AriSEIA has filed supplemental testimony in the Arizona Public Service (APS) rate case, due to factually inaccurate statements made by several APS witnesses on the stand after AriSEIA's witness, Kevin Lucas, testified. We had requested to move him after the conclusion of the APS witnesses, but APS objected. We have indicated our intention to recall Mr. Lucas to discuss these issues.

Arizona Corporation Commission
1200 W. Washington Street
Phoenix, AZ 85007
 
RE: RE-00000A-24-0025 Exceptions to the June 11, 2026 Recommended Order
 
Chairman and Commissioners,
 
The Arizona Solar Energy Industries Association ("AriSEIA") respectfully submits these comments in opposition to the Recommended Order ("ROO") recommending repeal of the Electric Energy Efficiency Standards Rules ("EEE Rules").

The record developed in this rulemaking does not support the conclusion that repeal of the EEE Rules is reasonable, necessary, or in the public interest. To the contrary, the record demonstrates that energy efficiency ("EE") and demand-side management ("DSM") programs continue to provide significant benefits to Arizona utilities, Arizona ratepayers, and the electric grid. The record further demonstrates that affected utilities continue to rely on EE and DSM as valuable planning resources and continue to achieve measurable energy savings, peak demand reductions, and reliability benefits through those programs.

The issue before the Commission is not whether the EEE Rules have been successful. The record overwhelmingly demonstrates that they have. The ROO’s own data shows that APS recorded DSM program costs of $941,563,758 and DSM net benefits of $1,432,000,000 from 2005 through 2024. ROO ¶ 40. Staff itself stated at the oral proceeding that it did not believe EE programs would cease after repeal because “the programs offer many benefits, so utilities and their customers will want the programs to continue.” ROO ¶ 40. Nor is the issue whether individual provisions of the rules could be improved or modernized. Rather, the question is whether the record supports eliminating the EEE Rules in their entirety. The ROO does not identify substantial evidence demonstrating that repeal of the EEE Rules is preferable to amendment, modernization, or replacement of specific provisions. Instead, the ROO largely relies upon policy preferences expressed by Commissioners during Open Meetings while failing to adequately address the substantial evidence demonstrating the continued value of EE and DSM programs.

For these reasons, the Commission should reject the ROO and decline to repeal the EEE Rules.
 
I. The Commission Should Update the EEE Rules Rather Than Repeal Them
AriSEIA does not contend that the EEE Rules are incapable of improvement. The electric industry has changed significantly since the rules were adopted in 2010. New technologies, new customer programs, and new grid needs have emerged. As a result, certain provisions of the EEE Rules may warrant revision or modernization.

The existence of potential improvements, however, does not support repealing the rules in their entirety. The question before the Commission is not whether the EEE Rules should remain frozen in their 2010 form. Rather, the question is whether the record supports eliminating the entire regulatory framework governing EE and DSM programs. The record does not support that conclusion.

One of the most significant consequences of repeal would be the elimination of the existing framework governing DSM implementation plans. The EEE Rules currently establish requirements for utilities to file implementation plans and annual reports and provide a structure through which the Commission reviews and oversees DSM programs. See A.A.C. § R14-2-2405; R14-2-2407.

The ROO does not explain what framework will replace those requirements if the EEE Rules are repealed. Nor does the ROO explain how utilities will be expected to propose future DSM programs or under what standards the Commission will evaluate those filings. The absence of any replacement framework creates unnecessary uncertainty for utilities, stakeholders, and the Commission itself.

This concern is particularly important because the Commission continues to recognize the value of DSM programs. In recent years, the Commission has repeatedly approved DSM programs and has specifically approved and reaffirmed Virtual Power Plant ("VPP") programs. The Commission's recent approval of VPP and other demand-side programs demonstrates that DSM resources remain an important component of Arizona utility planning and resource management. These programs are increasingly important tools for reducing peak demand, improving grid reliability, and providing value to customers and the electric system.

Indeed, the Commission has recently approved VPP programs on multiple occasions and utilities continue to include VPPs and other DSM resources within their DSM portfolios. Yet the ROO would eliminate the very rule framework through which those programs are planned, proposed, reviewed, and monitored. The ROO does not explain how future DSM plans containing VPP programs will be filed, reviewed, or evaluated if the existing rules are repealed.

The ROO repeatedly characterizes the EEE Rules as having "expired" in 2020. See, e.g., ROO ¶ 4. The ROO itself, in footnote 19, acknowledges that this characterization is “potentially misleading” and that the EEE Rules “are still in effect.” Staff confirmed at the December 4, 2025 oral proceeding that the rules have not expired, and Staff was required to correct the record in writing on this point. ROO ¶ 71.  That characterization conflates the expiration of the numerical EE savings target with the remainder of the rule. While the original savings target concluded in 2020, the provisions governing DSM implementation plans, reporting, program review, cost-effectiveness requirements, monitoring, evaluation, and Commission oversight remained in effect. Utilities continue to file DSM plans and the Commission continues to review and approve DSM programs pursuant to that framework. The expiration of a single target does not establish that the remainder of the framework should be repealed.

The continued development of VPPs and other innovative DSM programs requires regulatory certainty. Utilities need to understand what information must be included in their filings. Stakeholders need to understand how proposed programs will be reviewed. The Commission needs a consistent framework through which it can evaluate program performance and determine whether proposed programs are in the public interest.

Repealing the EEE Rules would eliminate that framework without replacing it with an alternative. Nothing in the record demonstrates that such uncertainty would benefit ratepayers or improve regulatory outcomes. To the contrary, the record demonstrates that DSM programs continue to play an important role in utility planning and grid operations.

If the Commission concludes that revisions to the EEE Rules are warranted, the appropriate course is to amend and modernize the rules rather than repeal them. At a minimum, the Commission should preserve the provisions governing DSM implementation plans and related reporting and oversight requirements. Doing so would allow the Commission to modernize outdated provisions while maintaining a clear framework for continued development of DSM and VPP programs.

II. The Record Demonstrates That EE and DSM Programs Continue to Provide Significant Benefits
The record developed in this proceeding demonstrates that EE and DSM programs continue to provide substantial benefits to Arizona utilities, customers, and the electric grid. While the ROO recommends repeal of the EEE Rules, the evidence cited throughout the record largely confirms the continued value of the programs and resources developed under those rules.

The Commission originally adopted the EEE Rules after finding that EE is a reliable and cost-effective resource that reduces load growth, improves system reliability, lowers costs for customers, reduces the need for additional infrastructure investment, and assists the Commission in ensuring safe, adequate, and reliable service at just and reasonable rates. Decision No. 71819 at 11-15. The ROO acknowledges those findings and reproduces them at length. ROO ¶¶ 24-30.

Importantly, the ROO does not identify evidence demonstrating that those benefits no longer exist. Nor does the ROO conclude that EE and DSM programs have failed to produce the outcomes that the Commission anticipated when it adopted the rules.

To the contrary, the record demonstrates that EE and DSM programs continue to produce measurable results. The updated Economic Impact Statement ("EIS") reports that APS has achieved more than 1,740 MW of cumulative peak demand savings through EE programs since 2005. The EIS further reports that TEP's DSM programs have delivered approximately 604.78 MW of capacity savings and 1.73 million MWh of energy savings since 2015. Exhibit C, Updated EIS at 3.

These are not theoretical benefits. They are measurable reductions in energy usage and peak demand achieved through programs implemented under the framework established by the EEE Rules. The EIS further recognizes that these investments contribute to utility resource planning, grid reliability, and peak demand reduction. Updated EIS at 3.

The EIS also acknowledges that utilities continue to view EE and DSM resources as valuable components of their planning portfolios. TEP's Smart Rewards program reportedly provides between 20 MW and 30 MW of first-hour peak demand reduction, while the utility has also launched a Storage Rewards program designed to leverage customer-sited battery storage to support grid reliability. Updated EIS at 3. These programs reflect the evolution of DSM resources and demonstrate why a regulatory framework governing DSM planning and oversight remains important today.

The record further demonstrates that repeal carries risks. The EIS concludes that repeal may result in reduced investment in EE programs, uneven program availability among utilities, diminished access to programs for low- and moderate-income customers, and higher long-term utility bills resulting from reduced energy savings opportunities. Updated EIS at 5. The EIS further recognizes that customers will continue to benefit from EE improvements already installed through programs developed under the existing framework. Id.

Taken together, the evidence demonstrates that EE and DSM programs continue to provide meaningful benefits and continue to serve many of the same purposes identified by the Commission when it adopted the EEE Rules. The record therefore does not support the conclusion that the framework should be repealed in its entirety. Rather, the evidence supports updating and modernizing the rules to reflect current technologies and utility needs while preserving the benefits that EE and DSM programs continue to provide.

