2° Out West Podcast

Tell Arizona utilities to transition to clean energy!

Western Resource Advocates Files Motion Requesting the Arizona Corporation Commission Reverse its Recent UniSource Decision

ACC Ruling Abandons Authority to Conduct Environmental Reviews for Methane Gas Power Plants

Public Utility Commissions in the West with Deborah Kapiloff – Western Resource Advocates

WRA Praises Approval of Colorado Utility Regulation Act – Western Resource Advocates

Full Transcript

[00:00:00] Dave: Of the states in our region, Arizona is particularly affected by climate change.

[00:00:08] News Clip: The tragic true impact of hot days here in our state. Maricopa County out with new numbers on Tuesday on heat related deaths.

[00:00:17] Dave: It’s hotter and drier than ever.

[00:00:19] News Clip 2: With temperatures that soared up to 117 degrees just this week.

[00:00:23] In fact, October has so far recorded the hottest temperatures this late in the year in more than 40 years.

[00:00:30] Dave: Arizona is at the center of it. It’s a battle happening behind the scenes, buried by wonky regulatory language and process. However, the results are very real. Arizona is falling behind the rest of the West with its progress on decarbonizing its economy.

[00:00:47] It’s not for lack of resources. Arizona receives an incredible amount of sunshine, over 330 days per year. It could easily be the solar capital of our country, potentially exporting solar energy to nearby [00:01:00] states. It’s due to issues in a little known but unbelievably important actor in Arizona’s regulatory and energy planning process.

[00:01:08] If I’m losing you a bit, hang in there. Energy regulation, energy resource planning, and public utility commissions are all things that sound insanely mundane. Public utility commissions are probably the least known. but most impactful government organization in your life. They make decisions ranging from how much you’re going to pay on your utility bill to how quickly we’re going to be able to address the climate crisis.

[00:01:31] A lot of meaningful change happens in these utility commissions. I’ve learned a lot, and the more I learn, the more I realize how critical utility commissions are and how critical energy regulation is in the process of decarbonizing. This podcast is going to get into some of the recent issues at the Arizona Corporation Commission, or ACC, one of the institutions that has the most power and ability to implement climate positive energy regulation in Arizona.

[00:01:55] Read: The ACC should be helping Arizona lead the charge on clean [00:02:00] energy, but they’re not. So let’s find out why. On this episode of Two Degrees Out West, you’ll learn what a public utility commission does, why you should care, and how Arizona’s public utility commission, the Arizona Corporation Commission, is hurting Arizonans, and what WRA is doing about it.

[00:02:23] Welcome to Two Degrees Out West, a podcast for advocates and decision makers seeking solutions to climate change and its effects around the West. On to Degrees Out West, we talk with climate experts and advocates to bring you stories, experiences, and insights from their work in the places we call home.

[00:02:41] I’m your host, Dave Papineau. On today’s episode, what is happening in the Arizona Corporation Commission?

[00:02:55] Emily Doerfler: We recently had a rate increase, and then on top of that rate increase, we have [00:03:00] had historic levels of heat. I mean, we weren’t even We’re almost at the end of October and we’re just now cooling down.

[00:03:10] Dave: That’s Emily Doerfler. She’s a resident of Arizona and knows all about the climate issues the state is facing firsthand.

[00:03:17] News Clip 3: An excessive heat warning is in effect Wednesday through Friday with temperatures above 110 expected. That will likely break another record for the most days above 110 in a year. September is late in the season for Phoenix to be facing excessive heat.

[00:03:35] Dave: It’s probably not a surprise that it’s hot in Phoenix, but it’s getting hotter.

[00:03:40] This September, Phoenix smashed its record for the most consecutive days above 110 degrees.

[00:03:45] Emily Doerfler: We were up in the 106, 110 until like mid October, which is very unique to me in the five or so years that I’ve been here, but I think it’s just a unique period. It’s just [00:04:00] been really difficult to handle the financial strain of that really high electric bill.

[00:04:07] Alex Ruthier: Alex Ruthier also lives in Arizona. There’s a large electricity demand for air conditioning. And so, um, by burning a lot of natural gas, there were hundreds of millions of dollars, uh, in fuel cost that was just put directly on the backs of Arizona ratepayers.

[00:04:25] Dave: Both Emily and Alex work for WRA. Emily as a clean energy attorney, and Alex as the Arizona clean energy manager.

[00:04:33] Both of them went to school at ASU. They’re working to help address the issues they see happening in their home state of Arizona. They also know a lot about the Arizona Corporation Commission.

[00:04:44] Emily Doerfler: Hello, my name is Emily Doerfler. Um, I am the Clean Energy Attorney for WRA and the Arizona team.

[00:04:51] Alex Ruthier: And, uh, I’m Alex Ruthier.

[00:04:53] I’m the, um, Arizona Clean Energy Manager and Senior Policy Advisor, uh, at Western Resource

[00:04:59] Dave: [00:05:00] Advocates. If you’re going to understand the ACC and the behind the scenes battle being fought for Arizona’s clean energy future, you’re going to have to understand a little about utility commissions. If you’re like me, just kind of a regular person, there’s a good chance you don’t spend a lot of time thinking about utility commissions.

[00:05:17] Emily and Alex, on the other hand, spend a lot of time thinking about utility commissions. That’s their job. I’ve started off by asking Emily to just kind of explain what a utility commission is and why they are so important.

