Arizona electric companies told state utility regulators last week that they are well equipped to deal with climate extremes to avoid disastrous rolling blackouts and major power outages like those experienced in California and Texas this past year. 

Poor planning is one reason those two states saw major energy shortages, regional and state power grid experts told members of the Arizona Corporation Commission (ACC) at the . 

The special meeting is one of several emergency hearings on the crises to help educate commissioners, legislators and community stakeholders about what went wrong and to be reassured that the same won鈥檛 happen on Arizona鈥檚 鈥渨atch,鈥� said Chairwoman Lea M谩rquez Peterson.

鈥淲e all want assurances that what we observed won鈥檛 happen here,鈥� M谩rquez Peterson said. 鈥淭he public trust their elected leaders to be working day and night to make sure these public health catastrophes don鈥檛 happen on their watch.鈥� 

Lack of planning led to tens of billions of dollars in damage

In California and Texas, lack of planning resulted in tens of billions of dollars in damages to property, life and the economy in both states. 

All states in the West are now grappling with how to prevent even more disasters. Energy demands are only going to increase along with costs, experts said at the hearing.  

Arizona and the other states and regions that share the grid in the West are at risk, they said. Coordination and cooperation must now be the focus. 

At the meeting, representatives from Arizona Public Service Company (APS), Salt River Project (SRP), Tucson Electric Power (TEP), UNS and Arizona Electric Power Cooperative detailed measures they are taking to prevent similar catastrophes. They said they are better prepared than California and Texas, pointing out that Arizona saw record heat last summer but experienced few problems in meeting demand.   

Representatives from the  (WECC) also spoke about their analysis and recommendations for rising risks across the Western U.S. The WECC is federally authorized to assure a reliable electric system within the Western Interconnection, one of two major power grids in the nation. The grid interconnects 14 states including Arizona, two Canadian provinces and northern Baja in Mexico. 

Among the most important recommendations is to pursue better cooperation and coordination in managing the grid moving forward, Jordan White, WECC鈥檚 vice president of strategic engagement and deputy general counsel told commissioners. 

Here are some takeaways from the summit:

1,000-year events now happening every 10 years or less

A major factor for California and Texas were catastrophic weather-related events that rarely occurred before 2000. A 1,000-year event now might happen every 10 years or less.

These major climate events require that states connected to the grid change how they have always conducted business, White said. 

Climate extremes causing less predictability in system

Much of the need for quick action lies in the changing season patterns in the West, White said. 

Historically, states in the Western Interconnection have had different peak energy seasons, making it easy to support each other. For example, Arizona has had excess energy to share in the winter when Northwest states were freezing. But warmer temperatures and higher demands overall are 鈥渂roadly impacting鈥� the system. Climate is becoming more similar across states, White said.

Less diversity among resources affecting supplies 

A large number of 鈥渂aseload predictable鈥� energy resources are being retired, which is reducing the diversity of available resources in states like California that are moving to 100 percent renewable energy. 

鈥淭he long and short of this is that the predictability and diversity that we relied on for so many years is changing, which requires a heightened focus on how we look at how the system is managed,鈥� White said.

Among the WECC鈥檚 top recommendations is the need for more cooperation and coordination, he said. Interdependencies need to be accounted for. 

What went wrong in California

High temperatures and widespread wildfires in California last summer caused power losses to millions of homes and forced the state鈥檚 power grid to order utilities to cut electricity on a rolling basis. 

An investigative report by the California Public Utilities Commission, the state Energy Commission and the California Independent System Operator, which manages the state鈥檚 power grid listed a number of reasons for the shortages including:

-California failed to properly prepare for shortages. For example, when California expected to import energy from other states to address its accelerated demand, virtually every power plant in the West was also running at full capacity. 

-As California has increased its reliance on renewables, it failed to account for shortages in energy generation from its solar and hydroelectric resources. 

