​Arizona Corporation Commission
1200 W. Washington Street
Phoenix, AZ 85007
 
RE: Comments on the August 30, 2024 Utilities Division Memorandum and Amendments, Docket No. E-99999A-22-0046
 
Chairman and Commissioners,
 
On August 30, 2024, Commission Staff filed a Memorandum with their recommendations as to the Integrated Resource Plans (IRP) of Arizona Public Service (APS), Tucson Electric Power (TEP), UNS Electric (UNSE), and Arizona Electric Power Cooperative (AEPCO).[1] AriSEIA participates on the Resource Planning Advisory Council (RPAC) for APS and TEP and has for many years.
 
        I.            AriSEIA IRP Engagement
 
AriSEIA first filed in this docket on April 28, 2023 expressing concerns about the delay with APS and TEP providing the modeling licenses that were required from the 2020 IRP Order (Decision No. 78499).[2] It had been 15 months and stakeholders still did not have nondisclosure agreements (NDAs) executed, licenses, or utility data. At that time, we asked for an IRP filing extension, as it takes months to review these models. AriSEIA reiterated these concerns verbally at the June 21, 2023 Open Meeting.
 
AriSEIA also hired a consultant and obtained a modeling license for this IRP. AriSEIA filed two different sets of comments in this docket on January 31, 2024. The comments we filed with our consultant, Rocky Mountain Institute (RMI), are 263 pages long.[3] These comments included comprehensive slides as to their review of the modeling done by APS (60 slides) and TEP (63 slides). We presented this work one on one with each utility and to each RPAC (four total presentations). Plus, RMI provided a presentation to each RPAC on IRP best practices (another two presentations, for six total presentations). We also provided an abbreviated version of the slides to Commission Staff, which we presented at the IRP workshop on July 31, 2024. AriSEIA also attended all of the modeling trainings and briefed APS on what we intended to do with the model before we ever obtained a license. AriSEIA also filed individual comments on the IRP on January 31, 2024, which were 142 pages in length.[4] Those comments focused on our recommendations for the next IRP (the 2026 IRP). Those recommendations are worth repeating here, as many of them are not included in Staff’s recommendation. Namely we recommend retaining the following requirements from the 2020 IRP Order:

• A comprehensive analysis of power system resiliency to extreme weather[5]
• Discussion of the load serving entities’ (LSE) gas price assumptions[6]
• A variety of potential portfolios[7]
• An analysis of resource adequacy[8]
• A requirement to provide stakeholders with modeling licenses[9]
• A requirement to eliminate must run designations,[10] as well as restrictions on the economic cycling of plants[11]
• A requirement that the utilities accurately account for the costs of hydrogen[12]
• A requirement that the utilities continue to include relevant tax credits in their modeling[13]
• A requirement that the utilities evaluate the emissions reductions of their portfolios[14]
• A requirement for the utilities to select a preferred portfolio[15]
• A requirement that both TEP and APS use capacity expansion modeling[16]

We also recommended the inclusion of the following new requirements:

• That the next IRP be filed in 2026.
• That TEP and APS be required to continue using a Resource Planning Advisory Council (RPAC) process to hold at least monthly meetings and commence at least one (1) year in advance of the next IRP filing deadline.
• That TEP be required to file a complete plan and actually use capacity expansion modeling similar to APS’ modeling and plan in this docket.
• That TEP and APS be required to continue using ASRFPs for procurement of new resources.
• That the RPAC be utilized to improve the ASRFPs prior to release and be apprised of the results thereafter.
• That modeling licenses, nondisclosure agreements, any necessary training, and preliminary data be provided to stakeholders at least six (6) months prior to the IRP filing deadlines.
• That the final data be provided to stakeholders at least three (3) months prior to the IRP deadline.
• That the preferred portfolio be provided to the RPAC at least two (2) months prior to the IRP filing deadline.
• That the utilities be required to run at least ten (10) different portfolios that evaluate a variety of different scenarios developed in concert with their RPACs.

