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State issues assured water supply designation amid ongoing lawsuits

Key Points:
  • EPCOR Utilities is the first recipient of an alternative designation of assured water supply
  • The designation was granted under new water rules adopted last year
  • ADWR is currently fighting two lawsuits against the rules

Gov. Katie Hobbs announced the first recipient of an alternative designation of assured water supply amid ongoing lawsuits against the Arizona Department of Water Resources. 

EPCOR Utilities is the first entity to receive a designation under the Alternative Designation of a 100-Year Assured Water Supply rules adopted by ADWR last year. The designation will allow residential construction to begin in parts of the West Valley after a two-year moratorium.

“This ADAWS Designation is going to save water, it is going to support sustainable economic growth, and it is going to create more housing,” Hobbs said in a statement. “Today we are again demonstrating that Arizona can, and will, continue to grow our economy while protecting our water.

In June 2023, Hobbs restricted the approval of new assured water supply certifications in the Phoenix Active Management Area due to a shortage of groundwater. The Alternative Designation of a 100-Year Assured Water Supply was approved in October 2024, allowing developers to explore new water sources and offset groundwater pumping in order to build in the area.

Under the ADAWS, new developments cannot obtain a certificate of 100-year assured water supply unless they can demonstrate that supply across the water provider’s entire service area, not just the development site. ADWR Director Tom Buschatzke celebrated the first designation under ADAWS in a statement released Oct. 7.

“I commend Governor Hobbs for her leadership in this effort, and I further commend my hard-working staff for the countless hours they have contributed to making this alternative pathway to an Assured Water Supply a reality for participating providers,” Buschatzke said. “The many stakeholders involved in this process have been intensely engaged and determined to find that next adaptation of water policy that allows incremental, sustainable growth while protecting groundwater. I heartily commend them as well.”

Hobbs’ announcement comes as ADWR fights two separate lawsuits from the Home Builders Association of Central Arizona (HBACA), one of which was joined by Senate President Warren Petersen and House Speaker Steve Montenegro. The first lawsuit alleges ADWR did not have the authority to create the ADAWS, and the second challenges the concept of an assured water supply altogether. 

The second suit, filed by the Goldwater Institute on behalf of HBACA, challenges the groundwater modeling requirements used for the 100-Year Assured Water Supply Program, which was created by the Groundwater Management Act in 1980. 

In a press release issued after the first lawsuit was filed in March, Republican leaders described ADWR as a “rogue” agency and characterized the groundwater pumping requirements as a tax.

“This is government overreach at its worst,” Montenegro said in a statement in March. “The people of Arizona elected us to defend their interests, not allow unelected bureaucrats to impose illegal taxes that make the American Dream of homeownership out of reach.”

Petersen repeated that characterization in a statement to the Arizona Capitol Times on Oct. 7.

“The Governor has unilaterally charged a 33.3% water tax, without legislative consent — and this new tax ultimately will be paid by Arizona families,” Petersen said. “This is exactly the abusive taxation that the Senate sued to stop, and it illustrates why taxpayers cannot trust Katie Hobbs with their checkbooks.”

Republican lawmakers have been frustrated with ADWR since late last year for using a rulemaking process to create the ADAWS without specific legislation directing it to do so. Legislators also expressed frustration with the Governor’s Regulatory Review Council, the agency responsible for reviewing and approving state agency rules, for giving the ADAWS the greenlight in 2024. 

Hobbs’ office and ADWR have disputed the characterization of the requirements as a tax and have defended the ADAWS as a way to preserve water supplies and continue home building in areas of the Valley that are dependent on groundwater.

Attorneys for ADWR filed motions to dismiss both lawsuits. An oral argument in the case filed by legislative leaders and HBACA is scheduled for Nov. 19, while the lawsuit filed by the Goldwater Institute on behalf of HBACA is currently awaiting a ruling from the Maricopa County Superior Court. 

Building water resilience through innovation and partnerships

Arizona stands at a pivotal moment. The Colorado River – long central to our state’s growth and prosperity – is shrinking under the strain of drought and rising demand. The challenges are real, but so are the opportunities. For decades, Arizona has led the nation in confronting water scarcity with foresight and resolve, from pioneering conservation strategies to forging multi-state agreements. That tradition of leadership matters now more than ever.

As we prepare for a future with less water, the path forward must be built on smart solutions, strategic partnerships and regional collaboration. At EPCOR, we’re committed to that work. Serving diverse regions and drawing from multiple sources gives us a clear view of Arizona’s water challenges and the responsibility to act. Our lowest hanging fruit is addressing aging infrastructure and making investments that conserve water, support growth and create greater efficiencies across our water and wastewater systems. Now, as pressures mount, innovation plays a critical role in shaping our next chapter. 

One area that innovation is making a measurable difference is leak detection. Through smart meters, we’re helping customers identify leaks early – saving water and reducing costs. And, through our partnership with FIDO Tech, we’re using AI and acoustic sensors to detect underground leaks. In fast-growing communities like San Tan, this technology has helped us rapidly find and repair over 115 million gallons of leaks annually that might have gone unnoticed for years.

We’re also advancing solutions through strategic partnerships. EPCOR recently collaborated with several startups through the Arizona Commerce Authority and Plug and Play’s sustainability cohort. One promising pilot effort is through OXbyEL, a local company developing a low-cost method to remove PFAS. Their system doesn’t just trap the contaminant – it breaks it down at the molecular level. Though early-stage, this kind of forward-thinking work shows how utilities can accelerate technology to protect public health. 

Looking ahead, we’re also exploring predictive maintenance and advanced decision-support systems that help us make faster, smarter decisions and keep our systems more resilient. Across Arizona, our industry is advancing supply and efficiency, from expanded reuse to regional water development projects. While EPCOR isn’t involved in every initiative, we’re proud to be part of the broader movement – from our innovative facilities where we reuse or recharge 96% of the wastewater we treat to our expansive conveyance systems that move water from where it’s abundant to where it’s needed. 

