Newly elected Arizona Corporation Commissioner Lea Marquez Peterson wants APS to slash its rates, but she is dreaming if she thinks she can accomplish this, even with her eight suggestions for the new APS CEO to focus on to lower costs.
There are two problems with Marquez Peterson’s approach. The first that she tends to favor micromanagement of the utility companies, especially imposing green power production methods such as wind and solar. These will increase costs.
It is simply not possible for political bureaucrats to know in advance what the proper mix of coal/gas/biomass/hydro/nuclear/solar/wind should be
But second, and more significant, none of her eight suggestions will allow for competition. This is the ONLY long-term approach that can cause APS customers to get the lowest rates possible.
I know this because I am familiar with the rate making process, having been a staff member at the Corporation Commission for four years, having studied rate making in my MBA program, and having monitored the ACC for over 40 years. Ratemaking is a very complex process, and it is simply not possible for government bureaucrats (or anyone else) to know what constitutes “fair” rates. Therefore, ratemaking inevitably devolves into a political process, not an economic analysis.
The accountants and lawyers and economists at APS are far smarter than the government bureaucrats at the ACC and will always succeed in preserving their revenue stream……..unless…..they are forced to compete.
Government monopolies never benefit the citizens, always the regulated entity wins. It is time to set APS free and let them compete.
Mr. Miller lives in Phoenix. His blog can be found here.