APS gets rate hikes and consumers pay consequences

Electric customers of Arizona Public Service are paying substantially more for power than customers of other Arizona utilities. And yet APS has continued to request and get price increases from the Arizona Corporation Commission.

That needs to stop.

While the Corporation Commission is still auditing APS’s books to decide whether it is earning too much from the last rate hike, APS will be eligible to file another rate case next month.

Not only does APS charge substantially more than other in-state utilities, it is ranked eighth highest among the 25 largest investor-owned utilities in the United States, according to data compiled by the Energy Information Administration, the statistical agency of the U. S. Department of Energy.

Further, the margin that separates APS pricing from other Arizona utilities is wide and growing wider.

The wider margin matters, because no other utility regulated by the Corporation Commission played more active a role in trying to stack the commission with friendly regulators.

Only recently did APS and its parent company Pinnacle West Capital Corp. finally acknowledge they donated millions to dark-money political groups in 2014 that helped elect two corporation commissioners.

In 2016, Pinnacle West openly advocated for its preferred candidates and spent about $4 million helping to elect three more Republican candidates as commissioners.

APS had filed the application for a rate increase in June 2016 that would be later voted on by APS’s five hand-picked commissioners in 2017.

In their analysis, staffers from the Corporation Commission and RUCO, the state’s Residential Utility Consumer Office, determined early in the process that APS did not need an increase, according to the current commission Chairman Bob Burns.

“The CEO of APS makes about $1 million a month,” Burns had said. “SRP, running a company of almost equal size, the CEO makes about $1 million a year.”

In 2017, the bundled retail price for APS was 22 percent higher than that of SRP, which is not regulated by the Corporation Commission.

The higher price based on the Energy Information Administration data, meant APS customers paid $615 million more compared to what Salt River Project (SRP) customers paid on an annual basis.

APS’s price was 13 percent higher than that of Tucson Electric Power (TEP) and 26 percent higher than UNS Electric’s price.

The higher surcharge has resulted in captive APS ratepayers being forced to fatten APS’s coffers by hundreds of millions of dollars more annually and bankroll rising dividends to its shareholders.

Pinnacle West has bragged about raising dividends to shareholders for the seventh straight year, which amounted to a 6.1 percent increase and $309 million in 2018.

The APS price differential compared to other Arizona utilities likely widened even more in 2018 when the APS rate increase was in effect for the full year.

Given the many similarities among the large, in-state utilities, there is no reason other than politics for a chronic APS price premium.

The utilities serve many of the same populous counties in the state.

The utilities also co-own some of the same power sources.

APS and SRP are of equal size. Tucson Electric and UNS are both investorowned, but are significantly smaller.

The Corporation Commission regulates all of them except SRP.

The commissioners have a constitutional duty to consider and protect the interests of consumers.

They must ensure that the interests of one public-service corporation’s shareholders are not permitted to overshadow those of the public served.

The Arizona Supreme Court has long held that a reasonable rate is one which is as fair as possible to all whose interests are involved.

The court also issued a stern warning 40 years ago that the commissioners would do well to remember: “APS has the power to issue and to buy and sell stock and thereby influence the return on common stock without regard for the interests of the consumer. It is this complete divorcement from the interests of the public that disturbs us.”

It should disturb all of us.