III. The ROO Fails to Demonstrate Why Complete Repeal Is Warranted
A central flaw in the ROO is that it never adequately explains why complete repeal of the EEE Rules is warranted based on the record developed in this proceeding.

Throughout the rulemaking, concerns were raised regarding the structure of the EEE Rules, the expiration of the original EE standards, the design of certain programs, and the costs associated with particular program offerings. Even assuming those concerns are valid, they do not establish that the entire rule should be repealed. Rather, they suggest that certain provisions may warrant amendment or modernization.

The ROO acknowledges that the original EE standards expired in 2020 and that utilities may continue to pursue EE and DSM programs even in the absence of those standards. ROO ¶ 4. Yet the ROO never explains why the expiration of the original savings targets requires elimination of the remainder of the regulatory framework.

As discussed above, the ROO incorrectly conflates the expiration of the numerical EE savings target with the continued operation of the remainder of the EEE Rules. The expiration of the original savings target does not establish that the remainder of the framework should be repealed.

The existing rules address far more than annual savings targets. As the ROO itself recognizes, the EEE Rules establish requirements relating to DSM implementation plans, Commission review of DSM programs, cost-effectiveness standards, reporting requirements, monitoring and evaluation, and related oversight mechanisms. ROO ¶ 22. The ROO does not explain why these provisions should be eliminated or identify evidence demonstrating that they are no longer serving a useful purpose.

Similarly, the ROO repeatedly references statements made during Commission Open Meetings expressing concern regarding particular EE programs, rebates, incentives, or implementation practices. ROO ¶ 33. However, concerns regarding individual program designs do not establish that the entire regulatory framework should be repealed. If certain programs are not cost-effective, the Commission can reject them. If certain provisions require revision, the Commission can amend them. The record does not demonstrate why repeal of the entire Article is the appropriate response.

When the Commission adopted the EEE Rules, it found that EE reduced costs, improved reliability, reduced infrastructure needs, lowered adverse environmental impacts, and was reasonably necessary to help ensure safe, adequate, and reliable service at just and reasonable rates. Decision No. 71819 at 11-15; ROO ¶¶ 24-30. The ROO does not identify comparable findings demonstrating that these conclusions are no longer valid. Nor does the ROO identify changed circumstances sufficient to justify eliminating the framework rather than updating it. The ROO’s sole explanation is that its “changed position… is rational based on the factual conclusions made herein, and the Commission’s action in repealing the EEE Rules is neither arbitrary nor capricious based on its conclusions.” ROO ¶ 62. A bare assertion that agency action is not arbitrary does not substitute for reasoned explanation of why prior findings are being reversed. Where an agency departs from prior factual conclusions, it must provide more than a conclusory statement that its new position is rational.

The Commission is not limited to a choice between preserving every aspect of the existing rules and eliminating the rules entirely. Indeed, rulemaking exists precisely because regulations may be amended as circumstances change. Yet the ROO contains little discussion of whether targeted amendments could address the concerns identified during this proceeding while preserving the portions of the rules that continue to provide value.

The absence of such analysis is particularly notable given the substantial evidence demonstrating that EE and DSM programs continue to provide measurable benefits. As discussed above, the EIS acknowledges ongoing energy savings, capacity savings, peak demand reductions, and reliability benefits associated with these programs. Updated EIS at 3. The EIS also identifies potential negative consequences associated with repeal. Updated EIS at 5. The ROO never adequately explains why those benefits should be disregarded or why the identified risks are outweighed by the benefits of repeal.

The Commission may reasonably conclude that the EEE Rules should evolve to reflect current market conditions, emerging technologies, and changing utility needs. The record, however, does not support the conclusion that complete repeal is the only available option or the option most consistent with the public interest. The record instead supports updating and modernizing the rules while preserving the portions of the framework that continue to provide meaningful benefits to utilities and ratepayers.

For these reasons, the Commission should reject the recommendation for complete repeal and instead pursue targeted revisions to the EEE Rules.

IV. The ROO Relies Heavily on Policy Preferences and Extra-Record Public Statements While Failing to Address Contrary Evidence
The ROO devotes substantial discussion to Commissioner statements, Commission press releases, and a guest commentary published in the Arizona Capitol Times. ROO ¶¶ 33, 35-39, 45-46. Those materials include broad policy statements regarding subsidies, cost shifts, “free” programs, “slush funds,” “special interests,” and the asserted need to repeal outdated mandates. ROO ¶¶ 35-39, 45-46.

Those materials are not a substitute for record evidence demonstrating that complete repeal of the EEE Rules is reasonable, necessary, or in the public interest. AriSEIA does not dispute that Commissioners may express policy views regarding EE and DSM programs. The problem is that the ROO appears to give substantial weight to press releases, public statements, and opinion commentary rather than grounding the recommendation in the evidence developed through this rulemaking.

That distinction matters. The purpose of a rulemaking record is to provide a transparent basis for agency action and to allow stakeholders to review and respond to the information on which the agency relies. Press releases and opinion commentary are advocacy materials. They are not evidence demonstrating that the EEE Rules should be repealed in their entirety.

The record contains substantial evidence demonstrating that EE and DSM programs continue to provide measurable benefits, including energy savings, peak demand reductions, reliability benefits, and customer savings. Updated EIS at 3; ROO ¶¶ 40, 43-44. The ROO also acknowledges that the Commission has recently approved DSM programs, including programs related to demand response and Virtual Power Plants. ROO ¶¶ 45-47. The ROO further relies on data drawn from APS and TEP Annual Progress Reports, the Commission’s own EIS, and utility IRP filings — yet Finding of Fact ¶ 89 states that “the Commission did not rely on or consider any study in its evaluation of or justification for the proposed repeal.” This is internally inconsistent. The Commission’s own Rules Review Procedure requires that the preamble “includes a reference to any study relevant to the rules that the Commission considered and either did or did not rely on.” Decision No. 78544 at 6 (Att. A). The Commission cannot simultaneously build its factual record on program data reports and claim to have considered no studies.

The ROO further acknowledges that the overwhelming majority of comments filed in this proceeding opposed repeal. Staff reported that 1,891 individuals filed or signed comments opposing repeal, while only 6 individuals filed comments supporting repeal. ROO ¶ 11. Numerous businesses, local governments, educational institutions, consumer advocates, environmental organizations, health organizations, utilities, and other stakeholders likewise opposed repeal. ROO ¶¶ 11, 19. While the Commission is not obligated to follow the majority view expressed in public comments, the volume and consistency of opposition demonstrates that significant concerns were raised regarding the consequences of repeal. Yet despite the volume of comments and evidence submitted, the ROO ultimately does not explain why the documented benefits of EE and DSM programs are outweighed by the asserted benefits of repeal.

The existence of widespread opposition does not require the Commission to reach a particular result. However, where the record contains extensive evidence and stakeholder input supporting continued EE and DSM programs, the Commission should meaningfully address that evidence and explain why it is unpersuasive. Simply cataloging comments, then relying on public statements and press releases favoring repeal, does not adequately explain why complete repeal is warranted.

Several of the concerns repeated in the ROO relate to particular program designs, incentives, rebates, or implementation decisions. ROO ¶¶ 33, 35-39, 45-46. Those concerns may support revisions to specific rules or greater scrutiny of individual DSM programs. They do not support eliminating the entire regulatory framework, particularly where the same ROO recognizes that DSM and VPP programs continue to provide value and should continue to be available. ROO ¶¶ 45-47.

For these reasons, the Commission should not adopt a ROO that devotes substantial attention to press releases, public statements, and opinion commentary while failing to adequately address contrary evidence in the record. The appropriate course is to update and modernize the EEE Rules, not repeal them.
 
V. The Commission Cannot Bypass Attorney General Certification on the Contested Claim That This Repeal Is Wholly Authorized by Its Exclusive Ratemaking Authority
The ROO concludes that this repeal “is wholly authorized by the Commission’s exclusive and plenary constitutional ratemaking authority under Arizona Constitution Article 15, § 3” and on that basis declines to submit the rulemaking to the Office of the Attorney General for review and certification under A.R.S. § 41-1044. ROO ¶ 61, 94-95; Conclusions of Law ¶ 3. That determination is legally untenable and exposes the repeal to challenge.

The ROO itself acknowledges the problem. In Finding of Fact ¶ 52, the ROO states that the Arizona Supreme Court’s 2020 decision in Johnson Utilities, L.L.C. v. Arizona Corporation Commission, 249 Ariz. 215 (2020) (“Johnson”), “suggests that the Arizona Supreme Court, if asked, may not view the EEE Rules as having been wholly authorized by the Commission’s constitutional ratemaking authority.” ROO ¶ 52. The ROO further acknowledges that the Johnson Court characterized as “flawed” the prior holding in Arizona Corporation Commission v. State ex rel. Woods, 171 Ariz. 286 (1992), on which the Commission had previously relied for the proposition that its ratemaking authority empowered it to adopt broad regulatory programs like the EEE Rules. ROO ¶ 52. The Johnson Court also expressed disapproval of Court of Appeals decisions, including Miller v. Arizona Corp. Comm’n, 227 Ariz. 21 (App. 2011), which had upheld the REST Rules under this same theory. Id.