The majority of these recommendations were not included in Staff’s recommendation. AriSEIA also filed a letter to this docket on August 27, 2024 in response to APS and TEP comments that stakeholders that obtained modeling licenses had not appropriately used those licenses.[17] That letter noted that fifteen different organizations filed stakeholder comments on the IRP on January 31, 2024. To our knowledge, the only stakeholder groups to obtain licenses were AriSEIA, Western Resource Advocates (WRA), and Sierra Club. All of those organizations hired consultants to evaluate the models. All of those groups filed comments on January 31, 2024, and presented at the Commission’s IRP workshop on July 31, 2024. All of the slides the stakeholders presented at that workshop were also filed in the docket.[18]

The Sierra Club filed 36 pages of single spaced comments on the APS plan[19] and 26 single spaced comments on the TEP plan[20] on January 31, 2024 and hired Synapse Energy Economics, Inc. to review the models. WRA filed 24 pages of single spaced comments on the TEP plan[21] and 49 pages of single spaced comments on the APS plan.[22] WRA hired Energy Strategies as their consultant on the model analysis, as well as to conduct their own modeling. Sierra Club and WRA also presented their work to the RPAC. Other than Staff, AriSEIA is not aware of any other stakeholder obtaining a modeling license. Collectively, the stakeholders that obtained modeling licenses filed 540 pages of analysis and gave at least 11 presentations on our work between the RPAC, the utilities, and the Commission. And that is despite the fact that we received the licenses and data from the utilities very late in the process. Until TEP filed comments on May 31, 2024, it had never before been asserted that the stakeholders had used the licenses insufficiently.[23] APS did not assert there was any deficiency with the stakeholder use of the licenses until August 26, 2024, nearly seven months after the stakeholders filed their comments.[24]
 
     II.            Staff Recommendation
 
AriSEIA did no less work than Staff did with the modeling license. In Staff’s recommendation, they wrote:
 
"Staff did find value in being able to navigate the software and step through the inputs in the project files…. Staff believes this software is important for Staff’s analysis in the IRP process. Staff recommends that APS, TEP, and UNSE continue to provide Staff` with a license to the Aurora Modeling Software."[25]
 
Staff then acknowledges the numerous issues stakeholders had in obtaining licenses from the utilities, stating:
 
"Stakeholders in the RPAC stated that they experienced difficulties with fully utilizing the licensing that was provided because of timelines and insufficient data sharing. As a result, stakeholders modeling effects were not as impactful as they could have been. APS only provided the project files for its reference case and TEP and UNSE only provided the project files for its base case."[26]
 
Despite Staff stating that even though they did not do their own modeling and acknowledging the many issues stakeholders encountered with the utilities in being able to access the models, Staff removes the requirement to provide modeling licenses to stakeholders. The 2020 IRP order stated:
 
"IT IS FURTHER ORDERED that Arizona Public Service Company, Tucson Electric Power Company, and UNS Electric, Inc. shall in future Integrated Resource Plans negotiate a project-based licensing fee that permits up to 12 Resource Planning Advisory Council members and Staff the ability to perform their own modeling runs in the same software package as these load serving entities, and to provide all necessary data and support to fully utilize the models. The load serving entities shall absorb the cost of the licensing fees."[27]

Despite recommending removal of this requirement, Staff then states that “Staff believes that transparency in the IRP process is important to develop comprehensive IRPs.”[28] However, removing the requirement to provide access to the modeling inhibits transparency. Staff’s only stated reason for removing the modeling requirement for stakeholders is cost.[29] However, a reimbursement model would not lower costs. In fact, because it would create additional administrative burdens, it would likely cost more. There is nothing in the Staff Recommendation that articulates the process by which Staff or the utilities will manage a reimbursement program. Some initial questions include:
 
·         Who will manage and monitor this program?
·         By what date must the utilities reimburse the costs of the modeling licenses?
·         What is the deliverable that stakeholders must provide to the utilities and by when?
·         What is the remedy process should there be a dispute?
 
Additionally, it is unclear if the utilities will be able to negotiate a reduced rate license if the stakeholders are to procure the licenses on their own to be potentially reimbursed someday if the utilities, in their sole discretion, deem it warranted. For example, WRA objectively met the never before stated requirement to model their own portfolios (something Staff admits they did not do). Therefore, if only WRA is entitled to reimbursement and that license is astronomically more expensive than the negotiated bulk licenses procured by the utility, the reimbursement could be higher than it is with the current system.
 
