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State Regulators Grant APS Rate Increase

State Regulators Grant APS Rate Increase

by Ken Alltucker - Dec. 16, 2009 09:24 PM
To read this article in The Arizona Republic, click here.

State utility regulators on Wednesday approved a rate hike that will allow Arizona Public Service Co. to raise monthly electricity rates. The Arizona Corporation Commission voted four to one to approve the APS rate increase, which will add $6.32 to a typical monthly bill.

Customers won't immediately see much of a bottom-line increase in their bills. That is because part of the overall bill, which is pegged to fuel prices, will decrease sharply when the new rate takes effect in January. In fact, the average household bill will rise just 64 cents to $133.51 per month based on 1170 kilowatt hours.
"We're pleased that the commission granted this increase," said APS President Don Robinson, who added that the rate increase will help the utility maintain stable finances while also investing in renewable energy and promoting conservation.

The fuel surcharge assessment is adjusted once each year, so customers may pay more in 2011 if natural gas prices increase over the coming year.

APS is allowed to pass along the cost of natural gas that it needs to operate its power plants. Natural gas costs can be volatile with price swings based on factors such as economic growth, supply disruptions or even cold weather snaps.

So much like fluctuations in gasoline prices, consumers can expect to see price changes in 2011 based on fuel surcharge.

Many utilities and their customers are paying less for fuel this year, said Jim Owen, director of media relations for the Edison Electric Institute, a group that represents shareholder-owned utilities.

The less expensive fuel "helps utilities and it helps customers. I think everybody can be grateful during these difficult economic times for any assistance," Owen said.

Still, news events swing the natural gas prices. For example, natural gas futures on Tuesday closed at an 11-month high as investors speculated that natural gas stockpiles would dwindle and cold weather in the Midwest would trigger demand for the fuel. Also, ExxonMobil announced it would acquire natural gas producer XTO Energy, a sign that the energy giant sees a lucrative future in natural gas.

APS has said that it needs to collect more for its base electricity rate to keep the publicly-traded utility on solid financial footing. The Phoenix-based utility needs to maintain strong finances to keeps its bond rating, which helps the utility borrow money at better rates.

Investors also have closely watched the rate case. Shares of the utility's parent company, Pinnacle West Capital Corp. closed Wednesday up 12 cents, to $37.56, just off the utility's 52-week high of $37.96.

An administrative-law judge in November recommended that APS be allowed to raise rates by $6.32 each month for the typical household. That was in addition to an emergency increase of about $2.68 approved by commissioners last December.

Also, 22 of 24 businesses, individuals and other representatives that participated in the rate case agreed APS should get its rate increase as long as the utility met concessions. The utility will be required to reduce an average of $30 million in annual costs over the next five years, meet standards for energy efficiency and bolster assistance for low-income customers.

Gary Pierce was the sole commissioner who voted against the rate increase.

Gary Yaquinto, president of the Arizona Investment Council, said the rate-case approval will benefit APS as well as investors and customers over the long haul. That is because the rate case sets timelines of when the utility can file for future rate cases.

"This charts a long-term path for Arizona Public Service with respect to the next several rates cases that APS will file," said Yaquinto, whose group counts 6,000 investor members. "This provides greater certainty for rate increases into the future."

Yaquinto said other benefits include APS' commitment to fund programs for low-income customers and to invest in renewable energy sources, including a solar energy plant, rooftop solar panels on schools and a wind farm in Arizona.