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Arizona (US-AZ)

Market Type: Hybrid (Limited Retail Choice)
SSS Relevance: ⭐⭐⭐ High
Grid Carbon Intensity: See emissions section

SSS Factors: significant nuclear capacity, hydroelectric resources, regulated market structure

1. Overview​

Arizona operates a regulated monopoly market where investor-owned utilities and municipalities have defined service territories overseen by the Arizona Corporation Commission (ACC). The state is undergoing a significant transition away from coal, which now accounts for less than 10% of total generation, toward a mix dominated by natural gas, nuclear, and expanding renewables 1. As of early 2026, the energy mix is approximately 47.5% natural gas, 27.9% nuclear, and 23% renewables (solar, hydro, wind), bringing the total share of low-carbon generation to nearly 49% 2.

The state’s grid reliability remains high, but it faces mounting pressure from surging demand driven by high-tech manufacturing, data centers, and population growth. Peak demand records were repeatedly broken in 2024 and 2025, with Salt River Project (SRP)—the state's largest community-based, not-for-profit utility—reporting peak demand exceeding 8,500 MW during extreme summer heat waves 1. To address grid sharing and cost management, major utilities are planning to join the Markets+ regional day-ahead market by late 2027 3.

Grid carbon intensity has fallen roughly 35% since 2005 to approximately 287 gCO2eq/kWh 4. Despite this progress, a major policy shift occurred in March 2026 when state regulators repealed the state's renewable energy standard, citing that utilities had already exceeded previous goals and preferring a flexible "all-of-the-above" strategy 1. ⚠️ Note: While state mandates were repealed, major utilities—APS, SRP, and Tucson Electric Power (TEP)—retain voluntary targets, such as APS's goal for 100% carbon-free energy by 2050 and TEP's target for an 80% reduction in emissions by 2035 2.

2. Market Structure​

Arizona maintains a regulated monopoly system without retail choice for residential customers. The state is not part of a Regional Transmission Organization (RTO) or Independent System Operator (ISO), instead relying on vertically integrated utilities and limited regional market participation.

Retail Choice and Regulation​

  • Regulated Monopolies: Major utilities such as Arizona Public Service (APS), Tucson Electric Power (TEP), and Salt River Project (SRP) hold exclusive service territories. While the state passed laws in 1998 to open the market by 2000, the process was halted following the California Energy Crisis 5.
  • Retail Competition Blocked: In April 2022, Governor Doug Ducey signed HB 2101, which repealed 1990s-era statutes allowing for retail competition. This legislation was supported by incumbent utilities to prevent new providers, such as Green Mountain Energy, from entering the market 56.
  • Regulatory Trends: As of early 2026, the Arizona Corporation Commission (ACC) has focused on market-driven regulation by scrapping clean energy mandates rather than opening the retail market 6.

Wholesale Markets and System Operation​

  • No RTO/ISO: Arizona does not belong to a full RTO or ISO. The grid is operated by individual vertically integrated utilities 7.
  • Western Energy Imbalance Market (WEIM): Operated by the California ISO (CAISO), this real-time market includes participation from Arizona utilities like APS to balance supply and demand 7.
  • Markets+ Initiative: Major utilities (APS, SRP, TEP, and UniSource) have agreed to join Markets+, a suite of day-ahead and real-time market services organized by the Southwest Power Pool (SPP), to improve reliability and lower wholesale costs 67.
  • Arizona Independent Scheduling Administrator (AISA): State law supports the AISA to provide non-discriminatory access to transmission facilities in the absence of a formal ISO 8.

Utility Ownership Models​

  • Investor-Owned Utilities (IOUs): Privately owned, for-profit corporations regulated by the Arizona Corporation Commission (ACC). Key examples include APS (owned by Pinnacle West) and TEP (owned by Fortis Inc.) 9.
  • Municipal Utilities: Owned by local governments and governed by elected officials rather than the ACC. The Salt River Project (SRP) operates as a quasi-municipal political subdivision and is the state's second-largest utility 1010.
  • Cooperatives: Non-profit entities owned by their members. Arizona is served by distribution co-ops (e.g., Mohave Electric Cooperative) and the Arizona Electric Power Cooperative (AEPCO) for generation and transmission 9.

