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{New!} Where we discuss current events in the electric industry world.


March 15, 2016

UNS Electric’s 2016 Rate Case, Docket Number E-04204A-15-0142

If you follow events in the Arizona utility world (and who doesn’t?), you have likely been aware of the UNS Electric rate case hearings being held at the Arizona Corporation Commission (ACC). Although UNS Electric is a small utility, serving customers in Mohave and Santa Cruz counties, the rate case has attracted significant attention due to its precedent-setting potential. UNS Electric has proposed several rate structure changes, in addition to revenue increases. These changes include increased basic service charges to residential and small commercial customers; an optional tri-part rate structure for residential customers and small commercial customers; and a mandatory tri-part rate structure for residential and small commercial customers with “partial requirements,” (generally customers with distributed solar installations). For commercial customers, UNS Electric is also proposing interruptible rates and discounted electricity rates to new businesses meeting certain qualifications. UNS Electric’s rate case is the first in a string of upcoming rate cases at the ACC; APS, TEP, and other utilities throughout the state have rate cases that will be heard later in the year.

UNS Electric’s client base is 88 percent residential customers, 11 percent commercial customers, and 1 percent industrial and mining customers. Retail sales have dropped 50 percent since 2012, due to the combined shutdown and curtailment of operations of their industry and mining customers. The utility also claims a 4 percent residential usage drop since 2012, due in large part to the effects of energy efficiency measures and distributed generation penetration.

Additionally, UNS Electric recently purchased a 137 MW portion of the 550 MW Gila River Power Station Power Block 3 for $55 million. Gila River Power Station is a Natural Gas Combined Cycle (NGCC) generating station in Gila Bend, and this acquisition is UNS Electric’s only baseload generating station in its portfolio. UNS Electric is requesting the ACC to allow UNS Electric to include the cost of acquiring the interest in Gila River Power Station in its rate base.

Some of the most contentious parts of UNS Electric’s proposal are the changes to rates and net-metering tariffs for residential and small commercial customers with distributed solar generation (DG). The new rate design for DG customers would require:

  1. Basic Service Charge (Metering, service line, customer service, billing functions and minimum distribution system costs recovery.)
  2. Demand Charge (To send appropriate cost-of-service signal and allow for recovery of fixed transmission and generation costs over a specific period of time.)
  3. Energy Charge (Recover fuel and purchased power expenses attributable to the amount of energy used by customer.)

The claim is that the rate design changes will result in a more equitable cost recovery in an environment with both declining electricity sales and increased system requirements.

Residential and small commercial customers who participate in net metering would be compensated for excess energy wheeled onto the grid at a new Renewable Credit Rate,- the rate at which the most recent utility scale renewable energy purchased power agreement connected to the distribution system of TEP. Currently, they are compensated at retail costs for all of their DG production.

We’ll be following the proceedings throughout the spring and will keep you informed on the progress.

-Joaquin Arredondo and Maren Mahoney