EXHIBIT 10.1
RATE SETTLEMENT AGREEMENT
April 20, 1994
This rate settlement agreement ("Agreement") is entered into as of
April 20, 1994, by Arizona Public Service Company ("APS" or the "Company") and
the Staff of the Arizona Corporation Commission ("Staff") for the purpose of
establishing revised rates and charges and related procedures for APS that are
just, reasonable, and in the public interest.
INTRODUCTION
In 1991, the Arizona Corporation Commission ("Commission" or "ACC")
approved a comprehensive and innovative settlement (the "1991 Settlement")
between Staff and APS that sought to keep APS' customer rates as low as
possible by directing the Company to further reduce its costs and operate more
efficiently. Since the 1991 Settlement, APS has taken a number of aggressive
steps to meet the Commission's goal of expense reduction and improved service.
One of the fundamental principles underlying the 1991 Settlement was
the Company's commitment to contain its costs, and thus its rates, through
disciplined cost management. This commitment was underscored, at Staff's
request, by the establishment of target price and cost levels which APS must
meet without deterioration in service. The 1991 Settlement also set forth in
detail the procedures for determining target price and cost levels and the
regulatory and rate consequences of failing to meet those targets. Finally,
the 1991 Settlement included a two-year moratorium on APS' ability to file for
a permanent rate increase and set forth procedures for determining how APS'
future rate filings would be handled.
The rate moratorium required by the 1991 Settlement ended in
December 1993. In addition, the procedures for limiting future rate increases
will likewise lapse unless APS files a permanent rate increase application
prior to January l, 1995. APS has indicated it has no present intention of
filing such a rate increase application by that time and therefore the target
pricing provisions contained therein will be of no further force and effect
unless a new agreement is reached.
The settlement described below represents the Staff's "report card"
on APS' performance that the Commission ordered in the 1991 Settlement. APS
has exceeded the Commission's cost reduction goals and has improved customer
service. These accomplishments were only possible through the cooperative
alignment of regulatory and corporate goals, the public commitment and
accountability to such goals, and the dedicated efforts of Staff and APS.
This progress toward improved utility performance should continue. The
settlement described below is in the public interest and provides the
company's customers with substantial benefits that would otherwise not be
achieved either at all, or at least not without significant expenditure of
public and private resources in protracted litigation. These benefits include
(l) an immediate rate reduction of approximately 2.2%; (2) an additional
moratorium on further permanent rate applications; (3) a comprehensive study
of the impacts increasing competition in the electric utility industry may
have on APS and its customers; (4) an increase in expenditures on renewable
resources and DSM programs, and (5) a provision that will encourage APS to
continue effective cost containment by allowing the Company to share with
ratepayers cost savings achieved in the next several years. In addition,
Staff has carefully reviewed APS' current financial condition, and believes
the provisions of this Agreement should not adversely affect the Company's
financial health; rather, it will sharpen management's focus on the challenges
of the future in a manner that is beneficial to its customers and its
shareholders.
NOW, THEREFORE, Staff and APS agree to the following provisions
which they both believe to be fair and reasonable and in the public interest:
TERMS OF AGREEMENT
A. REVENUE REDUCTION. For usage on or after the effective date of the
Agreement, as determined in accordance with Paragraph S, APS
jurisdictional rates will be decreased by approximately 2.2%
(approximately $32.3 million annually, based on September 30, 1993 sales
as adjusted).
B. SETTLEMENT RATES. The revenue decrease provided for in Paragraph A of
this Agreement shall be allocated among customer classes by means of a
uniform .20 cents/kWh reduction in the energy charges for all APS rate
schedules except those rate schedules set forth in Attachment A. In
addition, and concurrent with this rate reduction, APS will be authorized
to amend Schedule 1 of its tariffs. These revised tariff sheets are set
forth in Attachment B.
C. MORATORIUM ON AND PROCEDURES FOR FURTHER RATE CHANGES.
i. APS shall not file for a change to its general rates and charges
prior to December 31, 1996 ("Rate Moratorium Period"). Staff will
likewise be subject to the same moratorium. This moratorium shall
not apply to price changes pursuant to Paragraph P of this
Agreement.
ii. The next general rate application filed by APS will become effective
and permanent as soon as practicable after the filing, but in no
event later than 12 months after the filing. Such time limit shall
not be extended and shall supersede any Commission regulation or
legislative enactment which provides for a different period of time,
unless the Commission determines that such time limit has become
unreasonable due either to any amendment to the rate filing made by
APS which substantially alters the amount of the requested rate
change or substantially alters the facts used as a basis for the
requested rate change, or to an extraordinary event not otherwise
provided for. The provisions of this subparagraph shall not apply
to any general rate application filed by APS after December 31,
1997.
iii. During the six month period following the filing referenced in the
preceding subparagraph, APS and Staff will act in good faith to use
their best efforts to achieve a settlement on APS' filing and will
submit a written report to the Commission at the end of that period
on the outcome of such settlement activities. If a settlement is
reached, Staff and APS shall promptly file a motion seeking
Commission approval of the settlement, and the Commission shall
accept or reject the settlement as soon as practicable after filing.
iv. Neither APS nor Staff shall be prevented from seeking a change in
rates prior to or after December 31, 1996 in the event of conditions
or circumstances which constitute an emergency, such as the
inability to finance on reasonable terms or material increases in
the Company's cost of service as a result of federal, tribal, state
or local laws, regulatory requirements or orders. Staff's review of
such a request by APS for emergency rates shall focus on the
existence of a substantial threat or harm to APS' ability to
continue to provide reliable service.
D. ESTABLISHMENT OF FUTURE RATE PRINCIPLES. APS will aggressively pursue
the cost savings contemplated by Paragraph L of this Agreement with the
goal of maintaining average residential prices beyond the Rate
Moratorium Period at the proposed 10.45 cents/kWh level resulting from
this settlement rate reduction. To meet this goal, APS will have to
further reduce operating costs to offset increases in externally
imposed expenses, such as interest and other capital costs, fuel and
taxes.
In addition, APS will require additional regulatory flexibility and
pricing freedom to properly respond to the competitive forces and
financial risks inherent in the larger customer market segments.
Therefore, Staff will meet with APS in a good faith attempt to develop
new pricing and operating procedures that are responsive to market
conditions, competitive pressures in the electric utility industry, and
the Commission's relationship to regulated utilities and their customers.
In this endeavor, the parties agree to consider, inter alia, flexible
pricing provisions, innovative procedures, and product pricing
principles. The parties agree to provide a written report on their
progress to the Commission within 12 months of the date of commission
approval of this Agreement and will request prompt Commission approval of
recommendations that will assist APS in achieving its residential price
stability goals.
E. PROPERTY INCLUDED IN RATE BASE. The rates and charges authorized herein
fully include a return on the recorded book original cost of all
jurisdictional APS assets (net of depreciation, amortization, and
deferred income taxes and other deferred credits) as of September 30,
1993, excepting construction work in progress as of such date. However,
nothing in this Agreement shall be construed as prohibiting Staff or any
other party from pursuing new issues related to expenditures made or
actions taken after September 30, 1993.
F. AMORTIZATION OF "IN-LIEU" REFUND OBLIGATION AND RESTORATION OF PV-3
TEMPORARY IMPAIRMENT. The "In-Lieu" refund obligation referenced in
Decision No. 57649 (December 6, 1991), as well as in the 1991 Settlement,
shall be deemed fully discharged as of the date of Commission approval of
this Agreement, unless discharged earlier pursuant to the terms of the
l99l Settlement. Likewise, the temporary value impairment of Palo Verde
Unit 3 shall be deemed fully restored as of the date of Commission
approval of this Agreement, unless restored earlier pursuant to the terms
of the 1991 Settlement.
