The Arizona Free Enterprise Club released a statement on Wednesday severely criticizing the Arizona Corporation Commission (ACC). The statement came after the ACC, which is charged with protecting Arizonans from a non-competitive energy industry, voted to abdicate its duty by allowing formulaic rates that increase automatically year over year, as opposed to every increase being subject to public scrutiny and requiring approval.
The vote on Tuesday was carried 3-2 with commissioners Anna Tovar and Lea Márquez Peterson dissenting. According to the ACC, its policy statement “allows regulated utilities to propose formula rates in future rate cases. Under this approach, the ACC reviews and accepts as the rate a formula for calculating the utility’s cost of service, including clear definitions of inputs to that formula and a process for updating rates every year as the utility’s costs change.”
The commission claimed, “Formula rates will still be monitored closely to ensure that the utility does not over-earn relative to the cost of service for providing service (plus a reasonable return on invested capital), while continuing to provide service safely and reliably.”
The Arizona Free Enterprise Club responded in a statement saying:
“Following contentious double digit rate hikes being approved and ESG Resource Plans committed to going ‘Net Zero’ by 2050 being rubber stamped, the Commission has rushed through approving new rules masquerading as a mere ‘policy statement’ that could insulate utilities and the Commission from having to face ratepayers in future rate cases. The ‘policy statement’ would depart from traditional rate making and pursue ‘formula based rates’ offloading risk from investors to ratepayers and baking in automatic rate increases with little transparency or opportunity for ratepayer engagement.
“The only support for this ‘policy statement’ came from the utilities themselves. The Commission is charged to protect ratepayers by regulating the utilities, not the other way around. The Commission should pump the brakes, not rush through major rulemaking decisions in a lame duck session.
“The Arizona Free Enterprise Club is committed to protecting ratepayers, ensuring affordable and reliable energy in Arizona. We will continue to work to ensure utilities will not be able to force their captive ratepayers to foot the bill, especially through automatic rate hikes, for their costly goal to go ‘Net Zero’ by 2050 by shuttering reliable sources of energy generation to build out expensive and unreliable wind, solar, and battery storage projects.”
Attorney Dan Pozesfsky of Arizona’s Residential Utility Consumer Office (RUCO), expressed a similar view according to 12News saying, “Trying to implement formula rates through a policy statement rather than through rules is inappropriate, illegal and in this case denies due process.”
The outlet reported that the ACC, ignoring its own plans for the vote, rushed to schedule it noting that in a previous meeting Commission Chairman Jim O’Connor had told stakeholders, “Give us feedback. Bring us guardrails.” He added, “I eagerly look forward to that kind of input at our next workshop.” However, no workshop occurred and no published legal opinions were issued.
Diane Brown of the nonprofit Arizona PIRG Education Fund stressed that the vote was conducted with critical questions about the scheme remaining unanswered. She said, “This is precisely to me why it was so important to have the legal memo that this Commission said they would get. While there are statements that there will be increased transparency, I’m not seeing evidence of that. It is troubling to me that we haven’t heard from the ALJ (administrative law judge). We have not heard from Staff.”
During a city council meeting this week, Mayor John Giles and the Mesa City Council voted to approve across-the-board increases in the city’s utility rates and fees covering solid waste removal, electricity, gas, water, and wastewater. Over two-dozen Mesa citizens spoke during the meeting, which stretched over two-hours. Mesa, lacking a primary property tax, derives much of its funding from utility rates and fees.
The city is facing increases in electric rates of up to 39% for Winter Tier 2 usage charges for residents and a $2.75 per month service charge increase according to the council report. Non-residential users will face increases from 2-6 percent. Solid waste residential barrel rates will increase 5.5%, with commercial roll-off rates jumping 6.5%. Gas rates are increasing 6-15% for residences and from 9-25% for non-residential users. Water rates are increasing 4-9% for residents, 5.5% for non-residential, 8.5% for commercial users, and 19.5% for large commercial or industrial users. Finally wastewater service and usage components charges will increase by 7.5% for residents and 8.5% for non-residential.
