• Arizona Corporation Commission
• Arizona Department of Commerce Energy Program
• Arizona Public Service Co.
• Salt River Project
• Tucson Electric Power Co.
• Southwest Gas

Statewide Interconnection Procedures: No

• Although the Arizona Corporation Commission convened a working group in 2005 that developed draft standards and underwent revision by the commission staff, the commission has yet to finalize these into rules, so they remain stalled as of 2011.
• About statewide interconnection policies

Waste Heat Included in Renewable Portfolio Standard: No

• Proponents of Arizona's renewable portfolio standards neglected to include waste heat as a renewable resource. CHP is explicitly included as long as it is fueled by a renewable resource. See the policy.
• About waste heat in renewable portfolio standards

CHP in Utility Demand-Side Management: Yes

• Arizona's electric efficiency standard (22% by 2020) and gas efficiency standard (6% by 2020) both include CHP as an eligible resource for meeting those goals. Utilities have not yet adopted CHP programs (or included CHP as a custom measure) in their implementation plans, but two are considering how to do so. See the electric standard and the gas standard.
• About CHP in efficiency portfolio standards

Output-based Emission Standards: No

• Not addressed yet to our knowledge.
• About output-based emission standards

Fair Standby Rates: No

• Arizona utilities' standby rates are very high, and neither the regulatory commission nor the legislature has taken up the issue. In addition, there continue to be reports of utilities offering individual businesses a special lower rate in exchange for ceasing to pursue CHP, or in exchange for shutting down an existing system. This not only hurts CHP and loses its efficiency benefits, but hurts all other ratepayers as well.
• About standby rates

Recycled Energy Specific Incentives: Yes

• The Arizona Corporation Commission has approved CHP incentives of $400-500/kW, offered by Southwest Gas. See the webpage. In addition, the state offers an extra $300/kW from stimulus funds (and the offers can be combined), but these stimulus funds will go away in 2012. A couple of investor-owned electric utilities are considering incentive programs for CHP either on their own or in conjunction with Southwest Gas, but these haven't been released or finalized yet.

Arizona's commercial and industrial electric rates have increased steadily over the past five years with predictable increases over the peak season during summer through late fall. Both the commercial and industrial prices have stayed, for the most part, below the national average - particularly the commercial prices, with prices staying often a cent or more (per kWh) below the national average.

Arizona average commercial retail electricity price (2010)	9.45 ¢/kWh
National average commercial retail electricity price (2010)	10.26 ¢/kWh

Arizona average industrial retail electricity price (2010)	6.68 ¢/kWh
National average industrial retail electricity price (2010)	6.79 ¢/kWh

Source: EIA; data is year-to-date through December 2010.
Note: All data post January 2010 are preliminary estimates based on a cutoff model sample.

Natural gas prices have seen less volatility over the past five years than the US national average; however, the prices have also stayed $1-3 above the national average the majority of the time. The industrial natural gas price has seen more volatility than the commercial price, fluctuating more than four dollars over the course of the 2008 year (per thousand cubic feet, or TCF). Currently the price of natural gas, in Arizona, as well as nationally, is trending downwards.

When evaluating CHP, a considerable amount of attention needs to be placed on the price of natural gas, and where it may be headed in the future. The combination of relatively low electric prices and rising natural gas prices makes it more difficult for a CHP project to be economic and generate cost savings, but there are still going to be successful applications for the appropriate use of CHP. The best applications are those that value high reliability, have higher electric rates during peak times, spend a high percentage of their energy bill on air conditioning, and/or potentially could make use of a "waste fuel."

Arizona average commercial natural gas price (2010)	10.73 $/TCF
National average commercial natural gas price (2010)	9.23 $/TCF

Arizona average industrial natural gas price (2010)	7.55 $/TCF
National average industrial natural gas price (2010)	5.34 $/TCF

Source: EIA; data is year-to-date through December 2010.