A decision by state regulators to halt a move toward retail electric competition was met with relief by opponents and dismay by backers who said they will continue to press the issue.

In an unexpected move late Wednesday, the Arizona Corporation Commission voted 4-1 to end its inquiry into electric competition, citing constitutional issues.

Arizona passed its first rules to make retail power markets competitive in 1996, separating generation from the transmission and distribution of electric power so that consumers could choose their power suppliers.

The state essentially abandoned those rules after California’s botched attempt at a competitive power market caused rates there to soar in 2000 and 2001, and a state appellate court found Arizona’s competition rules unconstitutional in 2004.

In the latest inquiry by the all-Republican Corporation Commission, competition was backed by competitive power providers, large power users like Walmart and the conservative Goldwater Institute, who contended that competition would keep power costs down and boost service options.

But opponents, including Tucson Electric Power, Arizona Public Service Co., rural electric cooperatives and consumer groups such as AARP, said there is little evidence competition has benefited consumers in states that allow it.

Among other concerns, TEP said competition could expose residential ratepayers to higher costs as competitors would be able to cherry-pick large commercial customers.

“We think they made the right decision — it’s in the best interest of our customers, and that’s what we’ve been trying to say all along,” TEP spokesman Joe Barrios said, adding that retail electric rates remain relatively low and reliability remains high under current regulation.

The Arizona Power Consumers Coalition — a broad-based group including more than 90 utilities, cities, business groups and nonprofits and more than 50 mayors and local politicians — also applauded the move.

The Corporation Commission made its decision during an open staff meeting, after its regular open meeting Wednesday. The vote came after members were briefed in executive session on the legal issues entangling any new move to competition.

A main proponent of electric competition, Arizonans for Electric Choice & Competition, bashed the commission’s action and said the fight isn’t over.

The group, whose members include major power users like Intel Corp., Wal-Mart and Freeport McMoRan Copper & Gold, was “surprised and dismayed” by the decision, said Stan Barnes, president of Arizonans for Electric Choice & Competition.

“We regret the lack of openness in the ACC process that led to this decision,” Barnes said. “This discussion is not over, and we look forward to continuing to pursue a path that will lead to the opening of Arizona’s electricity market to retail competition.”

Wall Street reacted positively to the Corporation Commission’s decision, as shares in the publicly traded parents of TEP and APS rose Thursday even as broader market indexes slipped.

APS parent Pinnacle West Capital Corp. had cited uncertainty from potential deregulation when it delayed a plan to buy Southern California Edison’s portion of the Four Corners Power Plant outside Farmington, N.M.

Shares in UNS Energy Corp., TEP’s corporate parent, opened higher and closed Thursday at $44.77, up 33 cents, in trading on the New York Stock Exchange.

Pinnacle West shares closed at $53.45, up $1.13.

Utilities analyst Maurice E. May said it had become increasingly apparent that electric competition wasn’t going to fly in Arizona.

“It was just such a can of worms that I couldn’t believe the regulators brought it up again — it didn’t work before, why try again?” said May, an analyst with Power Insights/Wellington Shields.

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