Appeal from the Superior Court in Maricopa County. No. LC2012-000470-001. The Honorable Crane McClennen, Judge.
Arizona Center for Law in the Public Interest, Phoenix, By Timothy M. Hogan, Joy Herr-Cardillo, Counsel for Plaintiff/Appellee.
Arizona Corporation Commission, Legal Division, Phoenix, By Wesley C. Van Cleve, Charles H. Hains, Janet F. Wagner, Counsel for Defendant/Appellant.
Curtis Goodwin Sullivan Udall & Schwab, PLC, Phoenix, By William P. Sullivan, Trish Stuhan, Counsel for Amicus Curiae Reclamation Power Group, LLC.
Judge Patricia A. Orozco delivered the opinion of the Court, in which Presiding Judge Samuel A. Thumma and Judge Michael J. Brown joined.
Patricia A. Orozco,
[¶1] This appeal concerns the development of a proposed " waste-to-energy" (WTE) facility, which would generate electricity by burning landfill waste, and the classification of electrical power that would be produced by the proposed facility. The Arizona Constitution grants the Arizona Corporation Commission (the Commission) broad power to " prescribe just and reasonable" classifications and rates for services rendered by public service corporations. Ariz. Const. art. 15, § 3. We review the scope of that authority and the deference due a Commission decision, later vacated by the superior court, granting approval for the proposed WTE facility. For the reasons that follow, we reverse the superior court's decision and reinstate the Commission's decision to the extent it grants an application by Mohave Electric Cooperative, Inc. (Mohave) for a waiver to the Renewable Energy Standard and Tariff (REST) rules.
FACTS AND PROCEDURAL BACKGROUND
[¶2] Arizona public utility corporations providing electricity are subject to the REST rules promulgated in Arizona Administrative Code (A.A.C.) sections R14-2-1801, et seq. These rules require affected corporations " to satisfy an Annual Renewable Energy Requirement by obtaining Renewable Energy Credits [(Credits)] from Eligible Renewable Energy Resources." A.A.C. R-14-2-1804.A. A Credit is obtained for each kilowatt-hour " derived from an Eligible Renewable Energy Resource." A.A.C. R14-2-1803.A. Although specific Eligible Renewable Energy Resources are listed in the rules, the Commission " may adopt pilot programs in which additional technologies are established as Eligible
Renewable Energy Resources." A.A.C. R14-2-1802.D. The Commission also " may waive compliance with any provision of [the REST rules] for good cause." A.A.C. R14-2-1816.A.
[¶3] Mohave filed an application asking the Commission to either (1) recognize a proposed WTE facility as a " pilot program," or (2) waive the REST rules for the proposed facility " to the limited extent necessary to recognize energy produced [by the] facility as an 'Eligible Renewable Energy Resource.'" Mohave's application stated that Reclamation Power Group, LLC (RPG), which intended to develop, own, and operate the proposed WTE facility in Maricopa County, could not provide " economically viable" power unless the Commission classified the municipal solid waste that would be used as fuel by the facility as a Credit-eligible " Renewable Energy Resource." Appellee, Sierra Club -- Grand Canyon Chapter (Sierra Club) successfully intervened to oppose Mohave's application.
[¶4] The Commission's Utilities Division (Staff) produced a report on Mohave's application and drafted a recommended decision. The report stated that Mohave had provided Staff with a " breakdown, by category" of a waste sample from a landfill that Mohave claimed was representative of the waste composition the WTE facility would burn as fuel if the facility became operational. The report discussed how the Mohave " breakdown" showed ninety-five percent of the waste consisted of " biogenic material."  The Staff report concluded that burning waste of this composition would mean " the biogenic material contributes about [ninety-one] percent of the energy to the process while non-biogenic materials contribute about [nine] percent[.]" The report suggested that the ninety-one percent figure was high in relation to the results of other studies. As a result, Staff recommended that the Commission not grant " pilot program" status and instead grant a good-cause waiver of the REST rules to allow seventy-five percent of the kilowatts produced by the facility to be Credit-eligible " as being produced by an Eligible Renewable Energy Resource."
[¶5] Both Mohave and Sierra Club filed exceptions to the Staff recommendation. Following an open meeting, the Commission held a three-day evidentiary hearing before an administrative law judge (ALJ). Seven witnesses testified, including representatives from Staff and acting President of RPG Ronald Blendu. Following the evidentiary hearing, the Commission adopted most of the Staff findings and recommended decision, with two important changes: the Commission (1) granted the WTE facility " pilot program" status under the REST rules, noting that " [a]lthough we disagree with Staff that a waiver of the REST Rules is necessary to approve [Mohave's] application . . . we recognize and acknowledge that Staff's analysis . . . provides an independent and alternative basis upon which to approve this application[,]" and (2) granted Credits for ninety percent of the kilowatt hours that would be produced by the facility.
[¶6] Sierra Club petitioned for a rehearing, which the Commission granted. Another evidentiary hearing was held, with extensive testimony from several witness, once again including representatives from Staff and Ronald Blendu. Following the rehearing, the Commission affirmed its initial decision " in its entirety." The ...