Carbon-free energy rules move ahead in Arizona; renewable source requirement scrapped
Arizona utility regulators approved new clean-energy rules on Friday that will require electric companies to provide 100% carbon-free energy by 2050, with interim benchmarks between now and then.
The final rules passed Friday include a host of other requirements, from energy efficiency requirements and battery storage policies for utilities.
But because of some last-minute dealmaking to ensure the rules get three needed votes to become effective next year, they do not include a requirement for utilities to use a set amount of renewable energy, such as solar and wind, to reach the carbon goals.
Utilities still can meet the carbon-free rules by using renewable energy, and also by relying on nuclear power and energy-efficiency measures that help customers reduce consumption.
Even though the commission approved the new rules on a 3-2 vote Oct. 29, two seats on the commission are turning over next year. Commissioners didn't say as much Friday, but striking the so-called "technology" requirement ensures the newly seated commission doesn't strike down the energy rules.
Commissioners Robert Burns and Boyd Dunn will be replaced next year by Democrat Anna Tovar and Republican Jim O'Connor, while Republican Lea Márquez Peterson won election after being appointed to the commission last year. Tovar supports more clean energy and O'Connor doesn't support mandates.
Commissioners Justin Olson, who is opposed to mandates, and Sandra Kennedy, who supports renewables, will remain on the commission.
Márquez Peterson supported all components of the new rules except the technology requirements.
That means that without getting Márquez Peterson on board, the rules were almost certain to be struck down 3-2 next year under the newly seated commission.
"I didn't think it was necessary," she said Thursday before the vote. She said removing the technology requirement puts more responsibility on utilities to make prudent decisions, so they can't simply invest in renewables to comply with the rules and be guaranteed to recover the money from ratepayers.
Burns offered a simple amendment to remove the technology requirement, and while Kennedy opposed the move, it passed, and she gave her vote to the final rule package even though it didn't include the technology requirement.
The final rule passed 4-1 with Commissioner Justin Olson opposed.
'Rules will benefit the ratepayers'
"This has been a tremendous effort," Burns said when casting his vote, adding that the rules include "one of the most modern (integrated resource plan) processes I would say in the country.”
Kennedy thanked Burns for his work to get the rules passed.
“I really appreciate you pushing the needle to move Arizona," Kennedy said. "We have been successful in updating the rules. This is a job creator and an economic engine for our state. Most importantly, the rules will benefit the ratepayers of this state."
Dunn said he also was pleased with the final rules.
"I think we’ve set a new standard for listening to those in the community, the voters and others, and I appreciate their input," Dunn said. "This is a bipartisan effort. I’m very honored to be able to work on something that doesn’t necessarily involve 100% party lines.”
What the rules require
The new rules update the Renewable Energy Standard and Tariff that an all-Republican commission passed in 2006 and requires utilities to get 15% of their power from renewables by 2025, as well as the 2010 energy-efficiency requirements for them to use efficiency measures to meet 22% of their energy demand by this year.
Electric utilities now will have to phase out coal- and natural-gas-burning power plants, and they will need to start soon. The plan has interim requirements that utilities cut carbon emissions in half by 2032 and 75% by 2040.
The carbon reductions are based on how much carbon a utility's power plants emitted on average from 2016 to 2018.
Under that new rule, utilities must implement enough energy-efficiency measures by 2030 to equal 35% of their 2020 peak demand. The new rule also includes interim requirements to ensure utilities are working toward that annually.
Also included in the rule package are requirements for how utilities plan and build new power plants or make deals to buy power from others, with commissioners giving the OK to proposals that advocates such as the clean-energy advocacy Western Grid Group and Sierra Club said will make utility resource plans more transparent and competitive.
“Today’s vote was another important step for Arizona to become a clean energy leader and reduce our carbon emissions to help address the climate crisis," said Sandy Bahr, director of the Grand Canyon Chapter of the Sierra Club.
"As the sunniest state in the country, our future is with solar and associated storage, and this continued investment in energy efficiency will help us reduce electricity use and save us all money on our electric bills. We appreciate the hard work of the joint stakeholders and commissioners to move Arizona forward into a clean energy future.”
Praise for the new rules also came in from several other organizations, including solar groups, public health advocates, tribal organizations and environmentalists.
Olson opposes mandates
Olson, who opposes any mandates on utilities, tried to prevent the last-minute compromise by suggesting the meeting was not properly noticed. He said commissioners should not have been allowed to discuss Burns' amendment. Not passing the amendment likely would have assured the clean-energy rules failed in a final vote next year under the new commission.
Olson was outvoted, however. He also failed to pass an amendment that would have limited how much money utilities can spend meeting the new requirements.
“The voters spoke loudly and clearly just two years ago with regard to similar mandates when they rejected Proposition 127 over two to one," he said of the clean-energy ballot measure that failed in 2018. "That was a clear mandate that the voters are not interested in driving up rates. What voters are interested in is keeping rates low."
Olson said it is up to other agencies like the Department of Environmental Quality to set such policies, and if and when they do, the commission can decide what is an appropriate amount for utilities to spend meeting such rules.
Márquez Peterson two weeks ago supported Olson's spending cap, but abstained from a vote on Friday. She said a forthcoming economic impact report on the rules should give regulators clarity on what the rules might cost consumers.
What will happen next
The Corporation Commission staff will next submit a notice of the proposed rules to the Secretary of State.
The order includes dates for public comments, and in January the commission will file an economic impact analysis on the rules.
Sometime next year, an administrative-law judge will issue a recommended order stating the rules are set, and the commission must again vote on the rules. This is why commissioners supporting the rules needed backing from Marquez Peterson, even though they could have voted 3-2 without her support Friday.
After the commission's final vote, the rules are either filed with the Attorney General for certification, or the Secretary of State, depending if they are categorized as ratemaking or not, according to commission spokesman Nick Debus.
If the rules go to the Attorney General, that office has 60 days to certify them and send them to the Secretary of State, and if they go straight to the Secretary of State, they become effective within 60 days.
Reach reporter Ryan Randazzo at email@example.com or 602-444-4331. Follow him on Twitter @UtilityReporter.