Despite record-breaking profits, Arizona’s monopoly utilities — led by APS — are pushing to offload even more costs onto ratepayers with less oversight through a sweeping new bill, HB2679. 

If passed, HB2679 would allow utilities to use a financial tool known as “securitization” that trades high-interest loans for low-interest bonds that can be paid off over time. While this tool has benefited ratepayers in some states, lawmakers must understand that HB2679 creates an entirely new way for utilities to charge ratepayers without needing their regulators’ approval. That means this bill would allow utilities to pass any unwanted debt to their ratepayers without regulatory oversight on the number of bonds they issue and how much debt they can include. This bill also severely limits courts’ actions to protect ratepayers.

Allowing bonding without limits would be the most significant change ever enacted for financing billions of dollars of utility plants, transmission lines and other equipment. Yet, this bill was drafted and introduced without input or review from state government organizations that oversee utilities, public interest groups or any customer groups. Still worse, the bill is being fast tracked. It has only had one committee hearing and is expected to be voted out of the House of Representatives in less than 30 days from the date the bill was made public.

The Arizona Chamber of Commerce’s Jan. 30 op-ed supported this complicated and not well-understood utility financing mechanism. To understand what the bill actually does, and its myriad consequences, one must dig into its 40 pages. So let’s look at its key provisions and the approval process. 

HB2679 would allow every electric utility in Arizona to create bonds for the debt they have incurred and obligate customers to pay the bonds back with no exceptions. Unlike the current process where utility regulators approve debt amounts and types at the Arizona Corporation Commission, the commission could not restrict, prohibit or influence how much or what types of debt are being passed to ratepayers. Due to that provision and others, commission staff believe the bill is unconstitutional. 

In addition, if customers don’t or can’t pay the bonds, they can be sued. Bond payments can be added to a ratepayer’s electric bill with a requirement that bonds are paid first and electricity costs second. This increases the likelihood of electricity shut-offs as thousands of customers who struggle to pay monthly electricity bills will have their limited funds going to bonds instead of ensuring they can continue to have electric service.  

Historically, securitization bonds have been used to eliminate power plant debt. However, HB2679 has such broad language it allows utilities to send debt to customers for costs incurred from heat events, storms, floods, “weather, wildfire or other significant events or … loss of life, injury to person or property, human suffering or financial loss.” Additionally, natural gas fuel price spikes and past natural gas debt could be passed to consumers. In fact, it’s difficult to identify any costs that can’t be passed on to customers. 

Also, the bill provides no caps on the amount that can be charged to customers nor the number of bonds that can be issued. As an example of the magnitude of the bonds that could be passed to ratepayers, Arizona Public Service cites the 2021 storm Uri, which sent $3 billion to Texas customers through bonds with Oklahoma customers having to pay more than $4 per month for the next 16 years for that one storm.

Finally, as everyone knows, it can be dangerous for the elderly and sick to live in Arizona without electricity, especially in the summertime. As written by APS and other utilities, this bill could obligate customers to pay a victim’s family for a heat-related death (loss of life) rather than the electric company that caused the death.

As the Chamber pointed out, the state needs reliable and affordable electricity. What the state does not need is to give total authority to monopoly utilities to pass any debt they don’t want to its ratepayers. This bill is being rushed through the process without opportunity for study, dialogue or major amendment because it is a raw deal for customers and the state. 

Legislators and staff should look closely at this bill. There is no urgency or need to pass this proposal this year. It does not deserve an affirmative vote. There are too many unknowns and unintended consequences for it to become law.     

Amanda Ormond is the Principal of the Ormond Group LLC and is a former Director of the Arizona Energy Office.