Cooperative to File Rate Applications
On October 3, 2017 the cooperative will be filing a rate application with the Arizona Corporation Commission for a 6% increase in rates for both electric and gas service. Follow the links below to view the notices and the full rate applications.
Frequently Asked Questions
Who decides to file for a rate increase?
Ultimately, it is the board of directors of the cooperative who decide if and when to file for a rate increase. It is the board's fiduciary responsibility to protect the assets of the cooperative and ensure its long term viability. The board, in consultation with the management of the cooperative, look at the overall financial condition of the cooperative including prior years' and projected margins or losses for several years back in history and into the future in weighing the necessity of a rate increase. There are several factors that must be considered. Among these are:
- Changes in sales of energy (either selling more or less energy than planned on)
- Costs of construction, including:
- New utility plant to accommodate new customers' line extensions
- Regular replacement of aging plant
- Long term construction projects for infrastructure to provide for system reliability and enough plant capacity to handle growth in both customers and usage
- Ongoing operating and maintenance costs of the cooperative
- Financial objectives required by lending companies that loan money to the cooperative
- New laws and rules imposed by regulatory agencies such as OSHA, state corporation commissions, or state legislatures
- Cash and investment reserves in case of emergencies
Why is a rate increase necessary?
Since the loss of revenue from Phelps Dodge no longer purchasing power from the cooperative in the late 1990s, the cooperative has had negative margins (losses). For many years the cooperative has used cash reserves to offset the rising costs of operating the cooperative. The board and management feel it is not prudent to continue to use cash reserves to offset losses and thereby depleting the cooperative's emergency funds. While the cooperative has done much to reduce expenses mostly by reducing its work force and extending the life cycles of utility plant items, other rising costs in items such as fuel expenses, insurance costs, and the cost of construction materials have outpaced cost savings measures the cooperative has taken.
What is the meaning of Rules 103 and 107?
Rule 103 of the Arizona Administrative Code is the regular method for a utility company to file for a rate increase. It is a lengthy and often expensive endeavor. Rule 107 is the Arizona Corporation Commission's streamlined process specifically designed for use by cooperatives. Most of the studies, expert testimonies, and hearings used under "Rule 103" are not required for "Rule 107" thus reducing the time spent on preparing the application and following through with the whole process. This in turn saves the cooperative in two ways. First, the cooperative does not have the expense of outside consultants and lawyers to handle the rate filing. Second, there is less of a burden on the cooperative employees, freeing them to be more productive on other tasks.
What is the cost of a rate filing?
It is expected that by using the streamlined "Rule 107"rate filing, the cooperative will not have any outside expenses for consultant or attorney fees. In the cooperative's last rate "Rule 103" filings for the Electric and Gas divisions the cooperative spent $44,240 and $49,800 respectively for each division on outside consultant and attorney fees for its Arizona filings. The cooperative could be forced to use the "Rule 103" rate filing process either by Commission Staff, the Commissioners themselves, or by intervenors or objectors to the application. If the cooperative must use the more comprehensive "Rule 103" process it can anticipate having to spend money on outside consultants to help with the filing. The costs of the outside consultants would then be added to the rate increase application for the cooperative to recover those expenses, thus creating an even larger rate increase.
Are there other conditions tied to the Rule 107 filing?
As outlined in the official notices, the overall increase cannot exceed 6% of base revenue. Base revenue is the revenue billed for customer (system) charges and usage charges but does not include purchased cost adjustors or service fees such as connection fees. The rule also limits the increase on any one rate category to 150% of the overall rate increase. In other words a single rate category cannot have an increase of more than 9% (6% times 150%). The third limiting criterion is that the customer charge for residential customers cannot increase by more than 25%. This means, for example, that the $21 per month for the system charge on residential single phase customers cannot go up by more than $5.25 per month ($21 times 25%)
How much will my bill go up?
Since everyone's usage is different from their neighbors and one's own usage can vary seasonally throughout the year, there is no single answer. However, as described in the accompanying notice, the average residential electric user will see an increase of $4.25 per month. For natural gas customers, the average residential user will see an increase of $1.32 per month in the winter and an increase of $3.62 per month in the summer. Please remember that these dollar amounts are an average of all customers. You may see increases that are lower or higher than the average depending on your usage.
Why are some increases different than others?
In analyzing its current rate structures, the cooperative found that some rate categories were paying less than their share for the cost of service. The board of directors and management designed the new rates to lessen the effects of some rate categories subsidizing other rate categories. Other differences in increases between rate categories are due to the seasonal nature of energy usage (using more or less energy in the winter or summer).
When will the increase take effect?
It is expected that the Commission will issue its orders for the rates to be effective in April or May of 2018.
Who can I contact to find out more information?
The full applications is available here on DVEC's website or you may pick up a copy in our office. You may also obtain a copy from the Arizona Corporation Commission. Other general questions about the filing can be answered by management at the cooperative.