Last week, AIC filed testimony of its President and CEO, Gary Yaquinto, in support of the agreement reached among the parties to the joint application of reorganization filed by UNS Energy and the Canadian utility holding company, Fortis. AIC is one of ten intervening parties signing the settlement agreement.

AIC’s testimony (LINK) cites four positive elements of the agreement, which will redound to the benefit investors in UNS Energy and the Regulated Arizona Utilities:

  1. Fortis commits to an infusion of $220 million of equity capital through UNS Energy into the Regulated Utility subsidiaries — $20 million more than originally proposed by Fortis. The capital infusion will further improve the financial and credit metrics of UNS Energy and its Regulated Utilities;
  2. Two of three major credit agencies have issued positive outlooks following announcement of the transaction and the settlement agreement will further strengthen this positive assessment and improve access to capital;
  3. The settlement agreement further reinforces Forts’ commitment to continued local management control and security of operations of the UNS Regulated Utilities; and
  4. The agreement provides appropriate ring-fencing mechanisms to protect the Regulated Utilities and their customers from financial problems that might arise elsewhere in Fortis holdings.

Additionally, the settlement agreement provides balance and benefits for consumers, including bill credits of $30 million over 5 years and continuation of low income assistance programs.

The proposed agreement is scheduled for a public hearing in Tucson on June 16.

The settlement agreement reached in this case is yet another example of how contested regulatory cases can be resolved amicably among parties with varied interests thus reaching favorable and balanced outcomes that might not be possible under a fully litigated scenario. Settlement negotiations offer “give-and-take” opportunities for compromise among the parties unlike litigated proceedings where parties stick with an initial position from which Commissioners must ultimately choose. The Commissioners’ willingness to allow parties the opportunity to engage in settlement discussions and bring the results forward for their consideration is a significant shift from the ACC’s standard processing procedures of a decade ago, when most, if not all cases, were litigated from time of application-through-decision. With an opportunity for fair and open participation by all intervenors, settlements can provide an effective and efficient means for reaching resolution and limit or avoid costly appeals.

Encouraging parties to engage in settlement discussions was one of the recommendations AIC made to the Commission in its 2008 white paper, “Streamlining Administrative and Ratemaking Processes of the Arizona Corporation Commission (LINK)”.