PHOENIX, Ariz. (February 25, 2026) — The Arizona Corporation Commission voted 4–1 on Feb. 19, 2026 to approve UNS Gas, Inc.’s request to implement an Annual Rate Adjustment Mechanism (ARAM)—marking Arizona’s first regulated utility rate case in which the Commission considered and approved an alternative ratemaking method, often referred to as a “formula rate” approach.
Under the ARAM methodology, UNS Gas rates may be adjusted annually using a Commission-approved formula and review process, rather than relying solely on the traditional multi-year cadence for full-rate cases. ACC Chairman Nick Myers said the new structure is intended to reduce “regulatory lag,” promote “rate gradualism” for customers, and create regulatory efficiencies, while noting the Commission will closely monitor implementation “to make sure the ARAM operates as intended and results in just and reasonable rates.”
Commission leadership also framed the ARAM as a mechanism designed to increase transparency and oversight, reduce administrative costs, eliminate several existing adjustor mechanisms, and potentially lower borrowing costs for the utility benefits, they said, could flow through to customers. The process includes public notice requirements, informal and formal challenge periods, ACC Staff review of submitted data, and a Commission vote on any proposed rate adjustment.
Vice Chair Rachel Walden emphasized that the ARAM requires the Commission to review and approve company expenditures annually, including capital investments, rather than focusing primarily on test-year financials in periodic rate cases. She said savings—citing “One Big Beautiful Bill corporate tax cuts” would be passed on to customers through the ARAM structure. Walden also argued that in states using formula ratemaking, electric rates tend to be below the national average, and annual increases have been modest relative to inflation.
As part of the final decision, commissioners adopted several amendments they said strengthened oversight and reduced the utility's revenues. The Commission approved a 9.61% return on equity and lowered the Fair Value Increment (FVI) to 0.00%, which commissioners said would reduce bill impacts, limit utility profits, and could improve the company’s credit profile and cost of debt.
Commissioner Kevin Thompson said the outcome “strikes a fair balance” between protecting customers from dramatic increases and maintaining a financially healthy utility able to provide safe, reliable service. He added that commissioners have repeatedly heard customers prefer gradual rate changes rather than larger increases spaced further apart.
Commissioner Lea Márquez Peterson cast the sole dissenting vote and issued a statement saying she was not persuaded that the record contained enough information to demonstrate customer benefits from the formula rate design or the ARAM. She noted that she voted against adopting the formula-rate policy statement in 2024, citing concerns about transparency and opportunities for stakeholder input, and said her Feb. 19 vote was based on the specifics of the UNS Gas rate case.
Márquez Peterson said she offered an amendment to disallow the ARAM structure, which did not receive majority support. She also expressed concern that the approved approach may not deliver the “gradualism” the company projected and could create upward pressure on bills. In addition, she said she supported an Administrative Law Judge proposal to treat the ARAM as a pilot program—a compromise she viewed as an opportunity for the Commission to evaluate real-world impacts during a limited period—but that pilot approach was not adopted by the majority.
“I remain unconvinced that the ARAM or formula rates are a benefit to ratepayers in this case, nor that they will lower the overall cost to UNS Gas customers in the long run,” Márquez Peterson said.
Case materials are available in the ACC’s eDocket system under Docket No. G-04204A-24-0237.