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Brief Overview
In 2007, the Arizona Corporation Commission (ACC) voted to do away with allowing APS to offer up to 1,000 feet of provided line extension footage, a policy that had been in place since the 1950’s. Since this time, customers are being charged an astronomical cost for extensions without the ability to appeal the cost or go to another vendor for the line extension. This policy change has diminished land value, and in some cases priced owners out of building their home or being able to run electricity to a home that was already under construction.
Due to the overwhelming concerns of Realtors®, homebuilders, government officials and homeowners, the ACC is reexamining the extension policy in the APS rate case. Below are some brief talking points for your use, as well as, a comprehensive overview of the issue.
Should you have further question please email Meghaen Duger; VP of Government Affairs at meghaenduger@aaronline.com.
How can I help?
You can write the Arizona Corporation Commission or call individual Commissioners office asking them to reinstate the free footage policy. Contact information for the commission can be found at www.azcc.gov.
Talking points and a historical perspective are below for your use.
Talking Points
- Line extensions are costing the homeowner anywhere from $10,000- $25,000. APS has never provided what their actual cost to run the line is, nor is the homeowner allowed to go out for competitive bid.
- Individuals, who had bought land on which to build a home or business, structured their decision on known costs. The astronomical change in the cost of electricity was not one of those and could not be determined until contract work had begun and a building permit had been issued.
- Salt River Project, not under the regulatory authority of the Arizona Corporation Commission, continues to provide line extensions of up to 1,000 feet.
- According to APS records provided to the ACC staff, the estimated fiscal impact of providing line extensions as a cost of business charged to the ratepayers averaged .20 per month.
- In as many cases, the cost of accessing electricity with an extension has made the parcel unattractive for potential buyers and a white elephant for the current property owner attempting to market a parcel. Either way, the financial hit in counties around the state has been very real – raw land parcels values have fallen significantly, separate and apart from the current national economic recession.
- This new policy has created a situation where Rural Arizona is being under-served.
Historical Perspective
Historically, since the 1950’s, Arizona electric utilities have expanded the state’s distribution grid by offering line extensions to new customers of up to 1,000 linear feet. If the utilities were required to be underground, the property owner paid for the surveying, excavation, trench ‘shading’ and conduit. The utility company would provide the electrical cable and installation labor. The companies were repaid on this infrastructure investment by electricity purchases from these new (and perpetual) customers.
This availability stopped in 2007 with a policy change by a vote of the five-member Arizona Corporation Commission, with virtually no public notice and little visibility of this change in service availability costs. Individuals who owned land quickly discovered that market interest in purchasing parcels was falling dramatically as the cost of grid access was now being factored into potential building costs.
APS moved quickly after the ACC vote to begin charging thousands to tens of thousands of dollars to property owners requesting service, regardless of the amount of cable that needed to be run to their service box. The cost would vary from parcel to parcel, regardless of whether the service connect was above ground or buried. There was no formula for anticipating costs, and the cost would not be provided until there was a building permit. The homeowner has no right to appeal the cost and is held hostage to pay this cost if they want electricity run to their property. In many cases, since the ACC rule change, the cost of accessing electricity costs more for a new homeowner or small business than the cost of acquiring the parcel.
This new policy has especially hurt land values in communities in Rural Arizona. A number of Arizona County Assessors have written to the Arizona Corporation Commission expressing concern about the reasons for and thinking behind this policy change and advising the five Commissioners that the loss in property taxes on these raw land parcels has been significant and will need to be made up elsewhere in taxes.
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