Local electric rates could rise higher than expected

The average residential electricity bills will rise from $51.64 to $67.61 a month in the Kingman area if the Arizona electric division of Citizens Communications gets approval from the state, according to Citizens officials.

Citizens, which applied last September to the Arizona Corporation to pass on higher fuel costs to customers over a three-year period, revised the request because costs continued to rise, they said.

Citizens filed its revised application Wednesday with the ACC.

The utility recently concluded negotiations with Pinnacle West, its sole electricity supplier, to pay 5.8 cents per kilowatt-hour, ACC spokeswoman Heather Murphy said.

The adjustment would remain in effect for the span of the contract, which expires in May 2008.

The request would raise bills about 31 percent, up from the 25 percent increase that would occur over a three-year period under the previous proposal.

Citizens customers, who now pay about 8 cents per kilowatt-hour, would pay an additional 2.7 cents if the ACC were to approve the purchased power and fuel adjustment, said Carl Dabelstein, vice president for regulatory affairs for the utility in Phoenix.

Residential customers in Kingman use an average of 600 kilowatt-hours per month.

During the past 18 months, Citizens paid $87 million more for power than it has been able to recover through service rates charged to customers, according to a press release.

When Citizens applied for the adjustment last September, company officials indicated fuel costs had risen by $52.3 million since May 2000.

From May 2000 to this May, Citizens paid an average of 11 cents per kilowatt-hour and as much as 26 cents, according to the press release.

"The company recovers its power supply at a rate of 5.2 cents per kilowatt-hour," Dabelstein said during teleconference call Wednesday afternoon.

"As the account grows, the company has traditionally been able to seek recovery" for higher costs.

And while Citizens customers would pay more for electricity than under the previous proposal, the seven-year agreement protects them from paying even more, Citizens and Pinnacle West officials said.

Electricity bills will not be subject to market volatility, said Sean Breen, director of energy supply for Citizens in Flagstaff.

He added the agreement could save customers $30 million to $70 million for this summer.

The agreement provides customers long-term stability, said Alan Bunnell, a spokesman for Pinnacle West, parent company of Arizona Public Service in Phoenix.

"We have a long-standing relationship with Citizens and we were committed to renegotiating a contract that is beneficial to both parties," he said.

"(In) the last contract, they requested a market-based contract where the price was not fixed.

The price would fluctuate with what was occurring in the electricity market during any given time."

The wholesale market skyrocketed last summer because of the scarcity of electricity and increasing demand for it, Bunnell said.

APS has approximately 860,000 customers and generates about 4,000 megawatts of power.

The contract is subject to approval by the Federal Energy Regulatory Commission because it involves the sale of wholesale electricity, Murphy of the ACC said.

"That does not mean that they can't get the wheels rolling," Murphy said.

Murphy, who noted that the previous adjustment proposal never made it to the public hearing stage, said the ACC's accounting and rates staff will audit the new filing and provide sworn testimony in advance of the hearing.

She said an administrative law judge will hear the proposal and make a recommendation to the three-member commission.

"I don't know how long that it going to take," she said.

"It could take to early next year, maybe even longer."

Citizens also is seeking to pass on a so-called "stranded" cost of a penny per kilowatt-hour to customers who opt to seek electricity from another supplier once deregulation kicks in, Dabelstein said.

The cost, a portion of the 2.7 cent increase, would remain in effect for the length of the contract with Pinnacle West.

However, he said deregulation will not proceed until the ACC rules on the new filing from Citizens

Citizens has about 61,000 customers in Mohave County and 14,000 in Santa Cruz County.