AZ Leaders, Utilities, raise Concerns about California Actions and Electric Reliability

Published by The Bee News

August 4, 2021

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Arizona consumers at risk for power outages, higher energy costs

The Chairwoman of the Arizona Corporation Commission and an Arizona member of the Energy; Commerce Congressional committee, along with the state’s electric utilities, have sounded the alarm about recent actions taken by California that could disrupt electricity deliveries to Arizona.

The California Independent System Operator (CAISO) recently instituted practices that will increase costs and have adverse impacts on Arizona and other western utilities, according to a filing the utilities made this week at the Federal Energy Regulatory Commission (FERC). The filing asks FERC to
reconsider its decision to allow California to unfairly prioritize energy transactions that could harm Arizona and other states in the West.

“This decision is problematic for many Western states, including Arizona,” said ACC Chairwoman Lea Marquez Peterson. “Our electric utilities did the right thing and planned ahead, securing pre- negotiated contracts with utilities in the Pacific Northwest to ensure that critical hydropower would be
available to Arizonans when it would be needed the most which would be delivered across transmission lines through the state of California.”

Arizona Republican Cong. Debbie Lesko, a member of the U.S. House of Representatives Energy and Commerce Committee, this week grilled FERC officials about their decision regarding how CAISO will treat non-California utility transactions. “How does FERC justify approving a tariff that discriminates against other states in favor of California?” Lesko asked FERC Commissioner Mark Christie during a hearing. “Explain to me your
rationale for discriminating against other states that are paying in advance for a service and being denied that product per contractual obligations.”

At issue is the June 25 FERC Order that imposes a two-tiered system on Western power markets. Under the order, CAISO utilities will receive priority of power deliveries because they are located in California, while utilities and ratepayers in surrounding western states will be forced to pay a higher
amount for an uncertain amount of power delivered, to the extent they can receive any power at all.

The inability to receive power from the northwestern United States that Arizona utilities have contracted for – because California’s electric system may not deliver the power to Arizona, based on its new practices — could impact electricity reliability in Arizona and other Western states, according to
Patrick Ledger, the Chief Executive Officer of the Arizona Electric Power Cooperative. “Arizona Electric has a longstanding practice of working with our utility partners throughout the West to maintain reliability and support one another during emergency events such as heat waves in the summer,” Ledger said.

“This rulemaking threatens how we plan and operate our system, and we are disappointed with California’s decision to promote rules that are solely in their self-interest and are without concern for other regional utility partners.” Utilities will have to bear the cost of replacement power purchased on the open market to supplant electricity that may no longer be available through CAISO energy contracts. Electricity costs can skyrocket during times of scarcity – and the costs must be passed on to utilities’ customers; support for CAISO’s practice punishes smaller utilities who have planned ahead said
Russell Smoldon, Executive Director of the Arizona Municipal Power Users Association (AMPUA).

Allowing California to cherry pick our contracted power forces our small, mostly rural utilities back onto the open market to acquire power at a significantly higher cost. Support for this practice disincentives the strategic approach to power planning we have undertaken for decades to ensure we can provide reliable and affordable energy to our communities.

Representatives of other small electric systems echoed AMUPA’s concerns. “Rural Arizonans are especially at risk from California’s ‘steal what we need’ policy because getting power to rural folks is always more difficult,” said Bob Lynch, Executive Director of the Irrigation and Electrical Districts of Arizona.

AEPCO joined Arizona’s other electric utilities this week in filing a request for re-hearing with FERC, asking the agency to overturn its original ruling. In their request, the utilities state:
 The ruling is inconsistent with the Federal Power Act and the Commission’s open access transmission policy.
 The proposed requirements result in increased costs and have adverse impacts on utilities in Arizona and other states in the West.
 There are reduced opportunities to import power from the Pacific Northwest and “wheel through” California because the transmission access unfairly favors California utilities.
 The order erroneously approves an unjust and unreasonable and anti-competitive set of measures.

“The proposal unfairly prioritizes transmission service for CAISO over transmission service used for the export of power and wheel-through of power to other utilities across the Western United States and thus improperly jeopardizes the Arizona Utilities’ ability to serve their load with firm purchases that they have already made,” Arizona’s utilities commented to FERC. “FERC failed to sufficiently consider the concerns raised by affected entities and thus also failed to appropriately balance the interests of all affected stakeholders.”

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