State and Local Policy Database

Arizona

State Scorecard Rank

18

Arizona

21.0Scored out of 50Updated 9/2016
State Government
Score: 3 out of 7
State Government Summary List All

Arizona offers a property tax exemption for energy-efficient building components, although other consumer incentives are limited. The state government leads by example by setting stringent energy standards for public buildings and encouraging the use of energy savings performance contracts. Researched focused on energy efficiency takes place at several institutions in the state.

Financial Incentives List All

Financial Incentive information for Arizona is provided by the Database of State Incentives for Renewables and Efficiency (DSIRE Arizona).

Last Updated: July 2017

Building Energy Disclosure List All

There is no disclosure policy in place.

Last Updated: July 2017

Public Building Requirements List All

In 2003, the Arizona legislature passed House Bill 2324, which modified ARS 34-451. The 2003 law requires state agencies and universities to achieve a 10% reduction in energy use per unit of floor area by 2008 and a 15% reduction by 2011; newly constructed state buildings must be consistent with the ASHRAE 90.1-2004 (equivalent to IECC 2006).

Executive Order 2005-05, signed in February 2005, requires that all state-funded buildings constructed after the date of the Executive Order meet at least the LEED Silver standard. As of June 2013, Arizona’s three state universities have 42 LEED rated buildings.

Executive Order 2008-29 required all state executive agencies to conduct an analysis of energy usage by January 2009 and identify what actions are required to meet their energy goals. It is unclear if Arizona currently has benchmarking requirements in place for public facilities.

Last Updated: July 2017

Fleets List All

No policy in place or proposed.

Note: For state efficient fleet initiatives, policies listed must make a specific, mandatory requirement for increasing state fleet efficiency. State alternative-fuel vehicle procurement requirements that give a voluntary option to count efficient vehicles are thus not included.

Last Updated: July 2017

Energy Savings Performance Contracting List All

ESPCs are administered by the State Procurement Office of the Arizona Department of Administration and are reviewed by the Office of Grants and Federal Resources. A list of thirteen prequalified ESCOs is maintained, which state agencies are required to use. K-12 schools, cities, towns and counties may use the list. In 2012, legislation was passed that updated the state statutes for K-12 schools, cities, towns and counties. HB 2578 extended the life of the agreement based on the expected equipment life, term of financing agreement or 25 years, whichever is less.

Last Updated: July 2017

Research & Development List All

At Northern Arizona University, through the Energy Utilization study, the Institute for Sustainable Energy Solutions (ISES) of Energy Efficiency and Smart Grid research programs have partnered with: the College of Business and College of Social and Behavioral Sciences to perform qualitative research on the human dimensions of energy conversation and utilization behaviors and conduct research related to energy efficiency on Native American lands. 

Arizona State University’s LightWorks Center focuses in part on energy efficiency, including research into solid state lighting as a way to reduce energy costs as well as behavioral interaction with energy efficiency technology. The Center is funded in part by the US Department of Energy.

Last Updated: July 2017

Buildings
Score: 3 out of 7
Buildings Summary List All

Arizona is a home-rule state, however, the majority of new construction activity occurs in jurisdictions who have adopted the 2012 IECC. Utilities are involved in code compliance support activities, and the state organizes code training and outreach.

Residential Codes List All

Arizona is a home-rule state, meaning that codes are adopted and enforced on a local rather than state level. However, the Southwest Energy Efficiency Project has found that the majority of new construction activity occurs in jurisdictions who have adopted the 2012 IECC.

Last Updated: August 2017

Commercial Code List All

Arizona is a home-rule state, meaning that codes are adopted and enforced on a local rather than state level. However, the Southwest Energy Efficiency Project has found that the majority of new construction activity occurs in jurisdictions who have adopted the 2012 IECC. In addition, all state-funded buildings constructed after February 11, 2005 must achieve LEED Silver certification and meet the energy standards of ASHRAE 90.1-2004 as mandated by Executive Order 2005-05. 

