The Arizona Republic
Jul. 11, 2009
by Ryan Randazzo

Salt River Project announced Friday that it was considering raising electricity rates 8.8 percent, opening the next chapter in a long string of rate hikes to hit Arizona consumers over the past decade.

But it also offered a glimpse of the future, where more energy will come from cleaner, renewable sources - but will come at a premium.

If approved, the increase could go into effect in October. It would cost the average household in SRP territory about $12 a month, or nearly $150 a year.

SRP and Arizona Public Service Co., the other electrical utility serving the Valley, have each raised rates repeatedly in recent years, saying they need to keep up with the state's growth and the rising costs of fuel.
But SRP says this increase is meant to help fund a shift to more clean energy in the coming years.

The utility "must anticipate the challenges all utilities face as our country shifts to cleaner but more expensive ways to generate electricity," SRP General Manager Richard Silverman said.

SRP, a subdivision of the state government with its own board of directors, is not subject to Arizona Corporation Commission regulations, which require utilities to increase their use of renewable power in the coming years.

But utilities nationwide are shifting toward more green energy, anticipating that future federal rules will restrict the emissions from less expensive coal- or gas-fired power plants.

A rate hike for renewable energy may strike some as a surprise, because SRP currently gets almost none of its power from solar or wind power. Officials say that will be changing soon.

Right now, the utility buys extra power from Tucson Electric Power coal plants in the summer to meet peak demand.

Its contracts will soon expire, and it plans not to renew them, instead seeking out cleaner energy, like solar and wind.

SRP plans to buy power from Arizona's first wind farm, scheduled to begin making electricity this year.
The company also is buying geothermal and wind power from out of state.

While Arizona Public Service Co. has announced it will buy solar power from two large power plants in Arizona, SRP hasn't made such a deal yet.

"I anticipate an announcement in that regard in the next two or three months," said Mark Bonsall, chief financial executive.

Renewables debated

Utilities such as SRP are pursuing alternative energy because it is widely thought the U.S. will pass a bill that limits the amount of greenhouse-gas emissions from coal and natural-gas power plants.

Such a bill is working its way through Congress.

"If we make a decision as a society that we want to move toward more renewable energy as a means to reduce carbon, there will be a price to pay for that," said Suzanne Taylor, senior vice president of public policy for the Arizona Chamber of Commerce and Industry.

Alternative-energy advocates say solar and wind power plants will be better long-term bets.

"Renewable energy may be more expensive in the short term, but as fossil energy prices rise, renewable energy stays stable for the life of the facility - 30 years or longer," said Amanda Ormond, principal of the Ormond Group.

"To conduct a fair comparison, one must add in the cost of carbon regulation, air-pollution impacts, water usage and the price uncertainty inherent in fossil-fuel power plants," Ormond said.

Not all of SRP's immediate plans focus on green power.

It is investing $700 million in a new coal-fired power plant scheduled to begin making electricity this year.
It will own the new coal-fired generator at Springerville Generating Station that will be able to power about 100,000 homes at once.

Many rate increases

Both utilities serving the Phoenix area have frequently increased rates over the past several years.

APS also has been raising rates after a period in the 1990s when rates decreased and has a rate-hike pending before state regulators.

APS has a regulator- approved tariff that funds renewable energy. It increases independently of its general rates.
The average home in SRP territory uses 1,208 kilowatt-hours of energy a month, which would mean a $12.22 increase. SRP is increasing the cap on money available for low-income customers to help improve their home's energy efficiency to $6,000 from $2,000.

Bonsall also encouraged customers to sign up for a program that charges lower electricity rates except from 3 to 6 p.m. from May to October, which is when the utility pays higher prices to buy and generate power.