Arizona Public Service is a monopoly utility. If you live in the APS area you can’t shop around for another electricity company. You have one choice: pay APS what they say you owe or go without power.
The Arizona Constitution gave the AZ Corporation Commission the power to regulate monopoly utilities for that reason. The Commission is supposed to act in the public’s interest. It’s supposed to make sure that captive ratepayers are charged fair and reasonable rates while utilities have enough money to provide safe and reliable service.
Or at least that was the intent…. but it hasn’t been working out that way for a long time now because the elected ACC commissioners have been rubber-stamping APS rate increase requests.
APS is now asking the Commission to approve yet another unreasonably large rate increase. Its original request was for a 14% increase. After filing rebuttal testimony this spring, APS raised its request to nearly 15%.
That comes after the APS rate increase that took effect in 2024, which raised the typical residential bill by about 8%.
APS is even demanding an even higher allowed return on equity… which is the profit rate the company is guaranteed to earn for its shareholders.
APS is asking for a whopping 10.7% return on equity (their current authorized return is already a whopping 9.55%).
The allowed return on equity is one of the most important parts of a rate case. It directly affects how much ratepayers must pay each year. It also would let them ask for (demand) even higher rate increases in the future.
How Much Profit Is Enough?
APS and its parent company, Pinnacle West, aren’t struggling financially. Not by a long shot. You might say that right now, given who is on the Commission, they’re living high on the hog (and so are their shareholders).
Pinnacle West reported more than $616M in net income for 2025. Its current CEO got compensation of about $8.4M that year. The former CEO got $2.8M in total compensation. That’s your money.
How much money does APS really need from Arizona families in order to provide reliable service and attract the investment it needs?
Attorney General Kris Mayes (who used to be a commissioner) filed expert testimony arguing that APS’s proposed increase could be cut from about 14% to about 3% while still allowing the company to keep reliable service and a strong credit rating.
APS and their leadership see it differently, of course. They argue that its current rates are based on older costs, that equipment and labor are more expensive, and that new data centers and major industrial customers require large investments in generating capacity.
The ACC’s job is supposed to carefully examine APS’s claims, review the evidence, and decide which costs are justified and which costs shouldn’t be passed on to ordinary ratepayers.
Their track record over the last few years suggests they’ll approve of whatever the monopoly wants.
APS Also Wants Formula Rates
But wait, there’s more. APS isn’t just asking for a giant rate increase and a boost in their return on equity. They also want automatic rate increases via a ‘formula’ rate plan.
Under the traditional system, they file a rate case when they want to boost their rates. The ACC process includes testimony, public comment, documents, cross-examination, an Administrative Law Judge recommendation followed by a final public vote by Commissioners.
APS’s formula-rate proposal creates annual automatic rate increases using a formula. In other words, they’ll get automatic rate increases in the future and avoid the normal hearings and even ACC votes.
Energy Choices Matter Too
This rate case is also happening as APS changes its long-term energy plans.
In 2020, APS committed to providing 100% clean, carbon-free electricity by 2050. It also set interim goals for 2030 and said it would end coal-fired generation by 2031.
They’ve since thrown all that out the window.
Last summer, APS ended those commitments and shifted its 2050 target from zero-carbon electricity to carbon neutrality. APS also joined other Arizona utilities in backing a major new natural-gas pipeline project that would bring gas from West Texas to Arizona.
Long-term investments in gas infrastructure, power plants, transmission, and fuel contracts can affect customer bills for decades. They can also affect air quality, climate risks, and the health impacts of extreme heat.
What Happens Next?
The formal evidentiary hearing in the APS rate case is now underway. APS, ACC staff, the Attorney General’s Office, consumer advocates, businesses, and other intervenors are presenting evidence to the Administrative Law Judge.
After the hearing the judge will prepare a Recommended Opinion and Order (although that’s a bit of a misnomer because it’s not really an Order but more of a recommendation to the Commissioners).
The final decision from the ACC will come later this year (probably after the election but before the next set of Commissioners are seated).
Corporation Commission elections more important than most voters realize. The commissioners elected to those seats decide whether monopoly utilities are held accountable to ratepayers or whether customers are expected to pay whatever the utility says they have to pay.
Rate increases, higher return on equity levels which feed increased rates, future automatic rate increases and scrapping of clean energy goals and of course public health are all on the ballot in the ACC races. Pay attention!
