Frequently asked questions about pricing

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Increase details

Why did SRP increase prices?

SRP needed to increase prices for these reasons:

  1. Maintain reliable electric service. SRP continues to modernize the grid (our system of power lines and equipment) to safely and reliably deliver energy. This work includes replacing infrastructure, such as older power poles and underground lines, and adding new technology to incorporate more renewable energy sources into the grid.
  2. Power a growing economy. Arizona's economy is starting to improve. SRP provides reliable energy that supports growth and new jobs. In fact, during July 2014, customers set two all-time records for energy use. To meet increased power demand resulting from growth, we must build new infrastructure.
  3. Environmental initiatives. SRP has invested approximately $73 million during the past two years to add new environmental controls at key Arizona power plants to meet federal regulations. These upgrades are important, but they also add significant expense to existing operations without creating additional power resources.
How much of this increase is going to company stockholders?

SRP does not have stockholders or pay dividends. We are a community-based, nonprofit utility. Revenues are reinvested back into our electric grid for the benefit of all customers.

What is the amount of the approved increase?

The SRP Board of Directors reduced a proposed 3.9% increase to 3.3% for the first full year it is in effect. The full increase will take effect beginning in April 2016.

As a result of the price changes, the average monthly bill for a typical residential customer will increase by $3.86 for the 12 months beginning with the April 2015 billing cycle. Beginning with the April 2016 billing cycle, the average monthly bill increase for a typical residential customer will increase 75 cents more for a total increase of $4.61. Actual increases vary by price plan and usage.

Is the approved increase the same for all customers?

The increase varies by customer class, price plan, and usage. SRP allocates increases to customer classes and price plans relative to how well SRP recovers its costs. In other words, we attempt to match the costs to provide the service to the prices customers pay. Customer classes and price plans that have higher cost recovery will receive lower than average increases, while customer classes and price plans that have lower cost recovery will receive somewhat higher than average increases.

Price plan changes

What residential changes are included in the approved increase?

Here are some of the changes:

  • Increase the monthly service charge to $20 per month from $17 per month for all price plans.
  • Increase the Economy Price Plan discount by $3 in the winter to provide a discount of $20 per month in the winter, to accompany the $21 discount already provided in the summer. Also further expand participation in the program by automatically enrolling limited income customers who receive LIHEAP payments, so the customers no longer have to complete dual paperwork.
  • Continue testing two EZ-3 plan options: one with on-peak hours from 4‒7 p.m. (E-22) the other with on-peak hours from 2‒5 p.m. (E-25).
  • Introduce the Customer Generation Price Plan (E-27) for residential customers who, after Dec. 8, 2014, add solar or other technologies to generate some of their energy requirements. The new plan includes increased charges that better recover fixed costs related to the customer's facilities and their use of the grid, but also reduces the price customers pay per kilowatt-hour for energy.
  • Introduce an experimental electric vehicle price plan with lower overnight prices (E-29) to encourage nightime charging when energy is available at a lower cost.
  • Freeze the Medical Life Support Equipment Discount from new participation. The program will be broadened to allow anyone in the household that has medical life saving equipment to participate in the program. Customers who are currently enrolled in the program will continue to receive the discount, but new customers will not receive the discount.
What is the monthly service charge and why is SRP raising it?

The monthly service charge helps pay for recurring costs related to providing you with electric service. These costs remain fixed, no matter how much energy you use each month, and include billing and collections, metering, customer service and electrical equipment, power lines and service drops.

How much can TOU and EZ-3 customers potentially save after the April 2015?

Customers on TOU would save an average of 5.2% annually compared to the Basic Price Plan. For EZ-3 customers, annual savings would average 3.5%. Savings could be more or less than these averages, depending on how much energy customers can shift to off-peak hours.

Pricing history

Didn't SRP just raise prices?

The last price change occurred in November 2012. The recently approved increase took effect beginning in April 2015. Our prices had not increased in nearly two and a half years. Some customers may think prices increase more frequently because energy prices are seasonal and change throughout every year. However, SRP has kept prices well below the rate of inflation for the past 30 years. In fact, SRP temporarily decreased prices during 2013.

I read SRP raises prices by 5%–10% each year. Is that true?

No, that is absolutely false. Prior to the April 2015 increase, SRP prices had not changed since November 2012. If SRP prices are compared to the prices of other goods and services as measured by the Consumer Price Index (CPI) since Fiscal Year 1991, SRP's prices have provided an excellent value for the customer dollar. This graph shows that with the approved price adjustment, the inflation-adjusted price for SRP electricity, although higher than in the recent past, is competitive with overall prices charged over 15 years ago. In fact, the prices are lower than in the early 1990s.

How do SRP prices compare to those of other Arizona and other southwestern utilities?

