Arizona Corporation Commission Finds Potential Benefits from Greater Competition in State

A new staff report from Arizona Corporation Commission (ACC) urges a full evaluation of the state’s electricity market given the benefits competition could offer the state’s consumers, economy and environment. The report, issued last week, comes as the ACC considers revising state rules to introduce competition to its power market.
 
Competition would create multiple economic benefits for Arizona consumers, according to ACC staff:
 
“Demand and price-responsive consumers can participate in wholesale markets for capacity, energy, and ancillary services, including reserve markets…large commercial and industrial consumers are able to invest in backup generation, on-site energy storage, and end-use load controls to participate in power markets to manage usage and lower costs.
 
Furthermore, competition would create economic benefits for individual consumers as power suppliers and the overall grid become more efficient. “Restructuring has allowed grid operators to make smarter dispatch decisions, reducing costs by using lower-cost resources in one region to displace higher-cost power resources in another,” said staff.
 
Greater competition could help the state compete with neighboring states that already enjoy benefits of the competitive markets. “By not transitioning to a competitive market, (certain) stakeholders believe that Arizona risks lagging further behind as a national and international business competitors, disadvantaging businesses that need to compete in today’s global economy.”
 
ACC staff also recognized how the unique characteristics of organized competitive electricity markets enable clean energy generation to thrive.
 
“Competition could allow for the development of renewable resources and advanced energy technologies, increased demand response and energy efficiency, and support the innovation necessary to develop new technologies, products and services at lower costs than through government regulation while producing economic and environmental benefits. Texas and New York, amongst other places that have restructured, have experienced rapid growth in renewable generation and offer numerous green pricing options.”
 
Staff cited 2009’s SolarCity decision, which empowers Arizona schools, government, and non-profits to voluntarily make individual solar energy purchases from non-incumbent power suppliers to reduce the total load of their incumbent utility during periods of peak demand. Innovative programs like this could not only make clean energy more affordable but may also increase efficiency:
 
Retail competition, and the associated increase in the number of suppliers, may also bring consumers more choice in the availability of renewable energy products. Renewable program competition could drive down the costs of renewable energy program implementation…In addition to giving customers a choice in the type of energy products available to them, a system based on real-time pricing has the potential to make power consumption more efficient.
 
Competition is working across the country, and has led academics and state legislators to call for opening up Arizona’s electricity market. An in-depth study of competition in the state is a large step toward empowering consumers to “lower their total energy costs, increase their reliability and control, reduce their impact on the environment, and increase the value of electric services in their lives.”

Joel Malina | August 18, 2010