Further, a reimbursement program would make it impossible for small nonprofits, such as AriSEIA, to participate at all. AriSEIA has never missed an RPAC meeting. AriSEIA has objectively actively engaged in this docket. It has never been asserted that we do not participate or contribute and yet, under the Staff Recommendation, we are the stakeholder that would be excluded from this process going forward. AriSEIA reached out to Staff three times before this filing in an attempt to understand what problem they are trying to solve with their recommendations, but we were not provided the opportunity to discuss this issue.
 
AriSEIA objects to Staff recommendations 7 and 8 (also known as G and H). Those recommendations will not increase transparency. There is also no evidence that those recommendations will save ratepayers’ money.
 
AriSEIA also objects to Staff recommendation 13 (also known as M). The proper way for the Commission to modify a prior order is through A.R.S. § 40-252. Also, the Staff Recommendation is missing several of the items listed on page 2 above from the 2020 IRP Order that are still very valuable, such as:

• A comprehensive analysis of power system resiliency to extreme weather like heat and wildfires,
• Discussion of the LSE’s gas price assumptions,
• An analysis of resource adequacy,
• A requirement to eliminate must run designations as well as restrictions on the economic cycling of plants,
• A requirement that the utilities accurately account for the costs of hydrogen,
• A requirement that the utilities continue to include relevant tax credits in their modeling, and
• A requirement that both TEP and APS use capacity expansion modeling.

AriSEIA also recommends the utilities model ten, not seven, portfolios in the 2026 IRP. Staff recommended only seven in its recommendation 14 (also known as N).
 
The Commission removed the requirement for Staff to obtain a consultant to provide an independent review of the IRPs.[30] This is reason enough for continued stakeholder access to the models. Removing the third party requirement and limiting stakeholder participation in the IRP docket is a step in the wrong direction and takes us back to the backbox utility IRPs that we not acknowledged by the Commission in prior years.[31] This is the first time the utilities have ever provided modeling access and no evidence has been provided that those licenses were misused. No evidence has been provided that removing that requirement will save ratepayers money. Therefore, AriSEIA has provided two Proposed Amendments below.
 
  III.            Battery Storage
 
Baseload resources are resources that run consistently all or most of the time. Nuclear is an example. You are not going to ramp up and down a nuclear plant based on changes in demand. Dispatchable resources are resources that can be increased or decreased on demand as the needs of the grid change. Some resources are both, such as geothermal and hydropower. They can be run consistently or they can be ramped up and down based on needs. Some resources like gas peakers (combustion turbines (CTs)) and batteries are dispatchable, but are not baseload. Batteries can be dispatched as needed.[32]
 
There are many kinds of storage, batteries are one type. There are many different kinds of battery technologies and they have different capabilities. There are lithium ion batteries, redox flow batteries, lead batteries, vanadium redox flow batteries, nickel-cadmium batteries, sodium sulfur batteries, iron-chromium flow batteries, and zinc-bromine flow batteries.[33] The durations of these technologies range from two hours to ten hours.[34] Indeed, Salt River Project (SRP) has a ten hour flow battery expected to be operational by Q1 of 2026.[35]
 
Batteries are dispatchable. Therefore, they should not be excluded from the Commissioner Thompson and Commissioner Myers Joint Proposed Amendment No. 1. Further, singling out specific technologies undermines the utilities’ usage of all source requests for proposals (ASRFPs). The entire point of moving to ASRFPs is so that all resources have a level playing field on which to compete on cost and utility needs. The Commission singling out specific technologies that cannot be used for capacity or resource planning will jeopardize affordability. Further, it undercuts innovation. Why would the Commission want to choose winners and losers in a game with constantly improving technology? Additionally, specifically eliminating certain technologies makes the utilities more vulnerable to supply chain constraints. A war, natural disaster, new political administration, global pandemic, port strike, etc. can all impact which technologies are available and affordable at any given time. Why would the Commission want to constrain those options?
 
As the amendment is drafted, the only resources that appear to count as “dependable and dispatchable capacity, not including battery storage” but also “approved” after December 31, 2024 and before 2031 would be gas peakers (CTs). Specifying how much of what kind of resource a utility must buy and when, in order to make an additional decision about which plants to retire, is very prescriptive and may be more of a managerial decision than a regulatory one.
 
