APS 2011 Annual Report Download - page 124

PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
99
The following table shows the changes in the deferred fuel and purchased power regulatory
asset (liability) for 2011 and 2010 (dollars in millions):
Year Ended
December 31,
2011 2010
Beginning balance $ (58) $ (87)
Deferred fuel and purchased power costs-current period (69) (93)
Amounts refunded through revenues 155 122
Ending balance $ 28 $ (58)
The PSA rate for the PSA year beginning February 1, 2012 is ($0.0042) per kWh as compared
to ($0.0057) per kWh for the prior year. Any uncollected (overcollected) deferrals during the 2012
PSA year will be included in the calculation of the PSA rate for the PSA year beginning February 1,
2013.
Transmission Rates and Transmission Cost Adjustor. In July 2008, the FERC approved an
Open Access Transmission Tariff for APS to move from fixed rates to a formula rate-setting
methodology in order to more accurately reflect and recover the costs that APS incurs in providing
transmission services. A large portion of the rate represents charges for transmission services to serve
APS’s retail customers (“Retail Transmission Charges”). In order to recover the Retail Transmission
Charges, APS must file an application with, and obtain approval from, the ACC to reflect changes in
Retail Transmission Charges through the TCA. If the Settlement Agreement (discussed above) is
approved, an adjustment to rates to recover the Retail Transmission Charges will be made annually
each June 1 and will go into effect automatically unless suspended by the ACC.
The formula rate is updated each year effective June 1 on the basis of APS’s actual cost of
service, as disclosed in APS’s FERC Form 1 report for the previous fiscal year. Items to be updated
include actual capital expenditures made as compared with previous projections, transmission revenue
credits and other items. The resolution of proposed adjustments can result in significant volatility in
the revenues to be collected. APS reviews the proposed formula rate filing amounts with the ACC
staff. Any items or adjustments which are not agreed to by APS and the ACC staff can remain in
dispute until settled or litigated at FERC. Settlement or litigated resolution of disputed issues could
require an extended period of time and could have a significant effect on the Retail Transmission
Charge because any adjustment, though applied prospectively, may be calculated to account for
previously over-collected amounts.
Effective June 1, 2011, APS’s annual wholesale transmission rates for all users of its
transmission system increased by approximately $44 million for the twelve-month period beginning
June 1, 2011 in accordance with the FERC-approved formula as a result of higher costs and lower
revenues reflected in the formula. Approximately $38 million of this revenue increase relates to Retail
Transmission Charges. The ACC approved the related increase of APS’s TCA rate on June 21, 2011
and it became effective on July 1, 2011.