Arizona scraps energy mandates for market-driven utility regulation

By EPN Staff

Some Republican-led public utilities boards are bucking against energy regulations. Market choices, they say, should drive clean energy goals rather than regulatory prodding.

Arizona’s Corporation Commission (ACC) has moved decisively to roll back two major regulatory pillars of the state’s energy policy, the Renewable Energy Standard and Tariff (REST) rules and the statewide energy-efficiency mandate. The Electrical Energy Efficiency Standards Rules, which passed in 2010, required utilities to achieve cumulative energy-savings targets of 22% by 2020. Utilities have exceeded these goals since then. In 2006, the state passed the REST rules, which required utilities to produce 15% of retail electricity from renewable sources by 2025.

The ACC concluded that after two decades, the rule has become unnecessary and financially burdensome.

“The main thing about the REST rules is all our utilities already met the renewable requirements,” said ACC Chair Kevin Thompson in an interview with EPN staff. “They just had reporting requirements that were still mandated, that essentially were just paying attorneys every year to file them. That’s just an added costs ratepayers don’t need to fund.”

Thompson and Commissioner Rachel Walden both emphasized that while utilities may continue offering efficiency programs or expanding renewable portfolios, those decisions should not be dictated by rigid, statewide mandates that push costs onto ratepayers.

Both decisions reflect a broader push by the GOP-led commission to modernize Arizona’s energy regulatory framework and eliminate what it views as outdated, one-size-fits-all rules that hinder market efficiency and harm consumers.

Why it matters

Cost drove the ACC’s decision as much as general concern for business flexibility. The requirements, commissioners say, are counterproductive to the end of securing reliable and affordable energy.

The commission estimated Arizonans have paid roughly $2.3 billion in surcharges as a direct result of efficiency and renewables targets. Even as utilities have achieved the goals outlined, charges that remain embedded in customer bills often hit low-income households hardest.

Removing these rigid requirements shifts Arizona toward a market-driven approach, where utilities can choose the power sources and customer programs that provide the greatest reliability and lowest cost.

Market solutions are the true protection for consumers. The drive for electrification, Thompson said, is producing too many programs that ask ratepayers to shoulder new costs.

“We have utilities that are tone deaf and wanting to electrify transportation and give rebates on go-karts and off-road vehicles,” Thompson said. “Is that something ratepayers need to be paying for?”

What’s happening elsewhere

Arizona is not the only state rolling back what some say are antiquated energy policies.

In July of this year, the GOP-led legislature of North Carolina approved a measure to end Duke Energy’s mandate to reduce carbon emissions 70% by 2030 from 2005 levels. The legislation is now in effect. This largely dismantles a major component of the state’s 2021 climate law.