Citizen Staff
Sale of Citizens Utilities’ gas, electric assets to affect southern Arizona.
By OSCAR ABEYTA
oabeyta@tucsoncitizen.com
UniSource Energy Corp. won unanimous approval from the Arizona Corporation Commission yesterday to buy Citizens Utilities’ gas and electricity operations in northern and southern Arizona.
The $230 million deal is expected to close by late July, a UniSource spokesman said.
Rates in Citizens Utilities’ areas will increase 21 percent for gas customers and 22 percent for electricity customers.
Customers in the affected territories have not seen base rate increases for electricity or gas since at least the mid-1990s.
The commission’s order stipulated that no additional rate increases for gas and electric customers would be allowed before August 2007.
Commissioner Mike Gleason said the rate increases were inevitable, but were kept as small as possible.
“The 600-pound gorilla sitting in the middle of the room during all this was if UniSource did not go through with the deal, we’d go back to Citizens running it and instead of 22 percent rate increases, we’d have 45 percent increases,” he said.
Under the order, UniSource will not collect about $135 million from ratepayers, costs that Citizens Utilities incurred because of power contracts the company signed with Pinnacle West Energy Corp. during the electricity crisis in 2000 and 2001.
UniSource Vice President Steven Lynn said the rate increase for electricity allows UniSource to make up the difference in the wholesale price it pays under the contract and what it is allowed to charge customers.
“Citizens was losing money on every kilowatt hour sold,” he said. “We couldn’t continue to do that once we acquire their systems. It was a matter of coming to grips with reality of the wholesale power market.”
The commission ordered Unisource to begin negotiating with Pinnacle West 30 days after the transaction is complete to try to lower wholesale rates.
Ninety percent of any savings realized from those talks would go toward lowering consumer rates.
The commission also ordered UniSource to present a plan in December for opening up the electricity markets in the former Citizens territories to retail competition.
Commissioner Jeff Hatch-Miller said he hoped competition would allow customers to shop around for better electricity prices.
“If we’re going to have these kinds of rate increases, we want to ensure that other companies can come in and offer lower rates,” he said.
Commissioner William Mundell said the commission struck the best deal possible while allowing the acquisition to go through.
“Whenever you have a rate increase, that’s always a difficult decision,” he said. “We were trying to balance all the equities, and in the long term this will benefit all the counties involved.”
If UniSource closes the deal by month’s end, it could save $10 million.
Paperwork states that if it is complete by July 31, the purchase price decreases.
Some of those potential savings were factored into the gas rate increase, lowering the total rate increase from $21 million to $15.2 million.
Citizens Utilities serves about 75,000 electric customers in Santa Cruz and Mohave Counties, and about 125,000 gas customers in northern and southern Arizona.
Citizens Utilities’ assets will become a separate subsidiary called UniSource Energy Services.