Phoenix, Ariz. – On February 5, 2025, the Arizona Corporation Commission voted to Deny the applications for rehearing filed by the Arizona Attorney General and the Residential Utility Consumer Office pertaining to Decision No. 79647, the Formula Rate Plans (FRP) Policy Statement.  The Policy Statement was adopted in December 2024.  Subsequently, on February 12, 2025, the Commission directed the Office of General Counsel to file an Order explaining the Commission’s reasons for denying the applications for rehearing.  The order has been published in the ACC’s eDocket system, under docket number AU-00000A-23-0012.

Critics of the (FRP) Policy Statement have mischaracterized the Commission’s intention, claiming it would lead to “automatic increases” in utility rates on a more frequent basis.  The Commission’s intention is to promote gradualism by encouraging public utilities to seek rate adjustments more incrementally to avoid rate shock for customers.

Formula Rate Plans would be an option, not a mandate.  The Commission is taking into consideration the heavy burden that rate adjustments have recently imposed on customers experiencing a sudden and large rate increase after several years with no changes to their utility rates. Utilities that choose FRP are still required to file for rate cases and prove to the Commission that all the constitutional requirements for ascertaining fair value and determining a just and reasonable rate of return have been met; there is no such thing as "automatic" rate increases, or rate decreases, within Arizona’s constitutional mandates.

The current order states, in part, “We recognize the Policy is novel to the Commission, and before codifying specifics, the Commission wants to gather experience and wisdom.  We respect the position of AAG, RUCO and others that assert a formal rule should be issued first prior to application in a rate case.  The Commission has determined that the Policy has the potential to benefit consumers, to avoid rate shocks to rate payers, encourage gradualism, to ameliorate regulatory lag faced by utilities, and to achieve a more stable ratemaking process.  For these reasons, the Rehearing Motion, in which the AAG joined, is denied.”

More information on the ACC’s Formula Rate Plan Policy Statement can be found here https://docket.images.azcc.gov/E000040045.pdf?i=1733350296029.