Electric Company Rate Increase Granted

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In a split decision capping nearly two days of debate, the Arizona Corporation Commission granted Arizona Public Service (APS) an increase of just under five percent (5%) on average bills.

The actual increase amounts to four millionths of a dollar per kilowatt hour ($0.004 per kWh) in what the commission calls a Power Supply Adjustor (PSA). The PSA is a way for the utility to recover part of the money it has already spent to purchase power and natural gas to serve its customers.

APS sought approval for the Power Supply Adjustor of nearly five percent and a separate surcharge totaling another 1.8 percent on average. The commission did not approve the smaller increase, voting instead to delay implementation of that fee until sometime after April 1. This decision was consistent with a recommendation of Administrative Law Judge Lyn Farmer.

The decision to implement the PSA in February required a majority of the commissioners to approve an amendment to the judge's recommendation.

According to testimony from several participants in the commission's two-day session, current APS rates are calculated using natural gas and fuel costs stemming from as far back as 2002. In 2002, the price per unit of natural gas averaged $2.64 (San Juan Basin). By contrast, the 2005 average was $7.18. Natural gas prices were a significant factor behind the APS application.

Natural gas is used to fuel many of Arizona's power plants. It is traded on the open market like gold, silver, oil and other commodities. Hurricanes Katrina, Rita and Wilma damaged significant parts of the nation's natural gas infrastructure, causing San Juan Basin prices to top $13 per unit in 2005.

Many participants compared this case to repaying a credit card bill. APS had to pay large sums of money to buy the fuel its customers were using, but utility bills did not keep pace with the run up in prices.

The decision will allow APS to repay approximately $112 million in accumulated debt over the next year.

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