Arizona Chair Asks If Joining An RTO Absolutely Necessary For Retail Choice, Whether Utilities Can Be Incentivized To Join

Arizona Corporation Commission Chairman Bob Burns has issued a memo with a series of questions for stakeholder comment and to be addressed in the ACC's consideration of adopting retail electric choice

As previously reported, at the Commission's September 11, 2019 Staff Open Meeting, the Utilities Division Staff requested that the Commissioners submit to the docket any questions they have regarding retail choice

As exclusively first reported by EnergyChoiceMatters.com, at such meeting, Commissioners agreed to provide Staff with time to conduct research on retail electric choice in other states, with Staff to report to the Commission in January 2020. With Staff conducting such research, the Commission won't, at this time, direct Staff to develop a rules package for full retail electric competition for all customers.

Burns issued the following questions for stakeholder comment and consideration:

1. Is it absolutely necessary for the Arizona utilities to be part of or join a Regional Transmission Operator ("RTO") or Independent System Operator ("ISO") if we adopt full retail competition rules? Please explain in detail, why or why not.

2. On more than one occasion, the Commission's Legal Division has stated that the Phelps Dodge Court of Appeals Opinion ("PD Opinion") prevents the Commission from mandating that Arizona utilities join or be part of an RTO or ISO. Does the PD Opinion prevent the Arizona utilities from voluntarily joining an RTO or ISO?

3. Does the PD Opinion prevent the Commission from providing incentives for the Arizona utilities to voluntarily join an RTO or ISO?

4. Is it absolutely necessary for the Arizona utilities to divest themselves of all generation if we adopt full retail competition? Please explain in detail, why or why not.

5. If divestiture of generation is a necessity, what is the estimated stranded cost that would result?

6. The Commission's Legal Division has stated that the PD Opinion does not allow the Commission to mandate that Arizona utilities divest themselves of generation. Does the PD Opinion prevent the Arizona utilities from voluntarily divesting themselves of generation?

7. Does the PD Opinion prevent the Commission from providing incentives for the Arizona utilities to voluntarily divest themselves of generation?

8. If divestiture of generation is not required for full retail competition, would there be any stranded costs? If yes, please explain in detail why, how.

9. Commissioner Kennedy has proposed that full retail competition be implemented on somewhat of a pilot basis [see story here] over a limited geographical area. Would such a pilot/experiment/test be possible/feasible?

10. If Commissioner Kennedy's proposal is possible/feasible, would it work better over a larger area such as all of Maricopa and Pima Counties (to incorporate portions of both Arizona Public Service Company and Tucson Electric Power, and a Cooperative)?

11. Does the PD Opinion require the Commission to set rates based strictly on Fair Rate of Return on Fair Value Rate Base ("FVRB") or does it allow the Commission the discretion to consider a company's FVRB and then set an appropriate range of rates based on the Commission's evaluation and consideration of that FVRB (i.e., in the exact same manner the Commission sets rates for competitive telecommunications companies)?

Docket RE-00000A-18-0405