Arizona Corporation Commission Faces Backlash Over Controversial ‘Amended Formula Rates’

By Matthew Holloway |

The Arizona Free Enterprise Club issued a strong condemnation on Wednesday regarding the Arizona Corporation Commission’s (ACC) recent decision to implement formulaic rates. This policy change allows rates to increase automatically each year, sidestepping the previous requirement for public scrutiny and formal approval.

The controversial vote, held on Tuesday, resulted in a 3-2 decision, with commissioners Anna Tovar and Lea Márquez Peterson opposing the measure. The ACC’s official policy statement indicates that regulated utilities can propose formula rates in future rate cases, establishing a framework for calculating the utility’s cost of service and specifying the annual rate updates based on fluctuating utility costs.

In defense of the decision, the commission asserted that formula rates will be monitored to prevent utilities from over-earning, ensuring a reasonable return on invested capital while maintaining safe and reliable service.

However, the Arizona Free Enterprise Club articulated significant concerns. They characterized the new rules as a rushed move that would shield utilities and the Commission from accountability. The organization’s statement criticized the abandonment of traditional rate-making practices, arguing that this shift unjustly transfers financial risks from investors to consumers.

According to the club, “The only support for this ‘policy statement’ came from the utilities themselves. The Commission is charged to protect ratepayers by regulating the utilities, not the other way around.” They urged the Commission to reconsider and take more time for thorough deliberation on such significant regulatory changes.

Attorney Dan Pozesfky, representing Arizona’s Residential Utility Consumer Office (RUCO), echoed these sentiments. He remarked on 12News that introducing formula rates via a policy statement rather than formal rules is both “inappropriate” and “illegal,” compromising due process.

Further complicating the situation, 12News highlighted that the ACC failed to follow its own plan for public engagement. In a prior meeting, Commission Chairman Jim O’Connor encouraged stakeholders to provide feedback, yet no follow-up workshop occurred, and no legal opinions were released to clarify the process.

Diane Brown from the Arizona PIRG Education Fund raised additional concerns about the lack of transparency in the vote. She pointed out that critical questions about the new rate structure remained unanswered and expressed disappointment at the absence of input from the administrative law judge and commission staff.

This ongoing debate around Arizona’s energy regulation reflects broader concerns about accountability and consumer protection in the state’s utility market.

Matthew Holloway is a reporter for AZ Free News. Follow him on X for his latest stories, or email tips to Matthew@azfreenews.com.