Pine Water Company has asked the Arizona Corporation Commission for an interim rate increase to cover the extra costs incurred trucking water to customers during the summer months.
If approved by the ACC, Pine Water Company's 1,900 customers will pay an extra 95 cents per 1,000 gallons, probably beginning in June. The interim rate increase will be in force until the company can apply for and is granted a permanent rate increase.
In testimony presented to Administrative Law Judge Dwight Nodes at a procedural conference Monday, Pine Water Company President Robert Hardcastle said he is also concerned about winter water shortages.
"The historic shortage of groundwater supplies in the Pine area coupled with current and continuing low levels of precipitation received in the area during the winter months, make it highly probable that the company's water supply will not be sufficient to meet customer demand during the peak periods of May through September 2003," Hardcastle said. "Indeed, the drought conditions have become so severe that the company's water supply has not been sufficient to meet customer demands during the winter months of 2002 and 2003 for the first time since Brooke Utilities (the parent company of Pine Water Company) acquired the system."
Hardcastle said Pine Water Company has taken extensive steps to alleviate shortages since the system was acquired in August 1996. They include:
- Drilling five new wells in Pine and six new wells in Strawberry.
- Drilling two existing wells to greater depths where increased water supplies were available.
- Repairing and maintaining the existing system to recapture water from the leaking infrastructure the company inherited.
- Adding more than 170,000 gallons of additional water storage capacity in Strawberry and more than 100,000 gallons in Pine.
- Constructing a 10,800-foot pipeline known as Project Magnolia connecting the Pine and Strawberry systems, allowing the potential delivery of up to 700,000 gallons per day between the two systems.
"Brooke Utilities has invested more money, corrected more deficiencies, replaced more water meters, fixed more water system leaks, and improved more water system infrastructure than all previous owners," Hardcastle said.
He blamed the failure of these measures to solve the water shortage on "Gila County's obsession with increased levels of residential and commercial development in the area" and on the geology of the area.
"There is no aquifer below Pine," he said. "Rather, ... water travels ... in the Mogollon Rim through fractured rock. These fractures create fissures in which small and limited amounts of water can collect. If a well is drilled in a fissure, it is likely to be a limited production well."
In its request for the interim rate increase, Pine Water Company said the amount of the increase will be adjusted periodically to reflect the actual cost of supplementing the groundwater supply with outside sources.
Hardcastle said he has found just one company in the area willing to sell his company water.
"Pine Water has made arrangements with Starlight Pines Water Company, about 40 miles north of Strawberry, to buy supplemental wholesale water," he said. But Starlight Pines has established a limit of 150,000 gallons per day.
Hauling water is an expensive undertaking, according to Hardcastle.
"The cost of transporting one load of water (about 6,500 gallons) can be almost $40 per thousand gallons," he said. "Thus, a truck loaded with water can cost $260 plus the cost of water."
Hardcastle said the company has so far had to eat the cost of hauling water, but can't anymore.
"Without immediate rate relief to allow Pine Water to begin recovery of such costs, the company will face economic and operation collapse," he said.
Strawberry Hollow developer Loren Peterson, who has been involved in lawsuits and related legal skirmishes with Pine Water Company over the past two years, questions the need for an increase.
"(Pine Water Company's) application for a rate increase states it doesn't have any money," Peterson said. "But it seems to have fortunes to spend on litigation."
Concurrent with the interim rate increase request, Pine Water Company filed a revised curtailment tariff for the system. A curtailment tariff is simply a plan for dealing with water outages and shortages of varying degrees of seriousness.
The new tariff imposes stronger restrictions and penalties on Pine Water Company customers in order "to ensure the equitable distribution of water in times of water shortages."
Water supply status would still be divided into five categories, but mandatory conservation measures would begin at Stage 3 instead of Stage 4.
Stiffer reconnection fees are also proposed beginning at Stage 3 for those customers whose failure to adhere to mandatory curtailment measures results in disconnection from the system. Reconnection fees would be $250 for the first offense, $500 for the second offense and $750 for the third offense.
Payson Water Company was ordered last year by the ACC to review its existing curtailment tariff and come back with appropriate modifications. The ACC also requested that the company prepare and present a rate case by May, 2003.
Heather Murphy, ACC public information officer, said the filings by Pine Water Company are only the first step in the process.
"What happens is that there is testimony by the company and that's filed," Murphy explained. "Then there is testimony by the staff in response. In some cases, we'll subpoena an outside expert to offer testimony. Then there are a couple of other steps like rebuttal testimony, and none of that has happened yet."
A public hearing will eventually be held on the interim rate increase.