Two of Arizona’s largest electric utilities plan to ask state regulators for permission to raise their rates in 2026.
Arizona Public Service and Tucson Electric Power both filed paperwork notifying the Arizona Corporation Commission that they plan to file rate case applications, the formal process by which regulated utility companies ask commissioners to approve new rates paid by customers.
The commission just approved a rate increase for APS last year, and TEP’s current rates were approved in 2023.
But both utilities claim that they need to raise rates again to recover costs associated with infrastructure investments and inflation.
“The tremendous growth across APS's service territory shows no sign of letting up, with the Company's infrastructure and reliable energy supply providing the backbone of this historic expansion,” according to APS’ filing. “And yet, with high rates of inflation, persistently high interest rates, and continued supply chain volatility, the costs to serve current APS customers (let alone prepare for growth) are substantially higher than when the test year concluded in the Company's last rate case.”
Consumer advocates, who have accused utilities of prioritizing shareholder profits over customers, said they will be keeping a close eye on the rate cases.
“To protect ratepayers, especially those already struggling, the Arizona PIRG Education Fund urges APS to ‘ask for what they need, not what they want,’” according to a statement from Arizona PIRG, a public interest watchdog group.
APS has experienced consistent income growth. Pinnacle West Capital Corporation, the utility’s parent company, reported a net income of $609 million last year, up from $502 million in 2023.
APS noted in its filing that it will ask the commission to consider changes to its rates for larger industrial users “to ensure that the costs of serving large high load factor customers, including data centers, are apportioned fairly and in a manner that does not place undue financial burden on residential and small business customers.”
APS could also seek an increase to increase a controversial surcharge on solar customers approved by the commission last year. When the commission approved the surcharge, it directed APS to revisit the issue in its next rate case.
Both APS and TEP plan to ask the commission to approve a formula rate plan, which will allow them to seek rate adjustments more frequently. Under the model, utilities can ask for yearly adjustments moving forward rather than the typical rate case process that can take years to resolve.
For instance, APS’ most recent rates approved by the Corporation Commission last March are based on data from 2022.
The Corporation Commission voted 3-1 last year to allow utilities to ask for the new formula rate model despite opposition from consumer groups, who warned it will give customers less input in the process
The commission’s order still requires utilities using formula rate plans to undergo a full rate case every five years .
According to the applications, APS is asking that its new rates take effect by July 8, 2026. TEP is asking that its new rates go into effect by September 2026.
