SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 19, 1998
ARIZONA PUBLIC SERVICE COMPANY
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(Exact name of registrant as specified in its charter)
Arizona 1-4473 86-0011170
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
400 North Fifth Street, P.O. Box 53999, Phoenix, Arizona 85004
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(Address of principal executive offices) (Zip code)
(602) 250-1000
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(Registrant's telephone number, including area code)
NONE
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(Former name or former address, if changed since last report)
Item 5. Other Events
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Competition
Stranded Cost Hearing. As previously reported, in February 1998 the
Arizona Corporation Commission (the "ACC") completed a generic hearing on
stranded cost determination and recovery. See Note 5 of Notes to Condensed
Financial Statements in the Company's Report on Form 10-Q for the fiscal quarter
ended March 31, 1998 (the "March 10-Q Report"). On June 22, 1998, the ACC issued
an order in that matter. The order allows an "Affected Utility," such as the
Company, to choose between two options for the recovery of its stranded costs.
Under the first option, an Affected Utility that chooses to divest its
generating assets must file a divestiture plan for ACC approval no later than
October 1, 1998, and divestiture must be completed by January 1, 2001, after
which the Affected Utility would be permitted to collect 100 percent of its
stranded costs, including a return on the unamortized balance, over a ten-year
period. Under the second option (referred to by the ACC as the "Transition
Revenues Methodology"), an Affected Utility would be provided sufficient
revenues necessary to maintain financial integrity for a period of ten years or
the ACC would "otherwise provide an allocation of stranded cost responsibilities
and risks between ratepayers and shareholders as is determined to be in the
public interest." The order also states an intent that the various recovery
options "will provide the Affected Utilities sufficient revenues to enable them
to recover appropriate regulatory assets." The order requires each Affected
Utility to file with the ACC, within 60 days of the date of the order, its
choice of options for stranded cost recovery as well as an implementation plan
relating to its chosen option, including its estimated stranded costs separated
out into regulatory assets and other generation related assets.
The Company does not intend to divest its generating assets and will
continue to work with the ACC to reach workable resolutions on stranded cost
recovery. The Company cannot accurately predict the outcome of this matter.
Statement of Position. On May 29, 1998, the Staff of the ACC's
Utilities Division (the "ACC Staff") issued a Statement of Position and asked
for comments on a number of issues related to the implementation of retail
electric competition in Arizona. The Statement of Position, a copy of which has
been filed as an exhibit to this Report on Form 8-K, recommends, among other
things: the divestiture of Affected Utility assets; aggregation of customer
loads for purposes of competition phase-in; acceleration of the date to January
1, 2001 by which all customers would have competitive access; and, rate
reductions for non-eligible customers. Certain of the recommendations in the
Statement of Position are designed to amend the positions set forth in the
framework rules regarding retail electric competition previously adopted by the
ACC.
At the request of the ACC Staff, on May 22, 1998, the Company filed a
response to a draft of the Statement of Position. In the Company's response, the
Company stated that the proposals in the draft Statement of Position (many of
which are included in the final Statement of Position) were deficient or
unlawful in many material respects, met none of the stated objectives
of the draft Statement of Position, were punitive to Affected Utilities, and
continued to lack the level of detail and specificity required to implement
competition in the next seven months.
On June 4, 1998, the ACC held a special open meeting at which the
Statement of Position was discussed, but no action was taken. The Company cannot
accurately predict what action, if any, the ACC will take with respect to the
Statement of Position.
Agreement with Salt River Project. As previously reported, the
Antitrust Unit of the Arizona Attorney General's Office (the "Antitrust Unit"),
which has been involved in the ongoing regulatory and legislative proceedings
regarding the restructuring of the Arizona electric industry, requested
clarification of certain provisions of a Memorandum of Agreement between the
Company and the Salt River Project Agricultural Improvement and Power District
("Salt River Project"). See Note 5 of Notes to Condensed Financial Statements in
the March 10-Q Report.
Pursuant to an Addendum to Memorandum of Agreement, dated as of May 19,
1998 (the "Addendum"), the Company and Salt River Project amended and clarified
certain provisions of the Memorandum of Agreement in response to certain issues
raised by the Antitrust Unit. By letter dated May 19, 1998, the Antitrust Unit
advised the Company and Salt River Project that, upon their execution of the
Addendum, it would take no action regarding the language of the Memorandum of
Agreement, although it reserved the right to take action in the future if new
information justified doing so. The ACC Hearing Division has set a hearing for
August 6, 1998 so that the ACC may review certain provisions of the Memorandum
of Agreement, as amended.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(c) Exhibits.
Exhibit No. Description
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10.1 Statement of Position of the ACC Staff dated May 29,
1998
10.2 Addendum to Memorandum of Agreement dated as of May
19, 1998
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ARIZONA PUBLIC SERVICE COMPANY
(Registrant)
Dated: June 25, 1998 By: Michael V. Palmeri
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Michael V. Palmeri
Treasurer
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