Utility financing bill is unconstitutional, foes say, and could protect dirty power plants

Yahoo

10-04-2025

A bill in final stages of consideration in the Arizona Legislature that would allow utilities more flexibility in financing — but make ratepayers liable for bad investments — has been called "unconstitutional," "polluting," "overly broad," and "the largest change to utility financing ever contemplated in the state of Arizona."
Over 41 technical pages, House Bill 2679 proposes sweeping changes to how public power utilities in the state can manage their debt while planning to meet future energy demand. It aims to develop utility securitization rules by which electricity providers can shift financial responsibility for events like power plant retirement, unrecovered fuel costs, damaging weather events like wildfires and other operational uncertainties onto ratepayers via a monthly, unrestricted charge on their utility bills.
In theory, securitization can allow utilities the financial freedom to pursue new power infrastructure and take on expenses they otherwise could not for the benefit of the public's future access to affordable and reliable electricity. This is how utility company representatives described the bill's benefits to the House Natural Resources, Energy and Water Committee in February.
"We're all coming off the heels of this last election cycle where costs of goods and services, inflation and pocketbook issues were top of mind for voters," said Michael Vargas, director of government affairs for Arizona Public Service or APS, a public utility provider serving more than a million customers in central Arizona and the entity sources say would benefit most from the bill.
"Securitization supports Arizona's economic growth and compliments economic development efforts of the state and jobs, producing additional tax revenue and helping spur capital investment and new infrastructure in the state," Vargas said.
But opponents to the bill — including independent grid experts, energy efficiency and environmental groups, Arizona Corporation Commission members and the Arizona attorney general — say it goes too far and would force the public to pick up the tab for utility companies' bad investment decisions. They worry its length and complexity is stymying needed scrutiny and that, if passed, it would burden lower-income Arizonans most and risk stalling progress toward cleaner energy generation.
"We believe securitization can be a fantastic and helpful financing tool, however, there has not been in this conversation relating to this bill sufficient discussion about its broad applicability and unintended consequences," Caryn Potter, the Arizona Representative for the Southwest Energy Efficiency Project, told committee members. "Unlike laws in other states which tie securitization to plant retirement, this bill grants utilities broad discretion to securitize assets without requiring plant shutdowns or ensuring public benefits directly. As a result, utilities could offload uneconomic power plants while customers continue paying for them under new ownership."
Of particular concern among environmentalists is the bill's language allowing coal-fired power plants scheduled for retirement to instead be securitized, sold and stay operational under a new owner. Additional language related to energy reliability would, sources say, require coal plants that close to be replaced with natural gas facilities instead of cleaner options like solar — which have proven cheaper and similarly reliable in recent years while also creating jobs.
On April 8, this aspect of the bill took on new relevance when President Donald Trump signed executive orders aimed at "reinvigorating America's beautiful, clean coal industry." He named APS's coal-fired Cholla Power Plant in northeast Arizona, which had been slated for closure later this month, as one he'd particularly like to keep running.
The science has long been clear that coal is one of the dirtiest ways to produce electricity, is particularly harmful to human health and is responsible for about 19% of U.S. energy-related carbon dioxide emissions causing climate change. APS recently told The Arizona Republic that the company "has already procured reliable and cost-effective generation that will replace the energy previously generated by Cholla Power Plant," which it said had become "uneconomical to operate."
More: Trump: Keep APS's Cholla Power Plant open to boost 'beautiful, clean coal industry'
More central to the current debate over this bill than its implications for pollution and ratepayer expenses, however, is whether it's even allowable under the state constitution, which grants the authority to regulate utility finance decisions to the five elected members of the Arizona Corporation Commission.
House Bill 2679 was introduced on Jan. 29 by Rep. Gail Griffin, R-Hereford, who chairs the House Natural Resources, Energy and Water Committee — and who a 2024 Republic analysis found has introduced more recent bills opposed by environmentalists than any other Arizona lawmaker. Griffin did not respond to The Republic's requests for comment on the controversy around this bill.
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That same day, it passed muster by the House Rules Committee, which determines whether an introduced bill has enough legal standing to advance to a vote. On March 31, after the House passed it, the Senate Rules Committee gave it the green light as well.
But several top Arizona utility and legal authorities have stated that HB 2679 should not move forward.
On Feb. 25, the current executive director of the Commission, Doug Clark, wrote a letter to Griffin objecting to the bill on behalf of all five commissioners on the grounds that it "does not appear to permit any meaningful review by the Commission of the costs associated with securitization."
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Another letter dated March 23 from Bob Burns, who served eight years on the commission after spending 12 years as a Republican in the House, clearly states the longtime lawmaker and regulator's opinion that "HB 2679 should be reviewed with a great deal of caution and full understanding prior to adoption. Regulated monopolies, including APS, must have very vigilant oversight. This is the very reason that the Corporation Commission was included in the State's Constitution as the co-equal forth branch of government."
And on April 3, Arizona's top legal authority, Attorney General Kris Mayes, publicly opposed the bill as unconstitutional.
"(HB 2679) infringes on the Commission's exclusive, constitutional authority to set utility rates," she wrote, adding that "while the Legislature may enlarge the Commission's regulatory authority, the Legislature may not limit the Commission's constitutionally vested ratemaking powers."
Yet, despite this high-profile opposition, additional sources expressed concern that the bill has been making swift progress toward becoming law without detailed review or substantial efforts to amend it.
