(The Center Square) – Arizona Public Service’s rate increase proposal is an attempt to address the higher costs of maintaining a reliable grid, according to Anne Carlton, the utility’s manager of regulatory compliance.
Last June, APS filed paperwork with the Arizona Corporation Commission to increase its rates by 14%. However, state Attorney General Kris Mayes filed expert testimony opposing the hike last week, saying it should be limited to 3%.
“APS is asking Arizona families to foot the bill for shareholder profits that far exceed what any reasonable investor requires. This is just corporate greed run amok,” Mayes said.
In reaction to Mayes’ expert testimony, Ann Porter, APS’ communications director, said the company disagreed with Mayes’ “assertion” that a 3% increase would be sufficient to maintain reliable service and a strong credit rating.”
“The analysis presented does not reflect the realities of running a modern electric company and understates the investments needed for a safe, reliable energy grid,” Porter said, answering The Center Square’s questions by email.
The corporation commission is expected to discuss the proposed hike during a hearing set for sometime in May.
If approved by the commission, the rate increase would occur in late 2026 or early 2027, Porter said.
Carlton noted it is not uncommon for intervenors in a rate increase proposal case to have differing viewpoints.
When APS asks for a rate increase, it is saying it thinks “customers should be paying for these expenses,” she explained. “And essentially, that is up for debate.”
The manager added that the attorney general is one of many active participants in the rate case.
Carlton told The Center Square that the money from the proposed hike will cover items APS has already spent on, such as grid operations and maintenance and improving wildfire protections.
When APS evaluates rate cases, Carlton said the company looked at how rates are currently collected, which are based on its 2021 and 2022 expenses.
She added that APS compared the 2021 and 2022 rates and found a 14% difference.
Over the last four years, the company’s equipment expenses have increased by 60% or more, Carlton said.
“When [APS] builds new things in the future for things like new customers, that money is not recovered in this type of rate case,” the manager noted.
She added that the rate proposal is “adjusting our costs to reflect current reality.”
In APS’ rate proposal, the company is seeking to raise its return on equity percentage to 10.25%. Its current ROE is 9.55%.
ROE “comes down to borrowing money,” Carlton said, adding that when APS borrows money from its shareholders, the company has to pay them back with interest.
She said APS tries to get as close as possible to this number, but does not always achieve this percentage. Carlton highlighted 2025, when its ROE was below 7% due to increased business.
APS has an “obligation to invest in the grid, even if it means [its] shareholders aren’t seeing as large a return as they could based off of what the commission” has set for the company, she noted.
Carlton said APS is not “able to collect enough money from [its] customers to actually cover the amount of investment” it has made in its grid.
She said utility companies will “often split their borrowing between banks that require interest payments, and then shareholders who expect that return on equity.”
“ROE is essentially like the interest [APS] pays back to banks,” Carlton said.
She noted not all the company’s earnings are returned to shareholders. Carlton said the company will reinvest part of it into its capital portfolio, so APS can borrow less money in the future
“We’re looking forward in this rate case not to collect money for that growth, but to redo our rate design, to make sure customers like data centers pay for their expenses completely, versus having cost shifts potentially hit other customers,” she said.
According to Carlton, APS acknowledges that it “is never a good time to change people’s rates, especially what’s been going on economically across the board.”
The way utility companies are regulated in Arizona requires them to ask for rate changes, she noted.
She told The Center Square that the company offers financial assistance for people who may be struggling to pay their bills.
