Arizona Corporation Commissioner requests review of utilities’ billion-dollar electricity market decisions

PHOENIX — In a major step toward greater electric utility transparency, Commissioner Lea Márquez Peterson filed multiple requests directing Arizona Public Service, Tucson Electric Power, and Arizona Electric Power Cooperative to submit updated analyses detailing the ratepayer impacts of their proposed regional electricity market commitments. The Commissioner’s request follows an August letter and docket filing submitted by several public interest groups urging the ACC to mandate transparency in utilities’ regional market decisions.

The Western U.S. is undergoing a major shift in how electricity is shared across state lines, with two competing regional markets taking shape. The choice of which market Arizona utilities join will affect electricity costs and access to reliable power for Arizona families and businesses for decades to come. This decision is particularly consequential as Arizona grapples with rising electricity costs, rapidly growing demand from data centers and industry, and record-breaking heat that is straining the grid.

“Commissioner Márquez Peterson’s directive is a critical step toward protecting Arizona families and businesses from likely costly decisions by utilities,” said Michael Bueno, Senior Manager of State Climate and Policy at the Environmental Defense Fund. “Utilities shouldn’t make generational, billion-dollar commitments behind closed doors without showing their math. Requiring new data and side-by-side comparisons ensures that these decisions are focused on what’s best for Arizonans – keeping electricity costs down and ensuring access to clean and reliable power. 

So far, Arizona’s utilities have signaled their intent to join a smaller regional market, known as Markets+, a decision that could leave the state increasingly isolated from neighboring power systems. By contrast, utilities in Nevada, New Mexico, and other Western states have committed to the larger market, known as the Extended Day-Ahead Market (EDAM). The market landscape could continue to shift as the Bonneville Power Administration, a federal hydropower agency and major transmission provider serving the Northwest, recently indicated that it is reconsidering its market decision and could join EDAM.

Commissioner Peterson’s filings require the utilities to demonstrate how their market choices serve the public interest, specifically requesting:

• Cost and Operational Impacts: Comprehensive projections of production costs, administrative fees, transmission revenues, curtailment, congestion, and future resource procurement.
• Capacity and Reliability: Projections of changes to peak and ongoing power capacity under growing future demand.
• BPA Alignment: Ratepayer impacts and benefits if whether or not the Bonneville Power Administration shares a market footprint with Arizona utilities.
• Market Seams: Operational strategies to smooth over impacts from trading between energy market boundaries.
• Resource Planning Safeguards: Clarification on how each market option aligns with Arizona’s Integrated Resource Planning process.

Additionally, Commissioner Peterson noted in the filings that the ACC "retains well-established authority… to require utilities to justify the prudence of costs, including costs associated with market participation and to disallow recovery of costs that are not reasonable or not supported by the evidentiary record." This means the ACC has the authority to ensure utilities can’t charge Arizona ratepayers for the extra costs or foregone savings from a poor market decision.

Studies released by EDF and Aurora Energy Research earlier this year showed Arizona’s three largest utilities could forgo over $114 million in savings each year if they move forward with plans to join the Markets+ energy market over the Extended Day-Ahead Market.

Peterson’s requests can be found in Docket No: E-00000A-21-0271, which she opened in July 2021.