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Arizona Commissioner Frustrated with Polarization of Retail Choice Investigation, Suggests Hearing and Issues Supplemental Questions -- Texas Capacity Issues to Take Center Stage Frustrated with stakeholders that have chosen to "polarize" the Arizona Corporation Commission's investigation of retail electric choice, Commissioner Bob Burns suggested that an evidentiary hearing may be appropriate, and issued a list of supplemental questions.
In particular, Burns suggested that a hearing would permit stakeholders to address potential defects in the arguments of opposite stakeholders concerning capacity issues in Texas.
Arizona utilities and other parties opposed to choice have cited the capacity crisis in Texas -- a myth created by capacity owners harping on unrealistic out-year projections in the capacity, demand, and reserves report which have routinely been projected in Texas but have always been proven false -- as auguring against implementation of choice in Arizona. However, several electric choice supporters -- including affiliates of Texas suppliers who are claiming, before Texas regulators, that the energy-only market cannot assure resource adequacy and therefore fundamental changes are needed to the market -- have taken the exact opposite view of the Texas situation when speaking before Arizona -- these suppliers (who in Texas are equating continued reliance on an energy-only market with rolling outages) now tell Arizona regulators that, "the outlook for dire consequences in Texas appears to be wholly overstated."
Matters previously unmasked this dichotomy in the suppliers' view of the Texas market, depending on the state they were appearing in, in our story last month (click here)
"At the time of opening of the docket, I believed that the interested parties and stakeholders would take the opportunity to provide information that would facilitate a cooperative atmosphere in order to the assist the Commissioners in their decision whether or not to move forward. Unfortunately, that does not appear to be what has occurred. Instead, some of the interested parties and stakeholders have chosen to polarize the issues in a manner that, in my view, is not helpful for Commission consideration of these important matters," Burns wrote in a letter to his colleagues.
"I am disappointed that the interested parties and stakeholders choose to miss the opportunity to work with us in this process. I would have expected that even those who oppose any changes to the monopoly model would have still welcomed the opportunity for a fresh exchange of ideas that might result in recommendations for improving the current system of retail electric service to Arizona consumers. I would also hope that the proponents of change would be able to provide more detailed answers to my questions regarding how this would work if implemented in Arizona. Answers to these questions are dispositive to any decision regarding whether to move forward to Phase 2," Burns said.
"Given my concerns with the Phase 1 information-gathering process, it has occurred to me that an evidentiary hearing and the establishment of a full record for Commission consideration might be a good option. At an evidentiary hearing, the Commission would have the benefit of diverse parties addressing conflicting evidence on the key issues presented in the docket filings, including but not limited to:
"(1) Stranded costs: Proponents claim this number will be small because: (a) the utilities have been recovering the costs from ratepayers for years and the amount that they have not yet recovered can be made up when the plant is sold; or, alternatively, (b) the plants have depreciated so much that the utilities are actually making money on them. Opponents argue that the incumbents' stranded costs will amount to millions, potentially even billions of dollars. Proponents claim that the stranded costs from the 1998 examination of this issue were paid off in 2012. Opponents claim that only administrative stranded costs were paid off and that this number did not include any generation asset stranded costs. I believe it would be helpful to hear expert testimony regarding an accurate approximation of stranded costs.
"(2) Capacity issues in Texas: Opponents tell us about looming black- and brown-outs in Texas this summer as a result of generation shortages, i.e., low excess capacity levels. Proponents provide charts showing that a significant amount of new generation has been built since Texas became a competitive state - including four new coal plants. I believe it would be helpful if the parties examined potential defects in each other's assessments via a public setting.
"(3) Impact on Coal: Opponents tell us that moving to a competitive model would threaten the future of our coal plants. Proponents claim that the coal plants could be carved out. I believe we need to have both sides of the table present-to establish a full record-to help us examine the impact of competition on this important state resource.
"(4) Regional Transmission Operator/Independent System Operator: Opponents of retail electric competition tell us that setting up an RTO/ISO would cost hundreds of millions of dollars. Proponents, including the current Arizona Independent System Administrator ('AZISA'), tell us that '[n]othing in the examinations of ramping up the AZISA to date suggests that it could cost anywhere close to the 'hundreds of millions'' of dollars described by the opponents. I believe it would be helpful to have the diverse parties at the table provide testimony concerning the estimated costs and time it would take to set up an RTO or ISO.
"(5) Pricing/Service: Opponents claim that the effects of moving to a competitive model will dramatically harm residential ratepayers. Proponents claim competition will have the opposite effect. Again, I believe that having the parties present their side on this issue as well as critique the other side's statistics and studies would be helpful in our decision making process on whether or not changing our model would wholly benefit all Arizona ratepayers."
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September 5, 2013
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Reporting by Paul Ring • ring@energychoicematters.com
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