Power grab: Company that promises 100% renewable energy wants to challenge APS, Tucson Electric
Ryan Randazzo Arizona Republic
An electric company that provides 100% renewable energy wants to compete head to head with Arizona Public Service Co. and Tucson Electric Power, giving customers a choice in whom they pay for electricity.
Green Mountain Energy Co. is a subsidiary of Princeton, New Jersey-based NRG Energy Inc. The company has filed an application with the Arizona Corporation Commission to serve homes and businesses in the APS and TEP territories.
Currently those customers have no choice in who provides their electricity, as Arizona does not have an operating competitive market, but Green Mountain argues the law allows for it.
“Approval of this application is in the public interest because it will result in more options for customers and expand the availability of renewable energy in Arizona,” the company wrote in its application. “Indeed, by approving this application the commission can enable Arizonans to not only choose their electricity provider, but also choose the type of generation they would like to receive. Green Mountain is uniquely qualified to provide these new options to Arizonans.”
The application is likely to trigger opposition from the big utilities, first at the Corporation Commission, then likely in court if Green Mountain gets what it is after. Previous attempts to offer competitive service in the state have hit dead ends, but the new application is relying on an Arizona Supreme Court decision from last year to make its case that regulators must approve its request.
The big electric companies in Arizona have long opposed electric retail competition, or utility deregulation.
Green Mountain operates in seven other states, including Pennsylvania and Texas. It is licensed but not operating in four others.
“Our mission statement is to change the way power is made,” said Mark Parsons, vice president and general manager for Green Mountain Energy in an interview with The Arizona Republic. “We believe the way to do that is to give customers choices, and Arizona is a great opportunity for us to do that.”
He said company research has shown customers want a competitor for their local utility.
“We’ve done some surveying in the state and the overwhelming response we’ve got is they want a choice and they want renewable energy,” Parsons said.
The company's application states it expects 20,000 customers within five years.
Green Mountain doesn’t own any of its own power plants but purchases renewable energy and renewable-energy credits from others, including power plants owned by the parent company, NRG, he said.
The plan for 100% renewable energy in Arizona would rely on power purchased from other plants. Not every single electron a customer uses in their home under the Green Mountain plan would necessarily come from a renewable energy plant, as electrons can’t be separated once on the power grid.
Green Mountain would instead use renewable-energy certificates, or RECs, to ensure that every unit of energy used by customers was associated with a unit of renewable energy generated at a solar, wind or other alternative-energy plant.
The company is asking the regulators to approve rate plans. The plans will lock in a given price for residential customers for one year at a time, according to Green Mountain’s application.
Green Mountain also is proposing a cap on prices. Its tariffs would benchmark to the power generation costs of the competing utilities, with the minimum price not more than 35% below that price for either APS or TEP, and not more than 35% higher.
“We are going to be extremely competitive in how we enter the market and how we exist in the market,” Parsons said. “Whatever a customer feels comfortable signing up for they will be getting that price with no adjustments on our end of it.”
Business customers could choose between fixed rates or contracts that have variable prices.
The company proposes what is referred to in the industry as “utility-consolidated billing,” which means that customers choosing its service would continue to receive bills from APS or TEP.
The big utilities also would continue to provide transmission and billing services, and charge for those.
Their bills would contain an additional page detailing energy charges from Green Mountain.
Thanks to the prior efforts to deregulate utilities in Arizona in the 1990s, utilities, including APS and TEP, already list separate charges on bills and the commission already has rules requiring such.
Green Mountain plans to offer competitive prices, but not necessarily the lowest prices. The company is planning to capitalize on its 100% renewable-energy offering compared to what’s offered by other Arizona utilities.
“We are not selling the same product. We are offering a 100% renewable product versus 10% or whatever the existing product would be to offer,” Parsons said.
APS gets about 12% of its energy from renewables today, and plans for 100% carbon-free sources by 2050 and to get 45% of its power from renewable sources like solar and wind by the end of this decade.
TEP gets about 14% of its power from renewables today, and plans to get more than 70% from renewables by 2035.
Past attempts to launch competition
Arizona has previously flirted with electric retail competition. More than 20 years ago the state was on the cusp of offering consumers a choice, but the initiative stalled and has faced sporadic attempts to restart in the years since.
In the 1990s, the Corporation Commission worked on rules and in 1999 electric competition was approved. Some changes were added in October 2000.
But problems in the wholesale market caused competitive power companies to send customers back to the incumbent utilities.
The California energy crisis in 2000 and 2001, with its rolling blackouts, also raised concern over deregulation, though Arizona was not directly affected.
