It seems like every summer in the Valley, we’re hitting new records for heat — and for energy use.
As temperatures soar and more people — and data centers — move to the Valley, everyone has to use air conditioning to battle that heat all at once. And it’s making it harder for energy companies to keep up with demand.
APS announced a new energy use record when we clocked a record 8,631 megawatts between 5 and 6 p.m. on Aug. 7.
At the same time, we’re seeing energy regulators move to roll back requirements that utility companies here get a certain amount of energy from renewable sources like solar and wind power.
The mandate was set in Arizona nearly two decades ago by the Corporation Commission at 15%. It’s been credited with spurring a growing renewables market and moving the state in a clean energy direction.
But now, the all-Republican commission is moving to get rid of those requirements, Renewable Energy Standard and Tariff (REST) rules. They say they’re unnecessary and outdated, and it’s time to let the free market dictate where our energy comes from.
Arizona’s Democratic Attorney General Kris Mayes isn’t happy about it. She was one of the commissioners who voted for the requirements to begin with — when she was a Republican on the Corporation Commission in the early 2000s.
She says the move is illegal because regulators have a constitutional duty to set just and reasonable rates for consumers, and these commissioners provided no evidence that eliminating the standards will protect ratepayers or be in the public interest.
In fact, she argues renewables are the cheapest kind of energy and without standards in place, we’ll see utilities turn to less “clean” alternatives, like natural gas.
Earlier this month, all of the state’s major utilities announced a $5.3 billion project to build a major natural gas pipeline from Texas to Arizona. They say they need it to keep up with the demand on our energy grid. But, Mayes says the real reason is easy to find.
Full conversation with Kris Mayes
KRIS MAYES: The utilities make more money when they build natural gas plants because they can put that into what’s called rate base and then slap a rate of return on it, and therefore they make more money. And you add to that the fact that natural gas plants are powered with natural gas, and guess who pays for the cost of that natural gas? The ratepayers, the consumers of the state of Arizona.
You compare that to solar and wind — well, there’s no fuel source except the sun and the wind. And so it’s very simple economics. And the evidence proves that out. We know that the cost of clean energy has declined precipitously and in tandem with the renewable energy standard rules that we set up 20 years ago. It is a huge and massive success story that the commission is now trying to drive a stake through.
LAUREN GILGER: So regulators say they want the market to drive this. If you let the market drive the choice in terms of how the utilities are going to get our power, that the renewables will be part of that mix, because, as you say, they often are cheaper. Do you think that that’s misguided?
MAYES: It is misguided because it ignores the way utilities act and the way the utilities make their money. I mean, this is a silly and a ridiculous argument on the part on behalf of these commissioners. This is not a regular market. These are utilities that are regulated and they have a captured rate base. Consumers can’t get away from these utilities.
And the way the rates are set is based on how big and how expensive the plant is that they put into rate base. And so they’re going to choose — every day of the week — they’re going to choose coal plants or natural gas plants because that juices up their rate base. They’re not going to choose renewables voluntarily, necessarily. What they’re going to choose is the thing that makes them the most money. That’s going to be natural gas.
And then the other thing I would say is that as the state grows and our population grows and the energy demand grows, that is definitely going to mean the utilities are going to be producing more electricity, more kilowatt hours, and that’s going to drive the amount of renewable energy as a percentage down if the commission doesn’t at least keep the percentage at 15%, which is what we set.
GILGER: Right. So they’ll also point out that utilities in our state are already beating those original goals, that these are sort of outdated. You’re saying that won’t hold up in the future?
MAYES: We will definitely be dipping below 15%, which, by the way, at this point is already way, way, way behind our surrounding states, which puts us at a competitive disadvantage when you think about where renewable energy companies might locate and renewable energy projects might locate. So, yeah, this is one of the dumbest things that I have seen come out of this commission.
And they’ve done some, I think, unwise things lately. This is a commission that really is doing the bidding of the utilities quite often right now.
GILGER: Let me ask you a political question here, because APS also announced recently it’s dropping its clean energy goals for itself. And we’ve definitely seen energy policy out of the Trump administration that is in line with this, that is not favoring renewables in these ways and is definitely favoring the free market over that. Do you think the timing of this is political?
MAYES: Oh, it’s totally political, yes. It certainly has to factor into this decision. We know that Donald Trump and in this Congress, this MAGA Congress, have slashed renewable energy credits. Trump is ordering specific utilities — this is insane — to keep specific coal plants open. He tried to order APS to keep the Cholla Generating Station open.