Last Updated: August 2017

Compliance List All
  • Gap Analysis/Strategic Compliance Plan: NA
  • Baseline & Updated Compliance Studies: NA
  • Utility Involvement: Four of Arizona's utilities are actively involved in code-related efforts. Up to 1/3 credit of savings from building energy codes can be claimed by utilities to count towards annual savings goals. Utilities must demonstrate and evaluate the savings that they claim.
  • Stakeholder Advisory Group: NA
  • Training/Outreach: The Governor’s Office of Energy Policy (GOEP) works with utilities, specifically Arizona Public Service and Salt River Project, on education related to energy efficiency codes. The utilities are allowed, per the state’s energy efficiency standards, to count the training towards their energy efficiency requirements. The Arizona Building Officials also sponsors workshops/trainings on codes throughout the year.

Last Updated: June 2016

CHP
Score: 1.5 out of 4
CHP Summary List All

Arizona includes CHP as an eligible resource in its EERS and has adopted policies to support renewable-fueled CHP systems. One new CHP systems was installed in 2016.

Interconnection StandardsList All

In June 2007, the Arizona Corporation Commission (ACC) initiated a rulemaking process to establish statewide interconnection standards for distributed generation. This proceeding is still in progress. Draft rules released June 26, 2015 are available here and a ruling is still pending, but the commission has recommended utilities use the draft regulation until regulations are finalized.

The state's utilities independently developed interconnection agreements for distributed generation (DG) prior to the ACC's ongoing proceeding to establish statewide standards. The Salt River Project, Tucson Electric Power, and Arizona Public Service—the state’s major utilities—have all established their own interconnection procedures. It is likely that the state’s regulated utilities will adopt the ACC’s interconnection standards when final rules are adopted.

Last Updated: August 2017

Encouraging CHP as a ResourceList All

CHP in energy efficiency standards: On December 18, 2009 the Arizona Corporation Commission (ACC) ordered that all investor-owned utilities and rural electric cooperatives achieve 1.25% annual savings as a percent of the retail energy sales in the prior calendar year, ramping up to 2% beginning in 2014. By 2020, the state should reach 20% cumulative savings, plus up to a 2% credit for peak demand reductions from demand response programs, for a total standard of 22%. CHP is an eligible efficiency measure and utilities can choose to use CHP to meet their goals, although there is no separate CHP target within the EERS.

Last Updated: August 2017

Deployment IncentivesList All

Incentives, grants, or financing: CHP facilities are eligible for the Energy Equipment Property Tax Exemption, which provides a property tax exemption to owners of CHP systems. Commercial and industrial customer of Southwest Gas Corporation may also be eligible for rebates of $400/kW to $500/kW for CHP installations that are at least 60% efficient.

Net metering:  The Arizona Corporation Commission (ACC) adopted net metering rules in October 2008 that took effect in May 2009.  These rules allow net excess generation credited to the customer's bill at the retail rate through a kWh credit.

Last Updated: August 2017

Additional Supportive PoliciesList All

Arizona has policies to encourage the use of renewable-fueled CHP systems, waste heat to power (WHP) and biomass or biogas systems. These systems qualify for Arizona’s Renewable Energy Standard (RES) adopted by the Arizona Corporation Commission (ACC) in November 2006. The final rule expands the RES to 15% by 2025, with 30% of the renewable energy to be derived from distributed energy technologies. The standard allows for "Renewable Combined Heat and Power Systems," distributed generation systems, fueled by an eligible renewable energy resource, and produce both electricity and useful renewable process heat. Both the electricity and renewable process heat may be used to meet the standard’s Distributed Renewable Energy Requirement.

Renewable-fueled CHP systems may also be eligible for Renewable Energy Business Tax Incentives. Signed in July of 2009, SB 1403 created tax incentives intended to draw renewable energy product manufacturers to Arizona. To be eligible, businesses must meet certain minimum requirements for the quantity and quality of new jobs created. If approved, businesses may be eligible for income tax credits or property tax incentives. These incentives will be expire on December 31, 2019.