[00:05:30] Emily Doerfler: So there is a public utility commission or an energy utility commission in every state in the United States.

[00:05:39] They are purposed with regulating the utilities. Utilities have a monopoly over the people that they provide power to and therefore, Um, with that monopoly comes kind of a compact between the utility and the state. And so there’s more regulation over [00:06:00] utility companies than there are over, say, Walmart or Target or any other, um, most other types of, uh, businesses.

[00:06:09] Um, and so a public utility commission, a lot of, uh, what they do is to ensure that, uh, rates are established in a fair and equitable fashion. And so a utility can’t just unilaterally raise its prices for its customers. They have to go, usually have to go through something called a rate case. Um, and so, in Arizona, that’s a lot of what the Arizona Corporation Commission does, is, is go through these rate cases in order to, um, establish rates, um, for the utilities in Arizona.

[00:06:45] But they regulate a whole variety of things in, in the utility spectrum. Um, they regulate the types of resources that can, that utilities can procure. They regulate, um, [00:07:00] integrated resource plans.

[00:07:02] Dave: Utility commissions are great because they mean utility can’t just raise their rates on you. They usually have to go through that process Emily mentioned called a rate case.

[00:07:10] Rate cases are a large portion of what the Arizona Corporation Commission does. Utilities are required to justify their rates. One other important element is to note that the Arizona Corporation Commission only regulates public utilities, also known as investor owned utilities. which includes some of the biggest providers of electricity in the state, Arizona Public Service, or APS, and Tucson Electric Power, or TEP.

[00:07:35] Arizona is unique in that another utility, which provides electric power to much of Phoenix and the surrounding area, is Salt River Project, or SRP. SRP is a quasi governmental utility that is governed by an elected board of directors, and not the ACC. However, there are occasions that SRP still has to get approval from the to build new power plants, just like other utilities.

[00:07:57] We’re going to get into rate cases more, but for [00:08:00] now, hold on to that idea that utility commissions exist to regulate utility monopolies via things like rate cases and rulemaking. Energy resources need to be reliable, but they should also be increasingly cleaner if we’re going to meet our climate goals.

[00:08:15] An integrated resource plan, or an IRP, is something Emily and Alex are going to mention a few times during this episode. If you hear that, know that it’s just a plan for the suite of resources a utility is going to use to meet future energy demands. Thanks. Utility commissions help the IRP creation process.

[00:08:32] IRPs, as we mentioned in our last episode, are really important with the transition to clean energy, as they help define the plan to actually transition to clean energy.

[00:08:42] Emily Doerfler: Public utility commissions are probably the organization that affects your life the most, but is the least known and least understood.

[00:08:53] Dave: The ACC is the utility commission for Arizona. Like Alex pointed out, the five elected commissioners have a lot of areas of [00:09:00] Arizona’s economy that they are supposed to provide regulatory oversight for. Emily said this about what the ACC’s role for the people of Arizona is.

[00:09:09] Emily Doerfler: So I would say that the ACC’s main, um, main goal should be the balance of Protecting the people of Arizona, whether it’s their wallets or their safety or, um, the effects that this extreme amount of heat in Arizona has on them over, uh, having a reliable and, um, sufficient electric grid.

[00:09:36] And so the ACC is supposed to stand in between utilities and the people of Arizona and ensure that both. The people of Arizona are, are safe and are provided power, but that also utilities are capable of providing that power in a reliable way.

[00:09:58] Dave: The ACC

[00:09:58] Alex Ruthier: regulates more [00:10:00] than just energy. Um, the ACC also regulates securities, um, businesses and corporations that register in the state of Arizona.

[00:10:07] They regulate telecom. They regulate railroads. Um, so there is a variety of other things that the commission does that WRA doesn’t typically get involved in, but the commissioners are, are responsible for. And, and an interesting thing about the Arizona commission is that, uh, most of the public utility commissions in the country are, uh, The commissioners are appointed, um, and Arizona is one of the few states that has elected commissioners, uh, on the commission.

[00:10:34] So it’s a little bit of a different dynamic, um, with, with elected commissioners than appointed commissioners. Um, and it’s something that, that we have to be aware of while we’re, while we’re working with commissioners in Arizona.

[00:10:46] Dave: Alex went on to explain how the ACC relies on this thing he called the regulatory compact.

[00:10:52] If you were listening, Emily mentioned it as well. It’s fundamental to our understanding of the regulatory process.

[00:10:59] Alex Ruthier: It’s thought [00:11:00] of as like an agreement between the utilities and the, and the utility commission in that, like in exchange for, uh, regulation, the utilities follow those rules, but, but as a return for that, they gain the opportunity to make a reasonable rate of return on, um, the, the assets that they’re spending.

[00:11:22] And so, um, The commission is, uh, they set that reasonable rate of return and it’s not a guaranteed rate. It gives them the opportunity to earn that rate of return if they, if they mismanage, uh, money or something, or, or do something that, uh, is not in the public interest. Um, they, they build something, they build a new coal plan or something.

[00:11:46] And the commission says, well, this is not a prudent investment. Um, then they’re not allowed to collect their rate of return on that, but.