And so I think the utilities and this commission are playing to the fiddle of Donald Trump. And that’s just sad because the people who are going to get hurt are Arizonans.
GILGER: It’s interesting because when you voted for these standards 20 years ago, you were a Republican on the Corporation Commission. Do you think this reflects how much that definition has changed, I guess?
MAYES: Yeah, I’ll say. I was a Teddy Roosevelt Republican, and I don’t know that those actually exist anymore. I haven’t changed much really, personally or politically I think, since then. But those were the days when Republicans could be fiscally responsible and care about the environment and want to see our utilities diversify their energy mix.
And the other big thing — and the reason I think an all Republican commission voted for a 15% renewable energy standard — is we believe in competition. Renewable energy brings competition to the utilities. What do I mean by that? By allowing Arizonans and promoting Arizonans to put solar on their rooftops or do community solar, we are providing essentially at least some level of competition for these monopoly utilities so that consumers, residents can get away from them.
GILGER: Let me ask you lastly an environmental question here about what kind of message a move like this sends about the future and the quality of life we might want in this city going forward, especially as it gets hotter and especially as we see air quality go down.
MAYES: Yeah, I think it sends a terrible message. It sends a message that this Corporation Commission is OK, and our utilities are OK with becoming more and more dependent on natural gas. The ugly, dirty secret that the utilities don’t want you to know is that there are methane emissions along that entire pipeline, and especially associated with compressor stations for those natural gas pipelines, something that we are looking at out of the Attorney General’s Office.
So this is dirty energy. And now our utilities and our Corporation Commission want us to have more of it, not less.
As of Monday morning, Mayes hasn’t filed suit yet, and her office told The Show they’re still “evaluating all legal options.”
But Kevin Thompson, the Republican chair of the Arizona Corporation Commission, is not surprised the Democratic attorney general is not happy with this vote.
When he came into KJZZ’s studios recently, he said he agrees renewable energy is affordable today, but he argues the free market should decide whether or not utilities use it in their energy mix.
Full conversation with Kevin Thompson
KEVIN THOMPSON: You know, we’re very agnostic when it comes to energy technology, we want an all-of-the-above portfolio. We think that’s what it’s going to take to keep the power going and the lights on.
The rule put in place like requirements for 15%. Well, all of the utilities have already met that intent. APS is around 19%. I think Tucson Electric’s around 23%.
LAUREN GILGER: Right, so why not update the rules?
THOMPSON: Well, I think renewables are mainstream already, right? I don’t think we need to mandate our utilities to meet another intent. We’re seeing a lot of private investment coming into Arizona with renewables. Since I’ve been on the commission, we’ve approved renewables way more than we have thermal. And it just tells you that the market is dictating what is the most reliable and the cheapest, right?
And that’s something to remember as well is we’ve told the utilities that they have to do a low cost RFP. So they have to go out for a request for proposal for power, and they have to come back and show that the contracts that they’re getting into is the most affordable for the consumers.
GILGER: Right, right. So you mentioned that most of the utilities in the state, if not all, have already exceeded this 15% standard.
I wonder though, as we’re looking at the massive amount of energy demand in the Valley — I think we just met another record the other day, where it’s just the amount of power needed to keep houses cool in the heat of the summer here is just getting higher and higher as more people come, more data centers are built, more investment, etc.
Do you think that that could change? Like if these standards are not there, the utilities could very well say, “Well, we have too much and we have to go in another direction”?
THOMPSON: No, I don’t think so. I think there’s a lot of fearmongering out there, that if you do away with these rules, it’s all gonna flatline, it’s all gonna decline, the world’s over. And I’d say it’s not that, right?
Even though the utilities have already met the intent of the REST rules, you’re still seeing a lot of investment in renewables, not only from the utilities but from private equity.
GILGER: So when you’re looking at affordability versus reliability, you’re saying this has to be market driven. Do you think that renewables are less affordable or less reliable?
THOMPSON: No, I wouldn’t say they’re less affordable. I think they’re very affordable, and I think that’s why you’re seeing so much private investment coming into Arizona.
Reliable, really our peak demand, time frame is, is that 3-7 p.m. window, when everybody’s coming home from work, the kids are home, you’re making dinner, you’re taking showers, you’re doing laundry. That’s our peak demand.
And solar works really, really good. But not during our peak demand times, right? And so that’s where the battery storage comes into play, so we can help shift that demand curve and so I think everything plays its part. When the wind’s not blowing and the sun’s still shining, you’re good. When the sun’s not shining and the wind’s not blowing, you still have natural gas or you have Palo Verde, so we have other options in that portfolio, and that’s what it’s about.