Arizona has always led in water supply planning and management. The next chapter of Arizona’s water story is being written by all of us – utilities, industry and communities working together to secure our water future. Through smart planning, bold solutions and a united approach, Arizona will continue to lead as other states follow.

Shawn Bradford is senior vice president of EPCOR USA. 

Arizona Corporation Commission: Saving money for whom?

Ylenia Aguilar

The Arizona Corporation Commission was created with a simple mission: to look out for everyday Arizonans. It was never meant to be a tool for utilities or special interests, but rather a safeguard for the people who pay their bills each month and depend on affordable, reliable energy.

So why did the commission just vote unanimously to move forward with repealing Arizona’s energy efficiency standards? Whose money are they really trying to save?

Energy efficiency has always been one of the smartest investments we can make. It lowers utility bills, reduces wasted energy and saves real dollars for ratepayers, Republicans and Democrats alike. Families and small businesses benefit directly when their homes, schools and workplaces use less energy to do the same job. Efficiency programs are consistently ranked among the cheapest resources available, far less expensive than building new fossil fuel plants or passing on higher costs to ratepayers.

But instead of strengthening these programs, the ACC is dismantling them. The repeal process is not yet final, but by voting to begin formal rulemaking, the commission is signaling a willingness to strip away policies that save Arizonans money and improve our quality of life. It’s hard to square this with the commission’s constitutional mandate to protect the public.

This is not a partisan issue. Republicans want to save money just as much as Democrats or independents. Energy efficiency has nothing to do with political ideology, it’s about common sense. A more efficient air conditioner or water heater saves families hundreds of dollars a year. Weatherizing a home can cut energy waste and keep people cooler during deadly heat waves. Small businesses depend on efficiency programs to lower operating costs and stay competitive.

By moving to repeal, the commission is effectively saying: saving money for who? For utilities, which profit when we use more energy. Not for the average Arizonan, who is already facing rising bills and record heat.

The good news is this decision isn’t final. The commission will hold public comment hearings on December 2 at 9 a.m. and on December 4 at 1 p.m. Those hearings are our opportunity to push back and remind commissioners who they are supposed to serve. When Arizonans speak with a united voice, it makes a difference.

The ACC was created to be a watchdog for the people. It’s time to hold it accountable to that mission. I invite you parents, students, business owners, retirees and anyone who cares about saving money and protecting our communities to show up in December and make your voice heard.

Because at the end of the day, efficiency saves money. The real question is: saving money for who?

Ylenia Aguilar is a member of the Central Arizona Water Conservation Board and serves as the Sierra Club’s Beyond Coal Organizer in Arizona.

Correction: This story has been updated with the correct public hearing dates of Dec. 2 and Dec. 4.

Kevin Thompson: Still smiling as chair of the Arizona Corporation Commission

After two years on the Arizona Corporation Commission, Kevin Thompson stepped into the chair role this year. He sat down with the Arizona Capitol Times to talk about what he’s learned so far and why he wants four more years at the ACC.

Answers have been slightly edited for clarity. 

What led you to run for the Commission?

I started out (at Southwest Gas) in operations as an engineer, worked my way up to regional manager over the new business department, moved over to government relations, did that for about five years, and then fell in love with local government. (At Southwest Gas) I was the liaison between local government and the company. And so that’s where I really started working with local governments, and fell in love with how cities operate and how close they were to the people. So I decided to run for Mesa City Council, and got elected in 2015 as a council member, and served for eight years on the City Council. I was coming off of the City Council and thought I was done with politics. I was sure I was done with politics. And then a couple of legislators asked me if I would run for this seat because of my utility background and how I voted on the city council. They thought that I had made some really good votes. They wanted me to bring that to this position and asked if I would run. And then Nick (Myers) recruited me to run with him – and the rest is history.

How did your roles with Southwest Gas and the Mesa City Council prepare you for this role? 

Working on the gas side, I understood test years, I knew the operations, and I knew what the Corporation Commission was responsible for. So I didn’t come in completely blind. I came in with eyes wide open, so I knew sort of what was expected of me. I didn’t know necessarily the ratemaking process as the commission does it. I knew the ratemaking process as the city does it. And the City of Mesa owns its own gas, electric, water, wastewater, totally night and day different from how we do ratemaking. So it was new for me in that respect, and the level of intensity and the depth of the ratemaking and how technical it is. And when I came in, electricity was new to me. I knew the water side, I knew the natural gas side, but the electric side is so complex.

What do you wish people knew about the Corporation Commission?

I wish they knew more about what the Commission does and how we do it. When you go out and talk to people, they don’t even know what the Commission does. So you’re constantly reminding people … The other thing is, people don’t realize that the utilities are allowed to recover their costs by the (Arizona) Constitution. It’s written into the Constitution and people just think that, as a commissioner, you have the ability to say, “We’re not going to give you a rate increase this year.” So anytime that they’re putting money into poles, wires, pipelines, fuel, just inflation alone, it’s going to increase their cost. And the Constitution says that they’re allowed a just and reasonable return on that investment. So what we tell people is, if you don’t like the fact that the utilities are getting an increase, then rewrite the Constitution. Because we’re following the Constitution, we’re following the law, and our job is to make sure that it’s just and reasonable. 

You’re up for reelection next year. What about your time in this role made you want to serve for another four years?

I’m still smiling. I love this job. At the end of the day, I love serving the people. I did eight years in the Air Force. I served for eight years on a city council. I’ve done four years in this position. And to me, it’s about serving the people, and I enjoy doing that. So long as I’m smiling, I’ll continue to try to serve the people, as long as the people want me here serving them. I like to say that God gave you two ears and one mouth, so you should be listening twice as much as you speak. So listen to what’s going on, listen to your constituents and be a better person and try to follow the law and do what’s right. And that’s what I’m about.

You stepped into the chair position at the Commission this year. How has that changed your work?

