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Arizona Commission Denies Amendments Which Would Have Stated Intent To Act On Retail Supplier CC&N Applications, Directed Design Of Electric Choice Pilot

October 27, 2021

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Copyright 2010-21
Reporting by Paul Ring •

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In ruling on an Arizona Public Service rate case, the Arizona Corporation Commission voted 3-2 to reject a proposed amendment from Commissioner Justin Olson which would have stated an intent to act on pending applications from competitive retail suppliers for Certificates of Convenience and Necessity ("CC&N") for electric generation service, in compliance with statute

See background on recent CC&N applications in Arizona, and the ACC's obligation under statute with respect to electric choice generally, in our prior story here

As originally proposed, Olson's amendment stated that, "This amendment makes clear that regardless of the status of the Commission's Retail Electric Competition Rules, competitive energy providers are statutorily authorized to apply for a CC&N for electric generation service, and that the Commission will review and approve of these applications in a timely fashion, provided the applicant is fit and proper to provide electric service."

Olson's proposed amendment would have added a paragraph to the APS rate case order stating that, "...our consideration of retail electric competition in another docket does not preclude competitive energy providers from applying for a Certificate of Convenience and Necessity ('CC&N') for electric generation service. The legislature has spoken clearly on retail electric competition: 'It is the public policy of this state that a competitive market shall exist in the sale of electric generation service' A.R.S. § 40-202(B). In addition, the Arizona Supreme Court recently ruled that outside of the Commission's exclusive and plenary ratemaking authority, the legislature's authority is paramount. Johnson Utilities, L.L.C. v. Arizona Corp. Comm'n, 249 Ariz. 215 at [paragraphs] 28, 30, and 59 (2020). Further, the court limited the Commission's ratemaking authority to 'ascertaining the 'fair value' of PSCs and prescribing classifications, rates, and charges.' Id. at [paragraph] 50 (citing Ariz. Const. art. 15, §§ 3, 13, and 14). Therefore, regardless of the status of our Retail Electric Competition Rules, competitive energy providers are statutorily authorized to apply for a CC&N for electric generation service and the Commission is statutorily obligated to award such CC&Ns to any applicant that is fit and proper to provide electric services in our state[.] Therefore, the Commission hereby acknowledges this obligation and states its intention to review and approve such CC&Ns in a timely fashion. The Commission also expresses its intent to evaluate microgrid pilot programs as additional alternatives for ratepayers."

Chairwoman Lea Márquez Peterson, Commissioner Sandra Kennedy, and Commissioner Anna Tovar voted to reject Olson's proposed amendment. Tovar said that the issue is better addressed in the generic retail competition docket or similar proceeding

Commissioner Jim O'Connor voted along with Olson to adopt the amendment

Kennedy had offered, and later withdrew, a proposed amendment to Olson's amendment which would have additionally directed Commission Staff and all interested stakeholders to design an Electric Competition Pilot of at least 200 MW for APS residential customers within the Retail Electric Competition Rules docket, RE-00000A-18-0405.

Kennedy's proposed pilot would have been required to be designed (and possibly completed, based on discussion during an open meeting) before the Commission could grant any CC&N to a competitive supplier

Kennedy's proposed pilot would have been required to be no smaller in size than 200 MW and no larger than 300 MW and was proposed to contain at a minimum, the following requirements:

• The information that a competitive provider must present to the Commission in order to prove that it has the managerial, technical and financial capability to serve Arizona customers.

• The maximum rate that a competitive provider may charge Arizona customers is the maximum rate approved for APS.

• Minimum bond requirements for the competitive provider.

• Penalties for providing inadequate service as determined by the Commission.

• Method for APS to be reimbursed for the use of its transmission and distribution facilities, • Methodology for meter reading and billing

Furthermore, the Kennedy amendment would have required the following to be among the priorities considered in design of a retail choice pilot:

• Fully examine the successes and failings of electric competition in other markets, especially regarding consumer protection measures;

• Consider competitive options provided to customers be exclusively 100% renewable electricity, as determined by RECs obtained from renewable energy projects generated within the State of Arizona;

• Ensure the establishment of this pilot has a positive impact in accelerating APS's transition to clean energy;

• Ensure the establishment of this pilot does not threaten the reliability of APS's and Arizona's electric grid.

Olson expressed concerns with adopting such specifics for a pilot as proposed in the Kennedy amendment given that the APS rate case did not have a record developed concerning design of a retail choice pilot

The APS rate case is Docket E-01345A-19-0236

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