Arizona energy-saving programs in jeopardy

• The staff at the Corporation Commission has suggested ending energy-efficiency requirements
• The current rules force electric and gas utilities to conserve based on set annual goals
• Utility customers save millions of dollars annually through the programs that would be eliminated

The Arizona Corporation Commission has proposed eliminating the requirements for utilities to meet a portion of their energy demand through efficiency programs that reduce consumption.

Those programs, which also conserve water and reduce pollution, are projected to save consumers $9billion on their utility bills through 2020.

The staff at the commission on Tuesday filed its proposal, which must be weighed by the five elected commissioners. The regulators set rates and policies for utilities.

"At the end of the day, we want to be as energy-efficient of a state as we can but not overpay for this energy efficiency," said Commissioner Gary Pierce, who earlier this year asked the commission staff for ideas to amend the rules.

A bipartisan commission approved the energy-efficiency standard in 2010 on a 5-0 vote. The standard requires electric utilities to reduce the amount of power they sell by 22 percent by 2020 by helping customers conserve. A separate rule was subsequently passed regarding natural-gas utilities, requiring them to conserve 6 percent by 2020.

"The rules were set up, and it was pretty easy at first to capture all the low-hanging fruit," said Pierce, a Republican who voted for the rules in 2010. "But as we started reaching, these companies, because they are under an order to reach certain levels of energy efficiency, they were looking for stuff and trying to plug it in no matter what the costs."

Pierce and his adviser declined to offer any examples of efficiency programs at utilities such as Arizona Public Service Co., Southwest Gas Corp. or Tucson Electric Power Co. that are not cost-effective, but they said the formula for determining cost-effectiveness needs to be standardized.

The utilities spend tens of millions of dollars a year subsidizing the cost of efficient lightbulbs at local stores and providing customers rebates for efficient appliances and home-energy checkups.

Those efforts not only help customers save money on their bills, but reduce the pollution and water use associated with the electricity that would otherwise have been produced from power plants to meet the demand.

The proposal incensed energy-efficiency advocates.

"This is just crazy," said Kris Mayes, who served as chairwoman of the commission when the rule passed and now serves as director of the Arizona State University Utility of the Future Center. "Nothing in the record suggests the standard is not working. This is just offensive."

The proposal from the commission would do away with the requirements that electric and gas utilities incrementally increase their efficiency measures. It would allow the commission to set goals for electric utilities every two years, but not for gas utilities.

Pierce said that if approved, it would allow regulators to require utilities to use a reasonable amount of efficiency to meet power demand without oversubsidizing efficiency measures for the sake of meeting a particular goal.

But critics said without statewide standards, efficiency will not remain a priority.

"This is a free pass for utilities to give up on energy efficiency," Mayes said.

Energy efficiency is widely recognized as the least expensive way for utilities to meet electricity demand. Nationwide, it costs about 3 cents for a utility to save a kilowatt-hour of electricity through efficiency, which includes everything from compact-fluorescent lightbulbs to rebates for home-energy checkups.

That is much less than the cost of building any type of power plant to meet electricity demand. For example, the least expensive new natural-gas-fired power plants produce electricity with a lifetime cost of more than 6 cents per kilowatt-hour, and new nuclear or coal plants are even higher.

"We don't understand," said Jeff Schlegel, Arizona representative for the Southwest Energy Efficiency Project, which frequently gets involved in commission matters to encourage efficiency programs. "(This proposal) can't be based on performance. The utilities have performed well when they've been authorized to do so."

Utilities such as APS and TEP charge tariffs that run about $2 to $4 a month on the average customer bill to fund their energy-efficiency programs.

Unlike rooftop solar, which is limited to customers with the proper roof alignment and credit or cash for panels, nearly all customers can participate in energy-efficiency programs.

In 2013, APS and TEP customers conserved 645million kilowatt-hours of electricity through the companies' efficiency programs, knocking about $77million off their utility bills for the year, Schlegel said. Most of the efficiency measures, like more efficient appliances, are expected to continue saving customers money for years, he said.

"The utilities like the energy-efficiency programs because they give them another way to work with customers and gives them a resource to keep costs down," Schlegel said. "But I don't think they necessarily fully are in favor of how strong the goals are."

Last month, the American Council for an Energy-Efficient Economy ranked Arizona No. 4 nationwide for the amount of electricity its utility customers saved in 2013 compared with the prior year. It trailed only the cold-weather states of Rhode Island, Massachusetts and Vermont.

According to the council's scorecard, Arizonans conserved more than 1.3million megawatt-hours of electricity last year, or 1.74 percent of all retail sales. That compares with a median savings of 0.56 percent for all states.