Arizona Corporation Commission To Decide On Electric Market Deregulation

September 06, 2013

This fall, the state’s utility regulators will decide whether to take up an issue that could change how you get your electricity. The Arizona Corporation Commission has asked for comment on what it is calling retail competition. You also hear people refer to it as consumer choice, market restructuring and deregulation. Basically, it would allow other utilities to enter the market, and offer electricity to consumers, and the issue has brought strong feelings from both opponents, like Arizona Public Service Vice President Mark Schiavoni.

"The question isn’t really, ‘What is an outcome that would be desirable for everybody.’ For us, it’s more, what are you trying to fix? What’s wrong with our service today that you think it needs to be changed?" Schiavoni said.

And supporters like consultant Stan Barnes, the president of Arizonans for Electric Choice and Competition.

"Customers are not being treated right. There are good services and new products and innovation that we’re not getting," Barnes said. "There’s no competitive pressure on the utilities to seek business, hold business and be like normal businesses, and so it’s time to change that."

APS is among the groups opposed to deregulation. So are Salt River Project and Tucson Electric Power.

Barnes’ group includes Intel, Honeywell, Freeport McMoran and several other large companies that use a lot of energy. He said electricity is the last regulated monopoly in the U.S., and that opening the market up to competition would benefit the state.

"The market beats the monopoly in every other important kind of industry. There are buyers and there are sellers, and in electricity, there’s a lot of money to be made because there’s always somebody buying," Barnes said.

Barnes said when electricity providers have to compete for your business, they can offer better deals and perks. He said ratepayers would be able to choose the company and plan that best fits their needs and their budgets, but critics like Schiavoni said not everyone sees lower rates in a deregulated market.

"The commercial and industrial customers, normally because of the large loads that they are, they can strike a deal that gets them that type of thing. The rural areas, our residential customers locally, our low-income customers, they don’t get that same benefit," Schiavoni said.

But, Barnes downplays that concern. He points out companies are already lining up to come into the market if the Corporation Commission lets them. He said some of those new firms would likely specialize in providing electricity to smaller energy users, not just the bigger ones.

"There’s one Chase Field, and there are 3 million residential meters in Arizona. In other words, the market is in residential, as much as it is in the big users," Barnes said.

In requesting comments on whether or not to move forward, the Corp Com asked a series of questions, among them whether retail competition is compatible with the state’s current Renewable Energy Standard. It requires regulated utilities to generate at least 15 percent of their energy from renewable sources by 2025.

"I think the jury’s out," Bud Annan said.

Annan was in charge of solar energy development at the U.S. Energy Department for 15 years. He hopes the commission would require any new utilities entering the market to meet the standard, but under deregulation, it might choose not to.

"I don’t think the solar industry is opposed to deregulation. I just think they think it’s got to be done carefully and you start with having the good policy in place," Annan said.

Annan does not think deregulation would necessarily be the death knell of solar energy in Arizona, he just thinks the commission has to take its time setting up the rules.

Former Commission Chair Kris Mayes agrees. She said Arizona has in place now a system of programs encouraging homeowners and utilities to use solar energy.

"The problem with introducing deregulation right now is it sort of blows all of that up a little bit, and it introduces a whole new scheme, which you can do, but it does introduce a certain level of uncertainty into a system that’s actually been humming along pretty well," Mayes said.

But Mayes said in a deregulated market solar could flourish since customers could demand it, and utilities would have to meet that demand.

The Corporation Commission is expected to vote in the next several weeks whether or not to move forward. If it decides to, it would then have to figure out how to do it and answer a lot of questions. That process would likely last into next year.

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