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Arizona Restructuring Suspended            
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Acronyms for the State of Arizona
ACC-Arizona Corporation Commission
APS-Arizona Public Service Company
CTC-Competition Transition Charges
PG&E-Pacific Gas and Electric Company
SRP-Salt River Project
TEP-Tucson Electric Power Company

Last Updated: September 2008

06/07:  The Arizona Cooperation Commission held an open meeting and set the APS rate increase to approximately 5.7 percent on summer bills and about 3.5 percent on winter bills. Because APS has a variety of rate plans and customer options, individuals’ personal rate increases will vary.
Source:  Arizona Cooperation Commission

05/06:  The Arizona Corporation Commission approved a temporary interim rate increase designed to partially refund money Arizona Public Service (APS) has already paid for natural gas in 2005 and what APS projects it will incur in additional charges for 2006. The increase is necessary to pay down debts that continue growing due to the unprecedented and sustained high natural gas and purchased power prices. APS does not profit from this increase as the monies collected will be used solely to pay fuel costs. The temporary increase represents approximately 7.6 percent on the typical residential customer’s bill. The surcharge will end once APS collects approximately $140 million in fuel and purchased power prices.
Source:  Arizona Cooperation Commission

03/05:  In their first quarter 2005 report, the Electric Competition Advisory Group reported no activity for the fourth quarter of 2004 and the first quarter of 2005. The same group reported no activity since the first quarter of 2004.  This inactivity strongly suggests that electricity restructuring in Arizona has been indefinitely put on hold.

10/04:  Restructuring in Arizona was essentially placed on hold due to a variety of regulatory orders.  However, the state’s initial restructuring rules and legislation imposed a non-by-passable system benefits charge on direct access customers to fund Commission-approved low-income, demand side management, environmental, renewable and nuclear power plant decommissioning programs. However, since there were very few direct access customers in Arizona, there was actually no new funding.  According to the Arizona Corporation Commission (ACC), the system benefits charge reflected what was already in base rates for public benefits for each utility. Some utilities did not levy such a charge. For those utilities that did levy the charge, all customers were required to pay it. The amount of the charge that funded low-income programs varied by utility.  Most of the state’s major utilities have had low-income and energy efficiency programs for a number of years and these have continued under restructuring.
Source:  United States Department of Health and Human Services

03/04:  The Arizona Court of Appeals ruled that the Arizona Corporation Commission’s decision to require electric utilities to divest their generation assets was unconstitutional.  The Arizona Court of Appeals stated that it is the Commission’s duty to attempt to control retail rates, not to specifically control and manage electric utilities’ operations.  Furthermore, the ACC did not provide an explanation of how requiring electric utilities to divest their generation assets would help to control rates, thus providing the basis for the Arizona Court of Appeals to rule that this ACC statute was unconstitutional.
Source:  Arizona Court of Appeals

04/03:  The Arizona Public Service Company (APS) issued a report entitled “Arizona Public Service Company Comments to the Electric Competition Advisory Group.” The report stated that “For residential and smaller commercial customers, transaction costs of retail choice have been more significant than first believed…APS does not believe that the Retail Electric Competition Rules should be continued in their present form.”
Source: Arizona Public Service Company

09/02:  The Arizona Corporation Commission (ACC) issued its final order on Track A issues. The order instructed the Arizona Public Service Company (APS) and the Tucson Electric Power Company (TEP) "to cancel any plans to divest interests in any generating assets." The order also stated that the previous decisions dealing with the amount of power purchased through a competitive bid process were put on hold. The Commission had designated this issue part of Track B, which was to deal with the entire "competitive solicitation process." The ACC specifically stated that if APS pursued acquiring Pinnacle West Energy Corporation's generating assets, then these generating assets cannot "be counted as APS assets in determining the amount, timing and manner of the competitive solicitation process." In addition, the order established the Electric Competition Advisory Group, and the ACC staff was to “prepare and file reports detailing the activities of the Advisory Group." This order went into effective immediately.

08/02:  Due of the lack of competition in the state, the Arizona Corporation Commission (ACC) nullified a section of the restructuring law that required divestiture of generation assets.  Arizona's restructuring law did not allow former monopoly utilities to own power plants so the utilities were required to "move their power plants into a separate subsidiary or sell them to another unrelated company."  According to an ACC press release, the Commission stated that the Arizona Public Service Company (APS) and Tucson Electric Power (TEP) "have market power" in their service territories, and "full divestiture would limit the jurisdictional ability of the Commission to protect Arizonans from market power abuses." Also, APS is required to "file a separate application to transfer generating assets from Pinnacle West Energy Corporation to APS."

