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Arizona Commissioner Proposes "Basic Tenets" For Retail Choice

Utilities To Be Wires Only; Default Service Available During Transition

Residential Customers Eligible For Choice

Retail Suppliers Handle Billing, Customer Service

July 24, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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Arizona Corporation Commissioner Justin Olson has proposed, in a memo, a set of "basic tenets" for retail electric choice in the state.

Olson's memo follows an ACC Staff report regarding "possible" modifications to the ACC's retail electric competition rules

As exclusively reported by, the Staff report proposed limiting the customers eligible for retail electric choice to non-residential consumers who use more than 400 kW demand monthly. Non-residential customer aggregation to reach the threshold would be permitted, but such aggregations would be required to have minimum of 5 MW.

Municipal aggregations would be permitted, and could include residents, but would be subject to the 5 MW minimum for aggregation

Staff's report also proposed a transition period under which choice would be limited to 10% of load, and proposed that each retail supplier be required to have on file with the Commission tariffs describing the minimum, current and maximum rates for its services, and the services may not be provided until the Commission has approved the tariffs (more details here)

Addressing the Staff report, Olson wrote, "Staff's initial proposal to be a very modest increase in energy choice for some commercial customers. This initial proposal essentially removes the heart of the competition rules which intended to eliminate monopoly service territories and establish a regulated playing field for energy competition open to all customers."

"It is my hope that, instead of simply considering this limited proposal which would benefit only a small number of commercial customers, we consider a return to the central purpose of the competitive rules to restructure our form of regulation entirely. In my view, it is time to address whether there is any justification for continuing the monopoly system in a time when technology allows for a healthy, robust and reliable market in energy for all customers," Olson wrote

Olson would like parties to consider a "regulated competition" framework that includes the following basic tenets:

1) Incumbent utilities that ultimately operate only transmission and distribution

2) Energy Service Providers (ESPs) licensed by the Commission who serve both residential and commercial customers

3) ESPs that provide generation, billing, rate design, and customer service

4) Commission sets and approves maximum and minimum rates by evaluating fair value of property, market conditions, and the long-run cost of providing service

5) A transition to competition that allows utilities to offer a standard service for a period of time until all customers shop for their energy

6) Incumbent utilities can serve as Provider of Last Resort for a period of time until the responsibility can be shared among all ESPs

7) A transition from the Arizona ISA to forming or joining an RTO

Olson proposed two options for the next steps for the Commission:

Option 1: "If a majority of the Commission supports opening our retail markets for regulated competition, I propose that the Commission consider voting at our August Open Meeting on an order that indicates the Commission's plan to transition to a competitive market. The motion could include the broad principles of the new structure such as the basic tenets that I described above. Following a successful vote on this motion, the Commission could commence the rulemaking process to establish and finalize all the details associated with the regulation of competitive Energy Service Providers," Olson wrote

Option 2: "Alternatively, if a majority of the Commission is not yet prepared to vote for an order including the principles described above, I propose that the Commission establish a deliberate time table for consideration of all the issues that Commissioners feel need to be evaluated prior to voting for retail competition. This time table would include a Commission hosted workshop each month through the end of the year with a plan to vote on retail competition at the conclusion of this series of workshops," Olson wrote

Olson also proposed, for consideration at the August Open Meeting, that the Commission consider extending the moratorium on self-built utility generation.

"In light of the Commission's ongoing consideration of energy competition and other policies in the Energy Modernization Docket, I believe it makes sense to extend this moratorium until January 1, 2020. The moratorium that I propose the Commission consider would continue to allow utilities to purchase energy through competitively acquired power purchase agreements but would prohibit utilities from acquiring or constructing any generating facilities of 150 MW or more without Commission approval," Olson wrote


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