G. DECOMMISSIONING. The rates authorized herein expressly include an annual
allowance for decommissioning funding for all three Palo Verde Units at
the following ACC jurisdictional levels:
PV 1 $3,621,000
PV 2 $3,877,000
PV 3 $3,405,000
APS shall fund the amounts specified above through quarterly
contributions to the decommissioning trusts. The Commission hereby
adopts and approves the decommissioning factors set forth in Attachment C
hereto. However, the Commission shall not be bound in any subsequent
rate case to adopt the decommissioning funding levels or decommissioning
factors adopted and approved herein, but any subsequent change in such
levels or factors adopted by the Commission would not be applied
retroactively.
H. DEPRECIATION. The rates and charges authorized herein include an
allowance for depreciation computed at the annual rates and using the
methodology indicated in Attachment D hereto. These revised depreciation
rates and methodology are hereby expressly approved. The Company's
depreciation rates may also be changed from time to time in accordance
with the results of depreciation studies performed by or for APS, with
such changes to thereafter become effective upon Staff's approval. The
Commission shall not be bound in any subsequent rate case to adopt for
ratemaking purposes any changes in depreciation rates made pursuant to
this provision, but such ratemaking treatment would not be applied
retroactively. Any provision of A.A.C. R14-2-102 inconsistent with this
paragraph will be expressly waived.
I. IMPROVEMENT OF APS' EQUITY RATIO. In Section 2.E of the l99l Settlement,
both Staff and the commission supported APS' goal of continuous progress
toward a 40% common equity ratio. Staff continues to support that goal.
Therefore, in furtherance of that objective, APS shall, upon receipt of a
favorable ruling from the Internal Revenue Service, amortize below the
line its unamortized investment tax credits ("ITCs") over a five (5) year
period beginning with calendar year 1995. All such amortized ITCs shall
thereafter be treated as fully restored to the Company's rate base in any
future ratemaking proceedings.
J. RATE MIGRATION ADJUSTMENT. The rates and charges authorized herein
include the effects of any rate migration occurring as a result of the
l99l Settlement, and provisions of Section 20 of such l99l Settlement
shall be deemed fully satisfied.
K. EXPENDITURES ON DEMAND SIDE MANAGEMENT AND RENEWABLE RESOURCES. It is
the parties' intent that significant expenditures on both Demand Side
Management ("DSM") and renewable resources development shall be made by
APS. APS shall increase its commitment and activities in Demand Side
Management and renewable resources according to the following schedule:
i. APS shall spend at least $30 million over the next three years on
AGREEMENT OF SETTLEMENT - APS RATE CASE pre-approved renewable
resources and pre-approved DSM projects (including capital and
expensed program costs for renewables, DSM program costs, lost net
revenues due to DSM, and a reward or incentive for KW deferrals for
DSM). If APS fails to spend or commit to spend $18 million on
pre-approved renewable resources or pre-approved DSM projects within
three years from the effective date of this order, the unspent or
uncommitted portion of such $18 million shall be credited to
ratepayers through the Energy Efficiency And Solar Energy Fund
("EEASE Fund") as described in the Plan of Administration
(Subparagraph iv.).
ii. Each year APS shall spend an initial $6 million on pre-approved DSM
and renewables projects ("Base DSM/Renewables Amount"). After APS
has spent the required $6 million per year, APS shall be entitled to
recover up to $12 million per year through the EEASE Fund for
pre-approved renewable resource and DSM projects (including capital
and expensed program costs for renewables, DSM program costs, lost
net revenues due to DSM, and a reward or incentive for KW deferrals
for DSM). The amount recoverable through the EEASE Fund excludes
the Base DSM/Renewables Amount.
iii. A single EEASE Fund surcharge factor shall be applied to all
jurisdictional sales (except those on existing special contracts
which exclude the surcharge). To equitably distribute DSM and
renewables costs, APS shall explore a full range of DSM and
renewables programs for all customer classes and propose for pre-
approval, where applicable, customer service charges for DSM and
renewables in which the participating customer pays APS for some or
all of APS' DSM and renewables costs attributable to that customer.
iv. APS shall file a revised "Plan of Administration" for the EEASE Fund
within thirty (30) days of the effective date of this order and the
plan shall be effective upon a Staff determination that the plan is
in compliance with the Commission's order adopting this Settlement.
The plan shall include a process to account for the Base
DSM/Renewables Amount.
v. To be eligible to meet the goals and cost recovery mechanism
described in Subparagraphs i. and ii., a renewable or DSM program
proposed by APS under the terms of the plan of administration
described in Subparagraph iv must have been pre-approved by Staff.
The parties intend that the pre-approval process be substantially
the same as the existing process established for the EEASE Fund.
vi. APS shall expend a minimum of $250,000 on a low income DSM pilot
program.
vii. On or before December 31, 1994, APS shall submit a three-year
renewable resource plan for Staff review and comment that includes:
a. an aggressive program to identify, install and operate
cost-effective applications of renewables within the APS system
by the end of the three-year plan period;
b. an aggressive program to identify, install and operate
cost-effective applications of renewables (which are expected
to be cost-effective within a few years) by the end of the
three-year plan period;
c. a mix of technologies that must include photovoltaics and solar
thermal energy systems;
d. research and development projects such as resource assessments
for and test installations of wind energy systems, geothermal
systems, biomass systems, and other innovative renewable
technologies; and
e. a mix of off-grid applications, grid-connected end use
applications, distribution and transmission support, and
generation.
f. APS shall work cooperatively with Staff to develop the plan.
g. APS shall commit to spend at least $9 million on renewables
over the next three years as part of its obligation under
Subparagraph i. herein.
h. Nothing in this Subparagraph vii. shall be construed as
obliging APS to exceed the spending levels required by
Subparagraph i.
viii. APS shall report annually to staff on its renewable resources
activities. This report shall include a formal presentation at a
workshop and a written report.
ix. APS' goal of achieving 12 MW of renewables by December 31, 2000 as
stated in the Resource Planning hearing (Docket No. U-0000-93-052)
shall not be affected by this Agreement. Expenditures made by APS
on pre-approved projects during the next three years for the purpose
of achieving this goal are eligible for recovery through the EEASE
Fund pursuant to Subparagraphs i. and ii.
x. The provisions of this paragraph shall supersede any provisions of
the decision in Docket No. U-0000-93-052 to the extent they are
inconsistent.
L. ADJUSTMENT FOR EFFECTIVE COST CONTAINMENT. In furtherance of the
Commission's goal to establish regulatory procedures which encourage
superior utility performance, the Company shall have the opportunity to
earn a reward in its next general rate proceeding if that rate proceeding
results in no increase in residential rates. In that proceeding, the
Commission shall compare the costs of service for fuel expense and
operation and maintenance, for the test period under review, with the
target cost of service index for fuel expense and operation and
maintenance for all sales including sales for resale (but excluding
interchange and non-traditional sales) of 3.63 cents/kWh to determine if
the Company has achieved additional cost savings. Any achieved cost
savings that result in a price index below 3.63 cents/kWh for fuel
expense and operation and maintenance for all sales including sales for
resale (but excluding interchange and non-traditional sales) shall be
allocated in such rate proceeding between the Company's customers and its
shareholders by first adding to the Company's otherwise appropriate
jurisdictional revenue requirement 45% of such savings.
