Your electric bill may not go up as much.
But don’t hold your breath when it comes to saving the forest.
The Arizona Corporation Commission tentatively slashed Arizona Public Service’s “return on equity” last week — with nary a word about restoring a biomass burning mandate considered critical to thinning an unhealthy, fire-prone forest.
The company’s seeking a $169 million rate increase that could increase the average customer’s bill by about $5 a month. The board last week voted to cut the company’s allowed profit margin from 10% to 8.7%, which could trim that increase by about $34 million — depending on the outcome of days of additional hearings.
The commission put off consideration of two other requests to cushion the impact of the closure of coal-fired power. APS had asked for permission to bolster its rates to provide some $144 million to help offset the serious economic impact of coal and mine closures — mostly on reservations in Navajo and Apache counties.
The commission also did not act on the company’s request to add $450 million to its rates to cover the cost of adding environmental controls to a New Mexico coal-fired plant.
The board is slated to discuss those issues this week.
The decision on cutting the profit margin won’t actually take effect until the board finishes hashing out the full rate increase request.
The Corporation Commission opened its latest rate case some two years ago, after the last approved rate increase produced a lot more money for the power company than originally projected. APS has more than a million customers, including much of northern Arizona.
The cut in the company’s profit margin passed on a 4-1 vote — with Chair Lea Márquez Peterson voting against the plan. She has been the chief advocate for a new biomass mandate on the board, which would create a market for the wood slash produced by thinning projects.
The lack of a market for the saplings, small trees and wood debris that constitutes about half the material removed in forest restoration thinning projects has stalled efforts at large-scale thinning for nearly a decade. The state’s only biomass burning plant in Snowflake is hoping to get a long-term contract from Salt River Project and APS to continue operating, despite the lack of a mandate. Even so, the Novo Power plant can take wood slash from only abut 15,000 acres of thinning projects annually — far short of the 50,000 to 100,000 acres of thinning needed to make a dent in reducing the threat of town and watershed destroying megafires.
APS had sought to maintain its 10% allowed profit margin, despite a slew of customer complaints and lawsuits maintaining that the complex rate structure imposed two years ago had produced much higher rate increases than projected. A judge’s recommended order had come in at 9.16%. The Residential Utility Consumer Office had recommended 8.7%, which the commission ultimately accepted.
APS CEO Jeff Gulder conceded the complicated rate plan based on time of use and other factors hadn’t worked properly. Many customers sought — and received — refunds due to the confusion caused by the plan, which was supposed to cut use during peak hours.
However, he pleaded with the commission not to cut the company’s allowed profit margin below 10%, saying it would make it much harder for the company to get the financing needed to keep up with growth and upgrade its power grid.
“It will result in higher borrowing costs, which will ultimately be passed on to our customers,” he told the board.
He said the decision will likely mean the company will simply have to file a request for an emergency rate increase.
The hearing included extensive discussion of the company’s investment in a coal-burning plant in the Four Corners area. The company argued that if it had not bought into that power plant, it wouldn’t have had the power to meet customer demand during the past two scorching summers.
Critics said investing in a coal-burning plant was a poor decision and urged the commission not to reward the company by adding those costs to its rates.
The commission ultimately voted to address that issue in a separate hearing.
The commission must also still decide about whether to allow APS to add a portion of the cost of its $144 million proposal to help the Navajo, Hopi and other Navajo and Apache county communities cope with the impact of coal plant and mine closures. The money would help attract alternative industries. The company has promised to spend $25 million out of its existing profits.
Lost in the shuffle was the issue of a new biomass mandate. A decade ago, a previous commission required APS to generate a tiny share of its power from renewable power sources — including wind, solar and biomass. This essentially funded the construction of the Novo Power plant near Snowflake. However, solar and wind are now cheaper than burning biomass — which means the market for biomass depends on a separate mandate.
The board has refused to issue such a mandate on a 3-2 vote, arguing rate payers shouldn’t have to pay higher prices to thin the forest — even though it would protect the watersheds and forests on which those same ratepayers depend. At the time, the commissioners opposing the mandate cited the pending award of a fresh round of forest thinning contracts by the Four Forest Restoration Initiative.
However, the latest round of bid awards collapsed, in part due to the lack of a guaranteed market for biomass.
Meanwhile, the toll of megafires has risen exponentially, thanks to one of the worst droughts in 1,000 years and a century of mismanagement that has increased tree densities on millions of acres tenfold.