City staffers told The Mesa Tribune that the typical residential bill for water, wastewater, and solid waste will see an increase of about $5.60, from the current average of $100.21 to $105.81
As reported by the Tribune, Giles answered criticism at a meeting in late November telling the frustrated residents, “This proposed water-rate increase of less than 5% in Mesa is dramatically less than you see in every other community,” said Giles, zeroing in on the water utility increase.
“Cities around the Valley are increasing water 25%, talking about increasing wastewater charges 95%. We’re not doing anything remotely like that in the City of Mesa.“
“So if you’re upset about the increasing price of water, I’m with you. But if you want to vent those feelings, probably every other city council in the state would be a more appropriate place to do that because the increases are less than what you’re seeing in other cities.”
Kevin Medema, a Mesa resident who led the organization of a petition opposing the utility increases reportedly signed by 2,000 people, stressed, “We have citizens that are hurting financially. The city shoots for that 20% reserve (in the utility accounts). Well, you know a lot of residents won’t have that in themselves. So, please consider voting ‘no.’’’
Medema suggested that residents have offered to help the city find ways to reduce spending.
During the November 18th meeting, one Mesa resident, Lynda Patrick-Hayes poignantly called upon the council to “entertain the idea of cutting the utility rates and encourage the city manager to eliminate government waste. The City of Mesa has no revenue problems. It has a spending problem.”
Citing the city’s reliance on utility charges and sales tax due to lacking a property tax, Giles told the citizens, “There’s not an apples-to-apples comparison because the City of Mesa has a different model. We’re going to use utilities to help subsidize city services.”
Multiple attempts to reinstate a primary property tax, eliminated in 1945, have failed over the years.
“Now if you don’t like that model…the answer is not to come to the City of Mesa and say, ‘We don’t want you to raise utilities because that’s denying the reality of math.’”
Responding to calls to reduce city spending, Giles told the gathered objectors, “What your proposal is, you’re saying, ‘I want to dramatically cut spending on public safety in the City of Mesa.’ That’s what you’re asking us to do.”
Republican State Representative Barbara Parker spoke on behalf of her constituents in the area and told the council, “They call me when they lose their homes. They call the state when they can’t afford their insurance. And on behalf of them, I am telling you they are hurting and even one dollar makes a huge difference.”
Parker castigated the mayor and council for suggesting the city cut public safety spending, “The fact that we use the threat of fear and emotion that we are going to cut police and fire is so disingenuous and inappropriate. And to all the gentlemen and women in uniform tonight: I am one of you and I have trained many of the firefighters, and I want you to know we have your backs. And we need to elect people who will fund you first and then find funding for everything else. We are never going to cut funding to police and fire. That is always a tactic. It’s disingenuous, it is inappropriate, it lacks accountability, it is intellectually dishonest, and they are not pawns and you deserve better. Don’t let them use you as a pawn police and fire. It’s inappropriate to have a bond and then immediately after that election to suddenly have a tax increase or a rate payers increase.”
She concluded, “One of the things I was able to communicate to the legislature as a member of the Appropriations Committee is that: EVERY. SINGLE. DOLLAR. IS. SACRED. Every single penny is sacred. And when I’ve asked the citizens would they rather have one more penny in their pocket than have it go to waste or redundancies or excesses. Absolutely they say yes. I hope you’ll have the courage to do the right thing tonight. I can tell you on behalf of the state: we were able to cut budget, balance our budget, give money back to the taxpayers and fund every single program. And if the state of Arizona can do it, Mesa can do it better.”
The rate increases were passed by the city council unanimously with Giles stating, “I know all of that is not appreciated by this crowd to the extent that we’d like it to be, but it’s the facts. For those reasons I am compelled by math and the reality of the situation to support this increase.”
