APS and other monopoly utilities are addicted to rate hikes. Here’s how to stop them
Opinion: Between an anti-free market Legislature and a rubber-stamping Corporation Commission, Arizona ratepayers are in a world of hurt.
David Jenkins opinion contributor
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If it seems like every time we turn around our utility bills are going up, it’s because they are — and not because of inflation.
Arizona’s monopoly utilities, which are not subject to free market competition, have become addicted to profit-boosting rate hikes that are rubber stamped by the Arizona Corporation Commission.
Earlier this year the Corporation Commission approved a 7.6% rate hike for Southwest Gas, gifting the company a $61.7 million revenue increase, the largest revenue increase in company history.
It comes on the heels of the monopoly gas utility’s 9.7% hike in 2021.
And Southwest Gas utility told commissioners that it plans another hike request next year.
Customers could pay hundreds more
That was followed by the Corporation Commission approving a 153% increase in Arizona Public Service’s “Power Supply Adjustment Surcharge,” which would boost customer electric bills by more than $140 a year.
Tucson Electric Power bellied up to the trough, too, getting the commission to boost its “Purchased Power and Fuel Adjustor Clause,” increasing customer bills by more than $114 per year.
On top of that, both TEP and APS have pending rate cases that would further hike customer electric bills.
The 12% hike sought by TEP would raise average residential bills more than $14 per month.
Should the Corporation Commission rubber-stamp this hike too, on top of the fuel adjuster increase, TEP customers would be paying almost $300 more per year for electricity.
As for APS, its proposed $460 million hike would result in monthly increases of about $18 for its residential customers. Combined with the increased power supply surcharge, those APS customers would be paying an extra $350 per year for electricity.
Utilities have rigged the game for profit
The original idea behind monopoly utilities was to leverage private sector investment in transmission lines and other gas and electric infrastructure by guaranteeing the utilities an exclusive service area and ensuring that they can profit from that investment.
This model no longer works because the utilities have rigged the game to maximize their profits by shifting all or most of the costs onto their customers.
Utility business expenses passed on to customers in recent rate hike requests include everything from trade association membership dues and board meeting expenses, to increased shareholder profits and speculative “if we build it they will come” expansion.
These rate hikes are not being sought to mitigate losses, but rather to increase profits.
Tucson Electric Power profits, for example, increased from $191 million in 2020 to $217 million in 2022, yet the company is back before the Corporation
Commission asking for another rate hike.
Competition could help lower rates
What used to be a good deal for Arizonans has now become a raw one.
This also means there is no incentive for these monopolies to pursue the lowest cost energy sources, as they can just hike rates and pass all of the cost onto their captive base of customers.
The obvious fix for free market conservatives is to shift away from the monopoly model and introduce free market competition back into the utility sector.
Instead of having customers who cannot shop around, utilities would be forced to compete for your business by offering cheaper rates than their competitors do.
It would encourage utilities to invest in the cheapest sources of energy.
Sadly, lawmakers sided with monopolies
Unfortunately, the state Legislature passed an anti-free market bill last year, House Bill 2101, which further shields Arizona’s monopoly utilities from competition, permanently denies ratepayers the ability to choose their energy providers and ensures even more rate hikes.
The bill was pushed by the utilities in response to a permit application by Green Mountain Energy to provide 100% renewable electricity to their Arizona customers.
Faced with this sliver of possible competition, these legislators — most of whom claim to be conservative — sided with the monopolies and their army of lobbyists over free market principles and the people they represent.
Without free market competition, the only possible check against future rate hikes is the Corporation Commission — the same government entity that has been practically rubber-stamping every utility rate hike that comes before it.
How customers can fight back
Getting the Arizona Corporation Commission to start actually putting the interest of Arizonans above the fat cat utilities they have become so cozy with, will not be easy.
It requires utility customers to apply unwavering pressure at the ballot box by demanding that the Corporation Commission start rejecting new rate increases, and by voting out any commissioner — regardless of party affiliation — who keeps rubber-stamping new hikes.
It’s either that, or let these monopolies go on sucking away bigger and bigger chunks of your hard-earned income.
David Jenkins is president of Conservatives for Responsible Stewardship, a national organization with more than 800 Arizona members. Reach him at djenkins@conservativestewards.org.
