APS seeks $460M rate hike for Arizona customers. Here's how much it would cost you
Arizona’s biggest electric company is asking regulators to approve an additional $460 million a year in revenue, which would cost each of its 1.3 million customers an average of $18 more a month.
The rate-hike request comes a year after the elected members of the Arizona Corporation Commission voted 3-2 to punish the utility for woeful service and poor investment decisions by slashing its profitability.
Arizona Public Service Co. executives warned at the time the company would be back asking for a rate increase and that it would sue the regulators over the constitutionality of that vote. The lawsuit was filed months ago. The rate request was made Friday.
“This case has a significant increase. We do think this is necessary now in order to make sure we can continue to make the proper investments for our customers to serve them today and into the future,” said Ashley Kelly, manager of state regulatory compliance for APS.
She said the company needs additional revenue to maintain the “reliability and resiliency” of the power grid and continue to ensure the company has a balance of “clean” energy, which for APS, includes operating the nation’s largest nuclear power plant.
“Obviously, we don’t really like having to do rate increases, but APS has not had a base-rate increase since 2017 and obviously we have continued to invest in our infrastructure and our grid as well as work in a changing economic environment," Kelly said.
While the company has foreshadowed this request was coming, APS officials also don’t expect a quick decision. They have requested the new rates take effect in December 2023, which would require a decision in about a year.
The request represents a nearly 20% increase in “base rates,” but also about a 6% decrease in some of the additional fees APS charges for specific expenses, such as power plant fuel and renewable energy. That would result in a 13.6% actual increase on bills, according to the company.
The average monthly bill for residential customers is about $143 today. The average customer uses about 1,023 kilowatt hours of electricity a month.
'Adjustors' on bills could get cut
The seven fees APS charges on top of base rates, which are called “adjustors,” are always hotly contested.
One of them charges customers for the cost of natural gas and other power plant fuel. Another addresses changes in taxes, and allowed the company to reduce bills when President Donald Trump slashed tax rates.
One adjustor approved in 2012 allows APS to collect money that it misses out on when it subsidizes energy-efficiency programs like low-power light bulbs and rebates for efficient air conditioners. It’s called the “lost fixed-cost recovery” mechanism, or LFCR. Consumer advocates all agreed that adjustor was beneficial to customers because it encouraged the utility to fund more efficiency projects.
The adjustors go up and sometimes down at different times of the year and separate from base-rate increases.
With so many moving parts, the adjustors have frustrated regulators, not to mention customers. APS is proposing to simplify them by reducing the seven to four active adjustors. Among those proposed to cut is the LFCR.
Corporation Commissioners will make that decision, and voters will elect at least one new commissioner in next month’s election — two if Democrat Sandra Kennedy loses her bid for re-election.
When APS notified regulators months ago the request was coming, Corporation Commission Chairwoman Lea Márquez Peterson sent the company several pages of questions she wanted answered when the request was made.
“Parties should provide evidence demonstrating the minimum (profitability) necessary for APS to meet its voluntary clean-energy commitments safely and reliably, while maintaining affordability for customers and minimizing the impact to impacted communities,” she wrote in a June letter to APS and groups likely to participate in the rate case.
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'This is about getting us back in line'
APS prepared testimony from several executives that was filed with the request.
“APS continues to experience substantial customer growth in our service territory that has required significant additional investment,” APS President Ted Geisler said in his testimony. “We expect growth to continue, while at the same time customers will experience increasing needs for energy resiliency and grid reliability.”
Regulators a year ago cut about $119 million in annual revenue from the company. They also hacked the “return on equity,” or the profitability APS can earn, to 8.7% from 10%.
APS sued over that decision in a still-pending case but has asked for the return on equity to increase to 10.25% in its latest filing.
“This is about getting us back in line with our utility peers,” Kelly said.
Márquez Peterson had several requests regarding spending toward renewable projects that APS officials are preparing to address in the case.
Kelly said APS has researched how other utilities approach renewable-energy projects, as the chairwoman requested.
“Really what we are finding, the vast majority, 95% or above, all have very similar clean-energy commitments and transitions to clean-energy resources,” Kelly said. “Really it is part of doing business as a utility now and not something that warrants distinct treatment.”
Another element in the request likely to stir debate is the $106.5 million APS wants to contribute to the Navajo, Hopi and other communities affected by the closure of coal facilities.
This was debated at length during last year’s hearings and is a controversial topic in the political campaigns for two seats on the Corporation Commission this year, with Democrats favoring such support and Republicans opposing it.
Reach reporter Ryan Randazzo at ryan.randazzo@arizonarepublic.com or 602-444-4331. Follow him on Twitter @UtilityReporter.
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This article originally appeared on Arizona Republic: Arizona Public Service asks state regulators to approve big rate hike