Last Updated: August 2017

Utilities
Score: 10.5 out of 20
Utilities Summary List All

Arizona’s utilities administer a growing portfolio of energy efficiency programs. In 2010, the Arizona Corporation Commission (ACC) ordered that all investor-owned utilities must achieve 1.25% annual electricity savings starting in 2011, ramping up to 2% beginning in 2013. This energy efficiency resource standard (EERS) will ultimately result in 22% cumulative savings by 2020 (including a 2% credit for peak reductions from demand response). Regulated rural electric cooperatives are required to meet 75% of this standard. Arizona’s two largest investor-owned electric utilities, the Arizona Public Service Company and the Tucson Electric Power Company, operate a variety of demand-side management (DSM) programs applicable to a range of customers. Programs are administered by each utility and funding varies by utility. Program plans are submitted by utilities to the ACC and approval is required by the ACC before implementation. Arizona’s second largest electric utility, the Salt River Project (SRP), is a public utility and also offers a comprehensive range of efficiency programs. The utility’s board approves SRP’s funding for demand-side management.

The most recent budgets for energy efficiency programs and electricity and natural gas savings can be found in the State Spending and Savings Tables.

Last updated: September 2016

Customer Energy Efficiency Programs List All

Under the Arizona Administrative Code, electric and gas utilities must administer efficiency programs to meet targets set by the state’s energy efficiency resource standard (EERS). The Arizona Corporation Commission (ACC) approves program funding and spending for regulated utilities. Energy efficiency programs in Arizona are funded through an adjustor mechanism, collected through a non-bypassable surcharge on electricity bills, or through an adjustor mechanism, depending on the utility.

Arizona Public Service Company (APS), a major investor-owned utility and Arizona’s largest electric utility, operates a number of successful DSM programs for residential and non-residential customers. The utility operates a variety of residential and non-residential programs. Tucson Electric Power Company (TEP) recently received approval for updates to its DSM Program Portfolio, which includes programs for both residential and non-residential customers.

UniSource Gas and Southwest Gas also operate some energy efficiency programs..

Salt River Project, a public utility, has recently ramped up its energy efficiency programs. It seeks to achieve 20% of its expected retail sales through the implementation of energy efficiency and renewable resources by FY 2020. The utility has also set energy efficiency targets of 1.5% annual savings between FY 2012-2014, 1.75% between FY 2015-2017, and 2% between FY 2018-2020.

The most recent budgets for energy efficiency programs and electricity and natural gas savings can be found in the State Spending and Savings Tables.

Last Updated: September 2016

Energy Efficiency as a Resource List All

Arizona utilities have developed diverse resource portfolios that include energy efficiency as a resource. To address anticipated demand increases, Arizona Public Service and Tucson Electric Power plan to continue to expand already successful energy efficiency programs. In April 2015 the ACC required that regulated electric utilities specifically include, or explain why they exclude, energy storage and expanded energy efficiency and demand response in their integrated resource plans. See Docket No. E-00000V-13-0070 and Decision No. 75068.

Salt River Project's investment in energy efficiency is guided by its Sustainable Portfolio Principles, which direct the utility's current and future use of energy efficiency and renewable energy resources.

For more information on energy efficiency as a resource, click here.

Last Updated: September 2016

Energy Efficiency Resource Standards List All

Summary: Cumulative annual electricity savings of 22% of retail sales, and natural gas savings of 6%, by 2020.

In 2010 the Arizona Corporation Commission ordered that, by 2020, each investor-owned utility must achieve cumulative annual electricity savings of at least 22% of its retail electric sales in calendar year 2019 through cost-effective energy efficiency programs (see Docket No. RE-00000C-09-0427 Decision No. 71436 and Decision No. 71819). Cumulative annual targets for electricity savings are specified for each year, beginning at 1.25% in 2011, and based on retail electricity sales in the previous calendar year.  Electric distribution cooperatives must propose an annual energy savings goal that is at least 75% of the standard in a given year.