It’s funny, because people would ask me, “So what’s it like being the chair?” And I was like, it’s the same as being a commissioner, but they paint a larger target on you. I look at the chairmanship differently than I look at just being a commissioner. Because as the chair, you’re the face of the organization. So I think it’s my job to defend this organization, to protect this organization, and to really help steer this organization. We have phenomenal employees who are here every single day to do the best that they can do. We’re trying to make Arizona a better place and trying to help people live that American dream. So in this position, I know (my staff’s) workload went up by three times because we have to put the agendas together, and you’re meeting with all the different offices and so forth. But I think what we do on a day-to-day basis is really try to represent this organization in the best light that we can.

What do you do in your free time to unwind so you’re able to continue doing this work?

I got into this again knowing what was going to be asked of me. It always upsets my wife, but I always tell her I’ll rest when I die. She’s like, “Well, you don’t have to get there early.” But for me, my disconnect is I ride dirt bikes on the weekend when it cools off. I do a lot of dirt bike riding because it really clears your mind when you’re in your zone. When I get on a dirt bike, as soon as the engine starts, I don’t think about work, I don’t think about family. I’m listening to my bike, and I’m looking at the trail 50 feet ahead trying to pick my lines. And then, as soon as you’re done, all of that comes rushing back because, at the end of the day, you still have a job to do. 

What legacy do you hope to leave on the commission?

My goal is to leave the organization and the state in a better position than it was when I found it. I tried to do the same thing in Mesa. I’d like to say that I left district six, and I left Mesa in a better position than it was when I found it. And that’s all I want to do with this. When you run for office, you should not be doing it to get rich, because you don’t, and you shouldn’t be doing it to get famous. You should be doing it because you love your community, you love your state, you love your county, and you want to leave it better at the end of the day. I just want to be remembered as the guy who tried his best to make Arizona a better place for everyone.

2 state agencies argue ACC is improperly pushing policies

Key Points:
  • Policy statements from Arizona Corporation Commission have been challenged
  • Commission argues it is entirely exempt from governing agency regulations
  • Two agencies disagree, and are fighting against the commission

The Arizona Corporation Commission is facing challenges from two state agencies attempting to invalidate its policies, raising questions about the body’s authority and self-oversight. 

The all-Republican commission has spent the first part of this year fending off litigation and administrative review from the Residential Utility Consumer Office and the Governor’s Regulatory Review Council. Both entities allege the commission has been using policy statements in lieu of formal rulemaking processes to enact controversial regulations.

The commission argues it is exempt from statutes governing how state agencies create policies and has the authority to impose sweeping changes to ratemaking and utility oversight with little input from the public or stakeholders. That argument held up in a Maricopa County Superior Court, but it did not pass muster with the members of the Governor’s Regulatory Review Council.

The rulemaking process

Arizona’s Administrative Procedures Act requires that state agencies must submit rules governing the implementation of state statutes to the Governor’s Regulatory Review Council (GRRC) for approval. GRRC reviews state statutes, public comment, economic impact reports and any other materials provided by the agency to determine whether a rule or rulemaking package should be approved.

The act specifically exempts the Corporation Commission from submitting its rules to GRRC due to its constitutionally granted ratemaking authority, but requires the commission to develop a “substantially similar” process for reviewing rules. 

State agencies, and the commission, can also issue policy statements that provide clarifications or guidance on statutes, but do not impose requirements. If a policy statement imposes requirements on individuals, businesses or regulated communities, it can be invalidated by GRRC until it is adopted as a rule through a formal rulemaking process.

The commission does not have a formal process in place for reviewing its policy statements to ensure they do not constitute rules. In fact, attorneys for the commission have argued that it is entirely exempt from the Administrative Procedures Act. 

“The Commission is an independent Constitutional entity not part of the Arizona Executive Branch, the Arizona Court system, or the Arizona Legislature,” commission attorneys argued in a May 12 court filing. “By virtue of its independent and broad constitutional charter, it is vested with the exclusive power to create its own rules and its own policies, particularly when it is engaged in ratemaking.” 

But RUCO, GRRC and stakeholder groups disagree, and they are using several avenues to challenge that assertion.

Formula rate policy statement

In December 2024, the commission approved a controversial policy statement allowing utility companies to use formulas to adjust their rates annually, rather than solely using rate cases to ask for adjustments.

While many stakeholders, including RUCO, disagree with the use of formula rates, the most objections came from the way the commission implemented the idea: a policy statement. RUCO filed suit over the policy statement in March, arguing the commission chose to “illegally implement a sea change in public service corporation regulation.”

The commission asked Maricopa County Superior Court Judge Susan Pineda to toss out the lawsuit, which she did on June 13. Pineda sided with the commission’s interpretation of its authority, saying RUCO’s claim was based on “the erroneous premise that the Commission’s actions are subject to the APA.” 

Commission Chair Kevin Thompson praised Pineda’s ruling in a statement released after it was handed down.

“Today’s ruling is a significant win for the commission and Arizona,” Thompson said. “The court unequivocally affirmed our constitutional authority to set policy and rules in our ratemaking capacity.”

Autumn Johnson, an attorney who often represents solar industry groups before the commission, said she disagrees with the notion that the APA does not apply to the commission at all. 

“It is just patently absurd that the Corporation Commission is completely exempt from the entire Administrative Procedures Act,” Johnson said. “They’ve never argued that before. Courts have never found that before. That’s not what the APA says.”

An attorney for RUCO told the Arizona Capitol Times on June 13 that the office is considering other options to challenge the policy statement after the judge’s ruling. 

Undergrounding policy statement

In October 2023, the commission approved a policy statement that discouraged burying utility transmission lines underground in favor of above ground lines due to costs. Underground Arizona, a nonprofit based in Tucson, requested that the commission reconsider the policy statement in September 2024, but the commission rejected the request.

In November 2024, Dan Dempsey with Underground Arizona, filed a petition to GRRC asking it to review the policy statement. Although state statutes specifically exempt the commission from submitting rules to GRRC, Dempsey said that commission staff directed him to statutes regarding GRRC review when he inquired about options for appeal. 

The commission requested that Dempsey’s petition be denied due to a lack of jurisdiction from GRRC and noted that attorneys for the commission were unable to find a single instance of GRRC review of an ACC policy since the commission was established in 1912. 

