Jim O'Connor
Chairman

Our Arizona Corporation Commission has a statutory responsibility to maintain a safe and reliable grid at affordable rates, using the least cost and most reliable generation possible.

Recently the Commission has received public comments with respect to concerns by Arizonans that Environmental, Social and Governance (ESG) factors may be being considered when making decisions in utility rate cases, specifically electricity rate cases. Arizona statutes require the Commission to consider only reliability and affordability when protecting the energy grid and Arizona rate payers, with no mention of ESG factors for consideration.

In performing our Constitutional responsibilities, as Commissioners we must ensure that the utilities we regulate utilize technology-agnostic all-source Requests for Proposals (RFP) when evaluating the need for additional electricity to serve customers in their service territories. The RFPs solicit proposals for all sources of generation, including utility owned/operated or third-party owned and operated; or whether the additional energy is derived from electricity-saving measures from energy efficiency technologies or demand response measures. The utility must then submit its least cost, most reliable alternative to the Commission for review and approval.

I understand the concerns raised by the public to the Commission that ESG could be increasing their utility bills or impacting the integrity of our grid. But I can assure you any utility utilizing or promoting ESG as a determining factor when adopting generation sources would be met with swift pushback from me, and surely the majority of Commissioners currently serving.

Furthermore, any person or group telling you ESG is being considered as a determining factor by this Commission is either woefully misinformed, or even worse, being dishonest for personal gain.

ESG does not have universally accepted definitions or metrics, despite the efforts by investor advisory services such as MSCI (www.msci.com), Glass Lewis (www.glasslewis.com), ISS (www.issgovernance.com),  management consulting firms such as McKinsey & Company (www.mckinsey.com), S&P Global Ratings (www.spglobal.com), the Dow Jones Sustainability Index, and even governmental agencies such as the U.S. Securities and Exchange Commission.

The war on fossil-fuels witnessed in this country has been further fueled by the 2022 Inflation Reduction Act (IRA) and the Obama-Biden U.S. EPA to make fossil fuels extinct through over regulation.  The IRA made available billions of dollars of subsidies that have dropped the present cost of solar power to around $20/MegaWatt Hour (MWh), as compared to natural gas-fired generation which averages $30-33/MWh, and coal-fired generation averaging $35-$40/MWh, according to the U.S. Energy Information Administration.  Even new technologies such as small modular reactors are yet too costly to bring online, as evidenced by the recent cancellation of the planned project in Idaho given the costs of approximately $89/MWh.

In the face of cheap renewable power courtesy of Washington's generous subsidies, and the drive by the U.S. EPA to shut down coal and natural gas, the least cost power options right now are solar and wind. However, as Commissioners, we must consider reliability first and foremost, and that is why technologies such as battery storage and clean natural gas-fired generation will continue to play pivotal roles in the generation outlook, despite efforts by many to the contrary.

I encourage all Arizonans who are concerned with the ESG policy creep to engage with those charged in Washington, on Wall Street, and those organizations advising investors, to ensure fossil fuels will continue to play a critical role in the delivery of reliable, affordable power.

In the meantime, this Commission will continue to resist activist policies that don't place grid reliability and cost effective generation as their primary focus.

Chairman Jim O’Connor