Finally, because APS first announced it was closing Four Corners in 2020. It is not clear why the new capacity resources that APS must procure to replace Four Corners need be procured only after December 31, 2024. All capacity resources APS procures to replace Four Corners should count for resource adequacy purposes.
 
That being said, AriSEIA understands the purpose of the Amendment and has suggested a friendly amendment below to maintain the spirit of the Amendment while being technology agnostic.
 
  IV.            Commissioner and Staff Amendments
 
AriSEIA has reviewed the documents filed by Staff, Commissioner Myers, and Commissioner Thompson.
 
AriSEIA supports Staff Proposed Amendment No. 1. The utilities have been clear that the coal retirement dates are economic decisions.

AriSEIA opposes Staff Proposed Amendment No. 3. This amendment makes the data that the utilities are to provide to stakeholders with the modeling licenses more ambiguous. “Portfolios” are more specific. If Staff wishes to add “information” it should be additive to and not in lieu of the “portfolios.”

AriSEIA opposes Staff Proposed Amendment No. 2. This language is removed by AriSEIA Proposed Amendment No. 1. Further, this language is redundant. For the stakeholder to have modeling results, they would have to use the software.

AriSEIA supports Commissioner Myers Proposed Amendment No. 3. Ensuring the accuracy of load forecasts is essential for maintaining reliability and ensuring affordability.

AriSEIA supports Commissioner Myers Proposed Amendment No. 6. Regional markets participation is a relevant factor that can impact resource selections and costs and should be included in long term planning.

AriSEIA has offered a friendly amendment to Commissioner Thompson and Commissioner Myers Joint Proposed Amendment No. 1. AriSEIA supports efforts to ensure resource adequacy, but does not think the Commission should exclude any technologies that provide “dependable and dispatchable capacity.” Please see AriSEIA Proposed Amendment No. 3.
 
Respectfully,
/s/ Autumn T. Johnson
Executive Director
AriSEIA 
(520) 240-4757
[email protected]

[1] Arizona Corporate Commission, Staff’s Integrated Resource Plans (IRP) Recommendation, August 30, 2024, Docket No. E-99999A-22-0046, available here https://docket.images.azcc.gov/E000037784.pdf [hereinafter Staff Recommendation].

[2] AriSEIA, Letter to Commission on IRP, April 28, 2023, Docket No. E-99999A-22-0046, available here https://docket.images.azcc.gov/E000026311.pdf?i=1727931647086.

[3] AriSEIA, Vote Solar, and Advanced Energy United, Joint Comments to Commission on IRP, January 31, 2024, Docket No. E-99999A-22-0046, available here https://docket.images.azcc.gov/E000033451.pdf?i=1727931647086.

[4] AriSEIA, Comments to Commission on IRP, January 31, 2024, Docket No. E-99999A-22-0046, at 4-5, available here https://docket.images.azcc.gov/E000033415.pdf?i=1727931647086.

[5] Arizona Corporate Commission, Staff Assessment of 2020 IRP, March 2, 2022, Decision No. 78499, at 11:1-2,  available here https://docket.images.azcc.gov/0000206081.pdf?i=1700515655944 [hereinafter 2020 IRP Order].

[6] Id. at 11:8-13.

[7] Id. at 13:10-16.

[8] Id. at 14:5-8.

[9] Id. at 14:9-14.

[10] Id. at 14:15-17.

[11] Id. at 14:22-25.

[12] Id. at 15:1-3.

[13] Id. at 15:4-6.

[14] Id. at 15:7-9.

[15] Id. at 15:14-16.

[16] Id. at 17:15-17.

[17] AriSEIA, Letter to Commissioners, August 27, 2024, Docket No. E-99999A-22-0046, available here https://docket.images.azcc.gov/E000037591.pdf?i=1727931647086.

[18] Utilities Division Staff, IRP Memorandum, July 29, 2024, Docket No. E-99999A-22-0046, available here https://docket.images.azcc.gov/E000036917.pdf?i=1727931647086.

