Two of the major investor-owned gas and electric utilities in Arizona, Arizona Public Service Company and Tuscon Electric Power Company, operate a variety of demand-side management and energy efficiency programs, applicable to a range of customers. Programs are administered by individual utilities and funding varies by utility. Programs are submitted to and approval is required from the Arizona Corporation Commission (ACC). In December 2009, the ACC ordered that all investor-owned utilities and rural electric cooperatives achieve 1.25% annual savings, ramping up to 2% beginning in 2014. This EERS will ultimately result in 22% cumulative savings.
Arizona electric utilities budgeted $92.3 million on energy efficiency in 2010. Arizona electric utilities reported efficiency program savings of 570,634 MWh in 2009. Other utilities in Arizona offer more limited programs, focusing primarily on rebates for selected energy-efficient equipment.
Under the Arizona Administrative Code, electric and gas utilities must file energy conservation plans that must, at a minimum, include customer education and assistance programs to help the public reduce energy consumption and bolster participation in energy conservation programs sponsored by governmental agencies. Currently, energy efficiency programs are administered by investor-owned utilities. The Arizona Corporation Commission (ACC) approves program funding and spending.
Arizona Public Service (APS), a major investor-owned utility, operates a number of successful DSM programs for residential and non-residential customers. APS Request for Rate Increase, Docket No. E-01345A-08-0172S, was approved in January, 2010, as Decision Number 71460, which included its energy efficiency implementation plan. According to its 2009 resource plan that maps a strategy for the years 2009-2025, energy efficiency programs will continue to grow. Tucson Electric Power Company (TEP) recently received approval for updates to its DSM Program Portfolio, which includes programs for both residential and non-residential customers. According to the Energy Information Administration, Arizona electric utilities reported efficiency program savings of 570,634 MWh in 2009.
UniSource Energy and Southwest Gas also operate some energy efficiency programs, offering rebates for installation of certain energy efficient equipment.
Salt River Project, a public utility, recently released plans to ramp up its energy efficiency programs. It seeks to achieve 20% of its expected retail sales through the implementation of energy efficiency and renewable resources by FY 2020. The plans also set energy efficiency targets of 1.5% annual savings between 2012-2014, 1.75% between 2015-2017, and 2% between 2018-2020.
In Arizona, the Arizona Public Service Company administers a self-direct program that requires all eligible projects to meet existing cost-effectiveness standards applicable to cost-recovery mechanism (CRM) programs. Customers have access to 85% of their CRM fees to fund projects while 15% is retained for administrative costs, low-income programs, and measurement and verification. If a large enough project is developed that the money from a single year does not cover 100% of its cost, customers may continue to direct their CRM fees for up to 10 years until the project's costs are covered. More information on large customer self-direct programs can be found in the ACEEE report, Follow the Leaders: Improving Large Customer Self-Direct Programs.
Energy efficiency programs in Arizona are funded through a systems benefits charge, collected through a non-bypassable surcharge on electricity bills, or through an adjustor mechanism, depending on the utility. A non-bypassable charge is a charge applied to all customer bills in a given region whether they receive service from a local utility or from a competitive supplier. In 2010, electric program budgets totaled $92.3 million, and natural gas program budgets of $2.6 million. Arizona utilities spent $44.6 million on electric energy efficiency in 2008 and $56.7 million in 2009.
Reported budgets for energy efficiency programs for 2011 are in the State Spending and Savings Tables.
On December 18, 2009 the ACC ordered that all investor-owned utilities and rural electric cooperatives achieve 1.25% annual savings as a percent of the retail energy sales in the prior calendar year, ramping up to 2% beginning in 2014. By 2020, the state should reach 20% cumulative savings, plus up to a 2% credit for peak demand reductions from demand response programs, for a total standard of 22%. Electric distribution cooperatives are required to meet 75% of the standard in any year. Utilities can count energy supply from combined heat and power systems that do not qualify under the state's Renewable Energy Standards towards the standard, as well as 1/3 of the measured savings from new building codes. Utilities are allowed to credit energy savings achieved during 2005-2010 towards the requirements beginning in 2016.
Utilities must submit an annual implementation plan to detail progress in meeting goals and estimate cost and energy savings for programs over the next two calendar years. Utilities may recover the prudent costs of energy efficiency programs through a DSM tariff and the decision also allows utilities to request the Commission to consider the use of performance incentives to assist in achieving the goals.
Arizona also has natural gas efficiency standards aiming to achieve 6% cumulative savings by 2020.
The Arizona Corporation Commission recently provided authority for disincentive removal (revenue decoupling) and/or shareholder incentives for natural gas utilities (Docket No. 000009B-09-0428 Dec. No. 71855). On December 13, 2011, the ACC approved a full revenue decoupling mechanism for Southwest Gas as part of the utility's rate case (Docket No. G-01551A-10-0458).
Southwest Gas (SWG) had previously proposed a revenue decoupling mechanism, which was not approved. SWG was required to submit a report showing how the full revenue decoupling mechanisms proposed in the case would have affected customers if the mechanisms had been in effect from January 1, 2003 through December 31, 2008. (Docket G-01551A-07-0504, Decision 70665, Dec. 24, 2008).
Tucson Electric Power has proposed a mechanism including lost revenue recovery via an Authorized Revenue Requirement True-up (AART).
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Arizona Public Service (APS) has a tiered shareholder performance incentive that is based on a percentage of the net benefits from energy savings and capped as a tiered percentage of program costs. The maximum incentive APS can earn is 10% of net benefits for achieving savings above 125% of goals
Arizona utilities have developed diverse resource portfolios that include energy efficiency programs. To address anticipated demand increases, Arizona Public Service plans to continue to expand already successful energy efficiency programs to reduce use by 3,100 GWh by 2025. Arizona is also part of the Western Governor's Association. In June 2006, the governors signed resolutions to meet or exceed goals of 30,000 MW of clean energy by 2015 and a 20% increase in energy efficiency by 2020.
The evaluationof ratepayer-funded energy efficiency programs in Arizona relies on regulatory orders ( A.A.C R14-2-2409 and R14-2-2415). Evaluations are administered by the utilities. Arizona has established formal rules and procedures for evaluation, which are stated in A.A.C R14-2-2409 and R14-2-2415. Evaluations are conducted for each of the utilities. Arizona relies on the Social Cost Test (SCT) and considers it to be its primary cost-effectiveness test, the rules for which are stated in A.A.C R14-2-2401(36) and R14-2-2412(B).These benefit-cost tests are required for portfolio, total program, and individual measure level screening, with exceptions made for low-income, pilots, and new technologies.