Despite this frank acknowledgment of legal uncertainty, the ROO presses forward and claims the exemption from A.G. review. That is precisely backwards: where the constitutional basis for a rulemaking is genuinely contested in light of intervening Supreme Court authority, the cautious and legally sound course is to obtain A.G. certification, not to skip it. The original EEE Rules were submitted to the Attorney General for certification “out of an abundance of caution,” notwithstanding the Commission’s position at the time that they were wholly authorized by ratemaking authority. Decision No. 71819 at 17; ROO ¶ 30. No principled basis exists for applying less caution now, when the Supreme Court has cast additional doubt on the underlying constitutional theory.

The Attorney General of Arizona filed comments in this very docket opposing the repeal and stating that it “jeopardizes the Commission’s core responsibility to power Arizona’s future safely, reliably, and affordably, and is unlawful.” ROO, Exh. D at 6 (A.G. Comment). The ROO’s response to the A.G.’s comment never meaningfully addresses the A.G.’s argument that the Commission lacks an adequate evidentiary basis for repeal and never explains why A.G. certification is unnecessary given the uncertainty identified in Johnson. The Commission should not bypass A.G. certification on the basis of a legal claim its own Recommended Order concedes may not withstand judicial scrutiny.
 
VI. Repeal Creates an Unresolved Conflict Between Eliminating the Mandate and Preserving the Surcharges That Fund It
The ROO acknowledges a significant unresolved consequence of repeal: when the EEE Rules are eliminated, “there will no longer be even an illusory DSM/EE mandate (such as the expired EE standard that currently appears in the EEE Rules) to support the concept of the LFCR.” ROO Ƃ 49. The Lost Fixed Cost Recovery Mechanism (“LFCR”) is the surcharge mechanism through which APS and TEP customers pay for the revenue reductions caused by DSM programs reducing volumetric sales. ROO ¶ 49.

The ROO, however, does not order the elimination of the LFCR. Instead, the ROO states that the surcharges “will continue unless and until specific Commission decisions eliminate them.” ROO, Exh. C (EIS) at 5. This creates a direct conflict with the Commission’s own ratemaking obligation. If the Commission has determined that the EEE Rules are no longer in the public interest and that the mandate underlying the LFCR has expired, continuing to collect LFCR surcharges from ratepayers without a corresponding regulatory obligation raises a serious question under Article 15, § 3 of the Arizona Constitution as to whether those rates remain “just and reasonable.” The Commission cannot simultaneously declare the mandate that justifies the surcharge to be contrary to the public interest and continue charging ratepayers for it without explanation.

The ROO’s failure to resolve this conflict is an independent ground for rejection. If the Commission intends to repeal the EEE Rules, it should simultaneously address the continued collection of LFCR surcharges and provide ratepayers with a clear and lawful basis for any ongoing charges.

VII. The Economic Impact Statement Does Not Support Complete Repeal
The Economic Impact Statement ("EIS") provides further evidence that complete repeal of the EEE Rules is unwarranted. Exhibit C.

An EIS is intended to evaluate the probable costs and benefits associated with a proposed rulemaking. Here, however, the EIS repeatedly identifies benefits associated with EE and DSM programs and acknowledges potential adverse consequences associated with repeal.

The EIS reports that APS has achieved more than 1,740 MW of cumulative peak demand savings through EE programs since 2005. It further reports that TEP's DSM programs have delivered approximately 604.78 MW of capacity savings and 1.73 million MWh of energy savings since 2015. Updated EIS at 3. The EIS also recognizes that EE investments contribute to utility resource planning, grid reliability, and peak demand reduction. Id.

The ROO further acknowledges substantial net benefits associated with DSM programs. According to the ROO, APS reported DSM program benefits of approximately $1.432 billion compared to costs of approximately $941 million. ROO ¶ 40. These figures reflect substantial net benefits to customers and undermine the assertion that the existing framework has failed or no longer provides value. Notwithstanding these figures, the ROO concludes in Finding of Fact ¶ 84 that “the probable benefits of the proposed repeal of the EEE Rules in Arizona outweigh the probable costs.” The ROO offers no analysis reconciling that conclusion with the documented $490 million net surplus in ratepayer benefits, nor does it explain why a program generating a greater-than-1.5:1 benefit-to-cost ratio should be eliminated in the public interest.

The EIS further notes that TEP's Smart Rewards program has consistently delivered between 20 MW and 30 MW of first-hour peak demand reduction and identifies newer programs, including battery storage programs, that are intended to further support grid reliability. Updated EIS at 3. These findings demonstrate that DSM programs continue to provide measurable value and continue to evolve in response to changing grid needs.

The EIS likewise identifies several potential adverse consequences associated with repeal. The EIS states that reduced investment in EE programs may increase customer energy consumption and contribute to higher long-term utility bills. Updated EIS at 5. The EIS further concludes that repeal may result in inconsistent program availability across utility service territories, reduced access to EE programs, and disproportionate impacts on low- and moderate-income households. Id.

Importantly, the EIS does not conclude that EE or DSM programs have failed. Nor does it conclude that the framework established by the EEE Rules has been ineffective. To the contrary, the EIS repeatedly acknowledges the benefits associated with EE and DSM programs and identifies risks associated with eliminating the regulatory framework that supports those programs.

The EIS therefore raises the same question left unanswered elsewhere in the ROO: if EE and DSM programs continue to provide measurable benefits, and if repeal carries identifiable risks, why is complete repeal preferable to amendment?

The EIS does not answer that question. Instead, the EIS supports a more measured approach. If the Commission believes portions of the EEE Rules require revision, those provisions can be amended. If the Commission believes the expired EE savings standards should be updated, those standards can be revised. The EIS does not support the conclusion that the entire Article should be repealed.

Accordingly, the Commission should give substantial weight to the EIS findings recognizing the ongoing benefits of EE and DSM programs and should pursue modernization of the EEE Rules rather than their elimination.

VIII. Recommendations and Conclusion
For the reasons discussed above, AriSEIA respectfully recommends that the Commission reject the ROO's recommendation to repeal the EEE Rules. The record demonstrates that EE and DSM programs continue to provide substantial benefits to Arizona utilities, ratepayers, and the electric grid. The record further demonstrates that DSM programs continue to evolve and play an increasingly important role in resource planning, peak demand reduction, grid reliability, and customer participation. Nothing in the record demonstrates that those benefits have disappeared or that the regulatory framework governing such programs should be eliminated.

AriSEIA recognizes that portions of the EEE Rules may warrant revision. The electric industry has changed considerably since the rules were adopted in 2010, and the Commission may reasonably conclude that certain provisions should be updated to reflect current technologies, market conditions, and utility needs. The existence of potential improvements, however, does not support complete repeal of the rules. Accordingly, AriSEIA recommends that the Commission update and modernize the EEE Rules rather than repeal them.

At a minimum, the Commission should preserve the provisions governing DSM implementation plans. The ROO does not identify any replacement framework through which utilities will file future DSM plans or through which the Commission will review and oversee those filings. Eliminating those provisions would create substantial regulatory uncertainty for utilities, stakeholders, and the Commission.

This concern is particularly significant because the Commission has repeatedly approved DSM programs, including VPP programs, and utilities continue to rely on DSM resources as part of their planning portfolios. If the Commission intends for DSM and VPP programs to continue, a regulatory framework governing those programs must also continue.

The record supports modernization. It does not support elimination. AriSEIA therefore respectfully requests that the Commission reject the ROO and pursue amendments to the EEE Rules in lieu of repeal.
​
Respectfully,
/s/ Autumn T. Johnson
Executive Director
AriSEIA 
(520) 240-4757
[email protected]

Arizona Corporation Commission
1200 W. Washington Street
Phoenix, AZ 85007
 
Re: AriSEIA Support for the 2024 Arizona Public Service Company Demand Side Management Implementation Plan, Docket No. E-01345A-23-0088
 
Chairman and Commissioners,
 
The Arizona Solar Energy Industries Association (AriSEIA) respectfully urges the Arizona Corporation Commission (Commission) to approve the Arizona Public Service Company (“APS”) Second Amended 2024 Demand Side Management (DSM) Implementation Plan as filed, along with the Utilities Division Staff Recommended Opinion and Order.
 
