Arizona Public Service is engaged in a campaign to undercut solar power in the state. The 18,000 APS customers with solar panels essentially get a credit on their bill for the energy they don't use from the regular electrical grid. APS complains, as an Arizona Republic story put it, "customers with solar often see their bills reduced to the point that they are no longer contributing toward routine costs associated with maintaining the power grid. That, they say, forces customers without solar to pay the entire cost of maintaining the grid, even though solar customers use the grid to get power at night or when clouds pass overhead and to distribute their excess electricity." APS is asking the Corporation Commission to allow it to charge new solar customers an average of $50 to $100 more.
This has produced protests and at least one critical editorial. It is happening against a backdrop of efforts to "deregulate" the state power market (California, Enron, hello...?). Even the long arm of the Koch brothers is reaching in to support APS. The state's nascent solar industry is fighting on the other side. But with the powerful and little-scrutinized Corporation Commission now firmly in the hands of the Kookocracy — I'll make an exception for Susan Bitter-Smith — APS may well win. It would be one more headwind facing solar power in the sunniest state in the union. Perhaps worse, it distracts from the conversations we ought to be having about solar. With most of the reporting being "he said/she said" stories intended to avoid irritating powerful APS, it's difficult for most Arizonans to get the facts or explore the larger issues. I'll try to make a beginning in the next few columns. But today I'll focus on APS.
The company's argument is bunk. All customers must pay a basic fee that includes maintenance of the grid. But the attempt to kill solar in the crib — 18,000 customers out of more than 1 million — shows how the state's largest utility is accustomed to wielding influence and getting what it wants.
Like all investor-owned utilities, APS sticks by a narrative that essentially goes like this: The company and its shareholders have built the system, but are constantly kept on the brink of bankruptcy by meddlesome regulators. The reality is quite different.
APS owes its existance to the federal government, which in 1945 broke up the North American Power & Light Co., partly under the belief that it would be better if its individual units were locally owned (a very different, and healthier, philosophy than has been pursued since 1980). A group of Phoenix businessmen and farm moguls including lawyer Frank Snell got a great deal and brought local control to what was first Central Arizona Light and Power. They bought Northern Arizona Light & Power and Arizona Edison and APS was born in 1952.
Like most utilities — the Salt River Project (aka The Kingdom and the Power and the Glory) is a different animal and the topic for another column — APS is regulated by the Corporation Commission. But although the commission was the creation of the Progressive Era intended to act in the public interest, it has mostly been an arm of Arizona Public Service. The commission allows APS a monopoly. It gives APS a guaranteed rate of return which, protestations notwithstanding, the utility's viziers usually have substantial leeway in crafting.
This has not always worked to the benefit of ratepayers or even the company. For example, despite benefiting from and encouraging explosive growth in its service area, APS was carrying more than $2 billion in debt in the 1980s. To work a runaround on the commission's minimal — one could never be sure of a populist turn — regulation, APS formed an unregulated holding company, Pinnacle West Capital. This allowed CEO Keith Turley to diversify into such areas as real estate and the savings and loan sector, both roaring ahead in the late 1980s. Remember Merabank? That was a Pinnacle West unit, a gamble that ultimately cost taxpayers $1.5 billion when it failed in the scandal-driven S&L collapse of 1990. Michael Lacey wrote in New Times in 1989, "When the story is fully told, I think Keith Turley's greed will rival Charles Keating's penchant for buying U.S. senators in sheer gall." As Bill Clinton would say, it takes some brass to be complaining about a "subsidized" solar sector after the many public troughs at which APS has fed (and still nearly ran into the ground).
And there have been many. The American utility grid, as flawed as it is, is at the least the creation of a public-private partnership. Power was, and largely remains, relatively cheap in Phoenix because of massive federal projects. APS can, for example buy power when it needs it from, say, the Bonneville Power Administration, a New Deal creation. Don't forget Hoover Dam. The coal plants APS operates have been allowed to use the commons, aka the atmosphere, as a dump free of charge. Utilities enjoy a host of other subsidies. Oh, yes: for years, APS got a free ride from the Nuclear Regulatory Commission despite consistent troubles at the Palo Verde Nuclear Generating Station — one investigative report by the NRC, one of the most compromised and easy-going regulators, said that "cost controls have been viewed as more important than safety" at the plant. Even so, the NRC renewed its license for another 20 years in 2011.
Palo Verde. Construction began on the nation's largest nuclear generating station — largest power source of any kind — in 1976 and operations commenced a decade later. Although APS had partners in Salt River Project, El Paso Electric and others, it was the driving force and remains majority owner. Palo Verde's $5.9 billion cost was staggering and helped destabilize APS and some of the other utilities involved. It is the only nuke not built near a large body of water — water necessary for cooling, to avoid, well... Instead, we are told, the station recycles 20 million gallons of municipal effluent to keep the rods cool. It is also located approximately 40 miles upwind of the nation's sixth-largest city, and is quickly being encroached upon by the sprawl that APS has done so much to encourage. With much of Palo Verde's power sold on the grid, it is also an example of the priceless Sonoran Desert being degraded and put at risk to provide energy to California.
The old Arizona Public Service was at least a civic leader of great consequence (even when misguided, as in advocating freeways). After its near-death experience of 1990, it shed thousands of employees and was much diminished as a force for improvement. At least it kept its headquarters downtown, the last of a distinguished cohort that once included Valley National Bank and Central Newspapers. During the optimistic first term of St. Janet, Pinnacle West boss Bill Post lent his name to all manner of progressive ideas, even saying at one gathering that sprawl was bad and needed to be stopped if Phoenix was to have a sustainable future. Public affairs capo Marty Shultz championed many good causes, including the homeless services campus. But the company was torn between such sentiments and its de-facto membership in the Real Estate Industrial Complex. Now, apparently, all it can do is ride the status quo of more single-family houses, more sprawl, more dependence on traditional means of generating electricity. And find a way to stymie solar.
The great irony is that the international solar power movement was founded in Phoenix by, among others, executives of Arizona Public Service. But that is a story for the next column.