Fact Check Arizona: Utility rates, the Corporation Commission and green energy

On this episode, we start with a statement by a presidential candidate about electric bills, which leads to the topic of the board that regulates the state's utilities, the Arizona Corporation Commission. We look at some claims made during a debate for three seats on that commission while explaining how it does its work.

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Transcript

Steve Jess: Welcome to the Fact Check Arizona podcast from AZPM. In each episode of this series, we'll look at a particular claim about elections in Arizona. We'll set the record straight and also give a sense of the context surrounding the claim in question. I'm Steve Jess.

This week we're diving into issues that hit pretty much every Arizonan in the pocketbook. We're looking at how utility rates are set and how generating that power affects the environment.

We're going to go back a few weeks so we can start this week's show at the top of the ticket. Here's an audio clip from when former president Donald Trump was in Tucson on September 12.

Donald Trump: Under Comrad Kamala Harris, your electricity bills rose an estimated almost 100%. That's the largest increase almost anywhere in the country, did you know that? Congratulations, you're #1. Oh wait, that's not good.

SJ: Zac, it's a pretty easy call to flag that claim as wrong. The question is how wrong.

Zac Ziegler: Yes, flagrantly wrong would be a good phrase? Depending on where you live, due to rate changes your bills went up between $8.50 and almost $15 a month. Given that the average Arizona electric bill is around $150 a month, that's nowhere near double. Now, if your energy usage went up, that's a different story.

Utilities have said work-from-home caused an increase in residential demand. Also remember the last few summers for Tucson and Phoenix, the state's two big population bases, have all been among the 20 or so hottest summers on record by average temperature.

But, by the rate, your bills did not double, and in fact, WalletHub found that Arizona has the second lowest average for amount spent by residents on energy in the country, and its electric bills, surprisingly, were middle-of-the-pack at #22.

By the way, I found that study because Republicans running to be state utility regulators are touting it.

SJ: So the Republican running for president wants you to think your electric bill has doubled, while the Republicans who actually set the rates are pointing out how low they kept your bill, am I right?

ZZ: Yes, that data I talked about and the elected offices we'll be talking about are at the same place, the Arizona Corporation Commission. They are the body that, among other things, regulates how much utilities get to charge.

So, I requested every time an electric company asked to change its rate since 2021, those are called rate cases, and I received back five cases.

Those cases came from Tucson Electric Power, UNSE and Arizona Public Service.

SJ: Now, the Corporation Commission is overseen by five elected officials who are advised by a large staff who handle data crunching and the other less-glamorous work that the commission does like managing business licenses and watching over the means of moving some stuff in Arizona, be it goods on rail or energy through transmission lines and pipelines. Plus there's a lot more. Suffice to say the Corporation Commission has a lot of responsibilities.

I'm guessing we're not here to talk about an obviously false statement that caught zero traction in most news outlets. That elected board you and I mentioned is why we're here. Three of those five seats are up for grabs this year.

ZZ: Yes, and two of them are completely open, no incumbent running. The lone incumbent in the race is Lea Marquez Peterson. She is a familiar name in Southern Arizona, was a longtime head of the Hispanic Chamber of Commerce, ran for Congress in 2018, and was appointed to the Corporation Commission in 2019.

She's among eight people running for those seats, with the top three vote-getters joining the commission. Six of those received enough votes in the primary election to qualify for the Arizona Clean Elections debate.

Marquez-Peterson is one of three Republicans, along with Rene Lopez, whose bio says he's a project manager in the telecommunication and oil and gas industries, and Rachel Walden who worked as an account manager for the financial advisor Vanguard Group.

On the Democratic side are Ylenia Aguilar, who was a business development manager, Jonathon Hill–an aerospace engineer who worked on NASA projects, and Joshua Polacheck, who worked as a foreign service officer.

The race also features two Green Party candidates who weren't on the stage that night, Mike Cease, a perennial candidate in Tucson-area races, and Doctor Nina Luxenberg.

SJ: So that Clean Election Commission debate will be the basis of our Fact Check podcast this week, with the hopes of also informing listeners a bit more about not just this race but the offices people are seeking.

Let's start with a statement from Democrat Joshua Polacheck:

Joshua Polacheck: And under the current Republican majority on the commission, they have not seen a rate increase that they didn't embrace wholeheartedly. We need to make sure that we return the Corporation Commission to its constitutional duty of ensuring that you, the voters, get affordable, reliable and safe public services. And that is not happening under the current majority. We know that every single time that they've had an opportunity to protect the citizens of Arizona, they have instead sided with the out-of-state corporations.

