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State PBF/USF History, Legislation, Implementation

Arizona

Last Updated: May 2016
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Rate Assistance

Most of the major electric and natural gas utilities provide low-income rate assistance through surcharges that generate revenue from ratepayers. However, the Arizona Corporation Commission (ACC) has yet to establish criteria for a statewide low-income program, which means the type of assistance varies from utility to utility. Some programs offer percentage discounts based on usage, while others provide a flat dollar amount every month. In addition to their regular programs, Arizona Public Service and Southwest Gas offer supplemental crisis assistance.

Arizona Public Service, one of the state's largest utilities, is one of the companies offering a percentage discount to low-income customers based on usage, with the biggest savings going to customers using the least energy. Like most other programs, its Energy Support Program has changed over time. The following table illustrates the evolution of its discount.

Arizona Public Service: "Energy Support Program" Discounts
Usage
Pre-2005 Settlement
2005 Settlement:
Decision 6744
2014-2015
Under 400 kWh
30%
40%
65%
401-800 kWh
20%
26%
45%
801-1200 kWh
10%
14%
26%

Southwest Gas’ Low-Income Rate Assistance (LIRA) program doesn't use the scale approach but offers a 30 percent reduction on the first 150 therms of natural gas used every month between November 1 and April 30. The ACC ordered the percentage raised to 30 percent from 20 percent in 2012 to help low-income customers cope with the overall rate increase approved in Decision 72723.

While some utilities offer percentage discounts, others provide a set dollar amount every month, but even that practice varies. Tucson Electric offers a $9 per month discount to qualified customers year round. Salt River Project offers low-income customers a monthly discount of $21 during summer months and $20 during the winter.

Rate assistance programs amounted to about $51.5 million in 2014 and served 214,017 households.

History

Beginning in 1994, the ACC began a process to deregulate the electric industry in Arizona. In December 1996, it established (Decision 59943) the Retail Electric Competition Rules as the main vehicle for restructuring. ACC orders over the next few years supplemented these rules.

The ACC created the Low Income Issues Working Group to examine how deregulation could impact low-income customers. The working group focused on the creation of a system benefits charge (R14-2-1608) in Decision 59943. The ACC created the charge to make sure low-income customers that chose to participate in deregulated markets would continue to have access to programs providing rate assistance. The working group held eight meetings between April and July 2008.

The group examined the benefits and challenges of utility-based versus statewide low-income programs. At the time, utilities created and administered their own programs for their own service areas. Some working-group members raised the issue of whether a statewide program would be more beneficial in a deregulated market. The group failed to reach consensus on this issue.

The working group proposed six recommendations to the ACC. These included: preserving the existing low-income programs at utilities; making low-income programs across the state comparable; having all customers contribute to funding low-income programs through system benefits charges; and performing a low-income needs assessment. The group also recommended that, when the ACC created its final rule for the system benefits charge, language be included that the ACC would review each utility's charge every three years.

While Arizona's deregulation efforts lasted several years, an appeals court held certain parts of the ACC's rules invalid in 2004, and the Arizona Supreme Court declined to review the decision. This effectively stopped deregulation efforts. However, the system benefits charges stayed in the final rules, and the ACC took the Low-Income Issues Working Group's advice and included language stating the ACC would review the charges by each utility at least every three years. No progress was made at establishing a statewide program, and utilities continue to create and administer their own programs for their service areas.

Over the years, utilities have frequently asked the ACC to approve changes or eliminate their programs. The commission has repeatedly kept the needs of low-income customers in mind when making its rulings.

In June 2014, the ACC approved a settlement in a rate case (Docket E-01933A-12-0291) which made changes to Tucson Electric's Lifeline program. The settlement allowed the utility to give new low-income customers a flat discount of $9 per month (an increase from the previous $8 level). It also allowed the utility to collect two surcharges from low-income customers from which they had previously been exempted. The settlement required Tucson Electric to contribute $150,000 annually to the Arizona Community Action Association for bill-payment assistance.

Tucson Electric had sought changes to the program, because, according to the utility, the way the Lifeline discount had been applied resulted in over 40 potential combinations of residential rates. Tucson Electric claimed that, as the program evolved, a situation developed whereby similarly situated Lifeline customers paid significantly different rates. A spokesperson told the ACC that the approximately 23,000 Lifeline customers in 2011 were served on 20 different rates.

In 2004, Southwest Gas proposed to eliminate its LIRA tariff and to incorporate those low-income customers into other residential rate classes. The company asserted there was less need to protect customers from high winter heating bills under its proposed rate design. It wanted to replace a 20 percent discount on the first 150 therms with a 15 percent year-round discount with no usage criteria. In Decision 68487, the ACC rebuked the company's proposal, saying the tariff allowed for "a higher profile" and an "advance[d] ease of understanding" for LIRA. The ACC kept the tariff and the then-current 20 percent discount in place.

On more than one occasion, UniSource Energy Services has tried to reduce or limit its Customer Assistance Residential Energy Support (CARES) program. In 2012, it told the ACC it was concerned about the number of people enrolling in the program and the financial impact that had on all the other ratepayers that subsidize CARES. UniSource proposed eliminating its discount on the monthly charge for gas customers and increasing the discount on winter consumption for the first 100 therms of natural gas. The ACC decided (Decision 73142) the discount should stay, and UniSource should look at a "more robust process for determining eligibility."

Similarly, in 2007, UniSource proposed increasing the monthly charge for low-income gas customers from $7 to $13.50 from April through November. It also wanted to decrease the charge to $4.50 per month from December through March. The ACC upheld CARES' current parameters. It said the program would help mitigate the impact of the increased overall rate proposed by UniSource in the case.

Energy Efficiency

In 2010, the ACC adopted rules to increase energy efficiency by utilities. The electricity rules require public utilities to design Demand Side Management (DSM) programs that are cost effective and promote energy efficiency. Arizona's electric utilities are required to achieve annual energy savings of at least 22 percent by 2020. Gas utilities are required to achieve annual energy savings of at least 6 percent by 2020.

The rules specify that utilities have to allocate a portion of DSM resources to low-income customers, and that they needed to develop programs specifically for that constituency. In most cases, these low-income programs are weatherization programs (LIWAP), which local community action agencies administer through contracts with utilities. Over the years, the ACC has shown a willingness to require utilities to increase their LIWAP funding levels and specify that companies cannot move funds budgeted for low-income offerings into other DSM programs.

In 2014, DSM programs provided about $4.4 million for energy efficiency measures that served 1,144 households.

For More Information:

The Arizona Corporation Commission website

The Arizona Corporation Commission's E-Docket System

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