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ACC Approves Rate Increases for APS and Southwest Gas
ACC Approves Rate Increases for APS and Southwest Gas

In a week-long open meeting marathon, the ACC approved rate increases for both Arizona Public Service Company and Southwest Gas Corporation. In the case of APS, on December 18th the Commission authorized an interim rate increase of $65.2 million.  The increase reflects the ACC’s concern about immediate cost and credit pressures faced by the company as it struggles to maintain an investment-grade credit rating.  The increase was granted as part of the company’s general rate case filed in March 2008 and is subject to potential refund pending the outcome of the GRC sometime next year.  The Commission’s order granting the increase also requires APS to trim O&M expenses an additional $20 million (beyond the $50 million in cuts already identified by APS for 2009) and to reinvest the savings in infrastructure and technology.

As a separate matter related to the APS rate case, on December 19th the ACC staff filed its direct testimony in the APS general rate case in which it recommends rate relief for the company of $255 million.  This amount is well in excess of the interim relief of $65.2 million authorized by the Commission, but below the $448 million total increase sought by APS.  The staff recommendation is based in part on supplementing additional data on rate base beyond the historic test-year period and recommends a return on equity of 11 percent.

AIC is encouraged by the staff’s recommendation in the APS case to supplement the strict historic test-year with more current cost data and with its recognition that APS must improve its financial footing to continue to provide safe and reliable service to customers.

For Southwest Gas Corporation, the ACC authorized a rate increase of $33.5 million, which reflects a 10 percent return on equity.  The new rates are effective for service rendered to customers after December 1. 

AIC is disappointed that the Commission did not authorize implementation of either the weather normalization adjustor or the revenue decoupling mechanism proposed by Southwest in the case and supported by AIC, the Southwest Energy Efficiency Project and the Natural Resources Defense Council.  This is the second time this Commission has denied a decoupling mechanism for Southwest in a rate proceeding.  In their deliberations at the open meeting, the Commission did, however, encourage the parties to continue examining decoupling mechanisms in the generic docket on adjustors and incentive ratemaking.

Gary Yaquinto, AIC President