Retail Choice for Electricity Could be Coming to Arizona
When schoolchildren are taught about our system of government, they learn that there are three branches: a legislative branch, that makes the law; an executive branch that implements it; and a judiciary, which interprets the law and invalidates acts that conflict with the constitution. This system, in which each of the three separate and equal branches of government fulfill an individual role, is often cited as one of the cornerstones of American democracy.
It seems as if the Arizona Corporation Commission (ACC), which oversees and regulates utility companies in the state, missed school the day of that lesson. Most states have an agency like this, but the ACC differs in the degree to which it is insulated from the political branches of government. The ACC is specifically established in the state constitution, with exclusive jurisdiction over utility ratemaking. Members of the ACC are also popularly elected, keeping them independent of political control by legislative or executive officeholders. This independence has led the Commission to sometimes be referred to as a “fourth branch” of government.
And the Commission acts like it. Way back in the 1990s, the Arizona legislature passed the Energy Competition Act, which provided that “a competitive market shall exist in the sale of electric generation services.” The ACC saw things differently, and has refused to implement competition, claiming that it alone has the authority to decide whether electricity competition should be allowed in the state.
Recently, though, the Arizona Supreme Court has seemed to doubt the Commission’s exalted self-conception. Last year in Johnson Utilities v Arizona Corporation Commission, the Arizona Supreme Court used an obscure dispute over water utility management as an opportunity to dispel some common myths about the Commission’s power. The Court granted that the Arizona constitution gives the Commission exclusive authority over utility ratemaking, and as such “the legislature has no power to enact statutes prescribing rates and charges” for utilities. At the same time, the Court clarified that this exclusive authority applied only to ratemaking, and the legislature retained authority to legislate on all other matters related to the structure of the utility system.
Just this month, the Arizona Supreme Court weighed in again, in a case involving electric utility district consolidation. Writing for the Court in Sun City Home Owners Association v. Arizona Corporation Commission, Justice Clint Bolick went even further, stating that the Commission “is not entitled to ‘extreme deference’ in its utility ratemaking determinations.” Justice Bolick then took the highly unusual step of filing a concurring opinion to his own majority opinion, comparing the fate of electric consumers in the current system to contestants in The Hunger Games and stating that while the state constitution did grant plenary authority over ratemaking to the Commission, there was no need to impose “judicially created doctrines that make the burden [on consumers] more onerous.”
Perhaps reading the tea leaves, Green Mountain Energy has recently applied for authorization from the Commission to provide competitive electric service in parts of Arizona. Green Mountain, which markets itself as providing 100 percent renewable electricity to customers, cites the Johnson case and argues that the Commission is legally bound to follow the state legislature and allow electric competition. If successful, this would open the way for other competitive suppliers to enter the state and could add Arizona to the roughly dozen states that allow retail choice for electricity service. It remains to be seen whether the Arizona Corporation Commission will dismiss the recent statements of the judiciary as breezily as it has those of the legislature in the past.
Image credit: dcorneli
