Arizona regulators drop power deregulation push

PHOENIX - The Arizona Corporation Commission has dropped its consideration of deregulating the state's retail electricity market, a move that clears uncertainty surrounding two energy projects in neighboring New Mexico.

In an unexpected move, the commission voted 4-1 Wednesday to close its docket in the case after the panel's legal staff said there were huge legal impediments.

Under deregulation, customers can choose their suppliers of power, which is still delivered over local utilities' wires.

Deregulation supporters said it would foster competition and lower prices, while opponents said an unregulated marketplace would create uncertainty and has failed in other states.

The commission's legal staff cited the state Court of Appeals' 2004 ruling that overturned commission rules to govern a deregulated electricity market. The ruling was based on the Arizona Constitution's mandate for the commission to set "just and reasonable" utility rates.

Commission Chairman Bob Stump said after the vote he's "ideologically sympathetic" in most policy areas.

Arizona Public Service Co. cited uncertainty from potential deregulation when it delayed a plan to buy Southern California Edison's portion of the coal-fired Four Corners Power Plant outside Farmington, N.M.

APS called the commission's decision Wednesday a "positive development" and said it was moving to finalize the power plant deal.

"The decision by the commissioners provides economic certainty going forward for consumers and electric providers alike," said Jay Heiler, an APS lobbyist and chairman of a coalition that opposed deregulation.

With the decision, the Navajo Nation said it now can pursue a plan to buy a coal mine in northwestern New Mexico that feeds the Four Corners plant.

The Tribal Council formed a company to purchase the Navajo Mine from Australia-based BHP Billiton New Mexico Coal for $85 million but has not yet approved the purchase.

"That was one of the items we wanted to see finalized before we proceed with any purchase of the mine," said Erny Zah, spokesman for tribal President Ben Shelly.

Nick Dranias, a Goldwater Institute lawyer and a deregulation advocate, said the commission's decision was only a temporary setback.

"We're in this for the long game. Arizona's Constitution does not enshrine government-imposed monopolies. Stay tuned," Dranias told the Arizona Capitol Times.

Stump said one way to resume consideration of deregulation would be to ask voters to amend the Arizona Constitution. "This may be a remedy the proponents need to explore," Stump said.

Commissioner Brenda Burns cast the dissenting vote, saying the decision was premature and that she wanted to continue discussions.

"Whether she was for or against retail competition, she wanted to learn as much as possible on these issues," said Burns policy adviser Thomas Galvin.

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