'It's the largest change to utility financing ever contemplated in the state of Arizona, and there has been no discussion outside of the Legislature," said Amanda Ormond, an expert on the regional transition to post-coal-dependent economies with three decades of experience working in western energy and public policy. "The corporation commission was never consulted. The residential utility consumer office was never consulted.'
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These conflicts are essential to consider at this stage, Ormond added, because if the bill passes as it currently stands, in all its technical complexity, for-profit utilities in the state will become much more difficult to regulate.
"Once you do a bond, the only time to review what's being charged to customers is before the bond is issued," she said. "All the language in the bill is very clear that once the bond is passed, nobody can touch it. The courts can't. The commission can't. The governor can't. The Legislature can't.'
She's seen similar bills in other states — proposing to grant utilities less authority than this one — take years to make it through to law, being refined by diverse stakeholders at each stage.
For these reasons, Ormond said "this bill should not pass this year because it's too big an issue, and we have not had any conversation about the appropriateness. It cannot be fixed or amended. We need to start over."
If HB 2679 passes its upcoming floor vote in the Senate and ends up on Gov. Katie Hobbs' desk, sources are unsure about whether she would sign it into law. In response to a request from The Republic, Hobbs' press office didn't offer much clarity.
"Governor Hobbs is committed to supporting families struggling with rising costs and energy bills," a spokesperson wrote in a statement sent to The Republic. "The Governor is closely watching HB 2679 and analyzing how various proposals may deliver on lowering energy bills while advancing a clean energy economy in Arizona."
The three senators who voted against it advancing through the chamber's Natural Resources, Energy and Water Committee — Rosanna Gabaldon, D-Sahuarita, Theresa Hatathlie, D-Coalmine Mesa, and Priya Sundareshan, D-Tucson — also did not give insight into their positions in response to The Republic's requests.
But it seems likely HB 2679 will face continued pushback from the attorney general. In her April 3 letter, in addition to calling the bill unconstitutional, Mayes also said it "disincentivizes utility spending discipline."
This aligns with reasons other groups have voiced in their objections to it.
"HB 2679 is too broadly written without sufficient checks and balances and there are too many unanswered questions about how it could be used and how it would affect future ratepayers," said Sandy Bahr, director of the Grand Canyon chapter of the Sierra Club. "The bill does not protect consumers, our air, or our water, and could saddle future ratepayers with unreasonable costs."
Bahr worries the bill could stall progress toward building a cleaner energy grid by interrupting investment in wind and solar generation. By allowing utilities to securitize and sell old, expensive and polluting power plants instead of retiring them, individual utility companies could also potentially make it appear as though they have cleaned up their overall energy portfolios with a higher percentage of generation from renewable sources — while the old plants continue to spew pollutants and planet-warming emissions into Arizona's air under a different owner.
"HB 2679 would authorize utilities to issue bonds to pay for debt for a coal plant and then sell the plant," she said. "Plus, as the bill was amended in the House, it effectively requires them to replace the coal with gas, so we will get more pollution, not less. Most programs like the one being proposed require retirement of the plant and a policy to reduce carbon emissions."
Bahr also pointed to another, somewhat overlapping bill, HB 2201, that proposes to relieve electric utilities from negligence for wildfires started by their infrastructure. That bill, like so many others Bahr opposes, was also introduced by Griffin.
"If utilities are not properly maintaining their infrastructure and it ignites a fire, then they should be held accountable," Bahr said. "If they want some kind of deference, then they should be required to do more in their wildfire mitigation plans, not less as HB 2201 bill requires."
More: Arizona Republicans advance bill shielding utilities from wildfire lawsuits
All of these changes could impact ratepayers from minority and already-disadvantaged groups the most, said Itzel Rios-Vega, Vote Solar's regional director for the Interior West.
'This current energy system we have doesn't always prioritize people, it prioritizes profits," she said. "And there's folks who do not have a lot of resources and are already facing the brunt during summer in Arizona when it gets super hot and it can be inaccessible to pay electricity bills. It's mostly going to be communities of color who suffer."
Like Bahr and Ormond, Rios-Vega called out the backwards approach of the bill's support for fossil fuels like coal and natural gas as some kind of step toward more reliable, affordable or beneficial energy generation. Ahead of Trump's recent executive orders boosting coal, APS confirmed this with its plans to retire the coal-fired Cholla Power Plant in favor of more economical options.
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Since 2020, solar has been the source of "the cheapest electricity in history," according to the International Energy Agency, and it has only gotten cheaper since. With battery storage and smart management, solar is also competitive with natural gas in terms of reliability, especially in Arizona where sunshine is so abundant.
The state's policies should reflect this modern reality, Rios-Vega said, not use the concept of securitization to prop up outdated energy infrastructure that will only harm Arizonan's wallets, lungs and communities while lining the pockets of utility companies.
'Securitization, when met with the proper safeguards, can be a really good thing," Rios-Vega said. "It's just that in this bill, we see that those safeguards are not there. When someone (in committee) asked if there were any limits to this bill at all, the utilities couldn't say there was. So it does become this kind of sweeping blank check for utilities.'
Joan Meiners is the climate news and storytelling reporter at The Arizona Republic andazcentral.com. Her work has also appeared in Discover Magazine, National Geographic, ProPublica and the Washington Post Magazine. Before becoming a journalist, she completed a doctorate in ecology. Follow Joan on Twitter at @beecycles or email her at [e-mail].
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This article originally appeared on Arizona Republic: Utility bill is unconstitutional and a pollution risk, critics say