providing critical oversight to protect consumers and guarantee accountability.

This model isn’t new — 54 utilities in 12 other states, including major economic competitors like Texas, already use FRPs successfully. They’ve been proven to strike the right balance: creating certainty for utilities to invest in infrastructure while maintaining fairness and transparency for ratepayers. Adopting this model positions Arizona to meet today’s energy challenges while staying competitive on a national and global scale.

For businesses, this change couldn’t come at a better time. Companies investing in Arizona, from semiconductor giants to data centers, depend on a robust and reliable energy infrastructure to power their operations. By reducing regulatory lag, FRPs create the certainty businesses need to plan, grow, and invest with confidence.

Consumers also benefit from this framework. Instead of steep, unpredictable rate increases that come after years of accumulated costs, FRPs enable smaller, gradual adjustments tied to real-time investments. This means greater transparency, affordability, and predictability for families and businesses alike.

The Arizona Chamber of Commerce and Industry was proud to support this policy because we understand what’s at stake. A reliable, modern energy grid isn’t just a convenience — it’s a fundamental requirement for economic growth, job creation, and quality of life. The ACC’s decision to implement FRPs reflects a commitment to smart, innovative solutions that will help Arizona meet the needs of a growing population and expanding industries. 

This isn’t just about “keeping the lights on.” It’s about building a resilient, reliable grid that supports long-term success for Arizona’s businesses, families, and economy. At a time when infrastructure, energy reliability, and competitiveness are more critical than ever, FRPs represent a big win — for consumers, for businesses, and for Arizona’s future.

Danny Seiden is president and CEO of the Arizona Chamber of Commerce and Industry.