[00:11:52] Dave: Did you catch that? Alex is explaining that utilities are basically monopolies. They often have a captive market, meaning that without energy [00:12:00] regulation, they could charge ratepayers far above what’s fair and reasonable.

[00:12:04] A key role of a public utility commission, like the ACC, is to make sure that rates stay reasonable and that utilities are kept in check. Alex is saying that utilities essentially agree to be regulated in this informal agreement. in exchange for access to the chance to be a monopoly provider of electricity insulated from competition.

[00:12:28] You’re not guaranteed to make money as a utility, but they have the opportunity to do so in exchange for appropriate oversight. That’s a key role of public utility commissions. To stand for you, the ratepayer, and ensure that the business with a monopoly on something that you need does not take advantage of you.

[00:12:45] Alex Ruthier: Um, if they’re making prudent investments and they’re, and they’re following the commission’s direction, they’re not mismanaging, then, then they’re, they have a reasonable, uh, I don’t want to say guarantee, I think guarantee is too strong, a reasonable, um, [00:13:00] opportunity to, to gain the rate of return that, that is granted to them by the corporation commission.

[00:13:06] Okay.

[00:13:07] Dave: Emily says the ACC has another responsibility, outside of making rules in the interest of ratepayers.

[00:13:14] Emily Doerfler: WRA would argue that the ACC also has a responsibility to mitigate the effects of climate change. Utility generation, um, is a, has a huge effect on the emissions, uh, the greenhouse gas emissions that states produce.

[00:13:32] And no other agency, at least in Arizona, is, is better suited to, uh, prevent the um, the effects of climate change by reducing that, those emissions. This is something that the ACC either refuses to realize or just doesn’t realize at all.

[00:13:52] Dave: In 2020, the electric power sector accounted for 183. 1 million metric tons of emissions.

[00:13:59] Finding [00:14:00] ways to generate energy reliably that don’t emit greenhouse gases is an essential piece of reaching climate goals that we have here at WRA. The time is now, and states like Arizona are well positioned to leverage technology like solar. Again, Arizona sees 330 days of sunshine per year. Both Phoenix and Tucson are in the top five sunniest cities in the U.

[00:14:22] S. Utility commissioners play a key role in this process. State utility commissions have played a key role in pushing forward climate positive initiatives in states like Arizona, Colorado, California, and New Mexico. Like Emily said, the ACC is uniquely positioned to drive Arizona in a climate positive direction.

[00:14:43] But my guess is you know where this is going. It’s the ACC’s job to regulate utilities. As part of this authority, they have the ability to enable an accelerated transition to clean energy. But the ACC isn’t doing that. In fact, they’re doing quite the opposite currently. [00:15:00] Recent rulings and decisions from the ACC have been trending in a troubling trajectory.

[00:15:05] Here’s what Emily and Alex have to say about the current situation. Uh, what’s happening in Arizona with energy regulation and planning for the future?

[00:15:14] Alex Ruthier: That that’s a big question. Um, there’s a, there’s kind of a lot going on in Arizona and have has been over the last year or so. And Emily and I and the rest of our team have been hard at work.

[00:15:25] I think, I think the biggest thing that that just kind of wrapped up was the integrated resource plans that were filed by the big utilities, Arizona Public Service and Tucson Electric Power we we interacted with. And, uh, With both the utilities and the, uh, and the regulators at the Corporation Commission pretty extensively throughout that process, um, there are some rulemaking, uh, dockets that are open, which means that the Corporation Commission is trying to change rules, uh, on the way that utilities are regulated.

[00:15:57] They are actively trying to [00:16:00] eliminate the renewable energy standard and tariff, um, as well as the energy efficiency standards, both for electricity and gas in Arizona. Um, so those are the big things that we have going on at the Corporation Commission, as well as a variety of other things that we do in Arizona.

[00:16:16] Dave: We’re going to get into some of those things Alex is talking about in just a little bit. Essentially, the ACC is taking what Emily and even one of the commissioners called a hands off approach to the regulatory process. This is concerning because it’s already having serious downstream effects on Arizonans.

[00:16:33] Emily Doerfler: The role of the ACC is to regulate. And this specific commission seems to believe that the, that role to regulate is, is much smaller and less authoritative than it actually is. And so many of the decisions and the goals of this commission have been to. [00:17:00] Not regulate utilities, but to get out of the way, so to speak, which I think is actually a term that has been used by a commissioner, at least during one open meeting.

[00:17:14] And there’s a kind of a belief that free market principles will enable utilities to be well regulated without any government interference, which completely and totally ignores. The fact that utilities are monopolies and therefore completely exempt from that free market interaction. Um, and so it’s, it’s been almost the deregulation of utilities rather than the sufficient regulation in order to protect the people of Arizona.

[00:17:53] Dave: Remember, the purpose of the Utility Commission, like the ACC, is to stand for you, the consumer. They are [00:18:00] supposed to keep utility prices in check on your behalf. A lot of what the Arizona Corporation Commission has been doing has been attempting to repeal rules that both protect ratepayers and help guide utilities to adopt more clean energy overall.

