APS Rate Hike?

April 24, 2006

Transcript:

José Cardenas:
Tonight on Horizon, we begin a four-part series looking at the ways we use power in Arizona. Tonight, in "Power Hungry" Horizon examines the demand for gas and electricity. Also, we discuss the issue of the proposed APS rate hike. And we learn more about the musical director and conductor of the Tucson Symphony Orchestra, George Hanson.

Announcer:
Horizon is made possible by contributions from the friends of 8. Members of your Arizona PBS station. Thank you.

José Cardenas:
Good evening and thanks for joining us on Horizon. I'm José Cardenas filling in for Michael Grant. For the next four days on Horizon we will look at the energy that keeps our lives and economy operating. Here in the developed world we have created a civilization that feeds on gas and electricity, among other things. Over the course of the series we will focus on conserving that energy, on alternatives to oil and gas and power plants, and on the supply of power. Tonight we will focus our demand for power in Arizona. Producer Larry Lemmons and videographer Scot Olson show us how a once inhospitable desert valley has been transformed into the vibrant hub of energy it is today.

Gary Harper:
Electricity is the key ingredient to just sustaining the lifestyle we're all used to.

Bob Smith:
People just are using energy throughout the day for comfort, for recreation, to get their jobs done.

Joe Sparano:
If the automobile continues to be transportation of choice, the suggestion is while I don't have a crystal ball it sure looks like the dynamics are such that additional population growth will mean additional and ever growing demand.

Larry Lemmons:
This is the way we live. We produce and consume energy. Without giving it a thought we might switch on a light, open a refrigerator, heat up the microwave, turn on the television, and then the dishwasher. Imagine these actions multiplied millions of times in a single day.

Bob Smith:
You think of 100-watt light bulb. So 1,000 watts is a kilowatt. A typical home might use 4 to 5 kilowatts at any one time. 1,000 kilowatts is a megawatt. And in general that will power anywhere from 200 to 250 homes and then 1,000 megawatts is a gigawatt. So APS' peak load is around 7 gigawatts or 7,000 megawatts.

Larry Lemmons:
Did you get that?

Bob Smith:
There are 1,000 watts in a kilowatt, 1,000 kilowatts in a megawatt and 1,000 megawatts in a gigawatt.

Gary Harper:
To give an example maybe of metropolitan Phoenix and its size, in the summer months again between us and APS, we'll use in excess of 11,000 megawatts of load on a hot summer day. That is equivalent to like a Long Island, New York load.

Larry Lemmons:
On the highways and on city streets and in the air, energy is also needed to power the machines that take us from here to there.

Joe Sparano:
In Arizona, you use about 10, 11 million gallons per day of gasoline, diesel and jet fuel. Gasoline is by far the largest, about 7 million gallons a day. Arizona is the second fastest-growing state in the country. Has been for several years. It is expected to continue that growth. I think it's something like 6.5 or 7 million people here now and the projection is 9 million by 2020. All of that suggests a continued and increasing need for product.

Larry Lemmons:
Combine constant growth with constant demand and it's obvious there is an ever-expanding need for energy. The Arizona Department of Transportation reports that on road gasoline consumption since only 1995 has continued to climb to record levels last year. That's not all. Since 1977, we've had a 9% average annual increase of growth state product. Since 1980, we experienced an average annual increase of population of 3.2%. Our energy consumption since 1980 increased an average of 2.8%. Electricity consumption since 1980 increased on average 4.1%. In homes it increased 1.6%. You can see in this graph the rise of energy use in Arizona since 1949. And in this graph you can see who's using it. Summer in the valley. The blistering desert heat draws people to their thermostats. The ability to cool lives in the desert made living in the desert possible.

Gary Harper:
Air conditioning both for houses and industry is really what is a main ingredient of what causes the heavy use in the summer.

Bob Smith:
As you know, homes are larger today where as back from the 60s and 70s you might have had a 1500 square foot for an average home, now it's over 2,000. So the energy of a typical home has probably grown in the area 20 to 30% in that time.

Larry Lemmons:
And fun in the desert requires the same energy consideration. Imagine cooling chase field. This 8,000-ton cooling system does it and more.

Bob Smith:
I think what the folks at APS were able to do in terms of creating a facility that actually used the cheaper, more abundant energy at night to safely produce ice and chill air and then allow not only chase field but other businesses downtown to use that for its air conditioning source during the day I think is just very, very insightful and innovative.

