Policies: Energy Efficiency

A Brief on the Draft Amendment to Change Arizona's Energy Efficiency Resource Standard to a Goal

Published November 2014
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The essentials

  • The Arizona Energy Efficiency Resource Standard (EERS) requires regulated electric utilities with an annual revenue of more than $5 million to achieve a cumulative energy savings of 22 percent by 2020, based on historical customer demand. The incremental savings began in 2011 at 1.25% of the previous year’s retail sales. Regulated gas utilities have a similar requirement of 6 percent cumulative energy savings by 2020, also based on historical consumer demand.
  • On November 4th, 2014, the Arizona Corporation Commission (ACC) staff filed a draft amendment to the state EERS that would have the effect of rescinding the mandatory Standard. Instead, gas and electric utilities would be allowed to determine their own custom energy efficiency goals each year, on the basis of cost-effectiveness, during their bi-annual integrated resource planning (IRP) process. The IRP is non-binding.
  • The public has until Tuesday, November 18th, 2014 to submit comments to the ACC regarding the proposal. (Comment submission information can be found at the end of this document).
  • Currently, the Societal Cost Test is used to verify all energy efficiency programs under the EERS. The amended goal would allow the Commission to use three other tests to determine cost effectiveness:

o   The Participant Cost Test

o   The Ratepayer Impact Cost Test

o   The Utility Cost Test

 

 

Property Assessed Clean Energy (PACE): What it is, and whether it can be implemented in Arizona

Published February 2014
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The essentials

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  • Property Assessed Clean Energy (PACE) offers a path for building owners to fund energy efficiency upgrades and renewable energy projects.
  • Under the PACE framework, a local government provides the up-front capital for a building owner to install an energy efficiency project and/or a renewable energy system on their building. The building owner repays the capital over the course of 20 years through a property assessment tax.
  • PACE is being successfully used in 12 states and Washington, D.C. for commercial properties. Many states also allow PACE financing for residential properties, but most residential financing programs have been shelved for now while the Federal Housing Finance Agency (FHFA) issues rules related to lien seniority for mortgaged homes.
  • Developing a PACE program in Arizona would require passage of PACE-enabling legislation. PACE-enabling bills have been introduced in past legislative session, but have not been signed into law.
  • During the current 2014 session, State Reps. Orr (R) and Sherwood (D) are sponsoring PACE-enabling bill HB 2206.

The Energy Savings and Industrial Competitiveness Act (Shaheen-Portman Bill)

Published September 2013
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The essentials

  • The Energy Savings and Industrial Competitiveness (ESIC) Act (the Shaheen-Portman bill) was intended to promote energy efficiency measures and technologies in residential, commercial and industrial sectors.
  • It was a bipartisan energy efficiency bill, sponsored by Senators Jeanne Shaheen (Democrat-New Hampshire) and Rob Portman (Republican-Ohio), in the 2013 session. Senators Shaheen and Portman revived the bill in 2014 and introduced a more targeted bill in 2015.
  • The bill required states, Indian tribes and local governments to adopt energy efficiency codes for residential and commercial buildings. Training and assessment centers would be set up to promote R&D and application of energy efficient technologies in buildings.
  • It included provisions promoting sustainable practices in industrial processes and increasing industry partnerships with National Laboratories and energy service/technology providers.
  • The 2015 bill, the Energy Efficiency Improvement Act of 2015, included a provision focused on "aligning the interests of commercial building owners and their tenants to reduce energy consumption." The EEIA became an amendment to a bill approving the Keystone XL pipeline.
  • Both the original 2013-2014 Shaheen-Portman bill and the 2015 amendment failed in their respective sessions.

E-SIDS & PACE Financing: local solutions to up-front costs to clean energy

Published April 2012
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The essentials

  • Renewable Energy/Energy Efficiency Special Improvement Districts are funding mechanisms for energy efficiency and renewable energy projects within each district.
  • Funds are collected through a voluntary, 20-year property assessment tax.
  • AZ State Rep. Chad Campbell introduced Arizona HB 2298 this session, which would allow for the establishment of E-SIDS in Arizona.

Qualified Energy Conservation Bonds

Published March 2012
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The essentials

  • A Qualified Energy Conservation Bond is a qualified tax credit bond allocated by the Treasury Department to all 50 states, Washington, D.C. and tribal governments.
  • Federal funds are available for local energy efficiency programs, renewable energy production, technology research and commercialization projects throughout Arizona.
  • About $67 million has been allocated to Arizona.
  • The funds are not being used due (at least in part) to lack of intergovernmental communication and guidance.

HB 2830 Energy and Water Savings Accounts for Schools, Cities, & Towns

Published March 2012
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The essentials

  • Governor Jan Brewer signed AZ State Rep. Amanda Reeve’s (R-6) bill HB2830 into law in April 2012.
  • Before bill HB 2830 was passed, the only state public institutions authorized to enter into performance contracts for energy efficiency projects were K-12 schools (see A.R.S. §15-910.02).
  • The HB 2830 additions expand performance contracting authority to public universities, towns, cities, and counties throughout AZ, and extend these institutions’ performance contracting authority to include renewable energy generation projects.
  • This policy provides risk management and financing solutions to government entities as they retrofit existing buildings for greater energy and water cost savings.

Arizona State Tax Incentives Encouraging Electricity Generation from Renewable Energy Sources & Impacting Renewable Energy Demand

Published March 2012
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The essentials

  • The Arizona state tax code provides incentives for the generation of electricity from utilities, corporations and residences.
  • These incentives are in the form of two property tax valuation adjustment policies and three tax credits
  • In addition, the code encourages a decrease in overall electricity demand by encouraging adoption of energy efficiency measures such as passive solar systems, insulation, and double-pane windows.

Decoupling

Published March 2012
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The essentials

  • Energy efficiency may bring benefits such as less cost to consumers, fewer future rate increases, and less environment impact for energy consumption.
  • However utilities have a disincentive to invest in energy efficiency measures that reduce sales and therefore profitability.
  • A critical step for successful energy efficiency policy is a mechanism that severs the link between utility revenue and total energy sales.
  • The Arizona Corporation Commission has pursued such “decoupling” measures in several recent rate cases.

Arizona's Energy Efficiency Standard

Published March 2012
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The essentials

  • By 2020 Public Utility Companies with an annual revenue of more than $5 million must achieve energy savings (measured in kWh) equal to at least 22 percent of their previous year’s sales
    • Public Utility Companies must design Demand Side Management programs to encourage customers to reduce their energy usage
    • By 2020 every gas utility must achieve cumulative savings equal to 6% of their previous year’s retail sales