What went wrong in Texas 

In Texas, back-to-back severe winter storms last month caused the power crisis that resulted in a massive electricity generation failure. More than 4.5 million homes and businesses were left without power, resulting in shortages of water, food and heat. Some businesses were left without heat for several days. 

Two primary causes for the shortages were found to be:

-Inadequately winterized natural gas equipment, which led to extreme cold  freezing at natural gas plants. Frozen equipment at wells also limited the gas supply extracted from the ground.

-Texas has largely isolated itself from the two major power grids to avoid federal oversight and deregulate its energy sector. That complicated its ability to import energy from other states. 

Why Arizona is well prepared

Arizona is a different story, utility representatives told commissioners at the meeting. All of the utilities who spoke said they are well prepared for 2021.

Utilities also have a good diversity of resources to pull from, ranging from renewables to natural gas to carbon-free nuclear energy. Microgrids are also creating new energy sources. These small, self-contained power systems can draw energy from rooftop solar panels, nearby wind turbines and other sources.

APS said it has long invested in weatherization to protect plants and equipment from extreme heat. All of the utilities offer energy saving plans or enlist the help of residential and business customers to lower energy usage during peak summer hours.

Unlike Texas, Arizona utilities are regulated and under stricter reliability standards. Reliability and affordability of energy are written into the state Constitution. 

Moving forward, White of the WECC said, all members need to work together to better plan and manage the West鈥檚 energy as climate disasters are becoming more common. 

鈥淲e can鈥檛 ignore our neighbors,鈥� he said. To view the meeting in its entirety, go to:

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Lea Marquez Peterson was recently elected by her colleagues at the Arizona Corporation Commission to serve as its chairwoman. Marquez Peterson was elected to the Commission in 2020 following her appointment by Gov. Doug Ducey in 2019. 

Peterson of her goals clear: streamline processes and regulatory mechanisms so as to ensure public faith in the Commission, work with the Legislature and governor on important energy issues, and 鈥渞evisit and reinforce our pending Clean and Affordable Energy Rules to accomplish progressive outcomes through the use of conservative principles and regulatory mechanisms.鈥�

Marquez Peterson has a track record of working with legislators and the Governor鈥檚 Office to synthesize their power and expertise towards positive energy outcomes — for consumers, in the form of lower rates, and for utilities, in the form of policy conducive to expanding carbon-free energy sources.

In 2020, Democrat Anna Tovar also won one of the three seats up for election, campaigning on expanding renewable energy. Her campaign site it as her main policy priority, saying 鈥淸Arizona] need[s] to continue expanding [its]use of solar energy, not to mention all forms of renewable energy.鈥� 

Breaking from some national Democrats who champion clean energy reforms but often ignore economic concerns, Tovar believes that 鈥淸Arizona] can reduce [its] carbon emissions, create jobs, deliver reliable and affordable electricity to consumers, and build an energy infrastructure using the latest innovations to accommodate our state鈥檚 growing energy needs.鈥�

Similarly, Marquez Peterson championed renewable energy expansion, setting a bold : 鈥�100% clean and affordable energy by 2050 for Arizona.鈥�

New energy rules

The Commission in 2020 4-1 to adopt a 100% clean energy by 2050 goal, confirmed by 3 Republicans and 1 Democrat. The passage of the package hinged on the removal of the “technology requirements” which were seen by many as an effort by the Commission to overreach and manage which contracts utilities would award.

Chairwoman Peterson led the effort to eliminate the proposed “technology requirements” that she would allow utilities to “simply invest in renewables to comply with the rules and be guaranteed to recover the money from ratepayers,” rather than make “prudent decisions.”

Focused on ensuring that the rules package did not over-regulate and mandate which entities utilities awarded contracts to, Chairwoman Peterson ensured that “nuclear, natural gas, and forest biomass” would “be allowed to help with the transition to ensure reliability and affordability through the process.” She believes that the Commission shouldn’t “pick winners and losers”, and that the free market is vital to effective energy policy and conservation efforts.

