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Arizona commission declines to reimpose moratorium on gas-fired plants

Two commissioner-led proposals to reimpose a moratorium on the construction of new gas-fired power plants in Arizona by three investor-owned utilities and a cooperative were rejected by the full commission Sept. 19.

Commission Chairman Robert Burns and Commissioner Sandra Kennedy offered proposals to impose a moratorium for an indefinite period to induce utilities to procure renewable energy, storage and demand-side management options in their push for clean energy alternatives to fossil fuel.

The commissioners had also sought to restrict construction of new gas-fired plants because of concern that such assets might become stranded costs if the regulators eventually allow competitive energy suppliers to offer utility customers power at lower prices than utilities provide. The commission is considering restructuring Arizona's retail electricity market.

But at a Sept. 19 special meeting called to consider reinstating a gas plant moratorium, the five-member commission could not agree on these and other proposals for a new moratorium. No further plans were made to take up the matter again, according to ACC spokeswoman Holly Ward.

In their original March 2018 decision, the commissioners rejected the integrated resource plans of the three investor-owned utilities as being too heavily reliant on gas-fired generation and imposed a moratorium on acquisition or construction of any gas-fired plant of 150 MW or more. The moratorium was imposed on Pinnacle West Capital Corp. subsidiary Arizona Public Service Co., Fortis Inc. subsidiaries Tucson Electric Power Co. and UNS Electric Inc., and Arizona Electric Power Cooperative Inc. While AEPCO also fell under the moratorium, the commissioners accepted its IRP in that decision.

That moratorium expired Jan. 1, 2019, but the commissioners reinstated it in February by amending their original decision and putting it back into effect until Aug. 1.

In an effort to revive the moratorium, the commissioners considered imposing some additional conditions geared toward inducing the utilities to pursue cheaper and cleaner alternatives to gas.

APS warns it needs more gas plant capacity

However, APS executives warned of looming capacity shortages during summer peaks for meeting load requirements, especially on hot summer evenings after the sun sets and solar resources are no longer available.

APS Vice President of Resource Management Brad Albert said the highest peaks in demand for power might only occur for 10 to 15 hours over an entire year, but gas-fired resources will be needed to meet them. He said APS is not looking to build new gas capacity to meet that need because there is not enough time to bring those resources online over the next three years. Instead, the utility must enter into power purchase agreements with existing merchant-owned gas-fired resources.

But Albert said the availability of existing gas-fired capacity is dwindling, due to demand in other states for gas-fired plants to balance increasing amounts of solar capacity in the West, retirement of existing resources, and 2% annual load growth in Arizona resulting from new residents and data center developments.

"Our capacity situation is diminishing. We are getting to a much tighter reserve margin in the desert southwest," Albert said, pointing to the California ISO's estimate that Southern California will be short at least 4,000 MW by 2021, and he said Arizona will be competing for limited existing resources to fulfill its need.

Kennedy's amendment to the original decision would have applied to all gas investments, regardless of size, with the stated purpose of considering a comprehensive independent analysis of potential alternatives. Those restrictions would not have applied to power purchase agreements under 18 months for reliability purposes, according to an amendment Burns offered.