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Utility regulators give APS what it wants on renewables, for now

Two recent decisions at the Arizona Corporation Commission keep the utility monopoly comfortably in control to financially benefit from a larger electricity load.

PHOENIX — As financial analysts predict Arizona Public Service (APS) will shoulder new energy demands in the coming years, two recent decisions at the Arizona Corporation Commission keep the utility monopoly comfortably in control to financially benefit from a larger electricity load.

Solar industry advocates say the recent commission votes delay or all-out prohibit healthy competition and innovation in the renewable energy market. APS tells 12News the utility is equipped to lead the transition to renewables with thoughtful, reliable solutions.

Competitive community solar is not happening in Arizona

In February, the Commission voted 5-0 for APS to re-file a proposal involving smart technology and home solar batteries for ratepayers. The commission’s vote amounts to a delay of seven months for a program that renewable industry advocates say is ready now. The commission also gave APS the option to seek an extension in October.

In March, the commission voted to give APS full “opt-in” control over a competitive solar proposal that would have allowed farmers, nonprofits, small businesses and homeowners the option to band together with third-party solar developers to build mini-solar facilities. 

Critics contended the final version of the plan approved by the commission made competitive solar “so unworkable that no projects will actually be built.” Regardless, APS has already indicated it will not allow the program to exist in its service territory. 

Meanwhile, 22 states have adopted competitive community solar initiatives.

Decisions “highly deferential towards the utilities”

The decisions represent a setback for energy efficiency advocates who touted both proposals as opportunities to hasten the transition to renewables.

“These programs are really powerful tools to empower homeowners and to help make bills much more manageable, while helping the utilities shift towards more clean energy resources,” said Caryn Potter of the Southwest Energy Efficiency Project (SWEEP), a nonprofit funded by government and business allies.  

Over the course of more than two years, Potter and other stakeholders in the renewable energy space have met with APS in workshops to hash out the details of the two proposals.

Autumn Johnson of the Arizona Solar Energy Industries Association (AriSEIA) calls the two decisions “highly deferential towards the utilities.”

“You know it’s a real shame. We spent a year working on community solar and had interest from companies around the country of investing in Arizona and that program is essentially dead,” Johnson said. “Arizona differs, frankly, greatly from most of our neighboring states when it comes to the clean energy transition.”

APS: “We already have programs in place”

The plan approved by the commission regarding community solar means third party solar developers cannot broker deals with communities to generate and store solar power.

“The commission is putting all their eggs in one basket, a utility monopoly,” said Shelly Gordon, Director of Arizonans for Community Choice, an energy nonprofit funded by the solar industry.

A spokesperson for APS said the utility already provides options for ratepayers to utilize solar through a program it calls APS Solar Communities   (not to be confused with competitive solar communities), the Residential Battery Pilot (it is no longer accepting applicants, according to the website), and the Cool Rewards smart thermostat program  

“Because we are looking out for our customers, we did not support the programs (before the commission),” said Jill Hanks, spokesperson for APS. “And we already have programs in place that connect customers to clean solar technologies while also maintaining reliability and providing value.”

APS Customer to Grid Director Kerri Carnes, said during a commission hearing that “APS is absolutely committed” to “customer-sided resources."

“They are going to be an increasingly important part of the company’s energy portfolio,” Carnes said.

Why DDSR is promoted as a solution to energy needs

The vote in February involved a Distributed Demand Side Resources (DDSR) Aggregation Tariff. The DDSR model uses customer-sided resources, such as home batteries and smart technology to alleviate the grid’s energy demands.

The tariff is a blueprint that would provide compensation to ratepayers for participating in “time-differentiated rate plans” and lending their home battery’s storage capacity to the grid.

The tariff would also allow ratepayers to sync smart appliances to APS or a third-party vendor. Appliances like water heaters, pool pumps and thermostats would coordinate with the grid’s demands to alleviate the burden on the grid during peak hours.

This model of energy management is advertised as a way to reduce costs for ratepayers, reduce capacity needs and increase reliability.

“I do think this will be the direction of many commissions across the country so hopefully this is something that we can salvage,” said the proposal’s sponsor, Commissioner Lea Marquez-Peterson, during the February hearings. Although the effort appeared dead, commissioners added tweaks to the plan, prompting a re-vote the following day.

APS originally announced the DDSR Aggregation pilot program in early 2021 and promoted its benefits in a 22-page introduction.  

