TEP wants ACC vote on energy-saving plan

Oct 17 - Arizona Daily Star

Tucson Electric Power Co. wants state regulators to vote on a state-mandated energy-efficiency plan, citing delays that have put off the matter for more than a year.

The company's top executive wrote a letter to the Arizona Corporation Commission on Monday expressing disappointment that the matter wasn't scheduled for consideration during this week's regular open meeting.

But in a strongly worded rebuke, Corporation Commission Chairman Gary Pierce blamed TEP for the delay and said the utility should drop a request for performance incentive payments for reaching energy-efficiency goals.

TEP had proposed an array of new energy-efficiency programs to begin by mid-2011, to meet a state mandate. But the matter has been hung up over issues including the performance incentive and a proposal to allow TEP to recover some revenue it expects to lose as efficiency programs take hold.

After a series of hearings this summer, TEP's plan was expected to be considered by the Corporation Commission at its regular open meeting today and Thursday, but it wasn't put on the agenda.

On Monday, TEP Chairman and CEO Paul Bonavia wrote a hand- delivered letter to the five elected commissioners, imploring them to add the energy-efficiency plan to the agenda or to schedule a special meeting on the matter by the end of the month.

Bonavia said delaying the matter beyond Oct. 1 would jeopardize an updated plan backed by TEP and other parties to the case, including the state Residential Utility Consumer Office and groups representing business and environmental interests, because calculations used in the settlement are based on an Oct. 1 start date.

"This matter has been pending before the commission for 19 months, and any further delay in approval of the 2011-2012 plan will only serve to continue to deny TEP's customers the cost-effective energy efficiency programs that they overwhelmingly support and deserve," Bonavia wrote.

But in a letter Tuesday, Pierce blamed TEP for the most recent delay, saying that TEP officials specifically asked not to have the matter heard today, "leaving only a narrow and insufficient one- to two-hour window" to consider the matter on Thursday.

Pierce contended that TEP started the logjam last year by filing a proposal "sweetening by millions of dollars" a performance incentive the utility could reap for hitting its efficiency goals. The utility later rejected a plan proposed by the Corporation Commission staff in November 2011, which TEP called "confiscatory," Pierce said.

Pierce said hearings on the matter were held at TEP's request. "(The Corporation Commission) Staff's proposed energy efficiency plan for your company has not been approved because you demanded that it not be!" Pierce wrote.

TEP did file objections to the commission staff's plan, and in January the full commission decided to table the matter to give TEP and the other parties time to work out a compromise.

During a subsequent meeting in March, TEP wanted the commission to vote on a compromise plan that reduced or delayed some cost- recovery mechanisms, which lacked support of the commission's staff.

Instead, the commission voted 4-1 to send the matter to hearings before an administrative law judge.

During the March hearing, 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.

After hearings this summer, a commission hearing judge issued an order recommending a revamped proposal backed by TEP, the state Residential Utility Consumer Office and other parties to the case.

Administrative Law Judge Jane Rodda ruled that the updated plan is the quickest way to start achieving energy-efficiency results and stands the best chance of avoiding legal challenges. Customer comments were overwhelmingly supportive of the energy-efficiency plan, Rodda noted.

The plan would allocate $18.5 million for energy-efficiency programs through December 2013 and award TEP up to $5.5 million in performance incentives through 2013.

Pierce noted that the commission's own staff opposes the latest plan, contending that a new formula to calculate bill surcharges that support energy-efficiency programs will disproportionately affect small-business ratepayers.

The staff's recommended plan also would cut more than $2 million from the performance incentive.

Pierce said he delayed consideration of the plan because he is still researching "significant legal issues that are raised by TEP's proposal," including the precedence of increasing a performance incentive outside of a formal rate case.

Responding to Pierce's letter, a TEP spokesman said the company is prepared to address any legal concerns Pierce has.

"The updated energy-efficiency plan, we consider that to be a delicately negotiated agreement between all the different parties to the case, and we understand the commission still has some legal concerns about it," TEP spokesman Joe Barrios said. "So whenever it is placed on an agenda to be discussed or considered for a vote, we would be happy to respond to any concerns they might have."

Under standards unanimously approved by the Corporation Commission in 2010, TEP is required to achieve cumulative energy savings of 22 percent by 2020. Arizona is one of several states to adopt such standards, as a strategy to reduce the long-term costs and environmental effects of power generation.

To achieve that goal, TEP has proposed a major expansion of energy-efficiency programs - such as discounted home-energy audits and rebates for energy-saving improvements - funded by ratepayer surcharges.

TEP has suspended some efficiency programs it started with the expectation that its plan would win approval last year.

The Corporation Commission has agreed in principle that utilities should be allowed to recover some revenue lost to lower demand growth and has previously approved individual cost-recovery mechanisms for Southwest Gas Corp. and Arizona Public Service Co.

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

(The Corporation Commission) Staff's proposed energy efficiency plan for your company has not been approved because you demanded that it not be!"

Gary Pierce,

Corporation Commission chairman

Originally published by DAVID WICHNER, ARIZONA DAILY STAR.