3. Clean Energy Policy​

Arizona has undergone a significant shift in clean energy regulation, moving from mandatory state standards to a market-driven approach.

Repeal of Renewable Energy Standard​

In March 2026, the Arizona Corporation Commission (ACC) voted unanimously (5-0) to repeal the state's Renewable Energy Standard and Tariff (REST) [2]. Established in 2006, the REST had required regulated utilities to obtain 15% of their electricity from renewable sources by 2025 [2]. It also included a distributed generation carve-out, mandating that 30% of the annual renewable requirement come from residential and commercial solar installations [3].

Commissioners repealed the mandate arguing it was outdated because major utilities, such as Arizona Public Service (APS) and Tucson Electric Power (TEP), had already met or exceeded the 15% target [1][3]. They characterized the rules as an unnecessary subsidy that imposed reporting costs on ratepayers [1]. Critics, including the Arizona Attorney General, warned that the repeal eliminates the state's enforceable mechanism to track clean energy and may lead to increased reliance on fossil fuels [1].

Current Utility Goals​

With the state mandate eliminated, Arizona now relies on voluntary utility goals and an "all-source" procurement process where renewable projects compete with traditional energy sources based on cost and reliability [3].

  • Arizona Public Service (APS): APS shifted its goal in August 2025 from "100% clean energy" to "carbon neutrality" by 2050. The utility removed interim targets, such as a 65% clean energy goal by 2030, citing the need for natural gas to maintain grid reliability during extreme heat and population growth [3].
  • Tucson Electric Power (TEP): TEP maintains an "aspirational" target of net-zero carbon emissions by 2050. Their strategy includes ending coal use by 2032 and adding 1,500 MW of wind, solar, and storage by 2030 [3].
  • Salt River Project (SRP): SRP targets a 90% reduction in carbon intensity by 2050, with a near-term goal of reducing CO2 emissions by 40% (from 2005 levels) by 2035 [3].

As of 2024, APS reported a renewable portfolio of approximately 19%, while TEP reported approximately 29% [3].

Local Initiatives​

Despite the repeal of state standards, local initiatives continue. The City of Phoenix remains committed to a Climate Action Plan with a goal of carbon-neutral electricity city-wide by 2050 [3].

⚠️ Uncertainty on Timeline: While search results indicate the repeal was finalized in March 2026, one source mentions an ACC vote to repeal the standards occurred in early 2024 [3]. The exact effective date or if there were distinct legislative steps in 2024 versus 2026 requires clarification.

4. Utility Landscape​

Arizona's electricity market is served by a mix of investor-owned utilities (IOUs), public power entities, cooperatives, and municipal systems. The three largest electric utilities—Arizona Public Service (APS), Salt River Project (SRP), and Tucson Electric Power (TEP)—collectively serve the vast majority of the state's residential and business customers 11.

Major Providers​

Arizona Public Service (APS) APS is the largest and longest-serving electric utility in the state. As an investor-owned utility (IOU) and a subsidiary of Pinnacle West Capital Corporation, APS serves approximately 1.4 million customers across 11 of Arizona’s 15 counties. This service area covers much of the Phoenix metropolitan area as well as northern and southern Arizona 12 9.

Salt River Project (SRP) SRP is a community-based, not-for-profit utility and the primary provider for central Arizona. Technically classified as an agricultural improvement district and political subdivision of the state rather than an IOU, SRP serves more than 1.1 million customers. Its service territory focuses on the Phoenix "East Valley," including portions of Glendale, Scottsdale, and Laveen 11 13.

Tucson Electric Power (TEP) TEP is the largest utility serving Southern Arizona and a subsidiary of Fortis Inc. It provides power to more than 450,000 customers, primarily within the Tucson metropolitan area 11 9.

Other Electric Providers​

Investor-Owned Utilities (IOUs) Regulated by the Arizona Corporation Commission (ACC), other IOUs include:

  • UNS Electric (UNSE): A subsidiary of UniSource Energy Services, serving approximately 100,000 customers in Mohave and Santa Cruz counties 9.
  • Ajo Improvement Company: Serves the Ajo area 14.
  • Morenci Water and Electric Company: Serves the Morenci area in Greenlee County 14.

