Power Struggle

As Arizona's utilities grapple with the problems of deregulation, the chairman of the Arizona Corporation Commission is trying to get more regulation of one power company--and it's drawn him a slap from the governor.

In a July letter, ACC chair Jim Irvin asked Secretary of the Interior Bruce Babbitt to force the Salt River Project to give up its "unfair and unneeded advantages" and submit to ACC regulation.

But Governor Jane Hull, defending SRP as "a major factor in the success of the economy of central Arizona," has asked Babbitt to ignore Irvin's request.

The tussle comes as Arizona is preparing to enter a deregulated utilities market. By December 31, under new rules set by the Corporation Commission and the Legislature, some customers will be able to buy power from competing companies.

Unlike other utilities, SRP is a federal reclamation project, drawing power from federally owned dams and canals, and selling it to the public at reduced rates.

Irvin objected to SRP's access to federal power as an advantage over other companies on the market. The utility, Irvin said, was a stumbling block on the way to free and open competition.

"Arizona's electric markets will never be fair so long as the Salt River Project can compete [using] federal electricity resources. . . ." Irvin wrote.

Unfortunately for Irvin, there's not much he can do about it. SRP doesn't answer to the corporation commission. The public utility's dams are technically under Babbitt's jurisdiction at the Department of the Interior.

And the Arizona Constitution says SRP, as a municipal corporation, with its own elected officers, is exempt from commission regulation. Irvin and the other commissioners can only regulate private corporations.

So Irvin asked Babbitt to level the playing field by cutting off SRP's federal power, and letting the corporation commission take charge.

"[ACC regulation] can and should be applied to the Salt River Project," Irvin said. "Federal power programs can still benefit Arizona without unjustly rewarding one particular power supplier."

But Irvin's request drew a harsh response from Hull.
"Mr. Irvin is wrong in suggesting that the Corporation Commission should impose additional regulation on SRP," Hull wrote to Babbitt two weeks ago. "This is not how our system works in Arizona. I, for one, do not include new regulation in the concept of deregulation."

Hull said SRP was already cooperating with the rules set by the Legislature for deregulation. And, Hull wrote, the process is going just fine--no matter what Irvin says.

"From the perspective of the State of Arizona, we do not see the need for any major federal changes to the power and authorities of SRP," she wrote.

Irvin did not return calls for comment. Stuart Goodman of Hull's office says her letter "speaks for itself, in its tone and its message."

Irvin's political rival on the commission, former chairman Carl Kunasek, was even more pointed. "I want you to know that [Irvin's] letter is filled with many errors, that I do not support his request and that his letter is his individual position and not the official position of the Arizona Corporation Commission."

Jerry Porter, spokesman for Kunasek, calls Irvin's idea "boneheaded."
While SRP does get advantages from the federal government, so do other utilities, Porter says. To give up its federal assets--dams and canals--would just make power more expensive for SRP customers.

"Our job is to ensure a cheap, reliable flow of power," Porter says. "If I want a level playing field, I don't want to beat up SRP; they've got the lowest rates in the state. What I want to do is, I want to help [other utilities] to get their rates to where SRP is."

Richard Silverman, SRP's general manager, says SRP is following the rules for entry into the market.

"We believe it is necessary to cooperate with the corporation commission, and we are doing our level best to do that," he says.

But if SRP were to give up managing the dams and the power stations it built to go with them, Silverman says those assets would only go to other hands.

"We have built plants in Arizona that use coal found in Arizona, mined in Arizona, water from Arizona . . . to create electricity for people who live in Arizona," he says. "It doesn't make sense to turn around and sell those plants to the highest bidder, and then have to pay more for the power they generate."

Also, Silverman adds, cutting off SRP from the federal government would mean "somebody else would have to operate the reservoirs and canal systems," if SRP didn't.

SRP hasn't heard any response from the Department of the Interior about Irvin's request. Department staff did not return calls for comment for this story.

Contact Chris Farnsworth at his online address: [email protected]

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Chris Farnsworth