07/02:  An ACC Administrative Law Judge issued a recommendation on electric restructuring issues. In the order, the ACC staff concluded that "the wholesale market was not currently workably competitive; therefore, reliance on that market will not result in just and reasonable rates." The recommended order delayed divestiture of generation assets until July 1, 2004, and "removes the requirement that 100 percent of power purchased for Standard Offer Service shall be acquired from the competitive market, with at least 50 percent through a competitive bid process." The recommended order also formed the Electric Competition Advisory Group, and directed the ACC staff to submit periodic reports on the group's activities. Arizona Public Service Company and Tucson Electric Power Company would be required to obtain excess power from "the competitive procurement process as developed in the Track B process."  Track B, Competitive Solicitation issues, were to be dealt with in a subsequent order which the commission would be required to vote on and which would take effect immediately if approved. 100 percent recovery of $450 million in stranded costs collected by a Competition Transition Charge (CTC) and recovery of the balance of the $638 million in stranded costs through a "floating" CTC. What does this mean? Twenty percent of the load in TEP's territory was to be open to competition by January 2000, and all by January 2001.  Rates were to be reduced by 1 percent and frozen through 2008. TEP's generation assets were to be transferred to an affiliate company by the end of 2002.

01/01:  The Salt River Project (SRP) made 20 percent of their 1995 retail peak load available for competition on December 31, 1998 and opened its entire service territory to competition on June 1, 2000. Arizona Public Service opened 20 percent of their retail load to competition on October 1, 1999, and Tucson Electric Power opened 20 percent of its retail load to competition on January 1, 2000. Retail access was fully implemented by January 1, 2001.

03/00:  The Arizona Restaurant Association began to organize a buying block for its members. A potentially large group of commercial consumers in the Arizona Public Service territory may switch to an alternative electricity supplier, New West Energy, the marketing arm of the Salt River Project. Members in other service territories, Tucson Electric and SRP, were allowed to negotiate for an alternative supplier. New West Energy was to provide the Association's members electricity at a savings and various services including energy efficiency audits to enhance energy savings.

11/99:  The ACC approved TEP's restructuring agreement. The agreement was to allow recovery of $450 million in stranded costs collected from ratepayers through 2008; rate reductions of 1 percent and a rate freeze from July 2000 to 2008; and retail access beginning with 20 percent of TEP's retail load 60 days after ACC approval (January 2000), and all customers by January 2001. TEP's generation assets were to be transferred to an affiliate company by the end of 2002.

09/99:  The ACC approved the settlement agreement with APS for restructuring. The APS was required to open 20 percent of its retail territory to competition by October 1, 1999, and all of it by January 1, 2001. Residential rates were to be reduced 7.5 percent over 4 years, with large users' rates cut 5 percent over 3 years. APS was to be allowed to recover $350 million in stranded costs over the 5-year transition period. The residential shopping credit is set at 4.5 cents and large users' at 3 cents. APS was required to transfer its generation assets to an affiliate company.

05/99:  The ACC and the Arizona Public Service reached a settlement agreement (still subject to ACC approval and public hearings). The agreement includes 7.5 percent residential and small business rate reductions spread out from 1999 to 2003, and a 5 percent industrial rate reduction over the period 1999 to 2002. The plan was intended to allow recovery of stranded costs through a competitive transition charge through December 2004. Additionally, the agreement maintains APS's low income program.  TEP's settlement included a more modest rate reduction of 1 percent in July 1999 and in July 2000 with rates frozen at the July 2000 level until 2008.

04/99:  The ACC approved a plan with 4 options for stranded cost recovery that was intended to begin retail competition with 20 percent of consumers later that year and all consumers by January 1, 2001. Utilities were required to  file their proposals for stranded cost recovery by June. The solar portfolio standard was eliminated as too costly. A hearing process was to consider whether to adopt a renewable resource requirement that would include all renewables.

01/99:  The Salt River Project opened about 20 percent of their market to retail competition. However, only one alternative supplier (PG&E) was licensed to sell to only commercial and industrial consumers. SRP's restructuring plan included a 5.4 percent rate reduction for consumers remaining with SRP. SRP was not placed under jurisdiction of the ACC and thus was not effected by the court ruling that had delayed competition in the investor-owned utilities' territories.

01/99:  The ACC delayed retail access when the State Supreme Court decision put a stay on the restructuring settlements submitted by APS and Tucson Electric with the ACC. The restructuring settlements previously filed by APS and Tucson Electric with the ACC, were withdrawn.

08/98:  The ACC approved final rules for restructuring the investor-owned utilities in the State (Arizona Public Service and Tucson Electric Power). Retail competition was to be phased in over 2 years, beginning January 1, 1999 for large customers. Utilities were required to file restructuring plans by September 1998. These plans were to include divestiture of all generation assets for utilities to recover 100 percent of stranded costs and rate cuts of 5 percent for residential consumers. The rules retained the 1996 draft order's solar portfolio standard.

05/98:  HB 2663 was enacted and affirmed the ACC's authority to require utilities to open territories to retail competition. The bill extended restructuring to municipals and other publicly owned utilities, such as the Salt River Project, which opened its territory to retail access on December 31, 1998.

1997:  Work group reports were submitted to the ACC and the Joint Legislative Committee on:  retail access schedule, taxes, stranded costs, consumer protections, and the roles of the ACC and legislative committee.