Legal & Regulatory

Regulators, Lawmakers Spar Over Arizona Renewable Mandates

State regulators in Arizona want the state’s investor-owned utilities to source more of their electricity from renewable sources, and develop more energy storage options, rather than rely on new natural gas-fired generation in the future. State senators, however, voted March 14 to give utilities a way to get around any voter-supported mandates for renewables.

The actions are the latest in the continuing moves by several groups to establish rules for Arizona’s future power mix, as more coal units are retired and the state’s growing population increases demand for electricity.

The Arizona Corporation Commission (ACC), which oversees public utilities in the state, wants a moratorium on new gas plants with generation capacity of 150 MW or more at least through the end of 2018. The ACC recently unveiled “Arizona’s Energy Modernization Plan,” a proposal from commissioner Andy Tobin; the plan calls for the state to receive 80% of its electricity from renewable sources by 2050—with “the ultimate goal being 100 percent”—and also says “the state shall pursue a target of 3,000 MW of deployed energy storage by 2030.”

The group’s statement putting a moratorium on new large gas plants reads: “In an effort to protect ratepayers from potential unnecessary capital improvements in the near future and stranded asset costs in the long-term, this amendment places a temporary moratorium on new natural gas infrastructure pending Commission review and approval on a case by case basis.”

Utilities would need a waiver from the ACC to build a new gas plant. They also would need to submit “independent analysis comparing the present and future costs between the specific natural gas procurement and alternative energy storage options.”

Utility IRPs Questioned

The ACC’s action calls into question the Integrated Resource Plan (IRP) submissions of Arizona Public Service (APS) and Tucson Electric Power (TEP). Both utilities most-recent IRPs call for more natural gas-fired generation to meet the state’s growing power demand.

APS in its April 2017 IRP said gas-fired generation would increase from 26% of its portfolio, to 33% by 2032, with an additional 5.3 GW of natural gas generation capacity by 2030, more than double its current output. It said it plans to increase renewable energy from 12% to 18%.

TEP in its most-recent IRP, issued in April 2017, said its goal is to have at least 30% of “our retail load from renewable resources by 2030,” and also said it “will continue to rely on energy efficiency measures while investing in cleaner burning natural gas resources.”

At the same time, TEP said “we also must maintain access to and control of reliable, cost‐effective conventional generating resources. To that end, TEP recently replaced a long‐term lease with full ownership and control of Unit 1 at the Springerville Generating Station—Arizona’s newest, most efficient coal plant.” TEP also plans to build a new 200-MW gas-fired power plant near its gas-powered H. Wilson Sundt Generating Station in Arizona. The Sundt plant’s coal-fired units were retired in 2015. TEP wants the new plant, which would begin commercial operation in mid-2019, to provide flexible capacity that will help it integrate more renewables into its generation portfolio.

State Senate Bill Lessens Penalty

The state Senate, meanwhile, on Wednesday voted along party lines in support of a Republican-backed measure that would make any violation of state constitutional mandates for renewable energy a civil penalty, meaning utilities could avoid any mandate by paying a one-time fine of as low as $100, up to a maximum of $5,000.

The bill—HB 2005—is partly in response to a ballot initiative financed by Tom Steyer, a California billionaire hedge fund manager whose NextGen America group supports environmental causes. That measure, Clean Energy for Healthy Arizonans, if approved by voters would require that at least 15% of the state’s power come from wind, solar, and biomass by 2025.

HB 2005 was in part crafted by APS. A lobbyist for the utility, Rod Ross, on Wednesday told lawmakers that if APS was mandated to include more renewable energy in its portfolio, it would meet with lawmakers and regulators “and together come to a decision as to what the best course of action is to protect the state, its economy and its ratepayers.”

Some lawmakers have asked whether it’s appropriate for voters to decide state requirements for renewable energy. The state’s constitution and state courts have ruled the ACC has the power to determine those requirements. The ACC currently has a goal of 15% of the state’s power from renewables by 2025; Steyer’s initiative would amend the state constitution and increase the renewable goal to 50% by 2030, and also would preclude the possibility—currently being discussed by the ACC—to include nuclear power as a renewable.

Tobin earlier criticized APS for its plan to increase generation from natural gas, saying the utility needs “a more balanced and forward-looking perspective.” He and his fellow commissioners want to reform the IRP process, saying regulators should be able to amend utility proposals to more closely fit commission plans. The modernization plan he proposed in late January called on utilities to deliver more renewable energy during peak demand periods, an effort to incentivize deployment of energy storage.

Commissioner Bob Burns has said APS’s load forecasts are “too aggressive,” and “relied heavily on natural gas without adequate price sensitivity analyses.”

Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine)

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