On Tuesday, the Arizona Corporation Commission approved in a 3-2 vote a $119 million revenue decrease for Arizona Public Service (APS). The vote comes over two years after APS initially filed its rate application requesting a $184 million dollar revenue increase.
Overall, the Commission approved a revenue decrease to APS’s base rates of approximately $119 million dollars per year. However, this reduction to base revenues does not reflect all adjustors and other mechanisms not contemplated within this rate case, meaning that APS customers could see bill increases.
Commissioners offered over 40 amendments to the original Recommended Opinion and Order (ROO) issued by Administrative Law Judge Sarah Harpring. Over six days of discussion and debate at three separate open meetings, Commissioners voted to approve the amended ROO.
Myriad amendments were adopted over the course of this proceeding that pertain to solar customers, electric vehicles, Selective Catalytic Reduction (SCRs) equipment installed on the Four Corners Power Plant, coal impacted communities, and battery storage, among others.
Commissioner Justin Olson’s amendment adopts the Residential Utility Consumer Office’s (RUCO’s) recommendation of a Return on Equity (ROE) of 8.7%, a significant reduction from APS’s initial request of 10.15%. This results in an overall reduction in revenue of approximately $145.9 million dollars from APS’s adjusted test year revenues annually.
Commissioner Anna Tovar’s first amendment will create a new residential EV charging rate tariff with a year-round super off-peak period at night, from 11 p.m. to 5 a.m., to incentivize residential EV owners to charge their cars when system utilization is lowest. Another amendment from Commissioner Tovar will conform the GS-Schools TOU periods with APS’s other TOU periods, eliminating the overly complicated shoulder periods and pricing currently in place. This means that there will now only be on-peak and off-peak periods and pricing for GS-Schools TOU plans.
Commissioners Tovar and Jim O’Connor advanced a joint amendment making changes to APS’s recovery for the SCRs investments and just transition for coal-impacted communities. This amendment allows in rate base APS’s SCRs investments, SCRs deferral, and SCRs debt deferral, with the exception of $215.5 million due to planning imprudence. The amendment further requires APS to depreciate/amortize the SCRS, SCRs deferral, and SCRs debt deferral based on an end of life of July 2031. The joint amendment also provides immediate assistance for the Hopi Tribe ($1 million) and Navajo County Communities ($0.5 million), provides $10 million over 3 years in assistance for the Navajo Nation, authorizes APS to spend up to an additional $2.5 million total in electrification of buildings located in the Navajo Nation and on the and Hopi Reservation, and provides additional non-cash assistance.
Commissioner Jim O’Connor had two additional amendments advance. The first denies APS any recovery of monies expended for Directors & Officers insurance. As a result, APS’s test year operating expenses will be reduced by $720,860, and the working capital component of its rate base will be reduced by $290,000. Commissioner O’Connor’s additional amendment will allow recovery of only 50% of APS’s industry association dues, as recommended by RUCO. APS will now only be entitled to recover $1.1791 million through rates, rather than $3.582 million.
Chairwoman Lea Márquez Peterson had two amendments adopted dealing with Time of Use (TOU) on-peak hours. The first reduces on-peak times from five hours to three hours, changing on-peak hours to 4 p.m. to 7 p.m. from 3 p.m. to 8 p.m. Her other TOU amendment directs APS to propose for Commission approval a new tariff for APS general service commercial and government customers to allow light duty passenger electric vehicles (EVs), and medium and heavy-duty fleet EVs to take advantage of low-cost off-peak solar energy production during the day through sub metered Level-1 and Level-2 EV charging stations located at the commercial and governmental customers’ property. This program is intended to work in tandem with APS’s existing Take Charge AZ Program to encourage private companies and state and local governments to install sub metered Level-1 and Level-2 EV charging stations, which will benefit their employees and patrons, and will additionally benefit the grid, ratepayers, and renewable energy developers.
Commissioner Sandra D. Kennedy had several amendments adopted, one removes the current Grid Access Charge (GAC) on TOU-E for residential solar customers, which will allow for more access to solar for those wishing to install it without having to pay an additional fee to APS; currently the fee is approximately $0.93 cents per kilowatt of solar installed, totaling between $5 and $10 per month for the typical residential solar customer. Another amendment will create uniformity between APS and Tucson Electric Power Company service territories for the sizing of non-residential distributed generation systems. Further, Commissioner Kennedy advanced amendments that will unfreeze access to a TOU rate schedule for religious houses of worship that was established in 1996 but frozen to additional customers in 2013; an amendment that disallows 75% of cash incentives paid to APS executives and certain employees because APS’s goals primarily benefit shareholders, not ratepayers; an amendment that corrects flaws within the current design of the commercial battery storage pilot rate which to-date has led to zero participation in the program; and an amendment that focuses on low-income bill assistance by requiring APS to work with stakeholders to develop a low-income assistance program to provide greater bill assistance to customers whose energy burden is above 5% through a new tiered rate structure for consideration in a future APS rate case.
A joint amendment from Commissioners Kennedy and Anna Tovar expands upon the Solar Communities program established in the last APS rate case. This will allow greater access to the benefits of solar for low and moderate-income customers who may not otherwise be able to obtain solar panels by allowing APS to install and own the systems, lease the customers’ rooftop space, and recover capital expenses in future proceedings at the Commission; this amendment increases the annual budget for the program to $20 million, with a maximum of $30 million, and increases the customer bill credit to $50 from $30.
The new rates will become effective on December 1, 2021. However, it will take APS 10 months to implement the new on-peak TOU schedules.