Impact to Rural Arizona Electric Cooperatives

Building electric infrastructure in rural Arizona is more expensive per mile and services less customers per mile. This in turn results in less operating revenue and tighter margins. We don’t get a return on investment, every dollar we make goes directly to our member-owners not shareholders.

Arizona’s rural electric cooperatives are the only non-profit utilities included, which will put us at a disadvantage. Rural small businesses, ranchers, and farmers in cooperative service territories will be stymied with more expensive electricity and will find it harder to compete because of the arbitrary mandates in Prop 127.

 If the initiative passes, it will be memorialized in the Arizona Constitution and nearly impossible to amend, no matter how bad the economic impacts are on Arizona’s cooperative members. Prop 127 would not allow the Arizona Corporation Commission to make adjustments if the arbitrary renewable mandates compromises safety, reliability or affordability.

Since the 1960’s rural electric cooperative members have invested close to $1 billion in assets, which they will no longer be able to use to their advantage. These investments will be stranded assets (with remaining debt still owed to the bank) and another $1.2 – $1.5 billion of investments will be added to the existing ledger to comply with the requirements under Prop 127.

If Prop 127 passes in Arizona this November, it will have substantial negative impacts on Arizona rural electric cooperatives and their members, including:

 

Higher Electricity Prices for Cooperative Members

In order to build the necessary renewable energy generation to comply with Prop 127, the Arizona Generation and Transmission Cooperatives would be required to acquire 600 -1,000 MW of renewables through some combination of wind, solar and battery storage at a cost of $1.2 – $1.5 billion – which will be the key driver in increasing rates.

Prop 127 will significantly increase the cost of electricity; Arizonans would see their electric bills go up by roughly 40%. Low income families, seniors on fixed incomes and rural small businesses will be hit the hardest.

This ballot initiative is nearly identical to a similar one passed in California that has led to that state’s electric rates increasing five times more than the rest of the nation over the last six years. Since the measure was instituted in California, their retail electric rates are now 47% higher than Arizona. Due to Arizona’s severe weather conditions in the summer, the impact would likely be greater here. On average, states with similar mandates have retail electric rates that are 55% higher than the national average.

If the initiative passes, it will be memorialized in the Arizona Constitution and nearly impossible to amend, no matter how bad the economic impacts are on Arizona’s cooperative members. Prop 127 would not allow the Arizona Corporation Commission to make adjustments if the renewable mandates compromises safety, reliability or affordability.

 

Detrimental Impacts on Low Income Rural Families

Any increase to the electric bills of low-income customers is akin to a regressive tax, a tax on the people that can least afford it.

The majority of co-op members live at or below the poverty level. Economic Research Service puts the average per capita income for Arizonans in 2016 at $40,415. However, rural per capita income is far behind at $31,645. Census data have the poverty rate in rural Arizona at 26.2%, while it is only 15.8% in urban areas of the state. Suffices it to say, if utility bills increase by 40% (as research indicates), those in rural Arizona will be hard-pressed to make ends meet.

According to the Energy Information Administration (EIA) nearly one-third of U.S. households (31%) reported facing a challenge in paying energy bills or sustaining adequate heating and cooling in their home in 2015. According to the most recent results from EIA’s Residential Energy Consumption Survey (RECS), about one in five households reported reducing or forgoing basic necessities like food and medicine to pay an energy bill and 14% reported receiving a disconnection notice for energy service.

Over the last 2 years, our electric cooperatives have connected 36 MW of grid solar fields after their self-governing boards approved the projects. So, we are NOT opposed to renewables. What we are opposed to is an unreasonable and arbitrary mandate that would disproportionately impact rural cooperative members, including low income households, those on fixed incomes and small business owners.