State Oks Pine Water Increase

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Pine Water Company customers will pay more for water beginning Sept. 1 following approval of a rate increase by the Arizona Corporation Commission (ACC).

The average customer who paid $27.70 for 2,722 gallons in the winter will now pay $29.93, an increase of 8.1 percent. During the summer months, however, that same customer will pay 33.1 percent more for 3,269 gallons -- an increase from $29.56 to $39.33.

Pine Water Company originally requested a winter increase to $36.11 and a summer rate hike to $46.61, increases of 30.4 percent and 57.7 percent respectively. The decision followed the lines of a settlement agreement previously reached by Pine Water Company, intervenors John Breninger and the Pine-Strawberry Water Improvement District, and the ACC staff.

It grants Pine Water Company a revenue increase of 11.1 percent or $77,243, bringing total annual revenue to $731,291.

The company filed the request on May 1, 2003, asking the ACC for a rate increase that would generate an additional $268,993 in revenues. Robert Hardcastle, president of Pine Water Company parent Brooke Utilities, argued that the current rates -- in effect since April 1, 2000 -- had led to operating losses the last three years.

According to ACC spokesperson Heather Murphy, the company's rate of return had fallen to 1.91 percent due to increases in the cost of doing business, and the rate increase will boost it to 10 percent.

"This shows a requirement now to get an operating margin that's healthier -- more in line with what we do for other utilities," Murphy said.

The decision also includes Project Magnolia, the 10,800-foot pipeline that connects the Pine and Strawberry systems, in Pine Water Company's rate base rather than allowing the company to charge a separate fee for its use.

Judge Dwight Nodes, who wrote the decision, explained his rationale:

"Inclusion of the pipeline in Pine Water's rate base benefits the company's customers by providing a conduit to wells in the Strawberry area that have historically produced more dependable sources of water," he wrote.

The decision requires Pine Water Company to maximize water purchases from Strawberry and provides additional guidelines for ensuring that water hauling is used only as a last resort.

The decision also addresses Pine Water Company's water loss rate of 12.6 percent. An amendment to the decision, proposed by Commissioner Mike Gleason, requires the company to provide a detailed plan that addresses ways to reduce water loss to less than 10 percent. Gleason called the current rate "unacceptable."

Pine Water Company's history of inconsistent customer service was also addressed in the decision through a requirement for the company to establish a 24-hour local telephone number for reporting leaks and service outages.

"Various customer comments indicate that calls to the call center in California are often dropped or, even if the caller gets through to an operator, responses to reported leaks are not investigated in a prompt manner," Nodes wrote. "We believe it is incumbent upon a public service corporation to be responsive to customer inquiries of all types."

Another amendment, proposed by Commissioner Kristin Mayes, directs the ACC staff to prepare a report within three months that determines whether a moratorium on new water hookups should be instituted in the Pine Water Company service area.

Yet another amendment, proposed by Commissioner Bill Mundell, directs the company to "participate in all appropriate efforts to discover and implement a regional approach to solving water shortage problems in the the Payson-Pine-Strawberry area."

Reached by telephone after the decision, Mundell elaborated.

"They're ordered to do it," he said. "They don't have a choice."

Mundell said Brooke Utilities has a history of recalcitrance.

"We had to order them to do it, and I want to see solutions to the problem," he said. "Everyone needs to work together to find a regional solution both on the water conservation side and finding new sources of water."

When offered the opportunity to comment, Brooke Utilities President Robert Hardcastle said, "This decision is complex and we will not have a comment until we've received the written order and had a chance to analyze it."

Pine Water Company serves approximately 2,000 customers, while other water companies owned by Brooke Utilities serve the communities of Deer Creek, East Verde Park, Flowing Springs, Geronimo Estates, Mesa del Caballo, Star Valley, Strawberry, Tonto Basin and Whispering Pines.

Mundell characterized Pine's water woes as the worst the commission has had to deal with statewide.

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