Mesa Ratepayers Face New Uncertainty as Arizona Corporation Commission Weighs Formula Rate System for APS

A quiet regulatory shift could change how Mesa families see their electric bills for years

Mesa residents who pay Arizona Public Service for their electricity may see their rate increase process fundamentally change. The Arizona Corporation Commission is considering approving a formula rate mechanism for APS that would allow the utility to adjust rates annually instead of undergoing the traditional multi-year rate case process.

The proposal arrived alongside APS's request for a 14 percent rate increase. But the formula rate mechanism is a separate policy question with lasting consequences for consumer oversight.

How formula rates would work

Under the proposed system, APS would submit annual rate adjustment requests instead of the current process that can take three years or more to complete. The commission would have one year to review and vote on each adjustment. Full rate cases would still occur every five years.

APS President and CEO Ted Geisler testified that the mechanism would prevent cost shifts to residential customers as large data centers come online across the state.

"As we look to add substantial amounts of new large customers onto the grid, the costs driven by that customer class is going to change dramatically each year," Geisler testified. "It's going to be very, very different, and if we're not updating that on an annual basis, you will inherently start to create a cost shift and an affordability issue for residential and small business customers."

The utility also proposed a deadband provision. APS requested a 10.7 percent rate of return with a 20 basis point deadband. That means the company could not seek a rate adjustment if its actual rate of return fell between 10.5 percent and 10.9 percent.

Critics warn of lost accountability

Consumer advocates say the formula rate system would reduce public input and weaken protections for ratepayers.

Cynthia Zwick, director of the Residential Utility Consumer Office, told the commission her office would want to see far more consumer protections before supporting the mechanisms. RUCO is advocating for caps on annual rate adjustments. The utilities oppose such caps.

"Accountability is extremely important," said Allan Lenefsky, a Sun City resident, during a public comment hearing on May 18. "The formula will cause accountability to decrease tremendously. Consumers deserve better than that."

APS customer Vanessa Perez spoke against the formula rate at a recent hearing.

"Because now after repeated increases, APS wants the ability to raise rates with less public oversight and fewer opportunities for community input," Perez said.

A divided commission

The all-Republican Arizona Corporation Commission is split on the issue. Commissioners Nick Myers and Kevin Thompson support formula rates. Both are seeking re-election in the upcoming cycle.

Myers argued the system would allow rates to decrease when costs fall.

"As part of that formula rate process, we're requiring that they come in every single year to readjust that formula," Myers said during a May 18 debate. "Which means that if natural gas prices fall off, inflation takes a dip, whatever the case is, you actually have a chance of a rate decrease, which is something we've never had before."

Commissioner Lea Márquez Peterson voted against adopting the policy statement in 2024 and against approving the first formula rate for UNS Gas in February.

"A formula rate is a tool, not an entitlement," Márquez Peterson said at a February meeting. "Its use must enhance, not erode the commission's constitutional duty to protect public interest."

Legal questions remain unresolved

The commission approved a policy statement in late 2024 allowing utilities to request formula rate mechanisms. That statement was challenged in court by RUCO. The Arizona Court of Appeals ruled the commission violated rulemaking statutes in adopting it. The commission appealed. The Arizona Supreme Court sent the case back to Maricopa County Superior Court for further review.

Despite the ongoing litigation, the commission approved the state's first formula rate mechanism for UNS Gas in February. RUCO appealed that decision as well.

According to the commission, nine utility companies are currently asking for formula rates. That includes APS, Tucson Electric Power, one gas utility, and six water and wastewater utilities.

What Mesa residents should know

APS serves western Mesa along with Phoenix, Tempe, and parts of the East Valley. Any decision on the formula rate mechanism would affect how Mesa families see their electric bills adjust in the years ahead.

The commission has not set a final timeline for ruling on APS's formula rate request. The 14 percent rate increase case is already underway with hearings scheduled through the coming months.

"It is more challenging to get through the system than it used to be," said DES Director Michael Wisehart, speaking about a separate state agency issue. The quote illustrates the broader theme of regulatory complexity facing Arizona consumers across multiple state programs.

Mesa residents who want to participate can submit public comments through the Arizona Corporation Commission's website or attend future public hearings on the APS rate case.