State slows new TEP efficiency programs

Apr 11 - Arizona Daily Star

Consumer rebates among areas delayed by concerns over cost

There will be no new energy-efficiency programs for Tucson Electric Power Co. customers - at least for the time being.

State regulators delayed action Friday on a year-old proposal that would have greatly expanded things like rebates for energy- efficient lighting, amid concerns over the cost of the state- mandated programs.

The Arizona Corporation Commission decided on a 4-1 vote to launch potentially lengthy evidentiary hearings to overhaul TEP's plan - citing in part the threat of legal action by opponents of the proposed plan, including major business ratepayers.

Because the commission effectively tabled the matter, TEP energy- efficiency offerings such as rebates for higher-efficiency heating and air conditioning units will continue at levels set more than a year ago, and no new programs will be offered for now.

That doesn't sit well with folks like Hank Krzysik, a Tucson architect who was planning to help his local church, Our Mother of Sorrows Catholic Church, save 80 percent on its lighting bill by switching to high-efficiency lighting with help from one of TEP's proposed programs.

"By not approving this modified energy-efficiency plan, they have stymied a lot of work, a lot of development, and stymied the economy," said Krzysik, an Our Mother of Sorrows member who specializes in sustainable architecture and drove to Phoenix for Friday's hearing.

"This is a significant step backward," said Jeff Schlegel, Arizona representative of the Southwest Energy Efficiency Project.

"First, it stops any new programs from moving forward, and second, it rolls back the level of service TEP customers have come to expect in recent months."

But Corporation Commission Chairman Gary Pierce said there were simply too many issues to be resolved to allow the plan to move forward now.

"We're basically stabilized until we get through this evidentiary hearing," said Pierce, one of three Republicans on the elected, five- member panel.

Pierce said the delay in the case was due to several factors, including the difficulty in reconciling any cost-recovery mechanism with the company's last general rate settlement in 2008.

"We ended up with one delay after another, and then we got into the merits of it and it was obvious something had to be worked out," he said.

Commissioner Paul Newman, a Tucson Democrat and fervent proponent of energy-efficiency and renewable-energy programs, urged the commission to adopt the plan as a bridge to a more comprehensive plan next year.

"This is a nonpartisan issue, and I'm concerned that we have continuity in our energy efficiency programs, and here they're going to be delayed by these long hearings - it's problematic," Newman said.

The Corporation Commission enthusiastically approved new energy- efficiency standards in 2009, requiring TEP and Arizona Public Service Co. to achieve cumulative energy savings of 22 percent by 2020.

Adopted in some form by more than half the states, such ratepayer- supported programs are based on the expectation that long-term energy savings achieved through programs such as rebates for more efficient lighting defer the need to build new power plants.

TEP filed its most recent plan in January 2011, proposing greatly expanded efficiency programs, along with mechanisms to recover fixed- cost revenue lost because of reduced energy demand.

But that plan didn't fly with the Corporation Commission staff and some official parties to the case, including a group of business ratepayers who said the plan would result in unreasonably high increases in the fees customers pay to support energy-efficiency programs.

Republican commissioners including Pierce and Brenda Burns also objected to TEP's plan, contending that the cost-effectiveness of the programs and lost-revenue issue need more study and debate.

Working with parties including the state Residential Utility Consumer Office (RUCO) and the Southwest Energy Efficiency Project (SWEEP), TEP filed a modified plan that reduced or put off cost- recovery mechanisms.

The commission staff filed its own proposals, including one alternative granting TEP a waiver from complying with the energy- saving goals - something TEP said it supported only as a last resort.

A business group, Arizonans for Electric Choice & Competition (AECC), agreed with much of the modified plan. But the group backed a cap on customer surcharge increases and contended that the cost- recovery mechanism could be legally challenged as improper outside of a general rate case. The AECC's membership includes Asarco LLC, Walmart, Intel, Honeywell and Freeport McMoRan Copper & Gold Inc.

Freeport McMoRan, one of TEP's biggest customers, proposed an amendment that would exempt it from paying energy-efficiency surcharges if it spent $10 million annually on its own for efficiency improvements.

C. Webb Crockett, a Phoenix lawyer representing Freeport, said that under TEP's original plan, the company would pay upwards of $5 million annually on top of current fees for efficiency programs.

Newman opposed any exemption for Freeport.

"We can't just start making exceptions for the big dogs, to have them self-administer - that hurts all consumers," he said.

In pushing for hearings, Pierce cited the need to study the issues and the possibility that the plan could be challenged in court. The commission recessed once Friday to go into closed-door executive session to get legal advice.

Besides legal issues surrounding TEP's cost-recovery, Pierce said the commission needs to thoroughly vet the new plan to avoid intervention by the Legislature, which has challenged the commission's authority to set state energy policy beyond setting rates.

"I think all five of us (commissioners) strongly support energy efficiency, but we're going to get the plan right and we're going to get the legality right, that's for certain," said Pierce, who has said he doesn't believe the commission has sole authority to set energy policy.

Current energy-efficiency programs will be continued, under funding at levels set in 2010, and some new programs already approved by the commission would not be offered to customers for lack of funding, TEP President David Hutchens told the commission.

A TEP spokesman said the company was disappointed by Friday's decision but is ready to provide the commission with any information needed to formulate an acceptable plan.

The future of some new programs, including a subsidized, $99 home energy audits offer launched last year, is unclear.

TEP is in the process of evaluating its programs and will continue them as it can, albeit some at reduced levels, spokesman Joe Barrios said.

Contact Assistant Business Editor David Wichner at dwichner@azstarnet.com or 573-4181.

Originally published by DAVID WICHNER, ARIZONA DAILY STAR.