APS Online Rate Tool Gives Customers Bad Advice

By Steve Goldstein
Published: Friday, November 22, 2019 - 3:05pm

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STEVE GOLDSTEIN: An Arizona Public Service online rate tool handed out bad advice to thousands of customers who wanted to find the best plans for themselves, plans presumably that wouldn't cost more than what they were already paying. But that is what happened in some cases. Customers were encouraged to switch to plans that would actually cost hundreds of dollars more each year. The erroneous advice was discovered by Ryan Randazzo of the Arizona Republic, and now the company says it will repay about 12,000 misled customers. And Ryan is with me now. Ryan, how did all this come about?

RYAN RANDAZZO: Well, APS was directed to help customers better understand their rate plans because it came to light that less than half of their customers are on the best plan for the way they use electricity. So they had this tool online, and they were directing customers to it, saying, "Go online. Look at this tool. It will tell you if you are or are not on the cheapest plan for yourself.".

GOLDSTEIN: And at what stage did a realize there was a problem?

RANDAZZO: Well, APS told me last week they did not realize there was a problem until I brought it to them. And I showed them one customer in particular who had gone onto this tool. It told him to switch rate plans, but he was certain he was on the best rate plan for his usage. And it was telling him he'd save quite a bit of money by switching. But by his own calculations, it would actually cost him hundreds of dollars — in one case, $500 more a year — if he had switched plans. And he just believed that it was incorrect. And I brought that to APS, and to their credit, they did pull the tool offline once I brought that to them. And they're saying that the problem with that tool has persisted since February now.

aps building
Justin Stabley/KJZZ
APS Building in downtown Phoenix.

GOLDSTEIN: If someone were to go on the site and try to figure out and use the online tool, was it pretty easy to use if it was doing the right thing? Was it one of those — did you have to be somewhat savvy to understand? Or would you just put in how you use energy, how use electricity and it was supposed to spit out the right thing?

RANDAZZO: That's one issue. You'd at least have to know how to use the internet, right? I mean, they have more than a million customers. You can't assume that everyone can log on and set up an account and use the internet. So there's some fairness issue that tech savvy customers were going to be better informed about their rates than others. But once you went on there, the advice was very clear because it was purporting to use your actual data from the last year and say, "This is when you use electricity." And as you know, the company charges different rates during different seasons and different times of day. And so it would supposedly take your actual usage and say, "Hey, if you were on this plan, you wouldn't have paid as much." But we now know that that advice was 180 degrees wrong for some people, and it was actually directing them to plans that they would pay more money if they switched.

GOLDSTEIN: Does the number vary dramatically from customer to customer? Is it some people were maybe $15, someone might be $500?

RANDAZZO: The amount of money per customer is going to vary a lot because of the way APS charges customers. So not only do they charge you a different amount on peak from 3 to 8 p.m., but they also have these demand rates. And these have been the point of contention since 2016 when they proposed this rate increase. That these demand rates take the single hour — one hour, 60 minute period during an entire month — and that hour of on peak usage sets a demand rate for you. And that demand rate can be hundreds of dollars depending how much electricity you use in a single hour. So some customers who are unknowingly on these demand rates could, in fact, pay a substantial amount over the course of a year because they're on the wrong plan.

GOLDSTEIN: Has APS has indicated to you they're going to look more closely to see if there are more than 12,000 customers?

RANDAZZO: Twelve thousand is the number of people they say have switched plans since February, when they think the tool went awry, and are still on the worst plan or not on their best plan. So they know how many customers are on their optimal plan for the way they use electricity and how many are not. And they're saying that's the number that have switched and not made a good decision since February. So that's where that 12,000 number comes from. They don't actually know how many people looked at that online tool and followed its advice. And again, you can have a customer look at the tool on Tuesday and then switch rates on Saturday, and it would be hard to connect the two. So that's just the number — 12,000 is the number of people who have basically made bad rate decisions.

GOLDSTEIN:And APS plans to refund this money?

RANDAZZO: They say that they are going to reach out to these customers. They didn't detail how, although I imagine the state regulators are going to instruct them on how to do this. And they're going to encourage those 12,000 folks who are still not on their best rate plan to get in touch with APS. I'm sure that's going to have to be a phone call. They're going to have to have someone from the utility work through their bill the way the tool was supposed to act for them. And if they are paying more today, they're going to credit them the amount that they've overpaid since they switched their plans. So not all these folks switched in February. Not all of them have been on the wrong plan for seven months. Some might only have been on a bad plan for two or three months, but whatever, they've overpaid by being on the non-optimal plan, APS is saying they're going to credit those customers.

GOLDSTEIN: And you mentioned regulators, what is next for the Corporation Commission to decide to get involved more in this?

RANDAZZO: The state regulators already had anticipated bringing the new CEO of the utility before them in January, and they were all set to grill him about participating in elections. So it was not going to be a very friendly hearing as it was planned. Because this has come to light now, commissioners would like APS to come in much sooner — next month — and talk about this issue. So it's very likely, I think, that the company is going to be there in the next couple of weeks and have to explain how they're going to credit customers back.

GOLDSTEIN: From a PR standpoint, APS has been taking a lot of hits lately. How does this line up with what they've been facing recently?

RANDAZZO: This is pretty bad. This really strikes people as maybe the worst kind of corporate behavior because they were providing this because they already were in trouble, OK? The regulators already decided that APS wasn't doing a very good job explaining these complicated rates. So they were instructed to do better. When they tried to do better, they actually gave people bad information. And this isn't the only time they've given them bad information. We had a story where a customer called APS, and the customer service representative on the phone could not explain these demand rates that APS charges. This is even worse. We're not talking one rogue customer service person who didn't understand their job. We're talking the APS website that people were funneled to to change rate plans and encourage. And also letters that were sent directly to customers encouraging them to change rate plans that gave bad advice.

GOLDSTEIN: OK. Ryan Randazzo, reporter for the Arizona Republic and azcentral. Thanks.

RANDAZZO: Thank you.

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