M. FUTURE RATE TREATMENT OF PALO VERDE. Based on current Staff analysis of
APS' loads and resources, all three Palo Verde generating units are used
and useful and are included in rate base, less the net prudence
disallowance required by the l99l Settlement. In subsequent rate cases,
all three Palo Verde units shall likewise be included in rate base and
their fair value shall be based upon the depreciated original cost value
and reconstruction values, less the net prudence disallowance adjustment
in the l99l Settlement, in the same manner as other APS generating
facilities. Notwithstanding the foregoing, in the event that significant
changes in the operating characteristics, reliability or efficiency of
any or all of the Palo Verde units occur, or any unit is derated, the
Commission may re-examine in subsequent APS general rate cases the extent
to which such unit continues to be used and useful.
N. AFFILIATE TRANSACTION REQUIREMENTS. APS and its affiliates shall remain
subject to the provision of A.A.C. R14-2-801, et seq., as modified by
Decision No. 58063 (November 3, 1992). However, the additional reporting
and prior approval provisions of Commission Decision Nos. 54504 (April
29, 1985) and 55196 (September 18, 1986) are no longer necessary and are
hereby expressly revoked.
O. POST-RETIREMENT EMPLOYEE BENEFITS. The rates and charges herein do not
include an allowance for Post-Retirement Employee Benefits ("OPEBs") as
required under SFAS 106. APS, however, is funding OPEBs using external
funds. Although the Commission has not permitted recovery of this
liability accounting approach for any Arizona regulated entity, Staff
will consider recovery of these expenses in future rate proceedings.
P. INNOVATIVE RATES FOR "AT RISK" CUSTOMERS. In today's competitive
environment, APS and Staff agree that traditional ratemaking based on
fully-allocated embedded cost of service may be inappropriate for certain
of the company's larger customers. APS faces a significantly larger risk
that such customers may decide to leave the APS system for all or part of
their electric service needs, thus imposing the responsibility for
stranded fixed costs on others. This competitive challenge must be met
by timely permitting innovative rate structures and agreements that allow
APS maximum flexibility in responding to competition, while at the same
time benefiting its remaining customers. Consistent with the above
acknowledgements, Staff, therefore, will expeditiously review any APS
tariff or contract filing for such customers and recommend that such
filings be decided promptly by the Commission. Staff agrees that such
tariffs or contracts may contain price adjustment provisions which shall
be effective in accordance with their terms, provided that such prices
are at or above APS' marginal costs for service to such customers.
Q. MISCELLANEOUS RATE CHANGES. This Agreement shall not preclude changes
during the Rate Moratorium Period to specific rate schedules or terms and
conditions of service, or the approval of new rates or terms or
conditions of service, that do not significantly affect the overall
earnings of the Company.
R. FAIR VALUE. For rate making purposes, and in accordance with the terms
of this Agreement, APS' "fair value rate base" is $5,019,405,000 as of
September 30, 1993. A fair rate of return on APS' fair value rate base
is 7.35%. Staff and APS stipulate to the adoption of the above stated
fair value rate base and fair rate of return and agree that the resultant
revenue decrease, as reflected in Paragraph A above, results in just and
reasonable rates for the Company. The determinations made in this
section are made solely for the purpose of the settlement contemplated by
this Agreement.
S. EFFECTIVE DATE. Each provision of this Agreement is in consideration and
support of all the other provisions. This Agreement shall not become
effective until the issuance of a final Commission Order approving this
Agreement without change or alteration on or before June 1, 1994 in the
form of the Proposed Order attached hereto as Attachment E. In the event
that the Commission fails to adopt this Agreement according to its terms
on or before June 1, 1994, this Agreement shall be deemed automatically
withdrawn, the rate reduction provisions of this Agreement shall not take
effect, and APS and Staff shall be free to pursue their respective
positions without prejudice. In addition, if any appeal is taken or
other judicial review is sought of a final Commission order approving
this Agreement, then the parties shall no longer be bound by the terms of
this Agreement and this Agreement shall automatically become null and
void, in which case: (1) the rate reduction specified in Paragraph A.
shall immediately cease; (2) all bills rendered on or after that date
shall be at the rates existing immediately prior to the Commission's
approval of this Agreement; and (3) the revenue reduction theretofore
experienced by APS pursuant to Paragraph A. shall be recovered through
the EEASE surcharge mechanism.
T. AGREEMENT NOT PRECEDENTIAL. The terms and provisions of this Agreement
apply solely to and are binding only in the context of the purposes and
results of this Agreement and none of the positions taken herein by APS
may be referred to, cited or relied upon by any other party in any
fashion as precedent or otherwise in any other proceeding before this
Commission or any other regulatory agency or before any court of law for
any purpose except in furtherance of the purposes and results of this
Agreement. Nothing in this Agreement shall be construed as imposing a
cap on the Company's otherwise reasonable and prudent cost of service
for purposes of setting just and reasonable rates.
U. AGREEMENT AND COMPROMISE. This Agreement represents an attempt to
compromise and settle disputed claims regarding the prospective just and
reasonable rate levels for APS in a manner consistent with the public
interest and applicable legal requirements. Nothing contained in this
Agreement is an admission by APS that its current rate levels or rate
design are unjust or unreasonable.
V. PROPOSED FORM OF ORDER. A proposed form of order is appended hereto as
Attachment E, and is acceptable to both APS and Staff.
DATED at Phoenix, Arizona, this 20th day of April, 1994.
STAFF OF ARIZONA ARIZONA PUBLIC SERVICE COMPANY
CORPORATION COMMISSION
By Gary Yaquinto By William J. Post
Title Director, Utilities Division Title Senior Vice President
ATTACHMENT A
ARIZONA PUBLIC SERVICE COMPANY
ACC Approved Contracts with Provisions
For Exemption from General Rate Case Changes
Customer Nature of Contract Docket No. Decision Date
1. Cyprus Bagdad Copper Mine Subject to inflation adjustment U-1345-94-041 58870 3-16-94
2. Stone Container Corporation Daily sale at incremental cost U-1345-89-320 56770 1-11-90
3. El Paso Natural Gas, Fixed price "opportunity sale" U-1345-90-292 57127 10-22-90
Seligman
4. El Paso Natural Gas, Leupp Fixed price "opportunity sale" U-1345-90-292 57127 10-22-90
5. Phelps Dodge Corporation 1-year fixed priced U-1345-93-304 58501 1-13-94
"opportunity sale"
ATTACHMENT B
2.6 SECURITY DEPOSITS
Existing:
2.6.3 Cash deposits held by the Company six (6) months or longer shall
earn interest at the rate of six (6) percent per year. Deposits
on inactive accounts are applied to the final bill and the
balance, if any, is refunded to the Customer of record within
thirty (30) days.
New:
2.6.3 Cash deposits held by the Company six (6) months/183 days or
longer shall earn interest at the established one year Treasury
Bill rate as published in the Wall Street Journal, as determined
annually, as of January 1 of each year. Deposits on inactive
accounts are applied to the final bill and the balance, if any, is
refunded to the Customer of record within thirty (30) days.
4.4 RETURNED CHECKS
Existing:
4.4 Returned checks. If Company is notified by the Customer's bank that the
bank will not honor a check tendered by Customer for payment of any bill
because: (i) there are insufficient funds to cover the check; (ii) the
checking account has been closed; (iii) Customer has sent a "stop
payment" request on the check; or (iv) any other reason the bank will not
honor Customer's check, Company may require the Customer to make payment
in cash, by money order, certified check, or other means which guarantee
the Customer's payment to the Company.
4.4.1 Customer shall be charged a fee of eight dollars ($8.00) for each
instance where Customer tenders payment of a bill with a check
which is not honored by Customer's bank.
4.4.2 The tender of a dishonored check shall in no way (i) relieve
Customer of the obligation to render payment to Company under the
original terms of the bill, or (ii) defer Company's right to
terminate service for nonpayment of bills.
