At a meeting held Monday, APS officials explained the company is asking for a series of rate increases that could add an average of $20 per month to residential bills.
The customers will see the increases in increments. The first rate increase went into effect in February. The increase will only be through Jan. 31, 2007 as the company tests the waters around the rising cost of natural gas.
Jan Bennett, vice president of customer relations, said the company makes no profit on it. The electric bill increase is a ripple Arizona is feeling from the hurricanes Katrina and Rita.
Due to the disruption in natural gas supplies caused by the two hurricanes last fall, Arizona Public Service is seeking help to offset the spike in prices with which it has had to contend.
Officials from APS held a meeting in Payson Monday to discuss the possibility of a rate increase with community leaders. Bennett made the presentation.
He said the financial picture is complex and is affected by a combination of things.
There are actually four different increases under discussion with the Arizona Corporation Commission, he said.
Beyond the power supply adjustment (PSA) rate that has already been put into effect, the company is currently lobbying for three other increases. It is seeking a 2.6 percent surcharge on the PSA. Like the PSA, it will continue for only a year if it is approved, Bennett said.
A general rate increase of 18.3 percent is also being requested. If approved, it will probably go into effect in December 2006 or January 2007.
Part of the general rate increase is to cover the company's higher costs for natural gas. Because of the dramatic rise in the cost of natural gas, APS is asking for emergency action on that part of the general rate increase. The emergency rate increase is for 11 percent. If approved, Bennett said it would possibly become effective May 1, 2006.
"If we were given everything we asked for, it would add about $20 a month to the average residential electric bill," Bennett said. "But no one has an average bill."
Currently, APS customers pay approximately 8 cents per kilowatt hour, if the company is successful in all its requests, the cost will be about 11 cents per kilowatt hour.
The rising cost of natural gas is only one factor behind the request. The growing customer base is another element.
"We're the largest electric utility in the state," Bennett said. The company currently serves a million customers. "And we're growing at four times the national rate. In fact, our customer growth is exceeding the state's population growth and we don't see any real slow down."
On average, APS is getting 40,000 new customers a year. By 2015, it expects to be serving 1.4 million. By 2025, it anticipates having 1.8 million clients.
In spite of needing to produce more power for 57 percent more customers, the utility has reduced rates by about 7 percent over the last decade.
At the same time, its cost for fuel has risen 85 percent and it has reduced its operating expenses. "(Natural) Gas costs are volatile and are trending upward," Bennett said. In 2002, the cost of natural gas (for APS) was $2.70 per gallon. By the end of 2005, the rate was up to $8.25 per gallon, and at times, following the fall hurricanes, the price went as high as $15 per gallon.
Currently, APS customer bills include an average of $5.50 per gallon for natural gas, Bennett said.
The plants providing electrical power through natural gas were very attractive in the 1990s and they were very efficient to operate.
The largest part of the electricity APS sells comes from three sources -- gas, coal and nuclear power. Approximately 31 percent is from gas, 43 percent from coal, and 26 percent from nuclear. The cost allocation is substantially different, as 31 percent of the power from gas costs 66 percent of the funds available for fuel purchase. The coal costs about 28 percent of purchasing budget, while nuclear power is only 6 percent of the total spent on fuel.
While the company tries to meet growing demand and rising costs, it is continuing to look at alternative resources. Bennett said the company has been directed to have 15 percent of its power generated by renewable resources by 2025.
Among the alternatives it is investigating:
- Building a new coal-powered plant, or having it built. There are only a couple of places in the state that a new plant can be built, the Four Corners area and possibly the central part of the western border area. The coal-powered plant near Joseph City, the Cholla Plant, can be expanded as well.
- A transmission line to Wyoming, where the coal is cheaper. Called the Transwest line, it would be approximately 900 miles long and require several partners to build. Possibly attached to the Transwest line would be a tap into a wind-powered generating station, Bennett said.
- More biomass plants. Currently, APS is already buying power from the biomass plant in Eagar. Bennett said the company would like to see more plants operating.
- Solar and wind powered generating stations are another option.
- New nuclear plants are another possibility. Bennett said there are about six new plants, operated by consortiums, that are being considered. He said APS will wait to see how things go for those plants before seriously considering a similar venture.
As the process on the rate increase requests continues, Bennett said, APS will keep its customers informed.
"We will operate efficiently at a minimum cost to our customers," he said.