[00:18:13] Alex Ruthier: Something that has come up recently is Um, the, the commission is trying to repeal two or several sets of rules, um, that dictate, uh, some of the investments that the utilities need to make. Um, and because of this free market mentality, um, that the commissioners have, stated at displeasure with mandates, um, and mandating that the utilities do things Which is part of their responsibility is like making sure that the utilities are doing the things that they should be doing and so the the two big things that that we have been interacting with are Um the rest rules and rest stands for the renewable energy standard and tariff Um, which requires the utilities to invest a minimum amount Of their generation in renewable energy like [00:19:00] wind and solar, um, and then there are energy efficiency standards, which say that a certain amount of the total load that the utility serves needs to be met by energy efficiency.

[00:19:11] Emily Doerfler: Another way that the commission has kind of. deregulated the utility industry is by making it easier and easier for utilities to recover their investments from rate payers, whether that’s through the approval of the system reliability benefits mechanism for both APS and UNSE, which makes it So, which enables, uh, utilities to recover millions of dollars, um, from ratepayers without ever having to go through a rate case.

[00:19:48] Rather, they host these mini prudency hearings.

[00:19:54] Dave: Remember the rate cases that we talked about earlier? They’re a built in duty of the Arizona Corporation Commission to make sure that [00:20:00] utilities are not overcharging ratepayers.

[00:20:01] Emily Doerfler: Um, which take up a ton of resources, but these prudency hearings are separate from a rate case in addition to a rate case, um, or the other, uh, avenue that the commission has pursued lately is, um, something called formulaic rate making, which is where rather than having, uh, a rate case that establishes.

[00:20:26] A return on equity. It’s, it’s basically, they create this big formula that has all of these different variables in it, that in the end, when you plug everything in, it comes to the rate of return that the utility is supposed to receive, but those. Formulas have to be true up every single year, which is an extensive process.

[00:20:48] So very resource intensive process. So most of the organizations that come to the Arizona Corporation Commission and represent nonprofits, which in turn represent [00:21:00] The people of Arizona, what specific parts of it, the more and more these hearings and these large proceedings occur, the less resources these nonprofits have to pursue other things at the ACC or otherwise.

[00:21:16] It’s a, it’s very resource, resource intensive and APS can afford to pay a, a retinue of 10 attorneys to show up to each of these proceedings, but nonprofits don’t have those same resources. And it’s a lot more difficult for us to, you know, muster the amount of. effort that it takes to, to fight things at the ACC against such a mammoth corporation.

[00:21:45] Alex Ruthier: And I’ll add that this is something that we haven’t seen yet. It’s just something that we’ve, that the commission has been talking about. They’ve been holding workshops about and seem to be interested in moving in this direction. And we’re a little bit concerned because they, they would have basically one [00:22:00] big rate case like Emily was describing and then have annual true ups.

[00:22:05] To look back and make sure that they fully collected what they were supposed to collect from the previous year and then project what they’re supposed to collect for the next year and then set their rates for the year. As an advocate, we worry that it eliminates our ability to advocate because of the way that once the formula is set, Um, and they come back for the true up, uh, that Emily was describing.

[00:22:28] There’s no really opportunity, uh, to advocate in there. It’s basically plugging the numbers into the formula and coming up with the new rates. And so, um, without some, some serious consumer protections, uh, we worry that it would eliminate. Our opportunity to advocate and also, um, could lead down a path where, um, it’s hard to prove that the rates that are being charged to customers are just unreasonable.

[00:22:54] Dave: What Emily and Alex are saying is that under these new processes that the ACC is considering, it would be a lot [00:23:00] harder for organizations like WRA to advocate. Utilities simply have more resources and more money to throw at the problem. Stacks the system against the people of Arizona by making it more difficult for them to advocate.

[00:23:12] If you’re confused why the Arizona Corporation Commission is proposing all of these changes and trending in these strange directions, you’re not alone. I was too. Alex emphasized how much the free market driven mindset with which the ACC has been operating is fundamentally opposed to what the ACC exists to do.

[00:23:31] When you

[00:23:31] Alex Ruthier: have a monopoly, uh, in a, in a sector of the economy with no competition, um, it’s a, it’s a, it’s a market flaw that, that the free market can not correct for. And so, um, by, by espousing free market principles as a way to correct the, the, the things that monopolies are doing in the state of Arizona is basically.

[00:23:53] Is nonsense. And, and so, um, it’s why the commission was created when they created the constitution [00:24:00] for the state of Arizona. They created the corporation commission. Um, we call it the fourth branch of government in Arizona. Their, their, um, responsibilities are, are granted to them through the constitution.

[00:24:11] And so the founders of the state of Arizona recognized how important this was. Um, and those, those responsibilities don’t seem to always be taken. Seriously. And, and it is, it is really concerning, um, that, that those types of free market principles, um, and, and trust in it, in a monopoly that has very deep pockets, um, and their, their revenues are in the billions of dollars a year.

[00:24:39] It is difficult for organizations like ours, um, who are small and don’t have the kind of capital and, and, and budget that they do to, to interact there. Um, so it is. Um, it’s difficult when the regulators are kind of not on your side or not understanding the responsibility that they hope that they have by holding their [00:25:00] office.

[00:25:01] Emily Doerfler: And the irony is, of course, that some things like the price of different resources may have some market related qualities. For example, the market is telling utilities that they need to invest heavily in renewable energy and storage resources. And rather than being encouraged by those market forces, the commission is actually pushing back a lot on the investment of Utilities in renewables resources.