Peak demand savings achieved through demand response programs are allowed to qualify for up to two percentage points of the total 22% cumulative goal (based on a conversion of demand to energy), but there is a limit to the amount of peak demand savings that can be applied to the energy efficiency standard in any given year. Utilities can count energy supply from combined heat and power systems that do not qualify under the state's Renewable Energy Standards towards the energy efficiency standard, as well as one-third of the measured savings from new building codes. Utilities are allowed to credit energy savings achieved during 2005-2010 towards the requirements beginning in 2016.

Utilities must submit an annual or biennial implementation plan to detail progress in meeting goals and estimate cost and energy savings for programs over the next two calendar years. Utilities may recover the prudent costs of energy efficiency programs through a DSM tariff and the decision also allows utilities to request the Commission to consider the use of performance incentives to assist in achieving the goals.

Arizona also has natural gas efficiency standards requiring 6% cumulative savings by 2020 (see Docket No. RG-00000B-09-0428 Decision No. 71855). As in the case of electric cooperatives, gas cooperatives must propose annual savings goals that achieve 75% of the standard; propane companies must meet 50% of the standard. Energy savings from renewable energy projects sponsored by an affected utility may count towards meeting up to 25% of the standard in any given year.

Salt River Project has also set long-term energy savings goals through it's Sustainable Portfolio Principles. These Principles establish targets for the utility through its 2020 fiscal year, and ramp up to 2% beginning in FY 2018.

Last Updated: July 2016

Utility Business Model List All

On December 13, 2011, the ACC approved a full revenue decoupling mechanism for Southwest Gas as part of the utility's rate case (Docket No. G-01551A-10-0458). 

On May 24, 2012, the ACC approved a lost revenue adjustment mechanism (LRAM) for the Arizona Public Service Company as part of the utility’s rate case (Docket No. E-01345A-11-0224). In June 2013, and LRAM was also approved for Tucson Electric Power Company (Docket No. E-01933A-12-0291). UniSource Energy Services also operates under an LRAM.

Arizona Public Service (APS) has a tiered shareholder performance incentive that is based on a percentage of the net benefits from energy savings and capped as a tiered percentage of program costs. The incentive is capped at $0.0125 per kWh saved (See ACC Decision 74406).

TEP also has a performance incentive in place. The most recent incentive became effective July 2013 (See ACC Decision 73912). TEP receives a share (8%) of net benefits. The incentive is capped at $0.0125 per kWh saved.

Last Updated: July 2017

Evaluation, Measurement, & Verification List All
  • Cost-effectiveness test(s) used: SCT
  • Uses a deemed savings database: no

The evaluation of ratepayer-funded energy efficiency programs for Arizona’s regulated utilities relies on regulatory orders ( A.A.C R14-2-2409 and R14-2-2415). Evaluations are conducted by third-parties for each of the regulated utilities. Arizona has established formal rules and procedures for evaluation, which are stated in A.A.C R14-2-2409 and R14-2-2415. Arizona relies on the Social Cost Test (SCT) and considers it to be its primary cost-effectiveness test, the rules for which are stated in A.A.C R14-2-2401(36) and R14-2-2412(B). These benefit-cost tests are required for portfolio, total program, and individual measure level screening, with exceptions made for low-income, pilots, and new technologies.

Last Updated: July 2017

Guidelines for Low-Income Energy Efficiency Programs List All

Requirements for State and Utility Support of Low-Income Energy Efficiency Programs

No specific required spending or savings requirements identified. In 2010, the Arizona Corporation Commission (ACC) ordered in Decision 71819 that each investor-owned utility must achieve cumulative annual electricity savings of at least 22% of its retail electric sales in calendar year 2019 through cost-effective energy efficiency programs. The decision ordered that utilities “…allocate a portion of DSM resources specifically to low-income customers,” but does not identify a minimum spending level.