Dempsey argued that the policy statement in question was not a ratemaking issue, but a line siting issue, therefore making review by GRRC possible. After giving both parties an opportunity to state their cases at a May 28 meeting, GRRC voted on June 3 to invalidate the policy, with council members saying they felt confident that it was actually a rule. 

A week later, the commission voted to send a letter to GRRC informing it that commissioners still recognize the policy statement as valid, given the June 13 ruling from Judge Pineda confirming its exemption from the APA. 

“In light of the law governing this issue, and in response to GRRC’s unauthorized assertion of jurisdiction over commission rules and policies, the commission unanimously voted to affirm its previous position,” wrote Tom Van Flein, the commission’s general counsel, in a June 16 letter. 

The Department of Administration, which houses the Governor’s Regulatory Review Council, reiterated in a statement on June 20 that the council declared the policy “void.” 

Neither agency appears ready to acquiesce to the other, and it is unclear where things go from here.

“We’re going to treat the GRRC decision as valid,” Dempsey said. “We’re not going to accept the ACC’s interpretation.”

Johnson said she doesn’t believe the commission can enforce the policy statement after it was deemed void.

“If they have a problem with the decision, then they need to seek a declaratory action in the courts, or some kind of special action to the Supreme Court,” Johnson said. “They don’t just get to say ‘no thanks.’”

Johnson said she thinks both issues will continue to play out and hopes both agencies press the commission on its claims to broad authority with virtually no oversight.

“(These cases) provide a really important accountability function and really important checks and balances and a really important rule of law function,” Johnson said. “You cannot just have an agency or one branch of government that’s just completely run amok and isn’t beholden to anyone else.” 

Hobbs signs utility financing bill, foes say legal challenge could follow

Key Points:
  • Gov. Hobs signs bill allowing utilities to transfer debt to bonds
  • Bill was written by Arizona Public Service
  • Opponents say more oversight of securitization process is needed

Gov. Katie Hobbs signed a controversial utility financing measure into law on May 13, despite calls for a veto from environmental groups and some Democrats in the Legislature. 

House Bill 2679 allows utility companies to transfer debt into low-interest bonds that can be sold to recoup funding from aging or inefficient assets in a process known as securitization. The bill was written by Arizona Public Service and given to Republican Rep. Gail Griffin, R-Hereford, to sponsor. 

The legislation has been a point of contention this session and drew the ire of current and former Arizona Corporation Commission members, Attorney General Kris Mayes, Senate Minority Leader Priya Sundareshan and several environmental groups. 

In a statement released May 13, Hobbs said she worked with a bipartisan group of lawmakers on the bill to take it from a “concerning piece of legislation” to a “common sense, middle of the road solution.”

“HB2679 will lower costs for everyday Arizonans, improve grid resiliency by growing our energy economy, and ensure utilities are being held accountable to deliver cost savings to Arizonans,” Hobbs said. “I heard the concerns from clean energy and consumer protection advocates who opposed the original version of this bill, and I made it better.”

The bill has been a headache for lawmakers since it was introduced in January. It first received pushback from the all-Republican Corporation Commission in February, after commissioners said they were not part of the drafting process and were not made aware of the bill until it was filed. 

In early March, the ACC voted to make its position on the bill “neutral,” with several commissioners expressing frustration with APS and Republican lawmakers for not consulting with them prior to filing the legislation. 

A few weeks later, former commission Chairman Bob Burns, a Republican, sent a letter to lawmakers urging them to hold the bill until the ACC could conduct an evidentiary hearing on securitization. In early April, Mayes, a former commission chair, sent a letter to lawmakers saying she believed the bill could violate the ACC’s constitutional authority to set utility rates.

Despite the backlash, lawmakers pushed forward on the bill and added significant amendments to it in both the House and Senate. Opponents say the changes made were good, but still do not provide enough oversight of the securitization process and do not ensure that utility companies cannot securitize coal plants that remain in operation.

Amendments to the bill resolved some sticking points by removing the ability to securitize unrecovered fuel costs and limiting securitization to utility infrastructure in use at the time of the bill’s passage. 

Sundareshan said she felt “extreme disappointment” with the governor for signing the bill because of all the concerns brought to her office and the rushed legislative process the measure went through.

“The plant that this seems to be intended to allow APS to securitize … isn’t even scheduled for retirement for a number of years,” Sundareshan said, referring to the Four Corners Power Plant in New Mexico. “There’s time in which we could have gotten this right. The rush to sign (HB2679) is really inexplicable.”

Mayes’ spokesperson Richie Taylor said the attorney general still has concerns about the bill’s constitutionality, despite Republican lawmakers claiming amendments had resolved those issues. 

“Once the ACC greenlights a bond’s terms, it cannot later modify how those bond charges are passed on to customers,” Taylor said in a statement “This effectively hinders future commissions from performing their core regulatory duties over utilities. And (HB2679) enables ratepayer subsidization of utilities’ unprofitable investments by allowing a utility to sell a power plan once ratepayers have paid its remaining book value, letting the utility keep all sale proceeds.” 

The ACC has the exclusive authority to set utility rates under the state Constitution and the Legislature cannot modify that authority. A spokesperson for the ACC did not immediately respond to a request for comment on the commission’s current position on the bill. 

Sundareshan said opponents may challenge the legislation in court or ask Mayes to formally weigh in on its legality, but no concrete plans have been formed yet. 

The signing also comes after reporting from Capitol Media Services found APS’ parent company, Pinnacle West, donated $100,000 to a secretive legal defense fund Hobbs used to win election challenges from her former gubernatorial opponent, Kari Lake. Pinnacle West also donated $250,000 to Hobbs’ inauguration fund in 2023 and recent campaign finance reports show a $5,800 donation from the company’s PAC to Hobbs’ campaign in January. 

Not everyone was disappointed with the bill though. The Arizona Chamber of Commerce and Industry called it a “huge win for Arizona ratepayers” in a post on X on May 13.

Griffin, the bill’s sponsor, also celebrated the passage in a statement released May 14.

