Skip to content

State Energy Efficiency Policy Database

Arizona

#12

Related Publications & Documents

Related Items

Related External Links

Helps consumers, businesses, utilities, and local and state governments use energy efficiently.

and/or...  
Compare 2 or more States



Summary

Arizona’s utilities administer a growing portfolio of energy efficiency programs.  In 2009, the Arizona Corporation Commission (ACC) ordered that all investor-owned utilities must achieve 1.25% annual electricity savings starting in 2011, ramping up to 2% beginning in 2013. This energy efficiency resource standard (EERS) will ultimately result in 22% cumulative savings by 2020 (including a 2% credit for peak reductions from demand response). Regulated rural electric cooperatives are required to meet 75% of this standard. Arizona’s two largest investor-owned electric utilities, the Arizona Public Service Company and the Tucson Electric Power Company, operate a variety of demand-side management (DSM) programs applicable to a range of customers. Programs are administered by each utility and funding varies by utility. Program plans are submitted by utilities to the ACC and approval is required by the ACC before implementation. Arizona’s second largest electric utility, the Salt River Project (SRP), is a public utility and also offers a comprehensive range of efficiency programs.  The utility’s board approves SRP’s funding for demand-side management.

The most recent budgets for energy efficiency programs and electricity and natural gas savings can be found in the State Spending and Savings Tables on the left.

Links


Top of Page

November 8, 2013


Customer Energy Efficiency Programs

Under the Arizona Administrative Code, electric and gas utilities must administer efficiency programs to meet targets set by the state’s energy efficiency resource standard (EERS). The Arizona Corporation Commission (ACC) approves program funding and spending for regulated utilities. 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.

Arizona Public Service Company (APS), a major investor-owned utility and Arizona’s largest electric utility, operates a number of successful DSM programs for residential and non-residential customers. APS programs and energy savings targets are outlined in Docket No. E-01345A. The utility operates a variety of residential and non-residential programs. Tucson Electric Power Company (TEP) recently received approval for updates to its DSM Program Portfolio, which includes programs for both residential and non-residential customers.

UniSource Gas and Southwest Gas also operate some energy efficiency programs, including rebates for installation of energy efficient equipment.

Salt River Project, a public utility, has recently ramped up its energy efficiency programs. It seeks to achieve 20% of its expected retail sales through the implementation of energy efficiency and renewable resources by FY 2020. The utility has also set energy efficiency targets of 1.5% annual savings between FY 2012-2014, 1.75% between FY 2015-2017, and 2% between FY 2018-2020.

In Arizona, the Arizona Public Service Company administers a self-direct program option that requires all eligible projects to meet existing cost-effectiveness standards applicable to cost-recovery mechanism (CRM) programs.  Customers have access to 85% of their CRM fees to fund projects while 15% is retained for administrative costs, low-income programs, and measurement and verification.  If a large enough project is developed that the money from a single year does not cover 100% of its cost, customers may continue to direct their CRM fees for up to 10 years until the project's costs are covered. SRP also offers its large customers a self-direct option.

The most recent budgets for energy efficiency programs and electricity and natural gas savings can be found in the State Spending and Savings Tables on the left.

Links

Top of Page

November 8, 2013


Energy Efficiency Resource Standards

Summary: Cumulative annual electricity savings of 22% of retail sales, and natural gas savings of 6%, by 2020.

In 2009 the Arizona Corporation Commission ordered that, by 2020, each investor-owned utility must achieve cumulative annual electricity savings of at least 22% of its retail electric sales in calendar year 2019 through cost-effective energy efficiency programs (see Docket No. RE-00000C-09-0427 Decision No. 71436 and Decision No. 71819). Cumulative annual targets for electricity savings are specified for each year, beginning at 1.25% in 2011, and based on retail electricity sales in the previous calendar year.   Electric distribution cooperatives must propose an annual energy savings goal that is at least 75% of the standard in a given year.

Peak demand savings achieved through demand response programs are allowed to qualify for up to two percentage points of the total 22% cumulative goal (based on a standard conversion of demand to energy), but there is a limit to the amount of peak demand savings that can be applied to the energy efficiency standard in any given 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 energy efficiency standard, as well as one-third 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.

Utilities must submit an annual implementation plan to detail progress in meeting goals and estimate cost and energy savings for programs over the next two calendar years. Utilities may recover the prudent costs of energy efficiency programs through a DSM tariff and the decision also allows utilities to request the Commission to consider the use of performance incentives to assist in achieving the goals.

Arizona also has natural gas efficiency standards requiring 6% cumulative savings by 2020 (see Docket No. RG-00000B-09-0428 Decision No. 71855).  As in the case of electric cooperatives, gas cooperatives must propose annual savings goals that achieve 75% of the standard; propane companies must meet 50% of the standard. Energy savings from renewable energy projects sponsored by an affected utility may count towards meeting up to 25% of the standard in any given year.


Top of Page

August 9, 2013


Alternative Business Models

On December 13, 2011, the ACC approved a full revenue decoupling mechanism for Southwest Gas as part of the utility's rate case (Docket No. G-01551A-10-0458). 

On May 24, 2012, the ACC approved a partial revenue decoupling mechanism for the Arizona Public Service Company as part of the utility’s rate case (Docket No. E-01345A-11-0224).

On June 27, 2013, the ACC approved a partial revenue decoupling mechanism for the Tucson Electric Power Company as part of the utility’s rate case (Docket No. E-01933A-12-0291).


Top of Page

August 9, 2013


Reward Structures for Successful Energy Efficiency Programs

Arizona Public Service (APS) has a tiered shareholder performance incentive that is based on a percentage of the net benefits from energy savings and capped as a tiered percentage of program costs. The maximum incentive APS can earn is 8% of net benefits (capped at 16% of program costs) for achieving savings above 105% of goals (See Dec. 71448 (at page 28)).

  • Review relevant Dockets by searching here.

Top of Page

August 9, 2013


Energy Efficiency as a Resource

Arizona utilities have developed diverse resource portfolios that include energy efficiency as a resource. To address anticipated demand increases, Arizona Public Service and Tucson Electric Power plan to continue to expand already successful energy efficiency programs.

For more information on energy efficiency as a resource, click here.


Top of Page

August 8, 2013


Evaluation, Measurement & Verification
  • Cost-effectiveness test(s) used: SCT
  • Uses a deemed savings database: no

The evaluation of ratepayer-funded energy efficiency programs for Arizona’s regulated utilities relies on regulatory orders ( A.A.C R14-2-2409 and R14-2-2415). Evaluations are conducted by third-parties for each of the regulated utilities. Arizona has established formal rules and procedures for evaluation, which are stated in A.A.C R14-2-2409 and R14-2-2415. Arizona relies on the Social Cost Test (SCT) and considers it to be its primary cost-effectiveness test, the rules for which are stated in A.A.C R14-2-2401(36) and R14-2-2412(B).These benefit-cost tests are required for portfolio, total program, and individual measure level screening, with exceptions made for low-income, pilots, and new technologies. 


Top of Page

August 9, 2013