Continued construction of needed power supply facilities and dramatic
increases in basic commodity costs have compelled Arizona Public Service
(APS) to ask the Arizona Corporation Commission (ACC) to approve an
increase in retail customer prices of $265.5 million annually to become
effective no later than July 1, 2009.
The 8.1 percent average net increase takes into account a proposal to
implement an impact fee for new customers to connect to the system. The
fee will enable growth to partially pay for itself.
“The growing demand for electricity in Arizona
requires us to build more infrastructure, which has become increasingly
more expensive,” said APS CEO and President
Don Brandt. “We must continue to invest
approximately $1 billion a year in our system to maintain reliable
service to our customers, something to which we are deeply committed.”
Costs for the basic building blocks for providing electricity such as
copper, steel and aluminum are up 273 percent, 142 percent and 51
percent, respectively, since 2001. A transformer that cost $953 in 2003
now costs $1,626, a 70 percent increase. Gasoline to fuel APS’
line trucks and other vehicles has increased more than 120 percent.
“We don’t like to
raise prices,” said Brandt. “While
other businesses have a choice to limit their capital investments in
response to market conditions, APS does not. Even as we prepare for
another challenging summer, our current prices do not reflect all of the
costs of the equipment that keeps the lights on and our homes cool.”
In addition, APS seeks to continue working with the ACC on ways to
expand and promote the Company’s conservation
and demand-side management programs. APS proposes new Time of Use rates
as well as a “super peak”
rate option from 3 p.m. to 6 p.m. during the hottest summer months when
conservation measures can have their greatest impact. With 40 percent
enrollment, APS leads the nation in Time of Use customer participation.
These voluntary programs offer customers lower rates during non-peak
hours.
“We are continuing to develop programs that
help our customers use electricity more efficiently and reduce the
impact of this rate increase. The ability to fund and carry these
programs forward depends on positive outcomes in this rate filing,”
said Brandt.
If the Company’s request is approved by the
ACC, an average monthly residential bill would increase by $11.51 –
or, a little less than one cent per kilowatt hour –
from $123.90 to $135.41 based on an average year-round usage of 1,175
kilowatt hours.
Even with the current economic slowdown, Arizona continues to grow. APS
expects to add 430,000 customers by 2020, including roughly 380,000 new
homes and 50,000 new businesses. The Company will need 4,500 additional
megawatts to meet this need.
APS is aggressively planning for its next round of generation, including
power from renewable energy such as the recently announced Solana
Generating Station. If built today, Solana would be the world’s
largest solar facility at 280 megawatts and provide APS customers with
more solar energy than any other utility in the nation. Currently, APS
provides more than 130 MW of renewable energy to customers from solar,
wind and biomass and offers customers the opportunity to purchase as
much renewable energy as they choose. In addition, APS continues to
invest in new technologies that reduce greenhouse gas emissions.
In 2007, APS recorded all-time best reliability results while setting
34,000 new meters and managing one of the hottest summers on record. The
Company expects similar performance through the upcoming summer as a
result of the reliability enhancements it has made to the system.
“Arizona’s future
requires an electric company that is strong enough to power a growing
economy and attract the capital to finance required expansion. The
ability to recover our costs is essential for the Company to maintain
the highest levels of reliability and continue building the necessary
infrastructure to meet the demands of our customers and the state,”
said Brandt.
The Company expects the ACC to issue a procedural schedule during the
next several months detailing the timeline for addressing the request.
APS, Arizona’s largest and longest-serving
electricity utility, serves about 1.1 million customers in 11 of the
state’s 15 counties. With headquarters in
Phoenix, APS is the largest subsidiary of Pinnacle West Capital
Corporation (NYSE: PNW).
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