Corporation Commission approves APS rate hike

State utility regulators agreed Tuesday to allow APS to collect another $95 million a year from its customers.

But whether the company gets to keep it remains to be seen.

The 4-1 vote by the Arizona Corporation Commission came after the majority rejected a bid by Bob Burns to delay the rate case until his lawsuit against APS and his fellow commissioners is resolved. That involves the question of whether he was denied what he believes is his constitutional right as a commissioner to subpoena utility executives over how they’ve spent money in the past.

Burns had no better luck with a proposal to allow the rate hike to take effect but require APS to post a bond equal to the new dollars in case a judge ultimately sides with him and courts conclude the rate case was not handled properly.

But ultimately it may not matter.

In explaining his vote, Burns said he repeatedly reminded colleagues of their duties “and their obligation to let me do my job to consider and protect the interests of the consumers who elected me.” He said he had hoped they would change their minds about proceeding, especially with his raising questions about whether they are biased in favor of APS.

“It appears I will not see that change and will now need to rely on our courts to enforce my rights and the other commissioners’ duties,” Burns said. And he left no question about what he believes happens to the APS rate case if Maricopa County Superior Court Judge Daniel Kiley concludes that he should have been entitled to raise his questions.

“Any such vote will be subject to reversal, with a corresponding finding and command that all rate charges imposed on Arizona consumers in accordance therewith were illegal, unauthorized and must be refunded,” he said.

APS legal counsel Thomas Loquvam declined to comment on the possibility of refunds because of the pending lawsuit.

In the meantime, as of Saturday most APS customers will be paying more under the terms of a deal involving APS, commission staff, the Residential Utility Consumer Office and some other parties to the case.

It computes out to a nearly 3.9 percent rate increase. But for residential customers the figure is closer to 4.5 percent, a figure that APS figures will mean an average $6-a-month increase for its more than 1 million residential customers.

Burns was alone in his opposition as other regulators said it was a good deal.

Andy Tobin pointed out that groups representing low-income residents were in support. And Boyd Dunn said his support was based on the relevant facts and not personal attacks he considered “unfortunate.”

Within that increase, there are some significant changes in how bills are computed.

People who are currently paying a flat rate will find their basic charges — what they pay no matter how much or little energy they use — going up sharply. For basic customers, the figure is going from less than $9 a month to $15; for those large-use customers, meaning homeowners using more than 1,000 kilowatts a month, the base rate will be $20.

Much of that is designed to encourage customers to switch to alternate rate structures. One is a time-of-use rate, where the charge per kilowatt hour is higher during peak periods but lower at off-peak times.

APS currently has such a program, with higher rates from noon until 7 p.m. The new rate structure sets the peak hours from 3 to 8 p.m.

That drew concern from some consumer advocates who noted the higher overall rates and said it will be difficult for customers to use less power during that early evening hour.

And there’s something else: Any new APS customer will be automatically put into a time-of-day rate for at least 90 days. Only after that would they be able to decide that a flat per kilowatt hour makes more financial sense.

Burns attempted to insert a provision to guarantee a refund for new customers who pay more under a time-of-use rate than they would have under a flat rate. APS opposed the move, a position that Steve Jennings of AARP said shows what this is really about: corporate profits.

“I think you can see by the company’s position on this that they’re admitting that they’re going to charge people more than people need to pay for the power,” he told regulators. “People should only have to pay what it costs for them to get the power, not one penny more.”

But APS Vice President Barbara Lockwood said all this is part of the company’s need to move to “more modern rates” that reflect the cost and availability of electricity.

More to the point, Lockwood said promising customers a refund if a flat rate would have cost them less undermines that goal of getting customers to “work with the rates” to see if they can save money by adjusting their energy use.

“If it’s a flat guarantee, then there’s really no purpose or reason for customers to actually experience the rates,” she said.

Burns’ objections to the vote start with his inability to ask executives of APS and parent company Pinnacle West Capital Corp. about whether they were the source of $3.2 million in money from anonymous sources spent in 2014 to elect fellow Republicans Tom Forese and Doug Little. He contends it is his constitutional right as a commissioner to question utility officials about how money, which ultimately comes from ratepayers, is being spent.

APS has refused to comply with his subpoenas and the other four commissioners refused to issue an order to enforce them, which is why Burns wants Kiley to rule that the subpoenas are enforceable.

But he’s also accused the other commissioners of acting illegally in thwarting his efforts. And that, he argued, undermines the legitimacy of the whole rate case.

“Such unlawful actions have prevented the development of an appropriate and complete factual record for this proceeding and have unlawfully favored the economic interests of APS and Pinnacle West over the interests of consumers,” he charged.

Legal issues aside, Burns also questioned whether APS and its parent really are entitled to more money, noting that the commission’s own staff had originally called the request unjustified.

He pointed out that Pinnacle West CEO Don Brandt had total compensation last year of more than $11.3 million. By contrast, Mark Bonsall, the CEO of Salt River Project, the other major utility in the Phoenix area, gets about $1.1 million a year in salary and benefits.

APS spokesman Alan Bunnell said Brandt’s pay is tied to detailed performance goals set by the company’s board at the beginning of the year, including electricity reliability, customer service, workplace safety and “keeping the company financially strong.”

“The company performed well on these metrics in 2016 and shareholders also benefited from the company’s solid performance,” he said.

As to how those shareholders are doing, their dividends have increased every year since 2012. In fact the current dividend of 62.5 cents a share is 25 percent higher than what it was in 2012.

In hammering out a deal, APS made some concessions to blunt or eliminate foes.

For example, one provision provides a special discount rate for schools, a move that brought on the Arizona School Boards Association. There also is a new rate to attract data centers and customers with multiple locations, like grocery chains, will be able to have a single aggregate rate with lower costs.