Grand Canyon Times

The Arizona Corporation Commission (ACC) has decided against rehearing applications related to the Formula Rate Plans (FRP) Policy Statement. This decision, announced on February 5, 2025, pertains to applications filed by the Arizona Attorney General and the Residential Utility Consumer Office concerning Decision No. 79647. The Policy Statement was initially adopted in December 2024.

Following this decision, on February 12, 2025, the ACC instructed its Office of General Counsel to issue an order explaining the rationale behind denying these rehearing applications. This order is now available in the ACC’s eDocket system under docket number AU-00000A-23-0012.

There have been criticisms of the FRP Policy Statement, with some suggesting it might lead to "automatic increases" in utility rates more frequently. However, the Commission clarified that its aim is to encourage public utilities to seek rate adjustments incrementally to prevent sudden rate shocks for customers.

The Formula Rate Plans are intended as an option rather than a requirement. The ACC acknowledges the significant impact that abrupt rate changes can have on consumers who face large increases after years without any changes. Utilities opting for FRP must still file for rate cases and demonstrate compliance with constitutional requirements for fair value and reasonable rates; thus, there are no "automatic" rate changes within Arizona's legal framework.

The current order states: “We recognize the Policy is novel to the Commission, and before codifying specifics, the Commission wants to gather experience and wisdom. We respect the position of AAG, RUCO and others that assert a formal rule should be issued first prior to application in a rate case. The Commission has determined that the Policy has the potential to benefit consumers, to avoid rate shocks to rate payers, encourage gradualism, to ameliorate regulatory lag faced by utilities, and to achieve a more stable ratemaking process. For these reasons, the Rehearing Motion, in which the AAG joined, is denied.”

Further details about ACC’s Formula Rate Plan Policy Statement can be accessed online at https://docket.images.azcc.gov/E000040045.pdf?i=1733350296029.