Corporation Commission candidates talk utility rates as energy prices climb for Arizonans

The two Democrats trying to secure seats on the all-Republican Arizona Corporation Commission and incumbent Kevin Thompson are presenting voters with different ideas on how the state’s top regulator should set utility rates and ensure costs remain affordable for Arizonans.

Thompson and Republican state lawmaker Ralph Heap are running against Democrats Clara Pratte and Jonathon Hill for two open seats on the Corporation Commission, which is currently in the midst of considering double-digit rate increase requests from Arizona Public Service and Tucson Electric Power, two of the state’s largest electric utilities.

At a debate hosted by the Arizona Citizens Clean Elections Commission, Thompson talked about how he approaches those rate cases.

“We'll cut the fat,” he said. “We'll cut things where we think they need to be trimmed, and try to hold the utilities accountable.”

But, Thompson noted, the utilities are allowed to recover their costs from ratepayers under Arizona law.

“So it's not simply saying no. It's how can we make sure that it's just and reasonable in the process,” Thompson said.

But Pratte and Hill argued recent rate cases have been anything but “just and reasonable,” claiming rates are climbing faster now than ever before.

Pratte pointed out that both APS and TEP received sizable rate bumps within the past three years followed by their requests for increases of around 14% this year.

“That is not cutting the fat,” Pratte said. “That is making ratepayers pay for poor planning and not really addressing the underlying issues of ensuring we have a modern and reliable grid that serves everybody.”

At the same, Hill argued the large utilities are profiting too much from those rate hikes.

He pointed to documents released by APS parent company Pinnacle West Capital Corporation showing it generated more than $600 million in profit over the past two years.

“So over the last two years, that's $1.2 billion that Arizona customers have paid to this company, that then has just left Arizona,” Hill said. “It's left our economy. It's not here to help us anymore. It goes to Wall Street and all of their investors.”

Formula rates

The candidates also sparred over a controversial new ratemaking option the current commission is backing, called formula rate plan adjustments. Those plans would allow utilities to seek streamlined annual rate increases rather than go through the traditional rate case process, which can take years.

“The formula is assigned just like it is now, but what happens is every year now the utility would come back in for basically a mini rate case,” said Thompson.

He has defended formula rates, saying they will combat the “rate shock” that occurs when utilities seek larger hikes every few years.

But Pratte said there are better ways to combat that rate shock.

For instance, she argued the commission could separate smaller rural utility co-ops from the larger investor-owned utilities when it considers rate cases, which she says would reduce the backlog that leads to yearslong delays.

“Right now, they're all in one queue, which causes a lot of backlog,” Pratte said. “If you bifurcate those two things out, you're able to handle co-ops in a different way than investor-owned utilities, and that's something the co-ops have been very excited (about).”

Thompson, though, said the commission will still apply the same scrutiny to annual requests under the formula rate plan. Plus, he said, the annual adjustments could result in rates going down if a utility’s major costs, such as fuel, decrease.

“And so they'd have to bring all their receipts in and show us that they deserve to have an increase, or is it a decrease?”

Hill scoffed.

“Well, I'm glad we have this on tape because I'd love to bring this up like in a couple years and see if we ever actually see a decrease,” Hill said. “I don't think the utility companies would be fighting so hard for formula rates if it was ever going to lead to a decrease.”

Instead, critics of formula rates argue the streamlined process will actually result in less opportunities for the public — and ratepayers — to weigh on the changes.

Pratte argued that lack of public input is already a problem at the commission, especially when commissioners are making decisions that affect rural residents who cannot attend public meetings in Phoenix.

“A number of years ago, the commission used to do field hearings, because it's much easier to send five commissioners out to a rural community than ask a rural community to come to Metro Phoenix, right? And I think that is something that should be re-implemented,” she said.

Odd man out

Heap was the only major party candidate who did not appear on the debate stage. He also skipped a similar forum hosted by PBS earlier this week.

“I think it's disrespectful to the voters that have put him on the ballot for sure … I really think the public deserves to hear some of the crazy talking points that he is putting out there on their behalf,” Pratte said after the debate.

Pratte and Hill referred to Heap as Thompson’s running mate, though it’s unclear if Thompson views his fellow Republican in that way. Thompson did not take questions from the press after the debate to answer that question.

Heap advanced to the general election after defeating Commissioner Nick Myers, who was running alongside Thompson, in the Republican primary.

Since that time, Heap has kept a low profile and avoided most public speaking engagements as his campaign faces allegations it violated campaign finance laws.

EDITOR'S NOTE: The story has been updated to correct the spelling of Jonathon Hill's name.