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Arizona Ruling lets Arizona Utility Regulators' Renewable Energy Mandate Stand
Arizona Ruling lets Arizona Utility Regulators' Renewable Energy Mandate Stand
By Howard Fischer, Capitol Media Services/East Valley Tribune

State utility regulators are free to require utilities to buy or generate power from solar, wind and other sources, even if that costs their ratepayers more, the Arizona Supreme Court ruled Tuesday.
In a brief order, the justices upheld a decision by the state Court of Appeals tossing out a challenge by the Goldwater Institute to the “renewable energy standard” adopted by the Arizona Corporation Commission. That order gave no explanation.

But in leaving the lower court decision untouched, the justices essentially accepted the commission’s argument that its powers are broader than simply setting the rates that companies can charge.

The commission has defended the requirement to use more solar, wind and other renewable sources, saying it ensures that utilities have adequate supplies from various sources. And commission chairman Gary Pierce said that is certainly within the purview of the panel.

Pierce said, though, that foes are free to ask the Legislature to trim the commission’s powers.

Goldwater attorney Clint Bolick said that, with the high court ruling, that remains the only legal option. But he was not optimistic lawmakers are willing to go along.

“The Legislature has been cowed by the solar industry into submission,” he said.

Central to the fight is the requirement for investor-owned utilities to have 15 percent of their power from renewable sources by 2015.

But what caused the dust-up is that the commission is letting utilities charge their customers more to make up at least part of the higher cost.

Arizona Public Service Co., for example, can charge an additional penny for every kilowatt hour, up to $4.05 a month for residential users. Most commercial customers can be billed up to an extra $150.53 monthly, with a $451.60 cap for larger industrial users.

For Tucson Electric, the current surcharge is seven-tenths of a cent per kilowatt hour, up to $4.50 monthly for residential customers and $160 for small commercial customers. The largest can be charged up to $5,500.

Bolick called the decision “dangerous and unprecedented.”

“It gives the Corporation Commission pretty much unfettered power to regulate the policies of utilities,” he said, beyond the basic function of regulating the rates of the utilities that operate pretty much as monopolies in their service territories.

But the commission argued that forcing utilities to diversify their sources of power — even if there is an up-front cost — does have a direct effect on future rates. The courts agreed.

In writing the Court of Appeals ruling that the Supreme Court upheld Tuesday, Judge Margaret Downie said the commissioners concluded that continued reliance on the fossil fuels of coal and natural gas “is inadequate and insufficient to promote and safeguard the security, convenience, health and safety” of utility customers “and is therefore unjust, unreasonable, unsafe and improper.”

Downie also said there was evidence that reliance on a few sources of power makes the utilities — and their customers — more susceptible to both price fluctuations and shortages, citing a rate hike sought by APS when natural gas prices spiked.

Pierce acknowledged that the alternate sources have been more expensive than existing supplies.

But he said what needs to be considered is the current cost of building or acquiring new energy sources for a growing state. He said that new centrally located solar power plants are very close to being on par, on a kilowatt-by-kilowatt basis, with constructing a new coal or nuclear fired facility.

Anyway, he said, it’s not like renewable sources will ever replace either of those. He said Arizona always will need “base load” power plants, capable of running round the clock, something that neither solar nor wind can do.

Pierce shared Bolick’s assessment that the Legislature will not strip the commission of its authority to require the use of solar and other renewable sources, even if it does result for the time being in higher utility bills.

“It’s popular with Republicans,” he said of solar in particular.

That proved to be the case last year when Rep. Debbie Lesko, R-Glendale, introduced legislation to kill the renewable energy requirement. That generated fierce opposition from lobbyists for companies in the business of building and running solar plants who are counting on the mandate to guarantee that utilities will be buying their power.

Lesko quietly withdrew the bill.

“They were concerned at the time they were going to run off economic development,” said Pierce who, like the majority of legislators, is a Republican.