[00:25:36] So on top of espousing free market principles, they’re actually very often questioning those principles and making claims that they just aren’t as good as they seem, I guess.

[00:25:52] Dave: There’s a lot of areas in which the ACC has fallen short in Arizona. Probably one of the most newsworthy and one of the ones that WRA is most [00:26:00] involved in is the Black Mountain rate case with Unisource Electric.

[00:26:03] Like a lot of energy issues, the language is wonky, but essentially it has to do with the ACC allowing Unisource Electric, a major energy utility in Arizona, to circumnavigate 50 years of practice and avoid an essential environmental review process. Here’s Emily explaining everything that has happened so far.

[00:26:21] Emily Doerfler: Um, so I believe around March of 2024, Unisource Electric applied, um, for what is called a disclaimer of jurisdiction. for its Black Mountain Generating Station. Is is kind of the opposite of an application for a certificate of environmental compatibility, which is a it’s it’s a certificate that is the result of a comprehensive review of the environmental effects.

[00:26:54] that a plant, a major energy project really in general will [00:27:00] have on, uh, both the environment in the surrounding area and the people in the surrounding area. And so what this disclaimer attempts to do is to, um, officially declare that, Whatever major energy project is occurring does not, does not need a certificate of environmental compatibility.

[00:27:21] Now, what made this disclaimer unique is that it put forward in the argument as to why it deserved a disclaimer of jurisdiction, a novel interpretation of a statute, which establishes which Types of major projects require certificates of environmental compatibility and this interpretation was, was very, um, extreme and it basically asserted that each individual turbine, so each individual, um, system of power, I don’t, [00:28:00] I don’t know if there’s a better way to describe that, is its own separate plant, So plants are made up of a number of different units.

[00:28:08] They’re usually turbines connected to generators and Alex can speak more on this and probably in a more, um, correct way, but Unisource

[00:28:18] Dave: argued that they don’t need to have this CEC, the environmental review process, because they’re saying all of their power plant is actually four separate power plants, not just one.

[00:28:29] Unisource thought this would be a way to avoid the environmental review process, since each of those four turbines is only 50 megawatts. And the threshold for legally requiring the CEC is 100 megawatts. It’s a loophole that had actually been tried before in Arizona, and it’s been shot down by regulators in the past.

[00:28:46] As Emily’s about to explain, this loophole is a bit ridiculous. In the line signing committee’s decision, the chairman called the outcome absurd. If the decision stands, it would be almost impossible to require a CEC for any new gas peaker plant in Arizona. [00:29:00]

[00:29:01] Emily Doerfler: Power plants are made up of multiple of these generator turbine sets, and when you split those up, and so when you’re driving past a power plant, you’re not driving past a power plant.

[00:29:14] Instead, you’re driving past four because there are four separate generator turbine sets. The threshold for when you need that C. E. C. is 100 megawatts. And so when you separate them out into individual things that it doesn’t meet that 100 megawatt threshold. And the result is basically that no power plant, no peaker type power plant in Arizona qualifies as needing a C.

[00:29:45] E. C. Um, you could build 15, 50 megawatt turbines, and even though that is clearly more than 100 megawatts of generation, It [00:30:00] qualifies as 15 different plants, and therefore you don’t need to go through that comprehensive environmental review. Um, and so it’s, it’s really removed the authority of the commission to conduct these hearings that result in a CEC.

[00:30:18] And the result is that. The people in rural Arizona who are around these power plants, whether they’re whether it’s a new power plant or an expansion of an existing one, have so many less protections against the effects of those plants.

[00:30:35] Alex Ruthier: Yeah, and, and I’ll add that, that, um, this is a law that’s been in place for about 50 years and, um, like Emily said, this is a novel interpretation.

[00:30:44] It’s something that we haven’t seen before. This question came up a few years ago, uh, at the commission. I think it was about 10 years ago at the commission and the commission staff 10 Issued an opinion exactly in contrast to [00:31:00] what their opinion was in this case, saying that they did believe that, that you did need to get a certificate of environmental compatibility in this case.

[00:31:07] And in that previous situation, um, they did make the, the, the, um, utility go ahead and get the certificate of environmental compatibility. And so, uh, it’s, it’s really bucking, uh, like 50 years of precedent. And, and, and there’s a lot of, a lot of consternation around that word precedent at the, um, at the corporation commission, but, um, I think that the important thing is that, that the first place that this, that this is heard is at the Arizona power plant and transition transmission line siting committee.

[00:31:44] Uh, and, and we did intervene in this case at the committee, um, and the committee voted nine to two to deny, uh, the disclaimer of jurisdiction. So the, the committee that, that is charged with overseeing this, uh, sided with [00:32:00] WRA and other advocates that, that, you know, That black mountain and unse still needed to get a certificate of environmental compatibility um the company um appealed to the corporation commission and the corporation commission overturned, uh, the decision of the of the committee, um, The the nine to two decision by the committee was overturned So I think that’s important as well that that the committee who does this regulation Is saying that they still have jurisdiction, uh, and the, and the corporation commission is, is, is denying them that, that jurisdiction.

