Advanced Energy Perspectives

This post was updated Feb. 17, 2021 at 6:31 PM to reflect updated action on another bill, HB2737, that intends to add duplicative ACC oversight. See last section.

Arizona Legislators have the Arizona Corporation Commission (ACC) in the crosshairs this legislative session with a series of bills aimed directly at stripping commission  authority. HB2248 and SB1175 revoke the authority of the ACC to adopt or enforce policy related to electrical generation resources made after June 30, 2020. The bills purport to clarify the constitutional authority of the commission to regulate utilities, in the process stripping the commission of its  authority to create and enforce energy policy. Indeed the real purpose of these bills seems to be squashing the 100% clean energy rules the ACC gave initial approval to last fall and are now in the process of finalizing.

It’s no secret that Fortune 500 companies want more advanced energy. Over the past five years, these companies have signed contracts for more than 24 GW of large-scale renewable energy, pursued thousands of onsite solar installations, and embraced newer technologies like battery storage. The role of organized competitive wholesale markets as enablers of advanced energy procurement by large buyers is, however, a bit of a trade secret. Which is too bad, because policymakers could meet the needs of businesses and accelerate the transition to a cleaner economy all at once by expanding and reforming these markets. Here’s how.

The substantial growth in renewable energy in the U.S. comes from two sources: purchases made by utilities and retail suppliers to comply with mandatory targets such as state Renewable Portfolio Standards (compliance purchases), and purchases from customers that go beyond these targets (voluntary purchases), usually in pursuit of sustainability goals. These two types of purchases in combination drive renewable energy development in the U.S., but how they interact gets tricky, especially as states ramp up their clean energy targets to 100%. How do voluntary purchasers get what they pay for – and states reach their ambitious targets – in a way that’s fair for both? It’s all about “additionality,” and to date, states have taken different approaches.

Nevada has taken many important steps toward creating an electrified transportation future. In June, Governor Sisolak announced the Clean Cars Initiative, which is a program designed to bring more low-emission and zero-emission cars and light duty trucks to Nevada dealerships. Then, the Nevada Climate Strategy and Division of Environmental Protection’s 2020 Greenhouse Gas Emissions Inventory report echoed the need for thoughtful state policy to expand consumer choice and build out charging infrastructure in order to transform the transportation sector. In addition to their focus on cars and light trucks, they both recognize that electrifying medium- and heavy-duty vehicles will also be critical to meeting  the state’s commitment to a zero-emission future. Fleet ownership will be the key.

Over the past several months, our Indiana team has been intervening in a proceeding before the Indiana Utility Regulatory Commission (IURC) to examine Duke Energy Indiana’s coal self-commitment practices. Self-commitment refers to a process by which a utility instructs the regional market within which it operates – in this case, the Midcontinent Independent System Operator (MISO) – to dispatch the utility’s own resource unit regardless of whether or not it is the cheapest available at the time. Many vertically integrated utilities have been using this mechanism to run their expensive coal plants more frequently than economics would otherwise dictate. They do this because it is not their shareholders who suffer financial losses, but rather their captive ratepayers: When the cost to operate these units exceeds the market clearing price, utilities pass along the difference to customers, in part through fuel adjustment clause proceedings. AEE is working to curb this self-serving utility practice.