Corporation Commission to review rates at APS
Elected commissioners voice more frustrations
State utility regulators launch a new inquiry into the rates and profits at Arizona Public Service Co. after almost two years of customer complaints and a formal challenge to the company’s prices.
State utility regulators on Tuesday launched a new inquiry into the rates and profits at Arizona Public Service Co. after almost two years of customer complaints and a formal challenge to the company’s prices.
The opening of a new rate case could take more than a year to resolve and end up with APS rates going down — or up — depending on what regulators find.
Regulators on the Arizona Corporation Commission last approved a rate hike for APS in 2017, and the description of that increase as averaging $6 a month or 4.5 percent on residential customers is widely disputed.
Tuesday’s meeting showed the five elected commissioners are increasingly frustrated with the state’s biggest utility, but they have few options to make changes other than a lengthy rate case.
“The people of Arizona in APS rate territory are sick and tired of being sick and tired,” Commissioner Sandra Kennedy said when casting her vote.
Commissioners, including newly appointed Lea Marquez Peterson, voted 5-0 to order APS to file a new rate case by Oct. 31.
The action follows more than a year spent on a complaint about the 2017 rate hike filed by customer Stacey Champion. Resolving that complaint by adjusting rates raised legal concerns with the commission staff, who instead recommended a whole new case.
Commissioners Robert Burns and Kennedy discussed Tuesday how they might roll back APS rates to what they were before the 2017 changes, but legal staff at the commission recommended against any such move.
Rate cases usually take about a
year, which means any change to APS rates, up or down, is not likely before late 2020.
What happens in a rate case
Rate cases proceed like court trials, with the utility presenting detailed financial data to state regulators, who are supposed to determine fair and reasonable rates that strike a balance between allowing the company to cover its costs and protecting consumers.
The cases also include expert testimony and a top-to-bottom review of where the company is spending money.
Despite the fact the rate case was ordered because of concern APS prices are too high, some observers are concerned that a rate case could lead to even higher rates.
That’s because the rate case gives the company the opportunity to present data on its expenses, which it is allowed recover through rates.
Jorge “Jordy” Fuentes, director of the Residential Utility Consumer Office, which intervenes in rate cases on behalf of customers, said a cursory review of the company’s finances recently completed for the ACC shows the company has made “significant investments.”
“That is a signal that rates are potentially going up rather than going down,” Fuentes said Wednesday while cautioning against rushing a new rate case for APS.
What is the dispute?
Many customers since 2017 have complained that their bills rose more than the $6 average APS and the commission described in press releases.
Amid Champion’s dispute, an administrative-law judge and the commissioners explored the actual impact of the rate hike versus how it was described to customers.
APS officials testified that base rates did in fact increase residential customer rates by 15.9 percent. But APS Director of Rates and Rate Strategy Leland Snook said that various “adjustors” on customer bills were reduced 11.36 percent, and the result was a 4.54 percent overall rate increase.
Champion had a local management consultant analyze the APS rate changes, and he concluded that the 4.54 percent description was incorrect because while the base rate increase took place immediately after the 2017 approval, the reductions in adjustors did not.
Adjustors for things like power plant fuel and renewable energy change based on separate schedules. That means there was not a time when customer rates increased the exact 4.54 percent as described.
Because of this complexity, the commission staff as well as the administrative-law judge who proceeded over Champion’s case both suggest a more comprehensive and meaningful description of rate hikes in the future so that customers can better understand what to expect on their bills.
Champion said at Tuesday’s meeting the rates are simply too complex.
“At what point does this body and staff just admit culpability for a flawed rate design?” Champion said. “This is not based in reality. What this commission is supposed to do is to serve the best interest of the public.”