“By leveraging innovative financing tools, Arizona’s investor-owned utilities like APS and TEP, and public power entities like SRP, AEPCO and rural electric cooperatives, can lower consumer costs and free up capital to invest in new energy generating resources and grid upgrades,” Griffin said. “It’s a smart, forward-looking way to ensure Arizona’s utilities can keep up with rising demand.”

Utility financing bill on Hobbs’ desk, some Democrats urge veto

Key Points:
  • A bill allowing public utility companies to securitize assets passed out of the Legislature
  • Republicans say the governor will sign the bill with new amendments
  • Some Democrats say the bill does not have enough safeguards for utility customers

A controversial public utility company financing measure goes to Gov. Katie Hobbs, and while Republicans say they are confident she’ll sign it, some Democrats are urging her not to.

House Bill 2679 passed a final vote in the House on May 7 after being amended in the Senate a day earlier. However, critics of the measure, which would allow utility companies to transfer debt into low-interest bonds that can be sold to recoup funding from aging or inefficient assets, say it still has significant issues.

The bill, sponsored by Rep. Gail Griffin, R-Hereford, has been hotly debated and sparked conflicts between lawmakers and the Arizona Corporation Commission. It split both the Republican and Democratic caucuses during different floor votes, but the Senate only gave it final approval on party lines. 

Two Senate Democrats who are cosponsors of the bill, Flavio Bravo and Catherine Miranda, ultimately voted against it. But in the House, several Democrats flipped from ‘no’ votes to ‘yes’ votes, with 10 voting alongside Republicans to pass the bill on May 7. 

If Hobbs signs the bill, she could be running afoul of members of her party, including Senate Minority Leader Priya Sundareshan. Hobbs’ office typically does not comment on pending legislation and has declined to comment on this specific bill in the past. 

Proponents of the bill, like Griffin and most Republicans, say it will help utility companies like Arizona Public Service and Salt River Project lower customer costs. The Arizona Chamber of Commerce and Industry has urged lawmakers to support it, saying it will also help attract businesses to the state.

Opponents, like Sundareshan, Attorney General Kris Mayes and environmental groups, say the bill lacks oversight and guardrails that will allow the Corporation Commission to ensure utility companies only use securitization when it is in the best interest of customers. Mayes has even said the bill might infringe upon the constitutionally-granted ratemaking authority of the ACC.

Sen. T.J. Shope, R-Coolidge, sponsored an amendment to the bill in consultation with the Governor’s Office, Senate President Warren Petersen and the Corporation Commission that he says addresses concerns raised by the commission, former commissioners and other stakeholders.

“It will be signed,” Shope said while discussing the bill on the Senate floor on May 6. 

Shope’s amendment did address some problems that Democrats and environmentalists said made the bill unworkable, including removing the ability to securitize unrecovered fuel costs and limiting securitization to current assets with a few exceptions. 

And Griffin said she believes the amendment addressed the constitutional concerns raised by Mayes.

“The Commission’s constitutional ratemaking authority is reinforced with explicit discretion for approval, modification and rejection of any plan that is not acceptable by the Commission,” Griffin said. 

Sundareshan, D-Tucson, and fellow Democratic Sen. Rosanna Gabaldon, D-Green Valley, introduced their own amendments to add more limits to the bill, but those amendments failed in the Senate. Sundareshan’s amendments would have limited securitization to retired assets and would have prevented utilities from securitizing power plants they plan to sell to another company that would keep the plant active.

Sen. Lauren Kuby, D-Tempe, speaking on behalf of Sundareshan as she was absent from the floor May 6, said the amendments were proposed in good faith. 

“These amendments that we’re moving here today, they are truly an attempt to make the bill better,” Kuby said. “We’re not opposed to the tool of securitization … In fact, it’s been used across the country, but not in the case where we don’t have these guard rails. It’s very concerning the way the utilities are pushing to use securitization in Arizona. Our ratepayers must be protected.”

Nevertheless, Republicans voted against all three amendments offered by Democrats. Shope also disagreed with Democrats, who said that not enough stakeholder input was sought to draft or amend the bill.

“I think my colleagues on both sides of the aisle know that this has been stakeholdered, this has been discussed, this has been worked out, and we all have come to this conclusion that — with the Shope floor amendment — the bill is what it is, and we have worked it out,” Shope said during his final comments on the amendment.

After the Senate passed the bill, Sundareshan told the Arizona Capitol Times that she and Democrats were not invited to participate in those stakeholder meetings.

“I’m not aware who exactly was being stakeholdered with, but certainly my caucus was not meaningfully involved,” Sundareshan said. “And I like to point out that I am the member of the Senate Democrats who is an energy and environmental lawyer, so I would think that I should be consulted and maybe engaged on some of this.”

On April 29, Sundareshan joined former Corporation Commissioners Bob Burns and Sandra Kennedy in urging a veto of the bill if Republican amendments did not assuage their concerns. She hopes the Democratic opposition will encourage the governor to consider a veto. 

“I hope that the governor will take notice of the concerns that our caucuses are raising, and that the environmental communities are raising, that the ratepayer communities are raising, that the attorney general is raising, and so even though (Shope’s) communication with (the Governor’s Office) may have indicated that she is willing to sign it, I think that this is additional knowledge that may not have been made public before that they should take into account,” Sundareshan said.

APS is playing both sides on securitization bill

House Bill 2679 is being sold as a financing mechanism that is a win-win for utilities and their ratepayers. And yet, there is overwhelming opposition to the bill from both sides of the aisle. The Arizona Corporation Commission (a 5-0 Republican body), the Arizona attorney general, and former Republican legislator and chair of the Arizona Corporation Commission, Bob Burns, have all sent letters to the Legislature highlighting serious concerns with the bill.

Yet the bill has received bipartisan support, even from legislators who are typically very concerned about writing a blank check to monopoly utilities.  Arizona Public Service (APS) has been playing both sides. They have led Democrats to believe this bill is actually about tribal sovereignty even though nothing in the bill applies to tribes at all. The bill applies to public power entities, public service corporations and municipal utilities. How could the bill be about tribal sovereignty? 

