Beatrice Lang
Arizona Public Service (APS) is a monopoly utility provider that has come under fire for its frequent rate hikes and resistance to competition. Customers have expressed frustration over increased costs, with APS justifying hikes as necessary to maintain reliability and affordability. However, critics argue that the lack of competition allows APS to maximize profits at the expense of customers. While there have been attempts to introduce competition and reform, legislative decisions and utility lobbyists have thwarted these efforts. As a result, APS remains the primary energy provider in Arizona, with customers bearing the burden of higher rates and limited choices.
| Characteristics | Values |
|---|---|
| APS rate increase | 9.7% in 2021 |
| APS's proposed hike amount | $460 million |
| APS's monthly increase for residential customers | $18 |
| APS's annual increase for residential customers | $350 |
| Arizona Corporation Commission's decision | 153% increase in APS's "Power Supply Adjustment Surcharge" |
| Tucson Electric Power's increase | $114 per year |
| APS's customer satisfaction survey score | 680 |
| Average retail price of energy in Texas | 21.2% lower than in Arizona |
| APS's lower return on equity rate | N/A |
| APS's argument against lower equity | Less cash flow, higher cost of debt |
| APS's pending rate cases | N/A |
| APS's hike sought by TEP | 12% |
| APS's average annual price increase from 2008 to 2017 | 18.7% |
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What You'll Learn
Arizona Public Service's rate hikes
Arizona Public Services (APS), Arizona's largest electric service provider, has been criticised for its frequent rate hikes. In 2024, APS increased rates by 8%, which added an average of $12 to monthly electricity bills for Arizona consumers. This was preceded by a rate hike of 8% in 2023 and 4.5% in 2017. In 2025, APS sought another rate hike of 14%, which would have resulted in a further $20 increase in monthly electric bills.
The rate hikes by APS have angered many customers, with some expressing frustration over sharp increases in their monthly energy costs, despite no change in their electricity usage. The Arizona Corporation Commission (ACC) has been criticised for approving these rate hikes, with some calling for the rejection of new rate increases and for commissioners to be voted out.
The original idea behind monopoly utilities was to encourage private sector investment in transmission lines and other infrastructure by guaranteeing exclusive service areas and profitability. However, this model has been criticised for allowing utilities to shift costs to customers, leading to frequent rate hikes.
Competition in the energy market has been proposed as a solution to drive down costs and improve customer satisfaction. Texas, for example, has a competitive energy market where citizens can choose from various companies offering different energy plans, resulting in higher customer satisfaction and lower prices.
To address the rate hikes, some have suggested applying pressure at the ballot box, demanding that the ACC reject new rate increases and hold utilities accountable for their expenses. Without competition or regulatory intervention, APS and other monopoly utilities in Arizona are likely to continue passing on business expenses to customers through rate hikes.
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Lack of competition
Arizona Public Service (APS) has maintained its monopoly status in the state of Arizona due to a lack of competition in the energy market. This lack of competition has resulted from a combination of legislative decisions, utility company influence, and court rulings that have prevented the emergence of a competitive market.
For over two decades, Arizona has had laws in place that allow for competition in electricity providers. However, these laws have never been effectively implemented due to a combination of factors. Firstly, a powerful utility lobby has consistently opposed any attempts to introduce competition, leveraging its influence to maintain its monopoly status. This was evident when the Arizona Corporation Commission attempted to revisit deregulation in 2013, but quickly abandoned the effort in the face of opposition from APS.
Additionally, legislative decisions have shielded monopoly utilities from competition. For example, House Bill 2101 further protected Arizona's monopoly utilities from competition and denied ratepayers the ability to choose their energy providers. This bill was pushed by the utilities themselves, with legislators siding with the monopolies and their lobbyists over free-market principles.
The absence of competition has resulted in higher prices for consumers and lower customer satisfaction. Data from the U.S. Energy Information Administration shows that from 2008 to 2017, while the average annual price for power decreased by 7% in states with retail competition, it increased by 18.7% in states without competition, including Arizona. In contrast, Texas, which has a competitive energy market, offers its citizens a variety of energy plans from different companies, leading to higher customer satisfaction and lower prices.
The lack of competition has also contributed to a pattern of rate hikes by APS and other monopoly utilities. Without market forces to drive down rates, these utilities have repeatedly increased prices, often passing on business expenses to customers. This has led to frustration among ratepayers, who feel burdened by the continuous rate increases.
While there have been calls for reform and the introduction of competition, it remains to be seen whether these efforts will succeed in breaking APS's monopoly hold on the Arizona energy market.
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Customer dissatisfaction
Arizona Public Service (APS) is a monopoly utility provider in Arizona. There is growing customer dissatisfaction with the company, largely due to frequent rate hikes and a lack of competition in the market.
In August 2017, the Arizona Corporation Commission authorized a rate increase, which has been a source of frustration for many APS customers. The company has also proposed a $460 million hike, resulting in monthly increases of about $18 for residential customers. Combined with other surcharges, customers could be paying up to $350 more per year for electricity. These frequent rate increases have led to accusations of APS being "addicted to rate hikes".
