Candidates for one of three open seats on the Arizona Corporation Commission include, from left, Democrats Paul Newman and Marcia Busching and Republicans Bob Burns and Bob Stump.

Much of this year's election campaign for three seats on the Arizona Corporation Commission has focused on renewable energy, as the state's solar buildout continues to ramp up under a state mandate.

But not only will the next commission decide the pace of renewable-energy development, it will face critical decisions that may influence Arizona's energy policy for years to come.

Closer to home, the next commission will decide on Tucson Electric Power Co.'s pending request for a 15 percent rate increase after four years of frozen rates.

The five-member, constitutionally created Corporation Commission regulates utility rates and services, Arizona corporations, securities sales and railroad and pipeline safety.

Three incumbents - Republican Bob Stump and Democrats Paul Newman and Sandra Kennedy - are seeking second four-year terms on the five-member commission.

Two Republicans - Bob Burns and Susan Bitter Smith - join Stump on the GOP ticket.

First-time candidate Marcia Busching rounds out the Democratic ticket.

Also on the ballot are Libertarian Party candidate Christopher Gohl and Green Party candidates Daniel Pout and Thomas Meadows.

Green-energy standard

Renewable energy has become a major issue since an all-GOP commission mandated in 2005 that investor-owned utilities including TEP generate at least 15 percent of their retail power from renewable sources like solar and wind by 2025.

Candidates from both major parties say they're generally pleased with the state's progress in green-energy development.

But the Democrats want more solar, while the Republicans - who now control the commission with a three-member majority - say they're not inclined to increase the standard anytime soon.

The Green Party candidates want to transition completely away from fossil fuels to renewables; the Libertarian Party platform opposes any government control of energy markets.

Stump cites a recent study that ranked Arizona second among the states for installed solar capacity as of the second quarter of 2012.

Stump and fellow GOP candidates Burns and Bitter Smith say they are opposed to increased surcharges on ratepayers to pay for renewable-energy incentives, particularly with Arizona's still-struggling economy.

But Democrats - who four years ago won their first seats on the utility panel since 1999 - say the state can do more. They cite higher renewable-energy requirements in neighboring states like California, Nevada and New Mexico.

They say building out more renewable-energy capacity will protect the environment and keep costs down in the long term.

Pricing power

Democrat incumbent Newman - a Tucson resident and the commission's only member from outside Maricopa County - cites the external costs of fossil fuels and nuclear, including the public-health effects of burning coal.

With such costs considered, solar energy is now cost-competitive, or nearly so, with traditional generating resources, he said, citing a recent study by Arizona Public Service Co.

"Solar is cheaper than coal, cheaper than nuclear, and very close to parity with natural gas, and if you include all (external) costs, it's absolutely in parity," Newman said.

Stump disputes Newman's assertion, saying that a closer analysis shows APS data include government subsidies for renewables, and, with that and things such as its intermittent availability factored in, solar remains much more expensive than coal or gas.

Burns, a former state Senate president and appropriations chief, says his major concern is the fragile economy. He cited proposed pollution controls at the coal-burning Navajo Generating Station that could prove so costly the plant might close, costing hundreds of jobs and cutting the state's power supply.

"We need to be very careful about how we advance in this transition over to other fuels, or I believe we throw the baby out with the bathwater and destroy our economy," he said.

Democratic candidate Busching, an attorney and former Arizona Citizens Clean Election Commission member who has solar on her home, said she generally supports more solar but would withhold judgment on boosting the standard.

Bitter Smith, longtime chief of the cable-TV industry's trade association for Arizona and New Mexico, said she supports the renewable-energy standard at its current level, noting that solar can help address "increasing environmental constraints."

"It's a ringing success for Arizona, it's where it needs to be, and it has given us ammunition to deflect federal intervention," she said.

Democratic incumbent Kennedy says she's felt forced at times to "defend" the current renewables standard, noting that the commission's Republican majority has cut incentive levels for residential rooftop installations and slashed funding for solar-energy research.

"This effort should continue, not be scrapped or chipped away," she said.

Sharing the pie

In TEP's renewable-energy plan for this year, the commission's GOP majority led by Chairman Gary Pierce cut total incentives available for commercial rooftop systems, for which TEP had surpassed its incremental goal.

The commission kept the total TEP program budget for residential solar essentially flat but reduced maximum per-watt incentives for residential systems.

Democrats said the pullback jeopardizes the local solar industry.

Stump defended the incentive cutbacks as a prudent move to protect ratepayers and to spread incentives over more ratepayers, as the installed price of solar has plummeted.

"We recognize that if incentives are too high, there's less of the pie to go around, the money dries up and installers go out of business," Stump said.