The rules 鈥渞equire that energy storage systems make up 5 percent of those utilities’ total grid capacity by 2035 and that 40 percent of that total be customer-owned or leased,鈥� as well. Arizona Public Service (APS), the state鈥檚 largest utility, already resolved to accomplish this goal before the Commission acted.

Embracing carbon-free sources of energy such as nuclear power, as well as traditional renewables such as solar, wind, hydro, biomass, and more, the new rules that 鈥淯tilities still can meet the carbon-free rules by using renewable energy, and also by relying on nuclear power and energy-efficiency measures that help customers reduce consumption.鈥� 

Aimed at improving communities that are traditionally dependent on coal power, the new rules also 鈥渁 transparent and accountable planning process that includes preference for the purchase of clean energy from Tribes and coal-impacted communities.鈥�

In order for all these rules to be , the Commission has sent a notice of the proposed rule change to the Secretary of State鈥檚 Office. Next, the Commission will file an economic impact analysis — this month — and then they wait for a judge to approve the rules. Following this approval, the Commission will vote again and then the rules will be sent to the Attorney General鈥檚 Office. After the Attorney General forwards his certification to the Secretary of State鈥檚 Office, the rules go formally into effect.

Taking a 鈥渃arbon-reduction approach,鈥� the rules to nuclear power advocates and have received support from environmental organizations such as The Western Way and the Sierra Club.

But what do these rules mean for Arizona鈥檚 clean energy infrastructure? 

Arizona鈥檚 current energy portfolio

The Commission鈥檚 new rules differentiate between energy consumption and energy production standards. Why? There is a giant gulf between the power Arizona produces and the power it consumes.

the U.S. Energy Information Administration, Arizona鈥檚 two primary energy sources are nuclear power generation — coming in at 325.1 trillion Btu — and coal burning — making up 140.8 trillion Btu. Biomass comes in a distant third with 6.8 trillion Btu. 

Due to regional distributions of power and the interconnected nature of the United States, the consumption estimates are very different.

Natural gas, a cleaner alternative to traditional petroleum, makes up 400.5 trillion Btu. Motor gasoline, excluding ethanol, comes in 2nd with 332.2 trillion Btu. Coal comes in 3rd with 331.5 trillion Btu and nuclear finishes 4th with 325.1 trillion Btu.

Arizona has a net energy inflow of 287.5 trillion Btu, meaning that the state consumes that much more power than it produces, illustrating Arizona鈥檚 massive power needs and its potential for increased energy production. It also lends to the hypothesis that green policymaking must consider the difference between the growth of the state鈥檚 carbon free energy production portfolio and its consumption portfolio.

Palo Verde Generating Station, the nation鈥檚 most productive nuclear power generation facility, generates for 4 million people annually — all without carbon waste. The waste produced by nuclear power is minimal and it is storable, meaning that unlike greenhouse gases it can be compartmentalized and stored away. Further, modern regulations on domestic nuclear production make the possibility of reactor meltdown or failure highly unlikely.

With the Corporation Commission鈥檚 new rules, an expanding renewables sector is going to become inevitable. But some groups have rightly expressed concern regarding the increased price of relying on traditionally more expensive means of electricity generation such as solar and wind power. 

Thankfully, with further investment in innovation, renewables are becoming cheaper. In June of 2020 Forbes that 鈥淧lummeting wind, solar, and storage prices have fallen so fast that the United States can reach 90% clean electricity by 2035 鈥� without raising customer costs at all from today鈥檚 levels, and actually decreasing wholesale power costs 10%.鈥�

According to a conducted by the Goldman School of Public Policy at the University of California Berkeley, these goals will also be more feasible if natural gas production is maintained at at least 10% of electricity production. Natural gas is not carbon free, but it does produce significantly less waste than other energy sources such as coal and traditional petroleum.

These savings, however, will only be achieved through smart public-private investments in energy storage and clean energy infrastructure. This will include dedicating more investment towards electric vehicle charging stations, energy storage facilities, electric grid overhauls, carbon-capture technology, and innovation hubs that synthesize science and industry to pioneer new solutions.

