GCEC & GCU Plan of Merger

  • GCEC = Graham County Electric Cooperative
  • GCU = Graham County Utilities

At the 2020 GCU annual meeting held on October 17, 2020 the members voted to sell the gas utility to Southwest Gas Inc. (SWG) The transfer of the gas utility will be complete in 3rd quarter of 2021 and will leave the GCU cooperative with only the water utility.  When the water and gas utilities were acquired for the benefit of the community, those utilities were put into a separate cooperative from the electric utility because of the liability risks associated with natural gas utilities.  Having two separate companies duplicates expenses such as corporate filings, reporting to the Arizona Corporation Commission, and financial audits.  Now that the risks associated with a gas utility are not there, it makes sense to eliminate the duplicate expenses.  The merger will also enhance the financial well-being of the water division.

After reviewing the pros and cons of combining the 2 utility cooperatives, both GCU and GCEC Boards of Directors approved a plan of merger and authorized a vote by the members. The Plan of Merger (PDF) calls for GCEC, the electric cooperative, to be the surviving cooperative in the merger and own the water utility.  Therefore, the combined Bylaws will be based primarily on the GCEC Bylaws.  Members of GCU are generally members of GCEC -- people who have a water hook-up, have an electric meter.  In the proposed merger the GCU members will not lose any financial rights that they have now.  And the merger will continue to provide financial support to the water utility.

To merge the two utilities into one company requires that a 2/3rds majority of the total votes cast be "yes" votes to approve the merger and combine the bylaws.  The voting ballots will be mailed out on/or about April 16, 2021 to all GCEC and GCU members with voting instructions and a deadline to mail in or drop off their voting ballot at the GCEC office. Following the voting deadline of May 26, 2021, the election committee will count and certify the vote totals and report the results to the GCU and GCEC Board of Directors.

In the voting materials to be mailed on/about April 16th you will receive:

  • Voting instructions
  • Deadline information
  • The Plan of Merger

A combined annual meeting is scheduled for Saturday, September 18, 2021. There will be a report of the vote outcome and a presentation of electric and water operations. Other business will be conducted, including a status of the gas utility sale.

Why do we have to combine the utilities together?

The members will decide if the merger is approved. There are several reasons it makes sense to combine into one utility. With the pending gas system sale to SWG, GCU will have only water services. Having a separate utilities costs money for audits, reporting, filings, separate board, and is generally not efficient with a smaller utility.

The GCU members will lose control of the water system. What will stop the water system from being sold, similar to the gas system?

6 of the current board members are both GCEC and GCU members. All of the board members feel water is a precious resource for our valley and is an essential service. Board direction is to upgrade, grow, maintain the water system and to make the system profitable. While the make up of the board will change over the years the importance of water and electricity will not. You need water services to have a need for electricity. You need electricity to pump water. The 2 services are connected in many ways.

Can the water system function financially as a separate entity?

As an example, GCU does not have any employees, vehicles or large equipment. The employees, vehicles, and equipment are associated with GCEC. GCU pays for their share of the overheads. Also, GCU does not meet the loan covenants required by our lending institutions to borrow capital needed to run the company. GCU borrows money through GCEC which guarantees the loan obligations.

What happens to the employees if we combine utilities?

All the Coop’s employees are GCEC employees. The merger of the utilities will have no affect or change the number of employees working at the Coop. If there are changes in headcount it will be for business reason like reorganizing as business needs change.

Why now?

There are 2 separate boards that manage GCEC and GCU. As mentioned in a previous answer currently 6 board members serve on both boards. There are currently 2 vacancies on the GCU board. There would be less confusion if we combine the boards now rather than fill 2 positions and have new board members serve short terms.

What are the benefits to members?

There is an opportunity to reduce costs without affecting customer service, reliability, or safety. Lower costs help the Coop manage rates meaning smaller and less frequent rate increases.

Will the logos change?

Yes. If the GCEC and GCU merger is approved by the members, then a single logo will be developed.