New:
4.4 Returned checks. If Company is notified by the Customer's bank that the
bank will not honor a check tendered by Customer for payment of any bill
because: (i) there are insufficient funds to cover the check; (ii) the
checking account has been closed; (iii) Customer has sent a "stop
payment" request on the check; or (iv) any other reason the bank will not
honor Customer's check, Company may require the Customer to make payment
in cash, by money order, certified check, or other means which guarantee
the Customer's payment to the Company.
4.4.1 Customer shall be charged a fee of ten dollars ($10.00) for each
instance where Customer tenders payment of a bill with a check
which is not honored by Customer's bank.
4.4.2 The tender of a dishonored check shall in no way (i) relieve
Customer of the obligation to render payment to Company under the
original terms of the bill, or (ii) defer Company's right to
terminate service for nonpayment of bills.
4.4.3 Where the Customer has tendered two (2) or more dishonored checks
in the past twelve (12) consecutive months, Company may require
Customer to make payment in cash, money order or cashier's check
for the next six (6) consecutive months.
ATTACHMENT C
DECOMMISSIONING FACTORS
PALO VERDE
(Thousands of Dollars)
(APS Share)1
LINE TYPE OF FUNDING UNIT 1 UNIT 2 UNIT 3
1 Proposed method of decommissioning. Prompt removal/
dismantlement
2 Year in which substantial
decommissioning costs will first be
incurred. 2023 2025 2027
3 Year in which decommissioning
will be substantially complete. 2031 2033 2035
4 Total costs of decommissioning ($ 1992). $ 128,665 $ 126,599 $ 133,710
5 Total costs of decommissioning
(future dollars) (see item #6) $ 625,554 $ 670,385 $ 782,066
6 For each year between 2 and 3, the 2023 $ 1,235 $ -- $ --
annual cost of decommissioning 2024 2,555 -- --
(future dollars). 2025 33,229 245 --
2026 106,498 4,247 --
2027 111,291 38,792 3,414
2028 116,299 113,438 4,638
2029 121,532 122,723 34,075
2030 55,621 128,246 107,665
2031 47,294 134,017 136,074
2032 -- 83,183 142,198
2033 -- 45,494 148,596
2034 -- -- 123,529
2035 -- -- 81,877
$ 625,554 $ 670,385 $ 782,066
7 Methodology used to convert current
dollars to future dollars. Annual Rate 4.5% 4.5% 4.5%
8 After-tax rate of return
(compounded annually). 6.5% 6.5% 6.5%
9 Period over which decommissioning
costs will be included in cost of service. 1988-2024 1988-2015 1988-2024
10 For each year in 9, above, projected
amount to be included in cost of service. See: Schedule of
Decommissioning
amounts
(attached)
11 Estimated date on which the plant will
no longer be included in rate base. 12/31/2024 12/31/2025 12/31/2026
12 Cost study upon which decommissioning
cost estimates are based. TLG Engineering
1992
- - -------------
1 APS ownership share is 29.1%
ACC jurisdictional share is approximately 95.27%
ARIZONA PUBLIC SERVICE COMPANY
SCHEDULE OF DECOMMISSIONING AMOUNTS INCLUDED IN COST OF SERVICE
PALO VERDE UNIT I
(Thousands of dollars)
(APS Share)
Annual
Contribution ACC 1/
Required to Jurisdiction
Line Year Decommission Amount
1 1988 $1,496 $1,425
2 1989 $1,982 $1,888
3 1990 $1,982 $1,888
4 1991 $1,993 $1,899
5 1992 $2,140 $2,039
6 1993 $3,801 $3,621
7 1994 $3,801 $3,621
8 1995 $3,801 $3,621
9 1996 $3,801 $3,621
10 1997 $3,801 $3,621
11 1998 $3,801 $3,621
12 1999 $3,801 $3,621
13 2000 $3,801 $3,621
14 2001 $3,801 $3,621
15 2002 $3,801 $3,621
16 2003 $3,801 $3,621
17 2004 $3,801 $3,621
18 2005 $3,801 $3,621
19 2006 $3,801 $3,621
20 2007 $3,801 $3,621
21 2008 $3,801 $3,621
22 2009 $3,801 $3,621
23 2010 $3,801 $3,621
24 2011 $3,801 $3,621
25 2012 $3,801 $3,621
26 2013 $3,801 $3,621
27 2014 $3,801 $3,621
28 2015 $3,801 $3,621
29 2016 $3,801 $3,621
30 2017 $3,801 $3,621
31 2018 $3,801 $3,621
32 2019 $3,801 $3,621
33 2020 $3,801 $3,621
34 2021 $3,801 $3,621
35 2022 $3,801 $3,621
36 2023 $3,801 $3,621
37 2024 $3,801 $3,621
-------- --------
$131,225 $125,011
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1/ACC jurisdictional share is approximately 95.27%.
ARIZONA PUBLIC SERVICE COMPANY
SCHEDULE OF DECOMMISSIONING AMOUNTS INCLUDED IN COST OF SERVICE
PALO VERDE UNIT II
(Thousands of dollars)
(APS Share)
Annual
Contribution ACC /1
Required to Jurisdiction
Line Year Decommission Amount
1 1988 $1,360 $1,296
2 1989 $1,802 $1,717
3 1990 $1,802 $1,717
4 1991 $1,839 $1,752
5 1992 $2,320 $2,210
6 1993 $4,069 $3,877
7 1994 $4,069 $3,877
8 1995 $4,069 $3,877
9 1996 $4,069 $3,877
10 1997 $4,069 $3,877
11 1998 $4,069 $3,877
12 1999 $4,069 $3,877
13 2000 $4,069 $3,877
14 2001 $4,069 $3,877
15 2002 $4,069 $3,877
16 2003 $4,069 $3,877
17 2004 $4,069 $3,877
18 2005 $4,069 $3,877
19 2006 $4,069 $3,877
20 2007 $4,069 $3,877
21 2008 $4,069 $3,877
22 2009 $4,069 $3,877
23 2010 $4,069 $3,877
24 2011 $4,069 $3,877
25 2012 $4,069 $3,877
26 2013 $4,069 $3,877
27 2014 $4,069 $3,877
28 2015 $4,069 $3,877
29 2016
30 2017
31 2018
32 2019
33 2020
34 2021
35 2022
36 2023
37 2024
-------- -------
$102,710 $97,862
- - -------------
1/ACC jurisdictional share is approximately 95.27%
ARIZONA PUBLIC SERVICE COMPANY
SCHEDULE OF DECOMMISSIONING AMOUNTS INCLUDED IN COST OF SERVICE
PALO VERDE UNIT III
(Thousands of dollars)
(APS Share)
Annual
Contribution ACC /1
Required to Jurisdiction
Line Year Decommission Amount
1 1988 $1,435 $1,367
2 1989 $1,901 $1,811
3 1990 $1,901 $1,811
4 1991 $1,912 $1,822
5 1992 $2,052 $1,955
6 1993 $3,574 $3,405
7 1994 $3,574 $3,405
8 1995 $3,574 $3,405
9 1996 $3,574 $3,405
10 1997 $3,574 $3,405
11 1998 $3,574 $3,405
12 1999 $3,574 $3,405
13 2000 $3,574 $3,405
14 2001 $3,574 $3,405
15 2002 $3,574 $3,405
16 2003 $3,574 $3,405
17 2004 $3,574 $3,405
18 2005 $3,574 $3,405
19 2006 $3,574 $3,405
20 2007 $3,574 $3,405
21 2008 $3,574 $3,405
22 2009 $3,574 $3,405
23 2010 $3,574 $3,405
24 2011 $3,574 $3,405
25 2012 $3,574 $3,405
26 2013 $3,574 $3,405
27 2014 $3,574 $3,405
28 2015 $3,574 $3,405
29 2016 $3,574 $3,405
30 2017 $3,574 $3,405
