Chair Thompson Amendment Cuts Over $50 Million from APS Proposed Budget

Phoenix, Ariz. - Arizona Corporation Commission Chair Kevin Thompson successfully offered an amendment that will save ratepayers over $50 million in annual surcharges from the proposed Demand Side Management Implementation Plan filed by the Arizona Public Service Company ("APS"). The annual surcharges funded demand side management and energy efficiency initiatives that previous Commissions approved.

The DSM / EE mandate was authorized by the Commission in 2010 and required utilities to meet energy savings goals by 2020, while authorizing utilities to assess monthly surcharges on customers to fund these programs. Earlier this year, the Commission voted to initiate the repeal of the DSM / EE mandate, which collectively has cost Arizona ratepayers more than $1 billion in total surcharges since its implementation. The Commission also voted earlier in the year to require APS to file an amended DSM / EE budget for review and approval while the repeal proceedings advanced.

In their amended plan, APS requested an annual budget of $90,887,913, which is an increase from the 2022 approved budget of $79,394,096. APS requested increases in funding for several programs, both existing and new, which were rejected unanimously by the Commission.

"I support energy efficiency and demand side management programs that reduce the need for additional generation and lower the costs for all ratepayers, but APS' annual budget for these programs had become a bloated Christmas tree of incentives and rebates for special interests and customers who should be paying for these upgrades on their own," said Chair Thompson. "Unfortunately, prior Commissions condoned and even required these programs to expand to the point where they ballooned beyond the intent of the original goals. We have accomplished a major course correction for the Commission that will save APS ratepayers more than $50 million in annual costs while preserving energy efficiency and demand side management programs that help the most vulnerable members of our society. This reduces energy costs for all ratepayers, not just the select few who can afford to take advantage of the incentives."

Programs or incentives that were rejected include: incentives for horticulture or livestock fans, incentives for electric golf carts, incentives for high frequency golf cart battery chargers, incentives for UTC Gator off-road vehicles, incentives for EV charging stations for passenger vehicles driven by multifamily residents, incentives for advanced power strips, and incentives for air dryer upgrades. Additionally, the Commission ended the practice of providing financial incentives to home builders and contractors for purposes of installing energy efficient appliances in new homes, which is already required by law.

APS proposed to offer new program incentives for home builders that would have provided $1,000 per home for home builders to install ENERGY STAR NextGen-certified equipment, requiring connected devices such as connected heat pumps and heat pump water heaters, and also a proposal to increase the incentive for EV ready homes from $100 to $200 per home, and requiring all new homes to have smart thermostats in order to receive a rebate.

Thompson's amendment cut APS' total budget for these programs by more than 50%, removing approximately $51 million from the total proposed budget.

The Commission authorized several programs to continue including:

• Cool Rewards demand response program, which helps to manage energy use when energy demand is high, typically on very hot days.
• Tribal community energy efficiency programs.
• Energy efficiency programs for schools.
• Funding for recently approved Bring Your Own Device battery storage project that allows ratepayers to "sell" power back to the utility on demand response events at a rate cheaper than what APS would otherwise purchase power on the open market, thus saving all ratepayers money.
• Limited income weatherization programs.