Most Arizona Public Service Co. customers will see a slight bill decrease after regulators took a final vote on the electric company’s rates.
Utility regulators gave final approval to an approximately $119 million cut to APS revenue late Tuesday after reviewing data that confirmed most customers would see their monthly bills reduced.
APS said shortly after the decision it would sue over the issue, as its CEO said the company would if the final cuts were too severe.
The Arizona Corporation Commissioners decided major elements of the two-year-long rate case during multiple meetings in October, deciding to slash the company’s profitability and cutting hundreds of millions from APS’ request to charge customers for upgrades at a New Mexico coal plant.
The commissioners made such significant changes to the 5% rate hike the company originally requested, and even to the recommendation from an administrative-law judge, that it took a few days to calculate what the changes would mean for customers.
“APS has not seen a rate decrease since 1996, and today with our amendments we have voted on an approximate $119 million revenue decrease to base rates, providing relief to captive customers that have struggled with multiple challenges with APS’ previous management and a global pandemic,” Republican Chairwoman Lea Márquez Peterson said.
Commissioners Anna Tovar, a Democrat, and Jim O’Connor, a Republican, also voted in favor of the rate changes.
After all the changes, which include money to help communities affected by closing coal plants, APS will see a slight increase in revenue, largely because of adjustors that charge customers for specific items like power plant fuel and renewable-energy programs. Its “base rates” are declining by $119 million.
APS said the cuts were “short-sighted.”
“Our most important responsibility is to our customers, who depend on APS for the energy infrastructure that will power Arizona’s prosperity far into the future,” the company said in a prepared statement after the vote.
“Today’s short-sighted decision by the Arizona Corporation Commission ignores that crucial responsibility. Though customers will see some near-term benefits, the overall outcome will raise costs for customers in the long run and put our state’s economic future at risk — leaving us no choice but to take legal action.”
How decision will affect APS customers
The decision included major reductions, including a vote to prevent APS from charging customers for $216 million it spent on upgrades at the Four Corners Power Plant near Farmington, New Mexico, which is now scheduled to close earlier than previously planned.
The changes were too substantial to calculate on the fly last week, but after crunching the numbers, APS said about 69% of customers would see a bill reduction of 2% or less. That includes a reduction in base rates and an increase in rate “adjustors” for items like power plant fuel.
About 21% of customers will see an increase of less than 1%, and an unlucky 7% are projected to see bill increases from 1-3%.
The differences come from customers being on different rate plans and are based on how and when they use electricity.
The changes regulators made to APS revenue will affect bills starting in December, but the company said it would take several months to adjust the new on-peak hours on time-of-use energy plans.
The “on peak” hours for time-of-use electricity plans eventually will shift to 4 to 7 p.m. Today, those rate plans use on-peak hours of 3 to 8 p.m. APS said it could take 10 months to implement the change.
“This case has been a long time in coming for APS customers,” Tovar said.
Republican Justin Olson said APS rates are something he has heard complaints about since joining the commission in 2017, and he took credit for the amendment that reduced APS’ allowed return on equity to 8.7% from 10%.
But Olson also said that certain elements of the final plan were problematic, including contributions the company is being ordered to make to communities affected by closing coal plants.
For that reason, he voted against the final order.
Democrat Sandra Kennedy also voted against the final decision, citing the slight overall increase in APS revenue after accounting for rate adjustors.
“I cannot vote in good conscience for this rate increase,” Kennedy said, adding that part of her opposition came from the decision to not consider the massive investment in the New Mexico coal plant in a separate decision.
Positive reaction from consumer group
AARP said it was “thrilled” with the final order the commissioners passed, in part because the organization that represents people 50 and older was among the few parties that did not agree to a settlement in the controversial 2017 APS rate case.
“With today’s decision, AARP has been vindicated in our decision, and glad to know that then and now we will always fight for the 50 plus,” State Director Dana Kennedy said in a prepared statement.
In addition to the base rate reduction and time-of-use hour changes, AARP applauded that the basic service fees on most rate plans won’t increase and that APS will implement rate plans that are easier to understand.
AARP also was satisfied that a proposal from Olson was defeated that would have allowed new power companies to compete with APS for customers. AARP said that proposal failed “due to the evidence that it only hurts consumers while not reducing price.”
APS filed an analysis into the record for the case detailing how different customers on different rate plans would be affected by the changes. This is something commissioners have specifically asked for after the 2017 rate hike that was approved with no such details known to the commissioners who voted for it.
Only when activist Stacey Champion filed a formal challenge to that rate hike did it come out that the 2017 rate hike was wildly uneven, with some customers seeing huge rate hikes while others saw only a slight change.
In that 2017 case, APS described the average increase to regulators as being 4.5%. The company also said 102,000 residential customers were expected to have their bills go down 3.7%.But in testimony during Champion’s complaint, APS revealed that more than 300,000 customers were expected to have bill increases of 10.8% or more.
Reach reporter Ryan Randazzo at firstname.lastname@example.org or 602-444-4331. Follow him on Twitter @UtilityReporter.