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'Deny APS the rate increase': Customers speak out on utility’s request

Potentially hundreds of millions of dollars of revenue hang in the balance as state regulators must decide how much APS should be allowed to charge customers.

PHOENIX — Electricity costs of more than 1.3 million households, businesses, churches and other organizations in Arizona will be impacted if state regulators decide to give APS a rate increase later this year.

Consumers discuss low-income residents, corporate greed

It is no surprise that some customers are speaking out against a rate increase, and the commission will need to balance their concerns with other factors such as economic conditions, energy demands, and the ability of APS to maintain reliable service.

APS proposes its allowable “return on equity,” which drives the company’s profit, be raised from 8.7% to 10.25%. Every percentage point matters. APS reported annual profits ranging from $542 million to $649 million each of the last three years.

The actual impact on residential bills would increase by 13.6% or about $18 for the average household, according to APS.

However, a state consumer agency wrote in a legal filing earlier this year consumers faced a “grave” situation, projecting the impact to all APS bills at 26%.

Ten consumers provided public comment by phone during Thursday’s meeting and more than a hundred others filed comments in writing against the proposal during the past several days. 

Reasons they oppose APS’s rate increase include personal financial hardship, impractical rate plans, poor customer experiences, alleged corporate greed and concerns about the fossil fuel industry.

“Get us more solar, phase out coal and keep rates for consumers at reasonable levels,” Stephen Cook said Thursday during the meeting.

“A rate hike could kill me”

Another APS customer told the commission: “I already can’t afford my electric bill. I use medical equipment that requires electricity and a rate hike could kill me.”

During Thursday’s meeting, prominent consumer advocate Abhay Padgaonkar said “APS has miserably failed” on six performance factors that include affordability, renewables and reliability.

“Deny APS the rate increase because APS has simply not earned it,” he concluded.

Another customer wrote to commissioners: “Have some consideration for the working class who is giving it their all.”

A Sedona resident wrote: “I am a senior living on social security as my sole income. The CEO of APS gets an exorbitant salary and the company gives millions in political donations for influence. It is unconscionable that I will have to choose between paying to heat or cool my small townhouse or buying my medication and groceries.”

Customers also referenced a $25 million civil settlement in which the Arizona Attorney General’s office alleged APS misled customers dating back to 2017. APS denied wrongdoing in the settlement.

“In the past, APS has said a rate increase is only going to affect you ‘X’ amount. But in real life, it affects us way more,” said one customer on Thursday.

To help customers, APS places written notices on bills to notify them if they can save money on a different plan with the same usage behavior. The utility’s rate proposal includes expanding discounts for low-income residents, APS said.

APS: Hike needed to maintain and grow the grid

Commissioners are expected to both ensure APS makes a reasonable return on its investment and protect customers from being overcharged.

APS tells 12News the price hike is needed to “maintain and grow the grid.”

“Our request focuses on ensuring our customers have the energy they need, when they need it. We’ll do this by investing in cost competitive clean energy, while protecting overall reliability,” said a written statement from APS.

Padgaonkar argued that growth had been used to justify unnecessary profits. He said APS statistics show peak load has increased by 8% over 17 years.

“By creating an illusion of hyper-growth and relying on unrealistic load forecasts, APS falsely drives the need for unnecessary investments to jack up its rate base,” Padgaonkar said.

During an Energy Reliability Summit in April, a representative of a western utilities delegation told the commission there is an increased risk of western states having adequate energy resources over the next decade. APS told commissioners it is procuring resources to meet future needs.

“We’re seeing industry-leading 5-7% compounded growth year over year,” said Justin Joiner, Vice President of Resource Management for APS.

How much flexibility does the commission have?

There is a lingering question before the current Arizona Supreme Court about the commission’s rate-making authority that could influence APS’s rate case.

The majority opinion in a 2001 Arizona Supreme Court decision, US West Communications Inc. v. Arizona Corporation Commission, concluded commissioners have “broad discretion” to consider factors beyond “fair value” in rate cases.

“Fair value, in conjunction with other information, may be used to ensure that both the corporation and the consumer are treated fairly,” the majority wrote.

Judicial precedence allows commissioners to consider more than just “fair value” while determining a rate case, he said.

A current lawsuit appears to challenge that notion. A 2021 decision by the commission set APS’s ROE at 8.7%. Commissioners lowered the rate by .2% because of APS’s history of poor customer service. APS appealed the decision, and an appeals court ruled APS was deserving of an ROE of 8.9%. The appeals court concluded the commission did not have the authority to reduce APS’s ROE by .2% based on customer service.

In their appeal to the Arizona Supreme Court, attorneys for the commission argue the courts have already established commissioners can consider factors such as “poor management decisions” in deciding a utility’s ROE.

The commission argues if the current opinion stands, commissioners will be “powerless” in the future to make point reductions pursuant to their ratemaking authority.

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