31 2018 $3,574 $3,405
32 2019 $3,574 $3,405
33 2020 $3,574 $3,405
34 2021 $3,574 $3,405
35 2022 $3,574 $3,405
36 2023 $3,574 $3,405
37 2024 $3,574 $3,405
-------- --------
$130,717 $124,536
- - -------------
1/ACC jurisdictional share is approximately 95.27%
SCHEDULE D
ARIZONA PUBLIC SERVICE COMPANY
SUMMARY OF DEPRECIATION STUDY
DATA AS OF DECEMBER 31, 1992
_______________ ____ _______________________ __________ __________ ________ __________ _____________
CURRENT CURRENT ASL ASL DIFFERENCE:
FERC DEPREC ANNUAL DEPREC ANNUAL ASL VS CURR
FACILITY ACCT DESCRIPTION RATES ACRUAL RATES ACCRUAL ACCRUAL
_______________ ____ _______________________ __________ __________ _________ __________ _____________
TOTAL STM PROD. 311 STRUCTURES 3.36% 2,959,194 2.93% 2,577,695 (381,499)
312 BOILER PLANT 3.47% 21,882,957 3.16% 19,914,719 (1,968,238)
314 TURBOGENERATORS 3.36% 5,195,391 2.79% 4,315,109 (880,282)
315 ACCESSORY ELECTRIC 3.36% 4,068,955 3.00% 3,632,996 (435,959)
316 MISC. POWER PLANT 3.83% 1,100,596 3.87% 1,112,369 11,773
---------- --------- ---------- -------------
TOTAL STM PROD. 35,207,093 3.15% 31,552,888 (3,654,205)
---------- --------- ---------- -------------
TOTAL NUCLEAR 321 STRUCTURES 2.86% 17,571,218 2.63% 16,167,849 (1,403,369)
322 REACTOR PLANT 2.86% 26,234,301 2.89% 26,470,174 235,873
322.01 STEAM GENERATORS 2.86% 1,255,693 8.84% 3,882,157 2,626,464
323 TURBOGENERATORS 2.86% 9,511,302 2.73% 9,078,071 (433,231)
324 ACCESSORY ELECTRIC 2.86% 7,555,323 2.81% 7,411,496 (143,827)
325 MISC. POWER PLANT 2.86% 3,718,898 3.09% 4,019,152 300,254
---------- --------- ---------- -------------
TOTAL NUCLEAR 65,846,735 3.83% 67,028,899 1,182,164
---------- --------- ---------- -------------
HYDRAULIC PROD. 331 STRUCTURES 0.00% 0 2.16% 1,609 1,609
332 RESERVOIRS & DAMS 2.61% 25,890 2.16% 21,395 (4,495)
333 WATER WHEELS & TURBINES 2.76% 4,339 2.16% 3,391 (948)
334 ACCESSORY ELECTRIC 3.06% 13,892 2.16% 9,792 (4,100)
335 MISC. POWER PLANT 6.24% 6,804 2.16% 2,352 (4,452)
336 ROADS & BRIDGES 3.32% 1,639 2.16% 1,065 (574)
---------- --------- ---------- -------------
TOTAL HYDRAULIC 52,562 2.16% 39,602 (12,960)
---------- --------- ---------- -------------
COMB. CYCLE 341 STRUCTURES 3.45% 119,420 4.71% 171,185 51,765
342 FUEL HOLDERS 3.03% 362,573 4.62% 580,476 217,903
344 GENERATORS 3.23% 1,615,002 4.55% 2,275,003 660,001
345 ACCESSORY ELECTRIC 3.13% 202,687 4.56% 295,288 92,601
346 MISC. POWER PLANT 4.00% 42,667 7.12% 75,946 33,279
---------- --------- ---------- -------------
TOTAL COMB. CYCLE 2,342,348 5.11% 3,397,898 1,055,550
---------- --------- ---------- -------------
TOTAL OTHER PROD. 341 STRUCTURES 3.45% 53,399 3.26% 39,203 (14,196)
342 FUEL HOLDERS 3.03% 194,771 3.26% 192,080 (2,691)
343 PRIME MOVERS 3.03% 967,531 2.96% 939,168 (28,363)
344 GENERATORS 3.23% 467,442 3.26% 528,126 60,684
345 ACCESSORY ELECTRIC 3.13% 211,811 3.11% 214,048 2,237
346 MISC. POWER PLANT 4.00% 68,904 3.39% 56,877 (12,027)
---------- --------- ----------- --------------
TOTAL OTHER PROD. 1,963,858 3.21% 1,969,502 5,644
---------- --------- ---------- -------------
TRANSMISSION 352 STRUCTURES 2.00% 371,131 2.10% 389,687 18,557
353 STATION EQUIPMENT 3.09% 8,432,837 2.66% 7,251,538 (1,181,299)
354 TOWERS & FIXTURES 2.17% 1,536,838 2.17% 1,534,477 (2,361)
355 POLES & FIXTURES 3.71% 4,054,810 3.02% 3,304,239 (750,571)
356 OVERHEAD CONDUCTORS 2.60% 3,856,484 2.36% 3,505,895 (350,589)
357 UNDERGROUND CONDUIT 2.10% 108,368 2.10% 108,368 0
358 UNDERGROUND CONDUCTORS 3.00% 376,184 2.10% 263,328 (112,855)
---------- --------- ---------- -------------
TOTAL TRANSMISSION 18,736,651 2.36% 16,357,533 (2,379,118)
---------- --------- ---------- -------------
DISTRIBUTION 361 STRUCTURES 2.50% 345,743 2.88% 397,605 51,861
362 STATION EQUIPMENT 3.39% 3,485,087 3.85% 3,954,035 468,949
364 POLES, TOWERS, & FIXTURES 3.09% 6,463,800 2.97% 6,218,998 (244,802)
365 OVERHEAD CONDUCTORS 2.00% 2,664,056 2.08% 2,764,586 100,530
366 UNDERGROUND CONDUIT 2.27% 1,766,205 1.83% 1,426,450 (339,755)
367 UNDERGROUND CONDUCTORS 3.33% 14,107,834 4.07% 17,260,169 3,152,334
368.1 LINE XFMRS-POLE TOP 3.13% 4,089,994 3.00% 3,920,122 (169,872)
368.2 LINE XFMRS-PAD MOUNTED 3.13% 5,183,492 3.28% 5,433,972 250,480
369 SERVICES 3.50% 3,919,625 3.43% 3,844,966 (74,660)
370 METERS 2.57% 2,485,532 3.85% 3,719,742 1,234,210
371 INSTAL. ON CUSTOMER PREM. 6.43% 727,710 4.33% 490,421 (237,288)
373 STREET LIGHTS 3.00% 1,230,351 3.75% 1,537,939 307,588
---------- --------- ---------- -------------
TOTAL DISTRIBUTION 46,469,428 3.28% 50,969,004 4,499,576
---------- --------- ---------- -------------
GENERAL PLANT 390 STRUCTURES 2.62% 2,174,566 3.50% 2,904,955 730,389
391 OFFICE FURNITURE 5.00% 998,562 3.96% 790,861 (207,701)
391.1 COMPUTER EQUIPMENT 12.50% 9,330,555 12.50% 9,330,555 0
391.2 OFFICE EQUIPMENT 11.11% 517,027 7.07% 329,084 (187,943)
393 STORES EQUIPMENT 2.50% 32,258 2.50% 32,258 0
394 TOOLS, SHOP & GARAGE 7.31% 992,895 4.00% 543,308 (449,587)
395 LAB EQUIPMENT 6.67% 78,930 6.67% 78,890 (39)
397 COMMUNICATIONS 6.25% 4,206,807 4.76% 3,205,187 (1,001,621)
398 MISC. EQUIPMENT 5.00% 66,613 5.00% 66,613 0
----------- --------- ----------- -------------
TOTAL GENERAL PLANT 18,398,214 5.55% 17,281,711 (1,116,503)
----------- --------- ----------- -------------
TOTAL DEPREC. PLANT IN SERVICE 189,016,890 188,597,037 (419,853)
=========== ========= =========== =============
ATTACHMENT E
BEFORE THE ARIZONA CORPORATION COMMISSION
MARCIA WEEKS
CHAIRMAN
RENZ D. JENNINGS
COMMISSIONER
DALE H. MORGAN
COMMISSIONER
IN THE MATTER OF THE COMMISSION'S ) DOCKET NO. U-1345-94-120
EXAMINATION OF THE RATES AND )
CHARGES OF ARIZONA PUBLIC SERVICE ) DECISION NO.__________
COMPANY )
___________________________________) ORDER
Open Meeting
May __, 1994
Phoenix, Arizona
FINDINGS OF FACT
1. Arizona Public Service Company ("APS") is an Arizona corporation
providing electric utility service within the State of Arizona.
