Arizona Corporation Commission GOP Candidates Debate Retail Electric Competition

The Arizona Corporation Commission regulates privately-owned electric utilities in the state (and more, here is their self-description). Many states have their regulators appointed, but in Arizona the ACC commissioners are elected in state-wide races. Two positions are open in the November election. Recently the three Republican candidates appeared in an informal debate hosted by Arizona PBS.

About midway into the program the candidates were asked whether retail electric power should be opened to competition. The discussion begins at the 31:24 mark. Below I mostly summarize some key points, though I cannot help but to interject when necessary.

Candidate Kim Owens replied, “No, it is very clear. … We tried it, it did not work.” As part of her answer she claimed that “in every state, in every year” consumers ended up paying more (referencing the fundamentally unsound analysis published by the Wall Street Journal in 2021.) She reiterates this “always, everywhere worse” claim multiple times.

This is a false claim, but not necessarily one that even reasonably informed people would know is false. (Some discussion and links here.) If Owens wasn’t competing for a position of power over electric consumers and producers in Arizona she could be forgiven for not knowing. However, she is competing for a position of power; she is morally obligated to become better informed.

Candidate Nick Myers responded, “Unknown,” adding that the court case that paused implementation of retail competition in Arizona required the ACC to take additional steps before competition could begin. Those additional steps were never taken. Myers disputed Owens’s remark about Texas, citing a Baker Institute report (but he appears to be confusing this report on competition and prices with a second report on Winter Storm Uri). Myers said that until additional conversations are had over competition in Arizona we do not know whether retail competition can work here.

Candidate Kevin Thompson began by suggesting Republicans tend to favor free markets whether for energy or anything else, and he is always going to lean toward customer choice. He then explained why he thinks California’s failed experiment does not apply (it was wholesale competition that failed, but retail competition under discussion in AZ) and Texas’s winter storm failures do not apply (FERC’s report shows retail competition in Texas was not to blame, other policy choices caused the problems).

Then the candidates began a, um, let’s call it a “more interactive discussion.” Owens said Texas prices during the storm hit the maximum of “$9,000 kWh” (actually it was $9,000 MWh, so she is off by a factor of 1,000; it is an easy thing for a non-specialist to confuse, but again, Owens wants to be one of the power elite). “They kept the lights on, but it was a pretty price that they paid,” she concluded.

Of course, they (ERCOT) did not keep the lights on for everyone. Importantly for the discussion, it was shareholders of competitive power suppliers in Texas who paid most of that “pretty price” but customers of monopoly utilities in Texas will be paying that “pretty price” through bill adders for many years to come. The outrageous power bills Owens mentioned befell the roughly 0.5% of retail customers who signed up for a type of market-rate power contract that cannot be offered in Arizona (as per that 2004 court case and the Arizona state constitution).

Myers next pointed out the kWh vs MWh hour distinction, suggesting Owens is inexperienced, and Owens retorted, “Did someone get a $16,000 electricity bill?” She’s made opposing competition a theme of her campaign. The interactive discussion continues.

Myers noted, as I injected above, that very few customers made a very deliberate choice to accept a pure wholesale rate and take on the risks that come with it, and he added such rates cannot be offered in Arizona. Thompson jumped in to say the $9,000 MWh price was in the wholesale market, it was not a bill that retail customers paid. He is totally missing her point about customers of Griddy, some of whom received outsized electric bills (though the company did not collect on these bills after the storm).

Thompson said, “deregulation–well, not deregulation–customer choice is a such a complex issue, and that’s why we need to have stakeholder meetings.” I heartily approve of the term “customer choice” over the misnomer “deregulation” or the aspirational term “electric competition.” Consider that no candidate for the Arizona Corporation Commission has ever proposed not regulating the sale of electric power in the state. (Is there a Libertarian Party candidate?) The alternative up for discussion is whether or not some sort of regulated market might be better than the current regulated monopoly approach. Regulated vs. regulated, not regulated vs. deregulated.

Owens reports she is the only candidate that has committed against allowing competition in the state. There is a bit of back and forth about the law passed a few months back that repealed the remaining pro-competition parts of the state’s 1998 law. All candidates agreed that the law was passed and they would uphold that law. Owens said the opposition to the law came from the big environmental groups who want to push through the Green New Deal. <Insert eyeroll emoji here.>

The topic shifts to water utilities about the 43:15 mark, yielding just under 12 minutes of discussion on the possibility of retail electric competition. Just 12? It felt much longer. It seems like there is a “time flies when you are having fun” joke to be made here, but I can’t come up with one.

Of course these are just the three Republican candidates. Two of them will survive the Republican Primary and land on the general election ballot in November. There they will face two Democratic candidates: incumbent Sandra Kennedy and newcomer Laura Kuby. There is, in fact, a Libertarian candidate: Nathan Madden is running a write-in campaign.

There are two positions to be elected this fall, so the Republican primary features competition while the Democrats managed to avoid competition in the primary. There is probably a joke to be made here, too. I guess watching candidates engage in debate has drained the humor out of me.

The Libertarian slate is either half full or half empty, depending on how you look at it.