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Arizona refuses to accept long-term plans of investor-owned utilities

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Arizona refuses to accept long-term plans of investor-owned utilities

Arizona regulators refused to accept the proposed integrated resource plans of the state's investor-owned electric utilities, saying they did not adequately account for the flattening of load growth that will result from energy efficiency, electricity storage, smart grid improvements and other new technologies.

In a 3-2 vote, the Arizona Corporation Commission on March 13 ordered Pinnacle West Capital Corp. subsidiary Arizona Public Service Co. and Fortis Inc. subsidiary Tucson Electric Power Co. to provide more accurate load forecasts, asserting that the utilities relied too heavily on generation resources to meet future growth in electricity demand.

The agency approved Commissioner Robert Burns "Amendment No. 1," which said the commission would not acknowledge the plans because they did not comply with all requirements of established integrated planning rules. The amendment particularly zeroed in on the load forecasts of Arizona Public Service, Arizona's largest utility, as being "too aggressive." That unrealistic overstatement of future growth resulted in plans for additional generation resources, including heavy reliance on natural gas-fired generation without adequate fuel price analyses, the amendment said.

In approving that amendment, the commission went against its own staff's recommendation that the resource plans be accepted.

Burns said the commission must take the lead in resource planning by determining the need utilities must meet and recommending ways for them to meet that need.

"I think Arizona is behind the curve in discussing modernization of the grid," Burns said. "With all the new technologies out there, especially in the area of generation, we need a different way of planning to be more inclusive of the true experts of technology."

The commissioners agreed they need to hire a third-party consultant to review the resource plans and make recommendations.

Burns said the commission cannot acknowledge the resource plans because the foundation on which they are based is flawed. "The consequence of not acknowledging the plans sends a strong message to utilities to be more accurate in their load forecasting and give us a better plan," Burns said.

In supporting Burns' amendment, Commissioner Andy Tobin said he agreed the integrated resource planning process has not addressed an Arizona energy future in which technology is advancing quickly. "The IRPs are already outdated. There is no value to continue this process," he said.

Chairman Tom Forese cast the deciding vote for approval of Burns' amendment without comment.

Arizona Corporation Commission Utility Division Director Elijah Abinah and utility representatives argued for acknowledgement of the plans, saying the companies and stakeholders have spent significant time and resources on planning since they began those efforts in 2015 and have followed the earlier directions of the commission. Extensive and rigorous analyses and load forecasts were done, the utility officials insisted. "To come in at the last minute and recommend not to acknowledge [them] is a disservice," Abinah said.

However, the Sierra Club argued that Arizona Public Service's and Tucson Electric Power's plans were out of touch with the emerging clean energy economy. "We should not be building outdated fossil fuel plants when we have the best solar resources in the country," said Sandy Bahr, director of the Sierra Club's Grand Canyon Chapter, in a statement following the decision. "As the utilities go back to the drawing board, they need to make sure Arizonans aren't missing out on the renewable energy, battery storage, and energy efficiency technologies that guarantee low cost, reliable, clean energy."

This was the first time the commission has ever refused to acknowledge a utility's resource plan, according to the Sierra Club.