In 2021, the Public Service Company of New Mexico (PNM) attempted to “sell” their share of Four Corners power plant to the Navajo Transitional Energy Company (NTEC) for $1. In addition, the utility was going to pay NTEC an additional $75 million to take the plant off its hands. Even with paying NTEC to take the plant off its hands, the utility still argued to New Mexico regulators that offloading the plant would save its ratepayers $30 million to 300 million dollars; that’s how uneconomic the plant is. 

The elephant in the room is that APS wants to do the same. They want to offload their share of this wildly uneconomic plant and then securitize the loss from that “sale” on the backs of ratepayers. Ironically, this arrangement has Democrats in the curious position of supporting a bill that will almost certainly keep uneconomic coal plants online even longer; plants that use more water than their alternatives and emit significant amounts of air pollution. Governor Hobbs has said she is “analyzing how various proposals may deliver on lowering energy bills while advancing a clean energy economy in Arizona.” Unfortunately, that is the opposite of what HB2679 does.

APS simultaneously has convinced Republican lawmakers that the bill is good because it does the very thing Democrats would normally oppose. But it does that by subsidizing the “sale” of uneconomic power plants, resulting in a massive cost shift from NTEC on to the backs of ratepayers. We would all be paying for APS to pay NTEC to take Four Corners off its hands. As someone who spends a very significant amount of time at the Arizona Corporation Commission, I was under the impression that subsidies were antithetical to Republican principles.

Securitization can be an important tool in the toolbox when it comes to innovation in the electric grid. However, this bill is not that. This bill will keep coal online longer on the backs of Arizona ratepayers via a huge subsidy to the Navajo Transitional Energy Company. Lawmakers should vote no on HB2679 or the bill should be amended to remove the option to sell AND securitize an asset. The bill, as drafted, solely benefits the APS parent company’s shareholders.

Autumn Johnson is a public interest policy advocate and CEO of Tierra Strategy.

Wildfire regulation bill to be stripped of most contentious elements in Senate

A sweeping measure passed by the Arizona House giving utilities like Arizona Public Service and Tucson Electric Power major protections from lawsuits for wildfires sparked by their equipment will be stripped of the most contentious provisions in a state Senate committee hearing on Monday, the panel’s chairman said.

Finance Committee chairman Sen. J.D. Mesnard, R-Chandler, told Capitol Media Services on Friday that the amendment he crafted will remove provisions sought by the utilities requiring people or companies who sue over wildfire damages to prove by “clear and convincing” evidence that the utilities were at fault. That’s a much higher level of proof than what is normally required in lawsuits.

Also gone is a prohibition on recovering “consequential damages,” said Mesnard. Those include things like lost business income or compensation for renting a car if a person’s vehicle is destroyed by a fire and the owner awaits a replacement from the utility at fault.

Mesnard said that’s only fair.

Multiple drafts of the amendment, posted late Friday and still subject to change, also restore the ability to win punitive damages from a company whose negligence sparks a wildfire.

What utilities will still get in the legislation are hefty new protections from lawsuits if they follow new “wildfire mitigation plans” they will be required to create if HB2201 is enacted.

But Mesnard plans some changes there as well, one of which being the removal of a provision giving utilities a lawsuit shield if they only “substantially comply” with those plans. Also gone will be sections allowing the boards of public utilities like the Salt River Project to approve their own plans. 

Mesnard said that having a public utility approve its own plan that grants it lawsuit protections was problematic. Those company’s plans will instead have to be reviewed by the state Department of Forestry and Fire Protection. 

“That resonated with me, the idea of having your own board approve your plan, and that allowing for you to then have immunity or some degree of protection,” Mesnard said. “That did not make sense to me. I needed there to be some other authority.”

That “substantial compliance” provision that Mesnard found troubling could have awarded liability protections for utilities even if they didn’t follow parts of their plans, like failing to trim back vegetation along parts of their power lines’ route. Under the House-passed measure, someone who lost a home still had to prove by “clear and convincing” evidence the utility was at fault even if they didn’t follow their plans to the letter. 

“So it’s sort of like if we reach a lower bar it protects us to a higher bar, and I had a hard time going along with that,” he said.

The version that reached the Senate had legal issues as well, according to House lawyers who reviewed the proposal.

Most notably, they said it likely ran afoul of a provision in the state constitution that bars laws that limit the right of people to sue for compensation. The changes Mesnard is pushing should address those concerns.

Mesnard said he met with APS lobbyists and with opponents of the bill, most prominently lobbyists for the insurance industry and trial lawyers, to hammer out changes he would need before agreeing to put the measure on his committee’s agenda. Committee chairs can kill legislation by refusing to hear a bill, and Mesnard said he was prepared to do that if his concerns weren’t addressed.

An APS spokesman said the company, the largest power provider in the state, supports the measure and Mesnard’s proposed amendment. An SRP spokeswoman said her company still needs to review the final proposed changes but appreciated Mesnard’s attention and expects to be able to support the bill.

TEP spokesman Joe Barrios said his company welcomes the clear guidance it will give utilities for submitting wildfire mitigation plans that include procedures for things like cutting off power during high wind events to avoid triggering a fire and for cutting back trees and brush near power lines. 

“It will also provide protection for customers because wildfire liability costs and higher insurance costs are passed (on) through higher rates,” Barrios said in a written statement. 

“We have an obligation to continue serving customers, even in areas that may be risk-prone for wildfires,” he wrote. “The bill would reduce exposure to unfair financial risks only if we satisfy standards in our wildfire mitigation plans, thereby reducing real and potential costs for our customers.”

Opponents of the Arizona liability protection measure said Mesnard’s proposed changes will make the bill more palatable. Insurance companies and trial lawyers have strongly opposed the original measure because it stripped homeowners and insurers of much of their ability to recover damages from utilities responsible for starting a blaze.

“It is a lot, a lot better,” said Marc Osborn, a lobbyist who represents Farmers, Geico, Nationwide and Allstate at the Capitol.