In terms of overall price levels, SRP continues to offer competitive prices. The graph below demonstrates how SRP compares with other utilities in Arizona and several other states in the Southwest, both before and after SRP's recent price increase¹.

Overall average retail prices-cents per kWh

Source: Department of Energy EIA-826 Reports for 12 months ending July 31, 2014.
* The Arizona figure does not include SRP prices

¹ Please note that SRP’s proposed overall price reflects the average price level of pricing proposals effective with the April 2015 billing cycle. Prices for other utilities and states are based on historical bills through July 2014 and may not reflect the impact of recent price increases.

Why does SRP allocate funds collected from its electric business to support its water operations?

SRP provides more than electricity. It was formed more than 100 years ago in partnership with the United States to build Roosevelt Dam and the system of canals in the Valley and provide a stable water supply to the Valley. Today SRP operates the entire system of dams on the Salt and Verde Rivers and manages groundwater supplies, providing water for municipal, irrigation and agricultural uses.

As the oldest multipurpose federal reclamation project in the United States, SRP continues to perform its long-standing reclamation obligation that electric power operations can and should be used to keep water costs low and provide a stable and secure water supply. In our desert environment, a reliable and low-cost supply of water is critical to the Valley's economy and overall well-being. As such, a portion of SRP electric revenues that are available after the payment of operating expenses and debt service is used to provide partial support for SRP's water and irrigation operations.

Now in its second century of operation, SRP will continue to be instrumental in the growth of the Valley by managing water sources and providing inexpensive and reliable electricity.

Controlling SRP costs

What's SRP doing to keep its costs down?

SRP management has focused on controlling operations and maintenance costs. SRP was able to minimize the approved price increase with more than $45 million in costs cuts by trimming expenses.

Some examples of cost savings include:

  • Renegotiated contracts for material acquisition, telecom services, and property insurance resulted in a cost savings of over $17 million spread between O&M and capital projects.
  • Smart meter deployment allowed for the elimination of physical meter reading and reduced field service visits resulting in savings of over $16 million per year.
  • Sale of retired assets and recycled materials resulted in $6 million in proceeds to SRP.
  • Increased self-service options on SRP's website resulting in reduced call volume and associated staff resulting in an estimated savings of $4 million.
  • Additional PayCenters and alternative payment channels allowed for business office closures. The closures resulted in estimated savings of approximately $3 million annually.
Has SRP taken any other action to delay or limit an increase request?

Yes. During the last price process, SRP's Board of Directors created a Rate Stabilization Fund to help limit the need for future price increases. In August 2013, the SRP Board voted to release $23.7 million from the fund in April 2014 to delay the need for a fuel and purchased power factor increase (a component of customer bills) for at least a year.

Governance

Does the Arizona Corporation Commission have to approve SRP's proposed price increase?

No, as a political subdivision of the State of Arizona, SRP is a municipal utility and therefore its prices are not regulated by the Arizona Corporation Commission (ACC).

Who sets SRP's prices?

SRP is a political subdivision of the State of Arizona. SRP's publicly elected Board of Directors has the authority to establish electric prices. The Board reviews and decides upon any proposed changes to SRP's price plans, after providing notice to customers and other interested parties and affording them the opportunity to provide comments to the Board. A graphic that explains SRP's governance structure is available.

What approach does SRP use to set prices?

SRP's Board formally adopted the following series of Pricing Principles in January 2000:

  • Cost Relation: prices need to reflect cost of service
  • Sufficiency: prices need to maintain SRP's financial health
  • Gradualism: changes should be evolutionary, not revolutionary (avoid large price adjustments)
  • Equity: have customers pay their share of the costs we incur on their behalf
  • Choice: promote pricing options that help customers to manage their energy costs

Infrastructure

How much will SRP spend on environmental upgrades to comply with existing Environmental Protection Agency (EPA) requirements?

Current EPA environmental requirements require significant emissions expenditures for SRP's coal-fired power plants. Capital expenditures for emission reductions are budgeted at $83 million for Fiscal Year 2016, a portion of the $264 million planned emission expenditures in the four-year period beginning this year (Fiscal Year 2015) through Fiscal Year 2018. While some capital expenditures lead to increased sales revenues, expenditures for emissions controls do not result in additional sales and frequently result in a slight reduction in plant output. Therefore, SRP is unable to recoup these investments via additional sales and revenues.

How much is SRP spending on maintenance costs?

As SRP's transmission and distribution (T&D) system ages, two key areas of focus are the wood pole replacement project and the underground cable replacement project. In Fiscal Year 2015 and Fiscal Year 2016, expenditures for these two projects are budgeted at $123 million. Additional funds, in excess of $110 million, are budgeted for transmission and distribution maintenance, improvements, and replacements. SRP's generating assets also require maintenance and improvements with expenditures in excess of $185 million and $200 million planned in Fiscal Year 2015 and Fiscal Year 2016 respectively.

