Arizona Commissioners File Drafts To Implement Retail Electric Choice For All Customers
One Draft Would Rely On Utility Competitive Affiliate To Serve Non-Shopping Customers
All Suppliers Would Be Required To File Range Of Rates With ACC For Approval
"Written" Authorization Required For Customer Switch
Alternative Draft Would Limit Choice To Customers 100 kW Or Larger
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Arizona Corporation Commission Chairman Robert Burns and Commissioner Justin Olson have filed two proposed drafts to implement retail electric choice in Arizona
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Draft "A" would implement electric choice for all customers in affected utilities, while Draft "B" would include eligibility restrictions discussed further below
Under Draft "A" the utility would not provide supply to customers after a brief transition, with the utility's competitive affiliate designated to serve customers who have not made a choice. Draft "B' would place the utility in the default supplier role.
Burns and Olson wrote, "We would like to emphasize that these two proposals are only drafts and as such will
require modifications, however, we also believe that they are a good starting point. Hopefully,
interested parties can file comments to these two proposed drafts prior to the Commission's
February 25, 2020 workshop, in order to allow the Commissioners to have a more productive
discussion regarding the drafts."
Neither draft includes a proposed start date for retail electric choice
Neither draft would compel utilities to divest their generation (though, as noted above, Draft "A" would not allow utilities to supply customers at retail)
Neither draft would compel utilities to join an RTO or similar wholesale market, though they would require utilities to offer non-discriminatory access to transmission and distribution
Both drafts would apply to "Affected Utilities", which is defined as the following public service corporations serving electric load in
Arizona but excluding any with more than half of its customers located outside of Arizona:
Tucson Electric Power Company, Arizona Public Service Company, UNS Electric, Arizona
Electric Power Cooperative, Trico Electric Cooperative, Duncan Valley Electric Cooperative, Graham County Electric Cooperative, Mohave Electric Cooperative, Sulphur
Springs Valley Electric Cooperative, Navopache Electric Cooperative, Ajo Improvement
Company, and Morenci Water and Electric Company.
However, for Affected Utilities organized as Cooperatives, the members of the Cooperative may vote to maintain their current
service and not adopt retail choice
Salt River Project is not included in the definition of Affected Utilities.
Generally, utilities other than Affected Utilities would not be permitted to compete for customers outside of their service areas unless they voluntarily adopted retail choice in their own service area, though the draft rule has specific provisions for each type of utility (jurisdictional, etc.)
As further noted below, the draft requires, "written
authorization" for a switch in the customer's electric supplier.
The draft also includes a definition for community choice aggregation and contemplates service under CCAs, but the definition (nor any other part of the rules) does not specifically address opt-out municipal aggregation nor how opt-out aggregation would conform to the written
authorization provision discussed below
The drafts are discussed further below
Under Draft "A", all customers of the Affected Utilities would have the
opportunity to purchase electricity from their choice of electric service providers.
Ninety days after the start of competition (which is TBD under the draft), the Affected Utilities shall cease providing
direct electric service to customers.
Customers who have not chosen a competitive electric service provider will be placed
on electric service with the competitive affiliate of their former Affected Utility. Note that this assumes the utilities are interested in creating a competitive affiliate to serve customers who have not made an affirmative choice (or would compel such action regardless of the utilities' preference); the rule does not specifically contemplate another entity being designated to serve this role
The draft provides that an Affected or Incumbent Utility's competitive electric affiliates or an affiliate of which it
is a member shall not be permitted to offer Competitive Services in any other Affected
Utility's service territory until the Commission has ordered the service area of the potential
competitor's affiliated Affected Utility opened to competition.
Under the draft, competitive affiliates would be subject to charging a Price to Beat for three years. Competitive affiliates would continue to charge the same Commission approved rates
for a period of three years, the draft states. After three years, the Price to Beat would be lifted and the affiliates would be able to charge under their Commission approved competitive tariff.
The rules do not specifically address if a customer could return to the Price to Beat after initially switching away
Retail suppliers would serve as Providers of Last Resort (POLRs), for situations in which the customer's ESP (electric service provider, or retail supplier) fails to provide service to the customer or fails to meet its obligations.
Retail suppliers would be designated as POLRs by the ACC in a process similar to Texas, with eligibility based on market share.
The draft states that, "POLR shall provide service to customers using a market-based, month-to-month product." The POLR shall use the same market-based, month-to-month product for all customers in a
mass transition that are in the same class and POLR area, the draft provides
Concerning the provision of delivery service by the Affected Utility, the Affected Utility would be permitted to include in its
tariffs, "deposit requirements and advance payment requirements for Unbundled Services."
