LAUREN GILGER: Arizona Public Service, the state’s largest public electricity provider, is asking the Arizona Corporation Commission for its third rate increase in four years. This one would raise rates 14%, adding up to about $240 more per year for customers, and many of them are not happy about it.
PROTESTERS: No rate hikes! No rate hikes! No rate hikes! No rate hikes! No rate hikes!
LAUREN GILGER: That is what it sounded like at a press conference outside of the Arizona Corporation Commission in May. The elected Corporation Commissioners get to decide whether and how much APS gets to raise rates. Hearings finally wrapped last week. They were supposed to end in June but went over schedule because of the amount of expert testimonies.
There’s a lot at stake for the company and for consumers, and the Residential Utility Consumer Office, or RUCO, is the state agency that represents ratepayers — that’s all of us who get our power from APS — at the Corporation Commission. They are officially opposing the rate increase request, and here to tell us why is RUCO Director Cynthia Zwick. Good morning, Cynthia.
CYNTHIA ZWICK: Good morning.
LAUREN GILGER: OK, so your office is against APS’ request for this 14% rate increase. Tell us why.
CYNTHIA ZWICK: Well, we think it’s excessive. And actually, during the course of the hearing, it’s gone up to 15.3%, which we think is even higher and too much. But we think that there are elements of the case that are just excessive. The return on investment that they’re asking for increases rates. They’re also seeking a formula rate, which we oppose.
LAUREN GILGER: We’ll talk about that formula rate in a moment. But tell us more about that return on investment. How much would it be for APS?
CYNTHIA ZWICK: So, for APS, they’re seeking a 10.7% interest, which is a return on the equity, which is essentially what shareholders will earn in return if the investments take place.
LAUREN GILGER: So, this is happening, Cynthia, in the midst of this cost-of-living crisis here and across the country. Tell us who will be most impacted by a rate increase like this.
CYNTHIA ZWICK: Well, we think it’s a fairly broad group of customers that are going to be impacted. We’re hearing from low-income families, we’re hearing from middle-income families, we’re hearing from residential customers in general that this rate increase is simply too high. It’s not keeping up with the cost of living, it’s not keeping up with wage increases. And so, it’s a very broad group of customers that are really very concerned about this.
LAUREN GILGER: And it seems like APS is not the only company that you get a bill from every month that’s raising their prices, right? Like this is happening kind of across the board.
CYNTHIA ZWICK: It is. Every gas company, every water and wastewater company along with each large electric utility is coming in for rate increases at the same time.
LAUREN GILGER: Yeah, and this all adds up. OK, there’s another big aspect of this case that you just mentioned there. APS is asking for a change in the way that it gets to raise rates, right? Like they want to be able to adjust rates each year instead of going every couple of years for these big rate cases. Do you think that this would be beneficial for consumers?
CYNTHIA ZWICK: Absolutely not. What we are hearing is the benefit of this is gradualism— that people can sort of plan for increases on an annual basis. What we know is that in other states where there are formula rates, customers pay more and they pay a lot every year, usually, on an ongoing basis.
And so, we’re concerned that here as well, people will be paying more on an annual basis, but not just for APS. They’re likely going to be — depending on where they live — they could be paying more to APS or their electric company, their gas company, their water and their wastewater. So, they could have four increases in the scope of one year.
LAUREN GILGER: Wow, OK. So, APS says that they have to ask for this rate increase because of a lot of things: inflation, the cost of equipment that they’re using for the utilities goes up, as, you know, costs of everything are going up, and just the ballooning cost of electricity today, right, like we’re seeing temperatures rise here in the Valley, that amount of power that they have to provide more people here is going up, and the influx of data centers, which we’ll talk about more in a moment.
But do you think they have a fair argument here, that costs are going up for them, too?
CYNTHIA ZWICK: I think costs are going up for them, but they’re not going up to the extent that they need a 14% or 15% rate increase, which is really ultimately what is their ask.
LAUREN GILGER: I want to talk about data centers, Cynthia. They’re so controversial right now, and we’ve seen so many built here in the Valley in particular and around the state so quickly. They use a lot of energy, right? And people are upset about them on a lot of fronts. APS is asking for a separate increase essentially for large load customers, as they’re called, like this.
And the idea is to kind of make sure that they pay for any new plants, any new transmission lines that is needed to serve a data center, and there certainly could be that coming. Are you concerned that data centers, though, are driving up costs for customers right now?
CYNTHIA ZWICK: We are concerned about it, and that’s one of the things that we’re looking into in this case. We have actually asked that there’s a separate rate class for those large customers that’s established, and we’re also looking at the subscription rate that the utility is proposing.
However, that was not included as part of this case. So, we’re continuing to look at what those costs might be and whether truly growth is paying for growth or whether some of those costs are being shared with residential customers.
LAUREN GILGER: And we don’t have a clear answer to that yet?
CYNTHIA ZWICK: We don’t.
LAUREN GILGER: OK. So, if you’re looking at the amount of vitriol that data centers seem to be, you know, raising in the general public right now — we’ve seen this happen in various places around the state and around the country, obviously, where people are just up in arms about the building of these data centers — do you think that they understand the issue entirely? Do you think that if these things were to be completely separate, it would solve the problem?
CYNTHIA ZWICK: I don’t think it would solve the problem at all. I think that there has been — there needs to be much more communication with the members of the communities where these data centers are going in. I think there needs to be more transparency about what the costs are. Many of the contracts that utilities create with the data centers are covered by NDAs, so there is very little transparency. So, I think there’s a lot that can be done to sort of open the doors to better explain what the situation is, who is paying for what costs, and really how all of that is playing out in the community.
LAUREN GILGER: So that the people who are mad about this might understand it better.
CYNTHIA ZWICK: Right. They still may not agree with it, but at least they’ll understand what the issues are, which I think is missing at the moment.
LAUREN GILGER: So, if you’re looking forward and we understand that data centers will be needed for various things, like, you know, everything that operates our phone, like, what do you think needs to happen in terms of the rate structure and the payment structure so that customers aren’t bearing the weight of this?
CYNTHIA ZWICK: Well, we need to make sure that if the formula rate goes through and there are annual filings, that we have time to be able to really evaluate what those costs are and ensure that those costs are not being passed along. There has to be an open and transparent process for anyone who has an interest to really understand that and to measure whether that, in fact, is occurring — whether those costs are covered by the data center cost causers.
LAUREN GILGER: OK. Very quickly, we won’t likely see a decision on this from the Corporation Commission for quite some time, end of the year is what we’re looking at, likely. What are you watching for now?
CYNTHIA ZWICK: Well, we’re just watching essentially what we’re waiting for now is there are some closing briefs that have to be filed. We’re waiting for the recommendation from the judge. And that will really set the tone. The judge will make a recommendation to the Commission, but they can ultimately make any changes to the recommendation and implement whatever modifications they feel are appropriate.
LAUREN GILGER: OK, it’s a long process. RUCO Director Cynthia Zwick joining us this morning. Cynthia, thank you very much for coming in. I appreciate it.
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