According to the U.S. Department of Energy, if demand-side policies are implemented correctly, they can help modernize the nation’s electrical grid.

“Whether a utility and its regulator encourages demand response is an economic decision they make relative to the local specific electricity supply mix and market conditions,” the DOE states.

APS asks for more time

Both proposals theoretically threaten to cut into revenue from APS by lowering electricity bills and reducing the need for APS to build more infrastructure, another revenue stream for the utility.

Some questioned why progress on the DDSR isn’t moving faster. During the February hearing, APS initially asked for 21 additional months to evaluate the program.

“I tend to find that the utilities want to do everything slowly, or as slowly as possible on their own timeline,” Johnson told 12 News.

APS representatives to commissioners in February APS needed “operational experience” to test the technology through two more Arizona summers.

“At this time, before we do any additional RFP’s or anything like that, we need some additional time to gather data,” Allmon said. He said it was important the utility do the “right thing” rather than do it fast.

Citing expert data, a solar industry advocate said the commission should act now.

“This is a risk-free opportunity. We’ve been working on this for three years and when I hear the notion, ‘gosh, we better take our time here,’ meanwhile during this same time other states have started and rolled out these tariffs,” said Court Rich, who argues before the commission on behalf of solar companies.

Conflicting versions of DDSR cost-effectiveness

APS also told the commission the program was proving not to be cost-effective.

That conclusion contradicted a third-party evaluation from the Lawrence Berkeley National Laboratory (LBNL), an expert in the field. The commission hired LBNL to assess APS’s pilot project.

“Their conclusion was this is all wrong. They’re (APS) only capturing 5% of the value. LBNL said they are missing 95% of the value,” Rich told commissioners. “LBNL said APS ignored the full extent of benefits.”

LBNL reported APS did not address in its report five of eight benefits that stem from DDSR Aggregation Tariffs, Rich said. LBNL projected the life of a battery to be at last ten years. APS’s analysis projected it to be five years.

APS maintained customers risked taking on a financial burden.

“Based on how we evaluate these resources… we don’t see how we would avoid a cost shift,” Allmon said.

The commission ultimately voted on an amendment stating there shall be no cost shift to ratepayers. The commission also ordered APS to work hand-in-hand with LBNL to continue assessing its pilot project and to redraft a new tariff by October 1st.

Staff utility director Elijah Abinah disregards independent report

The ACC utility staff, which acts as a research arm of commissioners, also determined the DDSR Aggregation Tariff was not cost-effective.

“Based on what APS proposed and based on the program, I believe it’s not cost-effective,” said Utility Staff Director Elijah Abinah during the hearing.  Abinah did not explain why he believed APS’s analysis was more credible than the analysis by LBNL.

Rich and two other stakeholders publicly questioned during the hearing why Abinah and his staff seemed to dismiss input from stakeholders and LBNL.

“You don’t just take what APS says and say, well, APS said it,” Rich said. “You analyze all of it.”

Abinah responded by saying his staff followed commission rules to evaluate the potential benefits of the DDSR aggregation tariff.

“That is why my recommendation was, APS needs to get additional information and if they believe it’s appropriate, they can re-file,” Abinah said.

According to a document filed at the commission, Abinah’s staff performed a cost-benefit analysis of the proposal “in accordance with Arizona legal code.”

A history of decisions by Abinah to shield APS

As Utility Staff Director, Abinah’s words carry weight, especially when two sides offer contradicting information before the commission. Asked by email the reasons why he disregarded the LBNL’s findings in his report, Abinah declined to respond.

Abinah has been criticized in the past for appearing to show favoritism to APS over ratepayers. As 12News has previously reported, Abinah arbitrarily removed shut-off data from annual public utility reports after APS had an unusually high number in 2019.

After a public outcry, Abinah restored the data. Abinah also concealed from the public and even commissioners details of a taxpayer-funded independent report about APS. 

The information included internal survey data by APS that was embarrassing to the utility. It also contained conclusions that APS earned profits beyond what it was allowed to in 2018. Not until 12News threatened to file a lawsuit, did the commission agree to make the findings public.

Perhaps most consequential, Abinah recommended the commission vote to approve the 2017 APS rate case, which cost ratepayers much more than advertised while earning APS record profits. It also led to a $25 million settlement with the Arizona Attorney General’s Office on behalf of ratepayers.

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