Cooperatives and Municipal Utilities Non-profit entities and government-operated systems serve specific regions, often rural or municipal:

  • Electric Cooperatives: These member-owned entities serve rural areas, often under the Arizona G&T Cooperatives (AzGT) umbrella. Notable co-ops include Mohave Electric Cooperative, Sulphur Springs Valley Electric Cooperative (SSVEC), and Trico Electric Cooperative 15 9.
  • Municipal Utilities: City-owned providers include the City of Mesa Utilities, City of Safford, and Page Electric Utility 13 9.
  • Special Districts: Electrical Districts (e.g., ED No. 3 in Pinal County) serve specific agricultural and residential zones 16.

5. SSS-Eligible Resources​

ResourceTypeCapacity (MW)SSS EligibleNotes
It is the largest nuclear powerNuclear4,000✅ YesOperating nuclear
Palo Verde GeneratingNuclear4,000✅ YesOperating nuclear
and the HooverHydro2,080✅ Yes (pre-RPS)Legacy hydro
specific capacity of HooverHydro2,080✅ Yes (pre-RPS)Legacy hydro
Generation is primarily sourced from the Glen CanyonHydro1,320✅ Yes (pre-RPS)Legacy hydro

6. EAC/REC Registry Infrastructure​

In Arizona, Renewable Energy Certificates (RECs)—the primary type of Energy Attribute Certificate (EAC) used in the state—are tracked primarily through the Western Renewable Energy Generation Information System (WREGIS). WREGIS serves as the independent tracking system for the Western Interconnection, issuing unique serial numbers for every megawatt-hour (MWh) of renewable energy generated to prevent double-counting 17. The system facilitates the full lifecycle of EACs, including registration, trading, and retirement (the permanent removal of a certificate to substantiate a renewable energy claim) 18.

While WREGIS is the standard platform for large-scale projects and broader western market transactions, Arizona's specific Renewable Portfolio Standard (RPS) compliance processes have historically varied in their direct reliance on WREGIS 19. Organizations operating across multiple states may utilize alternative platforms such as M-RETS (Midwest Renewable Energy Tracking System) or CleanCounts to manage inter-registry transfers, though these systems serve different primary regions 20. Projects not registered in WREGIS may also utilize the North American Renewables Registry (NAR) 21.

7. Grid Emissions​

Generation Mix​

Scope 2 Reporting​

  • SB 253 requires Scope 2 reporting for companies >$1B revenue

Source: EPA eGRID, EIA, state regulatory filings

References​

Sources & Last Updated​

Research Date: 2026-03-09
Data Sources: EIA, EPA eGRID, state regulatory filings, SerpAPI research aggregation

This page was generated using automated research and may contain inaccuracies. Verify critical data with primary sources.

Footnotes​

  1. U.S. Energy Information Administration (EIA) (.gov) ↩ ↩2 ↩3

  2. Arizona Public Service ↩ ↩2

  3. Environmental Defense Fund ↩

  4. The Nature Conservancy ↩

  5. Quick Electricity ↩ ↩2

  6. Arizona Technology Council ↩ ↩2 ↩3

  7. Energy Star (.gov) ↩ ↩2 ↩3

  8. LII | Legal Information Institute ↩

  9. Arizona Corporation Commission (.gov) ↩ ↩2 ↩3 ↩4 ↩5 ↩6 ↩7

  10. Arizona Legislature (.gov) ↩ ↩2

  11. The Arizona Republic ↩ ↩2 ↩3

  12. City of El Mirage, AZ (.gov) ↩

  13. American Public Power Association ↩ ↩2

  14. Wikipedia ↩ ↩2

  15. www.reliableenergyarizona.com ↩

  16. Arizona G&T Cooperatives ↩

  17. resource-solutions.org ↩

  18. U.S. Environmental Protection Agency (.gov) ↩

  19. Western Electricity Coordinating Council ↩

  20. CleanCounts ↩

  21. www.greenprojecttech.com ↩