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<title>December 2006: Arizona Increases Existing Renewable Energy Requirement</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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<p ALIGN="left"><b><u><br>
<br>
December 2006</u></b><font size="6"><b><br>
</b></font></p><b>
<font size="6">
<p>ARIZONA INCREASES EXISTING RENEWABLE ENERGY REQUIREMENT</p>
<p align="left"></font><strong>by Robert Olson and
</strong>Philip R. Braley, Esq.<strong>-- Brown, Olson and Wilson, P.C.<font size="6"><br>
</font>
</strong>
</b><font size="6"><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
2008/01/05</em>)</font></p>
</font><center>
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<p ALIGN="left"><font face="Arial" size="2"><br>
</font>The Arizona Corporation Commission has approved new “Renewable Energy
Standard” rules (“RES Rules”). Decision No. 69127, Docket No.
RE-00000C-05-0030 (November 14, 2006) (designating the new rules as A.C.C.
R14-2-1801 through -1815) (the “Decision”). The new RES Rules substantially
increase the renewable energy requirement under the commission’s existing
“Environmental Portfolio Standard” (“EPS Rule”). A.C.C. R14-2-1618; see
Decision No. 63364, Docket No. RE-00000C-00-0377 (February 8, 2001). Enacted
in 2001, the EPS Rule required a renewable energy portfolio percentage of
.2% in 2001, with a maximum requirement of 1.1% by 2007. The RES Rules
extend the existing requirement to result in a maximum requirement of 15% by
2025. The RES Rules also add a new requirement that a portion of the
renewable energy portfolio be obtained from “Distributed Renewable Energy
Resources.” </p>
<p ALIGN="left">Under the basic renewable energy portfolio requirement, an
“Affected Utility” is annually required to obtain an amount of renewable
energy credits representing kilowatts of electricity generated from an
“Eligible Renewable Energy Resource.” The Affected Utility may acquire
renewable energy credits from other parties. The required amount of credits
is expressed as a percentage of the retail kilowatt hours sold by the
Affected Utility during the calendar year. The RES Rules establish an
“Annual Renewable Energy Resource Requirement” of 1.5% for 2007, increasing
by .25% increments annually through 2009, for a 2009 requirement of 2.0%.
The amount then increases by .5% increments annually through 2015, for a
2015 requirement of 5.0%. The amount then increases by 1.0% increments
annually for a maximum requirement of 15.0% in 2025.</p>
<p ALIGN="LEFT">The RES Rules contain a much more detailed statement
of what constitutes an Eligible Renewable Energy Resource than does the EPS
Rule. To qualify for renewable energy credits, power must (1) be generated
using a designated technology, (2) displace conventional energy resources
that would otherwise be used to provide electricity to an Affected Utility’s
Arizona customers and, (3) must be generated by a facility installed on or
after January 1, 1997, with the exception of certain hydro facilities.</p>
<p ALIGN="LEFT">The list of designated technologies includes generators
using the following energy sources: biomass, landfill gas, geothermal, wind,
hydropower, and certain forms of solar power. The list also includes “Fuel
Cells that Use Only Renewable Fuels,” specifically defined to exclude
hydrogen created from natural gas or petroleum products. The list also
includes an expanded list of qualifying solar technologies if installed so
as to qualify as a “Distributed Renewable Energy Resource.” These include
the following: commercial solar pool heaters; solar heating, ventilation and
air conditioning; solar industrial process heating and cooling; solar space
cooling; solar space heating; and solar water heating.</p>
<p ALIGN="LEFT">“Distributed Renewable Energy Resource” is defined as
designated technologies located at a customer’s premises that displace
conventional energy resources that would otherwise be used to provide
electricity to Arizona customers. The designated technologies include the
previously enumerated solar technologies as well as most of the other
technologies that qualify for treatment as an Eligible Renewable Energy
Resource.</p>
<p ALIGN="LEFT">The RPS Rules differ from the EPS Rule in requiring that
Affected Utilities also satisfy a “Distributed Renewable Energy
Requirement.” That requirement is expressed as a percentage of the Affected
Utility’s Annual Renewable Energy Resource Requirement. The Distributed
Renewable Energy Requirement for 2007 is 5%. The amount then increases by 5%
annually, resulting in a maximum requirement of 30% for 2012. The RPS Rules
specify that an Affected Utility must meet one-half of the Distributed
Renewable Energy Requirement from residential applications and onehalf from
non-residential, non-utility applications. Because “Eligible Renewable
Energy Resource” is defined to include “Distributed Renewable Energy
Resource,” a renewable energy credit that originates from a Distributed
Renewable Energy Resource would ordinarily apply toward both the Annual
Renewable Energy Resource Requirement and the Distributed Renewable Energy
Requirement.</p>
<p ALIGN="LEFT">Although approved by the commission, the RPS Rules are still
subject to review and endorsement by the Office of the Arizona Attorney
General. Once the RPS Rules are in effect, the commission is expected to
take separate action to explicitly rescind the EPS Rule. The issue is not
explicitly addressed in the Decision.</p>
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<blockquote>
<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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