APS 2015 Annual Report Download - page 104

Table of Contents
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
debt. Our December 31, 2014 Consolidated Balance Sheet presents $25 million of debt issuance costs as a reduction to long-
term debt; this amount was previously presented as a component of non-current other deferred debits. The adoption of this
guidance did not impact our results of operations or cash flows. Debt issuance costs continue to be amortized as interest
expense. See Note 6.
3. Regulatory Matters
Retail Rate Case Filings with the Arizona Corporation Commission
Upcoming Rate Case Filing
On January 29, 2016, APS filed a NOI informing the ACC that APS intends to submit a rate case application in June 2016 using
an adjusted test year ending December 31, 2015. The NOI provides an overview of the key issues APS expects to address in its formal
request such as rate design changes (residential, commercial and industrial), a decoupling mechanism, permission to defer for potential
future recovery costs associated with the Company’s Ocotillo Modernization Project, permission to defer for potential future recovery
costs associated with environmental standards compliance, inclusion of post-test year plant and modifications to certain adjustor
mechanisms, among other items. In its rate application, APS will request that its proposed pricing changes take effect in July 2017.
APS is still developing the exact amount of the request.
Prior Rate Case Filing
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.
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:
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