AriSEIA supports approval of the APS Second Amended 2024 DSM Implementation Plan[1] because the record demonstrates that the proposed measures comply with the Arizona Administrative Code requirements for cost-effective DSM programs and because the Utilities Division Staff Recommended Opinion and Order concludes that the updated portfolio meets applicable evaluation criteria.[2] AriSEIA’s interest is ensuring a stable, predictable regulatory landscape for distributed energy resources and demand-side programs. Approval of the plan, along with the Staff recommendation, provides needed clarity for market participants, customers, and project developers.
 
AriSEIA also strongly urges the Commission to preserve the Bring Your Own Device (BYOD) Virtual Power Plant Battery Pilot Program even if other changes to the DSM portfolio are considered. The BYOD program has been approved twice by vote of the Commission and resulted from a fully litigated rate case. It is a pay-for-performance-only program designed to compensate customers strictly for verified grid services. The Commission approved BYOD for a five-year term, and the program has not yet operated through even a single summer season. Premature modification or suspension would undermine the purpose of the pilot, create regulatory uncertainty, and diminish the value of distributed demand response resources that the Commission has repeatedly endorsed.
 
The BYOD pilot is also an essential contributor to APS’s projected portfolio-wide capacity savings. APS estimates that BYOD could enroll up to five thousand customers and contribute approximately 17 MW of dispatchable capacity during the pilot period.[3] These distributed, flexible resources play a significant role in meeting peak demand, reducing system costs, and increasing grid resilience for all APS customers.
 
For these reasons, AriSEIA supports approval of the Second Amended 2024 DSM Implementation Plan and the Utilities Division Staff Recommended Opinion and Order. If the Commission elects to modify the plan, AriSEIA respectfully asks that the Commission preserve the BYOD pilot in its entirety, including all funding allocated to the program in this plan, consistent with the Commission’s prior decisions and the purpose of the pilot itself.
 
Thank you for your consideration.
 
Respectfully,
 
/s/ Autumn T. Johnson
Executive Director
AriSEIA 
(520) 240-4757
[email protected]

[1] Application of Arizona Public Service Company for Approval of Its Second Amended 2024 Demand Side Management Implementation Plan, Docket No. E-01345A-23-0088 (filed June 20, 2025).

[2] Utilities Division Staff, Recommended Opinion and Order, Docket No. E-01345A-23-0088 (Nov. 19, 2025).

[3] Application of Arizona Public Service Company for Approval of Its Second Amended 2024 Demand Side Management Implementation Plan, Docket No. E-01345A-23-0088 (filed June 20, 2025) at page 3.

Arizona Corporation Commission
1200 W. Washington Street
Phoenix, AZ 85007
 
RE: Opposition to Repeal of the Electric Energy Efficiency Standards Rules in Docket No. RE-00000A-24-0025
 
Dear Chairman and Commissioners:
 
The Arizona Solar Energy Industries Association (AriSEIA) respectfully submits these comments in opposition to the wholesale repeal of the electric energy efficiency standards rules in the above-referenced docket. At the very least, please preserve the sections of the rule that pertain to filing Demand Side Management (DSM) plans R14-2-2405 through R14-2-2410, as well as any other provisions that Hearing Division deems necessary to DSM plan submission and approval.
 
Arizona is experiencing significant load growth and has repeatedly set new system peak records.[1] In this environment, demand side management programs are more critical than ever. Energy efficiency and demand side management resources provide cost-effective capacity, reduce reliance on volatile wholesale markets, and enhance reliability during times of peak demand. Arizona Public Service (APS) alone meets 14% of demand from DSM program, that is equal to the share of coal in their portfolio and exceeds the amount of utility scale renewables on their system.[2] APS has more than 2 GW of DSM on their system.[3] Eliminating the framework that enables these programs would increase costs for ratepayers and threaten grid stability.
 
We are particularly concerned about the proposed repeal of R14-2-2405 and the immediately following sections. These provisions are where utilities currently house their demand side management plans, including their virtual power plant (VPP) programs. The Commission has already twice voted to uphold these programs as valuable and cost-effective resources. These programs deliver capacity for less than market purchases and help utilities manage peak load reliably.
 
The Commission itself ordered the APS VPP pilot program in Docket No. E-01345A-22-0144, following review in a contested rate case and a year-long dedicated stakeholder process. The second year of funding for that program is now included in APS’s pending DSM plan in Docket No. E-01345A-23-0088. Repealing the DSM rule sections that house these plans could undermine the ability of the Commission and stakeholders to continue building on programs that have already been vetted and approved.
 
Energy efficiency and demand side management programs are not abstract policy ideas. They are in operation today, they are working, and they are providing measurable value to Arizona utilities and ratepayers. They save money, improve reliability, and ensure that Arizona can meet the challenges of rapid growth.
 
For these reasons, AriSEIA urges the Commission to reject the wholesale proposed repeal of the electric energy efficiency standards rules. Preserving at least portions of these rules, especially the DSM provisions, is essential to maintaining affordable, reliable, and resilient power for Arizona families and businesses.
 
Thank you for your consideration.
  
Respectfully,
 
/s/ Autumn T. Johnson
Executive Director
AriSEIA 
(520) 240-4757
[email protected]

[1] Arizona Corporation Commission, Arizona Electric Utilities Set Record High Demand Again; Demand Soars Above Original Forecasts for 2025, August 8, 2025, available here https://azcc.gov/news/home/2025/08/09/arizona-electric-utilities-set-record-high-demand--again--demand-soars-above-original-forecasts-for-2025.

[2] Arizona Public Service, Form 10-K 2024, December 31, 2024, p.5,  available here https://s22.q4cdn.com/464697698/files/doc_financials/2024/ar/PNW-2024-12-31-10-K.pdf.

[3] Arizona Public Service, 2023 Integrated Resource Plan, November 2023, p.26, available here https://www.aps.com/-/media/APS/APSCOM-PDFs/About/Our-Company/Doing-business-with-us/Resource-Planning-and-Management/APS_IRP_2023_PUBLIC.pdf?la=en&hash=F601897086C6836F7FD33C5C2F295F47. 

FOR IMMEDIATE RELEASE

Contact:
Autumn Johnson
(520) 240-4757
[email protected]

Phoenix, AZ - Today, the Arizona Corporation Commission (ACC) voted 4-1 to approve Arizona Public Service's (APS) Virtual Power Plant (VPP) pilot program.  AriSEIA proposed that APS adopt a VPP in its 2022 rate case. The ACC voted on February 22, 2024 to proceed with a VPP as a pilot program and ordered APS to file a plan of administration to implement that program. That implementation plan was voted on today and passed 4-1 with only Vice Chairman Myers voting no.

A virtual power plant allows a utility to aggregate customer owned devices, like batteries, to provide capacity back to the grid. APS' proposal is a pay-for-performance model in which customers are paid only when they provide capacity to the grid and they are paid a rate less than that of comparable wholesale purchases, saving all rate payers money.

"Virtual power plants are a win win for customers and the grid. These batteries are paid for with private capital and are already interconnected and ready for use today. This program will help APS meet the growing demand for electricity in Arizona," said Autumn Johnson, Executive Director of AriSEIA. "Trico already has a VPP and Salt River Project (SRP) just voted to implement one this year. Tucson Electric Power (TEP) plans to propose one in its next rate case. Arizona is moving in the right direction."

VPPs are deployed all over the country. There are more than 500 in the US and their capacity is expected to top 60 GW by 2030. According to the US Department of Energy, “VPPs are among the critical solutions to meet the pressing challenges the grid faces today and in the near term to keep electricity rates affordable while maintaining grid reliability and resilience.”[1] According to Brattle, VPPs could save US utilities $15-35 billion in capacity investment over ten years.[2]

The full docket can be found here.

About AriSEIA

AriSEIA is the leading voice of the solar industry in Arizona, dedicated to advancing solar energy through advocacy, education, and collaboration. With a commitment to promoting sustainable energy solutions, AriSEIA serves as a catalyst for the growth and development of Arizona's solar industry.

[1] US DOE, Pathways to Commercial Liftoff: Virtual Power Plants 2025 Update, January 2025, available here https://liftoff.energy.gov/wp-content/uploads/2025/01/LIFTOFF_DOE_VirtualPowerPlants2025Update.pdf. 

[2] Brattle, Real Reliability: The Value of Virtual Power, May 2023, available here https://www.brattle.com/wp-content/uploads/2023/04/Real-Reliability-The-Value-of-Virtual-Power_5.3.2023.pdf. 

Arizona Corporation Commission
1200 W. Washington Street
Phoenix, AZ 85007
 
RE: Please approve the APS Virtual Power Plant (BYOD) Pilot Program, Docket No. E-01345A-22-0144; Exceptions
 
Dear Chairman and Commissioners,
 
This issue was thoroughly litigated in the last Arizona Public Service (APS) rate case. APS conducted a robust stakeholder process as ordered by the Commission. AriSEIA recommends adoption of the Plan of Administration (POA) as filed.
 
