ACC Vote Puts Burden Of Running New Electric Lines On Consumers

By Tammy Gray-Searles
   Large increases in the cost to run electric lines to new properties are expected to have a significant im-pact on new development, especially in rural areas like Holbrook.
   In mid-February, the Arizona Corporation Commission made a decision that passes on the entire cost of extending power lines directly to new consumers, regardless of whether they are major developers or indi-vidual homeowners.
   Cited as a way to force growth to pay for itself, especially in rapidly growing areas in Phoenix, Tucson and Prescott, the increase did not appear to take into account issues faced in rural areas, where many new homes are built by individuals, not major developers. An exception was made for Hopi and Navajo reserva-tion lands, but not for individual homeowners in the rest of the state.
   Under the new regulations, customers will have to pay the entire cost of extending a power line to their property, and that cost must be paid up front. The new Arizona Public Service Co. (APS) service schedule for single family homes states, “All estimated costs of extending service to applicants, as determined by the company (APS), including backbone infrastructure costs, shall be paid by the applicant prior to the com-pany extending facilities. Payment is due at the time agreement is executed.”
   The service schedule also notes that the cost of the extension of lines to all subdivisions, custom home developments, master planned community developments, multi-family developments, high rise and mixed use residential developments, non-residential developments, corporate business and industrial park devel-opments will be paid for entirely by customers.
   APS cited rising costs as the reason for the changes. The corporation commission initiated the change in policy after finding that APS should not be including the expense for running new lines in its requests for rate increases.
   Prior to the new regulations, individuals received a $5,000 credit toward extending power lines to their property. Before the credit was put in place, APS ran extensions of up to 1,000 feet at no charge. The change is expected to raise $30 million in revenues for APS this year and $70 million next year.
   At the end of April, Pinnacle West Capital Corporation, APS’ parent company, reported a first quarter loss of $4.5 million, citing in part rising costs for providing electricity infrastructure.
   In a press release, the company noted, “Rising costs incurred by Arizona Public Service Co. (APS) to maintain and expand its electric system to sustain Arizona’s growth, and decreased earnings from Pinnacle West’s real estate operations, drove the lower results…
   “Arizona continues to grow even with a slower economy. To support current growth levels, we must continue building more electricity infrastructure at a time when basic building materials (such as steel, copper, aluminum and concrete) for providing electricity are at record-high prices. As a result, our costs for constructing needed facilities and maintaining APS’ existing electric service continue to increase.”
   Customers paying the cost of installing infrastructure will not receive any credits or discount for the electricity they purchase from APS, and will also be required to pay the standard connection fee. APS has also requested a basic rate increase of 8.1 percent beginning on July 1, 2009. The company cites the rising cost of installing new infrastructure as part of the reason the rate increase is needed.
   “The growing demand for electricity in Arizona requires us to build more infrastructure, which has be-come increasingly more expensive,” said APS CEO and President Don Brandt in a company news release. “We must continue to invest approximately $1 billion a year in our system to maintain reliable service to our customers, something to which we are deeply committed.”
   The press release went on to note, “Costs for the basic building blocks for providing electricity such as copper, steel and aluminum are up 273 percent, 142 percent and 51 percent, respectively, since 2001. A transformer that cost $953 in 2003 now costs $1,626, a 70 percent increase. Gasoline to fuel APS’ line trucks and other vehicles has increased more than 120 percent.”
   “We don’t like to raise prices,” said Brandt. “While other businesses have a choice to limit their capital investments in response to market conditions, APS does not. Even as we prepare for another challenging summer, our current prices do not reflect all of the costs of the equipment that keeps the lights on and our homes cool.”
   If approved by the corporation commission, the latest rate increase is expected to generate an additional $265.5 million in annual revenues. The most recent APS rate increase went into effect in June 2007. That increase was 6.8 percent for all customers.
   In placing the burden for building new infrastructure on new customers, the corporation commission noted that it hopes to keep that cost from being passed on to existing customers through rate increases.
   Although numerous groups pleaded with the commission to consider the impact the new line extension policy would have on rural Arizona, little discussion was held regarding the issue, with the exception of the impact on Native American reservations. Just before approving the changes, the commission approved an amendment to the original proposal that allows APS to offer customers on reservation lands a power line extension of up to 1,000 feet at no charge.
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   Details of the commission's discussion, comments from APS representatives and the arguments made against the changes by groups representing rural Arizona interests will be covered in part two of this article in the next edition of the Holbrook Tribune-News.