GILGER: Right, so you’re referring to this idea of dispatchability, right? Like whether or not renewable energy is able to be stored to use when demand is higher. Isn’t that possible at this point with battery technology?
THOMPSON: It is. Most batteries right now only last about 3 to 4 hours. Technology is advancing, and that’s what’s really cool about this job because you, you get to see it almost daily.
So let’s let technology catch up, but let’s keep that broad portfolio of generation types.
GILGER: So it’s the chicken and the egg, right? Like what comes first here, the regulators enforcing mandates to make sure that that market catches up and renewables can be reliable in the future and can have that kind of technology you’re talking about, or should we let the market drive it itself? Like, do you think this sends the wrong message then?
THOMPSON: No. I think we’ve been very clear at the beginning that we want the market to be able to drive this, and I think you’re seeing the market respond. And you don’t need government in the way telling people, telling businesses how to run their businesses. If the market is dictating that this is still the most affordable, that’s what the utilities are going to go after is the most affordable.
GILGER: I heard at the meeting, the Corporation Commission meeting when this vote happened, some regulators referring to this as, as a subsidy. It’s a mandate, right?
THOMPSON: It’s a mandate. In our world, anytime you mandate something for a utility, it’s basically a blank check that says you’re allowed to recover your cost.
GILGER: So do you feel like this mandate was essentially a subsidy to the renewables market?
THOMPSON: Absolutely. I mean, again, I think it did what it was supposed to do.
I brought up some questions yesterday in the opening meeting about Solana, for example. I wanted to know: What is it costing the ratepayers? That was the Solana (solar) plant out in Gila Bend. At the time was probably one of the leading technologies, but it’s costing ratepayers 15 cents per kilowatt hour.
And APS told us yesterday that the same power they can buy right now for 2.5 cents. And so our consumers are paying almost, you know, 6 times the cost of what power should be costing.
GILGER: So you’re saying that the cost is passed on to the ratepayer. There was, there was a third party economic analysis done for the commission though on this, right, that said that the savings for consumers would be real small, like $1 or $2 a month on your utility bill.
They also cited concerns about certainty in the market going forward without these regulations. Do you have that concern?
THOMPSON: I don’t. Obviously, when you look at the economics, a dollar here and a dollar there adds up, right? And, when, when you’re looking at like what this commission’s done over the last 2.5 years, we’ve cut, you know, almost $1 billion out of the utilities’ budgets on, on stuff that we think is wasteful.
Maybe eliminating the REST rules is only a dollar here or a dollar there, but in the grand scheme of things when you really look at the wasteful spending and how much is being spent, it’s a big deal.
GILGER: Let me ask you about the Attorney General. Kris Mayes has said that this move is not a good idea, but also that she thinks it’s illegal. Are you concerned you could be facing litigation over this and how the Corporation Commission has gone about it?
THOMPSON: No, not at all. I said it earlier, too, that it’s typical for her to rattle her saber on things like this. We’re undoing a lot of things that she put in place that have cost ratepayers billions of dollars since she put them in place.
And so I’m not overly concerned. If she wants to litigate this, we’ll litigate it, that’s fine. We’ll win. I have no doubt. We have the authority to set rules and we have the authority to unset rules, you know, to repeal rules. And so all we’re simply doing is repealing a rule that was put in place that no longer needs to be in place.
GILGER: We’re seeing APS at the same time drop its own clean energy goals for itself, and, and this is all very in line with the Trump administration’s energy agenda. I wonder how much you think politics is coming into play.
Do you think these things are happening right now because of the general political environment?
THOMPSON: I think it has a little bit to do with the political environment. I would like to think that the utilities are starting to look at the demand that’s on the system and saying, “How are we going to meet tomorrow’s demand today?”
When you look at our pipeline, capacity on the pipelines coming in, bringing in natural gas, we’re at full capacity on those lines. And you’re not gonna build any more new coal plants. And if you’re three to six years out on your SMRs or nuclear, and you’re still 2027 or 2028 getting the pipeline in here, what’s left?
That’s why I think you’re still going to see renewables come online. When it’s 118 and it’s 120 and we’re hitting our max, if the power goes out, people are going to to to be hurt. The vulnerable population in Arizona is going to suffer, and I think the utilities are seeing that.
I think the writing is on the wall. And so I think yes, politics has played a little bit of a role in that. But I again, I would like to think that they’re looking at the bigger picture and saying, “How do we meet the demand tomorrow today?”
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