By Staff Reporter |

A superior court has halted a case to determine whether utilities may use an annual rate adjustment mechanism to determine utility rates. 

The Arizona Corporation Commission (ACC) adopted the policy in December 2024. According to the ACC, the goal was to allow electric, water, wastewater, and gas companies to determine utility rates in a manner that would reduce costs, regulatory lag, and potentially rate shock for ratepayers. 

Major utilities have integrated the mechanism into their rate case applications, including Arizona Public Service (APS), Tucson Electric Power Company (TEP), UniSource Energy Services, Southwest Gas, Arizona Water Company, and EPCOR Arizona. 

The Residential Utility Consumer Office (RUCO) filed a lawsuit in the Maricopa County Superior Court last year challenging the ACC over its adoption of the policy. 

RUCO advocates for residential utility ratepayers before the ACC, which includes court intervention — though only in the largest utility rate cases which impact the most utility customers in the state, as RUCO director Cynthia Zwick advised lawmakers last year. 

RUCO maintains that the ACC should have adhered to the formal rulemaking process outlined in the Administrative Procedure Act instead of adopting the annual rate adjustment mechanism as a policy statement.  

The superior court dismissed the lawsuit last summer. However, RUCO appealed, and the Arizona Court of Appeals sided with the agency last November. The appeals court remanded the case back to the superior court to determine whether the policy should have been adopted as a rule. 

Now, the Maricopa County Superior Court has issued a stay pending the decision of the appeals court. The superior court ruled that their handling of the case at this point would be a waste of judicial time and resources. It will now be up to the appeals court to make a decision. 

ACC Chairman Nick Myers said in a statement that the commission is still in support of the challenged policy and would continue to defend it in court. 

“The use of adjustments, including the ARAM, is an important policy in reducing rate shock to consumers and reducing regulatory lag,” said Myers. “We will continue to utilize this mechanism and defend it in court.” 

“ARAM” refers to “annual rate adjustment mechanism.” 

Attorney General Kris Mayes has also recently entered the fight against the ACC’s contested policy, but on the basis of the policy itself and not whether the ACC should have gone through the formal rulemaking process. In March, Mayes filed a challenge against the ACC’s approval of the mechanism for UNS Gas. Mayes argued that the mechanism would result in “unjust and unreasonable rates.” 

Myers responded the next month in an Arizona Capitol Times guest column arguing that the Arizona Constitution grants the ACC authority to decide on their preferred rate design. Myers questioned whether Mayes was targeting the ACC to bolster her reelection campaign. 

“No one is suggesting that the attorney general should remain silent. Legal challenges, when grounded in clear violations of law, are appropriate,” said Myers. “But a pattern of selective, high-profile litigation combined with public messaging that mirrors campaign rhetoric raises legitimate questions about whether that line is being crossed. There is little doubt the lawsuits amount to lawfare, not advocacy for consumers or utilities.”

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