Arizona utility regulator makes rich companies into victims while you pay more

Imagine Arizona repealing the anti-speeding statute because reckless drivers speed in the school zones.

That is how little sense the Arizona Corporation Commission Chairman Jim O’Connor made in defending the recent 4-1 vote directing staff to draft rules to repeal the renewable energy and energy efficiency standards.

Standards that have created tens of thousands of jobs in Arizona, reduced harmful pollution, saved billions of gallons of water and generated billions in net benefits.

This vote comes on the heels of O’Connor claiming that there is a “war on fossil-fuels” and the Republican majority approving two new natural gas turbines without any scrutiny or public comment — despite him admitting that solar and wind are “the least cost power options right now.”

O'Connor says this is about a free market

In scapegoating the standards for costing ratepayers billions of dollars in out of market priced contracts, O’Connor said precious little about the commission’s own malpractice.

Whose fault is it if the commission he leads failed to protect ratepayers from abuse and overreach by the greedy monopolies by permitting them to sign wasteful, money-losing contracts?

Are the standards to blame if the Republican majority on the commission repeatedly failed in its duty to determine that the monopolies had invested prudently?

O’Connor, the free-market defender, declared, “Market principles should underlie all decisions our utilities make to serve their customers.”

Cue the laugh track!

Yet monopoly utilities make us pay more

The irony is that the dominant, investor-owned utilities like APS, TEP and Southwest Gas are the greatest beneficiaries of the most extreme anti-market principles imaginable:

Monopoly status with no competition, the presumption of prudent investments, guaranteed profit margins from captive ratepayers — and add to that the monopolies-are-the-victims delusion by the O’Connor Commission.

Thanks to the Republican majority’s repeated anti-consumer decisions, the APS price premium compared to SRP has skyrocketed to 29% higher rates while TEP was 22% more expensive.

The higher rates resulted in the captive APS and TEP ratepayers forking over an extra $1.1 billion in 2023 alone, based on the EIA data analysis.

O’Connor floated the absurd theory that rates are too high because of government mandates while laughably reporting only their costs and none of the benefits. Another commissioner, Kevin Thompson, decried that mandates are “easily hijacked by financially interested stakeholders.”

He is not wrong.

The fact is that the state-sanctioned monopoly mandate is routinely hijacked by financially interested stakeholders like Guggenheim that benefit from making a market in the securities of APS, TEP and Southwest Gas while seeking compensation for investment banking services.

Ratepayers, not utilities, need help

In the meantime, ratepayers’ struggles keep mounting under an eye-popping increase in gas and electricity bills.

The price Southwest Gas charged in 2022 to Arizona’s residential consumers was already 33% higher than the U.S. average — and higher than the average price in 44 other states, according to the EIA data — while the company caused tremendous hardship by disconnecting service 81,477 times, mainly for non-payment.

To add insult to injury, the same Republican majority, with a former company lobbyist turned commissioner in tow, rewarded Southwest Gas with a 9.4% hike in early 2023 on top of a 7.1% rate hike in 2021, leading to the largest revenue increase in company history.

And if that wasn’t enough, the Republican majority handed out another $357 million increase starting in August 2023. And yet, Southwest Gas is salivating to file another rate case in the first quarter of 2024.

The same Republican majority’s approval of a 153% increase in the power supply adjustor and an attractive resolution for APS in the new court resolution surcharge, has already resulted in the APS rates soaring 12% in the summer of 2023.

Repealing energy standards makes this worse

But the situation is about to get much worse.

APS is pressing for an additional $527 million in base revenue, or a 15.5% residential rate upsurge.

The pocketbook damage of the 50% APS price premium over SRP will be incalculable if the commissioners sign off on the request.

When they repeal renewable energy and energy efficiency, the Republican majority will have achieved the terrible trifecta of at once harming the ratepayers, the environment and the economy.

Consumers can only hope that the captured Republican majority stops doing the bidding for powerful monopolies while gaslighting powerless ratepayers — or better yet, gets voted out in the November election.

Abhay Padgaonkar is a management consultant and a consumer advocate. Reach him at abhay.padgaonkar@gmail.com. 

This article originally appeared on Arizona Republic: Corporation Commission is no friend to ratepayers or the environment