Opinion: It’s important for the Corporation Commission not to backpedal on a recent decision to grant APS a lower return on equity rate.
Autumn Johnson and Albert Linopinion contributors | Arizona Republic
It’s nationally important that the Arizona Corporation Commission held Arizona Public Service to a lower profit margin rate.
In Arizona, and the West broadly, we get our electricity from monopolies. Those entities include Salt River Project, Tucson Electric Power and Arizona Public Service (APS).
To prevent the monopoly from just picking any price to charge – which could gouge customers – the Arizona Corporation Commission, which regulates Tucson Electric Power and APS, evaluates many factors and decides on a profit margin called Return on Equity (ROE) that the monopoly utility is allowed to earn for its investors while providing a high level of reliable service.
The Corporation Commission essentially sets the price we pay for electricity and protects customers from potential abuses a monopoly could otherwise commit.
Many such commissions around the country are unwilling to push back on the utilities they regulate and often rubber stamp the will of the utility at the expense of its customers. However, last fall, the Arizona Corporation Commission became a national leader when it decided APS’ fair return of equity should be 8.7% instead of the 10.15% APS sought.
A lower ROE won’t hurt APS, as it claims
APS is owned by a publicly traded company, Pinnacle West Capital Corp. Its investors want the ROE as high as possible and have decided to appeal the decision in court. APS’ opening brief with the state Court of Appeals is due on April 27.
The decision is one of a few recent commission actions nationwide that seem to be updating return of equities to a more normal and fair level.
