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Questions raised about AZCC transparency in APS audit

Posted: 7:30 PM, Oct 28, 2019
Updated: 2019-10-29 17:40:10-04

PHOENIX — An Arizona Corporation Commission ordered third-party audit suggesting that the Arizona Public Service (APS) was making more money than authorized was withheld from the public for several months after its completion.

Ratepayer consultant Abhay Padgaonkar has a problem with that.

"As we are sitting here, you and I can look at the Mueller Report, which was on national security and counter-terrorism. We can look at the whistleblower complaint filed against the sitting president. And we can't see the audit report issued by the Arizona Corporation Commission," Padgaonkar said.

Padgaonkar served as an expert witness in the hearing of consumer advocate Stacey Champion's complaint asking the AZCC to rescind the 2017 APS rate increase. He says he's reviewed 10.5 million APS bills in his research and says the recently released draft reports validated what his analysis found: "they're over earning."

In June, an AZCC staff summary of the report concluded that the company needed to file a new rate case because of market changes and higher than expected revenues. Only after several media outlets pushed did commission staff release hundreds of unredacted pages of the draft report.

"Staff cherry-picked the findings and buried a lot of clear evidence," he says.

According to Padgaonkar, among the most important missing information is, "that APS has a 79 million dollar operating surplus."

An amount he says clearly shows the company is over-earning.

He also points to the return on equity, which is essentially what the company keeps as profit.

The AZCC authorized 10 percent. The audit shows APS made 10.45 percent in 2018.

"Point 45 percent doesn't sound like a lot, but when you multiply it by the rate base, which is $5.7 billion--with a b--that gives you about $26 million of extra income over and above what the commission authorized," Padgaonkar says. "That was the reason why the report was ordered in the first place."

Commissioners told ABC15 they got the full report the same day media outlets did, last Thursday.

Commissioners Boyd Dunn, Lea Marquez-Peterson, and Bob Burns say they are still going through it. Commissioner Sandra Kennedy had no comment, and Justin Olson did not respond to our request.

The current AZCC is a different commission than the one that approved the 2017 hike.

Padgaonkar says he hoping this commission makes it right.

"This commission has an opportunity to regain the trust of the people it represents," Padgaonkar said.

He says they can do that by scrutinizing requests for more ratepayer's dollars more closely.

"The whole rate case and rate setting is a game. And the utilities have taken it to an art form."

APS told ABC15 it does not believe the company is over-earning and does not find the report credible, saying in part, "It is based on hypothetical assumptions and selective adjustments made by the consultant. As ordered by the Arizona Corporation Commission rate review, we look forward to filing the complete picture with our new rate case on October 31."