APS filed a rate case with the Arizona Corporation Commission (ACC) on March 24, 2008. At the ACC's request, the Company updated its filing with new financial information on June 2, 2008.
General Rate Case Questions
Why is APS asking for a price increase?
APS' current prices do not reflect the full cost of providing electric service to our customers. The ability to recover our costs is essential for us to maintain the highest levels of reliability and to continue to build the necessary electric infrastructure to meet the current and future demand of our customers and the state.
Current base rates were set at 2005 cost levels. Since 2005, there have been dramatic increases in the essential building blocks of our electrical infrastructure - copper, steel, aluminum, concrete, etc. have experienced all-time highs. It has also been a time of record population growth in Arizona; we have been the second fastest growing state in the nation. So, APS has seen high growth at an even higher cost to keep up with it. Absent a price increase, APS' finances will continue to slip and could jeopardize our ability to finance necessary new infrastructure.
What did APS ask for in its overall base rate request?
Generally, over the next year, APS, the ACC, and other parties will work on three things:
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Base price increase - APS has requested a 10.55 percent base price increase, effective October 1, 2009, primarily to recover large electricity infrastructure investments to meet future demand as well as maintain the current system.
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Conservation rate options - Approval of new time-of-use rates will offer customers added opportunities to save energy and money by shifting the time of their energy usage away from times when overall demand is highest.
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Impact fee - Approval of an impact fee - to help new growth pay for itself - would decrease APS' base price request for existing customers by 2 percent. This fee would generally just be charged for new, physical interconnections to the APS system.
Did APS file more than one rate case?
No. APS has only asked for one overall price increase; however, it has requested this in two parts instead of a single increase. This has occurred through separate filings at the ACC, which could be confusing. Here is what has happened:
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On March 24, 2008, APS filed its initial base price increase (rate case) request.
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On June 2, 2008, at the ACC's request, APS filed an updated version of its base rate case, to go into effect in October 2009. This filing merely updated some technical aspects of the original request. The resulting rate request was slightly higher on average than our initial filing, but slightly lower for residential customers.
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On June 6, 2008, APS requested an interim base rate increase. That is, we are seeking to receive in late 2008 a portion of the funds from our overall price increase request, or approximately $115 million of the overall $278.2 million request. This portion would be subject to refund, pending the outcome of the base rate case in the fall of 2009. The interim amount for which APS has requested - about 4 percent - is equal to an amount of a recently expired fuel surcharge. That decision is expected in November 2008.
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When would new prices go into effect?
If approved as requested, the overall price increase would go into effect in October 1, 2009.
When would interim pricing go into effect?
If approved by the ACC, interim rates could go in November or December 2008. Notably, this is during the winter when energy prices and consumption are generally lower.
Why does APS need to collect money through interim rates now instead of 2009?
APS has seen high growth in its service territories at higher prices to keep up with it. So the company is operating at high deficits. Absent price increases, APS' finances will continue to slip and could jeopardize the service we provide. The interim price increase of 4 percent would provide some temporary relief and enable APS to recover approximately $115 million annually and continue its investments in Arizona's energy future. This amount is subject to refund pending the outcome of the overall base rate request in 2009.
Deteriorating finances at APS are mentioned as a factor in this rate request. Is APS doing all it can to effectively manage the company?
Yes. APS has the highest employee productivity in its long history and will be reducing its capital expenditures by more than $700 million over the next few years. But cost-cutting alone is not enough. To keep our commitment to a vibrant energy future for Arizona, APS needs to invest billions of dollars in the resources to bring about a cleaner environment, energy independence, and the latest "smart" technologies to allow customers greater control over energy costs, and energy efficiency programs.
When the General Rate Case is decided in 2009, will this be the last price increase for awhile?
Probably not. Given Arizona's continued growth - even during this temporary slowdown - and the ongoing inflation in basic commodity costs, rate increases are necessary to ensure APS is able to continue to reliably serve its customers. APS is also planning for future power generation needs as well as implementing new programs and technologies to improve system reliability and the environment. APS will continue to work closely with the Arizona Corporation Commission to ensure electricity remains a value compared to other household services.
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2008 Summer Rate Decrease
Did rates go down?
Yes. Due to actions from the Arizona Corporation Commission, two fuel-related surcharges expired in July and August 2008, respectively, resulting in an average price decrease of around 4 percent for customers.
When will the decreased rates take effect?
Rates were reduced by almost 1 percent in July 2008 and will be reduced by almost 4 percent in August 2008.
How long will these rates be in effect? Will the surcharges return at some point?
The specific surcharges have expired and will not return. However APS is asking for an interim price increase at the same amount as one of the expired surcharges. This amount is subject to refund pending the outcome of the overall rate case. If approved in November 2008, prices may return to the same level as early summer.
I received a bill notice of a Transmission Cost Adjustor (TCA) increase. What is this? Did it affect the price decrease this summer?
The Transmission Cost Adjustor is a surcharge on your bill that enables APS to recover transmission-related costs based on usage and market costs. Each year, the surcharge adjusts. In July 2008, the TCA increased by about $0.25 per month (or $0.0099 per kilowatt hour) for the average customer.
Rate Case Timeline
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March 24, 2008 - APS files General Rate Case
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June 2, 2008 - APS updates General Rate Case filing
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June 6, 2008 - APS asks to have part of General Rate Case request implemented on interim basis
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September 15, 2008 - ACC hearings scheduled to begin on APS interim request
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March 30, 2009 - ACC hearings scheduled to begin with public comment on APS General Rate Case
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