SJ: Zac, we heard a bit about raises in utility rates earlier when fact-checking a presidential candidate. Has this Corporation Commission hiked rates at the rate Mr. Polacheck says?

ZZ: So, the current Corporation Commission is 4-1 Republican. It did approve all three rate cases it saw for electric utilities, but that's unsurprising. Utilities were dealing with inflation in materials, fuel prices and labor costs through those years, and companies are guaranteed to make a profit, though that number isn't etched in stone in state law.

Let's talk about the process of getting a rate changed for some context though.

A company asks for a rate change, which is usually based on its Return on Equity, the amount of profit it is allowed to return to shareholders.

Its request goes to staff, which reviews it and the data to back up the claim. It then goes through comment and hearings for interested parties and the public.

And then it goes to a hearing before an administrative judge, who works with staff to offer up a Recommended Opinion and Order, and then it goes before the commissioners.

So, in the first case, TEP asked for a rate of 9.75%, the recommendation came back at 9.4%, and Commissioners vote last year for a 9.55% return for investors.

SJ: So that one went above the recommendation but less than what the company wanted. How about the other two?

ZZ: Not dissimilar, UNSE asked for 10.25%. Recommendation was 9.6%. Commissioners voted early this year for 9.75%.

SJ: Again, the commission split the difference between the company’s ask and the staff’s recommendation.

ZZ: Then comes APS. Asked for 10.25% also. Recommendation was 9.55%, and the commissioners this year agreed with the recommendation.

So, this commission isn't giving the companies everything they want, but they aren't going lower than the recommendations.

Now, in the two cases we have from the previous commission, they once went with the recommendation and then went more than a third of a percentage point lower than the recommendation.

That last case was against APS, and actually resulted in an estimated drop in the average bill.

SJ: That last case was one that another Republican candidate mentioned during the debate. Here's Republican Rene Lopez.

Rene Lopez: They removed out of APS' case over $200 million dollars of stuff that did not belong on the backs of the ratepayers. That's what we can do. That's what we can parse out and make sure that the balance between a funded and fully functional utility is not making profits and unduly off of the backs of the ratepayers.

SJ: So is that number right and how common are cases of rates dropping common?

ZZ: Mr Lopez is right-ish, APS wanted to make its revenue requirement $3.32 billion, they got $3.16 bllion, so his rounding was a little generous.

As for rate drops, they do happen, though not as often as going up. We did have one rate drop this year, it involved Southwest Gas, whose service area reaches into eight Arizona counties.

It zeroed-out a surcharge, which would result in an average drop of $7 a month for its customers, though that number is based on usage, so it will vary a lot throughout the year. I'm guessing most customers aren't saving much since we're still in triple-digit heat in most of the state! I know my showers are turned all the way to cold and they've cooled from way too hot to hotter than I'd like.

SJ: And air conditioning certainly doesn't run on natural gas.

ZZ: I don't even need to call my dad or brother who work in the HVAC industry for expert opinions. I can tell you it does not.

SJ: Well, let's turn to something that is often the talk of Corporation Commission debates that also has to do with the sun that brings that heat, ad that's solar power. Here's Democrat Johnathon Hill:

Johnathon Hill: We are the sunshine capital of the entire country. There is no reason why Arizona should not be running entirely on solar. When you look at states like Nevada, they have implemented solar in a very responsible way. I agree with Mr Lopez that California has made some mistakes in their implementation of renewable energy, but we can learn from those mistakes and we can prevent them from happening here in Arizona.

SJ: There's a strong statement in there. Could Arizona run entirely on solar?

ZZ: We'd need a LOT of panels. The US Energy Information Administration says Arizona is a top-5 solar power state with 6,100 megawatts of solar. But, that's only about 10% of what we generate.

To run the state on just solar, we'd need about nine times more than what we currently have, because about a tenth of our state's electricity is exported.

Plus we'd need battery storage because solar is really at its peak for on-average six-and-a-half hours a day in Arizona.

SJ: And that gets us to something that another candidate, Republican Rachel Walden had to say.

Rachel Walden: We get something like solar it's it it's lost its peak by 4:00 p.m. so when when energy is at its lowest demand, that's when solar is at its highest. When energy is at its highest demand, solar is at its lowest."

