APS seeks $299-mil rate hike due to rising natural gas costs

Portland, Maine (Platts)--9Jan2006

Responding to rising natural gas prices, Arizona Public Service Co Friday
asked the Arizona Corporation Commission for a $299-mil, or 14%, emergency
rate increase to take effect April 1. The increase would be subject to refund.

     The emergency fuel and purchased power request is in addition to a
pending request for an $80-mil "power supply adjustor" surcharge and an annual
PSA adjustment, slated to be $100-mil, or 5%, to take effect April 1.

     Together, these three rate adjustments total just under 21%, according to
APS, a utility subsidiary of Phoenix-based Pinnacle West Capital Corp. APS
earns no mark-up on fuel and purchased power costs. 

     "APS is presently experiencing a substantial operating cash flow
deficiency that has already led to one down rating of its debt securities to
the bottom rung of the investment grade ladder, thus increasing the company's
financing costs by approximately 10-50 basis points and decreasing the
marketability of its securities," APS said in its emergency rate request
application. 

     Without the rate relief, APS likely will be downgraded to "junk bond"
status, which would cost APS an additional $1-bil in financing costs over 10
years, the utility said.

     For more information, take a trial to Platts LNG Daily at
http://www.LNGdaily.platts.com.

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