APS seeks its second rate hike in 13 months

Arizona Public Service Co. customers could be looking at another $3-amonth rate hike pending the outcome of hearings this week, even as utility regulators consider reopening an APS rate case they approved last year.

Thousands of people have signed an online petition trying to undo the last rate increase and supporting the legal challenges to it, so the new hike is unlikely to be welcomed by the company’s more than 1.1 million customers.

APS is asking for another $67.1 million rate increase to cover the expenses of environmental equipment added earlier this year to the Four Corners Power Plant near Farmington, New Mexico.

The electric company installed new environmental controls on the two

units at the plant that still operate to comply with Environmental Protection Agency regulations on haze. APS previously purchased a larger stake in the units and agreed to close three older generators at the power plant to mitigate air pollution.

“It is the cumulation of much work by APS, its co-owners and the Navajo Nation to clean up the environment while at the same time maintaining a plant that provides necessary electricity to much of Arizona and is a critical part of the economy of the Four Corners area and the Navajo Nation,” APS lawyer Melissa Krueger said Wednesday.

APS owns 63 percent of the two remaining units at the plant and gets 970 megawatts of capacity from them. That is enough power for almost a quartermillion households when the units are running.

The Arizona Corporation Commission last year approved a rate increase for APS that officials said would average $6 a month. That hike is being challenged. Later this month, an administrative law judge will hear from APS and customers about whether it needs to be reconsidered.

Regulators also approved a rate decrease for the company in February to reflect the lower tax rate after President Donald Trump’s tax changes. That was described as an average $5.40 per month decrease for household customers.

The additional $3 a month APS is requesting now was left out of last year’s rate increase until the work on the Four Corners plant was completed.

The Residential Utility Consumer Office, which acts as a consumer advocate and intervenes in rate cases, agrees with the premise of a rate increase but recommends a lower increase than APS is seeking — $58.84 million. The Corporation Commission staff recommends an even lower $58.47 million after its review.

During a hearing Wednesday, the parties in the case debated not only the appropriate figure APS should recover from the project, but also whether it was prudent to begin planning for the plant’s closure and also whether low-income customers should get a reprieve from the increase.

In the APS rate case last year, the settling parties approved $1.25 million per year from the utility for crisis funding for limited-income customers (incomes

Arizona Public Service Co. customers could be looking at another $3-a-month rate hike pending the outcome of hearings this week, even as utility regulators consider reopening an APS rate case they approved last year.

of up to 200 percent of the federal poverty line) and the company agreed to provide an additional $1 million from profits for such funding.

In December 2013, APS closed the three oldest generators at the plant, which dated to the 1960s.

Units 1, 2 and 3 opened in 1963-1964 and Units 4 and 5 opened in 1969-1970. The newer units are larger and cleaner-burning.

Rather than pay to upgrade the three oldest units, APS closed them and paid $182 million for a larger stake in Units 4 and 5, which did not need as much of an investment to meet EPA standards.

That expense was included in the rate increase approved last year.

In 2015, APS began the work on the newer units, which included adding “selective catalytic reduction” equipment. The SCRs remove oxides of nitrogen from the plant’s emissions by 80 percent. The pollution contributes to the blue haze in the skies over the region and contribute to health effects such as coughing, wheezing and asthma.

The plant and a nearby coal mine generate about $225 million a year in economic benefits to the Navajo Nation and New Mexico economies, according to APS.

Unemployment on the reservation is about 50 percent, so the more than 800 jobs at the plant and mine are critical. More than 80 percent of the positions are held by Native Americans.

The operations are responsible for about 30 percent of the Navajo Nation’s general fund, according to APS.

APS owned 15 percent of Units 4 and 5 and bought an additional 48 percent stake in them from Southern California Edison. PNM Resources Inc. of New Mexico, Salt River Project, Tucson Electric Power and the Navajo Transitional Energy Co. also own minority stakes in Units 4 and 5.

BHP Billiton previously owned the coal mine next to the plant and transferred the mine to the NTEC, which was formed by the tribe to own the mine and other entities.