PHOENIX — Utility prices are top of mind after another record-breaking hot summer, and as voters consider candidates for the Arizona Corporation Commission this election.
The director of a state agency that oversees utilities said Arizonans are getting some of “the most cost-effective energy in the country.”
Federal data shows power companies regulated by the five-member commission do not stand out in a positive way when it comes to cost.
An independent analysis from consumer watchdog Abhay Padgaonkar and reviewed by a representative with the Energy Information Administration examines the average “price per kilowatt hour” in 48 states compared to the combined-average of APS, Tucson Electric, and UNS.
Those are the three largest utilities regulated by the Commission. Those three utilities sell electricity to more than 2.1 million homes and businesses in Arizona.
The analysis shows that compared to the averages of 48 states in 2023, the three Arizona utilities charged an average “price per kilowatt hour” that was:
- 11th highest for all customers (industrial, homes, businesses and schools)
- 19th highest for residential customers alone
- Higher than most neighboring states: 59% higher than Utah 18% higher than Colorado, 52% higher than New Mexico, 23% higher than Nevada, and 47% lower than California
Compared to 48 states from January to August of 2024, the three utilities charged an average “price per kilowatt hour” that was:
- 11th highest for all customers
- 14th highest for residential customers
- 11% higher than the total national average of all states
- 1% lower than the total national average of all states for residential customers
Compared to the not-for-profit utility SRP in Arizona, from January to August 2024, the three utilities charged an average “price per kilowatt hour” that was:
- 24% higher for all customers
- 20% higher for residential customers
In 2023 Arizona’s natural gas prices (also regulated by the Commission) were:
- 7th highest for all customers (residential, commercial, and industrial)
- 8th highest for residential customers
- 26% higher than the U.S. average
The analysis used data from the EIA and does not include Hawaii, Alaska or Washington D.C.
What’s important to know about energy costs
There is no perfect way to compare utilities. Each company faces challenges unique to their regulatory environment, region and customer base.
For example, while referring to energy costs, Commission Executive Director Doug Clark pointed out Arizona’s extreme heat over the past two years.
“During these heat events no major outage has occurred, no blackouts, no brownouts, and no catastrophic wildfires,” Clark said in a statement. “The Arizona Corporation Commission is proud for our contribution to the well-regulated utilities here in the State of Arizona.”
Arizona ranks high for reliability
Arizona ranked 7th best for reliability in 2023, according to the EIA. That is at least partly due to location. Most states in the west experience fewer weather outages compared to the rest of the country. However, even when eliminating severe weather events from the equation, Arizona has strong reliability rankings from the EIA. The not-for-profit SRP also increases Arizona’s overall score because it has exceptionally high-reliability metrics.
Comparing costs is not the same as comparing rates
A representative of the EIA reviewed the methodology cited in this story and discussed the usefulness of EIA data overall.
“The average electricity price people see in our data is a good barometer for comparing electricity prices across utilities and states, but there will certainly be differences for many consumers between what they see in our data and what they see in their utility bills,” said EIA spokesperson Chris Higginbotham.
The commission won’t say how or whether it calculates cost comparisons
One reason for this analysis is that 12News recently reported on four Republican Commissioners sharing a flawed WalletHub report that suggested Arizona had the 2nd best energy costs in the country.
As a result of 12News’ reporting, WalletHub changed its description of the purpose of the study on its website and a researcher quoted by WalletHub in the article requested his name and quotes be removed.
The Commission, however, doubled down on its decision to amplify the report, saying in a statement:
“The public can read this study and make up its own mind about the data used or the methodology used.”
Clark later added to the comments, providing a statement saying, “The Commission is not privy to the analysis utilized in the studies, but we are very proud that the citizens of Arizona are receiving some of the most reliable and cost-effective energy in the country.
Clark and Commission Chair Jim O’Connor did not answer 12News’ questions about what methodologies the Commission and its staff use to assess the impacts of their policies for themselves. They are duty-bound by the state constitution to ensure just and reasonable rates for ratepayers.
“If the Commission doesn’t know where it stands relative to other utilities, relative to other states, then they are flying blind,” Padgaonkar said. “That is highly concerning to me.”
About the consumer watchdog
Most of the data used in this story was compiled by data analyst and consumer watchdog Abhay Padgaonkar. He was an expert witness in the 2018 APS rate challenge that resulted in eventual cuts to APS’s guaranteed profits.
He later helped expose a faulty rate comparison tool at APS in 2019 that resulted in a $25 million settlement with the state.
Padgaonkar has also submitted various written analyses to the Commission on issues ranging from customer shut-off policies, ethics and utility investor profits. Padgaonkar’s reports have been cited by Commissioners over the years in official documents and public remarks, including Commissioner Lea Marquez Petersen in 2021.
At least one commissioner, Kevin Thompson, has accused Padgaonkar of having a political agenda.
“My agenda is that the cost burden on Arizona citizens should be less,” Padgaonkar said. “These three utilities are not the most cost-effective even in the state of Arizona, let alone across the country.”
Critics say higher costs benefit utilities over consumers
Individual ratepayers are concerned the current 4-1 Republican majority at the Corporation Commission is voting to benefit the utility companies over consumers.
A group of UNS customers in Lake Havasu City petitioned the commission to reopen a rate case, complaining of high costs.
Critics point to other decisions over the past two years, including earlier this year when the Commission awarded APS three times the amount of allowed profits in its new rate structure compared to what the state’s consumer agency RUCO recommended.
Another case: last year the Commission granted Southwest Gas a profit increase, and the utility is now requesting another rake hike.
Southwest Gas reported record-high earnings last year.
In response to critics, the Commission has cited unavoidable fuel costs, the needs of utilities to maintain strong credit ratings, and growing energy demands as justifications for rate increases.
Additional findings in the watchdog analysis
- While California has dramatically higher prices per kWh, Arizona’s average residential monthly bill ($148.44) was slightly higher than California ($144.81) in 2022, partly due to lower consumption habits there. That comparison is an example of why one data point does not tell the full story of what ratepayers face across regions.
- -Through August of this year, Arizona’s largest utility, APS, charged an all-sector price that was 20% higher than the neighboring utility SRP. Comparing residential prices, APS is 24% higher than SRP. The two utilities are similar in the number of customers served, but are different in many other respects and APS has pushed back against comparing the two utilities at all.
APS also disagrees with comparing its costs to the overall averages of other states.
“At the very least, it would be more appropriate to compare to investor-owned utilities in other states,” said Jill Hanks of APS.
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