Arizona News

Here & Now “Fast Facts”

Gasoline | Natural Gas | Electricity | Renewable Energy |

Gasoline

Arizona drivers use about 7.3 million gallons of gasoline a day reports the American Automobile Association of Arizona. That’s the equivalent of 173,000 barrels of gas.

To ensure Maricopa County meets EPA air standards, drivers in Arizona’s most populous area must use reformulated fuel called “Arizona Cleaner Burning Gasoline” which helps reduce emissions. Arizona CBG is slightly more expansive than unreformulated gas.

Arizona’s gas comes from two pipelines, one from the LA area to Phoenix. Another from El Paso to Tucson and on to Phoenix. Northern Arizona receives some deliveries by truck from New Mexico refineries.

AAA Arizona, which tracks gas prices, notes that half of the 300 U.S. refineries have been closed over the past 30 years resulting in a net loss of the ability to refine a million barrels a day. No new refineries have been built in that time. A proposal to build a refinery in Yuma is in the works, but still must clear several hurdles.

Gas Prices as of June 15, 2006 	
National  $2.90 			
Arizona   $2.96			
Phoenix   $2.95			
Source:  AAA Arizona (2006)			

Gas Prices ten years ago
National  $1.27
Arizona   $1.42
Phoenix  $1.43
Source: AZ Dept. of Commerce Retail Gas Price Report (2006), 

Energy Information Administration (2006)

DID YOU KNOW? Arizona Gas prices reached an average low of 96 cents a gallon ($.91 in Phoenix) in February 1999, the lowest price in a decade.

Natural Gas

• The United States produces 84 percent of the natural gas it consumes.
• The U.S. imports the remainder from Canada and from overseas as liquefied natural gas (LNG).
• Arizona gas companies buy natural gas from producers in New Mexico and Texas and pay to transport it using interstate pipelines.
• Natural gas is traded on the commodity markets and prices cycle from highs to lows like other commodities such as oil, coal or gold.

Factors behind recent 43% price increase of Winter 2005-2006

• Decreased U.S. production
• Higher demand nationally & internationally
• Increased exports
• Hurricanes Katrina and Rita

The Source of Natural Gas

Natural gas comes from organic material-the remains of plants and animals--that over the years have been covered by dirt and rock. Pressure and heat changed the organic material into coal, some into oil (petroleum), and some into natural gas -- tiny bubbles of odorless gas. The main ingredient in natural gas is methane, a gas (or compound) composed of one carbon atom and four hydrogen atoms

DID YOU KNOW? Because natural gas is colorless, odorless and tasteless, a chemical called “mercaptan” that has a sulfur like odor is added before distribution, to give natural gas a distinct unpleasant odor (smells like rotten eggs). That way, a gas leak can be more easily detected preventing a possible fire.

Natural Gas Regulation

The Arizona Corporation Commission regulates companies that provide natural gas in the state. The ACC does not allow gas companies to make a profit on the cost of natural gas. Customers pay the gas company for the fuel used on a dollar-for-dollar basis. The gas company earns a rate of return based on the costs of delivering gas to customers. That includes the cost of putting the pipe in the ground, maintaining the meters, having crews available to respond at a moment's notice to an emergency, training and all other expenses.

Electricity

Electricity in Arizona is generated from various sources:

• Nuclear power
• Coal burning power plants,
• Natural gas burning power plants,
• Hydroelectric damns
• Renewable energy sources such as solar and biomass

Top Five Providers of Retail Electricity in Arizona, 2004

(Thousand Kilowatt hours)

Entity
Ownership Type
Residential
Commercial
Industrial
Total



1. Arizona Public Service
Investor-Owned
11,527,402
11,402,140
2,578,341
25,507,883



2. Salt River Project
Public
11,342,116
9,737,140
2,751,464
23,830,720	



3. Tucson Electric Power Co.
Investor-Owned
3,459,750
1,787,472
3,295,768
8,542,990	



4. Morenci Water & Electric Co.
Investor-Owned
10,079
13,811
1,630,554
1,654,444



5. UNS Electric Inc.
Power Marketer
691,948
577,022
193,662
1,462,632	


 
Total Sales
27,031,295
23,517,585
10,449,789
60,998,669	


Source: Energy Information Administration, Arizona Electricity Profile, June 2006