[00:32:36] Emily Doerfler: It was pretty clear that the denial of the committee’s decision was not necessarily based on any aspect of law, but was rather politically motivated. Um, currently the, uh, definition of plant, which is that definition that we’ve been talking about, um, does not. Uh, include non thermal solar, [00:33:00] so PV, solar, and wind, um, and the commission expressed a great deal of frustration about that, um, and so WRA is concerned, and, and as a result, we have filed a lawsuit that this decision was not based on any facts or any law, but on a politically motivated Thank you.

[00:33:20] Um, plan to include solar energy and wind in that definition rather than just thermal sources. But that’s, that’s not how you make decisions when you are in a situation where you’re an unbiased decision maker. It has to be based on the facts. It has to be based on the evidence. It has to be based on the law.

[00:33:42] You don’t create the law to support your politically motivated plan. It, that’s just not how that works. It’s, it’s arbitrary.

[00:33:53] Alex Ruthier: And this is a case that WRA felt pretty strongly about. And, and we have, have moved [00:34:00] forward in taking this to the court, the, the superior court in Arizona to, to have them rule on this.

[00:34:05] So, um, this is still something that’s actively going on and, and, and we’re, we’re waiting to, to hear from the courts, um, their decision in this matter. So, um, there’s, there’s definitely more coming on this topic and, and, and we look forward to, to hopefully getting a resolution that, um, supports our view.

[00:34:22] Dave: So this might be a silly question, but why do the utilities not, why would you, would a utility be upset with an environmental review process that seems like a fairly straightforward and common sense thing to require of a power plant?

[00:34:36] Why would they go through all this trouble to circumnavigate that?

[00:34:40] Emily Doerfler: CEC, the Certificate of Environmental Compatibility process is a powerful one. Um, the legislature gave the line siting committee. a huge amount of authority to assert conditions, um, that would Negate some of the negative [00:35:00] effects that having a power plant a mile or two, or even less than that away from your property has, um, and so there’s a, a great deal that the committee can establish there.

[00:35:11] And I would say that, for example, a few years ago, um, for the S. R. P. attempted to expand. greatly expand the Coolidge plant. Um, and when the community got deeply involved in that CEC process, it resulted in, um, uh, a legal proceeding. And the settlement that finally came from that included millions of dollars in community funding, um, for an unincorporated town, Randolph, um, and scholarships.

[00:35:45] and a working group and a slew of additional requirements that benefited that community to a great amount. And it also lowered the amount of generator turbine [00:36:00] sets that they were adding to that plant, um, pushed it further away from the community. and prevented them from adding any additional generation to that plant moving forward.

[00:36:11] It was a huge win for rural Arizona, and I think that scared a lot of utilities. I don’t think that, um, they were too pleased about the results of that.

[00:36:22] Dave: It’s the job of the Arizona Corporation Commission to stand with the people of Arizona and regulate on behalf of ratepayers and communities.

[00:36:36] Emily Doerfler: There’s, there’s such an inequity between rural Arizonans and a power plant company that’s coming in and um, building this, these huge amounts of generation and the committee, the Landsat and Power Plant Committee and the CEC process really levels that playing field and I don’t think corporations particularly like that.[00:37:00]

[00:37:00] Dave: Another key area of failure is driving decarbonization in Arizona. Like we’ve already outlined, the ACC is uniquely positioned to drive decarbonization. One of those key failures involves something called REST rules. It’s Arizona’s very modest current map for how utilities should go about transitioning to cleaner energy.

[00:37:20] Uh, what are these R E S T or REST rules?

[00:37:25] Alex Ruthier: Sure. So the REST rules, um, I think I said before is the Renewable Energy Standard and Tariff, um, abbreviated as REST. Um, they were passed, um, In the, in the two thousands, I, I, um, I don’t remember the year off the top of my head. I think it was around 2010 that the rest rules passed.

[00:37:44] Um, and they have slowly ratcheted up the minimum amount of energy that needs to be generated by the utilities, um, by renewable energy. And so each year, um, within the standard, there’s like kind of a table that lists year [00:38:00] by year, what percentage the utilities need to generate from renewable energy sources.

[00:38:04] Dave: Instead of updating rest rules when they expire in 2025, the ACC is attempting to eliminate them entirely. Rest rules largely fall short of what is needed to address climate change, but they are a start. It only calls for 15 percent of energy to come from renewables by 2025, far below what is needed to hit science based climate targets.

[00:38:25] But there’s a lot of good baseline goals in there, and it is a start. It’s also all Arizona has right now.

[00:38:34] Emily Doerfler: The Renewable Energy Standard and Tariff is the only requirement in Arizona that utilities invest in renewable energy. Um, it is the only piece of, uh, statute or rule or code that, um, requires that utilities invest in, in renewable energy.

[00:38:53] Um, and The, the reasoning behind the removal of the rules [00:39:00] is, is basically that, well, utilities are already doing it, um, and I think that’s flawed, that’s a flawed piece of logic in a number of different ways, um, it’s flawed, it’s, it’s, it’s, it’s like if it’s raining and you have an umbrella. And you think to yourself, well, I’m not getting wet.

[00:39:20] I don’t need this umbrella. And so you take your umbrella and you chuck it aside because you weren’t getting wet before. So why would you need it? And suddenly you’re soaked. Um, it’s, it’s just not a logical way of thinking thing, thinking about things. I don’t think this rule should continue because it was too effective is not a reasoning why you should get rid of, of effective rules and, and a lot of states establish renewable energy standards and tariffs.

