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Arizona Corporation Commission Candidate Debate, Part 1

Last Thursday we hosted the 2010 Candidate Debate for the office of Arizona Corporation Commissioner.  Four candidates participated: Hon. David Bradley, Ms. Brenda Burns, Mr. Rick Fowlkes, and Commissioner Gary Pierce, who is running for re-election.  Michael Grant moderated the debate, taking questions from the live audience and webcast participants.

In this and Friday's blogs you'll find a recap of the debate; you can also watch the webcast here.  Because the debate was nearly two hours long, I haven't transcribed the candidates' responses verbatim; I also omitted the questions that the candidates addressed earlier this fall in response to our questionnaire (you can read those responses here).  There are currently two open seats on the five-member Arizona Corporation Commission -- the agency Chairwoman Kris Mayes has called "the most powerful state agency you've probably heard nothing about" (learn about the ACC here).

Michael Grant: As we look toward the future, what alternative energy sources do you see as viable and feasible and why?

Gary Pierce: The cost of renewable energy, particularly solar, has gone down.  With R&D we'll see more and more in the renewable world.  We'll see more nuclear.  I don't know what we'll see in coal-fired generation but I suspect that we'll see cheaper and more environmentally-sound coal technologies so we can continue to use coal because there's such a huge supply of it.  Again, I don't discriminate between electrons; I just push for the best bang for the buck, taking negative externalities into account.

Rick Fowlkes: Solar is the most promising but the drawback is that it is so expensive.  Other more practical options include clean coal.  And, in addition to large-scale nuclear plants like Palo Verde, small-scale nuclear is also a promising option.  Nuclear is right now the most economically of all generation sources.

Brenda Burns: Issues like water and storage that are associated with solar are being dealt with in R&D.  CO2 taxes and cap and trade bring uncertainty to lots of industries (especially coal-powered industries), but things are going on there as well.  We've identified the downsides to the various energy sources, now I want to develop certainty and stability for this exciting but uncertain time.

David Bradley: We underestimate the pace of change.  For example, solar and fuel cells: in 5 years there will be technologies that we don't even know about.  Arizona needs to be at the forefront of the R&D, design, and implementation of those technologies.  Two-thirds of the world is energy poor, so we have a tremendous opportunity to offer the world solar technology to offset that issue.

Michael Grant: Arizona is home to 6 coal-fired power plants, which support the state's still-expanding residential and commercial needs.  Although most Arizonans support renewable energy sources, those sources can't adequately replicate the energy needs supported by existing plants.  And they may cost the consumer more.

Rick Fowlkes:  There is technology to clean up emissions at existing coal-fired plants.  And there are other clean-coal technologies in developmental stages.  We're going to have demand for coal-fired plants a long time into the future.  But there are solutions: technologies that clean up the emissions and cleaner-burning types of coal.  Clean coal will be a key element in the energy mix.

Brenda Burns: Moving forward we've got to have all different energy sources working together, each for its highest and best use.  Certainly we'll need inexpensive coal into the future.  If we want to talk about cleaning up emissions, let's talk to other countries about cleaning up SO2 and NO2, which we do capture.  We have a very clean coal plant up in Springerville that's a good model.

But we need a mix.  The Abengoa solar plant will generate 280 megawatts to service 70,000 homes, which is great but we need a lot more.  Each Palo Verde plant generates around 1200 megawatts.  We talk about how many households and how many new businesses we're going to service we need it all and we need to figure out how it works together in the most efficient way.

David Bradley: The U.S. is spending $12 billion in research into clean coal.  That needs to continue.  But there are all kinds of ramifications of the continued use of coal, and we need to mitigate those consequences.  But coal is not going anywhere; some 50% of the power plants in US are coal-fired.  Let's make that as environmentally sound as possible.  It's partly a base load issue: how do we maintain the base (solar plants as currently designed don't solve that issue, though the technology will catch up and resolve). We need to ensure that to the extent we have to use coal we do it as safely as possible.

Gary Pierce: I want to talk about coal - we have some coal-fired plants that have a target on them by the EPA.  Those won't survive very well (up in Four Corners, for example).  There are some that will be fine.  California policymakers have said that they won't have fossil fuel-generated electricity coming into the state after 2016.  So as some of those power plants are decommissioned we'll see megawatts replaced by California utilities divesting themselves.  So I think we'll be good in terms of base load into the future, because California is restricting their utilities at the same time we're concerned about some of ours that are at issue.

But clean coal is just a term; you can't go buy clean coal.  The reality is that it's coal and all we can do is mitigate it the best we can, but it's worth it because of the 100 years of supply we have available.

Michael Grant: Who should control energy policy - the ACC or the legislature?  ACC maintains energy efficiency and renewable impact rates so they should have control; many in the legislature say ACC is pushing its ratemaking power to the limit and beyond.  What do you think?  See Question 1 on our earlier questionnaire (you can read those responses here).

