Arizona regulators kill proposal to require 100% carbon-free energy following years of work

Ryan Randazzo
Arizona Republic
The Arizona Corporation Commission leaves in place for now the Renewable Energy Standard and Tariff that 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 last year.

Arizona regulators on Wednesday killed carbon-free energy rules that were under consideration for years after Republicans watered down the proposals that would have boosted solar, energy efficiency and other clean power sources.

The changes that weakened the requirements for electric companies — making them "goals" rather than mandates — were too much for two Democrats on the Arizona Corporation Commission, who supported the plan to get 100% of the state's electricity from carbon-free sources by 2050.

In the end, the Democrats voted against the measure, as did one Republican. The final vote sunk the entire proposal.

The commission had already given those rules an initial approval last fall. Two of the five commissioners had changed with the November election, but the rules looked likely to advance with a final vote Wednesday with support from at least three — if not four — of the regulators.

They would have required electric utilities to phase out coal- and natural-gas-burning power plants over time and boost energy efficiency measures.

But Chairwoman Lea Márquez Peterson, who supported the rules in a November vote, backed some new proposals from her Republican colleagues on the commission, where they hold a 3-2 advantage over Democrats.

A key change came from Republican Commissioner Justin Olson, who proposed changing the clean energy requirements to "goals," which Márquez Peterson approved.

"The change from mandates to goals was not a significant change for me," Márquez Peterson said after the vote. "I didn't support giving a blank check to the utilities without having a cost analysis ... and not just from the lobbying firms, but from our staff or consultants."

Arizona Corporation Commission Chairwoman Lea Márquez Peterson

She said the commission will have a cost estimate later this year on the rules and that the issue could be revived for another vote.

Márquez Peterson said she was surprised to see the Democrats "flip flop" and vote against the clean energy rules.

Márquez Peterson supported amendments to the rules and voted in favor of the final comprehensive rule package along with one other Republican, meaning just one vote from either of the Democrats would have advanced the rules with the changes approved Wednesday.

Democrat Sandra Kennedy voted no to the amended rules — a surprise to most observers because of her strong endorsement of boosting renewable energy. Commissioner Anna Tovar joined her in that protest vote.

"When we had the opportunity to finalize the rules that were in place, I felt it would definitely take us in the right direction," Tovar said, adding that she couldn't support "watered down" rules. "I think it is an insult to what has transpired the past three and a half years."

Olson, who opposed the rules altogether, voted against them even though they included part of his amendment that Democrats found intolerable.

"There are still some fatal flaws," Olson said when casting his vote. "These rules can dramatically increase rates."

Old rules remain in place for now

By failing to pass the new requirements, the commission leaves in place 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 last year.

The now-stagnant efficiency rules, which don't include any increases beyond 2020, are one reason clean-energy advocates were hoping for the new rules to pass.

“Arizona’s major utilities have all said they want the regulatory certainty of a firm emissions reduction standard, and the commission today has failed to provide that," Adam Stafford, Western Resource Advocates’ senior staff attorney in Phoenix, said in a statement after the vote.

"Our state needs strong action and solid standards for reducing the emissions that cause climate change and realizing the economic benefits of clean energy.”

Arizona's renewable-energy requirements were keeping up with the times when they passed in 2006, but California, Colorado, Montana, Nevada, New Mexico, Oregon and Washington all have more ambitious renewable or carbon-free energy targets today, passed by their lawmakers or by voters.

The new requirements would have made Arizona's renewable rules stricter than Montana, Oregon and Washington, although Washington's goal of going carbon-free is by 2045, not 2050.

Customers at Arizona Public Service Co. pay about $3.50 a month now to fund the utility's compliance with those rules.

Olson invoked a 2018 ballot measure that would have forced utilities to use more renewable energy when he opposed the new rules Wednesday.

Arizona Corporation Commissioner Justin Olson

"What we have before us is the exact same mandate that failed in 2018,” Olson said, referring to Proposition 127, which the state's voters defeated by a wide margin.

Utilities, including APS, spent record amounts of cash to defeat that clean-energy ballot measure.

By contrast, the utilities supported the rules on the table Wednesday. In fact, APS and Tucson Electric Power both have similar self-imposed goals.

APS announced in January 2020 it would boost renewables and have carbon-free energy by 2050. TEP last year said it will retire all its coal plants in 12 years and be 80% carbon free by 2035.

At the Legislature: Lawmakers' effort to undo clean-energy rules in Arizona advances even as its fate appears doomed

Years of work scrapped by action

Increasing the renewable-energy rules and cutting carbon emissions was long discussed at the commission.

Former Commission Chairman Doug Little called for doubling the renewable-energy rules in 2016, though even as chairman he was unable to advance the issue.

Then in 2018 Commissioner Andy Tobin pushed the issue, suggesting commissioners support "clean" energy that would not displace the state's nuclear power plant, the biggest power producer of any kind in the nation.