A new published by The Western Way, an environmental advocacy organization, and the Arizona Technology Council outlines some of the steps Arizona鈥檚 Legislature can take towards these ends in the 2021 session.

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A bill advancing through both houses of the Arizona Legislature aims to clarify that state lawmakers, not utility regulators, have the authority to determine what clean energy goals are best for the state. 

The body that regulates utilities, the Arizona Corporation Commission (ACC), voted 3-2 to remain neutral on the issue for now. 

Meanwhile, the legislation has stirred debate statewide over who has constitutional authority to establish the standards. Hundreds of individuals and organizations have lined up on both sides. 

Ultimately, the Arizona Supreme Court may have to decide where the true power lies.

Question over constitutionality 

Gov. Doug Ducey and state lawmakers who favor legislative control believe the Commission overstepped its constitutional authority in setting renewable energy goals years ago for regulated utilities like Arizona Public Service (APS) and Tucson Electric Power (TEP). 

鈥淚 want to see the Corporation Commission setting rates and I want to see the state Legislature setting energy policy and I hope we can straighten that out this legislative session,鈥� Ducey said during the Arizona 番茄社区 of Commerce and Industry鈥檚 2021 Legislative Forecast Luncheon last month. 

Debate started after ACC ramped up energy goals

The recent showdown came after the ACC approved a proposal in November to ramp up clean energy and renewable energy requirements even though large utilities like Arizona Public Service and Tucson Electric Power have been working to meet clean energy goals, investing  hundreds of millions of dollars in infrastructure like solar energy plants and wind farms. 

Several legislators then introduced two mirror bills, and House Bill 2248, to cement their authority over energy policy. 

Sen. Sine Kerr, R-Buckeye, one of the sponsors, stated at a January hearing last month that ACC is authorized by the constitution to regulate customer utility rates, not set energy policy.  Kerr said the state constitution clearly defines the commission鈥檚 鈥渋ntended function.鈥� 

鈥淭hat is, exercising ratemaking authority to protect captive consumers against corporate abuse, while restoring the Legislature鈥檚 paramount authority to regulate public health, safety and welfare as recently affirmed by the Arizona Supreme Court,鈥� she said.  

Kerr was referring to the court鈥檚 ruling in another case involving the takeover of the trouble-plagued Johnson Utilities in San Tan Valley. In that case, the court acknowledged that the state Legislature and the ACC share authority on issues of public health such as clean air and water, but that the Legislature has the final say. 

What does the legislation do? 

The measure would prohibit the Corporation Commission from 鈥渁dopting or enforcing a policy, decision or rule that directly or indirectly regulates the types of critical electric generation resources used or acquired by public service corporations within this state鈥檚 energy grid without express legislative authorization.鈥� 

It also would prohibit any new mandates beyond current standards that were set by the ACC in 2006. Those standards require regulated utilities to obtain 15 percent of their energy from renewables like solar, wind and hydro power by 2025. 

In November, the ACC voted 4-1 to adjust those rules to require utilities to get half of their energy from renewable sources by 2035 and 100 percent from clean energy, including nuclear, by 2050.  

Commission votes to take 鈥渨ait-and-see鈥� stance

Last month, the commission voted 3-2 to remain neutral on the bills as they make their way through the House and Senate. 

Commission Chair Lea M谩rquez Peterson stated at the hearing that the vote was not necessarily meant to secede power to the Legislature, but was merely a wait-and-see move to start communicating with state lawmakers as the measures move forward. 

Both bills have now passed through all committees at the Legislature and await approval on the full Senate and House floors before going to the Governor鈥檚 office for his signature. 

For and against 

Opponents of the measure have said they are concerned that  the legislation could derail efforts to reduce carbon emissions in the state. Proponents believe the state Legislature has constitutional authority to make policy decisions that impact the health of citizens. 

