State regulators are entitled to force utilities to generate a portion of their power from renewable sources, the Arizona Court of Appeals ruled Thursday, even if it costs ratepayers more.

In a unanimous decision, the three-judge panel rejected arguments by the Goldwater Institute that the role of the Arizona Corporation Commission is limited to setting rates that electric companies can charge. The challengers argued that the renewable energy rules get into areas that are within the purview of each company's management.

But Judge Margaret Downie, writing for the court, said the record shows the commission clearly considered how decisions made today on sources of energy will affect rates in the future.

For example, she said, commissioners concluded after their hearings that continued reliance on fossil fuels - coal and natural gas - "is inadequate and insufficient to promote and safeguard the security, convenience, health and safety" of utility customers "and is therefore unjust, unreasonable, unsafe and improper."

And Downie said commissioners had evidence that reliance on a few sources of power makes the utilities and their customers more susceptible to both price fluctuations and shortages. That included a rate hike sought by APS when natural gas prices rose.

"Prophylactic measures designed to prevent adverse effects on ratepayers due to a failure to diversify electrical energy sources fall within the commission's power to lock the barn door before the horse escapes," she said.

The regulations require investor-owned utilities to generate 15 percent of their power from renewable sources by 2025. The list of acceptable alternate sources includes solar, wind and geothermal.

Commissioners acknowledged that these alternate sources of energy do cost more than power generated from nuclear energy or from coal-fired plants. And they gave the utilities permission to impose a surcharge to make up the difference.

Arizona Public Service, for example, can charge residential customers up to an additional $4.05 a month, with higher figures for commercial and industrial users. It was that surcharge that the Goldwater Institute argued gave the individuals and businesses it represents the grounds to challenge the rules.

The appellate judges also brushed aside complaints by Goldwater that the rules get into details that should be left to each utility's management.

Downie said the problem with that argument is that the utilities themselves are not complaining.

In fact, she noted, most, if not all of the affected companies worked with regulators before the rules took effect. And APS filed legal briefs arguing that the Goldwater Institute and its clients have no standing to make that argument.

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