GVC Corner: Utility deregulation may raise costs

September 9, 2013
Green Valley News
Stan Riddle

There is an issue pending before the Arizona Corporation Commission that we believe very few residents in Arizona know anything about. But if it is approved by the commission, it could affect the pocketbooks of residents and small business owners.

The issue is the deregulation of an electrical utility.

Earlier this month, GVC representatives met with Steve Eddy and Joe Salkowski of Tucson Electric Power to discuss proposed deregulation.

Arizonans for Electric Choice and Competition, formed in 1997, is leading the push to deregulate the electrical utility and open it up to competition that could come from potential power supply sources outside of the state. It further states that competition creates the ability to evaluate and shop for the best energy option, just like with cable, Internet and telephone service.

On the other hand, it is stated that if deregulation were to take place, these new energy companies would seek the biggest users of electricity, offering them lower rates, but lacking the incentive to provide reliable power to a broad base of consumers.

As a result, utility companies like TEP would be left with less revenue to cover their fixed costs, so remaining residential and business customers, whose business is not as appealing to these outside providers, would have to pay more through higher rates to cover TEP's fixed costs.

It should also be noted that deregulated energy markets require an independent system operator or other comparable entity to oversee grid operations and ensure that enough generation is available to meet anticipated customer demand — a service currently provided by regulated utilities. Such entities add a layer of costly bureaucracy that must be paid for through higher electric rates.

Conversely, it is stated that competition has proven to increase renewable energy use. Many competitive providers offer a variety of renewable energy options to consumers, with some able to select 100 percent of their electricity from renewable sources.

If the commission approves retail competition, TEP and other regulated utilities would be entitled to accelerated recovery of power plant cost, renewable energy supply contracts and other expenses incurred pursuant to their regulatory obligation to serve customers.

When deregulation was tried in California, it was a complete disaster, leading to power shortages, blackouts and out-of-control pricing. It was so bad that in 2002, the Arizona Corporation Commission halted the program in Arizona, but now it is being considered once more.

Currently, customers in Arizona enjoy some of the lowest rates in the region and the nation — 11.1 cents/kw hour.

Following the review of the "pros and cons" on this issue that we understand will be on the commission agenda prior to the September GVC Board of Representatives meeting, the GVC Executive Board voted unanimously against deregulation of the electrical utility.

We have advised the commission of the Council's position.

If you wish to look at the details provided by both sides on this issue, please stop by our offices. If you want to voice your opinion, write to the Arizona Corporation Commission, 1300 West Washington Street, Phoenix, AZ 85007.

Green Valley resident Stan Riddle is president of the Green Valley Council.

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