Among the groups supporting the legislation are Americans for Prosperity Arizona, Free Enterprise Club, Goldwater Institute for Public Policy Research, Homebuilders Association of Central Arizona, Market Freedom Alliance, and Republican Liberty Caucus of Arizona.

Among the opposition are the American Lung Association, Arizona Public Interest Research Group, Business for Water Stewardship, Environmental Defense Action Fund, Sierra Club, and Southwest Energy Efficiency Project, Western Resource Advocates, and Wildfire: Igniting Community Action To End Poverty In Arizona.

Voting along party lines 

State lawmakers are lined up along party lines on the issue with Republicans — who hold the majority — in favor of the two bills and Democrats opposed. 

At the Corporation Commission, Republican commissioners M谩rquez Peterson, Justin Olson and Jim O鈥機onnor voted in favor of maintaining a neutral stance with Olson stating that he fully supports the legislation. 

鈥淨uite frankly, I’m supportive of the objective of this bill and that is to make it clear that the state Legislature, governor and executive branch have that responsibility of establishing policies for public health,鈥� he said.

Democrats Sandra Kennedy and Anna Tovar voted against the measure, accusing the Legislature of a 鈥減ower grab.鈥�

鈥淚 am pretty saddened today,鈥� Kennedy said after the vote. 鈥淲e have taken an oath of office to uphold the Constitution. Clearly, this is unconstitutional.鈥�

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A first-of-its-kind proposal to allow private industry to synchronize electric customers’ smart devices and receive compensation for helping utilities operate the electric grid more efficiently was unanimously approved by the Arizona Corporation Commission (ACC).

If successful, Arizona would be the first state to permit third-party providers to aggregate and control a portfolio of potentially millions of smart devices that large utilities could use to more efficiently allocate and store energy for the grid. 

That could result in lower electric bills for homes and businesses and generate new smart technologies and industries here in Arizona, said Lea M谩rquez Peterson, the new chair of the utility regulating commission who  introduced the proposal. 

M谩rquez Peterson and her fellow commissioners voted to give the state鈥檚  largest electric utility, Arizona Public Service (APS), the go ahead to develop a 鈥渢ariff鈥� for the project — a plan that lays out the structure, fees and other parameters of the program — and move it forward after board review and approval. 

鈥淭he proposal allows aggregators of all kinds and technologies to participate in APS鈥� tariff, opening the door to potentially untapped market opportunities and economic development,鈥� M谩rquez Peterson said. 鈥淧reviously, rooftop solar was the only tool in the distributed energy toolbox. 

鈥淏ut now, we have so much more. Air conditioners, appliances, devices, and batteries, even entire homes, as long as they are connected to the internet, can now be called upon to shift and respond to the grid. That鈥檚 extremely valuable.鈥�

Tapping into millions of smart devices to benefit grid

These electric grid resources could include an array of smart devices and energy efficiency improvements, such as internet connected 鈥榮mart鈥� thermostats and ENERGYSTAR appliances, as well as at-home batteries. 

Through aggregation, they can help to reduce the total cost to the grid by reducing or shifting the time of energy used, reducing the amount of power needed during the most expensive times of day, utilizing or storing more power during the most affordable times of day, or otherwise improving the operating efficiency of the grid.

Companies, customers benefit based on value they provide

The third party companies providing the service for APS, potentially other utilities in the future, would be compensated for the value each provides to the grid. This would include compensation for the value of energy, capacity, demand reduction, load shifting, voltage support, and other ancillary services, to name a few, the chairwoman said. 

Consumers participating in the program also would be compensated based on the value they provide. 

鈥淥ur smart infrastructure, combined with Arizona鈥檚 digital connectivity and demand curve, which is unique to the Western United States, makes the Desert Southwest, and Arizona specifically, the perfect place to study demand-side optimization and lead on cutting-edge energy innovations and regulatory policies,鈥� she said. 