2. The rates and charges currently in effect for APS were determined
to be just and reasonable in APS' last general rate case, Decision No.
57649, dated December 6, 1991.
3. Since Decision No. 57649, a number of events have occurred which
affect APS' expenses, rate base and rate of return. Included among those
events are:
A. Capital costs for APS have fallen significantly.
B. APS has re-financed significant amounts of debt, and has
retired old preferred stock and issued new lower-cost
preferred stock.
C. APS has undertaken several programs to reduce costs and
improve efficiency.
D. APS has experienced significant growth in kWh sales
related to new customers.
4. The Staff of the Commission undertook a preliminary review of
these events and their impact on APS. APS provided Staff with substantial
amounts of data and supporting documentation, and made personnel available
as needed to help explain or interpret the data, to assist Staff in
conducting the review.
5. As a result of discussions conducted subsequent to Staff's review,
Staff and APS jointly concluded that the rates and charges previously
authorized by the Commission for APS should be reduced. Staff and APS also
reached agreement on a number of related issues.
6. Staff and APS believe that the agreement they have reached is
consistent with the best interests of the parties and the public interest
generally. The particulars of the agreement are memorialized in a written
Rate Settlement Agreement ("Agreement"), a copy of which is attached hereto
as Exhibit 1.
7. Pursuant to the Agreement, Staff and APS have agreed to the
following:
A. REVENUE REDUCTION. For usage on or after the effective date of
the Agreement, as determined in accordance with Paragraph S, APS
jurisdictional rates will be decreased by approximately 2.2%
(approximately $32.3 million annually, based on September 30,
1993 sales as adjusted).
B. SETTLEMENT RATES. The revenue decrease provided for in
Paragraph A shall be allocated among customer classes by means
of a uniform .20 cents/kWh reduction in the energy charges for
all APS rate schedules except those rate schedules set forth in
Attachment A to the Agreement. In addition, and concurrent with
this rate reduction, APS will be authorized to amend Schedule
1 of its tariffs. These revised tariff sheets are set forth in
Attachment B to the Agreement.
C. MORATORIUM ON AND PROCEDURES FOR FURTHER RATE CHANGES.
i. APS shall not file for a change to its general rates and
charges prior to December 31, 1996 ("Rate Moratorium
Period"). Staff will likewise be subject to the same
moratorium. This moratorium shall not apply to price
changes pursuant to Paragraph P.
ii. The next general rate application filed by APS will become
effective and permanent as soon as practicable after the
filing, but in no event later than 12 months after the
filing. Such time limit shall not be extended and shall
supersede any Commission regulation or legislative
enactment which provides for a different period of time,
unless the Commission determines that such time limit has
become unreasonable due either to any amendment to the
rate filing made by APS which substantially alters the
amount of the requested rate change or substantially
alters the facts used as a basis for the requested rate
change, or to an extraordinary event not otherwise
provided for. The provisions of this subparagraph shall
not apply to any general rate application filed by APS
after December 31, 1997.
iii. During the six month period following the filing
referenced in the preceding subparagraph, APS and Staff
will act in good faith to use their best efforts to
achieve a settlement on APS' filing and will submit a
written report to the Commission at the end of that period
on the outcome of such settlement activities. If a
settlement is reached, Staff and APS shall promptly file a
motion seeking Commission approval of the settlement, and
the Commission shall accept or reject the settlement as
soon as practicable after filing.
iv. Neither APS nor Staff shall be prevented from seeking a
change in rates prior to or after December 31, 1996 in the
event of conditions or circumstances which constitute an
emergency, such as the inability to finance on reasonable
terms or material increases in the Company's cost of
service as a result of federal, tribal, state or local
laws, regulatory requirements or orders. Staff's review
of such a request by APS for emergency rates shall focus
on the existence of a substantial threat or harm to APS'
ability to continue to provide reliable service.
D. ESTABLISHMENT OF FUTURE RATE PRINCIPLES. APS will aggressively
pursue the cost savings contemplated by Paragraph L with the
goal of maintaining average residential prices beyond the Rate
Moratorium Period at the proposed 10.45 cents/kWh level
resulting from this settlement rate reduction. To meet this
goal, APS will have to further reduce operating costs to offset
increases in externally imposed expenses, such as interest and
other capital costs, fuel and taxes.
In addition, APS will require additional regulatory flexibility
and pricing freedom to properly respond to the competitive
forces and financial risks inherent in the larger customer
market segments. Therefore, Staff will meet with APS in a good
faith attempt to develop new pricing and operating procedures
that are responsive to market conditions, competitive pressures
in the electric utility industry, and the Commission's
relationship to regulated utilities and their customers. In
this endeavor, the parties agree to consider, inter alia,
flexible pricing provisions, innovative procedures, and product
pricing principles. The parties agree to provide a written
report on their progress to the Commission within 12 months of
the date of Commission approval of the Agreement and will
request prompt Commission approval of recommendations that will
assist APS in achieving its residential price stability goals.
E. PROPERTY INCLUDED IN RATE BASE. The rates and charges
authorized herein fully include a return on the recorded book
original cost of all jurisdictional APS assets (net of
depreciation, amortization, and deferred income taxes and other
deferred credits) as of September 30, 1993, excepting
construction work in progress as of such date. However, nothing
in the Agreement shall be construed as prohibiting Staff or any
other party from pursuing new issues related to expenditures
made or actions taken after September 30, 1993.
F. AMORTIZATION OF "IN-LIEU" REFUND OBLIGATION AND RESTORATION OF
PV-3 TEMPORARY IMPAIRMENT. The "In-Lieu" refund obligation
referenced in Decision No. 57649 (December 6, 1991), as well as
in the 1991 Settlement, shall be deemed fully discharged as of
the date of Commission approval of the Agreement, unless
discharged earlier pursuant to the terms of the l99l
Settlement. Likewise, the temporary value impairment of Palo
Verde Unit 3 shall be deemed fully restored as of the date of
Commission approval of the Agreement, unless restored earlier
pursuant to the terms of the 1991 Settlement.
