APS 2015 Annual Report Download - page 55

Table of Contents
Electric Energy Efficiency. On June 27, 2013, the ACC voted to open a new docket investigating whether the Electric Energy
Efficiency Standards should be modified. The ACC held a series of three workshops in March and April 2014 to investigate
methodologies used to determine cost effective energy efficiency programs, cost recovery mechanisms, incentives, and potential
changes to the Electric Energy Efficiency and Resource Planning Rules.
On November 4, 2014, the ACC staff issued a request for informal comment on a draft of possible amendments to Arizona’s
Electric Utility Energy Efficiency Standards. The draft proposed substantial changes to the rules and energy efficiency standards. The
ACC accepted written comments and took public comment regarding the possible amendments on December 19, 2014. A formal
rulemaking has not been initiated and there has been no additional action on the draft to date.
Rate Matters. APS needs timely recovery through rates of its capital and operating expenditures to maintain its financial health.
APS’s retail rates are regulated by the ACC and its wholesale electric rates (primarily for transmission) are regulated by FERC. On
June 1, 2011, APS filed a rate case with the ACC. APS and other parties to the retail rate case subsequently entered into the 2012
Settlement Agreement detailing the terms upon which the parties have agreed to settle the rate case. See Note 3 for details regarding the
2012 Settlement Agreement terms and for information on APS’s FERC rates.
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.
APS has several recovery mechanisms in place that provide more timely recovery to APS of its fuel and transmission costs, and
costs associated with the promotion and implementation of its demand side management and renewable energy efforts and customer
programs. These mechanisms are described more fully in Note 3.
As part of APS’s acquisition of SCE’s interest in Units 4 and 5 of Four Corners, APS and SCE agreed, via a "Transmission
Termination Agreement" that, upon closing of the acquisition, the companies would terminate an existing transmission agreement
("Transmission Agreement") between the parties that provides transmission capacity on a system (the "Arizona Transmission System")
for SCE to transmit its portion of the output from Four Corners to California. APS previously submitted a request to FERC related to
this termination, which resulted in a FERC order denying rate recovery of $40 million that APS agreed to pay SCE associated with the
termination. APS and SCE negotiated an alternate arrangement under which SCE would assign its 1,555 MW capacity rights over the
Arizona Transmission System to third parties, including 300 MW to APS’s marketing and trading group. However, this alternative
arrangement was not approved by FERC. On December 22, 2015, APS and SCE agreed to terminate the Transmission Termination
Agreement and allow for the Transmission Agreement to expire according to its terms, which includes settling obligations in
accordance with the terms of the Transmission Agreement. APS has established a regulatory asset of $12 million at December 31, 2015
in connection with the expiration of the Transmission Agreement, which it expects to recover through its FERC-jurisdictional rates.
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