[19] Sierra Club, Comments on the APS 2023 IRP, January 31, 2024, Docket No. E-99999A-22-0046, available here https://docket.images.azcc.gov/E000033488.pdf?i=1727931647086.

[20] Sierra Club, Comments on the TEP 2023 IRP, January 31, 2024, Docket No. E-99999A-22-0046, available here https://docket.images.azcc.gov/E000033487.pdf?i=1727931647086.

[21] WRA, Notice of Filing Comments on the 2023 IRP of TEP, January 31, 2024, Docket No. E-99999A-22-0046, available here https://docket.images.azcc.gov/E000033471.pdf?i=1727931647086.

[22] WRA, Amended Notice of Filing Comments on the 2023 IRP of APS, January 31, 2024, Docket No. E-99999A-22-0046, available here https://docket.images.azcc.gov/E000033473.pdf?i=1727931647086.

[23] TEP, Response to Stakeholder Comments, May 31, 2024, Docket No. E-99999A-22-0046, available here https://docket.images.azcc.gov/E000035982.pdf?i=1727931647086.

[24] APS, Response to Commissioner Questions, August 23, 2024, Docket No. E-99999A-22-0046, available here https://docket.images.azcc.gov/E000037555.pdf?i=1727931647086 (APS asserts they purchased a total of six licenses for stakeholders. It is unclear if this number includes Staff. It is unclear who the additional licenses were for and contradicts information APS has provided as to the total amount spent on the licenses. It also falsely asserts that “APS is not aware of whether any other stakeholders utilized the remaining licenses,” despite us presenting at least 11 total times.)

[25] Staff Recommendation at 86.

[26] Id. at 86-87.

[27] 2020 IRP Order at 14:9-14.

[28] Staff Recommendation at 87.

[29] Id.

[30] Arizona Corporate Commission, Order, June 20, 2024, Decision No. 79385, Docket No. E-00000V-15-0094, available here https://docket.images.azcc.gov/0000211300.pdf?i=1727936736722.

[31] Arizona Corporate Commission, Order, March 29, 2018, Decision No. 76632 at 53:4-6, Docket No. E-00000V-15-0094, available here https://docket.images.azcc.gov/0000186964.pdf?i=1727936284687.

[32] American Clean Power, Clean Energy Storage Facts, available here https://cleanpower.org/facts/clean-energy-storage/.

[33] American Clean Power, Battery Storage, available here https://cleanpower.org/facts/clean-energy-storage/battery-storage/.

[34] Id.

[35] Salt River Project and CMBlu Energy Announce Launch of Innovative Long-Duration Energy Storage Project, Aug. 31, 2023, available here https://media.srpnet.com/salt-river-project-and-cmblu-energy-announce-launch-of-innovative-long-duration-energy-storage-project/. 

AriSEIA filed its opening brief in the TEP rate case on May 26th highlighting our recommendations on the revenue requirement (including return on equity (ROE) and common equity ratio), as well as rate design (including community solar, a bring your own device/virtual power plant proposal, tariff re-designs for R-TECH and LGST-SP, and ending the distributed generation (DG) meter fee). 

Arizona Corporation Commission
1200 W. Washington Street
Phoenix, AZ 85007
 
Re: Support for Approval of Revisions to Rate Schedule E-32 L SP, Docket No. E-01345A-22-0281
 
Chairman O’Connor and Commissioners,
 
Vote Solar and the Arizona Solar Energy Industries Association (AriSEIA) are supportive of the Arizona Public Service (APS) Company’s Application for the approval of revisions to rate schedule E-32 L SP and encourage the Commission to approve this rate.
 
APS’ proposed revisions are pursuant to Decision No. 78317 (November 9, 2021), which directed APS to engage in a collaborative with interested stakeholders to explore possible improvements to E-32 L SP (Large General Service Storage Pilot).[1] Following a series of collaborative meetings that took place from February to October 2022, APS has proposed revenue-neutral design changes that improve upon the Large General Service Storage Pilot rate.

