Tempe APS Customers Face 14% Rate Hike Proposal as Arizona Corporation Commission Hearings Begin

The Stakes for Tempe Ratepayers

Tempe residents who rely on Arizona Public Service for electricity could face an average annual bill increase of $240 if the state's utility regulator approves the company's proposed 14% rate hike.

The Arizona Corporation Commission began six weeks of hearings on the rate case on May 18. The commission's final vote is expected in December, with any approved increase likely taking effect in early 2027.

APS serves 1.5 million residential and commercial customers across central Arizona, including all of Tempe. This marks the company's third rate increase request in four years.

"You can't move around and shop around for a different electric company. So the only recourse that we have is to be here at the Arizona Corporation Commission and ask them to look out for working families in Arizona," said Ricardo Reyes of VetsForward, an APS customer who testified at the opening hearing.

Data Centers Drive the Debate

Customers and advocacy groups pointed to data center expansion as a primary driver of rising costs. Large technology firms are building massive facilities in Arizona's desert, consuming increasing amounts of electricity and requiring new infrastructure investments.

APS is seeking a separate 45% rate increase for large load customers, including data centers and manufacturing facilities. The company argues this structure ensures developers pay for the power plants and transmission lines needed to serve their operations.

"Big Tech's data centers are using up more and more of Arizona's electricity as well as demanding significant investments in new infrastructure, which as a result raises everyone's utility bills," said Blake Lister during public comment.

The Residential Utility Consumer Office, the state agency that represents ratepayers before the commission, is advocating for a completely separate customer class for data centers. RUCO Director Cynthia Zwick warned that ratepayers could face annual increases across multiple utilities.

"Depending on where you live, not only will you see an increase in your electric bill, you will likely also see one in your gas bill and you will likely see one in your water and your wastewater bill," Zwick said. "So you could see one, two, three or four increases on an annual basis and we just simply think that doesn't make sense."

Formula Rates Under Fire

APS is also requesting approval for a formula rate structure, a new ratemaking mechanism the commission approved in 2024. Under formula rates, the utility could adjust prices annually based on projected future costs without going through the traditional multi-month rate case process.

APS says the approach would prevent large rate increase requests every few years by reducing regulatory lag. Opponents argue it would give the utility too much power to raise prices with limited oversight.

RUCO is opposing the formula rate proposal. The agency is not convinced the mechanism would reduce costs for customers, given that nearly every utility company in the state is seeking to implement it.

Attorney General Challenges the Math

Attorney General Kris Mayes, a former corporation commissioner, filed expert testimony arguing the rate increase could be slashed to 3% by reducing the company's requested return on equity.

APS is seeking a 10.7% return on equity, the rate of return shareholders receive on their investment in the company. Mayes' office calls the request a $524 million "wealth transfer" from ratepayers to shareholders and recommends reducing the return to 6%.

RUCO and commission staff recommended a return on equity closer to 9%.

What Happens Next

The hearing process will run for approximately six weeks. Attorneys for APS, the state, and consumer advocates will present evidence to an administrative law judge. The judge is expected to issue a recommended order in November.

The five-member, all-Republican commission will then discuss, amend, and vote on the recommendation at an open meeting likely held in December.

Commission Chair Nick Myers, who is seeking reelection this year, said commissioners cannot simply reject a rate case outright.

"Contrary to popular belief, we as commissioners do not have the option of simply saying 'no' to a rate case, as much as we want to," Myers said. "We just don't have that option. We are required to set just and reasonable rates, which is a balance between the utility's viability and keeping the rates as low as possible."

Myers added that utilities never receive the full increase they request.

"The utilities can come in and ask for whatever kind of rate increase they want, that does not mean that they're going to get everything they ask for," Myers said. "As a matter of fact, I've never actually seen that happen."