APS 2012 Annual Report Download - page 120

PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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• Modification of the TCA to streamline the process for future transmission-related rate
changes; and
• Implementation of various changes to rate schedules, including the adoption of an
experimental “buy-through” rate that could allow certain large commercial and
industrial customers to select alternative sources of generation to be supplied by APS.
The Settlement Agreement was approved by the ACC on May 15, 2012, with new rates
effective on July 1, 2012. This accomplished a goal set by the parties to the 2008 rate case settlement to
process subsequent rate cases within twelve months of sufficiency findings from the ACC staff, which
generally occur within 30 days after the filing of a rate case.
2008 General Retail Rate Case On-Going Impacts
On December 30, 2009, the ACC issued an order approving a settlement agreement entered into
by APS and twenty-one other parties in APS’s prior general retail rate case, which was originally filed
in March 2008. The settlement agreement contains certain on-going requirements, commitments and
authorizations that will survive the 2012 Settlement Agreement, including the following:
• A commitment from APS to reduce average annual operational expenses by at least $30
million from 2010 through 2014;
• Authorization and requirements of equity infusions into APS of at least $700 million
during the period beginning June 1, 2009 through December 31, 2014 ($253 million of
which was infused into APS from proceeds of a Pinnacle West equity issuance in the
second quarter of 2010); and
• Various modifications to the existing energy efficiency, demand side management and
renewable energy programs that require APS to, among other things, expand its
conservation and demand side management programs through 2012 and its use of
renewable energy through 2015, as well as allow for concurrent recovery of renewable
energy expenses and provide for more concurrent recovery of demand side management
costs and incentives.
Cost Recovery Mechanisms
APS has received regulatory decisions that allow for more timely recovery of certain costs
through the following recovery mechanisms.
Renewable Energy Standard. In 2006, the ACC approved the RES. Under the RES, electric
utilities that are regulated by the ACC must supply an increasing percentage of their retail electric
energy sales from eligible renewable resources, including solar, wind, biomass, biogas and geothermal
technologies. In order to achieve these requirements, the ACC allows APS to include a RES surcharge
as part of customer bills to recover the approved amounts for use on renewable energy projects. Each
year APS is required to file a five-year implementation plan with the ACC and seek approval for
funding the upcoming year’s RES budget.