Arizona Corporation Commission (ACC)

First, some important legal concepts:

Ex ante jurisdiction is the power to prevent an activity from occurring.

Ex post jurisdiction is the power to punish an activity after it occurs.

As it concerns electric lines, the ACC has two separate powers: line siting and ratemaking. Line siting is an ex ante power while ratemaking is an ex post power.

The ACC’s line siting jurisdiction is established under ARS 40-360. Notably, section 10 limits this ex ante jurisdiction to above ground transmission lines only.

Meanwhile, the ACC’s ratemaking jurisdiction is established under ARS 40-361. Its ratemaking jurisdiction is much broader than its line siting jurisdiction. It applies to any and all charges:

“Charges demanded or received by a public service corporation for any commodity or service shall be just and reasonable.”

The ACC’s ex ante line siting jurisdiction is not a function of its ex post ratemaking jurisdiction. They are two separate statutes.

In advising the ACC’s Commissioners on a proposed policy statement, the ACC’s legal counsel and staff outlined this very separation of powers (see page 3 here):

“lt would not be appropriate to adopt a rule regarding ratepayer recovery as part of the line siting rules, however. The Line Siting Committee has no jurisdiction over rates, and a line siting rule regarding ratepayer recovery would therefore be outside the scope of authority granted under the line siting statutes. Additionally. the Line Siting Committee does not have jurisdiction over underground transmission lines. A.R.S. § 40-360(10) defines "transmission lines" as "a series of new structures erected above ground …” (emphasis added).”

Does the ACC have jurisdiction?

What does this all mean?

The utilities sometimes claim that the ACC can override local laws that require undergrounding. We can find no support for this claim and would welcome evidence otherwise. We believe it relies on a fundamental or deliberate misunderstanding of the ACC’s jurisdiction. While the line siting statute has a mechanism for issuing a Certificate of Environmental Compatibility in spite of local laws (ARS 40-360.06(D): if a law is ”unreasonably restrictive and compliance therewith is not feasible in view of technology available”), the ACC does not have the power to regulate the enforceability of local laws. Moreover, line siting statute does not apply to underground lines.

Thus, if your local laws have an undergrounding requirement, the ACC should not be able to stop their enforcement. And, we have not seen any evidence that the ACC has ever denied rate recovery for complying with local laws. If you have such evidence, please send it. In fact, Arizona utilities would not have over $6 billion of underground lines in service on their FERC balance sheets, which is net of “contributions in aid of construction,” if denial of rate recovery by the ACC were standard practice (see FERC filings here).

The Courts

In APS v. Town of Paradise Valley (1980), the Arizona Supreme Court determined that (at p. 451):

1. “...local governments can prescribe undergrounding within their boundaries”; and,
2. “[alternative funding mechanisms do] not prevent the Town from mandating the undergrounding at utility expense.”; and,
3. “[The line siting statutes] evidence a legislative recognition that the cities and towns have the power to act [on transmission lines].”

In TEP v. City of Tucson Board of Adjustment (2024), the Arizona Superior Court found (at p. 8):

The State has also preempted the City’s ability to determine where, but not how, transmission lines are constructed. The State clearly intended the Arizona Corporation Commission (ACC) to have exclusive authority over line siting for high-capacity transmission lines. A.R.S. § 40-360, et seq. See also 1971 Session Laws Ch 67, § 1. The purpose of this is to simplify the process of expanding Arizona’s electrical grid, which is necessarily a matter of statewide importance. However, the Court has been unable to locate any law which restricts the City’s authority to regulate how transmission lines are constructed. TEP is correct that there is no law which explicitly grants the City the authority to require undergrounding, but neither is there a specific law which purports to exempt utilities from all zoning regulations. Therefore, the Court finds that, as a matter of law, the City has the authority to require undergrounding of transmission lines.

TEPCO - Ruling.pdf378.9KB

In Haines v. City of Phoenix (1986), the Arizona Court of Appeals determined that whether the requirements of a plan constitute an enforceable regulation is up to the city council (at p. 290): “[under the] standard of consistency with the general plan ... we will not substitute our judgment for that of the duly elected legislative body, the city council.”

Thus, duly elected local legislative bodies can determine local undergrounding mandates through their ordinances, codes, plans, etc. The utility companies nor the ACC have the power to ignore those mandates.

The Municipalities

Municipalities across Arizona mandate the undergrounding of electric lines. Below is a non-comprehensive sampling of some of those mandates.

Chandler

From a City of Chandler presentation to the ACC, the Chandler City Code mandates undergrounding in many situations:

Paradise Valley

In 1964, the Town of Paradise Valley passed Ordinance No. 30 requiring new and higher capacity utility lines to be placed underground. The ordinance stated:

"...no person shall erect within the town boundaries and above the surface of the ground any new utility poles and wires except after securing a special permit therefor from the Town Council..."

Criminal penalties were provided for failure to comply with the ordinance.

As referenced above, APS sued the Town of Paradise Valley and lost at the Arizona Supreme Court.

This mandate, while watered down, still exists today under Paradise Valley Code Section 1102.2(E)(2):

Scottsdale

Scottsdale Revised Code Section 47-80 mandates the undergrounding of distribution lines:

Tucson

The Tucson City Code has undergrounding mandates for new developments similar to other municipalities. It also has undergrounding mandates for certain streets and areas. Here is a sampling:

Tucson City Code 5.3.9(A):

The University Area Plan, which is a part of the City’s general plan:

ACC Policy Statement 79140

“3. The Commission does not have jurisdiction over the undergrounding of electric transmission lines. A.R.S. § 40-360(10). Installing electric transmission lines underground is much more expensive than building them above ground. Underground transmission lines also can be more costly and challenging to maintain and repair. As a general matter, utilities under the Commission's jurisdiction should avoid incurring these higher costs unless underground installation of a transmission line is necessary for reliability or safety purposes, or to satisfy other prudent operational needs. Installing a transmission line underground for other reasons, such as stakeholders' preferences, would add unnecessarily to costs recovered through rates. Third parties, including cities, customers and neighborhood groups, seeking to fund the underground construction of a transmission line may do so, among other ways, by forming an improvement district for underground utilities as provided in A.R.S. § 48-620 et. seq.”

The above policy statement was adopted by the ACC on October 4, 2023 at the behest of attorney Meghan Grabel of Osborn Maledon, on behalf of SRP and TEP (see page 4 here).

While policy statements are not laws, given our data and analysis, we believe this policy statement is based on erroneous information. Each project should be evaluated by the ACC in the ratemaking process on its own without blanket prejudgments based on unchallenged arguments from the utility companies.