By Vin Nitido, Trico GM and CEO
You likely noticed in your bill last month, the 1.5 cent/kWh Power Cost Adjuster (PCA) credit has ended. Over the last year, we have been able to return more than $7.3 million in PCA credits to Trico Members, reflecting reductions in wholesale market power prices and certain credits received and passed on to us by our principal power supplier, Arizona Electric Power Cooperative (AEPCO). So why eliminate the credit now?
In June of 2016, the EPA Mercury and Air Toxics Standards (MATS) Rules for Power Plants went into effect. Implementing controls on the AEPCO coal generators to comply with the new MATS requirements resulted in a large increase in Trico’s wholesale power costs. AEPCO passes through any changes in its costs to Trico every six months (April and October), so October bills reflect those additional costs.
While coal generation is still the lowest cost power Trico purchases, that is changing quickly. AEPCO is in the process of converting one of its coal generators to burn natural gas, in order to comply with the EPA’s Regional Haze Rules. The cost of that conversion will be reflected in future Trico rates. But the conversion will also reduce our coal portfolio by half. Increasingly, the true environmental costs of coal generation are being reflected through both the regulatory and market process. I believe that will continue to be the case, notwithstanding the current EPA Administrator’s desire to eliminate the Clean Power Plan. Virtually every major electric utility in the United States has recognized this, and is transitioning from reliance on coal-fired resources to a more balanced mix of natural gas, hydro-electric, wind, solar and other renewable resources. That transition is being driven somewhat by regulatory action, but more importantly, by market forces.
Trico’s experience illustrates those market forces. Public demand for utilities to use and provide renewable resources has never been higher, including in our service territory. I’ve written before about the explosive growth of rooftop solar and the cost shifts associated with that. We moderated that cost shift in our recent rate case, but even with a reduction in the payment for solar energy exported from the home to Trico’s electric grid, we are still receiving an average of 15 interconnection applications each month. Trico now has over 2,000 rooftop solar interconnections on our system, representing about 5 percent of our Members and a total of over 22 Megawatts of connected renewable generation. However, the real economic driver of the solar market is the price of large utility-scale solar installations.
Trico’s purchase of 5 Megawatts of solar energy from the Apache Solar Project is highlighted here. In addition, Trico recently signed a letter of intent to develop and purchase 10 Megawatts of solar energy from a project to be constructed in Trico’s service area. Both of those projects will provide energy at a price that is very competitive with coal and gas-fueled resources and are not subject to volatile market commodity pricing. Is solar a total solution to our energy needs? Not until we have cost-effective and viable commercial storage capability, but it can and will be an important part of our balanced energy mix now and going forward.