The lack of competition in the market exacerbates customer dissatisfaction. Arizona has had laws in place for over two decades to allow competition in electricity providers, but this has never materialized due to a powerful utility lobby and legislative decisions. House Bill 2101, passed in 2022, further shielded APS and other monopoly utilities from competition, denying ratepayers the ability to choose their energy providers.
Customers are demanding choice and competition, which has been shown to drive down costs and improve customer satisfaction in other states. Texas, for example, offers a model where citizens can choose from various companies and energy plans, leading to higher customer satisfaction ratings and lower prices.
APS customers feel captive to the monopoly, and many are calling for reform to ease their burdens. Allowing households to choose their energy provider in a competitive marketplace is seen as a priority reform that can empower customers and drive down costs.
While APS claims to provide reliable, affordable, and clean energy, the frequent rate hikes and lack of competition have resulted in growing dissatisfaction among its customer base in Arizona.
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Legislative protection
Arizona Public Service (APS) has maintained its monopoly status in Arizona's energy market due to legislative protection. While Arizona has had laws supporting competition in the energy market, these have not been effectively implemented. The state legislature has passed bills that shield monopoly utilities from competition, such as House Bill 2101, which prevents ratepayers from choosing their energy providers.
The Arizona Corporation Commission, which regulates APS and sets electricity prices, has been criticised for approving rate increases and not sufficiently challenging the utility company. However, the Commission has also taken steps towards deregulation and creating a competitive market, although these efforts have been met with resistance from APS and the utility lobby.
Legislators in Arizona have backed plans to ensure that customers cannot quit APS, arguing that the monopoly status of utility companies protects consumers, keeps rates low, and ensures reliable electricity supply. They claim that competition could lead to issues such as rolling blackouts and soaring prices, as allegedly seen in California and Texas.
APS and other monopoly utilities have been criticised for frequent rate hikes, which are often approved by the Corporation Commission. These rate increases have frustrated customers, and there have been calls for the Commission to reject new rate hikes and for commissioners who approve them to be voted out.
While some argue that competition in the energy market would drive down rates and improve customer satisfaction, as seen in Texas, the Arizona legislature has been reluctant to introduce competition, instead prioritising reliability and affordability.
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Impact on consumer choice
Arizona Public Service (APS) has long been criticised for its monopoly status, with many ratepayers frustrated by the rate increases authorised by the Arizona Corporation Commission. The original idea behind utility monopolies was to leverage private sector investment in transmission lines and other infrastructure by guaranteeing an exclusive service area and ensuring profits. However, this model has been criticised for shifting costs onto customers, with APS accused of being addicted to rate hikes.
The lack of competition means that customers are unable to choose their energy provider, and are instead captive customers to a monopoly. This has resulted in higher prices and lower customer satisfaction. Data from the U.S. Energy Information Administration shows that from 2008 to 2017, the average annual price for power in the 14 states that have enacted retail competition declined by 7%, while prices increased by 18.7% in the 38 states that continue to prevent retail competition.
Texas offers a successful model where citizens can choose from dozens of companies offering various energy plans, competing based on price, customer rating, type of power generated, and special offers. This has resulted in higher customer satisfaction ratings and lower prices.
Arizona has had laws in place to allow for competition in electricity providers, but this has never materialised due to a court decision and a powerful utility lobby. Attempts to revisit deregulation in 2013 were shelved when APS objected. The state Legislature has also passed bills that further shield Arizona’s monopoly utilities from competition, denying ratepayers the ability to choose their energy providers.
The Arizona Corporation Commission regulates Tucson Electric Power and APS and sets the price of electricity to protect customers from potential abuses of monopoly power. However, critics argue that the Commission often rubber-stamps rate increases and fails to push back on the utilities it regulates.
In summary, the impact of APS's monopoly status on consumer choice is significant. Customers are unable to choose their energy provider, resulting in higher prices and lower satisfaction. While there have been efforts to introduce competition, these have been met with resistance from APS and the Legislature, who argue that the monopoly status protects consumers and ensures reliability.
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Frequently asked questions
Arizona Public Service (APS) is still an electric monopoly because the state legislature passed an anti-free market bill that shields Arizona's monopoly utilities from competition, denying ratepayers the ability to choose their energy providers.
APS has been criticised for its frequent rate hikes, which have resulted in increased costs for customers.
From 2008 to 2017, the average annual price for power in the 14 states with competitive markets declined by 7%, while it increased by 18.7% in the 38 states with monopoly utilities.
Competition in the electricity market can drive down costs, improve customer satisfaction, and provide ratepayers with innovative offerings.
There have been calls for legislative changes to introduce competition and give customers a choice in their energy providers. Customers can also pressure the Corporation Commission to reject new rate increases and vote out commissioners who approve hikes.
