Q&A with Gary Pierce, Commissioner, Arizona Corporation Commission

What is your reaction to how the EPA’s carbon emissions rule might affect your state? What are some ways your state is already prepared and what might be more challenging?

Arizona has a pretty diverse portfolio of energy and quite a bit of it is carbon based. We have a lot of coal-fired generation—40 to 45 percent of our generation is coal-fired. Nuclear is about 20 percent…Arizona probably can deal with this a little more easily than others because we have already been looking at our coal fleet. And we’re well positioned to do more natural gas, especially on the combustion turbine side.

Photovoltaic is a different issue because it tends to produce energy off of our peak…and is ascending in its usefulness as we reach our peak. So we really have all the energy we need at the time photovoltaic is producing energy in Arizona.

We have all the backup, we’re paying for all the backup and we’re paying for the photovoltaic. That’s a policy question to look at.  If you’re going to build an intermittent source you must build a backup…it costs more to do that.

Arizona will work through it as long as Arizona policymakers don’t try to put too much intermittency, which is higher cost in the system, and really have a good balance.

(On carbon dioxide’s affects on climate): CO2, I don’t really look at CO2 as a pollutant. I know the EPA does, and the Supreme Court has helped them out with that. But you would almost have to say is that poisonous…CO2 is important to plant life, to crops, to everything that we do.

True climate scientists know if you look at the cycles that have happened in climate, climate has been stable for 30 years, not warming. But we cooled for 30 years before that. Really getting good data is the important thing. The science isn’t settled.

The climate change skeptics, I don’t think they’re skeptical that there’s climate change, just that CO2 is the issue…Hopefully somebody in the Supreme Court will recognize that carbon dioxide is not a pollutant.

(On whether the EPA’s requirements are attainable): They’ve said we’ve set guidelines in each state that we think are reachable…and tell us how they’re not and we’ll work with you. That’s probably the position I would take if I had this elitist attitude that I want this done, here are the guidelines, you just go figure out how to do it. And tell me how I’m wrong and when you tell me I’m wrong, I’m going to tell you I’m right.

If a number of states come back and say we can’t reach it…I don’t doubt EPA would say wait a minute we’ve looked at this and we told you to figure it out yourselves, now we’re going to tell you how.

They did drive the formula. It makes everybody feel good to feel like we get to devise this. You get to devise it only if you come up with everything they really want to have happen.

Do you foresee your state having a formal or informal stakeholder process?

That’ll have to be organized. We have stakeholder processes, we call them workshops. This is one that I think will be well talked about because a number of legislators are so interested in this.

Administrator McCarthy talked about regional cooperation and collaboration. I think if you listen to that, they’re really trying to push folks into that and I think some states are going to be resistant about where it’s too cost prohibitive. You wonder sometimes if the agenda of the feds is to push us into regional transmission organizations or independent system operators. What’s the underlying purpose here? They’re really trying to push us out of our state right position and into regional conglomerates.

(States) can cooperate with other states…without having a governmental body they created to do it. Probably the governors and their departments of environmental quality are going to pull those together and public utility regulators will be involved, and they’ll probably involve legislatures as well.

Do you feel your role and responsibilities as a state regulator are evolving, particularly in light of this rule? Why or why not?

(The rule) makes it harder to make sure you have reliability at a reasonable cost because this will raise costs. Energy efficiency is the low hanging fruit, but then you’re spending more than a 1:1 ratio. You’re spending money to reduce energy use but it costs more than what is (offset).

(On renewable energy): When you go from 38 megawatts to 10,000 megawatts, that’s a problem for the system. You run into reliability issues. When you’re shutting down coal-fired generation baseload and when your option is let’s just add renewable, excuse me, you better hope your peak doesn’t go beyond the amount of baseload you have.

We will have to be building more baseload. We’re going to be building more nuclear. If the new definition of carbon is carbon equals CO2 –a lot of scientists will tell you carbon is not CO2–…then the next move is they’re going to attack natural gas. Attack coal now, attack natural gas later…then your only other option is nuclear.

You have to have a backup and battery backup is not going to happen for a long, long time, independent storage is not going to happen for a long, long time, or you’re talking about rationing power in the most advanced nation in the world and that’s not acceptable.

This administration really better think about where they want to steer this because folks won’t tolerate intermittent power, unreliable power. You flip the switch, they want it to work.

 What are some of the biggest energy issues facing your state? 

In Arizona we elect our commissioners, so we tend to be independent. But we have rowdy elections now, and those elections have been brought on most recently over the last six years because we implemented our renewable energy policy and we brought in…a constituency out there getting renewable energy and these businesses that have popped up…they’re so used to the government subsidy that has gone along with that.

Now, if you’re not a commissioner that sees it their way, you’ve got a fight on your hands. Now we’ve got fights and elections where commissioners really need to be neutral and free of this stuff. We run as Republicans and Democrats. You really need to be objective and following the constitution of Arizona making sure we’re providing reasonably priced, reliable and safe water, energy, natural gas. That should be our focus—doing all this stuff at prices people can afford and for our economy that attract business.

In Arizona we need to do those things right, follow our constitution and not let the political pressures get to commissioners. I’ll be gone off the commission, but I see this as a problem for commissioners. They’re making commitments to do certain things that maybe are not in the best interest in the long term.

Morning Consult