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May 5 2015 12:00:00:000AM
News Media Contact: Joseph Barrios, (520) 884-3725,

UniSource Energy Services Seeks Approval of New Electric Rates to Better Reflect Customers’ Use of its Upgraded Utility System

Kingman, Ariz. — UniSource Energy Services (UES) has requested new electric rates with higher fixed charges, lower energy costs and other changes that better reflect the cost of
serving customers’ energy needs.

The proposal UES filed today with the Arizona Corporation Commission (ACC) would increase average residential bills by about $1.99 per month on May 1, 2016. One year later, when a
proposed temporary bill credit expires, average residential bills would increase another $7.87 per month.

The revised rates would better match customer charges to the costs of operating and improving UES’ electric system, including a newly purchased natural gas-fired power plant, a new
large-scale solar array and other recent upgrades, said David Hutchens, President and CEO of UES.

“We have invested in a modern, efficient system that will reliably serve our customers for decades to come,” Hutchens said. “Now we need updated rates that are equally responsive to our
customers’ evolving use of our local electric system.”

UES’ current rates are based on costs incurred through June 2012. Since then, the company has invested about $170 million to acquire new power production resources, upgrade its
transmission and distribution systems and make other improvements to better serve customers. UES also faces higher costs to operate, maintain and repair its systems. In 2014, for
example, crews rebuilt a Lake Havasu City transmission line that sustained serious damage in two summer storms.

The company’s most significant investment was its $55 million purchase of a 25-percent share of the natural gas-fired Gila River Power Station Unit 3 in December 2014. The unit can
serve about one-third of UES customers’ peak energy needs, significantly reducing the company’s reliance on the wholesale energy market.

“We’ve locked in an efficient, reliable resource at an attractive price,” Hutchens said. “While this investment will be reflected in our rates, its cost will be largely offset by lower
purchased power costs and it will provide the added benefit of reducing our customers’ exposure to volatile market energy prices.”

Other recent investments that will improve service to customers include:

  • Upgrades to transmission lines and substations in Mohave County.
  • A new 7 megawatt (MW) solar array in Rio Rico.
  • Improvements to the primary transmission line serving customers in Santa Cruz County.
  • New automated options for customers who call UES’ Customer Care line.

UES is seeking to recover those and other expenses more equitably through rates that better reflect actual service costs. To provide safe, reliable service to customers, UES must
maintain power plants, transmission lines, substations, underground cables and overhead distribution equipment while conducting metering, engineering, customer service and business

These costs are largely “fixed” — that is, they don’t vary with customers’ usage. But current rates recover most of them though usage-based charges. That means lower-usage customers —
including those whose usage is significantly reduced by rooftop solar arrays — aren’t asked to pay for their fair share of the infrastructure needed to provide their service.

To ease this disparity, UES is seeking to recover a higher percentage of its fixed costs through fixed charges by increasing its basic service charge for residential customers from $10
to $20 per month. That increase would be partly offset by lower charges for energy usage and could be further offset by participation in UES’ energy efficiency programs.

The company also has proposed a new, optional rate that combines the basic service charge and lower kilowatt-hour (kWh) charges with a third fee based on a customer’s highest level of
energy usage. This “three part” rate would more closely mirror the costs incurred by UES because the company must develop and maintain facilities capable of serving every customer’s
peak demand.

Any residential or small business customer could use the proposed three-part rate. The rate would be mandatory, though, for new users of solar arrays and other distributed generation
(DG) equipment. Such customers use the local electric system differently, “pushing” and “pulling” energy in ways that create new cost burdens and reliability concerns for utilities and
their customers.

UES also is proposing a new net metering plan to more fairly compensate customers for excess solar energy. The company filed the plan with the ACC earlier this year but now is seeking
its approval as part of its request for new rates. If the company’s proposal is approved by the ACC, customers with existing solar arrays or those whose requests to connect new DG
facilities to UES’ system are submitted by June 1, 2015 would not be subject to the new net metering plan or mandatory use of the new three-part rate.

Users of solar power systems enjoy steeply discounted electric service under current rates, due in part to net metering rules that allow them to exchange excess solar energy for free,
on-demand utility power. UES is proposing instead to purchase excess output from new rooftop systems at the current market price for power from large solar arrays.

The revised net metering plan and the new three-part rate would help ensure that customers who use solar power pay a fair price for UES electric service. Because solar prices have
fallen significantly in recent years, UES can reduce subsidies that increase costs for other customers while maintaining momentum for the ongoing expansion of renewable energy
resources, Hutchens said.

“Since we all depend on our local electric system for safe, reliable service, everyone should pay a fair price for using it,” Hutchens said. “Our proposed rates include more equitable
charges for all of our customers, including those who use solar arrays.”

UES also is requesting approval of economic development rates that would provide temporary discounts to new or existing businesses that create new jobs and meet other requirements.

“We want to help our communities attract new employers and encourage existing businesses to expand their operations,” Hutchens said. “Many utilities in other communities already offer
similar discounts, so we’d like to do our part to contribute to the growth of our local economies.”

UniSource Energy Services provides safe, reliable electric service to approximately 93,000 customers in Mohave and Santa Cruz Counties through operating subsidiary UNS Electric, Inc. It
also provides natural gas service to approximately 150,000 customers in northern and southern Arizona through operating subsidiary UNS Gas, Inc. For more information, visit

UES and its parent company, UNS Energy, are subsidiaries of Fortis, which owns utilities that serve more than 3 million customers across Canada and in the United States and the
Caribbean. To learn more, visit

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