Aps Defends Itself Against Misinformation In Recent Letter


At APS, it is important to us that our customers have the most accurate information possible.

A Letter to the Editor that appeared in the Payson Roundup on Aug. 1 may have confused some of our customers. Because I have received a number of telephone calls and visits to our customer office in the past week with questions prompted by this letter, I feel compelled to clarify any confusion that may exist.

Specifically, I would like to address two issues referenced in the letter:

  • The breakout of charges on the monthly bill.
  • Recent media reports that mischaracterized the second-quarter earnings report for APS' parent company, Pinnacle West Capital Corp.

In April 2005, APS introduced a new bill design, intended to provide our customers with more information to help them better manage their energy use and costs. Among other features, the new bill design includes a streamlined summary page that makes it easier for customers to locate the bottom line -- the amount due and the due date.

Another feature of the new bill is a "Service Account" page that provides a breakout of specific charges in the monthly bill, including taxes and special regulatory assessments. As a regulated utility, APS is required to "unbundle" its rates, disclosing the costs that make up the total bill. The intent of these unbundled rates is to make it easier for our customers to compare our prices with those of other companies that may offer the same services in the future.

For those of you who were accustomed to a monthly bill that did not have the various charges broken out, the new bill can be an adjustment. If you have questions about any of the charges on your monthly bill, you can visit aps.com, come by the Payson customer office, or call us at (928) 474-2204.

Utility financial reporting is complex and can easily be misunderstood. As an example, recent media reports about our parent company's earnings were misleading and mischaracterized.

Like all publicly traded companies, Pinnacle West reports earnings on a quarterly basis, comparing the current quarter to the same quarter the prior year. While earnings in the second quarter of 2006 were closer to historical levels, earnings from the second quarter of 2005 were unusually low because of a large one-time loss of $59 million related to the sale of a power plant. Taking into account this unusual item, the company's earnings were up only 19 percent over the prior quarter -- not the 320 percent as reported in the media. And, we expect our year-to-date, ongoing earnings to be about the same as last year.

Moreover, return on equity is important in looking at the company's overall earnings picture. APS' return on equity was 5.7 percent for the 12 months ending June 2006. This compares to an allowed return set by our regulators, the Arizona Corporation Commission, of 10.25 percent. That translates to a $134 million earnings shortfall for just the past 12 months alone.

Increasing a customer's bill is something no business likes to do, and we don't take lightly the impact that rate increases have on our customers. In fact, our company reduced rates by 16 percent between 1992 and 2003. We are still working hard to keep our costs as low as possible, but increased energy costs -- especially for natural gas to fuel our power plants -- have forced us to request interim relief to recover a portion of the fuel and purchased power costs. We do not profit from these costs; we simply recover what we have spent. At an average daily cost that is less than a McDonald's meal deal, electricity still is a good value.

Finally, I want you all to know of our employees' personal commitment to our customers. In the past weeks, APS employees have kept the lights and air conditioning on for our million-plus customers during record-breaking heat and harsh monsoons. And, we're investing upwards of $1 billion annually in poles, lines and power plants so our customers can always count on reliable service. This is our business. And, we're good at it.

I hope this information has been helpful. I appreciate your business and the opportunity to serve you.

-- Jan Parsons is the APS manager of customer service for the Gila/Navajo district, which includes Payson.

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