APS seeking another hike in customer electric bills

The Arizona Republic
Ken Alltucker
July 23, 2005

Four months after winning approval to increase rates, Arizona Public Service Co. late Friday asked state regulators for another increase in electricity bills to help offset the rising cost of fuel.

APS wants state regulators to approve an "adjuster" that would raise the typical residential customer's bill 2.1 percent to $110.66 from $107.92. The utility said the increase is warranted under terms of a state-approved rate plan that allows the utility to pass along its fuel costs.

"Our costs are much higher than what we're actually collecting in rates," said Steve Wheeler, the utility's executive vice president of customer service and regulation. "The costs are stubbornly high."

The APS request comes on the heels of a rate increase approved by state regulators in March that increased the typical residential bill by 4.3 percent.

It took APS nearly two years to win approval for that increase, and it was significantly lower than the 10 percent increase that APS sought when it filed for the case in June 2003.

Yet Wheeler signaled that even more bill increases could be on the horizon if energy costs, particularly natural gas, continue to soar. Natural gas and other fuel costs jumped 24 percent over the past two years.

Salt River Project has also passed on fuel costs to customers.

Previously, APS customers had been protected from the volatile shifts in energy prices, but that rate cap expired in 2004. And a rate plan approved by the Arizona Corporation Commission in March allows the utility to recover 90 percent of fuel costs under a "power-supply adjuster."

Corporation commissioners still must review and approve the request, which would show up in November bills if the utility gets its way.

"I'm very surprised they filed so soon," Commissioner Bill Mundell said.

"I'll closely scrutinize the request to make sure they made prudent purchase of fuel and they have not brought on by their own actions."

Mundell and Commissioner Kris Mayes said they want to examine all fuel purchases made over the past few months to see it the price increase is justified.

They also plan to review the utility's power plants to investigate whether this year's outages at Palo Verde Nuclear Generating Station or the Westwing substation contributed to higher costs.

"There is no doubt natural gas prices are skyrocketing," Mayes said.

"That doesn't mean all purchases should be assessed against ratepayers."

Arizona Public Service's filing comes a week after the Valley's other major electric utility, Salt River Project, announced a plan to increase rates 2.9 percent for residential and business customers. Salt River Project's proposed rate change would take effect in November and increase the typical residential customer's bill $3.96 per month to $104.17.

SRP's estimate is based on average use of 1,155 kilowatt-hours while APS' estimate of $110.66 per month is for 1,100 kilowatt-hours.

Unlike APS, SRP doesn't need the state's approval to change rates, just its own board of directors.

If SRP's board approves the rate raise at its Oct. 3 meeting, it would be the second increase since 2000.

Its last rate increase of 1.5 percent took effect in November.

Another way Salt River Project has increased bills is by passing along fuel costs. SRP implemented a 1.6 percent increase to recover fuel costs, the fifth time that SRP passed along higher fuel costs to customers since 2002.

Corporation Commissioner Marc Spitzer said the higher costs show that Arizona needs to diversify energy sources through renewable sources such as solar and wind. APS and other utilities have increasingly relied on natural gas to fire power plants because of environmental and safety concerns over coal and nuclear plants.

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