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Arizona Staff Propose Policy Statement To Expand Competitive Electric Supply Buy-through Program To Medium-Sized Customers

December 11, 2018

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Reporting by Paul Ring • ring@energychoicematters.com

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Staff of the Arizona Corporation Commission have filed a proposed policy statement to institute a competitive electric supply buy-through program open to medium-sized C&I customers

As previously reported by EnergyChoiceMatters.com, ACC Chair Tom Forese had requested that Staff ready a proposal to allow a limited number of customers, who are smaller than the current size threshold for the AG-X program currently in place at Arizona Public Service for very large customers, to take competitive supply under a similar program

As previously reported by EnergyChoiceMatters.com, the AG-X program is a program under which a capped number of large customers and load are permitted to procure alternative sources of generation supply, which is delivered to the utility, with the utility ultimately supplying the customer with such alternative generation. For example, at APS, Rider AG-X is available to customers who have an Aggregated Peak Load of 10 MW or more and are served under Rate Schedules E-34, E-35, E32-L, or E-32 TOU L. At APS, total AG-X program participation is limited to 200 MW of customer load, 100 MW of which was initially reserved for customers with single-site peak demands of 20 MW or greater and with monthly average load factors above 70% unless not fully subscribed during the solicitation process.

In its proposed policy statement, Staff puts forth a new program, called AG-Y, to be available for, "medium and large commercial customers."

Staff does not define any thresholds for eligible medium and large C&I customers in the proposal. Eligibility would be addressed in utility filings in response to direction from the ACC

Implementation would not be until the utilities' next rate case

Under the Staff proposal, APS would be directed to either expand and modify its current AG-X to allow medium size commercial customers to participate or propose a new AG-Y alternative generation/buy-through program that would be for medium size commercial customers in its next rate case.

Under the Staff proposal, Tucson Electric Power Company would be directed to propose an AG-Y alternative generation/buy-through program for medium and large commercial and industrial customers in its next rate case.

Under the Staff proposal, UNS Electric, Inc. would be directed to propose an AG-Y alternative generation/buy-through program for medium and large commercial and industrial customers in its next rate case.

Under the Staff proposal, the Commission would direct such utilities, when modifying or expanding AG-X or proposing an AG-Y alternative generation/buy-through program, at the minimum, to address the following:

• eligibility requirements

• customer load aggregation

• rate structure

• administrative, credit, and other costs of the program

• rate impacts on non-participating customers

• utility cost recovery provisions

• customers returning to full requirements tariff

• whether there would be a cap on participation

• if there is a participation cap, how will the participants be selected

• whether there would be a minimum participation timeline

• whether the program would be experimental

• resource adequacy and planning issues

The proposed policy statement would further hold that:

• Utilities may offer participating customers an option to procure energy and capacity from the wholesale market as part of the Utility's competitive procurement process.

• Utilities may offer different purchasing structures based on the size and load factor of eligible customers.

• The Commission directs the Utilities to consult with customers who may be potential participants on program design prior to filing the program proposal.

• The Commission directs that the proposed program shall not shift costs to non-participating customers.

• The Commission directs that the program shall address any implications for a utility's renewable and energy efficiency standard compliance.

• The Commission directs that the program shall consider consumer protections for both participants and non-participants.

• The Commission directs that any modification or expansion of AG-X or a new AG-Y alternative generation/buy-through program shall be addressed in a rate case proceeding.

In a memo accompanying the proposal, Staff noted that, "Under the Arizona Constitution, the Commission must determine and consider fair value and the revenue effect of a new or modified tariff on the utility's rate of return. Because of these requirements, such tariffs are typically adopted in the context of a rate case."

Docket No. RU-00000A-18-0284

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