TEP, ACC Agree to Tentative Rate Deal
By SHELLEY SHELTON
Tucson Electric Power Co. and the Arizona Corporation Commission’s staff have reached a tentative settlement of TEP’s rate case, according to a statement filed Wednesday with the U.S. Securities and Exchange Commission.
The major terms of the agreement – which is still preliminary – set a cost-of-service method of determining power rates and allow for an overall increase of 6 percent in base rates over TEP’s current retail rates, according to the SEC filing by TEP and its parent, UniSource Energy Corp.
Cost of service, the traditional method for setting power rates in Arizona, bases rates on costs and a maximum rate of return.
The proposed settlement also includes a purchased-power fuel- adjustment clause – allowing the utility to collect a surcharge to cover swings in fuel costs; a freeze of base rates through Jan. 1, 2013; and a waiver of any legal claims under the 1999 settlement agreement.
TEP has maintained that the 1999 agreement allowed the company to begin charging market-based rates when the agreement expires Jan. 1, 2009. That agreement froze TEP’s rates for 10 years.
The ACC would establish the date when the base-rate increase would go into effect, according to the tentative agreement.
Arizona Corporation Commission spokeswoman Rebecca Wilder said it would be premature to comment on the proposed agreement.
TEP and the commission’s utilities staff have been in negotiations for about two weeks, said Joe Salkowski, a TEP spokesman. Hearings on the rate case were set to start on May 12.
The two parties have reached an “agreement in principle,” Salkowski said, meaning it has yet to be finalized.
If the ACC and TEP reach a final version of the agreement, the next step would be to request a new timeline for the case, Salkowski said.
The agreement would then become the subject of a hearing before an administrative law judge, who would make a recommendation to the full commission on whether to accept it.
“We’re pleased to have reached this point,” Salkowski said. “We believe the principles we have agreed to provide a fair resolution to the issues at stake and will provide the company and our customers with a greater degree of certainty about what rates we’ll be charging next year and for the next four years.”
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* Contact reporter Shelley Shelton at 434-4086 or sshelton@azstarnet.com.
Originally published by SHELLEY SHELTON, ARIZONA DAILY STAR.
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