SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): February 4, 2013
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Item 8.01 Other Events
As previously reported, Tucson Electric Power Company (TEP or the Company) has a rate case proceeding pending before the Arizona Corporation Commission (ACC or the Commission).
On February 4, 2013, TEP, ACC Staff, the Residential Utility Consumer Office, Arizonans for Electric Choice and Competition, and other parties to TEPs pending rate case proceeding entered into a settlement agreement (2013 Settlement Agreement). The 2013 Settlement Agreement requires the approval of the ACC before new rates can become effective. If the 2013 Settlement Agreement is approved, the average monthly bill for the average residential customer would increase by less than $3.00.
The terms of the 2013 Settlement Agreement include, but are not limited to:
The 2013 Settlement Agreement also includes cost adjustment mechanisms, an energy efficiency resource plan and modifications to TEPs Purchased Power and Fuel Adjustment clause (PPFAC), which are described below.
Lost Fixed Cost Recovery Mechanism
A Lost Fixed Cost Recovery mechanism (LFCR) would allow TEP to recover certain non-fuel costs that would otherwise go unrecovered due to lost kWh sales attributed to compliance with the ACCs Electric Energy Efficiency Standards and distributed generation requirements under the Renewable Energy Standard. The LFCR rate would be adjusted annually and be subject to a year-over-year cap of 1% of TEPs total retail revenues.
Environmental Compliance Adjustor
An Environmental Compliance Adjustor (ECA) mechanism would allow TEP to recover the costs of complying with environmental standards required by federal or other governmental agencies between rate cases. The ECA would be adjusted annually to recover environmental compliances costs, subject to a cap equal to 0.25% of TEPs total retail revenue requirement.
Energy Efficiency Resource Plan
The Energy Efficiency Resource Plan (EERP) would allow TEP to invest in cost-effective energy efficiency programs approved by the ACC. Investments under the EERP would be considered regulatory assets and amortized over five-years. If certain thresholds are met as established in the EE implementation plans and approved by the Commission, TEP would recover its costs associated with the EERP, including a return on and a return of its investments, through the Companys existing demand-side management surcharge.
Purchased Power and Fuel Adjustor Clause
A new PPFAC rate, which includes a one-time credit of approximately $3 million related to sulfur credits and a $9.7 million deferral of certain costs, will be effective at the same time new base rates are approved by the ACC. TEPs existing PPFAC mechanism will continue with certain modifications, including the recovery of the following costs and/or credits: lime costs; sulfur credits; broker fees; and 100% of the proceeds from the sale of SO2 allowances.
An ACC ALJ will issue a recommended opinion and order following the conclusion of hearings. That recommendation is then subject to approval by the ACC.
The parties to the 2013 Settlement Agreement agreed to ask the Commission (1) to find that the terms and conditions of the 2013 Settlement Agreement are just and reasonable and in the public interest, along with any and all other necessary findings, and (2) to approve the 2013 Settlement Agreement such that it and the rates contained therein may become effective on July 1, 2013.
The 2013 Settlement Agreement can be found on UNS Energys website through a link at http://ir.uns.com/tep.cfm.
TEP cannot predict whether the 2013 Settlement Agreement will be approved or modified by the ACC.
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.