The Grid Needs More Capacity
APS is predicting unprecedented load growth over the next decade. To meet this rising need, the utility must aggressively add capacity which, if not done thoughtfully, will put dramatic upward pressure on rates. One way to mitigate that upward rate pressure is to avoid direct utility investments where possible and to leverage customer owned assets to provide services that would otherwise require utility investment and risk increasing ratepayer costs. To this end, the Commission ordered APS to implement the money-saving Bring Your Own Device (BYOD) program (also known as a virtual power plant (VPP)) which uses customer owned batteries to meet peak demand. The evidence in the rate case found that such a program could give APS access to batteries at a cost well below the cost of utility owned storage or market purchases.

The Company has projected more than 4,000 MW of new capacity need over the following decade, and its integrated resource plan (IRP) shows that it will be procuring copious amounts of centralized generation and battery storage. APS’ 2024 all source request for proposals (ASRFP) sought at least an additional 2,000 MW of resources by 2030.[1]

Residential Batteries Can Provide Capacity
The Commission has been discussing this concept since at least 2020. In Decision No. 77855, the Commission ordered APS to “permit the aggregation of distributed demand-side resources [DDSR]… and provide compensation for the value each distributed demand-side resource provides, including, but not limited to, compensation for capacity, demand reduction, load shifting, locational value, voltage support, ancillary and grid services…”[2] In Decision No. 78165, the Commission ordered APS to file a DDSR tariff by May 1, 2022.[3] More than a dozen stakeholder meetings were held just in preparation to the filing of the DDSR tariff.[4] Once the tariff was filed, an entirely new docket was opened; workshops were held; national labs were engaged. That docket resulted in an additional year of work that resulted in the Commission finding APS did not go far enough and directing APS to issue a new RFP for the DDSR aggregation tariff.[5]
Also in 2020, Commission Staff recommended approval of APS’ original battery pilot program, which had an upfront incentive for installing batteries. Staff said, “a tariff that compensates customers for the specific benefit their systems bring to the grid can also be beneficial and in the public interest.”[6] Staff characterized such a program as a “forward-looking policy that can benefit all APS ratepayers.”[7] When APS first proposed this pilot, it stated this original pilot would “inform a future potential ‘pay-for-performance’ shared storage program and system planning to ensure continued reliability for APS customers.”[8]

APS sought to expand the original battery pilot, which was fully subscribed by January of 2023.[9] APS proposed expanding the battery pilot program in its amended 2023 Demand Side Management (DSM) plan. APS stated, “reallocating DSM budget to support expansion of the Residential Battery Pilot-an already-successful program that APS believes represents the best path forward to achieve the Commission's DDSR goals.”[10] The Commission has not voted on the APS 2023 DSM plan or its 2024 plan in which it also requested expanding the program.[11]

APS subsequently closed its battery pilot program because the Commission voted to pursue this VPP program instead in Decision No. 79293. At the February 22, 2024 open meeting in which the 2022 rate case was voted on, Vice Chairman Myers specifically asked Staff and the administrative law judge about their opinions on moving forward with the VPP program. Commission Staff said they have “no concerns moving forward” with the VPP program as was directed in the Recommended Opinion and Order.[12] Judge Harpring said the VPP “would present an opportunity that APS currently lacks that could be a lot more meaningful than APS’ battery pilot” and “I think this is an opportunity. APS needs a lot of dischargeable resources. This would provide a new dischargeable resource and I see that as a positive.”[13]

Denying the POA would eliminate all battery pilot programs at APS and would set Arizona back more than five years. That is not an efficient use of taxpayer dollars as the Commission has been pursuing this since 2020 or ratepayer dollars since APS has been working to aggregate demand side resources also since 2020. Another rate case would result in an unnecessary delay of at least two more years.

There are more than 500 VPP programs in the US.[14] By 2030, VPPs could reduce peak demand in the US by 60 GW. By 2050, VPPs could grow to more than 200 GW nationwide.[15] According to Brattle, VPPs could save US utilities $15-35 billion in capacity investment over ten years.[16] According to the US Department of Energy, “VPPs are among the critical solutions to meet the pressing challenges the grid faces today and in the near term to keep electricity rates affordable while maintaining grid reliability and resilience.”[17] Salt River Project (SRP) just committed to develop a VPP program by the end of 2025.[18]

Residential Batteries Add Capacity For Less Than Market Purchases
APS provided the quantity and price of its wholesale market purchases from 2018-2022 in the rate case.[19] An analysis of this data shows that the Company routinely paid in excess of $200/MWh for market purchases, with occasional purchases in excess of $1,000/MWh.  AriSEIA/SEIA’s analysis showed that the average weekday market purchase cost between 2019 and 2022 was over $100/MWh between 5 PM and 9 PM, the exact hours the VPP program would target.[20] 

But if one looks at the actual highest-cost purchases, the avoided energy potential is much higher. AriSEIA/SEIA determined the 500 highest cost hourly purchases throughout the year and then analyzed the purchases that fell in the core summer months of June to September from 2018 through 2022.[21] 

Even in 2019, which was an outlier in terms of the low quantity of high-cost market energy purchases, the average purchase during the high-cost hours was nearly $400/MWh. In 2021 and 2022 (and likely 2023), the price and quantity of high-cost purchases surged, with the average high-cost hour moving north of $800/MWh. 

Additionally, at $110/kW per year, the VPP program is less expensive that the cost of utility scale battery storage. The evidence in the hearing showed that the revenue requirement for APS-owned utility-scale batteries costs ratepayers $208/kW per year.[22] AriSEIA originally proposed $150/kW. The valuation in the POA is the result of a compromise derived out of the Commission ordered stakeholder process in Decision No. 79293.

Please Adopt the APS POA
In Staff’s Memorandum, they correctly assert the numerous benefits that this program can provide to the grid and they correctly state that all of these numerous benefits were discussed at length during the six month stakeholder process, which led to the creation of the POA. It is incongruent to argue that APS does not consider enough of the benefits which would “lower the net cost of the BYOD Program” and “increase the availability of customer incentives” while also stating that the program presents a possible cost shift.[23] Making the program a pilot capped at 5,000 customers was a compromise that the Commission already voted on in Decision No. 79293. Changes to the size of the program are not part of the Commission order to APS or Staff and are outside the scope of the POA. Additionally, the costs of the program are already factored into the per-kW valuation. The payments to participating customers are already reduced to cover the costs of the program. Further, while Staff expresses concerns of a cost shift, they also argue that APS should rate base the VPP program, which would allow APS to collect a return on the VPP program, which would increase costs for everyone.

As mentioned above, APS’ first battery pilot was fully subscribed. As of January 31, 2025, APS had more than 4,195 customers with batteries and another 1,250 were in the interconnection pipeline. Given the increase in electricity rates and the decrease in the RCP, most installations will soon be solar plus storage. Further, it is the installers who obtain customer enrollment, not APS or EnergyHub. The installers already have direct relationships with qualifying customers and have a natural incentive to educate customers as to the program. APS’ Cool Rewards program currently has 95,000 enrolled customers, capable of conserving 160 MW of energy.[24] The potential for a battery program is significant.
As was directed in Decision No. 79293, APS thoroughly considered the kW versus kWh issue, which was resolved in favor of a program design with a $/kW payment structure. We have no recollection of Staff ever raising this issue in the stakeholder process. As a capacity resource, which is the point of the program, kW are the appropriate metric. This was also discussed at length in the rate case testimony.

Staff states that, “given the increasing demand for electricity in Arizona, Staff recognizes the importance of leveraging existing capacity resources and supports the advancement of technologies.”[25] We agree. According to APS, “APS resource planners expect peak customer demand to grow to more than 13,000 MW by 2038. For perspective, it took APS 140 years to reach 8,200 MW of peak demand, and customer needs will increase by 60% in only 14 years.”[26] The Commission has been discussing this concept for five years and this exact program for two years. Additional delay is unwarranted and needlessly limits capacity resources that are already available today at a time when we are experiencing significant load growth at a price less expensive than the alternative.

As Staff correctly points out “APS was ordered to meet with other interested parties to collaboratively reach an agreement on the language of the BYOD POA.”[27] And against all odds, APS has done just that. Please approve the POA as drafted. AriSEIA has attached AriSEIA Proposed Amendment 1 to modify Staff’s draft order to approve the POA.
​
Respectfully,

Autumn T. Johnson
Executive Director
AriSEIA 
(520) 240-4757
[email protected]

[1] APS 2024 ASRFP, available here https://www.aps.com/en/About/Our-Company/Doing-Business-with-Us/Resource-Planning/Request-for-Proposals.

[2] ACC Decision No. 77855, Docket No. E-01345A-19-0148, available here https://docket.images.azcc.gov/0000202797.pdf?i=1741200024102.

