Arizona Public Service customer and ratepayer advocate Stacey Champion said at a Feb. 4 meeting of the Arizona Corporation Commission that more than two years after a controversial rate-case settlement and her subsequent complaint that resulted in an administrative law judge ordering a new rate case, she still thinks APS' rate options reflect flawed rate design.
"It's overly complex and overly burdensome to the majority of customers," Champion told the commission [E-01345A-16-0036, E-01345A-16-0123].
APS representatives, attending the meeting to update commissioners on the company's progress correcting mistakes associated with a faulty rate-comparison tool, said the company has issued 9,970 refund checks to customers placed on rate plans that were not the most economical for them, as a result of using the tool. A third-party consultant from The Brattle Group assured the commission that a new rate-comparison tool is performing as expected.
APS has also conducted customer outreach to help customers get on the most economical plans, and has held focus groups and stakeholder meetings on pro forma billing since the last ACC meeting, APS Chief Operating Officer Daniel Froetscher told the commission. Additional efforts include convening a customer advisory board, now under development, and instituting a "secret shopper" program, both of which are set to begin in April, Froetscher said [E-01345A-19-0003] (see CEM No. 1573).
Nevertheless, Abhay Padgaonkar, an activist colleague of Champion who provided expert testimony in her 2018 rate protest before the commission, says something isn't right about APS' rates [E-01345A-18-002]. The company, based on the Brattle Group report, has a much higher percentage of customers on demand-rate structures, in which a demand charge kicks in if a customer goes over their allotted usage during peak times, than the national average, he said. Difficulty understanding and managing time-based rates—which include both time-of-use and demand rates—drives customers to avoid them and choose plans that are less economically advantageous for them on an annual basis, Padgaonkar said via phone during the meeting. He estimates the situation has led APS to overearn by more than $100 million, according to his own calculations and a controversial report commissioned by the ACC from Overland Consulting.
Padgaonkar likened discussing problems with the rates to "rearranging the deck chairs on the Titanic," and suggested the commission mandate that APS transfer 90 percent of customers to their most economical plans by a chosen date and impose sanctions if the company fails to do so. "The more people who are not on their most economical plan, the more APS keeps overearning," he said. "The ratepayers get squeezed, and investors get rewarded."
ACC Utilities Director Elijah Abinah told the commission the new rate tool and the Brattle Group assessment will be subsequently reviewed by an independent consultant to be selected by commission staff and paid for with APS funds. The utilities division issued a request for proposals Jan. 16 and will begin reviewing results of the RFP Feb. 7 with the goal of having a consultant in place by Feb. 10, Abinah said.
Jim Armstrong of the utilities division staff told commissioners the consultant will look at APS rates going back to August of 2017 and will consider public comment surrounding problems with the rates and the tool, circumstances surrounding those problems, and APS' response. The consultant will also perform a thorough review and assessment of the Brattle Group report and do an independent analysis of APS' new rate-comparison tool. The RFP calls on a consultant to analyze APS' customer education and outreach and the company's presentation of information to customers as well, Armstrong said.
Abinah told the commission at a previous meeting that while APS is providing funds for the new consultant, the review would be fully independent of the company. Abinah said his goal is to docket a staff report based on the consultant's findings by early May for consideration at the ACC's meeting later that month.
Also at the ACC, Commissioner Lea Márquez Peterson on Feb. 6 opened a new docket concerning performance incentive mechanisms in electric utility rate cases [E-00000A-20-0019]. Márquez Peterson said her goal is to bring ratemaking in line with regulatory considerations and customer interest in a rapidly changing energy landscape. "I want to understand whether our current regulatory and rate making structures are equipped to address these new energy realities and the expectations of customers in the future," she said in a news release.