SJ: That’s obviously wrong. Solar is by definition at its lowest once it's dark, and peak demand isn't at night. When is peak solar production and when is peak demand?

ZZ: So production really depends on the time of year. I pulled down data for last year from the National Renewable Energy Laboratory for midtown Tucson, and it showed that in the winter you are generating power from about 8am to 5pm and the highest peak between 10 and 3.

If you go to a mid-summer day, that production can start as early as 6am and run as last as almost 7pm, but the peak is really from 9 to 4.

So yes, solar does peak before 4pm, as Rachel Walden said. And most utilities charge a premium for peak usage hours starting at, you know, 3 or 4 pm and lasting until 7pm. Those are their high-demand hours, so yes, things don't quite match up.

Now, solar during the summer does still produce into those peak usage hours. So solar radiation is measured in watts per square meter. A mid-June day is in the 900s until 4pm, but it tapers from there, 800s in the 4:00 hour, 700s into the 5:00 hour, down even more in the 6:00 hour before dropping off to pretty much 0 in the 7:00 hour.

SJ: So solar production doesn't go away at 4pm, it's just not as high as we need it to be.

ZZ: Correct. Hence why utilities like Tucson Electric Power often add storage capacity when they add more solar to their portfolio.

SJ: Okay, so let's get to a statement that factors into that idea that Democrat Ylenia Aguilar made on the debate stage.

Ylenia Aguilar: Our main responsibility is to ensure that we are providing a safe, reliable grid and what does that look like and how do we get to the lowest cost possible for them, because this is what we're elected to do. So I do think that what Jonathon and and the rest of the panelists have mentioned, like, there is a responsibility and there is an all of the above approach but we have to do what costs less because that's what we're elected to do.

SJ: So, Zac, what do the statutes say about the job of the Corporation Commissioners?

ZZ: Well, the section of the state constitution that establishes the commission, that's article 15, uses the phrase "just and reasonable" to describe rates that are charged.

The commission's website describes its job as trying "to balance the customers' interest in affordable and reliable utility service with the utility's interest in earning a fair profit."

And no part of the Arizona Revised Statutes that I could find mentioned safe and reliable specifically, though I'd guess voters would be pretty upset if power weren't that. It seems to me then to be more of a statement of value or a philosophy than a recitation of law beyond that idea of "Just and reasonable" rates.

SJ: Okay we have one last quote to mention, this one from the race's lone incumbent, who is Republican Lea Marquez Peterson.

Lea Marquez Peterson: I think that certainly the utilities in terms of the energy that they're bringing onto the grid can impact the ozone and the environmental impact. However, I think the biggest push towards what's bringing ozone into our air is really vehicles."

SJ: Zac, we hear a lot of concern about the environmental impact of producing our power. But how much of our air pollution is due to power generation?

ZZ: So I found [a report from the Arizona Department of Transportation])https://azdot.gov/sites/default/files/2024-04/adot-carbon-reduction-strategy-final-january-2024.pdf) from about a year ago that lays out its Carbon Reduction Strategy. And most of the way through that report is a chart labeled Carbon Emissions by Sector 2016-2021.

Now, carbon dioxide and ozone are two different things. Marquez Peterson referred to 'the ozone' and 'ozone' in that clip, so it's not 100% clear if she means the ozone layer or ground-level ozone pollution.

The state Department of Environmental Quality says ground-level ozone forms from chemical reactions between certain pollutants and sunlight, and it points out that ozone is different from smog. But it says, the top causes are the same as what we deal with for greenhouse emissions: cars, power plants, industry . . .

That ADOT report shows the Electric Power Sector as being responsible for about 41% (41.3%) of emissions and Transportation for about 46% (46.3%).

And if we're talking solely about vehicles on the road, they account for 81% of that sector's emissions. So, do the math on that, it means cars and trucks are responsible for 37.5% of carbon emissions in Arizona.

SJ: So, if we're talking strictly emissions, power plants still edge out automobiles, but there isn't solid information specifically on the subject of ozone.

ZZ: Correct.

SJ: That wraps up our look at the Corporation Commission and utility regulation in Arizona. If you have any comments about this or any other of our podcasts, don't hesitate to get in touch with us. Our website, of course, is news.azpm.org.

Don't forget to subscribe wherever you get your podcasts. For Zac Ziegler, I'm Steve Jess, thanks for listening.