DID YOU KNOW? In 2004, the average cost of electricity in Arizona was 7.45 cents per kilowatt hour, ranking Arizona 18th most expensive in the country. Hawaii was the costliest at 15.70 cents per kWh; Idaho the cheapest at 4.97 cents per kilowatt hour.
Source: Energy Information Administration State Electricity Profiles, 2006

Electric Regulation

The Arizona Corporation Commission oversees the electric power industry in Arizona. To get power to your home or business, utilities or their affiliates provide power generation, high-voltage transmission and low-voltage distribution. Power can be purchased from another company or generated at a power plant owned and operated by a traditional utility. It then travels along high-voltage lines before it is "stepped down" to a lower voltage at a substation near your home or office. Distribution lines leaving the substation carry the power to your home or office. The Arizona Corporation Commission does not have authority over electric service provided by a city or municipality, irrigation district, electric district or utilities operated by tribal authorities. Source: Arizona Corporation Commission

APS

• Serves almost a million customers in 11 of the state’s 15 counties.
• Operates 11 power plants throughout Arizona and in Northwest New Mexico.

Recent APS Rate Increase

APS sought a 14%, or $299 million rate hike in January 2006 citing the higher cost of natural gas and power APS needs to purchase to supply customers. The Corporation Commission issued a temporary interim rate increase of 7.6% that ends once APS recovers about $140 million. Without the revenue, APS faced major hurdles in obtaining debt financing. Standard & Poor’s, a major ratings agency, had downgraded the value of APS’ debt to one rung above junk status. At its May 17 annual shareholders meeting, Pinnacle West Capital Corp., the parent company of APS, announced plans to invest almost $5 billion in new capital over the next five years to meet future energy needs.

SRP

The Salt River Project Agricultural Improvement and Power District provides electricity to retail customers in the Phoenix area. It operates or participates in seven major power plants and numerous other generating stations, including thermal, nuclear and hydroelectric sources.

Renewable Energy

Some of the first forms of power came from renewable energy. Windmills and water wheels still exist, but have been mostly replaced by devices that capture energy from solar, wind, water, and steam resources.

U.S. Renewable Energy Consumption: Electric Power Sector, 1964-2004

(Trillion Btu)

Year	Conventional Hydroelectric Power	Wood	Waste	Geothermal	Solar	Wind	Total
1964	1,853	2	NA	5	NA	NA	1,859
1974	3,143	1	2	53	NA	NA	3,199
1984	3,353	5	4	165	(s)	(s)	3,527
1994	2,620	152	282	325	5	36	3,420
2004	2,673	168	340	302	6	143	3,632

(s)=Less than 0.5 trillion Btu.
Source: Energy Information Administration Annual Energy Review

DID YOU KNOW?

In 2004, Hydroelectric power accounted for three times as much energy produced than from all other U.S. renewable sources combined (biomass, geothermal, wind and solar): 270 million kilowatts per hour versus 90 million kWh.
Source: Energy Information Administration U.S. Renewable Electricity Profile, 2006

Arizona Corporation Commission’s Renewable Energy Standards

The Arizona Corporation Commission voted in February 2006 to increase the percent of energy that must come from renewable sources such as solar, wind, or biomass to 1.25% in 2006, increasing by .5% each year to 2010. After that, the ACC has set the rate to increase at one percent a year until 2025, when renewable energy resources will total 15% of utility production portfolios.
Source: Arizona Corporation Commission

Renewable Energy Incentives

Arizona has other incentives for renewable energy, possibly including wind. However, they are generally directed towards fairly small operations. Among them is a Qualified Environmental Technology Facilities Credit. This incentive allows a credit toward the personal or corporate income taxes in the amount of 10 percent of the cost of construction of a qualified environmental technology manufacturing, producing or processing facility.

A personal income tax provision allows a 25 percent tax credit on the cost of a solar or wind energy device up to $1,000. The Revolving Energy Loans for Arizona (RELA) Program provides loans up to $500,000 to companies that manufacture renewable equipment or acquire it for use in their own processes. The Solar and Wind Energy Equipment Tax Exemption of up to $5,000 applies to solar and wind energy equipment. Finally, Arizona has net metering provisions depending on the utility's service area. Arizona Public Service Company permits net metering for facilities under 10 kW, while Tucson Electric Power Company allows net metering for facilities under 100 kW.
Source: Energy Information Administration, Arizona Profile, 2006