UNS Gas, Inc. is the First Utility Approved by ACC to Implement anAnnual Rate Adjustment Mechanism Methodology in Rate Case

Phoenix, Ariz. - At the Arizona Corporation Commission's (ACC) February 19, 2026, special open meeting, the Commission voted 4-1 (with Commissioner Lea Márquez Peterson dissenting) to approve UNS Gas, Inc.'s (UNSG) application to implement an Annual Rate Adjustment Mechanism (ARAM). This marks the first regulated utility rate case in which the Commission considered and approved an alternative ratemaking method. The ARAM methodology allows the utility rates to be adjusted annually based upon a Commission-approved formula and review process. <_o3a_p><_o3a_p>

"The approved ARAM will help address regulatory lag, promote rate gradualism for ratepayers, and introduce meaningful regulatory efficiencies," said Chairman Nick Myers. "Similar methods are used at the federal level and in various states across the country. However, as this is our first attempt in Arizona, the Commission will be especially watchful to make sure the ARAM operates as intended and results in just and reasonable rates." <_o3a_p><_o3a_p>

The ARAM will help improve transparency and oversight, reduce administrative costs, eliminate several of UNSG's existing adjustor mechanisms, allow UNSG to access capital at lower rates to the benefit of customers, may result in rate decreases, and promotes rate gradualism. The ARAM methodology includes extensive public notice requirements, informal and formal challenge periods, ACC Staff's comprehensive review of all data provided, and the Commission's consideration and vote on any rate adjustment. <_o3a_p><_o3a_p>

"The ARAM will require the Commission to review and approve all expenditures, including capital investment, each year instead of only reviewing test year financials," said Vice Chair Rachel Walden. "Savings, such as those resulting from the One Big Beautiful Bill corporate tax cuts will be passed onto customers via the ARAM. In every state that has implemented formula ratemaking, their electricity rates are below national average, and annual increases, if any, have been well below the rate of inflation, or 1% - 1 ½% per year. To me, that is a step in the right direction for affordability."<_o3a_p><_o3a_p>

Several amendments submitted by Commissioners further strengthened oversight and reduced revenues for the utility. The Commission approved a 9.61% return on equity and decreased the Fair Value Increment (FVI) to 0.00% - this means reduced profits for the utility, a reduction in bill impact for customers, and a better credit rating and lower cost-of-debt for the utility, which will also benefit customers.<_o3a_p><_o3a_p>

"Today's outcome strikes a fair balance between protecting ratepayers from dramatic rate increases and ensuring a healthy and viable utility that can continue to safely provide critical services to customers," said Commissioner Kevin Thompson. "We've consistently heard from ratepayers that they'd prefer rate increases be gradually spread out over time and not experience dramatic increases more frequently. The Commission adopted several amendments that enhance the recommended order and further protect ratepayers and promote transparency."<_o3a_p><_o3a_p>

All documents related to this case can be found in the ACC's eDocket system at https://edocket.azcc.gov/ , Docket No. G-04204A-24-0237.<_o3a_p>