Will repealing Arizona energy efficiency standards help lower costs? It's not entirely clear

On Wednesday, the Arizona Corporation Commission unanimously voted to repeal energy efficiency standards that have been in place since 2010. Regulators say it will help customers save money, but proponents of the rules say it's not that simple.

The Electric Energy Efficiency Standards required Arizona Public Service, Tucson Electric Power and others to create efficiency programs that could cut overall energy demands by 22% by 2020.

Commissioners voted to begin a repeal of the mandate last fall, citing that utilities had already surpassed the benchmark and were recuperating costs from the program at such a rate that customers were no longer saving money.

“Whenever a regulator — the commission — tells a utility, ‘you must go do something,’ that’s a very good justification when they come to recover rates to say, ‘you told us we had to do it,’” Commissioner Nick Myers said.

Myers argued that developers today are building with energy-efficient appliances regardless of whether or not they receive a credit from utilities. Meanwhile, people who can’t afford to upgrade their appliances are subsidizing rebates for others.

“Maybe they get a $1,000 rebate from an energy-efficiency program,” Myers said. “Well, they don’t have the other $9,000 to even buy that air conditioner in the first place, so they’re not getting any benefit of the EE (energy efficiency) program, but they’re still paying it out of their utility bills.”

Sandy Bahr, director of the Sierra Club’s Grand Canyon Chapter, says that’s a bit misleading.

“Energy-efficiency standards benefited all ratepayers, even those who weren’t taking advantage of the programs,” Bahr said.

She argues that APS and TEP are effectively monopoly utilities given the lack of competition in this sector.

“APS is not like a grocery store,” Bahr said. “You can’t just go to another one if you don’t like APS. You have no choice — unless you want to move."

Therefore, she says the utilities should be mandated to help customers conserve energy and lower costs.

“We know energy efficiency is the lowest-cost energy resource. Study after study demonstrates that,” Bahr said. “By saving energy and especially being able to shave off those peaks, that reduces the need to build more generation and more generation, more power plants — those are what really cost the ratepayers money.”

She said the commission’s own analysis showed that the repeal could result in higher costs in the long term because there will be little incentive to upgrade, and older, less efficient systems could remain in use while energy demands continue to rise.

The commission also voted to repeal its Renewable Energy Standard and Tariff in March. The mandate was adopted two decades ago to force utilities to build more renewables like solar and wind.

Myers said he and his colleagues campaigned on removing mandates like these because they lead to surcharges.

“We see rules like this, or mandates like this, largely as blank checks,” said Myers. “Anytime you tell a utility what they have to do, then they are basically guaranteed to recover on that. If we don't tell them what to do, then they have to bring good programs to us and justify them."

Utilities may no longer be required to prioritize efficiency, but many are still recuperating costs from prior initiatives. Some programs could remain in place at the utility’s discretion, regardless of the vote to remove the mandate.

The commission acknowledges a complete elimination of efficiency-related surcharges would require a separate order.