APS Reaches $87M Rate Settlement: No Demand Charges, Solar Still Grandfathered

Arizona Public Service announced on March 1 that the utility had reached a settlement in its 2016 rate case (Docket No. E-01345A-16-0036), originally filed last June 1. The overall rate settlement would allow for an $87.25 million revenue increase (3.3 percent) – about half of what APS had requested – and would continue to grandfather customer-operators of rooftop solar system, as decided (Docket No.E-00000J-14-0023 by the Arizona Corporation Commission last December.

Under the terms of the agreement, pending the approval of the ACC, the typical monthly bill for residential customers would increase 4.5 percent, or about $6 per month.

Originally, APS had requested a $165.9 million – or 5.74 percent – rate increase, which would have raised the average residential customer’s monthly bill by $11.09 (or 7.96 percent), according to a report by Advanced Energy Economy.

No Demand Charges 

The hard-fought agreement also eliminates the mandatory demand charges on residential customers that had been proposed by Arizona’s largest utility.

Indeed, AEE reported, the filing last June had proposed:

• A default demand charge for residential and small commercial customers, based on the highest hour of usage between 3 p.m. and 8 p.m. every month,
• An off-peak and peak energy charge that differed by season,
• An increase in the basic service charge ($24 a month for solar customers), and
• A reduction in the net metering credit from retail to wholesale rates.

Instead, if approved by the commission, the new settlement would grandfather existing solar customers at current retail rates and would compensate future private solar customers for their excess electricity at a retail credit starting at 12.9 cents/kWh.

 New Rate Options for Consumers

The agreement includes more rate options. Among the choices for residential customers:

• An advanced time-of-use rate that will become the standard rate for future customers;
• Two optional demand rates, plus a pilot demand rate for customers with certain types of technology at their homes;
• Two more off-peak hours on weekdays (3 p.m. to 8 p.m., instead of noon to 7 p.m.) and four more off-peak holidays; and
• A plan that includes a super off-peak period of 10 a.m. to 3 p.m. on weekdays during the winter, in order to encourage customers to use more electricity at midday when solar production is abundant and demand is low

Rate Structure for C&I Customers

For business customers, the agreement would:

• Establish a special discount rate for schools;
• Offer a new economic development rate option to encourage businesses to relocate or expand, along with a rural municipal economic development rate;
• Create a new rate to attract highly efficient customers, such as data centers, that need affordable, highly reliable electricity;
• Provide an aggregation rate that reduces energy costs for chain accounts, such as grocery stores; and
• Improve time-of-use options to work better with the operating schedules of many businesses.

Stakeholder Buy-in

Thirty of 40 stakeholders in the rate review process support the agreement, the utility claimed, including ACC Staff, the Residential Utility Consumer Office, merchant generators, unions, seniors, business customers, limited-income advocates, rural municipalities, schools, and federal agencies. Among the environmentalists represented were the Arizona Solar Deployment Alliance, Arizona Solar Energy Industries Association, Solar Energy Industries Association, Vote Solar, and Energy Freedom Coalition of America.

“What we have is a blueprint that will bring about more solar, a smarter energy infrastructure, a cleaner energy mix, and more options for customers,” said APS CEO Don Brandt

Under the terms of this agreement, APS would not begin another request for a comprehensive review of its rates before June 1, 2019.