The commission entertained thousands of comments and several discussions of the rules in the docket opened that year.

Arizona Corporation Commissioner Sandra Kennedy

Then last July, longtime Republican lawmaker turned Corporation Commissioner Robert Burns teamed up with Kennedy, also a longtime lawmaker serving on the commission with him, and they proposed a bipartisan clean-energy rule, which led to a compromise and the proposed rules that failed to pass Wednesday. 

Part of the rules got an initial approval in October and two more votes advanced them before Burns termed out of office. That included a compromise last fall with Márquez Peterson, who opposed a requirement specifically requiring renewable energy.

She preferred not to dictate technology and to focus on reducing carbon with whatever power sources could do that. Burns agreed to that change in hopes of securing Márquez Peterson's vote for the future final rule making.

That compromise appeared to ensure the rules would have the three votes needed once Republican Jim O'Connor and Tovar took office in January.

O'Connor had discussed his opposition to energy mandates on the campaign trail, but he voted for the clean-energy rules Wednesday. Meanwhile, Tovar had campaigned on a pledge to increase renewables and voted against the measure because of the "significant" changes from Republicans.

"When we voted, I thought we had pretty much won the day," O'Connor said after the vote. "We had accomplished enough that we would have rules and they would work, and work better because of the many amendments."

O'Connor voted first and said he was surprised the Democrats opposed the measure.

Many debates in long meeting

Wednesday's meeting on the subject ran from 9 a.m. until after 8 p.m., and started off mundane. Solar companies spoke in favor of the clean-energy rules. Oil companies spoke in opposition.

The first change commissioners approved was an amendment from O'Connor, requiring utilities to provide periodic estimates for the costs and savings of complying with the clean energy rules versus providing energy without regard for carbon emissions.

Arizona Corporation Commissioner Anna Tovar

Tovar said she opposed making any changes that would further delay implementation the rules, and suggested opening a new docket to deal with the last-minute amendments offered by the Republicans.

But O'Connor said he was not willing to rush the rules. All three Republicans approved the amendment.

That change and others made throughout the day were by themselves going to delay the final implementation of the rules until spring of 2022. That bothered the Democrats but they still seemed content they would get to boost the state's clean energy rules with support from Márquez Peterson.

O'Connor had another amendment that would have pushed back the date when Arizona utilities would have had to reach zero carbon emissions from their power generation beyond 2050.

Arizona Corporation Commissioner Jim O'Connor

"Feedback my staff and I have had with power companies … hitting that 50% target by 2032 is a slam dunk, no-brainer, easy to achieve by all of the power companies, by that date," O'Connor said. "However, the absolute unknown by everyone in the industry is achieving that last 20%. From 80% to 100% clean, nobody can tell us how we are going to do it."

O'Connor's proposal failed on a 3-2 vote early in the day though, with only he and Olson supporting it.

Regulators also debated the costs and benefits of complying with the new rules.

Olson, as he has throughout hearings on the rules, said he was concerned utility customers would see higher expenses.

Proposal: Plan to strip Arizona regulators of power to make clean-energy rules moves closer to governor's desk

Tovar asked some of the stakeholders participating in the webcast meeting to chime in on costs.

Ellen Zuckerman from the Southwest Energy Efficiency Project cited a study from Stratagen Consulting released by her group indicating APS and TEP could reduce costs about 11% by adding more renewables and investing in energy efficiency as called for in the new energy rules. 

"Exceeding the requirements in the energy rules will provide a benefit of more than $2 billion in net present value,” Zuckerman said. “There is absolutely no question based on this analysis that we’ve provided the commission that the energy rules are directionally the best thing to do for consumers to protect them against unnecessary costs.”

Olson wanted to make the new rules effective only if they were the absolute cheapest way to meet energy demands.

"If it’s not the lowest cost, there is no mandate. If it is the lowest cost, then the utilities are in the same position as they are with the mandate," Olson said.

After about three hours of discussion on that proposal, and after legal staff at the commission repeatedly raised concerns, Olson dropped that effort.

But then his amendment changing the rules to "goals" passed with support from O'Connor and Márquez Peterson, who said she had studied the issue thoroughly, was concerned about climate change, but thought goals gave utilities more flexibility.

"Regulating climate change is not what we are here to do,” Márquez Peterson said when voting for the change.

Tovar said she felt the chairwoman was changing direction from her vote on the rules in the fall.

“I’m sad that you’re not standing by them today," Tovar said.

Márquez Peterson disagreed, saying the changes made the rules better.

O'Connor said the rules are likely to get revived.

"So now we don’t have a delayed process by six months, which it would have been if it had passed, we actually have no energy rules and the process needs to be initiated all over again," O'Connor said.

Reach reporter Ryan Randazzo at ryan.randazzo@arizonarepublic.com or 602-444-4331. Follow him on Twitter @UtilityReporter.