A lawsuit, Phelps Dodge Corp. v. Arizona Electric Power Cooperative, sought to clarify some of the ambiguities of deregulation. An Arizona Appeals Court ruling in 2004 in that case partially invalidated the rules passed by the commission.
That effectively ended deregulation in the state for the time.
The Corporation Commission reviewed deregulation in 2013 but voted abruptly to stop the meetings amid a concerted opposition campaign from APS. Commission lawyers at the time also warned that the Phelps Dodge decision was a concern.
Another round of meetings on the subject took place in 2019.
The legality of the application will undoubtedly be challenged by APS and TEP.
“There most likely will be some pushback,” Parsons said.
The pushback began within hours of the announcement. TEP issued a statement on Wednesday disparaging deregulation and Green Mountain's plans to use RECs to meet its renewable-energy commitment.
"Arizona has already rejected retail electric competition, repeatedly, and for good reason," TEP's statement said. "Deregulation can compromise reliability, as evidenced by deadly blackouts in Texas earlier this year, while driving up bills and disappointing customers who were sold on the prospect of new energy 'options.'”
TEP also said RECs were not the same thing as renewables used on its grid.
"In a way, they’re in the idea business — the idea that, with a few clicks of a mouse, your energy can suddenly, magically, be coming from 100% renewable resources," TEP said of Green Mountain.
While Green Mountain just filed its application on Wednesday with Arizona regulators, APS Senior Vice President of Public Policy Barbara Lockwood spoke with The Republic about the possibility of competitive power providers in March.
“We don’t think it’s a good idea,” Lockwood said at the time. “APS has served our customers reliably for over 100 years. It is our responsibility to plan for and make sure we have the ability to provide electricity reliably at all times.”
APS and other major utilities over the years have discussed particular concerns with deregulation. One is that with multiple providers who might gain or lose customers in a given year, it is challenging to forecast how much electricity a particular utility will need to serve customers and procure or build that capacity at a reasonable price.
After the massive grid failure in Texas last winter, officials like Lockwood pointed to that state’s deregulated market as one of the contributors to the disaster that left millions in the dark and cold.
Opponents also point to confusing promotions from competitive power companies that lure customers but wind up charging them more. AARP has spoken out previously with such consumer concerns in Arizona regarding electric retail competition.
“There is example after example of customers paying more,” Lockwood said in March. “And there also is story after story about targeting more vulnerable populations … Primarily, we just don’t think it is good for customers.”
Josh Robertson, director of regulatory policy and public involvement at Salt River Project, also spoke to The Republic in March about the possibility of Arizona opening up electric companies to competition.
He echoed many of the same concerns as APS, including reliability and mixed data on whether competition actually saves customers.
He said that utility planning involves much more than simply estimating how many customers they might have.
"Utilities in a regulated environment go about planning by looking at the future resource plans and optimizing them for low costs but also for resiliency and flexibility, environmental and social objectives," he said. ""All of those come in and you still need to make sure your system operates in a safe and reliable manner. If you move to that type of (competitive) structure, this planning really gets fragmented."
Robertson said SRP likely would oppose such an effort even if it did not affect the company.
SRP is not regulated by the Corporation Commission but by a board of directors who are elected by landowners in its territory. And Green Mountain's plans in fact do not include competing with SRP.
"Just in general it is not in the best interest in the state," Robertson said at the time, before Green Mountain's plans were known. "We are interconnected with APS and TEP. I think those reliability concerns would still be there, even if SRP were to not be included in that."
New case could support effort
Green Mountain says that the Energy Competition Act passed in Arizona in 2000 gives it the right to seek a certificate to provide service in the other utilities’ territories. The act from the Legislature states that “a competitive market shall exist” in the electricity market.
Green Mountain also points to last year’s Arizona Supreme Court decision dealing with the troubled Johnson Utilities water company in the far East Valley to support this point.
The company said that decision makes it clear that the commission has ultimate authority over utility rates, but that state lawmakers have some say over other energy matters, such as retail competition, which they exercised by passing the Energy Competition Act.
Green Mountain's application says the commission has a “scattered” history on the subject, with “at least six” similar applications filed but basically ignored by the regulators.
The company cites a 2006 application Sempra Energy Solutions filed, which was delayed for years and has yet to receive a final decision from the commission.
Green Mountain says last year’s Johnson Utilities decision clarifies that the commissioners must act on their new application.
Reach reporter Ryan Randazzo at ryan.randazzo@arizonarepublic.com or 602-444-4331. Follow him on Twitter @UtilityReporter.
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