Town of Thatcher Transfer

On June 28th and 29th of 2017, Graham County Electric Cooperative, Inc. will transfer Thatcher residents, electric services who are currently served by GCEC, to the Town of Thatcher.  On February 3, 2016, GCEC and the Town of Thatcher signed a “Distribution Wheeling and O&M Agreement”. Municipalities such as the Town of Thatcher have the right to acquire electric utility service territory within the town limits.

  • TOT = Town of Thatcher
  • GCEC = Graham County Electric Cooperative
  • GCU = Graham County Utilities
Why is my service being transferred to the Town of Thatcher?
  • Municipalities such as the Town of Thatcher (TOT) have the right to acquire electric utility service territory within the Town limits – GCEC and TOT have service territorial agreements dating back to 1973
  • GCEC and TOT signed a new “Distribution Wheeling and O&M Agreement” on February 3, 2016, that transfers all Thatcher residents who are currently served by GCEC to the Town
When will the transfer occur?

Subject to Arizona Corporation Commission (ACC) approval, it is anticipated the transfer will occur on or about July 1, 2017 (The current target date is June 27th).

What happens to my capital credits with GCEC?

All capital credits that have been allocated to Thatcher residents will continue to be retained by the customer. Capital credits will be retired according to the GCEC capital credit retirement policy.

If GCEC is going to be the wire provider and restore power during an outage then why can’t I contact GCEC directly if I’m a Thatcher resident?
  • GCEC and TOT have agreed that residents of TOT should call the Town for all questions related to their electric utility service. After the transfer, Thatcher residents will be customers of TOT and not GCEC for electric service. The Town will be able to determine if the outage is because of non-payment or some other issue.
  • If it’s determined that the outage is due to power or equipment failure then the Town will be responsible for contacting GCEC to have service repaired as soon as possible. Following this process will avoid unnecessary call outs for GCEC crews which will help decrease the amount of time it takes to restore power during an outage. The customer will also avoid additional charges or fees for unnecessary service calls.
If I want to upgrade or make any changes to my electric service then who do I contact?

Thatcher residents will contact TOT regarding any service upgrade or changes. TOT will then notify GCEC of the required changes and GCEC personnel will complete construction as part of the regular scheduled work orders. If GCEC personnel need to communicate with the customer about the service upgrade or changes then TOT will share the customer contact information with GCEC.

What is the difference in rates between GCEC and TOT?

TOT electric rates and monthly minimum charges are generally lower than GCEC rates. The following chart compares the residential rates for both entities:

Type of Charge GCEC Thatcher
Residential monthly minimum charge $9 $7
Residential commodity charge per kilowatt-hour $0.11038 $0.091

Please contact TOT at (928) 428-2290 if you have additional questions about the rates and fees for TOT.


  • AEPCO = Arizona Electric Power Cooperative
  • ECAR = Environmental Compliance Adjustment Rider
What is the justification for the ECAR? Do the AEPCO financial forecast results indicate the need for an AEPCO ECAR?

The ECAR provides AEPCO a mechanism whereby the costs of environment compliance not reflected in its current rate tariffs may be recovered through the ECAR Tariff without the time and expense of filing a new rate case. Further the ECAR may provide a rates gradualism mechanism to smooth out sudden rate increases as a result of the costs of environmental compliance. During AEPCO’s financial forecast presentation to the Board of Directors in January, 2014, the possibility of an ECAR Surcharge based upon MATS mercury control costs and SNCR chemical costs was discussed. The ranges mentioned were $2.6 million per year to $5.1 million per year for the 2016-2020 timeframe, prior to any possible adjustments for O&M cost savings.

Can AEPCO provide a draft of the ECS Plan or describe what will be included in the ECS Plan? When will AEPCO expect to implement a tariff charge greater than zero?

AEPCO does not yet have a draft of an ECS Plan prepared. As mentioned in the Plan of Administration, the ECS Plan would be a formal plan to meet an environmental compliance requirement and would include, as a minimum, a scope of work, anticipated timelines and cost estimates. AEPCO would expect that a tariff charge greater than zero could be implemented in the 2016 to 2020 time frame to address compliance with MATS and/or Regional Haze environmental regulations.

