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Where did APS' money go? Ratepayers on the hook for updating old power plants

Arizona Utilities Politics APS
Posted at 5:39 PM, Dec 04, 2019
and last updated 2019-12-04 21:34:43-05

PHOENIX — If it seems like Arizona Public Service (APS) is asking to raise rates every couple of years, that's because it is.

As a regulated monopoly the company has a guaranteed profit, also called a return on equity, of 10 percent for the money it invests to run the business.

The Arizona Corporation Commission (AZCC) is tasked with deciding if the investments are prudent, then allows reimbursement to the company through rate hikes on consumers.

In its latest rate case before the Commission, the company is asking for an additional $184 million in revenue and attributes much of the spending to upgrading two 1960's era power plants: Ocotillo gas power plant in Tempe, and Four Corners coal power plant in Fruitland, New Mexico.

Critics say it's a waste. "These are ancient 50 and 60-year-old plants, " said consumer advocate Abhay Padgoankar. "Imagine driving a 50 to 60-year-old car and keeping it up to snuff for modern times."

He has been a vocal critic about how APS spends money because the ratepayers are guaranteed to be on the hook. "As long as a plant is used and useful it can be charged back to the ratepayers," he said.

In the case of Ocotillo, APS says it's been modernized to use more clean energy, less water and produce power more quickly during peak usage times.

But environmental group Sierra Club, calls it another huge investment in expensive, dirty fossil fuels. "Even if the emissions are less, there's still a lot of emissions from it," said Sandy Bahr, Executive Director of Sierra Club.

She argues ratepayer money is better spent phasing out the plants, "and investing a lot more and solar and wind and solar-plus-storage."

Bahr says that's especially true for the coal-powered Four Corners plant.

In 2015 APS settled with the US Department of Justice over violations of the Clean Air Act. The company spent $400 million dollars on pollution controls. $73 million of that is requested in the company's latest rate case.

"Ratepayers are going to be saddled with the cost of paying that possibly for decades to come," said Padgoankar.

In a statement APS says: "These investments make the Four Corners Power Plant a cleaner 24/7 power resource for our customers while preserving its economic benefits for the region..."

An administrative law judge has already recommended that the investments into Four Corners are prudent.

Over the next year, the Arizona Corporation Commission will hold hearings about APS' rate case to determine whether to pass the company's costs on to consumers in the form of a rate hike.