Rim Country Insulated From Power Rate Crisis


As Californians brace for more blackouts and some rural Arizonans rail against a 300-percent hike in electricity costs, Rim country residents will likely enjoy stable electricity prices and supplies, local APS manager Jim Spencer said this week.

The cost of a megawatt hour of power in California is about $350, 10 times the going price a year ago. That price increase has caused a power crisis in California that's put a squeeze on some of Arizona's smaller utilities, which buy much of their power on the open market.

APS and the state's other large power companies generate their own power to provide stable supplies and protect themselves from the whims of the open market.

In rural Pinal and Maricopa counties, the San Carlos Irrigation Project, which serves 13,300 customers, recently announced that huge rate increases are imminent, possibly as early as this month.

"But there are stark differences between California and most of Arizona," Spencer said. "When deregulation started over there in 1996, the rule was to divest electricity generation facilities."

The result is that California is now a net importer of power.

"They need to bring in 20 percent of their electricity," he said.

Since rate caps imposed as part of deregulation prevent California's public utilities from passing on the higher cost of buying power on the open market, the state's two largest utilities, Southern California Edison Company and Pacific Gas and Electric Company, say they have lost $12 billion since June.

As a result, the California state legislature recently devised a plan to allow the state to issue bonds to cover the losses and recoup the money through new rate increases averaging 9 percent.

Arizona's major power utilities, on the other hand, have strong market positions.

"We have not been forced to sell off our generating capacity, and we have negotiated long-term contracts to buy power at stable prices," Spencer said.

Even with the electricity shortfall, it took a combination of factors converging at the same time to throw California into crisis.

"Their economy was booming, and they didn't accurately estimate the increased demand, so they had to buy more electricity on the spot market at the going rate" Spencer said.

"It took all this coming together almost like the perfect storm to throw California into chaos."

While Arizona electricity supplies could be tight next summer when Phoenix and other desert communities are craving electricity to keep homes and offices cool, Spencer thinks the Rim country will be fine.

"We already have an agreement with the state Corporation Commission to continue to lower our rates through 2003," he said. "At that time," he said," APS rates will be 16 percent lower than they were 10 years ago not counting inflation."

And to help maintain stable power supplies and prices in Arizona, a new power plant is being built, Spencer said.

"We haven't had to sell off our generating capacity, and we are building Redhawk, a new 2000-megawatt plant down by Arlington near Palo Verde," he said.

Service to the Rim country also is expected to improve with the addition of new transmission lines over the next few years.

But Spencer cautioned that the Rim country is not home free.

"Eleven Western states are all interconnected through the same power grid," he said. "A problem anywhere on that grid can impact Arizona. In the end, we're all in this together."

Commenting has been disabled for this item.