SRP seeks 2.9% rate hike - Typical bill could rise by $3.96

Arizona Republic
Ken Alltucker, July 16, 2005

Salt River Project is seeking a 2.9 percent electricity rate hike for residential and business customers to help fund $4.1 billion in projects across Arizona to ensure a reliable source of power.

If approved by the utility's board in October, the rate change would take effect in November and increase the typical residential customer's bill by $3.96 per month, to $104.17. That's based on an average month's electricity use of 1,155 kilowatt-hours.

The rate hike, which must be approved by SRP's board, would be its second since 2000. The last rate increase of 1.5 percent took effect November 2004.

The utility also passes along fuel costs directly to customers. The latest fuel-cost adjustment in April resulted in an average 1.6 percent annual jump in electricity bills. It was the fifth time that SRP passed along higher fuel costs to customers since 2002.

Utility executives say the rate increase is needed to pay for a trio of expensive projects needed to shore up the region's energy supply and delivery system.

"It's our growth that required the replacement of old facilities as well as new facilities," said Mark Bonsall, SRP's associate general manager of commercial and customer services.

Among projects that would get the green light is construction of a $680 million power plant in Springerville to ensure a reliable source of energy for years to come. The utility recently decided to exercise an option to build the coal-fired power plant, which would generate 400 megawatts of electricity by 2009 or 2010. It would be the fourth Springerville power plant; SRP owns a 100-megawatt stake in a third Springerville unit now under construction. One megawatt is enough to power 250 to 300 homes during the hottest summer days.

Other big-ticket projects include a high-voltage transmission line that would snake through the fast-growing southeast Valley and new emissions-control systems at the Mohave generating station.

SRP scheduled four public meetings in August to discuss the proposed increase, which would raise $55 million a year from ratepayers. The utility's board is scheduled to vote on the increase Oct. 3. Unlike the region's other major utility, Arizona Public Service Co., SRP's rate changes are not subject to approval of the Arizona Corporation Commission.

Bonsall expects that fuel costs likely will remain steady over the next couple of years. SRP already has locked in energy costs with contracts over the next year and a half, and the board has agreed to use $55 million earned from wholesale sales to guard against fuel-price fluctuations in 2007. The wholesale revenue comes from excess energy the utility sold during non-peak times.

"Given our projections today, it should prevent the need for a fuel-cost adjustment" through 2007, Bonsall said.

Reach the reporter at ken.alltucker@arizonarepublic.com or (602) 444-8285.