APS Seeks Retail Rate Increase; Rising Fuel & Purchased Power Costs Make Request Necessary

PHOENIX--(BUSINESS WIRE)--Nov. 4, 2005--Impacted largely by skyrocketing prices for natural gas and purchased power, as well as other fuel cost increases, Arizona Public Service (APS) announced plans today to request a 20 percent, or $409 million, overall rate increase for its retail customers to become effective no later than December 31, 2006. About 60 percent of the total request is due to the higher cost of fuel and purchased power.

The application, scheduled to be filed later today with the Arizona Corporation Commission (ACC), is in addition to the Company's $80 million Power Supply Adjustor surcharge request currently pending before the ACC. As proposed, the surcharge would add a 1.7 percent temporary increase to customers' bill for 24 months. The ACC held hearings on the proposed increase in October, but a final decision on this request has not been issued by the Commission.

"Everyone is experiencing unprecedented prices at the gasoline pumps. Similar increases in fuel prices are having a dramatic impact on our business and the cost of electricity," said Jack Davis, APS President and CEO. "The simple fact is that fuel is our single largest cost of providing electricity. And, since we only charge our customers for what the fuel costs us, our rates need to reflect the true prices we pay."

For example, the price of natural gas nationally has surged by about 700 percent since 2002 alone -- rising from about $2.00 per million British thermal units (MMBtu) in early-2002 to more than $14.00 per MMBtu in 2005. (See graph below.)

Davis said although fuel costs represent almost two-thirds of the Company's requested rate increase, they are not the only reason. The request also includes the costs of new facilities to serve customers, including the Sundance Power Plant, financing costs, and other costs of providing reliable service.

"Arizona's future requires an electric company that is strong enough to power a growing economy and attract the capital to finance required expansion," he said. "The ability to recover our costs is essential for the company to maintain the highest levels of reliability and continue building necessary infrastructure to meet the demands of our rapidly growing state."

The Company expects the ACC to issue a procedural schedule during the next several months detailing the timeline for addressing the request.

If the Company's full request is approved by the ACC, an average monthly residential bill would increase 20 percent from about $101 to about $121, based on average usage of around 1,100 kilowatt-hours of energy. Rates for commercial and small business customers would increase about 19.5 percent on average. The average increase for industrial customers would be about 21.5 percent. Individual bill increases will vary depending on usage patterns.

An additional $40 million for replacement power costs related to recent unplanned outages at the Palo Verde Nuclear Generating Station are not included in this request. The Company expects to file for a fuel price adjustment in April 2006 under the ACC-prescribed adjustment process that could be as much as an additional 5 percent increase, a portion of which would be for Palo Verde-related expenses. Any such increase would be reviewed by the ACC.

Customers wishing to learn more about the rate filing can go to BrightArizonaFuture.com for further information. They also can call APS at 602-371-7171 or toll-free at 800-253-9405.

APS, Arizona's largest and longest-serving electric utility, serves more than 1 million customers in 11 of the state's 15 counties. With headquarters in Phoenix, APS is the largest subsidiary of Pinnacle West Capital Corp. (NYSE:PNW).