[3] ACC Decision No. 78165, Docket No. E-01345A-19-0148, available here https://docket.images.azcc.gov/0000204280.pdf?i=1741200631832.

[4] APS DDSR Tariff, June 1, 2022, Docket No. E-01345A-22-0143, available here https://docket.images.azcc.gov/E000019505.pdf?i=1741200030297.

[5] ACC Decision No. 78878, March 16, 2023, Docket No. E-01345A-22-0143, available here https://docket.images.azcc.gov/0000208710.pdf?i=1741200030297.

[6] ACC Decision No. 77762, Docket No. E-01345A-19-0148, available here https://docket.images.azcc.gov/0000202207.pdf?i=1741200977874.

[7] Id.

[8] APS Supplemental to the 2020 RES Plan, August 26, 2020, Docket No. E-01345A-19-0148, available here https://docket.images.azcc.gov/E000008576.pdf?i=1741203415780.

[9] APS 2023 Demand Side Management Annual Progress Report, March 1, 2024, Docket No. E-00000U-18-0055, available here https://docket.images.azcc.gov/E000034300.pdf?i=1741300652460.

[10] APS Amended 2023 DSM Implementation Plan, May 31, 2023, Docket No. E-01345A-22-0066, available here https://docket.images.azcc.gov/E000027360.pdf?i=1741300107475.

[11] APS 2024 DSM Plan, November 30, 2023, Docket No. E-01345A-23-0088, available here https://docket.images.azcc.gov/E000032472.pdf?i=1741374160495.

[12] February 22, 2024 Open Meeting at 7:21:00.

[13] Id.

[14] Utility Dive, US VPPs Can Meet Summer Demand Peaks Faster, Cheaper Than New Generation and Transmission, July 10, 2024, available here https://www.utilitydive.com/news/us-vpps-can-meet-summer-demand-peaks-faster-cheaper-than-new-generation-an/721024/.

[15] RMI, Virtual Power Plants, Real Benefits, January 2023, available here https://rmi.org/insight/virtual-power-plants-real-benefits/. Attachment A

[16] Brattle, Real Reliability: The Value of Virtual Power, May 2023, available here https://www.brattle.com/wp-content/uploads/2023/04/Real-Reliability-The-Value-of-Virtual-Power_5.3.2023.pdf. Attachment B

[17] US DOE, Pathways to Commercial Liftoff: Virtual Power Plants 2025 Update, January 2025, available here https://liftoff.energy.gov/wp-content/uploads/2025/01/LIFTOFF_DOE_VirtualPowerPlants2025Update.pdf. Attachment C

[18] SRP, Board of Directors Approves Pricing Proposal, February 27, 2025, available here https://media.srpnet.com/srp-board-of-directors-approves-pricing-proposal/.

[19] AriSEIA 4.03_ExcelAPS22RC03362_Hourly Market Purchases 2018-2022

[20] Lucas Direct at 59.

[21] This is twice as many as are allowed in the BYOD program, which authorizes 60 event days with events up to 4 hours.

[22] See Kevin Lucas in hearing test. Sept. 1, 2023 at 00:04:31.

[23] Utilities Division Memorandum, February 26, 2025, Docket No. E-01345A-22-0144, available here https://docket.images.azcc.gov/E000041768.pdf.

[24] APS Customers Served with Reliable Power During Record-Breaking Heat, October 7, 2024, available here https://www.aps.com/en/About/Our-Company/Newsroom/Articles/APS_Customers_Served_With_Reliable_Power_During_Record-Breaking_Heat#:~:text=APS%20Cool%20Rewards%20acts%20like,small%20power%20plant%20would%20produce.

[25] Utilities Division Memorandum, February 26, 2025, Docket No. E-01345A-22-0144, available here https://docket.images.azcc.gov/E000041768.pdf.

[26] APS Secures its Largest-Ever Energy Supply to Reliably Serve Customers, November 20, 2024, available here https://www.aps.com/en/About/Our-Company/Newsroom/Articles/APS_Secures_its_Largest-Ever_Energy_Supply_to_Reliably_Serve_Customers#:~:text=APS%20resource%20planners%20expect%20peak,is%20conducting%20a%202024%20ASRFP.

[27] Utilities Division Memorandum, February 26, 2025, Docket No. E-01345A-22-0144, available here https://docket.images.azcc.gov/E000041768.pdf.

Salt River Project
1500 N. Mill Avenue
Tempe, AZ 85288
 RE: 2025 Pricing Proceeding Recommendations
 
Mr. President, Board Members, and Staff,
 
The Arizona Solar Energy Industries Association (AriSEIA) is the solar, storage, and electrification trade association for the State of Arizona. We advocate for pro renewables policies at every level of government. AriSEIA does not speak for or represent a single company. We represent nearly 100 companies in the State and we advocate for policies that we think are beneficial for the industry and the grid and best serve the public interest to the greatest extent possible.
 
As such, we agree with most of the proposals made by the other organizations, namely Southwest Energy Efficiency Project (SWEEP), Vote Solar, Wildfire, Arizona PIRG, Western Resource Advocates, and Sierra Club on February 6th. We also support many of the points made by Mr. Neil. We agree with an evidenced based approach to policy and ratemaking. We do not support or endorse comments or proposals that impede the clean energy transition, either by individual commenters or individual companies. Batteries are an essential and integral component to increased renewables on the grid, both at the distributed and utility scale levels. Misinformation about the safety or efficacy of batteries is unhelpful and shortsighted and we encourage the board and management to disregard such comments and proposals.
 
Correcting Battery Misinformation
While China is currently the world's leading manufacturer of battery cells, a diversified supply chain outside of China is rapidly developing, including manufacturing here in the U.S. The risk of China-only sourcing diminishes by the day.
 
Residential batteries do not fail at high rates; they work well when properly installed. Very few residential batteries fail. Like any other mechanical or chemical device, batteries degrade over time. The manufacturer maps, specifies, discloses, and guarantees this degradation. After 10 years, typical home batteries are guaranteed to still produce 70% (on average) of their original rated capacity. Capable installers consider this degradation when modeling system performance and expected savings and discuss these factors with their clients. Every home is different, uses different amounts of energy, and has different load profiles from other houses. Ethical, competent solar installers study the complexities of home batteries and design the best system for the home, the homeowner's usage, and savings goals. Batteries are often used to achieve these goals, and when designed and installed correctly, they will provide many years of reliable operation and savings.
 
There are very few fire risks associated with modern batteries. Manufacturers have incorporated numerous safety features designed to ensure safety, and data shows very few issues. Additionally, the best practice in Arizona is to install the battery inside of a home, in a garage or utility room, and not outdoors. Home batteries are widely available and can be ordered, delivered, and installed today. Out of half a dozen popular battery manufacturers, only one is experiencing supply issues.
  
Virtual Power Plants
Distributed batteries allow individual ratepayers to reduce their electric bills and increase their resiliency in the event of a power outage, while also benefiting the utility and other ratepayers, by providing valuable capacity when the grid needs it most. Valuing that capacity sends a price signal to a ratepayer who has used their own capital to install a battery to provide the stored energy to the grid, instead of their own home, when there is strain on the grid. This is a supply virtual power plant (VPP). SRP can call an event on a hot August afternoon and thousands of homeowners can respond by allowing SRP to use their batteries, instead of them using the stored power themselves.
 
According to the U.S. Department of Energy, there is currently 30-60 GW of VPP capacity on the grid today, but that amount needs to triple by 2030.[1] Arizona Public Service (APS) is in the process of adopting a VPP modeled off of AriSEIA’s proposal, which is derived from a very successful VPP program called ConnectedSolutions. Our proposal is a pay for performance only model that allows the utility to call up to 60 events in the summer season for up to three hours. A third party aggregator operates the program just like a smart thermostat program. Participants can lock in their rate for five years. While we understand that actual adoption of a VPP program within this pricing proceeding may not be possible, we recommend the Board direct management to engage with AriSEIA to develop a program to bring to the board for consideration by the end of the year.
  
Time of Use
64% of SRP’s customers are not on a time of use rate and 95% of SRP’s customers can opt out of a time of use rate. Only 5% of SRP’s customers are solar customers and, yet, they are the only customers required to be on a time of use rate. All customers should have the same rate plan options and all customers should be defaulted onto a time of use rate. Contrary to the comments of the board consultant, no one has argued for 100% participation on the time of use rates, but it should be the majority of customers and customers should have to opt out, rather than opt in. No current time of use customers should be defaulted to non-time of use rates in 2029. They should instead be defaulted to E-28. The differential between the on peak and off peak rates should be roughly 3:1 and that differential should be between on and off peak, not on and super off peak. The on peak time of use window should be three hours to maximize participation.
 
