News & Events

Current Utility News
Current News


Debate Webcast

Click above to watch a replay of the debate anytime or to submit comments.

Improving Regulatory Efficiency at the Arizona Corporation Commission is a Win-Win-Win

So the other day I got an e-mail from the Goldwater Institute announcing a new policy report whose title really caught my attention: "Rediscovering the ACC's Roots: Returning to the Original Purpose of the Arizona Corporation Commission."  It particularly struck me because about a year and a half ago the AIC released a report titled, "Streamlining Administrative and Ratemaking Processes of the Arizona Corporation Commission."

Is it possible that there's something on which the Goldwater Institute and I can agree?

As I dove into the Goldwater Institute's report, it certainly didn't look like it.  It was clear from the introduction that the bastion of Libertarian politics is still fuming about the Superior Court's September 2009 decision in favor of the Arizona Corporation Commission (ACC) in Miller v. State of Arizona Corporation Commission.   In that lawsuit the Goldwater Institute argued that the ACC's rule requiring Arizona's public utility providers to derive 15% of their energy from renewable sources by 2025 was unconstitutional.  The Court disagreed (and so do I).*

But then I found it - a nugget on which we can agree: that the Arizona Corporation Commission can (and should) improve regulatory efficiency.

 The purpose of the ACC

In our 2008 Report we talk about the purpose of the ACC, and its challenge in today's environment: to effectively and efficiently utilize its scarce resources to protect consumers against potential monopolistic abuses while also encouraging investment in infrastructure and services to meet Arizona's growing population.

The Corporation Commission's job is a balancing act.  At one extreme, it could set rates so low that no utility could afford to provide energy, water, or telecommunications services to Arizonans.  At the other extreme, the ACC could set rates so high that no Arizonan would be able to afford to pay for those services.  In between is some rate that allows utilities a fair profit (encouraging them to provide those important services and to continue to invest in the state's infrastructure) and keeps energy, water and wastewater, and telecommunications services affordable for consumers.

Improvements we've advocated

That basic balancing act role is, at its core, the same today as it was in 1912.  So I fundamentally disagree with the Goldwater Institute's assertion that the ACC behaves very differently at its core than the state's founders intended it to.

That said, there's always room for improvement, and clearly the world is very different than it was nearly 100 years ago.  While the ACC's fundamental role is unchanged, the way that it operates should look quite different.  In our 2008 Report the AIC said "regulation of public service corporations in Arizona could be streamlined in several areas that would save Commission resources while also lessening regulatory uncertainty but still preserving the integrity of the Commission's decisions.  Reducing regulatory overhead is a winning proposition for consumers, investors, and the Commission itself."

Specifically, we suggested seven improvements that the ACC could make to deliver that win-win-win:

  1. Establish processing criteria so that routine and non-controversial rate filings can be approved by the Commission without discussion (through a Consent Agenda).
  2. Implement new procedures to lower the cost and frequency of rate cases, and to improve the consistency of ACC rate case filings and decisions.
  3. Create a streamlined rate case process for member-owned utilities (which need less regulatory oversight given that they are controlled by their consumers).
  4. Streamline telecommunications regulation where services and/or providers are found to be competitive.  The purpose of the ACC is to protect consumers from bad behavior by monopolistic utilities - when the utility doesn't have monopoly power, it should need less regulatory oversight.
  5. Provide incentives to encourage water company consolidation.  Clearly there are efficiencies to be gained by consolidating the number of water companies that the ACC regulates.  In addition, consolidation would make management of those water companies more efficient.
  6. Allow and encourage electronic filings.  Given that the ACC already scans paper documents into electronic format (a resource-intensive process in itself), it only makes sense to allow companies to make their filings electronically.
  7. Encourage consumers to be more efficient in their use of utility infrastructure (which mitigates upward pressure on demand, enables utilities to earn their Commission-authorized revenue, and reduces the frequency and volume of rate cases).  The ACC can encourage efficiency by authorizing innovative, conservation-oriented rate structures and removing barriers to utilities' pursuit of energy efficiency and demand reduction programs.

Some progress

Since November 2008 when we issued the white paper with those seven efficiency recommendations, the ACC has made progress in some areas.  For example, it has expanded the Consent Agenda (allowing for streamlined approval of routine, non-controversial rate cases) and approved a settlement agreement among parties in implementing new rates for APS.

Still, more progress needs to be made to both modernize and harmonize the ratemaking process with conservation and alternative energy policies. The Commission would also do well to reconsider the manner in which it processes water company rate cases to reduce the time and expense for both the Commission and the regulated water companies.

The need for regulation will exist as long as some utility companies have monopoly control over markets. To be fair to utility shareholders, utility ratepayers, and taxpayers, the ACC should reexamine the way it regulates in a way to reduce regulatory burden and costs to all parties.

The seven improvements that the AIC has advocated would be a win for the ACC, a win for Arizona consumers, and a win for utilities.  The Goldwater Institute would throw out the bathwater, the baby, and the tub.  I think it's much more prudent to simply redraw the bath.

 What's your take?  Write a comment below -- no registration required.


*A little background on the court case, straight from the Goldwater Institute's report: "In 2008, the Goldwater Institute filed a legal challenge against the Corporation Commission, arguing that its renewable energy mandates exceeded its limited constitutional authority. Unfortunately, on September 2, 2009, the Superior Court of Arizona, Maricopa County, ruled against the Institute, largely due to the vast deference afforded to the Commission by other government branches. Instead of viewing the Commission's promulgation of the Renewable Energy Standard and Tariff (REST) rules as an unwarranted expansion of the ACC's power, the court ruled that the Commission's acts were simply the latest in a long string of energy policy decisions, fully compliant with the state constitution."

Written on Friday, 28 May 2010 09:08 by Gary Yaquinto

Viewed 441 times so far.

Rate this article

(4 votes)
blog comments powered by Disqus