Consumers face absorption of higher electric, gas costs

Electricity users large and small in Kingman will look for ways to absorb the 22 percent rate increase approved as part of the sale of Citizens Arizona electric and gas assets to UniSource Energy.

The 21 percent increase in basic gas rates will not be as much of a shock to gas customers because the gas surcharge of more than 20 percent levied the past two years will be phased out as the new rate increase goes into effect, UniSource media relations director Steve Lynn said.

"That is why all the discussion has been on the electric side as the ACC (Arizona Corporation Commission) discussed the sale," Lynn said.

The commission approved the rate increases Tuesday as a condition of the sale of sales of Citizens Arizona to UniSource.

Citizens Arizona was a subsidiary of Citizens Utilities, based in Stamford, Conn.

The city of Kingman pays about $1 million per year for gas and electricity, City Manager Roger Swenson said.

The 2004 budget included a 10 percent increase for utilities, and additional money was put in contingency funds.

The biggest use of electricity by the city is for pumping water.

Gas and electric pumps are used to allow the city to use the cheapest fuel.

Lynn said UniSource Energy is aware that no price increase is good for customers but that the increased retail electric rates reflect the wholesale power cost.

UniSource Energy, which is based in Tucson, could not have purchased Citizens' assets without the rate increases, Lynn said.

Citizens officials have said the company absorbed $130 million of increased wholesale power costs when wholesale prices jumped during the California power crisis in summer 2000.

Citizens also absorbed about $10 million in increased wholesale gas costs.

ACC members asked about phasing in the electric rate increase, but UniSource said Citizens was losing money on every kilowatt sold.

Lynn said the numbers in the sale proposal would not work with lower or phased-in rates.

Rate increases will show on electricity used during August, Lynn said.

Customers likely will see the increased cost on bills received in late August and in September.

Some local customers have been looking for ways to decrease electric bills that peak during greatest use of air conditioning.

Don Pointer said he has combined fans and a swamp cooler during the hot part of the day to keep a part of his house at 76 degrees.

He uses the air conditioner at night.

He said he can tell that this combination is saving him electricity by looking at his meter..

Citizens has a program for low-income residents for help with bills and insulating homes to reduce use of electricity.

UniSource will continue that program.

As part of the rate settlement, UniSource will publicize that program in English and Spanish.

The ACC was concerned that too few people are taking advantage of the program.

UniSource will continue payment programs that allow consumers to make level payments each month and avoid one or two large monthly bills.

The ACC was reluctant to disapprove the sale and the rates negotiated and put the business back on the market.

Citizens could have come back for additional raises in rates and reinstated the $130 million from the summer of 2000 Heather Murphy, ACC spokesperson, said.

The approval ends a process that began in September 2000 when Citizens filed for a pass-through rate hike for wholesale electric costs.

One attempt to sell the company fell through after that, and Citizens was losing money every day, Lynn said.

James S.

Pignatelli, chairman, president and chief executive officer of UniSource Energy commended the ACC for making a very difficult decision.

"It's never easy to grant double-digit rate increases, even when those increases are fully justified by economic realities," Pignatelli said.

The new UniSource Energy Services will serve 126,000 gas customers in Mohave, Santa Cruz, Coconino, Navajo and Yavapai counties and 77,500 electric customers in Mohave and Santa Cruz counties.

Tom Ferry, vice president of the electric division for Citizens Arizona, will continue to serve in the same capacity for UniSource.

Gary Smith, Citizens gas vice president in Flagstaff, will serve as vice president for the gas division for UniSource.

Lynn said most Citizens employees will be hired by UniSource.