[00:39:49] In, in the early two thousands, um, at these similar levels of say 15%, 20%, et cetera. But a, a good majority of [00:40:00] those states have actually updated their roles to include, um, for example, zero or a hundred percent renewable energy by 2050 or 80% renewable by 2035, or any other combination that you could come up with.

[00:40:18] They became more ambitious, not less. Um, and so while utilities have undoubtedly met that standard of 15 percent by 2024 that the rule establishes, we could be asking for even more. Um, and that goes back to the ACC’s role to mitigate the effects of climate change. Um, by removing the rest rules entirely, they’re absolving themselves.

[00:40:45] of a utility’s effect on climate change rather than taking the problem head on, and it is a problem. A problem that we are not effectively meeting.

[00:40:59] Alex Ruthier: Yeah. And I [00:41:00] think Emily makes a really good point there. And that like, if you, if you look at the Arizona’s neighbors, um, California, Colorado, um, New Mexico, they’re, they’re, they’re, Renewable energy standards are substantially higher than Arizona’s.

[00:41:17] And, and so when, when the commissioners come and say, Hey, this is out of date. We agree with that. We do agree that the, that the, that the standard is out of date. But we have a very different view on how to resolve that. We think that it should be updated and made relevant and, and modernized. Whereas the commission is just saying, we just need to get rid of it.

[00:41:37] And I, and I think it goes back to something that, um, we, we talked about earlier in that, that the commission is, is opposed to mandates for the utilities. And this falls into that, to that area of mandates. And so, um, they, they think that the free market can take care of this and, and so that, that we should get rid of the mandate.

[00:41:55] Um, It’s kind of a nonsensical argument. If you [00:42:00] understand the economics of of monopolies operating in a sector. So

[00:42:05] Dave: Alex emphasized that utilities aren’t always incentivized to adopt clean energy

[00:42:09] Alex Ruthier: and energy wise. Solar in Arizona just kind of makes sense. It’s sunny here, something like 330 days a year.

[00:42:16] Um, we have great solar resources. And so, um, getting energy from solar just makes sense. Um, and because of the way the utilities, uh, make money, uh, by spent, by making capital expenditures, incentivized to purchase the cheapest resources. Uh, and so, If these rules go away may be disincentivized from from investing in these types of resources.

[00:42:44] Emily Doerfler: All we’re asking is that the commission conduct a good faith review of the rules and actually come to a conclusion based on that review, not, I mean, and the way that the rest rules were Were deemed to be [00:43:00] unnecessary was through a commission vote. Um, the, the staff at the ACC actually wanted to update the rules to add things like a definition for what storage is under the resources that could qualify under, um, like the percentage of renewable energy that a utility had to use annually.

[00:43:23] Um. And, and they were actually told, no, don’t conduct that review. Don’t conduct that rulemaking that would update terms that would ensure that reporting requirements were sufficient, but non duplicative. We just want you to delete this. And that’s just not the way that government should function. These rulemakings are supposed to be a collaborative process between government entities and stakeholders who have so much knowledge about, you know, the subject matter of that rule.

[00:43:58] Dave: Emily put a lot of [00:44:00] emphasis on how ridiculous it is to not only eliminate rest rules, but have nothing to replace them.

[00:44:05] Emily Doerfler: Climate change is real. Climate change is still affecting us all today. Thank you The rule is in place to address climate change, and therefore deleting it while the problem still exists is nonsense.

[00:44:22] Dave: Emily said it best. To eliminate REST rules is to eliminate Arizona’s only current initiative to address climate change via utility decarbonization. The ACC needs to be expanding on REST, not eliminating it. This is, of course, an ongoing story. Alex gave us an update on what’s coming next and what WRA is doing about these issues.

[00:44:43] Alex Ruthier: I mean, I think there’s still a lot going on. I mean, we’ve been talking about the rest rules and we mentioned before the energy efficiency rules, um, the informal part of that process to, to change those rules has, um, been completed and we’ll move into the formal rulemaking [00:45:00] process. Um, and that, that will probably take up a large majority, if not all of 2025 for that to happen.

[00:45:07] So, um, it’s something that’s going to be on our radar for a while. Um, The, the, the, as you mentioned that the UNSC case with black mountain is still ongoing and Emily’s working on that really hard with, with our team and some outside consultants to, to make sure that, that we see that through. And so, so that will be going ongoing for awhile, potentially through 2025.

[00:45:29] And so, um, I think those are, those are the biggest things that are, that are coming up, uh, and are on our radar, um, at least at the, at the corporation commission. Yeah, that we talked about before, as well as, um, the possibility of changing the way that rate cases happen in Arizona. Um, the commissioners have, um, voiced an interest in formulaic based rate making that Emily mentioned before.

[00:45:53] And so, um, It’s potential that we’ll see some kind of policy statement or, or rulemaking, [00:46:00] um, at the commission related to, um, how that process takes place. Um, we also just finished the integrated resource plans for, um, Um, the, the electric utilities in Arizona and the commissioners have voiced an interest in another rulemaking that will codify some of the requirements of the integrated resource plan process.

[00:46:23] So, um, we’re hoping that that takes place next year and kicks off and, um, we look forward to engaging in, in both of those as well.

