New Legislation Makes a West-wide Electricity Market Possible for Arizona Utilities

PHOENIX — Formation of a West-wide regional electricity market with independent Western governance took a massive step forward last Monday with California Assembly Bill 825 becoming law.

The legislation creates a path to a regional electricity market that is governed by an independent board made up of members from across the West, rather than the California Independent System Operator. The new Regional Organization (RO), which will manage the market, is expected to be established as soon as January.

Utility companies and regulators in Arizona and 10 other western states have been hesitant to join a California-governed energy market, but this legislation clears a path for Western states to coordinate electricity needs and transactions more efficiently without California control, which would lead to significant customer savings and improved reliability and resiliency. “It was not possible for Arizona utilities to join a market governed by California. Now Arizona and other western states can have an equal voice in the development and operation of a western energy market. This is a fundamental shift, which requires a new look by Arizona utilities at available market options,” according to Amanda Ormond, Director of Western Grid Group.

Building a regional electricity market that supports energy trading has long been recognized in Arizona as fundamental to improving the reliability of the electric system and lowering costs for customers. Arizona’s three largest utilities (APS, SRP, TEP) saved over $128 million in benefits in 2024 alone from participating in the Western Energy Imbalance Market — the first, highly successful Western energy market product. 

According to Steven G. Zylstra, president and CEO of the Arizona Technology Council and SciTech Institute, “Studies conducted by state regulators and utilities have shown that building a regional electricity market will reduce the overall cost of the electric system, which is critical as Arizona technology businesses and all customer groups are facing increasing electricity costs.”

“The choice of which regional electricity market to join is one of the most important and impactful decisions utilities will make. This legislation creates a reset for evaluating which market option will provide the most benefits and cost savings for Arizona ratepayers. A truly West-wide electricity market offers the best path for providing cheaper, cleaner and more reliable energy for Arizonans,” said Michael Bueno, Senior Manager for State Climate Policy & Strategy with Environmental Defense Fund.

Nidhi Thakar, Senior Vice President, Policy, Clean Energy Buyers Association commented, “The enactment of California Assembly Bill 825 is a landmark step toward expanding the Western grid. This new law marks a pivotal moment in advancing a more affordable, reliable, and clean energy future for the broader Western region, including Arizona.” 

Kelly Trombley, Senior Director for State Policy at Ceres stated, “This authorization comes at a critical time when load growth is putting pressure on utilities across the west. Greater regional sharing, which has never been more important for energy affordability and economic resilience, is now possible.” 

"Arizona is one of the largest markets for data center development in the country. The cost of electricity in the state continues to rise, and aging infrastructure, coupled with extreme weather events, further threatens access to affordable, reliable electricity. Regional collaboration through a Western electricity market is vital for the future of Arizona's electric grid,” said Sydney Welter, Regional Markets Policy Advisor for Western Resource Advocates.