Arizona regulators vote to repeal state renewable energy target, efficiency rules

In a highly unusual move, Arizona utility regulators ordered their staff to draft new rules that would repeal the state's existing mandates for renewable energy and energy efficiency.

The Feb. 6 order by the Arizona Corporation Commission, approved by a 4-1 vote at an open meeting, sets the Republican-led state apart from most other jurisdictions across the country, which are pushing utilities to source electricity from emissions-free sources.

According to the Energy Information Administration, as of November 2022, 36 states and the District of Columbia had established renewable portfolio standards. In Arizona's case, the ACC first established the state's renewable energy standard and tariff in 2006. That standard requires regulated utilities to obtain 15% of their power from renewables no later than 2025.

But the mandates have become unpopular with some Republicans, who claim the rules are raising prices for utility ratepayers since the costs utilities incur to comply with the rules are passed on to customers.

In a joint press release Feb. 8, ACC Chairman Jim O'Connor and Commissioner Kevin Thompson claimed that the REST mandate has cost ratepayers about $2.3 billion since it was implemented in 2006.

O'Connor said that at the time the REST rules were approved, then-Chairman Jeff Hatch-Miller promised that the commission would review the rules every year to ensure they remained in ratepayers' best interest. "Those reviews never occurred, and costs were never considered," O'Connor claimed.

O'Connor also said that utilities often ended up acquiring power above market prices to comply with the renewables mandate. "Mandates distort market signals and are not protective of ratepayers," he claimed.

The repeal of the REST rule has concerned some renewable developers, who say the action is part of a broader campaign in Arizona against renewable development by industry opponents.

Speaking remotely to the Feb. 6 ACC meeting, Autumn Johnson, executive director of the Arizona Solar Energy Industries Association, claimed that "a half-dozen" bills have been proposed in the state legislature, "all intended to make it harder or more expensive to build utility-scale renewables." She also said that three local jurisdictions in the state have imposed moratoria or limits on new renewable projects.

"I worry that, on top of all of this, the only state in the country to repeal what is already an extremely modest RPS sends the wrong signal to the industry," Johnson said. "It says, 'Take your business and your jobs and your dollars elsewhere.'"

In addition to the REST mandate, the ACC's order also calls for revoking efficiency rules for both electric and gas utilities. Those rules, which went into effect in 2010, have cost ratepayers just under $1.1 billion to date, according to O'Connor and Thompson.

"Living in Arizona, we all should be mindful to practice energy efficiency," Thompson said. "But too much focus has been placed on societal metrics and costly feel-good programs that don't prioritize ratepayer affordability and grid reliability."

He added: "Once the mandates are removed, it will be incumbent upon Arizona's utilities to propose programs that actually work to benefit ratepayers and protect the integrity of our grid."

In their statement, the two commissioners said the process of revoking the rules could take over a year due to a requirement for public comment and the need to submit the action for review by other state agencies.