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Thu, March 21

Citizens Electric replaces lawyers in pass-through case

Citizens Arizona Electric has hired new legal counsel for its pass-through rate case before the Arizona Corporation Commission.

The ACC on Wednesday disqualified the entire Brown and Bain law firm from representing Citizens, which seeks a rate increase to recover the increased wholesale cost of power purchased from Arizona Public Service.

Brown and Bain also has been representing Citizens in negotiation with Arizona Public Service about its wholesale power contract, which the commission sees as a conflict of interest.

"The firm represented Citizens in a legal dispute with APS (Arizona Public Service) over electric charges," Mark Spitzer, ACC commissioner, said.

"In my opinion, the APS/Citizens relationship is a major issue in this case."

As a result, Citizens named Robert Metli as legal counsel for the rate-increase case.

The case involves the pass-through cost of electricity purchased by Citizens from APS in the summer of 2000 and a new wholesale contract negotiated during 2001.

Under Arizona utility regulations, an electric utility that distributes power purchased from generation companies can pass that wholesale cost of the power along to retail customers under the Purchased Power Fuel Adjustment Clause.

During the summer of 2000, when wholesale power costs in the region increased because of the California power crisis, Citizens paid an extra $54 million for peak power delivered by APS.

Since then, Citizens' wholesale power cost has increased an additional $61 million, partly because of the higher-priced contract negotiated with APS, Citizens Electric Manager Tom Ferry said.

Action on the pass-through, rate-increase request for $54 million filed during the summer of 2000 was delayed while Citizens negotiated with APS and considered legal action.

When Citizens negotiated a settlement with APS and a new contact was signed, a new pass-through request was filed with the ACC.

Spitzer said Wednesday the Brown and Bain firm was disqualified because the ACC wants no question or appearance of conflict of interest.

"The public must have confidence in the decisions of the ACC in this case," Spitzer said.

"There should be no appearance of conflict of interest."

Brown and Bain lawyers who advised Citizens Electric about the APS contract would have been expected to testify about that contract during an ACC rate-increase hearing.

As a result, Spitzer said, they would have been cross-examined by lawyers from their own firm representing Citizens before the commission.

The increased cost of electric power passed on to customers would add 30 to 50 percent to bills, Citizens electric estimates.

Ferry said Citizens Electric now has one of the lowest rates in Arizona.

That would change if the ACC approves the pass-through request.

Spitzer said the parties met Wednesday following the ruling about legal counsel to develop a hearing calendar.

An administrative law judge will likely take the calendar under advisement.

"The case is unlikely to be resolved before the new five member commission takes office, Spitzer said.

"It would have to be completed for the ACC meeting Dec.

17 and that is a short timeline."

The ACC will expand to five members beginning with the January 2003 meeting.

Arizona voters approved expansion of the ACC in 2000.

Spitzer said new members will have to read a lot to be prepared, but that should not be an issue.

"I ruled on the Qwest and Southwest Gas cases at my first open meeting," Spitzer said, "It takes a lot of reading."

He said the Arizona constitution requires the ACC to set rates to assure consumers a reliable source of power at reasonable rates while giving the companies a fair rate of return to investors.

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