Utility funds dedicated to weatherization, in addition to DOE funds for weatherization, are managed by the Arizona Department of Housing (ADOH).

Cost-Effectiveness Rules for Low-Income Energy Efficiency Programs

Since 2011 Arizona Administrative Code Title 14, Chapter 2, Article 24 (R14-2-2412) has directed that “…an affected utility’s low-income customer program portfolio shall be cost-effective, but costs attributable to necessary health and safety measures shall not be used in the calculation.”

Coordination of Ratepayer-Funded Low-Income Programs with WAP Services

Level of coordination is unclear from publicly available data.

Last updated: April 2017

Self Direct and Opt-Out Programs List All

All the major electric utilities offer a self direct option for large customers. APS: Large customers using at least 40 million kWh per calendar year can elect to self-direct energy efficiency funds. Customers must notify APS each year if they wish to participate, after which 85% of the customer's demand-side management contribution will be reserved for future energy efficiency projects. Projects must be completed within two years. Self-direction funds are paid once per year once the project is completed and verified by APS. TEP: to be eligible for self-direction, a customer must use a minimum of 35 million kWh per calendar year. SRP makes self-direction available only to very large customers using more than 240 million kWh per year. For all utilities, a portion of the funds they would have otherwise contributed to energy efficiency is retained to cover the self-direction program administration, management, and evaluation costs.

Last Updated: July 2017

Data AccessList All

Arizona has no policy in place that requires the release of energy use data to customers or third parties. 

Last Updated: September 2016

Transportation
Score: 3 out of 10
Transportation Summary List All

Arizona offers incentives for high-efficiency vehicles, and has policies in place that encourage the integration of transportation and land-use planning. 

Tailpipe Emission Standards List All

Arizona has no policy in place or proposed.

Last Updated: July 2017

Transportation System Efficiency List All

Transportation and Land use Integration

Arizona passed the “Growing Smarter” Act in 1998 and the “Growing Smarter Plus” Act in 2000 to address sprawl-related issues and to provide communities the means with which to shape their future growth. These acts require that each municipality create and submit a comprehensive plan that reflects public opinion and also that each municipality submit their plan to regional planning offices. In 2007, the state established a “Governor’s Growth Cabinet” to more effectively coordinate interagency spending and planning according to the principles outlined in the “Growing Smarter” Act. 

VMT Targets: No policy in place or proposed.

Complete Streets: No policy in place or proposed.

FAST Freight Plans and Goals: No finalized freight plan or goals in place.

Last Updated: July 2017

Transit Funding List All

No policy in place or proposed.

Last Updated: July 2017

Incentives for High-Efficiency Vehicles List All

Electric vehicles in Arizona pay a significantly reduced vehicle license tax as part of the state’s Reduced Alternative Fuel Vehicle License Tax program. The vehicle license tax on an AFV is $4 for every $100 in assessed value. 

Last Updated: July 2017

Equitable Access to Transportation:
Arizona does not have any state programs in place to incentivize the creation of low-income housing near transit facilities, but it does consider the proximity of transit facilities when distributing federal Low-Income Housing Tax Credits to qualifying property owners. Last updated: July 2017
Appliance Standards
Score: 0 out of 2
Appliance Standards Summary List All

Policy: Arizona Revised Statutes, Title 44 (Trade and Commerce), Section 1375

Description: In 2005, A.R.S. 44-1375 created Arizona’s Appliance and Equipment Efficiency Standards, which implemented minimum energy efficiency standards for twelve products. Ten of the twelve state standards became effective January 1st, 2008, the other two became effective in 2010. However, all twelve have since been preempted by federal standards introduced in EPAct 2005 as well as the Energy Independence and Security Act of 2007.

HB 2332, passed in 2009, amends A.R.S. 44-1375 by establishing new standards for three additional products – pool pumps, pool pump motors and electric spas – that became effective January 1, 2012. These have not been preempted by federal standards.

Last Updated: June 2017