TEP: State Proposals on Electric Rates Are ‘Reckless’

By SHELLEY SHELTON

Tucson Electric Power Co. has blasted as “reckless” electric- rate recommendations that the Arizona Corporation Commission staff and a state consumer watchdog agency filed late Friday.

Those recommendations were the first in a series of testimony to be filed regarding a rate case filed by TEP last July. TEP’s response, issued in a statement Sunday, sets the stage for what could be a long and protracted fight beginning in May, when the rate case hearing will begin.

“The proposals from staff’s consultants and RUCO (the Residential Utility Consumer Office) are simply reckless,” James Pignatelli, chairman and CEO of TEP and its parent company, UniSource Energy Corp., said in the statement. “The rates proposed by staff’s consultants and RUCO would not provide the increases we need to cover our rising costs and serve our customers’ growing energy needs. They clearly did not consider the financial impact their recommendations would have on this company.”

The power company entered into a settlement agreement in 1999 that froze its electric rates for 10 years. Just before freezing the rates, the company implemented a series of reductions that put rates below levels that were in effect in 1994, TEP noted.

Pignatelli has contended that the settlement agreement was a contract with the Corporation Commission that would entitle the company to begin charging market-based, competitive rates when the freeze is lifted at the end of this year.

He previously has said that he is prepared to fight on the issue in court but prefers to avoid litigation as long as TEP is compensated for the money it didn’t make during the 10-year rate freeze.

The electric utility is asking for an overall rate increase of 15 percent to 23 percent – depending on which of three rate designs would be used – which would increase the average residential rate by 8 percent to 12 percent.

Besides a market-based rate plan and a traditional cost-based rate plan, TEP proposed a hybrid plan under which it could sell power from certain power plants and keep the revenue and income.

But the ACC’s staff and RUCO – a state agency that represents consumer interests before the ACC – rejected two of TEP’s three rate proposals in testimony filed Friday.

Both bodies said they preferred traditional cost-of-service rates and offered much smaller revenue numbers than TEP requested under that method in July.

TEP is estimating that both proposals would reduce current rates – by 2 percent to 3 percent, in the case of the ACC staff proposal – and compromise the utility’s ability to provide safe and reliable service.

“The rates they proposed are lower than the ones we charge now, which are lower than the ones we charged in 1994,” TEP spokesman Joe Salkowski said. RUCO Executive Director Stephen Ahearn could not be reached for comment Monday.

Corporation Commissioner Kris Mayes said the filing Friday is just one of many steps in the rate case process.

Mayes would not comment specifically on the rate issue, citing commission policy regarding pending matters, but she said she was surprised that TEP reacted so strongly.

The commissioners will hear the points of view of all parties in the case, including consumers, during a public-comment session on the first day of the hearing, and they’ll judge by what they feel is fair, Mayes said.

“I don’t think it’s helpful for TEP to be using words like ‘reckless.’ That’s sort of reckless,” she said. “This is going to be the most complex rate case in the history of Southern Arizona. That’s why I think TEP should muzzle the rhetoric a little bit and just focus on its case.”

* Contact reporter Shelley Shelton at 434-4086 or sshelton@azstarnet.com.

Originally published by SHELLEY SHELTON, ARIZONA DAILY STAR.

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