Will the Member’s approve and/or have opportunity to review the ECS before AEPCO files it with the ACC? If so can we include language in the Plan of Administration that reflects this? When does AEPCO plan to file the ECS with the ACC?

Yes. The AEPCO Board Approval and Member Consent Section, page 4 of the plan of administration, states that, prior to filing an initial ECS plan and revised ECAR Tariff or seeking a subsequent modification of either the ECS or ECAR, AEPCO will seek authorization from the Board and unanimous consent of its Members. AEPCO would review the ECS Plan as it is developed with the Members. AEPCO expects that an ECS Plan could be developed and filed with the Commission no sooner than approximately 6 months after the Strategic Resource Planning Group finalizes the Apache Station Study.

How did AEPCO resolve all of the ACC Staff issues raised in Finding of Fact No. 78 of the Rate Decision?

For reference below:

  1. Minimum or maximum dollar amounts not specified
  2. Needs specificity regarding environmental compliance obligations
  3. Does not address whether the surcharge will base revenue requirements upon short or long-term financing, or simply upon ongoing operating cash requirements
  4. Does not include a formalized process and list of regulatory accounts to be used for recording funds received and classification of qualified environmental assets
  5. Does not include a provision requiring that the ECAR remain subject to Commission audit on an annual or bi-annual basis

AEPCO worked with the Staff to address the issues listed in Finding of Fact No. 78. AEPCO was able to reach agreement with the Staff on all aspects of the ECAR except for the issue of recovering additional chemical costs incurred due to environmental regulation(s). AEPCO has filed the ECAR Plan of Administration and Tariff incorporating the recovery of additional chemical costs incurred due to environmental regulation(s) and asked the Commission to approve the filing with that inclusion.

How does AEPCO plan to use the ECAR to recover MATS Chemical Costs? Is it just for cost recovery until the ST2 conversion, what is the total dollars ($7.5 million)? What period of time is the recovery over, 5 years, 10 years? Can AEPCO provide an example?

AEPCO would address these issues in the development of the ECS Plan. As mentioned in the response to question number 1, during AEPCO’s financial forecast presentation to the Board of Directors in January, 2014, the possibility of an ECAR Surcharge based upon MATS mercury control costs and SNCR chemical costs was discussed. These costs range from $2.6 million per year in 2016, $5.1 million per year in 2017, and $4.6 million per year in the 2018 to 2020 timeframe.

Does the AEPCO plan use the ECAR for recovery of the EPA capital compliance costs of approximately $30 million? Will this include only carrying costs or capital or a combination? Over what time period will AEPCO recover the costs and over what time period will AEPCO finance the costs? If AEPCO plans to charge carrying costs how would this be accomplished under the current Plan of Administration?

The possible plan that AEPCO discussed during the financial forecast presentation to the Board of Directors involved the recovery of MATS mercury control chemical costs. AEPCO has not yet developed an ECS Plan which may include the recovery of environmental capital carrying costs.

How will the Class A Members absorb the AEPCO ECAR costs? Can the Class A Members pass this through in their Wholesale Power Cost Adjustors? Was this discussed with the ACC? Is there a cap on the rate impact allowable to the Class A Member retail customers?

AEPCO discussed with the Staff the fact that the ECAR Tariff charges would be included as a part of the Members’ Wholesale Power Cost Adjustors similar the charges under the current rate tariffs. The Staff indicated that the Wholesale Power Cost Adjustors would be the mechanism for the Members to recover those charges. The Staff did not request a cap on the rate impact allowable to the Class A Members as part of the ECAR Plan of Administration and Tariff filing. If Staff has concerns in that regard, those concerns would be properly addressed during the ECS Plan filing.

Other items that AEPCO believes may be helpful to the Class A Members?

For additional detail, you may refer to the reference materials that AEPCO has furnished, such as the ECAR Plan of Administration and Tariff Application which includes a copy of the ECAR Plan of Administration and Tariff as filed. AEPCO has also furnished a redline comparison of the ECAR Plan of Administration and Tariff to the drafts that were included in AEPCO’s last rate case as Exhibits GEP-7 and GEP-8.

AEPCO ECAR Filing Public Notice (PDF)