Having the ability to hold a utility responsible is important, he said. PG&E, for example, is now burying its power lines to avoid sparking a wildfire – something that only happened after the company faced two multibillion dollar lawsuits. He called the bill much more reasonable with Mesnard’s changes. 

“Would we prefer no bill? Yes,” Osborn said. “But I think Mr. Mesnard did a pretty good job of grinding off the rough edges on it.”

If the changes are adopted in Mesnard’s committee, the measure will go to the full Senate for approval and then back to the House for them to sign off on the changes. 

Gov. Katie Hobbs will then have the final say.

Utility-authored securitization bill is horrible deal for ratepayers and state

Despite record-breaking profits, Arizona’s monopoly utilities — led by APS — are pushing to offload even more costs onto ratepayers with less oversight through a sweeping new bill, HB2679. 

Amanda Ormond is a former Director of the Arizona Energy Office.

If passed, HB2679 would allow utilities to use a financial tool known as “securitization” that trades high-interest loans for low-interest bonds that can be paid off over time. While this tool has benefited ratepayers in some states, lawmakers must understand that HB2679 creates an entirely new way for utilities to charge ratepayers without needing their regulators’ approval. That means this bill would allow utilities to pass any unwanted debt to their ratepayers without regulatory oversight on the number of bonds they issue and how much debt they can include. This bill also severely limits courts’ actions to protect ratepayers.

Allowing bonding without limits would be the most significant change ever enacted for financing billions of dollars of utility plants, transmission lines and other equipment. Yet, this bill was drafted and introduced without input or review from state government organizations that oversee utilities, public interest groups or any customer groups. Still worse, the bill is being fast tracked. It has only had one committee hearing and is expected to be voted out of the House of Representatives in less than 30 days from the date the bill was made public.

The Arizona Chamber of Commerce’s Jan. 30 op-ed supported this complicated and not well-understood utility financing mechanism. To understand what the bill actually does, and its myriad consequences, one must dig into its 40 pages. So let’s look at its key provisions and the approval process. 

HB2679 would allow every electric utility in Arizona to create bonds for the debt they have incurred and obligate customers to pay the bonds back with no exceptions. Unlike the current process where utility regulators approve debt amounts and types at the Arizona Corporation Commission, the commission could not restrict, prohibit or influence how much or what types of debt are being passed to ratepayers. Due to that provision and others, commission staff believe the bill is unconstitutional. 

In addition, if customers don’t or can’t pay the bonds, they can be sued. Bond payments can be added to a ratepayer’s electric bill with a requirement that bonds are paid first and electricity costs second. This increases the likelihood of electricity shut-offs as thousands of customers who struggle to pay monthly electricity bills will have their limited funds going to bonds instead of ensuring they can continue to have electric service.  

Historically, securitization bonds have been used to eliminate power plant debt. However, HB2679 has such broad language it allows utilities to send debt to customers for costs incurred from heat events, storms, floods, “weather, wildfire or other significant events or … loss of life, injury to person or property, human suffering or financial loss.” Additionally, natural gas fuel price spikes and past natural gas debt could be passed to consumers. In fact, it’s difficult to identify any costs that can’t be passed on to customers. 

Also, the bill provides no caps on the amount that can be charged to customers nor the number of bonds that can be issued. As an example of the magnitude of the bonds that could be passed to ratepayers, Arizona Public Service cites the 2021 storm Uri, which sent $3 billion to Texas customers through bonds with Oklahoma customers having to pay more than $4 per month for the next 16 years for that one storm.

Finally, as everyone knows, it can be dangerous for the elderly and sick to live in Arizona without electricity, especially in the summertime. As written by APS and other utilities, this bill could obligate customers to pay a victim’s family for a heat-related death (loss of life) rather than the electric company that caused the death.

As the Chamber pointed out, the state needs reliable and affordable electricity. What the state does not need is to give total authority to monopoly utilities to pass any debt they don’t want to its ratepayers. This bill is being rushed through the process without opportunity for study, dialogue or major amendment because it is a raw deal for customers and the state. 

Legislators and staff should look closely at this bill. There is no urgency or need to pass this proposal this year. It does not deserve an affirmative vote. There are too many unknowns and unintended consequences for it to become law.     

Amanda Ormond is the Principal of the Ormond Group LLC and is a former Director of the Arizona Energy Office. 

House approves bill to require wildfire prevention plans from Arizona utility companies

Utility providers may soon be required to produce wildfire prevention plans after House approval of HB2201 on Feb. 25. 

The bill, which initially failed to pass over concerns that it went too far to protect power providers from wildfire liability, was approved on its second vote in the chamber, 35-25. 

The bill, if approved by the Senate, would require power entities and electric utilities to prepare wildfire mitigation plans to proactively prevent wildfires and decrease any damages that may occur from a fire. Those new strategies include inspection procedures for wildfire risks, procedures for de-energizing power lines, community outreach and public awareness efforts, and new steps on how power companies will monitor compliance with their plans. 

Rep. Gail Griffin

“If the electric company, power company is at fault, they are liable,” said the bill’s sponsor Rep. Gail Griffin, R-Hereford. “It helps save lives, and properties and ratepayers.”

The bill is a response to the devastating wildfires in Southern California that destroyed thousands of structures and tens of thousands of acres of land in Los Angeles County. 

Many lawmakers originally opposed the bill during its first vote on the House floor on Feb. 18.

That vote occurred before Rep. Neal Carter, R-San Tan Valley, amended the bill to remove a provision that would have prohibited a class action lawsuit from being filed for a cause of action against power providers related to a wildfire. Carter’s amendment also removed language from the measure that initially proposed removing the ability to assign any fault to a provider for their decision to de-energize or not de-energize an electric grid.

Carter said attorneys in California often sue power companies after a wildfire and claim negligence from the company to receive large sums of money in property damage or injury compensation. That procedure, Carter claimed, is too unwieldy for Arizona.

“It drives up rates for the people who purchase power,” Carter said of the civil lawsuits. “It also creates power companies who are gun-shy about leaving the power on when there’s high winds for example, so they shut it off.”