G. DECOMMISSIONING. The rates authorized herein expressly include
an annual allowance for decommissioning funding for all three
Palo Verde Units at the following ACC jurisdictional levels:
PV 1 $3,621,000
PV 2 $3,877,000
PV 3 $3,405,000
APS shall fund the amounts specified above through quarterly
contributions to the decommissioning trusts. The Commission
hereby adopts and approves the decommissioning factors set
forth in Attachment C to the Agreement. However, the
Commission shall not be bound in any subsequent rate case to
adopt the decommissioning funding levels or decommissioning
factors adopted and approved herein, but any subsequent change
in such levels or factors adopted by the Commission would not
be applied retroactively.
H. DEPRECIATION. The rates and charges authorized herein include
an allowance for depreciation computed at the annual rates and
using the methodology indicated in Attachment D to the
Agreement. These revised depreciation rates and methodology
are hereby expressly approved. The Company's depreciation
rates may also be changed from time to time in accordance with
the results of depreciation studies performed by or for APS,
with such changes to thereafter become effective upon Staff's
approval. The Commission shall not be bound in any subsequent
rate case to adopt for ratemaking purposes any changes in
depreciation rates made pursuant to this provision, but such
ratemaking treatment would not be applied retroactively. Any
provision of A.A.C. R14-2-102 inconsistent with this paragraph
will be expressly waived.
I. IMPROVEMENT OF APS' EQUITY RATIO. In Section 2.E of the l99l
Settlement, both Staff and the commission supported APS' goal
of continuous progress toward a 40% common equity ratio. Staff
continues to support that goal. Therefore, in furtherance of
that objective, APS shall, upon receipt of a favorable ruling
from the Internal Revenue Service, amortize below the line its
unamortized investment tax credits ("ITCs") over a five (5)
year period beginning with calendar year 1995. All such
amortized ITCs shall thereafter be treated as fully restored to
the Company's rate base in any future ratemaking proceedings.
J. RATE MIGRATION ADJUSTMENT. The rates and charges authorized
herein include the effects of any rate migration occurring as a
result of the l99l Settlement, and provisions of Section 20 of
such l99l Settlement shall be deemed fully satisfied.
K. EXPENDITURES ON DEMAND SIDE MANAGEMENT AND RENEWABLE RESOURCES.
It is the parties' intent that significant expenditures on both
Demand Side Management ("DSM") and renewable resources
development shall be made by APS. APS shall increase its
commitment and activities in Demand Side Management and
renewable resources according to the following schedule:
i. APS shall spend at least $30 million over the next three
years on pre-approved renewable resources and pre-approved
DSM projects (including capital and expensed program costs
for renewables, DSM program costs, lost net revenues due
to DSM, and a reward or incentive for KW deferrals for
DSM). If APS fails to spend or commit to spend $18
million on pre-approved renewable resources or
pre-approved DSM projects within three years from the
effective date of this order, the unspent or uncommitted
portion of such $18 million shall be credited to
ratepayers through the Energy Efficiency And Solar Energy
Fund ("EEASE Fund") as de- scribed in the Plan of
Administration (Subparagraph iv.).
ii. Each year APS shall spend an initial $6 million on
pre-approved DSM and renewables projects ("Base
DSM/Renewables Amount"). After APS has spent the required
$6 million per year, APS shall be entitled to recover up
to $12 million per year through the EEASE Fund for
pre-approved renewable resource and DSM projects
(including capital and expensed program costs for
renewables, DSM program costs, lost net revenues due
to DSM, and a reward or incentive for KW deferrals for
DSM). The amount recoverable through the EEASE Fund
excludes the Base DSM/Renewables Amount.
iii. A single EEASE Fund surcharge factor shall be applied to
all jurisdictional sales (except those on existing special
contracts which exclude the surcharge). To equitably
distribute DSM and renewables costs, APS shall explore a
full range of DSM and renewables programs for all customer
classes and propose for pre-approval, where applicable,
customer service charges for DSM and renewables in which
the participating customer pays APS for some or all of
APS' DSM and renewables costs attributable to that
customer.
iv. APS shall file a revised "Plan of Administration" for
the EEASE Fund within thirty (30) days of the effective
date of this order and the plan shall be effective upon a
Staff determination that the plan is in compliance
with the Commission's order adopting the Settlement.
The plan shall include a process to account for the
Base DSM/Renewables Amount.
v. To be eligible to meet the goals and cost recovery
mechanism described in Subparagraphs i. and ii., a
renewable or DSM program proposed by APS under the terms
of the plan of administration described in Subparagraph iv
must have been pre-approved by Staff. The parties intend
that the pre-approval process be substantially the same as
the existing process established for the EEASE Fund.
vi. APS shall expend a minimum of $250,000 on a low income DSM
pilot program.
vii. On or before December 31, 1994, APS shall submit a
three-year renewable resource plan for Staff review and
comment that includes:
a. an aggressive program to identify, install and
operate cost-effective applications of renewables
within the APS system by the end of the three-year
plan period;
b. an aggressive program to identify, install and
operate cost-effective applications of renewables
(which are expected to be cost-effective within a few
years) by the end of the three-year plan period;
c. a mix of technologies that must include photovoltaics
and solar thermal energy systems;
d. research and development projects such as resource
assessments for and test installations of wind energy
systems, geothermal systems, biomass systems, and
other innovative renewable technologies; and
e. a mix of off-grid applications, grid-connected end
use applications, distribution and transmission
support, and generation.
f. APS shall work cooperatively with Staff to develop
the plan.
g. APS shall commit to spend at least $9 million on
renewables over the next three years as part of its
obligation under Subparagraph i. herein.
h. Nothing in this Subparagraph vii. shall be construed
as obliging APS to exceed the spending levels
required by Subparagraph i.
viii. APS shall report annually to staff on its renewable
resources activities. This report shall include a formal
presentation at a workshop and a written report.
ix. APS' goal of achieving 12 MW of renewables by December 31,
2000 as stated in the Resource Planning hearing (Docket
No. U-0000-93-052) shall not be affected by the Agreement.
Expenditures made by APS on pre-approved projects during
the next three years for the purpose of achieving this
goal are eligible for recovery through the EEASE Fund
pursuant to Subparagraphs i. and ii.
x. The provisions of this paragraph shall supersede any
provisions of the decision in Docket No. U-0000-93-052 to
the extent they are inconsistent.
L. ADJUSTMENT FOR EFFECTIVE COST CONTAINMENT. In furtherance of
the Commission's goal to establish regulatory procedures which
encourage superior utility performance, the Company shall have
the opportunity to earn a reward in its next general rate
proceeding if that rate proceeding results in no increase in
residen- tial rates. In that proceeding, the Commission shall
compare the costs of service for fuel expense and operation and
maintenance, for the test period under review, with the target
cost of service index for fuel expense and operation and
maintenance for all sales including sales for resale (but
excluding interchange and non-traditional sales) of 3.63
cents/kWh to determine if the Company has achieved additional
cost savings. Any achieved cost savings that result in a price
index below 3.63 cents/kWh for fuel expense and operation and
maintenance for all sales including sales for resale (but
excluding interchange and non-traditional sales) shall be
allocated in such rate proceeding between the Company's
customers and its shareholders by first adding to the Company's
otherwise appropriate jurisdictional revenue requirement 45% of
such savings.
M. FUTURE RATE TREATMENT OF PALO VERDE. Based on current Staff
analysis of APS' loads and resources, all three Palo Verde
generating units are used and useful and are included in rate
base, less the net prudence disallowance required by the l99l
Settlement. In subsequent rate cases, all three Palo Verde
units shall likewise be included in rate base and their fair
value shall be based upon the depreciated original cost value
and reconstruction values, less the net prudence disallowance
adjustment in the l99l Settlement, in the same manner as other
APS generating facilities. Notwithstanding the foregoing, in
the event that significant changes in the operating
characteristics, reliability or efficiency of any or all of the
Palo Verde units occur, or any unit is derated, the Commission
may re-examine in subsequent APS general rate cases the extent
to which such unit continues to be used and useful.
