Arizona Legislator: Open Our State Up to Electric Competition

A key Arizona legislator is pressing to reopen the state’s electric markets to full competition in order to spur job growth, reduce emissions, encourage innovation and reduce costs for consumers. Representative Lucy Mason of Prescott, chair of the House Water and Energy Committee, recently held a legislative forum that cited a report by the Goldwater Institute to urge competition in the state’s electricity market.

The Goldwater Institute report, Opening the Grid: How to Recharge Arizona's Electricity System for the 21st Century, was authored by two respected economists and finds that electricity restructuring has been successful in Britain, Texas and Pennsylvania, and would work in Arizona if the state’s electricity market was open to competition.

“If we move toward restructuring, they’ll (the regulated utilities) be investing with their own money, and they’ll have incentives to reduce their costs, leading to reduced costs for Arizona ratepayers,” said Andrew Kleit, one of the report’s authors and professor of energy and environmental economics at Penn State University.  

The Goldwater Institute report also details how Arizona can avoid failed restructuring efforts by promoting long-term contracts between power generators, suppliers, and consumers – an important aspect of competitive electricity markets. During the California energy crisis of 2000-2001, for instance, such contracts were prohibited or discouraged, allowing for vast changes in prices.

In the late 1990s, Arizona was moving toward full competition, only to halt the process after California’s flawed restructuring effort ignited an energy crisis. The fact that the Goldwater Institute report — advocating full retail and wholesale electric market competition — was the focal point of an Arizona legislative energy forum on electricity markets clearly suggests that we have begun to round the corner after California’s disastrous missteps cast a long shadow over restructuring, a trend noted previously by COMPETE blogger George Waidelich of Safeway.