Sustainable resources

Why is SRP pursuing energy efficiency, solar, wind, geothermal and other renewable projects?

SRP’s Board set a goal to meet 20% of our retail sales with sustainable resources by 2020. This includes energy efficiency measures. As our country's energy mix continues to evolve and technology in this area continues to improve, it’s the right thing to do for the future.

Does SRP expect to meet the sustainability goal?

Yes, we are on track to meet the goal of 20% by 2020 and have exceeded our annual goal every year since 2007.

What kinds of renewable projects is SRP supporting?

SRP has a mix of renewables such as wind, solar, geothermal and biomass energy, hydropower, conservation and energy-efficiency measures. We expect to spend $216 million this year and $228 million next year for sustainable sources and programs.

Energy efficiency

How is SRP helping customers to control their energy bills?

In addition to optional pricing plans, which help customers manage their electricity bill, SRP offers a combination of energy-saving advice and rebates at savewithsrp.com for residential customers and savewithsrpbiz.com for business customers.

What energy-efficiency programs does SRP offer?

SRP offers rebates on the purchase of energy-efficient appliances and equipment, including lighting, cooling systems, pool pumps, insulation, shade screens and motors. Saving advice and rebate information are available at savewithsrp.com and savewithsrpbiz.com.

Sponsorships and advertising

Why does SRP sponsor local events?

Sponsorships continue our more than 100-year tradition of supporting communities we serve.

As a community-based nonprofit utility, SRP sponsors a variety local events for three reasons:

  1. Educate customers.
    We reach many customers in one place with information that will help them save energy, water and money, and learn about water and electric safety. SRP representatives talk face-to-face with customers to help them better understand their bill, money-saving options and provide other solutions based on the individuals' needs.
  2. Support nonprofit organizations.
    Help raise money that is donated to nonprofit organizations, which provide essential services to assist children and families; support education; help people in need and improve the quality of life in our communities.
  3. Sustain a strong economy.
    We support programs and events that contribute to the economic well-being of our communities. Many events draw out-of-state attendees, which brings additional dollars to our cities.

All sponsorships are analyzed to help ensure they cost-effectively meet specific business objectives such as:

  • Reaching target audiences (e.g., residential and/or commercial customers, stakeholders).
  • Strengthening business and community relationships.
  • Relevant opportunities to educate customers about energy efficiency, water conservation and stewardship, sustainability initiatives, power and water safety, and community involvement.
  • Providing value to customers and communities.
Why does SRP sponsor the Waste Management Phoenix Open?

As a major water, power and telecom provider in the Greater Phoenix area, SRP plays a vital role in economic development – and the Waste Management Phoenix Open has a significant economic impact on our region. A study by ASU's W.P. Carey School of Business showed that the 2012 tournament injected more than $220 million into our economy. Additionally, SRP's financial support of this event helps nonprofit organizations. In 2014 alone, Thunderbirds Charities donated more than $7 million to over 100 local charities. Since its inception in 1937, the Thunderbirds have donated about $93 million through proceeds raised from this tournament. The event also gives us the opportunity to have SRP staff on-site to connect with customers on ways to save energy, water and money, and share information about water and electric safety.

Why did SRP support the Super Bowl?

SRP's sponsorship of cash and in-kind services was with the nonprofit Arizona Super Bowl Host Committee (AZSBHC) – not the National Football League (NFL). The AZSBHC relies on financial support from companies throughout the state to bring the Super Bowl here. As a major water, power and telecom provider in the Greater Phoenix area, SRP plays a vital role in economic development – and the Super Bowl has a significant economic impact on our region. According to a study by ASU's W.P. Carey School of Business, the 2008 Super Bowl attracted more than 90,000 visitors from around the world and generated more than $500 million in economic benefit for Arizona. The 2015 game is projected to generate even greater economic benefits for our state.

SRP's sponsorship also helped raise money that was donated to nonprofit organizations that provide essential services in our communities. For Super Bowl XLIX, the AZSBHC is partnering with the NFL Foundation to distribute more than $2 million in legacy grants to Arizona nonprofits. SRP and the AZSBHC are partnering with Northern Arizona University on research to improve forest health, which is essential for protecting our watershed and providing a clean water supply for the Valley.

As a Host Committee partner, SRP had access to a variety of community events and activities designed to engage Valley residents, visitors and business leaders. These venues help us reach many customers with information that will help them save energy, water and money – and learn more about water and electric safety.

SRP received no tickets to Super Bowl XLIX as part of our sponsorship.

Why does SRP advertise?

As a community-based, nonprofit utility, our communications, including paid media, are designed to educate and inform customers about a variety of topics including: ways to save energy, discounts and rebates, billing and payment programs, electric and water safety, water conservation, investments to improve reliability, and customer service enhancements.



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