42-5063

42-5063. Utilities classification;
definitions

A. The utilities classification is comprised of the business of:

1. Producing and furnishing or furnishing to consumers natural or artificial gas
and water.

2. Providing to retail electric customers ancillary services, electric distribution
services, electric generation services, electric transmission services and other services
related to providing electricity.

B. The utilities classification does not include:

1. Sales of ancillary services, electric distribution services, electric generation
services, electric transmission services and other services related to providing
electricity, gas or water to a person who resells the services.

2. Sales of natural gas or liquefied petroleum gas used to propel a motor vehicle.

3. Sales of alternative fuel, as defined in section 1-215, to a used oil fuel
burner who has received a permit to burn used oil or used oil fuel under section 49-426
or 49-480.

4. Sales of ancillary services, electric distribution services, electric generation
services, electric transmission services and other services that are related to providing
electricity to a retail electric customer who is located outside this state for use
outside this state if the electricity is delivered to a point of sale outside this state.

C. The tax base for the utilities classification is the gross proceeds of sales or
gross income derived from the business, but the following shall be deducted from the tax
base:

1. Revenues received by a municipally owned utility in the form of fees charged to
persons constructing residential, commercial or industrial developments or connecting
residential, commercial or industrial developments to a municipal utility system or
systems if the fees are segregated and used only for capital expansion, system
enlargement or debt service of the utility system or systems.

2. Revenues received by any person or persons owning a utility system in the form
of reimbursement or contribution compensation for property and equipment installed to
provide utility access to, on or across the land of an actual utility consumer if the
property and equipment become the property of the utility. This deduction shall not
exceed the value of such property and equipment.

3. Gross proceeds of sales or gross income derived from sales to:

(a) Qualifying hospitals as defined in section 42-5001.

(b) A qualifying health care organization as defined in section 42-5001 if the
tangible personal property is used by the organization solely to provide health and
medical related educational and charitable services.

4. The portion of gross proceeds of sales or gross income that is derived from
sales to a qualified environmental technology manufacturer, producer or processor as
defined in section 41-1514.02 of a utility product and that is used directly in
environmental technology manufacturing, producing or processing. This paragraph shall
apply for twenty full consecutive calendar or fiscal years from the date the first paper
manufacturing machine is placed in service. In the case of a qualified environmental
technology manufacturer, producer or processor who does not manufacture paper, the time
period shall begin with the date the first manufacturing, processing or production
equipment is placed in service.

D. For the purposes of this section:

1. "Ancillary services" means those services so designated in federal energy
regulatory commission order 888 adopted in 1996 that include the services necessary to
support the transmission of electricity from resources to loads while maintaining
reliable operation of the transmission system according to good utility practice.

2. "Electric distribution service" means distributing electricity to retail
electric customers through the use of electric distribution facilities.

3. "Electric generation service" means providing electricity for sale to retail
electric customers but excluding electric distribution or transmission services.

4. "Electric transmission service" means transmitting electricity to retail
electric customers or to electric distribution facilities so classified by the federal
energy regulatory commission or, to the extent permitted by law, so classified by the
Arizona corporation commission.

5. "Other services" includes metering, meter reading services, billing and
collecting services.

6. "Retail electric customer" means a person who purchases electricity for that
person's own use, including use in that person's trade or business and not for resale,
redistribution or retransmission.