The Large General Service Storage Pilot rate is a pilot rate available to large commercial customers who choose to adopt energy storage systems. The purpose of E-32 L SP is to promote the economic dispatch of customer-sited energy storage systems in a manner that aligns with high peak load. To date, no customers have chosen to take service on E-32 L SP. APS’ revisions to the rate include higher energy charges during all hours and months of the year, and significantly higher energy charges during summer on-peak periods between 4:00 and 9:00 PM. Demand charges have been reduced commensurately, resulting in a rate design that is overall revenue-neutral. 
 
APS’ revisions address a flaw in the current E-32 L SP by increasing the emphasis on volumetric energy rates. As a result, the revised Large General Service Storage Pilot will provide greater investment certainty for commercial customers. Demand charges present operational challenges for customers seeking to reduce their energy bills because they are calculated based on the customers’ highest 15-minute period of energy usage throughout the month. A customer who proactively dispatches their energy storage system during all but a single 15-minute period of the month will pay a demand charge equal to what they would have paid had they not adopted energy storage at all. Demand charges can penalize customers who adopt energy efficient technology, especially new and unfamiliar technology, because it is challenging to forecast savings and there is significant risk that small changes in operation of the energy storage system could threaten forecasted savings. In contrast, emphasis on volumetric rates gives customers the opportunity to save money on their utility bill in a manner that is proportional to the benefit they are providing through dispatch of energy storage during times of peak load. APS’ proposed revisions - particularly the increases in the summer on-peak energy rate from 6.5 cents per kilowatt-hour to 17.6 cents per kilowatt-hour - maintains a strong price differential that will encourage the dispatch of customer-sited storage during periods of high load in the summer.
 
We recommend one additional change to the E-32 L SP tariff. While the current tariff defines the on-peak period as 4:00 to 7:00 PM on weekdays, the revised tariff re-defines the on-peak period as 4:00 to 9:00 PM every day. We recommend narrowing the on-peak window to weekdays, as this better aligns with the hours when APS is most likely to experience high customer load and normal hours of business operations. The Commission could direct APS to evaluate this change as part of their current rate case in Docket No. E-01345A-22-0144. We do not wish this evaluation to delay approval of the revised tariff at the May 2 Open Meeting.
 
Arizona is poised to lead on the adoption of distributed battery storage through the development of rates that encourage economically efficient adoption of customer-sited batteries. Increased adoption of customer-sited batteries gives utilities an additional tool to flexibly and cost-effectively meet their customers’ energy needs and can provide significant cost and grid resilience benefits for all ratepayers. We appreciate APS’ efforts to work with stakeholders to improve the E-32 L SP tariff. We urge the Commission to approve APS’ Application today and consider whether changes to the on-peak hours are warranted through evaluation as part of APS’ rate case.
 
Thank you for your consideration of this important matter.
 
Respectfully,
 
Kate Bowman
Interior West Regulatory Director
Vote Solar
[email protected]
703-674-8637

Autumn Johnson
Executive Director
AriSEIA
[email protected]
520-240-4757

[1] Decision No. 78317, November 9, 2021, page 441 lines 15 - 21.

AriSEIA filed the direct testimony of our two experts today in the Tucson Electric Power rate case. We are focusing on community solar and battery storage programs for residential and commercial customers. The testimony and exhibits exceed 400 pages. You can view the entire filing at the button above. TEP is due to file their response on February 15th.

Arizona Corporation Commission
1200 W. Washington Street
Phoenix, AZ 85007

Re: Arizona Public Service (APS) E-32 L SP Tariff, Docket E-01345A-22-0281

Madam Chair and Commissioners,

Pursuant to Decision No. 78317,1 APS was ordered to engage with stakeholders, namely the Arizona Solar Energy Industries Association (AriSEIA) and the Solar Energy Industries Association (SEIA), to redesign the E-32 L SP (Storage Pilot) rate tariff to increase customer adoption of the 35 MW commercial pilot program. AriSEIA appreciated the opportunity to provide constructive feedback and generally guide the tariff design process towards a solution that creates value for APS and the adopting customers.

