UES Seeks New Electric Rates To Cover Investments In Service Quality

UniSource Energy Services (UES) is requesting new, higher electric rates to cover the costs of providing safe, reliable electric service and to continue maintaining the company’s financial health.

If approved, the rates UES proposed today in a filing with the Arizona Corporation Commission (ACC) would increase typical residential customers’ average monthly bills by about $3.60, or about 4.4 percent when compared to today’s electric rates, which are among the lowest in the state. Under the proposed rates, the average monthly electric bill of a typical residential customer would be about $86.

“Our current rates don’t reflect the investments we’ve made and expenses incurred over three and a half years to improve upon the high level of service customers have come to expect from UES,” said Paul Bonavia, Chairman and CEO of UES and its parent company, UNS Energy Corp. (NYSE: UNS). “We’ve reinforced and expanded our system infrastructure while investing in renewable energy and energy efficiency. Our proposed rates reflect the added value of these improvements, which have resulted in safer, cleaner and more reliable service for customers.”

UES’ total electric rates lag behind its service costs. UES’ current rate structure is based on costs incurred by the company in 2008. Since then, operating costs have increased due to such things as rising material costs, while sales have remained essentially flat due in part to government mandated energy programs.

Since 2009, the company has invested more than $157 million to acquire new power production resources, strengthen its distribution system and make other improvements to serve customers’ needs. Common utility benchmarks indicate that UES’ distribution operations rank among the most reliable in the industry.

UES also filed the rate proposal to satisfy a 2010 requirement from the ACC after it determined that the purchase of the Black Mountain Generating Station could be incorporated into the base rates of UES electric customers if certain requirements were met.

UES is asking for new rates to be in place in early 2014, more than three years after the most recent increase. Other rate components such as renewable energy and energy efficiency surcharges required to satisfy state-mandated programs have contributed to customer bills during that period. The ACC will determine when new rates would take effect.

UES’ proposal includes a new funding plan for energy efficiency programs that reflects the company’s focus on energy efficiency as a low-cost resource. Customers could partially offset monthly bill increases associated with higher base rates by participating in one or more of the company’s energy efficiency programs.

UES’ proposed rates include a mechanism to help ensure the recovery of its system costs. A portion of these costs is recovered through rates that generate revenue based on consumption levels, which are reduced by state-mandated energy efficiency and renewable power programs. The mechanism would be adjusted annually to account for the reduced energy sales that result from these programs. A similar mechanism has already been authorized for other Arizona utilities.

UES is also proposing a new cost adjustment mechanism that will allow UES to recover costs associated with the transmission of electric power to customers. A similar mechanism has already been authorized for use in Arizona.

UES’ rate-increase request will be reviewed by the ACC, a five-member panel of elected officials that sets utility rates and oversees other aspects of the company’s operations. That review typically includes public hearings before an administrative law judge who recommends a proposed order for the ACC. The review process typically takes about a year.

Additional details about UES’ rate proposal are available at uesaz.com, including frequently asked questions and a copy of the application.

UniSource Energy Services, a subsidiary of UNS Energy Corporation (NYSE: UNS), provides electric service to about 91,000 customers in Mohave and Santa Cruz counties. The company also provides natural gas to more than 146,000 customers in Mohave, Yavapai, Coconino, Navajo and Santa Cruz counties. For more information, visit uesaz.com. To learn more about UNS Energy, visit uns.com.

Copyright Business Wire 2010