COMMISSIONERS 

GARY PIERCE • Chairman 

BOB STUMP 

SANDRA D. KENNEDY 

PAUL NEWMAN 

BRENDA BURNS ARIZONA CORPORATION COMMISSION 

Statement of Gary Pierce 

Chairman of the Arizona Corporation Commission 

Arizona Regional Haze FIP 

EPA Public Hearing 

Docket No. EPA-R09-0AR-2012-0021 

July 31 , 2012 Phoenix, Arizona 

Gary Pierce 

Chairman 

(602) 542-3933 

Fax (602) 542-5560 

My name is Gary Pierce, and I am Chairman of the Arizona Corporation Commission, which 

regulates Arizona's investor-owned and cooperative utilities and sets the rates paid by their 

customers. On July 23 , 2012, I sent a letter, along with two other commissioners, 

Commissioner Stump and Commission Bums, in opposition to the Federal Implementation Plan 

that the EPA has proposed for three-coal burning plants in Arizona. 

In my role as commissioner, I strive to keep utility rates for the companies and cooperatives that 

I regulate as stable and low as reasonably possible for the benefit of Arizona's citizens and 

businesses. I know that economic development in Arizona greatly depends upon our ability to 

provide safe, reliable, and inexpensive energy to new and existing businesses. For this reason, I 

am greatly concerned about EPA's proposed FIP. 

Costs ofEPA's FIP 

To provide a sense of the economic impact EPA's FIP would have for Arizonans, let me 

describe the impact to AEPCO and its customers. AEPCO is a generation cooperative and owns 

the Apache Generating Station, which is located in Cochise County about 30 miles east of 

Benson. AEPCO provides most if not all of the electricity consumed by members of five 

electric distribution cooperatives in Arizona: Duncan Valley, Graham County, Trico, Mohave, 

and Sulphur Springs Electric Cooperatives. Under the FIP proposed by the EPA, AEPCO 

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would be required to invest a mtmmum of $80 million according to optimistic estimates 

developed by EPA. AEPCO thinks the costs will be closer to $180 million. To place this in 

perspective, AEPCO recently filed a rate case with our Commission, and I can tell you that 

AEPCO currently reports having a total of $232 million in net utility plant in service. In other 

words, under EPA's optimistic $80 million estimate, EPA's FIP would require AEPCO to 

increase its existing rate base by approximately one-third. Under AEPCO's estimate, EPA's FIP 

would require AEPCO to increase its existing rate base by approximately 75 percent. 

For the benefit of those who may not understand how ratemaking works, if a utility increases its 

rate base by one-third, and everything else like interest rates and operating expenses remains the 

same, the utility would need a one-third increase in its revenues during its next rate case. 

Adding insult to injury, EPA's FIP will also increase AEPCO's operating and maintenance 

expenses by as much as $3.5 million per year. Thus, it is fair to conclude EPA's FIP would 

necessarily result in skyrocketing rates for AEPCO's customers, increasing utility bills for 

Arizona residents and businesses between 33 and 75 percent. 

The financial impacts of EPA's FIP to APS' and SRP' s customers are not quite as drastic, but 

they are still significant. For example, APS has already spent $324 million on the Cholla Power 

Plant to improve visibility and the proposed FIP would require an additional $311 million 

investment. Salt River Project is in the process of spending $500 million at its Coronado 

Generating Station to reduce emissions, but under the FIP they would be required to spend 

another $110 million. 

Benefits of EPA's FIP 

Now that I've addressed the cost of EPA's FIP, let me address its benefits because we can all 

recognize and appreciate that the environmental benefits of clean air are certainly worthy of 

expense, sometimes even significant expense. However, in this case, EPA's FIP is not even 

close to surviving a good faith cost-benefit analysis. First, we should recognize that the 

Regional Haze Rule and the FIP proposed by EPA does not protect human health, only human 

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vistas. Secondly, the incremental improvement of EPA's FIP over ADEQ's SIP will be less 

than one deciview, or in other words, there will be no visibility improvement. Even if we were 

to accept EPA's cumulative deciview model, which we believe is legally flawed, EPA's FIP 

would provide negligible benefit to human vistas. In sum, EPA's FIP proposal will impose 

significant costs upon Arizona utilities, necessarily cause electric rates in Arizona to skyrocket, 

and result in no perceptible improvement over ADEQ's SIP proposal. 

Process of EPA's FIP 

I am also deeply troubled by EPA's public process for the proposed FIP. EPA appears to have 

adopted a "sue and settle" strategy for adopting a FIP in Arizona to circumvent public notice and 

coordination with Arizona that would otherwise be required under the Clean Air Act. It is my 

understanding that the proposed FIP was not available for public review until July 20th and that 

the technical support document was only made available on July 18th. Today's public hearing, 

which was initially proposed as the only public hearing on this matter, has provided a little more 

than a week for parties to complete their analysis of EPA's proposal and prepare responsive 

comments. It's embarrassing that EPA initially thought that this meeting would provide 

sufficient public participation and comment for its proposed action. 

While I appreciate that EPA has recognized the failings in the process it initially proposed, I still 

believe the revised process to be woefully inadequate considering the significance of this 

decision and the potential impact to the communities that are home to these plants. While an 

additional two weeks for public comment is an improvement, it is not sufficient towards 

addressing this matter in a way that is fully solicitous of public input. 

Request 

I urge the EPA to withdraw the FIP for the three plants in question and work with ADEQ to 

remedy any deficiencies in the SIP it has proposed. 

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