Corporation commissioners oppose renewable mandate

As two powerful groups wage an expensive campaign war over a renewable energy initiative on the November ballot, Arizona voters are left to decide who should set energy policy: The state body elected to ensure affordable electric rates? Or a California environmentalist considering a run for president?

A majority of the five members elected to the Arizona Corporation Commission (ACC) oppose the initiative, Proposition 127, saying it could result in harmful and unintended consequences.

The ACC was created by the state constitution, and effectively has legislative and judicial power, adopting rules and regulations and regulating utility rates in Arizona. Its mission is “to power Arizona’s future by ensuring safe, reliable, and affordable utility services.”

Several commissioners, including Bob Burns and Andy Tobin who are former state legislators, said they oppose the initiative for several reasons, including that it fails to consider complex energy issues and future market conditions, and there’s already a loophole in place.    

The initiative, called Proposition 127, would mandate that all electric utilities except Salt River Project ratchet up their renewable energy supplies to 50 percent by 2030. Under current state regulations, utilities must provide 15 percent by 2025.

“Initiatives can work if they are clear cut and black and white, and voters can understand them,” Burns said. “But energy policy is a different beast. It is extremely complicated.”

Energy is key to economic activity and social upward mobility, and it is critical that all stakeholders are involved in a public process that is flexible to address changing conditions to maintain affordable electric rates, Tobin said.  

“This is ludicrous to me, that we would lock everybody’s hands into the constitution so we cannot work together to fix things in tandem when necessary,” he said.

Here are what commissioners say are the top potential pitfalls:

Overproduction of excess renewable energy

California sells its excess renewable energy to states like Arizona on the Energy Imbalance Market (EIM). The market was created in 2014 to address excess solar and wind energy. With Arizona and Nevada both facing renewable energy initiatives in the general election, passage could mean overproduction.  

“My concern is if we have California overproducing solar at midday now,” Burns said. “If Arizona cranks out solar and overproduces at noontime along with Nevada, it could cause the energy imbalance market to fail. If we have to continue to increase our solar and we don’t have a place to move it, how do you correct it if it’s locked in the constitution?”

Unstable renewable energy credit (REC) prices  

A provision in Proposition 127 that allows utilities to buy credits as opposed to using more renewables could negatively impact electric pricing.     

“When you buy and sell credits they go up and down depending on supply and demand,” Burns said.  “If demand is needed and APS needs to buy RECs, then the price could be very high. Utilities operate on a cost basis. It would be the ratepayers picking up the bill.”

Premature closing of facilities  

Under the initiative, power plants would be forced to close, costing jobs and raising electric rates in struggling rural and tribal communities.

Arizona Public Service has also said it would be forced to close the Palo Verde Generating Station prematurely. Oversupply of renewable energy in the cooler months would make it economically unfeasible to keep it running only a few months of the year.

Closures do not come cheap, Tobin said.

“Just because a plant is closing, doesn’t mean you don’t have to pay the bill for it. So now you have $300 to $350 million in abandoned assets before you get a single watt of solar.”

A loophole is already in place  

Gov. Doug Ducey signed into law a measure that allows fines of up to $5,000 for utilities who violate the initiative. He said he did it to protect ratepayers. Utilities could skirt the law with minimal consequence.

“I’m sure if that was attempted, there would be lawsuits,” Burns said. “Then who pays for all the legal costs? Utilities operate on a cost basis, so ratepayers pick up the cost.”

The only way to alter the constitution would be through another initiative election.

Electric bills will increase

Every major utility and almost every electric cooperative in the state has said they would have to raise rates to meet the expensive quotas laid out in the initiative.  

Commissioner Justin Olson said this would hurt those who can least afford it and “break the backs of common, hard working Arizonans.”  

Two powerful groups are in a multi-million dollar battle over the initiative in Arizona.

Pushing for its passage is California environmentalist and billionaire Tom Steyer who is backing renewable energy legislation and initiatives across the country. Steyer recently announced he is considering a run for president.

On the opposing side is a coalition of more than 100 organizations including Chicanos Por La Causa and the Arizona Federation of Teachers.

Victoria Harker

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