Concerning ESP (retail supplier) rates, to address the ACC's constitutional charge to ensure just and reasonable rates, the draft would subject retail supplier rates to ACC oversight, under a range of rates. ESPs would be required to obtain a CCN
The draft would require that each Electric Service Provider shall have on file with the
Commission tariffs describing its services.
The Commission would approve, in each Electric Service Provider Tariff, a maximum and
minimum rate(s) for those services. An Electric Service Provider may price its competitive services at or below the maximum rates specified in its filed tariff, provided
that the price (the minimum) is not less than the marginal cost of providing the service.
In establishing the range of rates, the draft states that the Commission shall determine the fair value of the company's property and shall take fair
value into consideration when determining the appropriate maximum and minimum rate.
In determining an appropriate maximum and minimum rate, the Commission shall consider
all the costs to Electric Service Providers and general market conditions of providing
electricity in the state, the draft states
Concerning supplier licensing, the draft provides that, in appropriate circumstances, the Commission may require, as a precondition to
certification, the procurement of a performance bond sufficient to cover any advances or
deposits the applicant may collect from its customers, or order that such advances or
deposits be held in escrow or trust. The draft does not set forth any specific financial assurance levels
Concerning customer enrollment, the draft states that, "No consumer shall be deemed to have changed providers of any service authorized in this
Article (including changes from the Affected Utility to another provider) without written
authorization by the consumer for service from the new provider."
A definition of "written
authorization" is not included in the draft
The draft sets forth certain requirements for written
authorizations, including a requirement that, "The authorization shall not contain any inducements[.]"
The draft includes various marketing and disclosure rules, generally following those in other states with retail electric choice
Of note is that, for variable plans for residential and small business customers, the draft provides that, "If there is not a limit on price variability, the EGS [sic] shall
clearly and conspicuously state that there is not a limit on
how much the price may change from one billing cycle to
The draft would also require the disclosure statement for mass market variable rates to list a telephone number and Internet address at which a customer may
obtain the previous 24 months' average monthly billed prices for
that customer's rate class and the Utility Distribution Company
service territory. The supplier shall also include, in plain language, a statement that historical pricing is not
indicative of present or future pricing.
The draft rules would establish a rescission period of 3 business days following receipt
of the disclosure statement. The rescission period begins when the customer receives the
"written disclosure," the draft states
The draft rules would allow automatic renewals, and would set forth renewal notice requirements similar to those in other states
The draft provides that if a customer fails to respond to an "options" renewal notice and is
converted to a month-to-month contract, "the EGS [sic] shall
provide a disclosure statement under § 54.5 [sic] (relating to
disclosure statement for residential and small business
customers)." In such case, notice of a subsequent change in pricing shall be
provided to the customer at least 30 days prior to
the new price being charged.
The draft further provides that when a customer fails to respond to either of two renewal notices, a fixed term contract shall be converted to one of the following:
i. A month-to-month contract, either at the same
terms and conditions or at revised terms and
conditions, as long as the contract does not contain
ii. Another fixed term contract, as long as the new
contract includes a customer-initiated cancellation
provision that allows the customer to cancel at any
time, for any reason, and does not contain
Draft B contains generally the same proposed terms as Draft "A" discussed above except for the differences noted below
Notably, Draft B would limit customer choice to eligible customers
Draft B defines "eligible customers" as any individual customer with a monthly demand of at least
100kw or an Aggregation of customers with a combined monthly demand of at least 400kW
Under Draft B, the Affected Utilities would serve customers who have not selected a competitive supplier, under Standard Offer Service. Affected Utilities may offer only Standard Offer Service under Draft B
While the tariffs for Standard Offer Service shall not include any special
discounts or contracts with terms, or any tariff that prevents the customer from
accessing a competitive option, the draft would allow the Standard Offer tariff to include, "time-of-use rates, interruptible rates, or self-generation deferral rates."
Additionally, under Draft B, an Electric Service Provider that is an affiliate of an Affected Utility shall be subject to
offering only the Standard Offer Service of its affiliated Affected Utility within the first
two years of the effective date of the competition rules.
Draft B provides that, within one year from the effective date of the competition rules, power purchased by an Affected
Utility for Standard Offer Service shall be acquired from the competitive market through
prudent, arm's length transactions, with at least fifty percent through a competitive bid process, with a condition that, by 2030, 100 percent shall be purchased from the competitive market.
Draft B provides Standard Offer rates, "shall reflect the costs of providing the service," including, "Generation-related billing and collection," costs. While the rule specifically delineates various costs included in Standard Offer rates (generation, transmission, ancillaries, billing, etc.), other overhead costs (call center, etc.) are not specifically listed
The Affected Utility would serve as one of the POLRs under Draft B, but ESPs would be designated as POLRs as well, based on market share as under Draft A