The new HB2201 is an attempt by lawmakers to protect both power companies and consumers by keeping the electric grid energized. 

The bill also raises the burden of proof to clear and convincing evidence for a plaintiff to prevail in a civil lawsuit against a power company, which is a higher standard of proof than the preponderance of evidence standard used in most civil cases, but not quite as rigorous as the beyond a reasonable doubt standard used in criminal proceedings. 

“It means you have to provide evidence that the power company was at fault,” Carter said. “Why should we have California-style energy driving our energy policy here?”

Several members of the Arizona Freedom Caucus voted against the bill, including Rep. Alexander Kolodin, R-Scottsdale, who said he doesn’t believe the bill has functionally changed from when House members first voted against the measure. 

Kolodin offered an amendment on Monday which proposed removing the clear and convincing evidentiary standard. The amendment failed 28-29 after Griffin called it “hostile” and brought it to the floor without Kolodin first discussing it with her.

“I can’t support this bill without the Kolodin amendment,” said Rep. Justin Olson, R-Mesa. Olson is the only member of the legislature who has served on the Arizona Corporation Commission, the governing entity that regulates public utilities across the state. 

Still, the requirement of proactive plans from utility companies prompted support for HB2201 from Democrats interested in bolstering Arizona’s wildfire prevention and response capabilities.

Power providers would be required to submit their plans to the Corporation Commission for review by May 1, 2026, if the bill is signed. Following that date, plans must be submitted every even-numbered year.

Utilities get second chance at bill to give them immunity from sparking wildfires

The state’s largest electricity provider and other utilities will get a second chance Monday to see the Arizona House consider legislation shielding them from much of the liability they currently face if their equipment starts a catastrophic wildfire.

The measure backed by Arizona Public Service Co. and other electric providers failed by a 32-28 vote last week over concerns about the new liability shield. It’s opposed by insurance companies and trial lawyers because it strips homeowners and insurers of much of their current ability to recover damages from utilities responsible for starting a blaze.

Changes to the liability limits will be needed to win over lawmakers who voted against the bill last week. But just how much they are pared back won’t be known until amendments are made public before Monday’s action.

Rep. Gail Griffin

APS and other backers tout the proposal’s provisions requiring utilities and public power co-ops to create wildfire mitigation plans and file them with regulators. Power companies must identify and manage wildfire risks and consult with state and federal land or fire officials before submitting the plan. 

Critics note that there’s nothing in HB2201 requiring any standard for those plans. And once filed, a mitigation plan would be considered approved and if the utility substantially follows it, allow them to say they met the standards of care.

The move comes as utilities in California and Oregon have faced massive lawsuits after wildfires started by their power lines destroyed entire communities. Power companies across the Western United States fear the same will happen to them.

The problems for opponents come from provisions that give utilities major new cover from liability for causing a fire.

The proposal rejected by the House last week bars fire victims from banding together to file class-action lawsuits, raises the standard of proof needed to hold a power company liable and prevents businesses and homeowners from recovering extra compensation for things like lost income or expenses incurred as a result of a fire. And it rejects any punitive damage awards even if the utility ignored its own plans and failed to shut off power during a major wind event.

Rep. Walt Blackman, R-Snowflake, voted against the measure because of the lawsuit limits in the bill sponsored by Rep. Gail Griffin, R-Hereford. But he then made a motion for it to be brought back for a second vote later.

“I am having problems with the fact of the limited liability on this,” Blackman said. “As you know, we have suffered a lot of wildfires in my neighborhood, in my community, and a lot of those folks, when they file for claims, they’re being turned away.”

Other conservative Republicans also voted against the measure, which received bipartisan support and opposition.

Rep. Alex Kolodin, R-Scottsdale, said the measure runs afoul of a state constitution provision that bars laws that limit the right to sue. The attorney who reviews proposed House laws for constitutionality reached a similar conclusion.

“The Arizona Constitution protects us from measures such as this that seek to use the power of big business to force this body to abrogate the rights that Arizonans have enjoyed since statehood to bring positive action under the common law,” Kolodin, a lawyer, told fellow lawmakers during the vote. “It’s worked for 400 years, and there is great wisdom in what our framers did for us. Let’s stand strong and not be the reason why, if God forbid, one of our districts burns, our constituents blame us.”

APS lobbyist Michael Vargas said during a House committee hearing early this month that his company is in “enthusiastic support” of the bill. He said opponents’ arguments about liability are incorrect.

“All this legislation does is clarify how liability is prescribed up against the filed and approved wildfire management plan,” Vargas said. “At the end of the day, if we’re at fault, we’re at fault, and we’re going to be liable and we’re going to take full responsibility for anything that may have occurred.”

Tucson Electric Power, Salt River Project and several power co-ops across the state support the measure. Also backing the measure are unions and some city and county officials in rural Arizona.

But Barry Aarons, a lobbyist for the Arizona Trial Lawyers Association, disagreed that the bill only clarified rules for suing power companies. And he answered a question a backer of the bill, Rep. Teresa Martinez, R-Casa Grande, asked of insurance lobbyist Laura Curtis: whether insurers wanted to be able to sue utilities.

Yes, Aarons said. 

“The Seventh Amendment, the United States Constitution, guarantees right to trial by jury. You have a right to access to the courts,” he said. “The provisions of this bill will deny you that access, period. That’s true. That’s an incontrovertible fact.”

Insurance company representatives told the House committee hearing the bill that the changes would shift liability from utilities to insurers and ordinary homeowners or business owners.

Marc Osborn, a lobbyist who represents insurers Farmers, Geico, Nationwide and Allstate, called Griffin’s legislation “one of the most aggressive liability prevention bills that we’ve seen in any of the states.”

“There’s been about six or seven major utility caused fires across the U.S.,” Osborn said. “And insurance companies, individuals in cities and towns generally, if the utility causes a fire, will attempt to recover their lost costs.”

If Griffin’s bill becomes law, he said recovering those damages from utilities will be nearly impossible. 

 

 

 

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