Retain SRECs and the AZ Renewable Energy Standard (with data!)

06 February 2014

Click Read More below for transcript.

06 February 2014

Good morning, commissioners,

My name is Jamie Kern. I’m a native of Arizona, an APS customer, and keenly interested in value-based decision-making.

So today I’ll first establish a dollar-value and customer cost for DG RECs (for APS) – something wholly absent from all proposals to either waive or eliminate them under the claim of “ratepayer interests” and “costing more” for customers. And second, I’ll explain why that value is ultimately irrelevant to the REST. I realize that without any other pricing data, you’ll have to trust, and hopefully check, my numbers.

So, based on Pinnacle West’s most recent 2012 Annual Report, total electricity sold by APS amounted to a need for 336,000 RECs from DG. With the 2012 declining DG incentives – properly weighted – that amounted to average cost of ~$12/APS DG REC in 2012. Paid for through the environmental benefits billing surcharge, that cost an average of $0.30/mo per customer (when levelized over 20 years: ~$0.18/mo).

In 2013, with a 0.5% higher DG requirement, but little to no incentives, APS DG RECs cost customers an average $0.09/mo (~$0.06 levelized). This year, at a token, hypothetical $0.01/W DG incentive (RECs have no value in AZ right now), that would cost customers an average PENNY PER MONTH. I didn’t bother to levelize that. But I did extrapolate to 2025, where increased energy demand and successful DG REST implementation would affect ratepayers to the tune of an average nickel per month.

This brings me to my second point: page one of the REST orders that each Affected Utility propose methods for “recovering the reasonable and prudent costs of complying with the Proposed RES Rules.” Two and a half years of sound deliberation went into a public-backed plan for RE development at a reasonable and prudent cost. Friday’s Pinnacle West filing will have us believe that the question for this proceeding is “what outcome avoids the most costs for customers?” Considering that “the most costs” would be a mere nickel a max month in 2025, the question instead should be “what outcome ensures the public’s REST stands strong?”

A concluding clause in the REST speaks to the ultimate societal benefit of stable, predictable, continuous, long-term policy – true on all fronts. Arizonans rely on you for that.

Every major FERC order over the last 15 years is leading us toward regional markets where RECs have traded at over $500 apiece. It would be far wiser not only to keep Arizona’s REC mandates, but for both utilities and individuals to purchase RECs now, while dirt cheap, and hold these locally generated commodities for significant mid-term gains. This is Arizona’s opportunity to invest in the energy equivalent of Berkshire Hathaway or Apple shares at their IPO prices.

So I urge you to evaluate these numbers, and protect long-term value of both the REST the RECs it generates. Thank you.

[Additional paragraph inserted midway in the email to the Commission]

Now, for a “reasonable and prudent” method for APS to recover these REST DG compliance costs: in exchange for 20 years of RECs from new DG, I propose an extremely modest, and I’ll admit arbitrary, monthly utility billing credit to consumers of $0.70/kW-installed. This, beautifully, amounts to the same unlevelized penny per month per customer for 2014.