Semstream Rate Hike Merits Careful Study


We hope the Arizona Corporation Commission will rouse itself to carefully scrutinize SemStream’s propane rate increase in Payson.

SemStream wants a 26 percent increase in the base rate — its first boost in 14 years. In addition, the company wants to make it easier to slap on a surcharge when propane prices exceed its base rate.

Now, certain elements of the request make sense. Energy costs have increased in the past 14 years. Moreover, most customers would prefer a realistic base rate to the surcharges that have doubled and tripled winter gas bills without warning for many customers.

However, we cannot suppress a certain skepticism in reading SemStream’s request for the change in rate structure. The numbers in SemStream’s rate request don’t add up.

For instance, the company’s filing says last year it lost $300,000 on revenues of $6.4 million. The rate increase would generate an extra $1.6 million in revenue — which would turn the $300,000 loss into a $1.3 million profit. According to our primitive math skills — that works out to a margin of 17 percent for a regulated monopoly.

Moreover, the budget figures filed to support the rate increase include a $640,000 management fee — presumably paid to the parent company. Guess they need more money to finance a resumption of their speculation on oil futures. Now, we might have swallowed the increase in the base rate in light of the 14-year wait and the absurdity of oil prices, which largely determine the cost of propane. Might even be worth it if a higher base rate eliminated the surcharges.

But wait: There’s more. Right now, the company can only impose surcharges or offer rebates if the lag between propane and prices and its base rate prompts the company to either over collect or under collect by $120,000.

In the future, the company wants to slap on a surcharge immediately — instead of waiting until it hits the $120,000 threshold. However, when it collects too much — SemStream wants to wait until the over collection hits $265,000 before having to fork over rebates or refunds.

Company officials said this will benefit customers by ensuring customers have a more real-time grasp of energy costs. Gee. Thanks guys. Always looking out for us.

So we are reduced to hoping the brand new board members on the Arizona Corporation Commission will study this rate increase a lot more carefully than they studied the surcharges SemStream imposed in 2009 — or the way that Brooke Utilities treats its water customers, for that matter.

Energy plan offers chance to say yes

Granted — the deal looks too good to be true. Nonetheless, we hope that Gila Community College will this week sign on for the visionary solar/geothermal project that will form the first durable link between GCC and the proposed Arizona State University campus next door.

The backers of the 6,000-student undergraduate college are trying to pull together an ambitious plan to build a $50 million solar and geothermal energy project that would not only supply both campuses, but sell excess power to Arizona Public Service to boot.

Only catch: They have to have at least some portion of the system in operation by the end of the year to qualify for federal incentives that will cut the cost of the project by more than 50 percent. Since the ASU campus won’t likely break ground until then, the backers need a partner that can start using the power immediately.

Cue GCC.

Now, the deal makes great sense for the fast-growing community college on strictly economic terms. The combined solar and geothermal systems will save the community college about $4,000 annually. An alternative, privately backed, solar-power-only plan would save only $3,000 annually. Better yet, the deal with the Rim Country Education Alliance backed by Payson would form the first, crucial link between GCC and the college.

Make no mistake, the relationship between the community college and ASU will play a crucial role in the success of both campuses. If they work closely, GCC students will transfer seamlessly to the college next door — and students can combine classes at the two campuses to get a wonderfully low-cost, high-quality education. That’s why GCC must jump at this first solid opportunity to form a partnership, to the great benefit of students on both campuses.

Fortunately, the GCC board responded with rare unity to Payson Mayor Kenny Evans’ pitch.

Now, we hope they’ll also share a sense of urgency — since the deadlines have become inexorable when it comes to the solar and geothermal components of the project.

Fortunately: This plan’s a no-brainer — no cost to the college will bring great benefits.

So please, GCC, just say yes.


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