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AZ Electricity Prices Would Skyrocket under Reconciliation Package

October 20, 2021

October 20, 2021
By Isaac Orr and Mitch Rolling

Progressives in the U.S. House of Representatives, along with wind and solar advocates, are eager to pass a major $3.5 trillion reconciliation package that would radically alter the fabric of American life for decades to come. And in the Grand Canyon State, the plan would saddle Arizonans with a hefty new price tag for their electricity.

The reconciliation package contains a multitude of subsidies and handouts to boost wind and solar, but one of the policies that deserves the most scrutiny is a proposal called the Clean Electricity Performance Program (CEPP), which is one of the most sweeping energy proposals in American history. Under the CEPP, electricity providers would be required to increase the amount of carbon dioxide-free electricity sold on their systems by 4 percent every year or pay penalties. As a result, the CEPP is essentially a de facto renewable energy mandate and carbon tax rolled into one bad policy. Implementing this flawed program would greatly increase the cost of electricity for Arizona families and businesses.

A newly released study by our organization—Center of the American Experiment—concluded that complying with the CEPP would cost Arizonans an additional $119 billion through 2052, compared to running the existing electric grid. This would cost electricity customers an additional $1,200 per year, on average, every year through 2052. If the Palo Verde nuclear power plant ceases operation, CEPP compliance costs would increase to $2,500 per customer per year.

The CEPP causes such large increases in electricity costs because it would require a massive build-out of solar panels, wind turbines, battery storage facilities, and electric transmission lines to meet the objectives of the CEPP. For example, the amount of power plant capacity on the grid increases by 50 percent—relative to 2019—and the number of solar panels installed in Arizona would grow 13-fold under the plan, which you can see in the graph below.

While that may seem like a good thing, increasing the number of power plants on the grid merely to meet arbitrary government mandates, rather than meeting the electricity demands of consumers, unnecessarily increases the cost of electricity, and this would harm Arizona families and the state’s economy.

Rising electricity costs are a double whammy to the economy because they increase the amount of money that families must spend on energy—thus reducing the amount they can spend on other things like groceries, school supplies, or auto repairs—and it increases the overhead costs of every business in the state. Businesses would try to raise their prices to make up for higher energy expenses, which would mean higher costs for healthcare, food, and other important items because electricity is the invisible ingredient in everything.

In these circumstances, low-income households—often living in rural and inner-city areas—would be hit hardest, because they already spend more of their income on energy bills than their more affluent peers. Rising electricity prices would make it more difficult for low-income households to afford air conditioning, forcing them to endue higher temperatures and making them more vulnerable to heat-related illnesses. How can that be considered “environmental justice?”

Not only would the electric grid in our modeling be more expensive than the current Arizona grid, it would also be less reliable. Natural gas currently produces the largest share of the state’s electricity generation, but under the CEPP, solar would become the largest source of power, generating 38 percent of Arizona’s electricity by 2031.

This is more than double the amount of electricity that California currently derives from solar, and the Golden State has struggled to produce enough electricity to meet when the sun is setting. This has led the California grid operator to ask Californians not to charge their electric cars when the sun is setting.

To help stave off California-style power shortages when the sun goes down and meet CEPP requirements, Arizona electric companies would need to install massive quantities of batteries—6.5 times more than the national total in 2019—to save the solar power generated during the day for use when it is needed later. California has experienced a multitude of problems with their storage facilities overheating. Reliable electricity under the CEPP is far from certain.

The CEPP is a massive cost burden on Arizona families that would make the grid less reliable and more expensive. Rather than impose the same failed policies that are plaguing California in every state in the nation, we should be focusing on making sure we are delivering reliable, affordable electricity to every household in a way that is increasingly environmentally friendly. Unfortunately, this is unlikely to satisfy progressives in the House, who have taken up the mantra #NoClimateNoDeal.

Our electric grid acts as the arteries of our entire economy. Americans can’t afford to find out what is in the reconciliation package, and the CEPP, if we pass it. Sometimes, the best deals are the ones you don’t make. 

Isaac Orr is a policy fellow and Mitch Rolling is a policy analyst—both specializing in energy and environmental policy—at Center of the American Experiment.



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