APS 2015 Annual Report Download - page 108

Table of Contents
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table shows the changes in the deferred fuel and purchased power regulatory asset (liability) for 2015 and 2014
(dollars in thousands):
Year Ended December 31,
2015
2014
Beginning balance $ 6,926
$ 20,755
Deferred fuel and purchased power costs - current period (14,997)
26,927
Amounts charged to customers (1,617)
(40,756)
Ending balance $ (9,688)
$ 6,926
The PSA rate for the PSA year beginning February 1, 2016 is $0.001678 per kWh, as compared to $0.000887 per kWh for the
prior year. This new rate is comprised of a forward component of $0.001975 per kWh and a historical component of $(0.000297) per
kWh. On October 15, 2015, APS notified the ACC that it was initiating a PSA transition component of $(0.004936) per kWh for the
months of November 2015, December 2015, and January 2016. The PSA transition component is a mid-year adjustment to the PSA rate
that may be established when conditions change sufficiently to cause high balances to accrue in the PSA balancing account. The
transition component expired on February 1, 2016. Any uncollected (overcollected) deferrals during the PSA year, after accounting for
the transition component, will be included in the calculation of the PSA rate for the PSA year beginning February 1, 2017.
Transmission Rates, Transmission Cost Adjustor and Other Transmission Matters. In July 2008, 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 was
previously required to file an application with, and obtain approval from, the ACC to reflect changes in Retail Transmission Charges
through the TCA. Under the terms of the 2012 Settlement Agreement, however, 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
Charges because any adjustment, though applied prospectively, may be calculated to account for previously over- or under-collected
amounts.
Effective June 1, 2014, APS’s annual wholesale transmission rates for all users of its transmission system increased by
approximately $5.9 million for the twelve-month period beginning June 1, 2014 in accordance with the FERC-approved formula. An
adjustment to APS’s retail rates to recover FERC-approved transmission charges went into effect automatically on June 1, 2014.
Effective June 1, 2015, APS’s annual wholesale transmission rates for all users of its transmission system decreased by
approximately $17.6 million for the twelve-month period beginning June 1, 2015 in accordance with the FERC-approved formula. An
adjustment to APS’s retail rates to recover FERC-approved transmission charges went into effect automatically on June 1, 2015.
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