Arizona regulators are moving toward the repeal of the renewable energy standard for utilities, saying the mandate has cost ratepayers billions of dollars since it was adopted in 2006.
The Arizona Corporation Commission voted 5-0 on Aug. 14 to start a rulemaking process to repeal the Renewable Energy Standard and Tariff (REST).
REST requires 15% of regulated electric utilities’ retail sales to be from renewable resources by 2025. Utilities have met or exceeded the standard.
Commissioners called REST an outdated mandate that has driven up customer costs.
“If renewables are truly the most affordable and reliable option … the generational technology should be able to prevail on its own without the need for mandates that have added millions of dollars in extra costs for ratepayers each year,” Chair Kevin Thompson said.
Commissioner Rachel Walden said the all-source request for proposals process that utilities are required to follow is the best way to select resources. Renewables will continue to be an option, she said.
“I want to reiterate that if solar and wind is the cheapest generation, and can be balanced out with the reliable baseload, that it will be selected,” Walden said. “I have not heard or seen evidence that there needs to be a mandate.”
The commission’s action follows a vote in February 2024 to start laying the groundwork for the repeal. (See Tug-of-war Developing over Ariz. Clean Energy Rules.)
Commission staff will file a notice of rulemaking, and the commission will hold three public comment sessions in November.
APS’ Clean Energy Goals
The action comes as one major utility, Arizona Public Service, has backed away from its commitment to 100% clean and carbon-free energy by 2050.
APS also had an interim target of 65% clean resources and 45% renewable energy by 2030.
During an Aug. 6 quarterly earnings call, officials with APS parent Pinnacle West Capital said the company has updated its clean energy goals to an “aspirational carbon-neutral approach” by 2050.
The company also is canceling its interim targets “to better reflect APS’ near-term need to ensure reliability and affordability,” Pinnacle West said in a release. The integrated resource planning process will be used “to help determine the most responsible path forward.”
The company attributed the change to the need for reliable electricity as the state’s population and economy grow at “unprecedented levels.”
“Our mission is to reliably serve customers at the lowest cost possible,” Pinnacle West CEO Ted Geisler said in a statement. “To do that, we need to integrate the most reliable and cost-effective resources available to us to meet Arizona’s fast-growing energy needs.”
At the Aug. 14 commission meeting, several speakers said the REST rules should be retained and modernized rather than repealed.
Autumn Johnson, executive director of the Arizona Solar Energy Industries Association (AriSEIA), said that just because investor-owned utilities have met the 15% renewable energy requirement of REST doesn’t mean they will continue to do so.
“Given the load growth projected by the IOUs, the plans to spend approximately $5.3 billion on a new gas pipeline and APS’ recent announcement that they are reneging on all of their clean energy goals, there is absolutely no certainty that the utilities will remain at 15%,” Johnson told the commission.
In an Aug. 7 announcement, the ACC praised the state’s three largest electric utilities for their commitment to Transwestern Pipeline’s Desert Southwest expansion project. The new pipeline will transport natural gas from the Permian Basin in West Texas to Arizona and New Mexico.
Steven Zylstra, president and CEO of the Arizona Technology Council, said the REST rules have created a predictable framework for private investment in the state’s clean energy economy.
“With federal renewable and clean energy tax credits already eliminated, now is the worst possible time to undermine an industry that has delivered so much progress for our state,” Zylstra said in comments filed with the commission opposing the repeal.
REST Costs Disputed
According to the ACC, renewable resources accounted for about 19% of APS’ energy portfolio in 2024, up from 13% in 2023. For Tucson Electric Power, about 29% of its energy portfolio consisted of renewables in 2024, compared to 27% in 2023.
The ACC estimates the REST rules have resulted in about $2.3 billion in surcharges to Arizona ratepayers since 2006. REST supporters dispute that figure.
When evaluating costs and benefits, one must consider the cost of non-renewable resources that would have been built without the REST rules, according to comments filed jointly by AriSEIA, Vote Solar and Solar United Neighbors.
In addition, renewable resources save ratepayers money because they have no ongoing fuel costs, the groups said.
They noted that 36 states have standards or goals for clean and renewable energy and 21 states have set target dates for achieving 100% clean energy.
