Corporation Commissioner Bob Burns holds Round 1 of electric deregulation arguments
The hearing was covered by the Yellow Sheet Report, which is summarized here:
Michael Grant, who represents the anti-deregulation Arizona Investment Council, and the Goldwater Institute’s Nick Dranias agreed to a few broad principles, but mostly clashed over the meaning of Phelps Dodge v. Arizona Electric Power, the court ruling that struck down key elements of the commission’s previous electric competition rules. They also disagreed on what extent – if any – electric competition could be constitutionally and statutorily permitted in Arizona.
Grant laid out four legal problems that effectively block the road to retail competition here: The Corporation Commission is constitutionally obligated to set rates; commissioners are required to use “fair value” (meaning they must consider the value of properties owned by public utilities in Arizona) in setting those rates; the Constitution prohibits rate discrimination among similarly situated customers; and the law requires rates to be open and on file with the commission and for deals to be disclosed. He added that, while Phelps Dodge expressly allowed for the commission to set a range of electricity rates, the question is how broad that rate spectrum can be, and he said case law and the Constitution limit it to a “pretty narrow range.”
In his presentation, Dranias argued state laws and even Phelps Dodge allow for a competitive retail market to exist in Arizona. He reiterated the best way to proceed is by phasing in the transition deregulation of the telecom industry can provide the commission with a framework, if it decides to dismantle the electric monopolies. He said Chapter 6 of ARS Title 30 expressly compels public utilities to open their territories to competition; that the Arizona Independent System Administrator could effectively manage the grid; that the legal landscape has changed a lot on the issue of divestiture since Phelps Dodge; and that compelling the utilities let divest of their generation assets is best in a competitive environment.
Dranias said Arizonans are “scared” of deregulation and need to have a taste of the free-market system before they’ll agree to amend the Constitution. “
Grant reiterated what other critics have argued: if the Goldwater Institute and other proponents want a deregulated market, they should go to the ballot and make their case to the voters.
