Arizona Residential Utility Consumer Office Open to Studying Retail Choice Proposals

In comments on Arizona's investigation into retail electric choice, the Residential Utility Consumer Office, a key stakeholder, did not take a definitive position, and said that it continues to research the subject.

Of note, however, is that in answering the ACC's question of what mechanisms are needed to ensure an effective and efficient market, RUCO listed, "[a] default service rate that shields from fuel spikes."

Also with respect to default service, RUCO asked whether Arizona could, "dictate that a residential default service rate be offered by competitive suppliers at a capped amount? If so, what happens if market prices increase above the cost to provide the service?"

RUCO also asked whether it would be possible, "to set the default service rate at 10% less than the current average residential rate with the only increases pegged to inflation?"

On the other hand, RUCO asked whether Arizona could, "have every market participate with greater than 5% market share be allocated some default service customers after an appropriate transition period?"

"At this point in our research, RUCO believes that the default service/provider of last resort ('POLR') could be based on specific regions in the state. At first it would be the distribution utility then possibly a bid structure which replaces the incumbents. After that, RUCO could see a default service with residential customers equally spread among market participates [sic]," RUCO said.

RUCO also listed "standardized labeling" and "smart aggregation policies" as required to ensure effective and efficient competition.

RUCO urged competition advocates to put forth a "comprehensive proposal" so that specific policies can be evaluated, rather than debating theoretical questions. Such a proposal should be put forward by the supporting parties as soon as possible and before the ACC workshop on the matter, RUCO said.

Also of note is that RUCO said, should retail choice be introduced, "there should be full divestiture."

Moreover, "the incumbents' spin offs may only be allowed a specific percentage of market," RUCO said.

RUCO noted that, "[t]he payment for stranded assets, the establishment of a grid operator, consumer tools/ education, and additional state employees tasked with consumer protection efforts will surely be expensive. Research should be done to obtain the transition cost per meter."

"Energy suppliers and industrial customers should bear most of these costs," RUCO said.

RUCO also identified one particular challenge as being that, with retail choice, "Arizona [would be] losing control over in-state assets. Some suggest joining California's ISO [while] others propose an Arizona only ISO. Even with an Arizona only ISO it would be governed by an unelected board and looked after by FERC."

"In general, competition can reduce rates for market participates [sic] with sufficient bargaining power. RUCO believes that it might be possible to create a competitive electric market that bestows each customer class with sufficient market power to realize lower rates. However, RUCO also believes that it is important to assess possible savings under various time horizons and market conditions. Retail competition might save customers money now because natural gas prices are low; however, it could expose customers to price shocks if that situation ever changes," RUCO said.