Arizona

Arizona

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Select Economic and Energy Data Value State Rank
Real Gross Domestic Product, per capita $32,343 13th lowest
Unemployment 9.5% 18th highest
Gasoline Price, per gallon $2.85 16th highest
Electricity Price, per kWh 9.57¢ 19th highest

Arizona has average energy prices. More than a third of the state’s electricity is generated from coal, supplied from mines located in New Mexico and northern Arizona. Arizona’s 3.87 gigawatt[i] Palo Verde Nuclear Generating Station is the country’s highest capacity nuclear plant and the second-highest capacity power plant of any type. This single plant provides a quarter of Arizona’s electricity. Palo Verde is the only nuclear generating facility in the world that is not located adjacent to a large body of above-ground water. Instead, it evaporates water from the treated sewage of several nearby municipalities to meet its cooling needs.

Arizona has substantial coal deposits. About two-thirds of the state’s coal production goes to electricity production in-state, while the remaining one-third goes to electricity generation in Nevada. The Glen Canyon and Hoover Dams, located on the Colorado River in northern Arizona, provide some hydroelectric power. Arizona’s large desert areas offer some of the highest solar power potential in the country, but solar energy currently makes a negligible contribution to the state’s electricity supply.

Regulatory Impediments to Affordable Energy

Although affordable energy is a vital component of a healthy economy, regulations frequently increase energy costs. Regulations imposed in the name of reducing carbon dioxide and greenhouse gas emissions are especially costly. Carbon dioxide is a natural byproduct of the combustion of all carbon-containing fuels, such as natural gas, petroleum, coal, wood, and other organic materials. Today, there is no cost-effective way to capture the carbon dioxide output of the combustion of these fuels, so any regulations that limit carbon dioxide emissions will either limit the use of natural gas, petroleum, and coal, or dramatically increase their prices.

Below are some facts about Arizona’s regulatory environment that are likely to affect the cost of energy or the cost of using energy. Arizona has enacted a number of programs that raise the price of energy, including surcharges[ii] to fund renewables.

  • Arizona does not cap greenhouse gas emissions. However, former Governor Janet Napolitano signed Executive Order 2006-13 in 2006, setting a greenhouse gas emissions goal of 2000 levels by 2020 and 50 percent below 2000 levels by 2040.[iii]
  • Arizona is a member of the Western Climate Initiative (WCI), a regional agreement among some American governors and Canadian premiers to target greenhouse gas reductions. The central component of this agreement is the eventual enactment of a cap-and-trade scheme to reduce greenhouse gas emissions 15 percent below 2005 levels by 2020.
  • Arizona requires utilities to sell a certain percentage of electricity from renewable sources. The state’s renewable portfolio standard mandates that 15 percent of retail electric load must be generated from renewable sources by 2025 and thereafter with 30 percent of the renewable energy derived from distributed renewable technologies.[iv]
  • Arizona does not require gasoline to be mixed with renewable fuels. However, the state requires motorists to use an oxygenated motor gasoline blend in the Tucson area during the winter and in the Phoenix metropolitan area year round.[v]
  • Arizona is working to implement automobile fuel economy standards similar to California’s, which would regulate greenhouse gas emissions from new vehicles. Executive Order 2006-13 coordinates the efforts of the Arizona Department of Environmental Quality with the Arizona Department of Transportation to adopt and implement California’s vehicle emissions standards.[vi]
  • Arizona does not require new residential and commercial buildings to meet energy efficiency standards. However, state-owned and state-funded buildings must meet ASHRAE 90.1-1999. ASHRAE 90.1 is a model code that mandates certain energy efficiency standards and was developed by the American Society of Heating and Refrigeration and Air Conditioning Engineers. Former Governor Janet Napolitano issued Executive Order 2005-05, which requires Executive Branch agencies to implement a variety of standards in new state-funded buildings, to the extent possible.[vii] These standards include meeting efficiency standards and acquiring at least ten percent of energy from renewable sources. The executive order also requires state-funded buildings to meet at least the silver LEED standard. The silver LEED standard is one level of the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) rating system. Arizona Revised Statute 34-451 also requires three departments to reduce energy consumption by 15 percent from 2002 levels by 2011.[viii] Finally, Arizona Revised Statute 34-452 requires new state building projects over six thousand square feet to meet solar design standards.[ix]
  • Arizona imposes state-based appliance efficiency standards. These standards will affect portable electric spas, residential pool pumps, and residential pool pump motors, beginning in 2012.[x] In addition, all state department are to purchase products certified by Energy Star or the federal energy management program (FEMP), if cost effective.[xi]
  • Arizona does not allow electric utilities to “decouple” revenue from the sale of electricity, but does allow natural gas utilities to decouple revenue from the sale of natural gas. Some states decouple revenue from actual sales, allowing utilities to increase their revenue by selling less electricity or natural gas.

[i] Energy Information Administration, Palo Verde Nuclear Generating Station, Arizona, Sept. 10, 2009,                                          http://www.eia.doe.gov/cneaf/nuclear/page/at_a_glance/reactors/palo_verde.html

Data Sources: Real GDP per capita 2008: Bureau of Economic Analysis, News Release: GDP by State (June 2, 2009), http://www.bea.gov/newsreleases/regional/gdp_ state/gsp_newsrelease.htm; Unemployment: Bureau of Labor Statistics, Regional and State Employment and Unemployment–February 2010 (Mar. 10, 2010); Gasoline Prices: American Automobile Association, AAA Daily Fuel Gauge Report (Mar. 30, 2010); Electricity Prices: Energy Information Administration, Electric Power Monthly, Table 5.6.B., Average Retail Price of Electricity,  (March 15, 2010), http://www.eia.doe.gov/cneaf/electricity/epm/table5_6_b.html; Electricity Generation Data: Energy Information Administration, Electricity Generation 2009, http://www.eia.doe.gov/cneaf/electricity/epa/generation_state_mon.xls.

[ii] Arizona Corporation Commission, In the Matter of the Proposed Rulemaking for the Renewable Energy Standard and Tariff Rules, Docket No. RE-OOOOOC-05-0030, Decision No. 69127, 11, Line 19, http://images.edocket.azcc.gov/docketpdf/0000063561.pdf.

[iii] Ariz. Exec. Order, No. 2006-13 (Sept. 7, 2006), http://www.azclimatechange.gov/download/EO_2006-13_090806.pdf.

[iv] Lawrence Berkeley National Laboratory, Renewable Portfolio Standards in the United States, http://eetd.lbl.gov/ea/ems/reports/lbnl-154e.pdf.

[v] Energy Information Administration, Arizona, Apr. 8, 2010, http://tonto.eia.doe.gov/state/state_energy_profiles.cfm?sid=AZ.

[vi]Ariz. Exec. Order, No. 2006-13 (Sept. 7, 2006), http://www.azclimatechange.gov/download/EO_2006-13_090806.pdf.

[vii] Id.

[viii] Ariz. Rev. Stat. 34-471, Energy Conservation Standards for Public Buildings, http://www.azleg.state.az.us/FormatDocument.asp?inDoc=/ars/34/00451.htm&Title=34&DocType=ARS.

[ix] Id.

[x] Arizona Department of Commerce, Arizona Appliance Efficiency Program, http://www.azcommerce.com/Energy/Efficiency/AZ+Appliance+Efficiency+Program.htm.

[xi] Id.