Hourly Update

Arizona utilities under scrutiny for pension plan shortfalls

PHOENIX - State regulators want to know why three major Arizona utilities are facing a combined pension funding shortfall of more than a half-billion dollars. Arizona Public Service Co.'s $472 million funding gap represents the biggest shortfall among the state's largest regulated utilities. The Phoenix-based utility wants to recover $218 million of that as part of a 20 percent rate hike request before state regulators. The parent company of Tucson Electric Power reported a shortfall of $37 million, and Southwest Gas' pension is underfunded by $76 million. The utilities claim the gaps primarily are due to stock market fluctuations and that there's no danger that current or retired employees will be left without retirement checks or health benefits. Still, state regulators are debating whether these shortfalls should trigger closer scrutiny of the pension policies of all of Arizona's largest utilities to ensure that companies have the proper safeguards to protect pensions, health care and other benefits. "It's disturbing that some of the state's largest utilities have underfunded pensions," Arizona Corporation Commissioner Kris Mayes said. There are concerns that more ratepayers will be asked to shoulder the burden of pension shortfalls by paying higher rates for electricity, natural gas or water. Last month, APS sought a 20 percent increase in electricity rates to pay for everything from new power plants and lines to pension costs. About 2 percent of that would be funneled into the company's pension fund, which covers nearly 12,000 current and retired workers. The Corporation Commission has started the exhaustive process of deciding how much money APS is entitled to recover from its customers.