Arizona regulators on Wednesday began a series of evidentiary hearings on separate general rate increase proposals from the state’s largest and smallest investor-owned electric and natural gas utilities, respectively. Final action from the Arizona Corporation Commission (ACC) on both cases is expected later this year, a Phoenix-based ACC spokesperson told NGI.

The biggest and most controversial of the two is a combined interim and base rate increase settlement totaling $196.3 million for Arizona Public Service (APS). When fuel costs are included the pending rate hike overall is more than $344 million. At the end of last year the ACC granted APS $65.2 million in interim rate relief, rejecting a request by the utility for more.

In addition, APS reached a settlement with stakeholders that could provide an additional nonfuel-cost base rate increase of $131.1 million, and all of that is on the table in the hearings that are now getting under way in Phoenix.

Separately, Tucson-based UNS Gas Inc., a subsidiary of UniSource Energy, has a pending general rate request to increase annual rates by $9.5 million, or about 6%. The gas utility’s current rates were approved by the ACC in November 2007.

As it experiences annual growth of 2.5%, UNS said the need for the proposed revenue boost was attributable to a combination of increased growth in its service territory and the corresponding increase in its capital and operating costs. Since its last rate increase, UNS said it has incurred $54 million in capital costs to meet customer growth, and its operating expenses have shot up to $37.7 million, nearly $3 million more than what is covered in the utility’s rates.

Along with the increase in annual revenues, UNS is proposing to increased its fixed monthly service charge and make other changes in its tariffs, including possible demand-side management program additions.

For APS, when the rate settlement’s fuel cost provisions are also considered, the total rate increase is $344.7 million, including $137.2 million for increased fuel costs. The settlement parties agreed that the APS rate base, on which it currently earns its authorized profit levels, is $7.66 billion, based on the end of December 2007 (its last rate case test year).

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