We recommend that E-16 and E-28 have the same on peak period. To alleviate management’s concern about the shifting on peak window and the need to cover more than just 3 hours, we recommend customers have the option of one of two staggard on peak windows. We recommend a 4-7pm on peak option and a 6-9pm on peak option. This alleviates strain on the grid, allows families to select which plan works best for their schedule, and does not penalize solar owners.
 
We also recommend that the super off peak window be 10-3pm in the winter. This aligns with both the costs experienced by SRP and with what other utilities, such as APS, are currently offering. This will reduce customer confusion, creates an evidence and cost based program, and does not unnecessarily penalize solar customers.
 
Fixed Fees
AriSEIA agrees with the other organizations that made comments on February 6th. Fixed fees should be as low as possible, as volumetric charges better align price signals with behaviors that improve efficiency. However, to the extent SRP has fixed fees, there should be parity between solar and non-solar residential customers. Solar customers should not be singled out for punitive and discriminatory fees.
 
Export Rate
SRP’s export rate is significantly below the other large utilities in Arizona. The valuation of the avoided cost is not correct. That methodology has not been highly scrutinized by the Arizona Corporation Commission or stakeholders because the Resource Comparison Proxy (RCP) framework has not yet rendered it necessary; however, SRP’s proposed export rate methodology in this case is inadequate. AriSEIA met with SRP extensively about our concerns with the value of solar study in 2024. The current cost allocation study does not correctly assign value to capacity costs and avoided transmission and distribution costs. We recommend that SRP adopt an export rate closer to that of Tucson Electric Power (TEP) to be evaluated on an annual basis and locked in for existing customers for a period of ten years, not one year. Even though SRP is three times larger than TEP, their current number of solar customers are comparable. Therefore, TEP is a reasonable starting place for an export rate that is fair to solar customers, but is closer to the current SRP proposal.
 
Additionally, any customers on a net metered rate should be allowed to stay on that rate until 2034 and not be inadvertently bumped in 2029, as is currently proposed.
  
If SRP provided more than two months to process this pricing proceeding, AriSEIA could provide a more detailed analysis and recommendation as to solar rate design. Organizations need time to hire an expert, have the expert review the workpapers, run their own analyses, and make a detailed recommendation. Therefore, we recommend the board set a vote on this pricing proceeding this summer, since the rate will not take effect until November of 2025, so that the best possible recommendations can be brought forward.
 
Commercial Rates
SRP seems to want to move to more plans with a storage component, but not in a way that will increase the adoption of storage. We recommend SRP adopt a pilot storage rate similar to the E-32L SP rate that APS adopted in 2024. APS developed that tariff in 2023 as a result of the prior rate case in a stakeholder process with AriSEIA. A copy of that tariff is included as Attachment A.
 
Recommendations
As such, AriSEIA recommends the Board offer amendments that accomplish the following:
 
1.      Move the final vote on the pricing proposal until summer of 2025, with new rates to still take effect in November of 2025;
2.      Open all four proposed rate plans to solar and non-solar customers;
3.      Default all new customers to E-28 with an opportunity to opt out;
4.      Have the super off peak time be 10-3pm in winter, instead of 8-3pm year round;
5.      Have the same on peak time of 4-7pm or 6-9pm on both E-28 and E-16 with the ability of the customer to choose which of those periods works better for their family;
6.      Move the export rate closer to that of TEP with a 10 year lock in, evaluated annually by SRP;
7.      Adopt a pilot commercial storage rate similar to APS’ E-32L SP;
8.      Grandfather all net metered customers on their current rate until 2034, if so desired by the customers; and
9.      Management should be directed to work with AriSEIA via a stakeholder process to develop a VPP program to be presented to the board by the end of the year.
 
Respectfully,
 /s/ Autumn T. Johnson
Executive Director
AriSEIA 
(520) 240-4757
[email protected]

[1] U.S. Department of Energy, Pathways to Commercial Liftoff: Virtual Power Plants, Sept. 2023, available here https://liftoff.energy.gov/wp-content/uploads/2023/10/LIFTOFF_DOE_VVP_10062023_v4.pdf. 

Same APS discrimination against solar customers 

Arizona Public Service likes to tout itself as somehow new and different. It is not the APS we remember involved in scandals at the Arizona Corporation Commission (ACC) or opposing renewable energy like with Proposition 127. They have new leadership and clean energy goals now. But if you are paying attention, APS consistently makes decisions that undermine renewable energy and hurt solar customers.

Last year, APS opposed the adoption of community solar in Arizona. Community solar is an option for customers that want rooftop solar, but cannot install rooftop solar either because they are renters, or live in multifamily housing, or have an older roof. It allows them to participate in the clean energy transition while also increasing a distribution grid resource and saving them money on their electric bills. The ACC ended up adopting a policy to kill any advancement of community solar in Arizona.

APS continues to ask for annual decreases in the export rate solar customers are paid for the extra solar power their rooftop panels produce and they sell back to the grid. APS buys it at a fraction of what it sells it to your neighbors for. APS has consistently fought against you having any options to sell that extra power elsewhere, including supporting HB2101 in 2022, which eliminated competition in the electric sector in Arizona.

APS simultaneously has advocated for increased fixed fees on solar customers. APS has nearly 200,000 customers with rooftop solar and it has advocated for all of them, every single one, to pay 15% more for the same power than their neighbors without rooftop solar. That new fee is the subject of ongoing litigation at the ACC and APS has most recently advocated for 74,000 of those customers to be completely excluded from the hearing entirely. These customers got solar years ago and are on rate plans called “Legacy Solar.” 

If APS is successful, not only will these customers be subject to APS’ discriminatory fees on solar, but they will be deprived of their due process rights, as well. APS has also argued (and won!) that the evidence used to substantiate this discriminatory fee on solar customers not be evaluated in the hearing. So, the evidence used to substantiate the fee is not part of the hearing in which the ACC decides if the fee is even legal.

Earlier this year, the ACC ordered APS to start a pilot program that aggregates the household batteries that customers pay for with their own money to offset energy APS needs when demand from customers is especially high. APS was ordered to undergo a stakeholder process and work collaboratively with the community to develop a fair program. Instead, APS has come up with a program that will almost certainly fail, because it inadequately pays for the resource it takes from customers. 

APS will continue to penalize solar customers unless the utility is held accountable. APS does not like solar customers because solar customers pay for their solar panels themselves. APS does not own them and does not earn a profit margin off of them. APS’ nearly 200,000 solar customers need to pay attention and need to tell the ACC that APS must stop its needless attacks on solar customers. 

Unfortunately, the ACC just sided with APS and determined that some solar customers may, indeed, be excluded from the rate case rehearing and that the underlying evidence APS provided to justify the discriminatory fees on solar customers will not be evaluated. This raises serious concerns about the validity of the rehearing. The public needs to reach out to the ACC in support of solar. You can file a comment with the ACC and be sure to reference Docket No. E-01345A-22-0144.
​
Autumn Johnson is executive director of the Arizona Solar Energy Industries Association.

Arizona Corporation Commission
1200 W. Washington Street
Phoenix, AZ 85007
 
RE: APS Virtual Power Plant (BYOD) Pilot Program, Docket No. E-01345A-22-0144
 
Chairman, Commissioners, and Staff,
 
Arizona Public Service (APS) is predicting unprecedented load growth over the next decade. To meet this rising need, the utility must aggressively add capacity which will put dramatic upward pressure on rates. One way to mitigate that upward rate pressure is to avoid direct utility investments where possible and to leverage customer owned assets to provide services that would otherwise require utility investment and risk ratepayer funds. To this end, the Commission ordered Arizona Public Service (APS) to implement the money-saving Bring Your Own Device (BYOD) program (also known as a virtual power plant (VPP)) which uses customer owned batteries to meet peak demand. The evidence in the rate case found that such a program could give APS access to batteries at a cost well below the cost of utility owned options.

AriSEIA/SEIA have raised several concerns about APS’s approach and its valuation methodology during the ongoing BYOD stakeholder process. APS has expressed consistent opposition to this program that could displace some utility investment opportunities from the start so it is unsurprising to AriSEIA/SEIA that APS’s methods and assumptions are designed to skew the outcome of this process in its favor. While we have some questions about the program implementation costs, the primary issue is with the value of avoided capacity and energy. The Company’s approach for valuing these categories does not reflect actual conditions on the ground and, as a result, produces avoided cost values that are substantially lower than justified.  Further, under the Company’s value, nearly all potential value from participating perfectly will be eaten up by the opportunity cost of forgoing peak time of use (TOU) reductions. Stated more plainly, APS’s proposal undervalues the important services BYOD can provide to such an extent that ratepayers will be unlikely to participate at all and would be better off simply reacting to the TOU rate. Rather than provide the appropriate price signal to customers to manage their battery for the broader good of the grid and all ratepayers, APS’s proposal will result in retrenchment to optimizing individual bill savings.

