The Arizona Supreme Court has ruled that a Corporation Commission’s approved rate-increase method -- known as the system improvement benefit (SIB) -- complies with the commission’s mandate in determining the fair value of a utility’s property when setting rates.

The SIB has been the focus of a long-time lawsuit filed by the Residential Utility Consumer Office, based on the commission’s 2011 approval of a step-increase rate plan for a water company, designed to create gradual rate increases for the consumer.

“The Supreme Court’s decision today restores a valuable tool to the commission’s rate-setting tool box,” Chairman Doug Little said. “The system improvement benefit program allows our water utilities to recover the costs of infrastructure improvements gradually -- as they are actually accomplished. This is important because it minimizes the rate impact on water customers, spreading the costs over time instead of hitting them with a big rate increase every few years. It also means that Arizona now has one of the best regulatory environments for investment in our water utilities, meaning more jobs and more economic investment in Arizona."

The ruling clarifies the commission’s authority and can reduce a utility's need to file lengthy full rate cases more than once every five or so years.