Arizona

Summary The two investor-owned gas and electric utilities in Arizona, Arizona Public Service Company (APS) and Tucson Electric Power Company (TEP), operate a variety of demand-side management and energy efficiency programs, applicable to a range of customers. Program are administered by individual utilities and funding varies by utility. Programs are submitted to and approval is required from the Arizona Corporation Commission (ACC). According to the Energy Information Administration, Arizona utilities spent $31.9 million on energy efficiency in 2007, saving 312,736 MWh.

Under the Arizona Administrative Code, electric and gas utilities must file energy conservation plans which must, at least, include customer education and assistance programs to help the public reduce energy consumption and bolster participation in energy conservation programs sponsored by governmental agencies. Currently, energy efficiency programs are administered by investor-owned utilities. The Arizona Corporation Commission approves program funding and spending.

Arizona Public Service, a major investor-owed utility, operates a number of successful DSM programs for residential and non-residential customers. According to its 2009 resource plan that maps a strategy for the years 2009–2025, energy efficiency programs will continue to grow. Tucson Electric Power Company recently received approval for updates to its DSM Program Portfolio, which includes programs for both residential and non-residential customers. According to the Energy Information Administration, Arizona utilities reported efficiency program savings of 312,736 MWh in 2007, 0.4% of total retail sales.

UniSource Energy and Southwest Gas also operate some energy efficiency programs, offering rebates for installation of certain energy-efficient equipment.

Salt River Project, a public utility, recently released plans to ramp up its energy efficiency programs.

Back to Top

Energy efficiency programs in Arizona are funded through a systems benefits charge, collected through a non-bypassable surcharge on electricity bills, or through an adjustor mechanism, depending on the utility.  A non-bypassable charge is a charge applied to all customer bills in a given region whether they receive service from a local utility or from a competitive supplier. According to the Energy Information Administration, Arizona utilities spent $31.9 million on energy efficiency in 2007, 0.47% of their total spending. In August 2007, the Arizona Corporation Commission authorized an additional $3.5 million in annual demand-side management funding for Arizona Public Service and removed the 52% budget cap for APS’ Non-Residential Existing Facilities Program rebates and incentives.

Back to Top

On December 18th, the ACC ordered that all investor-owned utilities and rural electric cooperatives achieve 2% annual savings beginning in 2014. By 2020, the state should reach 20% cumulative savings, plus up to a 2% credit for peak demand reductions from demand response programs, for a total standard of 22%. Electric distribution cooperatives are required to meet 75% of the standard in any year. Utilities can count energy supply from combined heat and power systems that do not qualify under the state's Renewable Energy Standards towards the standard, as well as 1/3 of the measured savings from new building codes. Utilities are allowed to credit energy savings achieved during 2005-2010 towards the requirements beginning in 2016. For a copy of the approved ruling, click here, courtesy of SWEEP.

Back to Top

Decoupling reduces the financial disincentive for utilities to support energy efficiency by separating utilities’ profits from their levels of sales. Southwest Gas (SWG) has asked the Arizona Corporation Commission for a revenue decoupling mechanism.  The commission reviewed a recommendation on the SWG case in late 2008. At that time, the commission chose not to approve any of the mechanisms proposed by SWG.  The commission determined that consideration of revenue decoupling through the pending generic docket (G-00000C-08-0314; E-00000J-08-0314) is the appropriate method of addressing those issues. SWG was required to submit a report showing how the full revenue decoupling mechanisms proposed in the case would have affected customers if the mechanisms had been in effect from January 1, 2003 through December 31, 2008. (Docket G-01551A-07-0504, Decision 70665, Dec. 24, 2008).

Back to Top

Currently, only an APS shareholder incentive is in place, set at 10% of DSM program net economic benefits and capped at 10% of total DSM expenditures. APS proposed modifying this incentive mechanism in a new rate case filed in 2008, requesting recovery of net lost revenues as well as removal of the cap on the incentive.

Back to Top

Arizona utilities have developed diverse resource portfolios that include energy efficiency programs. To address anticipated demand increases, Arizona Public Service plans to continue to expand already successful energy efficiency programs to reduce use by 3,100 GWh by 2025. Arizona is also part of the Western Governor's Association. In June 2006, the governors signed resolutions to meet or exceed goals of 30,000 MW of clean energy by 2015 and a 20% increase in energy efficiency by 2020.

Back to Top

• Arizona Corporation Commission
• Southwest Energy Efficiency Project
• Arizona State Incentives for Renewables and Efficiency
• Arizona’s Energy Future, APS Resource Plan 2009 through 2025
• Arizona Energy Office

Last Updated 01/21/2010

Back to Top