Arizona adopts utility tariff for demand-side resources, including smart technology

The Arizona Corporation Commission (ACC) recently approved a proposal to direct Arizona Public Service Company (APS) to create a tariff for distributed demand-side resources, such as smart thermostats, connected hot water heaters, and energy storage systems.

The proposal came from Chairwoman Lea Márquez Peterson, and the vote by the ACC was unanimous. The goal of the proposal is to compensate aggregators of distributed demand-side devices for the resources they provide to the grid.

“This includes compensation for the value of energy, capacity, demand reduction, load shifting, voltage support, and other ancillary services, to name a few,” the ACC explained. “As a result of the compensation, a portion of the benefits should flow to Arizona consumers who adopt new technologies, and a portion should stay with the aggregators for the value they provide for synchronizing otherwise isolated resources.”

APS is still looking into the proposal.

“Our team is in the process of retaining consultants to help us assess and evaluate the value streams provided by each of our demand-side resources,” said Kerri Carnes, manager of customer to grid solutions at Arizona Public Service. “We look forward to filing an aggregation tariff that will help Arizona lead in determining the appropriate value and accelerating the use of these new energy efficiency technologies.”

The commission has invited stakeholders — including technology companies, consumer product manufacturers, and third-party aggregators of energy and smart devices — to be involved in the development of the tariff process.

ACC expects the proposal to create more cost-effective energy efficiency programs and allow APS customers more demand response technologies to help them better understand time of day usage.

“Demand-side resources not only give customers more tools to control their utility bills, but it also creates a more efficient grid for utility services providers, setting an example that other jurisdictions can follow, if Arizona gets this right,” said Chairwoman Márquez Peterson. “A more efficient grid means better pricing for customers. So, it truly is a win-win scenario, which could be applied nationwide.”

She added that she hopes the program will allow for economic development and new market opportunities.

“Previously, rooftop solar was the only tool in the distributed energy toolbox. But now, we have so much more,” said Márquez Peterson. “Air conditioners, appliances, devices, and batteries, even entire homes, as long as they are connected to the internet, can now be called upon to shift and respond to the grid. That’s extremely valuable.”

The Southwest Energy Efficiency Project (SWEEP) is recommending the tariff. In a letter to the commission, the group said that approval of Commissioner Marquez Peterson’s proposal “would create a mechanism to support increased deployment of energy efficiency and demand response technologies and would support a more comprehensive approach to serving customers and meeting the needs of the energy system at lowest cost.”

Márquez Peterson added that Arizona may be the perfect place to launch a program like this. According to APS, as of 2014, 99 percent of residential APS customers already had Advanced Meter Infrastructure as well as 98.5 percent of commercial customers.

“Our smart infrastructure, combined with Arizona’s digital connectivity and demand curve, which is unique to the Western United States, makes the Desert Southwest, and Arizona specifically, the perfect place to study demand-side optimization and lead on cutting-edge energy innovations and regulatory policies,” she explained. “Our accomplishments could serve as a model that provides unbound potential and efficiency on the grid like we’ve never seen before.”

The commission has requested the new tariff to be developed and ready for final review by April 1.