Chair Thompson Votes to Initiate Repeal of Costly Energy Efficiency Mandate

Phoenix, Ariz. - The Arizona Corporation Commission unanimously initiated the official repeal process for the Demand Side Management / Energy Efficiency (DSM/EE) standards. In February 2024, Thompson offered a motion to kick off the repeal process, culminating with this week's vote to initiate public hearings and eventually a rulemaking repeal pending a final vote of the Commission in the future.

The DSM/EE Rules were first adopted by the Commission in 2010 and required utilities to meet certain energy efficiency standards by 2020, which have been met. Since their inception, the mandates have cost Arizona ratepayers more than $1 Billion in additional surcharges. During the August Open Meeting the Commission also voted to initiate the repeal of the Renewable Energy Standard Tariff (REST) mandate. The two rules combined have cost Arizona ratepayers more than $3.6 Billion since their inception.

"The energy efficiency mandate reached its goals years ago and is not effectively delaying the need to construct new generation today," said Chair Thompson. "You can't use a cup to fill a generation gap that demands buckets of new power. We encourage every customer to practice energy efficiency and viable programs that benefit all ratepayers should continue to be evaluated and approved. However, customers should not be forced to serve as de facto funders for utility slush funds and revenue streams for special interest groups."

Under DSM/EE, customers are assessed monthly surcharges to help fund costs associated with utilities meeting these mandates. Examples of programs that have been funded with DSM/EE budgets include shade trees, smart thermostats, energy efficient light bulbs, rebates for homebuilders to install energy efficient appliances, and electric vehicle charging stations. Unfortunately, these programs are not actually "free" as ratepayers pay the bill. For example, one utility DSM/EE budget funds $10 million in annual subsidies alone in ratepayer dollars paid to homebuilders to install appliances.

Since joining the Commission in 2023, Thompson has worked to tackle these programs and systematically separate waste from benefit as programs come up for annual reviews. On a separate track, the Commission moved forward to explore the complete repeal of the mandate. A repeal of the rules would not mean that all energy efficiency and demand side programs would cease to exist, but utilities and stakeholders will be required to demonstrate that programs actually move the needle in terms of actual energy efficiency and reducing costs for all ratepayers.

For example, earlier this year the Commission approved a DSM/EE "Bring Your Own Battery" Pilot program. The Pilot allows participating APS customers to receive financial compensation for providing energy from their personal battery storage to the electric grid during specified time periods of stress and energy need. The customers' stored energy would be used to help stabilize the grid during peak demand periods when excess power is in limited supply and otherwise typically purchased by a utility at a costly premium (that is then passed on to the ratepayer). By allowing the utility access to stored battery power, participants will receive a monetary benefit, but more importantly all ratepayers will receive the benefit of access to peak power at a discounted rate.