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In Arizona, utilities fight a 50% renewable standard on the ballot

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In Arizona, utilities fight a 50% renewable standard on the ballot

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Electricians install solar panels on a roof for Arizona Public Service Co. in Goodyear, Ariz.
Source: Associated Press

Facing fierce opposition by major utilities in a state with one of the richest solar resources in the United States, renewable energy supporters in Arizona are attempting to pass a ballot measure on Nov. 6 that would change the state's constitution to require investor-owned utilities and cooperatives to obtain 50% of their power from renewable sources within 12 years, more than tripling the current standard.

Called Proposition 127, the measure would increase the renewable portfolio standard from 15% by 2025 to 50% by 2030 for Pinnacle West Capital Corp. subsidiary Arizona Public Service Co. and Fortis Inc. subsidiaries Tucson Electric Power Co. and UNS Electric Inc., which collectively serve more than 1.71 million customers in Arizona. The initiative will also apply to 10 rural electric cooperatives, but not to the Salt River Project, a state political subdivision that serves more than 1 million customers in the Phoenix, Ariz., metropolitan area.

Solar energy has strong support among the state's more than 3.6 million registered voters according to a recent poll conducted for the Center for Western Priorities and the Resources Legacy Fund, but Prop 127's outcome is uncertain. In a September poll of 500 participants conducted for The Arizona Republic, the measure trailed by 13 percentage points with 46.6% of respondents saying they would vote no and 33.6% favoring the initiative. Nearly 20% of those polled were still undecided. Wells Fargo Securities reported on Sept. 30 that while early polls favored approval, the race has become a toss-up because of the "education" campaigns financed by the state's utilities.

"This is going to be a tough race," said Clean Energy for a Healthy Arizona campaign spokesman D.J. Quinlan in an Oct. 12 interview. "It shouldn't be. The issue of whether we should build more solar and renewable resources is very popular. But tens of millions of dollars in advertising is being spent lying to people about the costs."

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Money talks for and against Proposition 127

Proposition 127 has attracted more campaign spending than any other ballot measure in at least the past decade in Arizona history, according to the Secretary of State and FollowTheMoney.org.

Through Sept. 30, Pinnacle West had contributed more than $22.2 million toward a campaign to defeat the initiative through Arizonans for Affordable Electricity, according to the Secretary of State. Meanwhile, Clean Energy for a Healthy Arizona, the measure's primary campaign group, had collected more than $18.5 million, much of it from NextGen Climate Action, a group backed by billionaire activist Tom Steyer.

After the proponents submitted more than 480,000 signatures to the Arizona Secretary of State's office to get the measure on the November ballot, Pinnacle West mounted an unsuccessful court challenge, claiming that most of those signatures were invalid. In August, the Arizona Supreme Court rejected the utility's petition.

The company did persuade Attorney General Mark Brnovich, who is running for re-election, to insert the words "irrespective of cost to consumers" into the ballot question. Initiative supporters objected, to no avail. Pinnacle West and its president and CEO, Donald Brandt, have contributed $4,500 and $2,500, respectively, to Brnovich's campaign, state records show.

Hedging its bets, the utility company helped push through the state legislature a law that limits penalties for noncompliance with renewable energy requirements to civil fines of no more than $5,000.

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Utilities unified in opposition

Clean Energy for a Healthy Arizona's Yes on 127 campaign argues that Arizona, with its abundant sunshine and open land, has unmatched potential to generate cheap, clean power from the sun and to lower energy costs by more than $4 billion over the next 22 years while adding thousands of jobs.

Power generators and distributors are unified in their opposition. Tucson Electric Power and the Grand Canyon State Electric Cooperative Association, a group of nine electric distribution cooperatives with about half-a-million customers, have joined Pinnacle West to stand against the initiative. The ballot measure would require small electric cooperatives to spend up to $1.5 billion on renewable energy infrastructure and would increase the cost of electricity for their customers by about 40%, said association spokeswoman Katy Reno.

Tucson Electric Power said its residential customers would typically see their bills rise nearly $450 per year by 2030. The standard would force early retirement of power plants, eliminate jobs and damage the economy, the utility said. Closing the coal-fired Springerville Generating Station before its scheduled retirement, for example, "would compromise the long-term diversity and security of our energy supply," the utility said on its website.

The mandate would also force the closure of the Palo Verde nuclear plant, according to Arizona Public Service, or APS. But the initiative's supporters, including the Grand Canyon Chapter of the Sierra Club, have described that as a scare tactic, noting that the plant has multiple owners including utilities in California, New Mexico and Texas that would most likely prevent such a move.

APS argues it does not need much new solar power because utilities in the Southwest, particularly California, are already selling solar power at low prices and sometimes pay Arizona's utilities to take it off their hands. What is needed, utility executives argue, is gas-fired power to balance intermittent solar, especially during hot desert summer evenings.

Pinnacle West's Brandt said in a Sept. 14 open letter that the initiative would drive up costs for consumers, exceeding the estimate by the state's Residential Utility Consumer Office of $630 per average customer and would hurt the state's ability to attract new jobs, especially high-tech. APS would have to invest billions of dollars in solar plants, transmission lines and new back-up power while installing more battery storage capacity than exists in the entire U.S., Brandt continued.

Arizona utility regulator weighs in

Most members of the Arizona Corporation Commission have remained silent on the issue. The exception is Commissioner Andy Tobin, who announced on Oct. 9 his opposition to the initiative and called on fellow commissioners to join him in opposing it.

Tobin also urged fellow commissioners to adopt his "Arizona Energy Modernization Plan," which calls for utilities to obtain 80% of their power from zero-emissions sources by 2050. The state should encourage renewable energy development, Tobin said, but his plan would include nuclear power as well as investments in energy storage, energy efficiency and other resources. Utilities should be able to adapt to changing technologies, rather than being tied to a constitutional mandate, Tobin argued.

He also objected that the initiative exempts the Salt River Project, which is the state's largest owner of coal plants. Salt River Project's latest integrated resource plan shows the utility gets 53% of its annual energy supply from coal, while APS gets 21% from coal. Both utilities are nearly the same size: APS produced 36,600 GWh in 2017 and Salt River Project produced 33,000 GWh.

Commissioner Bob Burns responded to Tobin's call for support by urging the commissioners to consider whether sanctions should be imposed on Tobin for violating state statutes and the ACC's code of ethics by using commission resources to influence the outcome of elections.