APS 2015 Annual Report Download - page 105

Table of Contents
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
• Deferral of increases in property taxes 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;
• A procedure to allow APS to request rate adjustments prior to its next general rate case related to APS’s acquisition of
additional interests in Units 4 and 5 and the related closure of Units 1-3 of Four Corners (APS made its filing under this
provision on December 30, 2013, see "Four Corners" below);
• Implementation of a “Lost Fixed Cost Recovery” rate mechanism to support energy efficiency and distributed renewable
generation;
• Modifications to the Environmental Improvement Surcharge to allow for the recovery of carrying costs for capital
expenditures associated with government-mandated environmental controls, subject to an existing cents per kWh cap on
cost recovery that could produce up to approximately $5 million in revenues annually;
• Modifications to the PSA, including the elimination of the 90/10 sharing provision;
• A limitation on the use of the RES surcharge and the DSMAC to recoup capital expenditures not required under the
terms of the 2009 Settlement Agreement;
• Allowing a negative credit that existed in the PSA rate to continue until February 2013, rather than being reset on the
anticipated July 1, 2012 rate effective date;
• 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 2012 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 2009 Settlement Agreement to process subsequent rate cases within twelve months of
sufficiency findings from the ACC staff, which generally occurs within 30 days after the filing of a rate case.
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.
In 2013, the ACC conducted a hearing to consider APS’s proposal to establish compliance with distributed energy requirements
by tracking and recording distributed energy, rather than acquiring and retiring renewable energy credits. On February 6, 2014, the
ACC established a proceeding to modify the renewable
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