Arizona Public Service seeks rate hike in part to support power plant spending

Arizona Public Service on June 1 asked the Arizona Corporation Commission for the first comprehensive review of the company’s rates in five years, with the rate hike needed in part to build as 500-MW expansion of the gas-fired Ocotillo plant.

“Our proposal moves Arizona forward with continued investments in an advanced energy grid, a cleaner energy mix and new technologies that will enable our customers to have more choices and control,” said Don Brandt, chairman, president and CEO of APS.

If approved, the request would enable APS to:

  • Invest $3.6 billion over the next three years in upgrades and maintenance for the energy grid;
  • Complete a $500 million investment to modernize the Ocotillo Power Plant with more efficient generation that reduces emissions and water use;
  • Support a $400 million investment to reduce emissions at the coal-fired Four Corners Power Plant and comply with more stringent federal environmental standards;
  • Fund the continued development of innovative technologies such as battery storage, microgrids and advanced solar research;
  • Continue industry-leading performance at the Palo Verde Nuclear Generating Station, which produces 80% of Arizona’s carbon-free electricity;
  • Increase funding by 35% for financial assistance to help limited-income customers, to $48 million annually; and
  • Create new economic development rates to help attract jobs and investment to Arizona.

“By investing $3.6 billion in Arizona’s energy grid over the next three years, we’ll also be stimulating Arizona’s economy and creating opportunities for suppliers,” said Brandt. “We are recommending new economic development rates that will help attract new jobs and investment to Arizona, with a particular emphasis on high-tech data centers.”

APS is requesting a net increase of 5.74%, or $166 million annually, to support its operations and investments in the energy grid. The average monthly bill for residential customers would increase 7.96%, from $139.32 to $150.41. Of that $11.09 monthly increase, $1.74 is due to subsidies for the rooftop solar industry, which continue to grow. Business customers would see increases ranging from 0.4% to 6.14% depending on the size and energy usage of the business.

APS prices have remained stable over the last 20 years, increasing 1.6% per year on average – well below the rate of inflation. The company noted in its filing that through efficiency measures and other cost-saving initiatives, it has reduced costs by $207 million since 2008. “It was important that we tighten our own belt before asking customers to pay more,” said Brandt.

APS said its plan also benefits customers by reducing the “lucrative” subsidy currently paid to support the rooftop solar industry by the 96% of residential customers who do not have rooftop solar. The change would not affect the 40,000 customers who already have rooftop solar, or those who install systems prior to July 1, 2017.

“Our proposal is pro-solar and pro-customer. We want to continue Arizona’s solar leadership the right way – with more solar, for more customers, without driving up the energy bills paid by non-solar customers,” said Brandt. “Importantly, our proposal does not affect customers who have already made the decision to put solar on their homes.”

APS said it first proposed a reduction in the subsidy in 2013; the resulting cost shift has now grown into a billion-dollar price tag paid for by non-solar customers, and it will continue to grow until the ACC takes action.

“It’s time for our industry to adapt its pricing model to reflect new energy technologies and the changing way customers are using electricity,” said Brandt. “There will be the usual naysayers who want to protect the status quo for their short-term financial gain, but Arizona has delayed too long already.”

APS, Arizona’s largest and longest-serving electricity utility, serves nearly 1.2 million customers in 11 of the state’s 15 counties. With headquarters in Phoenix, APS is the principal subsidiary of Pinnacle West Capital Corp.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.