New chair brings business approach to regulatory body

M谩rquez Peterson, who is the only commissioner based outside of Maricopa County, brings a strong business background and education with her to the utility-regulatory commission. 

Before being appointed to the commission in 2019 and her recent election in November, she served as the president and CEO of the and executive director for .

She was the owner and operator of a business brokerage firm and a chain of six gasoline station-convenience stores in the Tucson region. She earned her undergraduate degrees in Tucson in marketing and entrepreneurship from the University of Arizona, and her master鈥檚 degree in business administration from Pepperdine University in California.

Among the many boards she serves on are the Pima County Workforce Investment Board, University of Arizona Foundation, president of the National Association of Women Business Owners in Tucson, and a member of the national U.S. Small Business Association鈥檚 Small Business Development Council advisory board. 

Calling on stakeholders to participate in proposal

Stakeholders such as technology companies, consumer product manufacturers, and third-party aggregators that are involved in providing energy services or devices for the grid such as battery storage, energy efficiency, smart devices, smart appliances, internet of things, home energy monitoring devices, and ancillary services interested in getting involved in the development of the project, go to: . 

A copy of the proposal can be viewed .

About the Arizona Corporation Commission

The ACC was established by the state constitution to regulate public utilities and business incorporation. The commission is Arizona’s co-equal, fourth branch of government. The five Commissioners elected to the Corporation Commission oversee executive, legislative, and judicial proceedings on behalf of Arizonans when it comes to their water, electricity, telephone, and natural gas resources as well as the regulation of securities, pipeline, and railroad safety. To learn more about the commission and its commissioners, visit: .

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Arizona Corporation Commissioner Lea M谩rquez Peterson wrote identical letters to United States Sens. Kyrsten Sinema, D-Ariz., and Martha McSally, R-Ariz., requesting they work with their colleagues to ratify the U.S.-Mexico-Canada Agreement as soon as possible.

Gov. Doug Ducey appointed M谩rquez Peterson to the Arizona Corporation Commission, which regulates public utilities statewide, in May 2019. She is the first Latina to serve in a statewide office in Arizona.

鈥淎s a member of the Arizona Corporation Commission, I have the unique opportunity to comment on the USMCA from the perspective of a public utility regulator and the utilities and utility customers we represent,鈥� M谩rquez Peterson wrote in the letters.

鈥淔rom this perspective, I see the USMCA as providing net benefits for all signatories in the areas of energy, water, and telecommunications policy, which complement and support our push for a cleaner and more interconnected economy.鈥�

M谩rquez Peterson said she specifically supported the USMCA鈥檚 promotion of:

• Energy, including zero-tariff energy trade and the ability to share electricity across the border;
• Telecommunications, including full access to public and major suppliers鈥� networks;
• Electric vehicles, with incentives to encourage companies to build in Arizona;
• Utility infrastructure;
• Air quality, including enforcement of existing environmental laws to improve air quality in major metropolitan and rural areas across North America; and
• Water, including addressing land- and sea-based pollution, promoting waste management infrastructure and protecting Arizona鈥檚 natural water resources.

鈥淎s we begin to discuss building a more robust and interconnected regional grid in the west, we will necessarily need to consider how we connect and interact with our clean energy customers and suppliers on both sides of the Arizona-Sonora border,鈥� M谩rquez Peterson said.

鈥淢ore access to [electric] transmission infrastructure between these two partners will provide benefits and clean energy opportunities for everyone, while promotion of electric vehicles charging and production by manufacturers and suppliers will help both neighbors as they strive to achieve shared air quality goals across the region,鈥� she said.

Before her appointment, M谩rquez Peterson served as president and CEO of the Tucson Hispanic 番茄社区 of Commerce for almost a decade. The U.S. 番茄社区 of Commerce recognized the Tucson Hispanic 番茄社区 as the 鈥淗ispanic 番茄社区 of the Year鈥� in 2013, under M谩rquez Peterson鈥檚 leadership.

To view the letter to Sinema, .

To view the letter to McSally, .

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