The Democrats also criticize the commission's Republicans for voting to count a proposed trash-burning power plant toward the renewable-energy goals of the Mohave Electric Cooperative - essentially eating up any renewable credits for solar power for years to come.

Stump defended the move, noting the Environmental Protection Agency counts waste-to-energy facilities as renewable and some 90 such plants operate nationally.

The matter may yet play out in court - the Sierra Club last month filed a lawsuit challenging the commission's decision.

Energy efficiency

Under standards unanimously approved by the commission in 2010, TEP is required to achieve cumulative energy savings of 22 percent by 2020. Arizona is one of several states to adopt such standards, as a strategy to reduce long-term costs and environmental effects of power generation.

Both the Republicans and Democrats say they support the energy-efficiency rules.

"I'm a firm believer," Busching said. "We're doing well at implementing it with some utilities, not so well with others."

To achieve its energy-savings goal, TEP has proposed a major expansion of energy-efficiency programs - such as discounted home-energy audits and rebates for energy-saving improvements - funded by ratepayer surcharges.

But TEP's plan has been delayed for more than a year amid wrangling over costs.

The Corporation Commission has agreed in principle that utilities should be allowed to recover some revenue lost to lower-demand growth, and has granted cost-recovery mechanisms to Southwest Gas Corp. and APS.

Chairman Pierce has refused to hear a modified plan recommended by a hearing officer. He blames TEP for the long delay and cites opposition to the new plan by the commission's own staff.

Kennedy, Newman and Stump - who as sitting commissioners can't talk about the pending case - have filed letters urging Pierce to take TEP's efficiency plan to a vote as soon as possible.

Newman and Kennedy say energy efficiency represents low-hanging fruit that along with renewable-energy development can help forestall the need for major new power plants.

They criticized the commission's GOP members for approving a waiver to the rule for a Graham County utility whose ratepayers faced large billing increases to support the plan.

Stump said he agrees with the energy-saving policy but is wary of the costs: "We need to be sensitive to the cost to ratepayers in the present but also be forward looking ... to make sure we get those cost savings down the road."

Burns and Bitter Smith say it's too soon to propose any changes to the standard but they would wait and see how it works. Bitter Smith said waivers to the rule are an important option to protect smaller utilities and their ratepayers from runaway costs.

Deregulation redux

Electric competition also may re-emerge as an issue before the commission, amid a nationwide move promoting deregulation of retail electric markets.

Arizona moved toward a competitive market with rules first adopted in 1996. But a California deregulation debacle in 2000 and a subsequent court ruling prompted the commission to abandon the effort.

Other states have adopted some form of competitive market, with varying success in keeping rates down. Now groups such as COMPETE Coalition are pushing competition in Arizona.

"There's a whole slew of people in $2,000 suits who want to deregulate this place and take away local control," said Newman, who said he strongly opposes such moves.

As a former business owner, Kennedy says she's interested in studying deregulation to help boost service and lower costs, but she's leery of harming smaller ratepayers.

Busching agrees, saying she's open-minded but cautious.

The Republicans say they strongly support a free market but also are wary of costs to smaller ratepayers.

"Competition gives you the best service at the lowest cost ... but you need to have a number of competitors in the the marketplace - if you don't, you trade one monopoly for another," Burns said.

Bitter Smith said electric competition won't be among her top priorities.

"The ultimate yardstick will be, is it good for residential ratepayers?" Stump said. "If it harms ratepayers, I can't support it."

Water reform

Bitter Smith, a past president of the Central Arizona Water Conservation District, says her main priority will be to reform the way the Corporation Commission regulates small water companies.

Because of the high legal cost of filing a full-blown rate case with the commission, many smaller companies put it off until they are forced to seek a major rate increase, Bitter Smith noted.

She favors mechanisms adopted by some states allowing water companies to collect special surcharges between major rate cases, to help replace aging systems.

"It is a reform process that has to happen. … It needs a champion," said Bitter Smith.

The incumbents and other candidates have agreed that the issue needs study.

Stump said incremental funding mechanisms such as one adopted in Pennsylvania can help keep utilities healthy while promoting "rate gradualism" and avoiding rate shock.

Newman and Busching said the issue deserves more attention to assure water companies stay healthy.

"We've got to look at some changes, but we have to protect the constitution and the due process we go through at the commission," Kennedy said.

On StarNet: Find more information on the upcoming election at azstarnet.com/elections

Contact Assistant Business Editor David Wichner at dwichner@azstarnet.com or 573-4181.

Senior reporter covering business and technology for the Arizona Daily Star/Tucson.com