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Arizona Corporation Commission initiates workshop process to flesh out electricity competition; will consider interim expansion of competitive access Dec. 17

Today’s lede: Arizona utility regulators to begin retail electricity competition workshops next month. When one door closes, another opens. One day after Nevada voters rejected a ballot initiative that would have ended monopoly regulation in that state, across the state line the Arizona Corporation Commission late Wednesday agreed to begin a workshop process to help frame a new policy addressing retail electricity competition in the state.

In the closing minutes of a daylong open meeting, Commission Chairman Tom Forese brought up the last agenda item for discussion, building on a rulemaking (RU-00000A-18-0284) launched in August that would modify the commission’s Energy Rules regarding retail electricity competition. Specifically, Forese called for the commission to initiate a workshop process beginning Dec. 3 to, as Forese described, “have a comprehensive discussion on competition in Arizona [and] everything this would entail.”

Forese nominated Commissioners Boyd Dunn and Bob Burns as co-chairs, noting that he would attend but not chair the workshop process.

“I’ll be happy to co-chair with commissioner Burns,” Dunn said. “This issue of deregulation can go so many different directions. When this was discussed before, how many workshops were there?”

Dunn referred to the commission’s last dalliance with a formal regulatory process considering opening the state’s monopoly-regulated electricity market to competition, only to suddenly conclude in September of 2013 that the state’s constitution barred the regulators from taking action.

Elijah Abinah, the ACC’s utilities division director, responded that the commission’s previously aborted effort to consider electricity competition in Arizona had encompassed “at least 30 workshops.”

“Mr. Burns and I will be at this for quite a while,” Dunn replied.

New competitive access program to be considered at December open meeting. Forese asked staff to put together a “conceptual bridge to retail competition” in time for consideration during the next ACC open meeting Dec. 17. The ACC chairman called for establishing a new program similar to the ag-x rate rider at Arizona Public Service, which allows the utility’s largest electricity customers to obtain their electricity needs from competitive suppliers, with the utility obtaining the power and “wheeling” it to the customer. Forese called for development of “something similar” to the ag-x rider, but that “specifically would be available for smaller users.”

In a last-minute exchange, Abinah confirmed with Forese that the ongoing development of an electricity competition policy in Arizona will not encompass the state’s rural electric cooperatives. Abinah also indicated that a policy relating to electric vehicles also will be forwarded to the commissioners next month.

The developments appear to indicate the ACC will hit the road running next month in what could potentially result in Arizona becoming the first state to proactively open its electricity market to competition in the wake of California’s epic failed restructuring effort, which devolved into a calamitous financial crisis in 2000-2001. While at least a dozen states have opened their markets to competition, all of these restructuring efforts were initiated by state policy makers prior to California’s infamous energy crisis. In the wake of California, many states, including Arizona and Nevada, stepped back from developing restructuring programs. In Virginia, the state reversed course and re-monopolized just as utilities were about to lose their monopoly protection, and in Michigan utilities convinced lawmakers to ratchet back competitive access, limiting customer choice to just 10 percent of each utility’s load.

Arizona has embarked on a course that could establish the state and the commission as trail blazers on transitioning from monopoly regulation to competition, potentially establishing a regulatory record and a framework that other states, such as neighboring Nevada, could adopt. But it remains to be seen how far the ACC will take this. As Dunn indicated, it appears to be the start of a lengthy process. Nevertheless, competition advocates should be encouraged that Forese has called for rapid development of an interim program that would expand competitive access as the regulators struggle to work out a broader retail competition program in the long term.

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