N. AFFILIATE TRANSACTION REQUIREMENTS. APS and its affiliates
shall remain subject to the provision of A.A.C. R14-2-801, et
seq., as modified by Decision No. 58063 (November 3, 1992).
However, the additional reporting and prior approval provisions
of Commission Decision Nos. 54504 (April 29, 1985) and 55196
(September 18, 1986) are no longer necessary and are hereby
expressly revoked.
O. POST-RETIREMENT EMPLOYEE BENEFITS. The rates and charges
herein do not include an allowance for Post-Retirement Employee
Benefits ("OPEBs") as required under SFAS 106. APS, however,
is funding OPEBs using external funds. Although the Commission
has not permitted recovery of this liability accounting
approach for any Arizona regulated entity, Staff will consider
recovery of these expenses in future rate proceedings.
P. INNOVATIVE RATES FOR "AT RISK" CUSTOMERS. In today's
competitive environment, APS and Staff agree that traditional
ratemaking based on fully-allocated embedded cost of service
may be inappropriate for certain of the company's larger
customers. APS faces a significantly larger risk that such
customers may decide to leave the APS system for all or part of
their electric service needs, thus imposing the responsibility
for stranded fixed costs on others. This competitive challenge
must be met by timely permitting innovative rate structures and
agreements that allow APS maximum flexibility in responding to
competition, while at the same time benefiting its remaining
customers. Consistent with the above acknowledgements, Staff,
therefore, will expeditiously review any APS tariff or contract
filing for such customers and recommend that such filings be
decided promptly by the Commission. Staff agrees that such
tariffs or contracts may contain price adjustment provisions
which shall be effective in accordance with their terms,
provided that such prices are at or above APS' marginal costs
for service to such customers.
Q. MISCELLANEOUS RATE CHANGES. The Agreement shall not preclude
changes during the Rate Moratorium Period to specific rate
schedules or terms and conditions of service, or the approval
of new rates or terms or conditions of service, that do not
significantly affect the overall earnings of the Company.
R. FAIR VALUE. For rate making purposes, and in accordance with
the terms of the Agreement, APS' "fair value rate base" is
$5,019,405,000 as of September 30, 1993. A fair rate of return
on APS' fair value rate base is 7.35%. Staff and APS stipulate
to the adoption of the above stated fair value rate base and
fair rate of return and agree that the resultant revenue
decrease, as reflected in Paragraph A above, results in just
and reasonable rates for the Company. The determinations made
in this section are made solely for the purpose of the
settlement contemplated by the Agreement.
S. EFFECTIVE DATE. Each provision of the Agreement is in
consideration and support of all the other provisions. The
Agreement shall not become effective until the issuance
of a final Commission Order approving the Agreement
without change or alteration on or before June 1, 1994 in the
form of the Proposed Order attached thereto as Attachment
E. In the event that the Commission fails to adopt
the Agreement according to its terms on or before June 1,
1994, the Agreement shall be deemed automatically
withdrawn, the rate reduction provisions of the Agreement
shall not take effect, and APS and Staff shall be free to
pursue their respective positions without prejudice. In
addition, if any appeal is taken or other judicial review is
sought of a final Commission order approving the Agreement,
then the parties shall no longer be bound by the terms of
the Agreement and the Agreement shall automatically become
null and void, in which case: (1) the rate reduction
specified in paragraph A. shall immediately cease; (2) all
bills rendered on or after that date shall be at the rates
existing immediately prior to the Commission's approval of
the Agreement; and (3) the revenue reduction theretofore
experienced by APS pursuant to paragraph A. shall be
recovered through the EEASE surcharge mechanism.
T. AGREEMENT NOT PRECEDENTIAL. The terms and provisions of the
Agreement apply solely to and are binding only in the
context of the purposes and results of the Agreement and none
of the positions taken herein by APS may be referred to,
cited or relied upon by any other party in any fashion as
precedent or otherwise in any other proceeding before
this Commission or any other regulatory agency or
before any court of law for any purpose except in
furtherance of the purposes and results of this Agreement.
Nothing in this Agreement shall be construed as imposing a
cap on the Company's otherwise reasonable and prudent cost
of service for purposes of setting just and reasonable rates.
U. AGREEMENT AND COMPROMISE. The Agreement represents an
attempt to compromise and settle disputed claims regarding the
prospective just and reasonable rate levels for APS in a
manner consistent with the public interest and applicable
legal requirements. Nothing contained in the Agreement is an
admission by APS that its current rate levels or rate design
are unjust or unreasonable.
CONCLUSIONS OF LAW
1. APS is a public service corporation within the meaning of Article
15 of the Arizona Constitution and A.R.S. Section 40-250, 40-251 and 40-367.
2. The Commission has jurisdiction over APS, over the subject matter
of this proceeding, and over the Agreement submitted by the Staff and APS.
3. The Agreement resolves all matters contained therein in a manner
which is just and reasonable, and which promotes the public interest.
4. The Commission's acceptance and approval of the terms of this
Agreement between Staff and APS are in the public interest.
5. Based on the Agreement of APS and Staff, for purposes of this
proceeding, APS' fair value rate base as of September 30, 1993 is
$5,019,405,000, and a fair and reasonable rate of return on that fair value
rate base is 7.35%.
6. Based on the Agreement between APS and Staff, it is appropriate to
reduce APS' authorized revenues by $32.3 million from September 30, 1993
sales as adjusted.
7. APS should be directed to file revised tariffs consistent with the
Agreement and the findings contained herein.
8. The rates and charges authorized herein are just and reasonable.
ORDER
IT IS THEREFORE ORDERED that APS shall decrease its rates and
charges for all usage on or after the effective date of this Order
consistent with the Findings of Fact and Conclusions of Law contained herein
so as to result in an annual decrease of $32.3 million, and shall fund $6
million per year for the next three years on pre-approved Demand Side
Management and renewables projects, for a total of $38.3 million per year in
benefits to APS' customers.
IT IS FURTHER ORDERED that this Order incorporates the Agreement
executed April 20, 1994, between APS and Staff, and such Order is expressly
conditioned thereon.
IT IS FURTHER ORDERED that the terms and conditions of the
Agreement be and the same are hereby adopted and approved.
IT IS FURTHER ORDERED that APS is authorized and directed to file
revised schedules of rates and charges consistent with the Findings and
Conclusions of this Order.
IT IS FURTHER ORDERED that neither APS nor Commission Staff shall
file any application to initiate a general rate change prior to December 31,
1996.
IT IS FURTHER ORDERED that any general rate change proposed by the
Company on or after December 31, 1996, but not later than December 31, 1997,
if substantiated after appropriate notice and hearing and authorized by the
Commission, will become effective within twelve months following the filing
of the proposed rate change.
IT IS FURTHER ORDERED that this Order shall become effective
immediately.
BY ORDER OF THE ARIZONA CORPORATION COMMISSION
___________________________________________________________________
CHAIRMAN COMMISSIONER COMMISSIONER
IN WITNESS WHEREOF, I, JAMES MATTHEWS, Executive
Secretary of the Arizona Corporation Commission,
have hereunto, set my hand and caused the
official seal of this Commission to be affixed
at the Capitol, in the City of Phoenix, this
____ day of ___________, 1994.
_______________________________________
JAMES MATTHEWS
Executive Secretary
DISSENT____________________