Throughout the duration of 2022, AriSEIA met monthly with APS and reiterated that rate optionality and investment certainty are key components of behind-the-meter energy storage adoption as not all customer loads are created equal, and few customers are able to benefit from existing tariffs using 15-minute interval demand charges. To that end, we collaborated with APS on the proposed volumetric, time-of-use (TOU) rate including a substantial differential between on-peak and off-peak rates which de-risks the customer’s energy storage investment in terms of achieving monthly savings while creating grid support during the utility’s coincident peak periods. Our assessment of the new rate tariff is that it will encourage participation in the pilot energy storage program through market-competitive payback opportunities. This rate tariff may also provide a foundation to develop more value-stacking opportunities for utilities such as distributed virtual power plants or similar grid-response programs.

While the proposed E-32 L SP pilot revisions are a significant step in the right direction, we believe that further alignment with APS’ true coincident on-peak demand periods is important to creating an equitable program. To this end, we issued our recommendation to APS to limit the on-peak hours to Monday through Friday in lieu of across all seven (7) days of the week as the weekend load and marginal prices are typically much lower and do not merit the same TOU price differential. We look forward to continuing to work with APS as this program evolves.

Thank you for considering these comments and we encourage you to adopt this rate in the first quarter of 2023 and to continue promoting more grid-interactive programs for customer-sited distributed energy resources.

Respectfully,

Autumn Johnson
Executive Director
AriSEIA
520-240-4757
[email protected]

John Mitman
President, Board of Directors
AriSEIA
480-251-2934
[email protected]

1 Arizona Corporation Commission, Decision 78317, November 9, 2021, available here https://docket.images.azcc.gov/0000205236.pdf?i=1670984264693.

BEFORE THE ARIZONA CORPORATION COMMISSION
 
 COMMISSIONERS
Lea Márquez Peterson – Chairwoman
Sandra Kennedy
Justin Olson
Anna Tovar
Jim O’Connor
  
IN THE MATTER OF THE APPLICATION OF ARIZONA PUBLIC SERVICE COMPANY FOR A HEARING TO DETERMINE THE FAIR VALUE OF THE UTILITY PROPERTY OF THE COMPANY FOR RATEMAKING PURPOSES, TO FIX A JUST AND REASONABLE RATE OF RETURN THEREON, AND TO APPROVE RATE SCHEDULES DESIGNED TO DEVELOP SUCH RETURN.

Docket No. E-01345A-19-0236
 
Arizona Solar Energy Industries Association (AriSEIA) Comments on Arizona Public Service (APS) Efforts to Comply with Order Relating to Rate Schedule E-32 L Storage Pilot in Decision No. 78317
 
We appreciate the Commission’s decision to include AriSEIA/SEIA in collaborative discussions with APS on the rate design elements and intended success of the E-32 L Storage Pilot (SP) plan.[1]
 
Background
 
The E-32 L SP tariff was established in December 2017 as a result of APS’ previous rate case with the intention to evaluate the opportunity of large-scale, behind-the-meter energy storage solutions as a value-added benefit to the grid while allowing for high demand (as determined by 15-minute interval kilowatt readings) customers to benefit from peak shaving.[2] Due to several issues, including poor rate tariff mechanics and imbalanced Cost of Service (COS) formulas (notably with lower per-kW rates than the non-pilot, base E-32 L rate tariff), the pilot program offering did not facilitate subscription from any customers.
 
Decision No. 78318 and Current Status
 
AriSEIA/SEIA offered testimony that the E-32 L SP rate schedule required re-evaluation. The Commission ordered APS to do the following:
 

1. Remove the rate design flaws contributing to a lack of adoption while maintaining an identical basic service charge (BSC) to E-32 L,
2. File monthly updates with customer participation figures and commentary from required stakeholder feedback, and
3. Engage in a collaborative process with AriSEIA/SEIA, Staff, and other stakeholders concerning the effectiveness of the E-32 L SP plan. Additionally, if issues are identified, APS “may” apply for consideration of modifications based on evidentiary records in the subsequent 12-month period following the decision.

 
Subsequent to the order, APS filed its revised rate tariff on December 1, 2021, and held its first stakeholder engagement meeting on February 23, 2022. AriSEIA/SEIA maintains that while APS is complying with the letter of the order, the spirit of the decision is being left to stakeholders to enforce.
 
