Review of request for electric bill hike begins

Citizens Utilities Electric Division's case filed recently with the Arizona Corporation Commission is not a full rate case but instead a cost recovery of electricity purchased, said Heather Murphy, ACC spokeswoman.

"Citizens makes no profit on the electricity," Murphy said.

"The cost of electricity is a direct pass-through.

The application is to recover the increased cost of electricity paid by Citizens to Arizona Public Service since the summer of 2000."

Murphy said Citizens' application will likely be considered by ACC commissioners in 6-9 months.

The time in between will be spent gathering testimony and holding public hearings before an administrative law judge.

In a full rate case, everything from office supplies to executive salaries are subject to audit by the ACC.

In the Citizens case, only the cost paid for electricity is at issue.

Murphy said Citizens is an electric distribution utility with no generation of electricity.

All such electric companies have the pass through feature for power costs.

However, Mohave Electric Cooperative, a nonprofit utility owned by the people it serves, has a different set of ACC pricing regulations.

Mohave Electric Cooperative serves a wide area in the county, including Bullhead City.

Investor-owned utilities such as APS that generate power do not have an adjuster pass-through clause for electricity costs and operate under a different set of regulations for setting the rate structure.

Citizens filed an application with the ACC in September 2000 under the Purchased Power and Fuel Adjustor Clause (PPFAC) to recover $54 million extra cost for purchased power from May to August of 2000.

"The PPFAC is a "bank" where the difference between what our customers paid Citizens for electric power purchased and the cost of power to Citizens is deposited," said Sean Breen, director of energy supply for Citizens.

"If we purchase power for less than is being charged, the money is credited to a customer account in the 'bank.' When we pay more, the difference is credited to Citizens."

The electric purchase rate used by Citizens from 1997 to May of 2000 was 5.19 cents per kilowatt hour (KWH).

During the summer of 2000, the cost went as high as 12 cents per KWH.

By September, Citizens had paid APS $54 million more for power than retail customers were paying Citizens.

The PPFAC "bank" showed customers owed the $54 million to Citizens.

Citizens applied for an adjustment with the ACC to recover the money as outlined in the regulations of the Arizona Corporation Commission.

The adjustment under the PPFAC rules was held by the ACC for more data on power costs from Citizens.

Citizens and APS disagreed on the purchase contract and the charges by APS.

"We did pay the bills as presented by APS and kept the electricity flowing to customers," said Tom Ferry, director of Citizens Arizona Electric operations.

Murphy said the delay and eventual withdrawal of the first PPFAC cost adjustment was partially caused by events in California.

"It is reasonable to believe that Citizens waited for the price gouging allegations in California to be settled while negotiating with APS," Murphy said.

Allegations were not proved in the California cases.

"We came to the conclusion that litigation of the differences between Citizens and APS interpretation of the purchase contract would be long and costly," Ferry said.

"We negotiated a new fixed price, seven year contract that will give our customers stability in pricing and save them money for summer 2001 power."

With the new contract in place, Citizens has reapplied to the ACC under the pass through rules of the PPFAC to recover higher costs for the summer of 2000 to June 1 of 2001 when the new contract was in force.

The second part of the application reflects the higher costs in the new contract from June 2001 to 2007.

The pass though cost of electricity purchased by Citizens from May 2001 to June 1, 2001 would increase retail rates by 31 percent, if approved by the ACC.

Breen said the new contract and settlement of the litigation with APS would give Citizens customers stable pricing for the next seven years comparable to rates paid by Phoenix area consumers.