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Regulators reduce rates for Arizona’s largest power company

November 4, 2021 GMT

PHOENIX (AP) — Most Arizona Public Service customers will see a small decrease in their bills after state regulators slashed the rates that the state’s largest electric utility can charge.

The Arizona Corporation Commission on Tuesday gave final approval to a plan that will reduce APS base rates by about $119 million, according to The Arizona Republic. The company vowed to sue, calling the decision “shortsighted” and warning it will increase consumer costs in the long run.

The rare rate reduction reflects a significant change of fortunes for the politically influential utility, which in 2017 was granted a large rate hike that was billed as an average increase of 4.5% but amounted to a much larger spike for many of its customers.

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APS had originally asked for a $187 million rate increase, which it later reduced to $169 million, ABC15 reported. Instead, commissioners voted 3-2 to reduce the company’s return on equity from 10% to 8.7%. The commissioners also voted not to allow APS to bill its customers for hundreds of millions of dollars in improvements to a coal plant in New Mexico, which the regulators determined was an imprudent expenditure.

The commissioners did allow APS to increase revenue for adjusters that charge customers for specific items like power plant fuel and renewable-energy programs, the Republic reported. Altogether, APS will see a slight increase in revenue but significantly less than it would have without a cut in its base rates.

Lea Marquez Peterson, the commission’s Republican chairwoman, said APS rates haven’t been reduced since 1996, “providing relief to captive customers that have struggled with multiple challenges with APS’ previous management and a global pandemic.” She voted for the changes along with Republican Jim O’Connor and Democrat Anna Tovar.

Under retired CEO Don Brandt, APS spent lavishly on political contributions, including millions to elect its favored members of the Corporation Commission. Some of the spending was funneled through dark money political groups and wasn’t acknowledged by APS executives for years.

“Our most important responsibility is to our customers, who depend on APS for the energy infrastructure that will power Arizona’s prosperity far into the future,” said a company statement released after the vote. “Today’s short-sighted decision by the Arizona Corporation Commission ignores that crucial responsibility.”

APS argues the Commission’s actions will raise the utility’s borrowing costs for future investments, including renewable energy projects, and the higher costs will ultimately be paid by customers.

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The new rate plan also reduces the number of “peak” hours when customers on some plans pay higher rates. The new hours will be 4 p.m. to 7 p.m. instead of 3 p.m. to 8 p.m.

APS said about 69% of customers would see a bill reduction of 2% or less. About 21% of customers will see an increase of less than 1%, and 7% are projected to see bill increases from 1-3%. The exact impact on customers will depend on their rate plans and the time of day when they use electricity.

The changes will begin affecting bills in December, but the company says it will take months to fully implement them.