PHOENIX — Arizona regulators and politicians are using a nonsensical WalletHub “energy costs” ranking to defend key votes that have led to higher energy bills in Arizona.
WalletHub released the “Energy Costs by State 2024” ranking in July. The formula used by WalletHub ranked Arizona as the 49th most expensive state (or the 2nd cheapest.)
But critics are slamming the study for its unorthodox methods that produce anomalous results, and WalletHub has since clarified on its website that its “total energy cost” national ranking is not actually a dollar amount that is intended to pertain to a household or person.
In other words, it’s an average number that pertains to no one.
Commissioners promote “2nd Place” ranking
Since July, Corporation Commissioners Lea Marquez Peterson and Nick Myers, along with the Commission’s communications team, have promoted the study’s findings on social media, in news releases and in political debates.
“Let’s look at the facts. The facts say a recent WalletHub survey shows Arizona is second in the nation when it comes to a combination of electricity, gas and gasoline bills,” Marquez Peterson said at a recent debate.
Marquez Peterson, a Republican, is running for re-election on the Commission.
Democrat Jonathon Hill, an aerospace scientist at ASU also running for the Commission, fired back at Marquez Peterson. During the debate Republican candidate Rene Lopez also cited the study.
“I’ve read the survey and as someone who does science professionally, it is an embarrassment. It is clearly fatally flawed,” Hill said. “The fact that you (Marquez Peterson) have been on the commission four years already, you have all the resources available to the commission, and the one resource that says you did a good job came from an app is disappointing.”
Red flags show why the study should not be taken seriously
Critics noted several red flags.
WalletHub titles the study “2024 Energy Costs” and states the data is collected “as of June 3, 2024.” However, every metric used in the study except for one is from 2022.
The study also treats equally large and small sample totals of different categories of energy.
For example, WalletHub ranks Wyoming as the costliest state: a $1,591 monthly “total energy cost." That amount is nearly twice as much as the next state.
WalletHub cites “relatively high prices for heating oil” as a contributing factor to Wyoming’s total. Federal data shows less than 400 people statewide actually use heating oil in Wyoming, amounting to about .1% of households. Yet that average cost is added to the total averages of electricity, natural gas and fuel.
In other words, the four categories are treated equally.
“That is insanely wrong methodology,” Padgaonkar said. “They took a bill that applies to a handful of people and added that to a bill that applies to millions of people. You can’t do that.”
An economist and state senator from Wyoming, defensive about his state’s ranking, called the study “b.s.” and “worthless.”
WalletHub defends the ranking as “a way to compare states” with the sum of averages of energy costs.
“I would not say it’s B.S. All of our data comes from official places and our equations can be reproduced,” said Christie Mathern, spokesperson for WalletHub.
Another red flag: the study’s “total energy cost” dollar figures pertain to no particular group or individual.
For example, the study concludes Arizona’s “Energy Costs by State (2024)” monthly average is $400.
According to WalletHub, that is the sum total of four “residential energy types:” electricity, natural gas, motor fuel and home heating oil. 12News asked WalletHub to specify who or what the average $400 amount pertains to. A household? A driver? An adult? Per capita? WalletHub acknowledged it pertains to no one.
WalletHub Communications Manager Diana Polk told 12News in a statement the ranking is a “total metric."
“(It) should be used as a way to compare states, and not as a way to see how much the average person or household pays per month,” Polk said.
Polk said WalletHub has clarified a note in its report and further defined for readers how they use their metrics.
“I know you are really focused on the total metric, but please make sure you accurately depict that the study has four more components and rankings that none of your experts have voiced any concerns with,” Polk said.
WalletHub defends energy cost rankings
12News journalists analyzed the data provided by WalletHub and concluded the “total energy cost” ranking is misleading and nonsensical.
A spokesperson for WalletHub disagrees.
“I am very disappointed that you came to these conclusions, as they do not accurately represent the facts,” Polk said. “The criticism of our report seems to come primarily from individuals with their own agendas and focuses on the total cost, but that is only one of the five rankings provided in this report as a way to compare costs across state lines.”
The total energy cost ranking is what politicians are using to justify Arizona’s energy policies.
“What’s worrisome is people who are constitutionally duty-bound to set prices for electricity, water, and gas monopolies are using clickbait headlines with garbage results,” Padgoankar said.
Credible studies show Arizona energy is much more expensive
Other studies reveal a much different picture.
- The Energy Information Administration provides the most direct “apples to apples” comparison of energy costs between states. The EIA’s formula breaks down “Dollars Per Million British Thermal Units.” The most recent report from 2022 shows Arizona ranks as 7th most expensive in the nation for household and business energy costs.
- Energy costs for Arizona households alone were the 12th highest. That was before the Corporation Commission approved new fees and rate hikes to the state’s largest utilities in 2023 and 2024.
- Arizona’s natural gas price for residential customers was the 8th highest in the nation, and was 26% higher than the U.S. average, based on the EIA’s 2023 Natural Gas annual report.
- Southwest Gas was 33% higher than the U.S. average for residential customers in 2022. That was before the Commission approved higher rates. The state agency representing utility consumers has opposed every major vote by the Commission over the past two years involving rate hikes.
Commission says “public can make up it’s own mind”
A spokesperson for the Arizona Corporation Commission tells 12News the ACC and Commissioners are free to share the study with the public.
The public can read this study and make up its own mind about the data used or the methodology used,” said Nicole Garcia.
Garcia provided data from the EIA and the U.S. Bureau of Labor Statistics.
“Data collected by both agencies show that average residential electricity prices in Arizona remain BELOW the national average,” Garcia wrote in an email.
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