Michael Grant: What's your position on global climate change and the contribution of AZ power plants to it?  What's your opinion of the ACC's responsibility with regard to climate change?  How do you propose to evaluate the cost and the context of its externalities (emissions, land use, water, etc.)?

David Bradley: Yes, I believe there is a cycle of climate change that we all endure -- we can follow it in our ice packs.  42% of the ice cap is gone in 42 years.  Human intervention had something to do with that.  The methane that was under the ice is now in the atmosphere.  It's foolish to pretend there isn't a human factor -- we have to consider that and plan for that as we move forward.  And so what can we do? We have to consider the amount of carbon we put into the air.  We may not be in the same ship, but we're in the same sea -- all of us together.

Gary Pierce: We're studying this issue now at the ACC so we can weigh in on what value if any should be placed [on mitigating emissions].  We can place values on mitigating NO2 and SO2 emissions and using less water - and I don't think that is going to be crippling to coal.  Unless you want to put a tax on the air we exhale - that massive transfer of wealth and surcharge on ratepayers will impact this economy, and for what effect?  What can man actually control for the $1 trillion it would take, what is the percentage of the temperature that we can affect?  The biggest factor I see in climate change is winter, spring, summer, fall and we deal with those changes.  Technology will allow us to deal with that.  Humans with changing technology will thrive.

Rick Fowlkes: There has been a lot of hysteria and publicity about the global warming/climate change issue, and as an engineer with a scientific background I've looked at both sides.  There's so much of this that is beyond our control.  We could shut down coal plants and run up cost of living and reduce our standards of living and every week for years now the country of China has completed a new coal-fired plant.  The biggest source of CO2 emissions is the ocean, and there's nothing we can do about that.  I would dig in my heels against a carbon tax.  We need to look at what we can control, and climate change is not one of them.

Brenda Burns: The answer from the Feds is a cap and trade which applies an artificial cost to CO2 emissions.  And I would consider that an artificial rate increase.  I do know there are a lot of scientists who disagree on climate change.  But a lot of scientists who do believe it's man made say we're not going to avoid its consequences.  I would hate to see us saying, "Gosh we didn't plan for sea level rises."  We don't want to go broke while other emissions are taking place in other countries.  Look at facts.  We all want the truth and we don't want artificial rate increases.

Michael Grant: We've got a ton of water companies that take up a lot of regulatory resources.  Many times they're very small and have difficulty delivering services.  Are there ways that the Commission can encourage consolidation of water companies -- maybe granting larger service areas to get economies of scale?

Gary Pierce: Yes.  Those are things we can do and consider.  There are really 5 or 6 large water companies among 300 or so in AZ that we regulate.  If you were President of AZ you would assign territories and consolidate.  It's difficult to find a fair solution in the world of consolidation.  There are companies that interconnect because their rates were already pretty similar and it wasn't going to impact them much.  It has to work for the ratepayer and the company.  For the standpoint of less work for our staff, which would decrease regulatory lag, economies of scale for the commission consolidation would work but we have to make sure it works for ratepayers as well.

Rick Fowlkes: I feel very strongly that the law that provides for competition in the electric power industry could serve as a model for competition in the water resources industry.  There are over 300 private water companies regulated by ACC.  Rather than consolidate, invite them to form competitive consortiums where they merge distribution networks or divest themselves of distribution and just do water supply.  Now let them expand and compete with other companies.  If they compete with 2 or 3 other companies they shouldn't even have to come to the ACC for a rate increase because they're not a monopoly anymore.  So that's the answer -- let them compete for the customer's business.  That will be best for the ratepayer and for the state when it comes to down the road meeting future demands, particularly in rural areas.

Brenda Burns: Clearly having so many water companies is a strain on the ACC.  To consolidate and be better able to listen to their needs in a shorter time frame is good for everyone.  I'd like to hear from the industry.  But I think there needs to be some sort of nexus, some sort of way that it works for the ratepayers who have similar needs to offset the needs of one and costs of another so that everybody has a win for the long term. 

David Bradley: Figure ways to incentivize consolidation as much as possible.  We're capitalists -- we like to see competition.   But competition without regulation -- what has happened?  Some of those incentives to consolidate might be inflationary rate adjustments over 2 or 3 years that are automatic and don't require coming back to the ACC every time.  I would never favor just letting it go.  I think we need to have a role, I think we need to incentivize consolidation; there are some opportunities there.  One of the biggest costs in water is moving it -- electricity costs.  We could incentivize more solar power -- more efficient ways -- to move that water.  Another piece is to work with developers.  Thinking about moving forward, we have to hold developers accountable so that people don't get suckered in to areas where the water issue is not well planned out and there is sticker shock 4 or 5 years later when the infrastructure collapses.

Stay tuned for Part 2 of the candidates' responses - posted here on Friday.

Written on Wednesday, 22 September 2010 14:58 by Gary Yaquinto

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