Larry Lemmons:
As we've seen, the demand for energy is rising constantly in the valley. Energy companies work hard to meet that demand. But rapid growth means the supply might lag occasionally, especially when disruption occurs.

Joe Sparano:
Just to put it in perspective, so every day it is a challenge because all your gasoline gets here by pipeline. All the diesel gets here by pipeline. 70% from California, 30% from New Mexico and west Texas. So in 2003 when there was a pipeline disruption, it had a tremendous and immediate effect because 30% of the supply was taken off the market.

Larry Lemmons:
For power companies, because energy is shared around the country through a network grid, disruption in one place can affect power somewhere else.

Bob Smith:
That's something that I think probably most folks don't really understand is that the wire in their home is connected through other wire, wire in British Columbia, wire in Baja, Mexico. The western grid starts with the Rocky Mountain States, goes all the way west to the coast and includes, as I mentioned, parts of California and Baja, California. It's interconnected in a way the things that happen in the Puget Sound area potentially can impact what happens here in Arizona.

Larry Lemmons:
As the valley expands, so must the number of plants and transmission lines.

Gary Harper:
Over the next 10-years, our plan actually has about a 40% to 45% growth in our total demand. What that means is you've got to have about that much growth in power plants, in transmission lines, in order to get the power to where the people are.

Larry Lemmons:
Despite the heat, Arizona and particularly the valley, continue to attract people from around the world. They bring with them greater and greater demand for power, as technology and human need converge to expand this hub of energy.

José Cardenas:
Tomorrow night in our series "Power Hungry," we'll take a look at our supply of energy here in Arizona, Wednesday we'll take a closer look at solar energy and on Thursday, we'll look at a new technology that will help us save energy. The Arizona corporation commission will be considering a judge's recommendation Wednesday that Arizona public service should not get the 11% rate hike it is requesting as an "emergency interim rate increase." Chief administrative judge Lynn Farmer suggests APS implement a 5.4% rate increase instead. It's a non-binding opinion and the corporation commission can accept it, take it into consideration, or reject it altogether when members meet to determine the matter on May 2nd. We asked a representative for APS to appear on the show tonight to talk about the proposed rate hike, but the company says, in light of the ongoing proceedings, they would not feel comfortable talking about the issue until it is decided. Joins us on the program tonight to argue against APS's request for an 11% rate hike, the director of the Residencial Utility Consumer Offices, Steve Ahearn. Mr. Ahearn, thank you for joining us on Horizon.

Steve Ahearn:
Thank you.

José Cardenas:
Tell us very briefly first about what RUCO is and what it does.

Steve Ahearn:
Sure. We're a small state agency. We're funded by a small assessment on everybody's utility bills. We were founded in 1983 to be the voice of the Residential Consumer before the corporation commission. Prior to that there had been no formal representative of our residential interests before the commission. And these are very complex proceedings. Lobbyists for large users, big companies themselves, and the commission has a staff. What we perform is the role of representing the residential utility user.

José Cardenas:
Now before we get into our discussion of APS's rate increase, I should mention that my law firm does some work for APS; they're not involved in the rate request and I don't do any work for APS. But tell us first about the judge's ruling and explain it to us in the details of what happened last Wednesday.

Steve Ahearn:
Sure. What we had before us in this matter was an emergency request by the Arizona Public Service Company. There are a lot of requests out there at the moment. The company has what's called a general rate case, a very large rate case, that they filed I believe last November. On the order of 20%, something just shy of that, I believe. What this emergency filing did in early January was to pull out from that larger application the field portion, the portion of that large application that results from their having purchased primarily natural gas and other power on the open market to supply us. And that's the lion's share. I think this original application.

José Cardenas:
The lion's share of the 21% of so?

Steve Ahearn:
That's correct. This was I believe 14% in its original incarnation. It was reduced somewhat by pulling out I think costs associated with the outages at the Palo Verde nuclear plant. So it was reduced from on the order of 300 million to I believe approximately 230.

José Cardenas:
This particular request. That's the difference between 11% and 5.4%?

Steve Ahearn:
The emergency-- the emergency application was for approximately 14% of an increase. The overall general rate application was for 21%. So they were approximately 20%. They're looking for about two-thirds of their larger application in this emergency context.

José Cardenas:
In your assessment of the judge's ruling?

