Energy Supply & Conservation

The southwest region is facing ongoing market conditions that are expected to affect the cost and supply of electricity going forward. We want to keep you informed and ask for your help.

What can Mesa Electric Utility customers do to help?

The time of day when electrical energy is used has a direct impact on the cost to the Mesa Electric Utility to serve these loads. These costs affect customer billing rates, especially in the summer months. For this reason, changes in customer energy use can help even though we do not currently offer time-of-use (TOU) rates, except for customers with electric vehicles.

Customers can help reduce the summer impact by conserving electricity between 3:00PM and 8:00PM, as this time period has seen the most dramatic increases in electrical power supply pricing. You can also join the Smart Peaks program if you have a smart thermostat.

How does Mesa Electric Utility acquire electric supply needed to serve the our electric utility customers?

We do not own or operate electric generators, so we buy our electric supply through long-term agreements and short-term seasonal and daily power market purchases. These electric system contracts are the result of competitive requests for proposals with Mesa’s qualified suppliers. Mesa also participates in a resource pooling group through the Western Area Power Administration (WAPA) of the U.S. Department of Energy known as the Resources Management Services program (RMS).  We have installed almost 1 megawatt of solar panels in the downtown area to power connected with our grid, reducing the amount of energy we have to purchase on the wholesale energy market. Mesa plans to add more solar installations at city properties in 2025 and beyond.

Through RMS we have access to the wholesale power supply market for short-term energy purchases to cover any energy needs that remain after accounting for Mesa’s other agreements. These arrangements have served us well for many years; however, supply costs have increased significantly in recent months.

Why have electric power supply costs increased so significantly in recent months?

The increase is a result of many market forces coming together in a “perfect storm.” The energy market in the United States is transitioning from a largely coal powered grid to one powered by more natural gas and renewable resources (solar and wind). As coal power generators are retired in the southwest U.S., natural gas generating capacity and renewable resources must be added. For instance, Navajo Generating Station, the largest coal generating station in the southwest, was taken offline in December 2019. 

New generator additions in the region have been almost exclusively natural gas and solar power, but additions have not kept pace with the retirement of coal generation. Additionally, the desert southwest is one of the fastest growing regions in the United States: In recent years, the Phoenix area has consistently ranked in the top five for metropolitan population growth. Growing population results in growing electric demand.

Doesn’t Mesa receive its power from Palo Verde Nuclear Generating Station (Palo Verde)?

No, we do not typically purchase power from Palo Verde. Palo Verde was put into service in the late 1980’s in the west Phoenix valley. It was constructed by a group of utilities including APS, SRP, El Paso Electric, Southern California Edison, Public Services Company of New Mexico (PNM), Southern California Public Power Authority and the Los Angeles Department of Water and Power.

These seven utilities own 100% of the plant’s output. That output can be sold to other utilities, however, given the importance and need for base-load power (that is, power that is delivered around the clock), these utilities need the output to serve their own customers. Given that SRP, APS and El Paso Electric are all experiencing significant load growth, they don’t have substantial extra power to sell.

During winter months, Mesa will occasionally see power purchases from Palo Verde. Purchases are also made from the Four Corners Area, Hoover Dam or any of the natural gas fired power plants in the Phoenix Valley. Mesa is focused on obtaining the least expensive power for its customers regardless of where it comes from, provided that it is reliable.

What steps is Mesa Electric Utility taking to address this unprecedented power pricing situation?

Mesa is approaching the problem from multiple angles to ease the impact on its electric customers.

• Internal Departments Helping: Water Resources, Environmental Management & Sustainability and other departments have identified methods to reduce energy use during the critical summer months. Some of these include increased thermostat settings in city buildings, shifting required pumping operations to non-peak times where possible, etc.
  
  
• Generation Studies: We are exploring possible opportunities to install our own generating capacity to serve customer load in the longer-term to help protect customers from continued energy market price instabilities.
  
  
• Diversifying the Energy Portfolio: We are undergoing contract negotiations with two large, utility scale solar providers. These projects will provide fixed rate energy for approximately 10 - 15% of our annual electric energy needs that is priced well below current market rates. We are also installing almost 1 megawatt of solar in the downtown area that is directly connected with our grid, reducing the amount of energy we have to purchase on the wholesale energy market.
  
  
• Demand Side Management: We are developing programs to help customers save energy and reduce their peak demand. Things like helping customers reduce their air conditioning load during the peak hours of the day will help limit the amount of very expensive peak energy purchases that we have to make.
  
  
• Furthering Energy Partnerships: We have joined other Arizona municipal utilities in a request for proposal process to identify additional generation from new sources at competitive prices.
  
  
• Increasing Competition: In 2012 we had only one potential electric supplier. We’ve worked to increase this to six potential electric suppliers. We have also joined the Western Systems Power Pool, an organization that provides a standardized form to conduct electric power purchases with almost 300 other electric utilities.

Why didn’t Mesa plan for this?

In our Integrated Resource Plan (IRP), we foresaw an increasing “tightness” in the market, meaning that we predicted that available generation capacity was decreasing relative to demand. As such, we planned to study and add internal generation, diversify our portfolio with solar resources, and implement measures to help our customers save peak energy. 

This plan was adopted by our council and we have been laying the groundwork to do all of those since the 2019 IRP. What we didn’t expect is the rate that this market scenario developed. It must be emphasized that the southwest energy market changed over a short period of time. Generating capacity takes time and resources to build, and we are moving as quickly and diligently as possible to do this in the most economical manner for our customers.

Where can I learn more about Mesa's electric supply?

NERC 2021 Summer Assessment

NERC 2020 Long Term Reliability Assessment

California ISO Summer Readiness