[00:46:31] Dave: Hopefully you understand why WRA is so interested in utility commissions after listening to some of this. I had to learn a lot to get up to speed, and I’m still learning. I hope you are as well.

[00:46:41] It’s easy to get spun around by rule making terms and the legal process of utility regulation, but when you boil everything else away, it’s If you live in Arizona, the ACC and the decisions that the five electric commissioners make affect almost every aspect of your life. It’s not something that the average person is usually aware of, but your [00:47:00] utility bills, the effects of extreme heat, water bills, and essential clean energy tech are all dependent on the ACC.

[00:47:07] If you don’t live in Arizona, we encourage you to learn more about the utility commission in your state.

[00:47:15] At WRA, we recognize the seriousness of climate change and what a failure to respond would mean.

[00:47:24] The whole reason that we’re engaging with the ACC as deeply as we are is because we think we can make positive change for Arizona and for the West. We think that Arizona should be a leader in positive climate infrastructure and a leader in clean energy. We just need to build the processes and regulatory environments that make that possible.

[00:47:43] A lot of the ACC news is troubling, but I wanted to leave by asking Emily and Alex what a brighter future for Arizona might look like.

[00:47:52] Alex Ruthier: I, I, I will say one, one bright spot that I, that I see is, um, that, that the, the biggest utilities in the state, [00:48:00] A-P-S-S-R-P and TEP have all made long-term goals to decarbonize their systems.

[00:48:06] Um, A A PS has a, has a clean by 2050 goal, and, and SRP and TEP both have a net zero, uh, by 2050 goal. And so. We, we see the need to, to accelerate that and make sure that the, the cumulative emissions between now and then are minimized, um, and possibly get to those, to those goals sooner than 2050. But, um, at least we can see that the utilities are recognizing the need for this, that, that there is a public demand for it.

[00:48:35] And despite the corporation commission, not being. Particularly supportive of those goals that at least the utility seemed to be recognizing the need there.

[00:48:46] Emily Doerfler: A bright future for Arizona to me looks like greater involvement and awareness of the Arizona Corporation Commission and a more unbiased view of renewable energy and what it [00:49:00] can do for Arizona.

[00:49:02] Dave: The, I mean, it sounds like both what you both you were saying is that if. The ACC were to regulate, there’s a massive opportunity in Arizona to lead the way in clean energy instead of, instead of kind of. Dragging their feet.

[00:49:19] Alex Ruthier: Yeah, I think that’s absolutely the truth and and because we have such great solar resources here um if we I mean I’m gonna i’ll talk about something that we haven’t talked about yet today but but regionalization and and markets and transmission like If we can figure out how to connect arizona to some of our neighbors and other states We can export that and and bring money into arizona and and really make that resource What it truly is a resource for the state You Um, and be able to, to be an energy supplier to, to other states in the region.

[00:49:53] So, yeah, I think if, if we can get on board and, and be able to, to interconnect with, with some of our [00:50:00] neighbors and, and really transform our grid to, to supply clean energy, I think there is, um, not only a societal benefit, but I think an, an, uh, a direct economic benefit to the state of Arizona and its citizens.

[00:50:18] Dave: If you feel a little bit troubled or disheartened after listening to all of this, that’s okay. At WRA, we see through the troubling headlines to a brighter climate future ahead of us. We hope to help you see that as well. If you would like to take action, you can join Concerned Arizonans and let the Arizona Corporation Commission know you want them to move towards clean energy, not away from it.

[00:50:39] Learn how to add your name in our show notes. If you live in another state, we encourage you to join our email list or follow us on social media. Did you like what you’ve heard? Bring others into the conversation. Share our show with family, friends, and group chats alike. Follow us on Instagram, Facebook, or LinkedIn to stay up to date with the latest climate news in the West.

[00:50:58] You can find show notes and a [00:51:00] transcription of this episode online

[00:51:06] at westernresourceadvocates. org. Lastly, WRA would like to thank our sponsors who make our work possible. Our Impact Sponsor is First Bank. Our Premier Sponsor is Vision Ridge Partners. Our Supporting Sponsors are BSW Wealth Partners, GoCo, Group 14 Engineering, Jones Co., Meridian Public Affairs, and Solup.

[00:51:29] Thank you for listening.

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2 Degrees Out West is a podcast from Western Resource Advocates, an environmental conservation organization that’s focused on the Interior West. WRA works across seven states to protect our climate, land, air, and water. WRA protects and advocates for Arizona, Colorado, Utah, New Mexico, Nevada, Montana, and Wyoming.

2 Degrees out West is a podcast for advocates and decision makers who want to fight climate change and its impacts across the West.

On 2 Degrees Out West we talk with climate experts and advocates to bring you stories, experiences, and insights from their work in the places we call home.

It is Hosted by Dave Papineau. 

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As we wrap up our heartening exchange, consider this your invitation to join a movement bristling with optimism and action. Get the lowdown on how to make informed decisions, and why sharing success stories amplifies our collective impact. Let’s turn pledges into palpable change, wear our commitment like a badge of honor, and use the power of social networks to rally the troops. As we envisage a community vibrant with climate champions, our discussion serves as a promise that a thriving planet isn’t just a dream—it’s a future we’re shaping together, one pledge, one policy, one pin at a time.

Tune in to learn more about the Bright Climate Future Pledge and why we should all be hopeful in 2024.