Pine-Strawberry Water District Files Takeover Suit Against Brooke Utilities

Seeks to break company’s monopoly

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The Pine Strawberry Water Improvement District Board has filed suit to condemn the water companies serving the two communities and has asked the Arizona Corporation to revoke owner Brooke Utilities right to operate the two systems.

The board announced both actions at its Nov. 20 meeting.

Private utilities need from the Corporation Commission a Certificate of Convenience and Necessity (CC&N) to operate. This establishes a type of regulated monopoly and defines the terms under which a utility can operate.

If the corporation commission revokes the CC&N, Brooke Utilities would no longer have exclusive rights to serve water to customers within its designated service area.

That could put the Pine and Strawberry Water companies out of business and open the way for the use of other water sources, such as the Milk Ranch Well owned by Ray Pugel and Robert Randall. Currently, well owners can’t sell water to other property owners in the service area.

Hardcastle has refused two purchase offers from the PSWID board, which means filing suit in Superior Court is the next step in acquiring the two water companies.

If the courts grant the condemnation, Hardcastle would be forced to sell to PSWID at a price decided by a judge or jury.

The board’s last offer to Hardcastle was for $2.5 million.

“We’re trying to fire the water company,” said PSWID chairman Bill Haney at a Nov. 23 meeting.

The documents PSWID filed with the ACC included an extensive inventory of water problems in the two communities, including allegedly decaying infrastructure, inadequate service and the need to haul of water during summer droughts. Residents found themselves paying hundreds of dollars in hauling fees over the summer.

Moreover, the lack of dependable water supplies from the current network of shallow wells prompted the corporation commission to impose a building moratorium on the community.

For the courts to revoke Brooke Utility’s CC&N, the district must prove the deficiencies exist.

Since state statues say the company must supply adequate water and services, Brooke will have to prove the problems are not factual to keep its CC&Ns. However, the company could mount as a partial defense its effort to drill the K2 well, to reach reportedly ample supplies of deep water. Critics of that effort recently won a recall election against the previous board and suspended the K2 well project.

The condemnation process is not unusual in the state. The City of Scottsdale is considering taking over Arizona American’s System and Sedona may move to take over of the Arizona Company, due to allegedly inadequate main lines, insufficient pressure in fire hydrants and concrete-asbestos in water lines.

Also, years ago the city of Casa Grande unsuccessfully tried to condemn the assets of the Arizona Water Company.

Star Valley at one point tried to condemn a Brooke Utilities in that town, but suspended its estimate when it got an updated estimate of the value of the system.

The forced takeover of the Pine and Strawberry Water companies began last spring with a successful recall election of four board members.

Since then, the board has forged ahead with take over efforts by hiring a consulting-engineering firm to appraise the value of the two water companies and applying for a loan to finance the anticipated purchase.

The board’s actions have gotten support by the community.

In the last election, voters rejected the one candidate, Sam Schwalm who had objected to the takeover and returned four incumbents — Tom Weeks, Richard Dickinson, Donald Smith and Terry Schleizer.

Hardcastle did not immediately respond to request for comment.

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