Capacity Value Issues

APS had indicated that it will use the Public Utility Regulatory Policies Act (PURPA) avoided capacity cost for the BYOD. Based on its Federal Energy Regulatory Commission (FERC) filing, this appears to be roughly $80/kW-year.  There are two key issues with using the PURPA avoided capacity value as a proxy for avoided capacity costs. 

First, the Company’s latest PURPA filing assumes that customer-sited microgrids are the capacity resource of choice. This is a non-conventional and inappropriate choice. APS was recently prevented by the Commission from pursuing additional customer-sited microgrid projects due to the impingement of its utility monopoly into a competitive market. This alone disqualifies this technology as the future capacity resource of choice, and any PURPA capacity costs based on this technology. Further, the Company has projected more than 4,000 MW of new capacity need over the following decade, and its integrated resource plan (IRP) shows that it will be procuring copious amounts of centralized generation and battery storage. Using a more conventional avoided resource such as a battery or gas combustion turbine (CT) or Company unit is more appropriate. AriSEIA/SEIA’s filing in this case used the annual revenue requirement of a utility-scale battery as a proxy, finding its avoided capacity value was north of $200/kW-year.

Second, PURPA is not driving investment in Arizona. The Company indicated that it has not signed any new PURPA contracts for years and the IRP filing does not rely on this financing mechanism for future procurements. Rather, it is procuring resources through competitive all-source contracts and through market-based purchases. Tying the value of this program to a moribund policy that is not producing new capacity is simply the wrong framework and should not be approved.

Energy Value Issues

The Company is using a simulated dispatch model to project avoided energy costs. This approach is necessarily tied to the input assumptions used and will necessarily not reflect actual real-world conditions, particularly during the scores of high-load/high-cost hours that the BYOD program will target. APS indicates that the average avoided energy cost is between $33/MWh and $52/MWh, a value that is simply inconsistent with historic market purchases during high-cost hours.

APS provided the quantity and price of its wholesale market purchases from 2018-2022 in the rate case.[1] An analysis of this data shows that the Company routinely paid in excess of $200/MWh for market purchases, with occasional purchases in excess of $1,000/MWh.  AriSEIA/SEIA’s analysis showed that the average weekday market purchase cost between 2019 and 2022 was over $100/MWh between 5 PM and 9 PM, the exact hours the BYOD program would target.[2] 

But if one looks at the actual highest-cost purchases, the avoided energy potential is much higher. AriSEIA/SEIA determined the 500 highest cost hourly purchases throughout the year and then analyzed the purchases that fell in the core summer months of June to September from 2018 through 2022.[3]  The results show that year after year, the avoided energy cost values during the highest cost hours are at times an order of magnitude larger than what APS proposes.

Even in 2019, which was an outlier in terms of the low quantity of high-cost market energy purchases, the average purchase during the high-cost hours was nearly $400/MWh. In 2021 and 2022 (and likely 2023), the price and quantity of high-cost purchases surged, with the average high-cost hour moving north of $800/MWh. 
Against this irrefutable historic purchase data, which has cost the Company’s customers tens of millions of dollars per year, the Company’s offer of as little as $33/MWh in avoided energy is simply unacceptable. AriSEIA instead recommends a minimum value of $500/MWh for avoided energy purchases for the BYOD program, a value which is roughly 1/3 of the highest cost purchase in recent years.

APS’s Proposal Is Eroded by TOU Opportunity Costs

By lowballing the avoided cost value on both the energy and capacity side, APS is setting the BYOD program to undercompensate customers for the real services they provide which will cause the program to fail. The residential value available to customers is only $40/kW-year based on the average reduction over the course of a program year.  The Company is authorized to call up to 60 events of up to 4 hours each between the hours of 4 PM and 10 PM.  Given that only half of these hours fall within the current peak TOU period (and fewer than half if events are called on weekends), customers participating in the BYOD event will have to consider the opportunity cost of peak TOU reductions. In other words, customers electing to participate in BYOD and give APS the ability to access the energy and capacity when they need it, may be inclined to simply participate in the TOU rate design thereby depriving APS and all its customers of the savings possible with BYOD.  

APS’s current peak and off-peak rates are roughly $0.34/kWh and $0.12/kWh, with a rate spread of $0.22/kWh.  Each kWh that a customer discharges their battery during an off-peak hour event call thus has an opportunity cost of $0.22. From this, it is possible to calculate the total opportunity cost that a BYOD customer faces by participating in the program.

In a best-case scenario, every event would be as short as possible (perhaps 2 hours) and fall during the peak TOU period.  In this case, discharges from the battery would not incur an opportunity cost and the customer could capture the full $40/kW-year benefit the Company proposes. In a worst-case scenario, every event would be 4 hours long and fall on weekends. This means that 100% of the event hours would incur the opportunity cost. A middle of the road scenario might assume event calls from 6 PM to 9 PM weekdays, with 2/3 of the hours occurring off-peak.
Suppose one analyzes an 11.5 kWh battery. The results of the three different scenarios are tabulated below. Even in the middle scenario, so much of the value of the program is eaten up by the opportunity cost that it is hardly worth the effort for a customer to sign up for the program. And in a worst-case scenario, it actually costs the BYOD customer money to participate in the program.

APS’s Stakeholder Process Violates Order No. 79293

Order 79293 (the “Rate Case Decision”) orders APS to “meet with AriSEIA/SEIA and any other interested parties to discuss collaboratively and attempt to reach agreement on the language of the BYOD Pilot POA.”[4] APS has held several stakeholder meetings in which it has told the stakeholders what it plans to do. AriSEIA requested an additional meeting to walk through the concerns identified above. APS sent out the proposed valuation that same afternoon. At the following stakeholder meeting, several stakeholders pointed out that the APS methodology was flawed and the valuation was too low and would make the program unsuccessful. APS requested stakeholders provide feedback in writing. Stakeholders asked for the Company’s workpapers. Stakeholders received two spreadsheets with two business days to review before the date in which APS asked for written feedback.

To date, it does not appear that APS plans to consider any stakeholder feedback in the plan of administration (POA) it intends to file within a month. APS is going through the motions of a stakeholder process, but there is nothing to indicate they intend to discuss collaboratively or attempt to reach agreement with stakeholders.

Respectfully,
 
Autumn T. Johnson
Executive Director
AriSEIA 
(520) 240-4757
[email protected]

[1] AriSEIA 4.03_ExcelAPS22RC03362_Hourly Market Purchases 2018-2022

[2] Lucas Direct at 59.

[3] This is twice as many as are allowed in the BYOD program, which authorizes 60 event days with events up to 4 hours.

[4] APS Rate Case Decision, Order No. 79293, 452:17-18, available here https://docket.images.azcc.gov/0000210704.pdf?i=1722230808744. 

FOR IMMEDIATE RELEASE
Contact:
Autumn Johnson
[email protected]
520-240-4757

Phoenix, AZ - Yesterday, the Arizona Corporation Commission (ACC) voted 4-1 to impose a new and discriminatory fee on rooftop solar customers in APS service territory. The new fee imposes a 15% greater increase on solar customers, over and above the rate increase that all customers will see starting on March 8th. The fee will show up on most customers' bills as a "grid access charge" and will be approximately $2-3 a month in addition the the rate increase everyone will get of approximately $10-12 a month, per APS. AriSEIA opposed the fee and offered an amendment to eliminate it from the rate case, which was not adopted. 

AriSEIA championed a Virtual Power Plant (VPP) program that was adopted 5-0 as a pilot program to commence next year. This program will save all ratepayers money, by allowing customers with batteries to opt in and share their battery capacity with APS when there is high demand on the grid, thereby limiting the need to build new, replacement resources.

The ACC also voted 5-0 to prohibit APS from competing with private industry in the microgrid space and voted 5-0 to correct on-peak hours for a commercial storage tariff called E-32 L SP, both upon AriSEIA's request. AriSEIA's request to stop disproportionately negative impacts from increased demand rates over energy rates on the E-32 M and E-32 L rate plans was not adopted.

"Yesterday was a challenging day for solar in Arizona. In a state with more than 300 days of sunshine, almost 400 solar companies that employ more than 8.250 people and contribute more than $1.5 billion to the state annually, we should be looking at ways to foster the sector, not penalize it. An unsubstantiated and discriminatory fee on solar customers is a step in the wrong direction," said Autumn Johnson, Executive Director of AriSEIA.

AriSEIA plans to file a Motion for Reconsideration on the solar charge and will engage with APS on the VPP program implementation.

AriSEIA is the state's solar, storage, and electrification trade association. It is the only trade association in the state that focuses on all scales of solar at every level of government, doing both regulatory and legislative work, and has boots on the ground.