Steve Ahearn:
Well, I believe that it splits the interests right down the middle. My organization had originally suggested that there was no emergency and that the company should not be granted this request because we didn't believe that it was an emergency.

José Cardenas:
You weren't arguing that they shouldn't be granted any increase but simply that it didn't need to be handled on an emergency basis?

Steve Ahearn:
That's correct. Really what we're fighting over here is for expenses that the company has and will incur. And there's not really a question about whether they should get this- whether they should recover this amount, it's just a matter of when. And what the company has been attempting to do through this emergency application was to expedite collection of this amount. And what I would suggest is that in the normal course of regulating this company they are going to be made whole and this would have-- they would have been made whole over the course of this year in their pending large application in any event. What the judge has done and what the staff had proposed was to speed up collection of this outstanding balance before it gets too large. And we can live with that at RUCO.

José Cardenas:
Now when you say will be made whole, are you suggesting that the overall rate increase in the 20% area should be granted? You wouldn't oppose that? It's just the timing? Or what's the question?

Steve Ahearn:
In this particular application emergency, they pulled out just the fuel charges. And these are hard costs that have been and will be incurred in order to supply us with electricity.

José Cardenas:
And as I understand it from what APS has been telling the public, they were talking about hundreds of millions of dollars of unrecovered costs? Is that right?

Steve Ahearn:
Well, as yet unrecovered costs. It's in the nature of regulating these monopolies that they invest first and recover later with interest. And that's what we fight over in rate cases.

José Cardenas:
Now the expressed concern from APS is that this will affect their bond rating and they're concerned that would in turn increase consumer costs. Some of the materials that they provided are that junk status of their bonds are rated that way could cost consumers more than $1 billion over the future.

Steve Ahearn:
Right. I don't doubt that there was a serious-- I assert that there was a serious negative consequence to a downgrading of the Arizona Public Service credit. However, I believe that this recommended order by judge Farmer will go a very long way to-- I'm not going to say indemnify the company, but minimize the possibility that they will receive a further downgrade.

José Cardenas:
There's been a lot of back and forth between APS or at least their positions on cost and comments by some of the commissioners regarding investments in the community, advertising and so forth. Where does RUCO stand on all this?

Steve Ahearn:
What we do is very typically go after the large ticket items in these rate cases. Those that get at the cost of service. We'll dicker over depreciation and some of the other items, even purchase of fuel, for example. Very large hundreds of millions of dollars items. Whether an entire plant ought to be put in rate base. I think it's appropriate for the commissioners as a policy matter to take a look at some of these other expenses that the company represents is on their shareholder's nickel. What I look at is expenses associated with supplying us with electricity and what the commission is doing is looking for-- they're turning over every single rock including money that's actually expended currently by the shareholders, that the company is going to represent that these expenses for advertising, tickets to the ball park, that these are-- these come out of the shareholders' pockets and not the rate pairs.

José Cardenas:
And Mr. Ahearn, we're going to have to leave it there for now but thank you for joining us on Horizon.

Steve Ahearn:
Okay.

José Cardenas:
In 2004 the Tucson Symphony Orchestra was the recipient of the Arizona governor's arts award. That was in recognition of the symphony's significant community impact. One of the reasons for the symphony's success is its music director and conductor, George Hanson. Producer Sooyeon Lee profiles Hanson, who has been employed ten years with the oldest continuing professional performing arts organization in the state of Arizona.

[Applause]

George Hanson:
The best part of my job hands down is making music with colleagues on stage. That is the biggest thrill. ¶¶[Music]¶¶

Sooyeon Lee:
Conductor George Hanson has appeared with nearly 90 symphony orchestras and opera companies in 18 countries. The New York philharmonic orchestra, Warsaw, Budapest, the radios of orchestra, Berlin, Hamburg, Carnegie hall. The list goes on. ¶¶[Music]¶¶

George Hanson:
Let it go. Here's three.

Sooyeon Lee:
The orchestra in which he spent the most time is the Tucson symphony. Celebrating its tenth season, Hanson is the 16th conductor and the T.SO.'s 77-year history.

George Hanson:
It's been a tremendous ten years. I feel like I'm part of the community. Tucson is certainly part of me.

Sooyeon Lee:
Born in Minnesota, Hanson started his music career at a very young age.