Key Issues on Proposed E-32 L SP Rate Plan and Discussion
 
It is AriSEIA’s understanding that the intent of this pilot program is to facilitate adoption of energy storage for APS’ large commercial customer class up to 35 megawatts (MW) of installed capacity, and to that end, we submit the following feedback for consideration:
 

1. Under the value proposition of demand charge reduction for any large commercial customer (relying on monthly demand charge savings to justify the investment), it is critical that the rate tariff be rebalanced more toward demand charges (in excess of $20/kW) to provide for appropriate returns relative to risk on performance.[3] AriSEIA requests that an ‘Option A – Demand Reduction’ rate plan be established to provide appropriate return on investment value for all large commercial customers seeking energy storage by increasing the demand rate during the on-peak period.
2. As a preferred alternative to a demand-focused rate plan, AriSEIA requests that APS establish an alternative E-32 L SP ‘Option B – Time of Use’ rate plan including high-spread, time-of-use (TOU) energy pricing to reward energy storage systems on an ongoing basis in lieu of relying on singular 15-minute interval demand peaks for savings. This tariff should be structured similarly to Southern California Edison’s TOU-8 Option E tariff whereby on-peak energy prices are more akin to ‘super peak’ multipliers.[4]
3. AriSEIA requests that APS also include provisions for demand response as an additional value stacking opportunity for distributed energy storage solutions. Studies[5] show that distributed energy storage can provide significant value outside of a customer’s non-coincident peak demand or time-of-use pricing window which would support additional energy storage investment through ancillary benefits.

 
Due to the nature of variability between customer load profiles (predictability of peaks depending on facility type), the economics of energy storage vary significantly from project-to-project. Furthermore, the value proposition (i.e., return on investment), depends on whether or not a customer can monetize federal tax incentives directly. Although pending federal legislation includes a change which provides tax credits to ‘storage only’ projects, the current Internal Revenue Code only allows energy storage customers to claim available tax incentives when the storage systems are charged by solar energy (at least 75%) throughout the operational year.[6]  Given that many APS E-32 L customers are tax-exempt and the fact that this tariff is unlikely to support solar projects in conjunction (i.e. tax credits will not be available), we believe it is critical that the tariff be designed in a way that provides sufficient economic incentive to pursue pilot projects for all interested customers.
 
Conclusion
 
Energy storage systems represent significant investments and require a precise and reliable method for return on investment. We submit that the spirit of the Order requires that APS demonstrate a thoughtful and comprehensive approach to the design of the E-32 L SP rate tariff, and we recommend an approach that leverages optionality and increased on-peak vs. off-peak differentials.
 
As it stands, it is AriSEIA’s position that the current E-32 L SP rate plan will not facilitate any adoption toward the cap of 35 MW without substantial changes, and we recommend the Commission direct APS to issue revised rate tariff options that will provide further opportunities for customer adoption.
 
We thank the Commission and its staff for the opportunity to submit these comments.
 
Respectfully submitted this 6th day of May, 2022.
 
/s/ Autumn T. Johnson
Executive Director
Arizona Solar Energy Industries Association (AriSEIA)
[email protected]
520-240-4757
 
/s/ John Mitman
Board President
Arizona Solar Energy Industries Association (AriSEIA)
[email protected]
480-251-2934

[1] See APS 2019 Rate Case, Docket No. E-01345A-19-0236, Decision No. 78317, available here https://docket.images.azcc.gov/0000205236.pdf?i=1650001754509.

[2] See APS 2017 Rate Case, Docket No. E-01345A-16-0036, available here https://edocket.azcc.gov/search/docket-search/item-detail/19348.

[3] National Renewable Energy Laboratory, Identifying Potential Markets for Behind-the-Meter Battery Energy Storage: A Survey of U.S. Demand Charges, available here https://www.nrel.gov/docs/fy17osti/68963.pdf.

[4] Southern California Edison, Schedule TOU-8 Time-of-Use - General Service – Large (Option E), available here https://www.sce.com/regulatory/tariff-books/rates-pricing-choices and included as Attachment A.

[5] National Renewable Energy Laboratory, Storage Futures Study, available here https://www.nrel.gov/analysis/storage-futures.html.

[6] National Renewable Energy Laboratory, Federal Tax Incentives for Energy Storage Systems, available here https://www.nrel.gov/docs/fy18osti/70384.pdf.