APS 2013 Annual Report Download - page 98

Table of Contents
PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
will impact our balance sheet presentation; however, we do not expect these presentation changes to be material to our balance sheet. The adoption of this new
guidance will not impact our results of operations or cash flows.
3. Regulatory Matters
Retail Rate Case Filing with the Arizona Corporation Commission
On June 1, 2011, APS filed an application with the ACC for a net retail base rate increase of $95.5 million. APS requested that the increase become
effective July 1, 2012. The request would have increased the average retail customer bill by approximately 6.6%. On January 6, 2012, APS and other parties
to the general retail rate case entered into the 2012 Settlement Agreement detailing the terms upon which the parties agreed to settle the rate case. On May 15,
2012, the ACC approved the 2012 Settlement Agreement without material modifications.
Settlement Agreement
The 2012 Settlement Agreement provides for a zero net change in base rates, consisting of: (1) a non-fuel base rate increase of $116.3 million; (2) a
fuel-related base rate decrease of $153.1 million (to be implemented by a change in the Base Fuel Rate from $0.03757 to $0.03207 per kWh; and (3) the
transfer of cost recovery for certain renewable energy projects from the RES surcharge to base rates in an estimated amount of $36.8 million.
APS also agreed not to file its next general rate case before May 31, 2015, and not to request that its next general retail rate increase be effective prior
to July 1, 2016. The 2012 Settlement Agreement allows APS to request a change to its base rates during the stay-out period in the event of an extraordinary
event that, in the ACC’s judgment, requires base rate relief in order to protect the public interest. Nor is APS precluded from seeking rate relief, or any other
party to the 2012 Settlement Agreement precluded from petitioning the ACC to examine the reasonableness of APS’s rates, in the event of significant regulatory
developments that materially impact the financial results expected under the terms of the 2012 Settlement Agreement.
Other key provisions of the 2012 Settlement Agreement include the following:
· An authorized return on common equity of 10.0%;
· A capital structure comprised of 46.1% debt and 53.9% common equity;
· A test year ended December 31, 2010, adjusted to include plant that is in service as of March 31, 2012;
· Deferral for future recovery or refund of property taxes above or below a specified 2010 test year level caused by changes to the Arizona
property tax rate as follows:
· Deferral of 25% in 2012, 50% in 2013 and 75% for 2014 and subsequent years if Arizona property tax rates increase; and
· Deferral of 100% in all years if Arizona property tax rates decrease;
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