George Hanson:
Well, I started playing the piano when i was five, wrote my first little piece of music, minuet in g at the age of 6. My career as a composer never really took off. And I think we can all be grateful for that. I had wanted to be an astronaut. Then I moved on to becoming a racecar driver, got very serious about that, actually raced motorcycles for awhile. Then decided, no, I think I'll become a doctor. But I still wasn't committed to music until sometime after I had a series of sinus operations and discovered that I didn't like hospitals. And I looked around at age 17 and announced very much to my piano teacher's and my parent's chagrin that I had decided to go into music.

Sooyeon Lee:
A bohemian composer, Gustav Mohler and his music have a special place for the Hansons.

George Hanson:
I think it was in college where I heard a recording of Mohler's first symphony and I decided that was the repertoire I really wanted to do. I found out years later that had inspired my father to become a conductor. He had gone to a performance of the Chicago symphony when he was 16 and said, you know, that's pretty cool trumpet parts. I think I might like to be a trumpet player. He wound up then going on to become a conductor.

Sooyeon Lee:
On his 24th birthday, Hanson shared the stage with his future mentor and teacher, Leonard Bernstein.

George Hanson:
Well, I remember I conducted this wonderful orchestra at Indiana University in a run through of Brahms' second symphony. There were probably a thousand people in the audience. He said, that's very nice but he took my baton and he stepped up on the podium and he conducted. He didn't say a word. And it completely changed the sound of the orchestra. And the entire audience and the orchestra, everyone was just watching and observing and experiencing this. And then he came to a place where the music kind of died down and he stopped. And the whole place burst into applause. And then he took the baton and he handed it back to me and he said, now, you do that. And that was my first lesson with Leonard Bernstein. I got to work with him then in Los Angeles and in Tanglewood, then in 1985 and 1986 I assisted him at the Vienna state opera for a world premiere of his, went on to do some other projects and was in touch with him until really a few months before he passed away. Here's 73. Three and -- ¶¶[Music]¶¶

Sooyeon Lee:
Hanson spends much of the last 10-years traveling.

George Hanson:
In 1994 as music director of Anchorage. That was my first music directorship. I flew back and forth from New York to Anchorage on a monthly basis. When I got the Tucson position in '96, I moved here and then commuted back and forth to anchorage. In 1997 I was offered a position in Germany to run a German opera house and orchestra and concert series. I have to say I hesitated but I have to say I'm certainly glad that I did it. It lead to my meeting my wife, Petra, and our wonderful boys, James and Victor and Max. When Victor and Max were born, that was the point where I really decided that I'm going to have to make up my mind. I can't do an inter-continental commute every month. Of course I was spending about 200-days a year jet-lagged. And I really wanted to be a dad. It's fun to have a little distraction now and then. I don't know if I'm going to want them to become musicians or not. But they're just starting now. They're certainly going to learn music. Victor will play the violin and max will play the cello and James is playing the piano already. So we're starting the Hanson piano trio.

Sooyeon Lee:
Critics have noted remarkable changes in the Tucson Symphony Orchestra during Hanson's tenure.

George Hanson:
The conductor's role is a complex one. Because he not only has to determine things like the tempo of the piece and the balance and the dynamics, but the conductor in a lot of ways has another aspect of the job where he sets the tone, the atmosphere of the music-making. That happens primarily in the rehearsals. And that's where the conductors, whether you're just starting or you've got a number of years or experience like I have, you're constantly learning and hopefully improving on that aspect of the job. ¶¶[Music]¶¶ The essence of the classical repertoire is so broad and so varied, the experience that one could expect from Mozart's requiem is quite different from the experience one would expect from-- Beethoven's 9th symphony. If the composer touches your heart, whether it's uplifting or reflective or just plain thrilling, then the symphony and I have done our job.

Merry Lucero:
How is the supply for energy race to go keep up with the demand from Arizona's rapid population growth? We continue our four-part series, power hungry, with a look at what is being done to meet Arizona's energy needs of the future. Plus we discuss the results of the latest ASU-Cronkite TV eight poll Tuesday on Horizon.

José Cardenas:
Wednesday, we'll continue our examination of power with a look at alternatives. Thursday, we'll see what we can do to conserve our power as we wrap up our four-part series, "power hungry." Friday, join us for the Journalists' Roundtable. That's Horizon for tonight. Michael grant will be back tomorrow and I'll see you again on Thursday with Horizonte. Thanks for joining us. Have a good evening.

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