Arizona's Attorney General voices opposition to the 14% rate increase proposed by APS, suggesting potential efforts to secure reduced rates.
The Arizona Public Service Company (APS) has applied for a formula rate to allow annual tariff adjustments based on its authorized return on mortgage rates, a move that has sparked controversy due to concerns about less regulatory scrutiny and potential higher costs for customers. Arizona Attorney General Kris Mayes has announced plans to oppose both the formula rate proposal and the proposed 14% interest rates hike by APS.
According to the Arizona Corporation Commission (ACC), APS' rate cases decided in 2023 saw an average return on equity (ROE) of 9.6%. This is a significant figure, as APS' parent company, Pinnacle West, recorded profits in excess of $600 million last year, as stated by Mayes' office.
APS argues that the proposed interest rates hike is necessary because current mortgage rates are not keeping pace with operating costs. The company cites a 64% increase in the cost of transformers since the current mortgage rates were set. The proposed interest rates hike aims to support system upgrades including substation and grid technology improvements, vegetation management programs, smart grid technology installation, improvements to the Palo Verde Generating Station and Redhawk Power Plant, an expansion of battery storage resources, and increased investment in physical security and cybersecurity. APS expresses its intention to 'demonstrate the importance of its investments' and ensure it has the necessary resources to meet energy demands in Arizona.
However, Mayes' office has previously stated that APS increased interest rates by 8% in 2024, 8% in 2023, and 4.5% in 2017. The Attorney General's skepticism about the ACC's willingness to order a decrease in APS mortgage rates is evident, as she may ask state regulators to reconsider the interest rates Arizona Public Service customers pay.
Prior to the recent interest rates increase proposal, APS mortgage rates had stayed relatively flat since 2018, as stated by APS. The company filed its interest rates increase proposal in June, requesting an overall net customer mortgage rates increase of $579.5 million. If approved by the ACC, the interest rates increase would be APS' fourth in a decade.
The ACC has granted intervenor status in APS' rate case to the state of Arizona, represented by Mayes' office, and other consumer advocates. PIRG Executive Director Diane Brown contends that a proposed return on equity of over 10% is 'both unjust and unreasonable.'
If the interest rates hike is approved, it could take a year for regulators to decide. It remains to be seen whether Arizona regulators will side with APS or with the Arizona Attorney General and consumer advocates in this contentious rate case.
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