Amidst a blizzard of figures and complaints, the Arizona Corporation Commission staff has recommended cutting Payson Water Company’s proposed 118 percent rate increase to about 75 percent.
But with a confusing swirl of figures and bitter complaints by customers still unresolved, the Arizona Corporation Commission on Jan. 8 postponed the scheduled rate hearing until February. In the meantime, Administrative Law Judge Dwight Nodes will hear public comments at a Jan. 13 hearing.
Indignant customers have inundated the commission ever since Payson Water Company indicated it wants a 118 percent rate increase for all the communities it serves, including Whispering Pines, Geronimo Estates, Deer Creek, Mead Ranch, Flowing Springs, Gisela/Tonto Creek Shores, East Verde Park Estates, and Mesa del Caballo.
The request includes permission to impose water hauling charges in areas like the East Verde Park Estates and in some cases dramatically increase the cost of reconnecting service.
In the most recent round of filings, ACC staff suggested a rate increase of about 75 percent on the grounds the company hadn’t documented its expenses and should have a 6 percent profit margin rather than the 11 percent it requested.
Payson Water Company President Jason Williamson has protested the staff’s recommendation and warned that without an adequate rate increase the company can’t afford to borrow the money it needs to improve a system beset by chronic water shortages.
The commission has previously approved a separate application by the company to hook up the roughly 400 Mesa del Caballo customers to Payson’s Blue Ridge Pipeline, a move that will likely double their water bills — even before the overall rate increase takes effect.
But the debate continues to swirl about the company’s request for a huge increase in water rates for all the communities it serves.
The commission staff has waded into a flurry of arguments and figures.
ACC public information officer Rebecca Wilder said, “You often see hearings set for multiple days to reserve space (in the hearing room). They will keep going as long as they need. It’s pretty common that hearings can be more than one day.”
Sharp questions by commission staff suggest the company could have a hard time getting the rate increase it says it needs. The company has already backed off its initial request for a 124 percent increase in revenue, which included the 118 percent rate hike. Now it says it needs only a 112 percent revenue increase.
Williamson testified he needs higher rates immediately. “Any delay in an increase in rates will have a dramatic impact on the Company … Besides the fact that we do not currently have enough revenue to pay all our bills, such a delay will also have an impact on our ability to meet the debt service coverage ratios that are required for the (federal) WIFA financing set to close within one month from now,” he said during a Dec. 6 hearing.
The ACC Administrative Law Judge Dwight Nodes will hear public comments starting at 10 a.m. on Monday, Jan. 13 in the commission hearing rooms, 1200 W. Washington St. Phoenix, Ariz. The proceedings will be webcast at www.azcc.gov (click the Live Meeting Broadcast button). People can also call in comments at (602) 542-4250 or listen on the phone at (602) 542-0222.
So far, the filings have reflected radically different viewpoints.
Customer filings: Clayette Gonzales
Many customers have sent e-mails protesting the increase, but Mesa del resident Clayette Gonzales wrote an emotional appeal in simple, plain language.
She said she “thought the C.C. (Corporation Commission) was too protect the people.” She said many people have had to dig their own wells and believes Mesa del Caballo residents will end up subsidizing Payson through payments made for Blue Ridge water. Residents “are elderly, retired people, who have no one to protect them from greedy corporations.”
Reidhead decries ‘fuzzy math’
Deer Creek resident Kathleen M. Reidhead in a 72-page commentary wrote the company had ignored her request for information on the cost of providing water in each community. She said since Gisela and Deer Creek sit in the Tonto Creek basin, while Mesa del, East Verde and Whispering Pines sit in the Verde River basin, the company should not consolidate its billing.
“A more reasonable approach would be to implement a rate structure that allows customers in these two communities to use as much water as they demand, hence ratemaking should be designed to allow for maximum consumption at very affordable costs.”
Reidhead cited alleged “fuzzy math” that she said painted a misleadingly dire picture of finances. “The ratepayers deserve accurate and honest reporting of all accounting by PWC, especially in light of the high level of distrust that already exists,” she wrote.
Reidhead claims she discovered that $755,709 from the sale of the Star Valley/Quail Valley water system disappeared from the Brooke Utilities books. PWC is claiming losses related to the sale as part of the rate increase.
She also said PWC has flaunted Arizona Department of Environmental Quality (ADEQ) and Arizona Department of Water Resources (ADWR) rules, after the commission staff concluded Hardcastle failed to file required state reports in 2009 and 2011.
She maintained each community should have its own rate based on its costs, so that people in Deer Creek wouldn’t have to pay for improvements in Mesa del Caballo’s system — including the hookup to the Blue Ridge pipeline. “Thirty-two private well owners in MDC appear to have acquired ample supplies of water,” she wrote. “Only PWC claims to have inadequate or underperforming wells. That is a claim that warrants further investigation, but should not be accepted without proof, in light of the other inaccurate and/or misleading claims that PWC has presented throughout the course of this case.”
Beware hidden charges: Tom Bremer
In a Jan. 9 e-mail to East Verde Estates water customers, EVP Water Committee Chairman Tom Bremer wrote, “In response to a challenge by ACC staff accountants, PWC reduces the proposed new rate for residential 5/8 x 3/4 inch water meters from $39.24 to $25.42. This sounds like a good thing, but…”
He said PWC also increased the per-gallon costs for those who use more than 3,000 gallons per month and will add water-hauling charges in the summer. Moreover, he said he fears the company will calculate a homeowner’s usage based on the most water used on any day in a month.
Bremer said PWC will increase the disconnect fees during the dry summer months if customers don’t pay bills promptly or use too much when rationing is in effect. The reconnection fee could rise from less than $40 per infraction to $200 for the first violation and up to $3,000 for a third violation.
Water Company rebuttal
In a filing on Dec. 6, Williamson disputed claims that the company had failed to file water quality reports required by the Arizona Department of Environmental Quality (ADEQ).
“We have met with ADEQ and subsequently responded to this issue in a letter to ADEQ dated Nov. 7, 2013. Since we have fulfilled our response obligations, the ball is in ADEQ’s court.”
ACC staff also asked about the mislabeling of wells and missing annual reports with the Arizona Department of Water Resources (ADWR).
Williamson said his company has corrected the mislabeled wells and is waiting for Brooke Utilities to find the missing ADWR reports. While it waits, PWC is filling out reports itself.
The ACC staff questioned the lack of documentation for $200,000 in improvements since 2000 claimed by company accountant Thomas Bourassa. Normally, the commission sets rates so the company can recover its investment and make a profit.
Williamson testified Brooke Utilities provided tax returns listing the investments, which should substitute for the missing invoices. “The Company wasn’t able to provide all the invoices requested by Staff, but the Company did provide other documentation. An invoice may be helpful, but it is not the only or best proof of who paid for something,” Williamson testified.
Under oath, Hardcastle wrote that his accounting office had changed between 2008 and 2009 and so he lost the documents.
Then ACC staff questioned how Brooke Utilities had accounted for the sale of a portion of the company to the Town of Star Valley.
Williamson testified he believed that had been covered in the prior rate hearing.
“…there is a very long record of these amounts being shown on the books and tax returns of the Company. This means that most of these amounts were a part of the previous rate case that was approved in 2000. I don’t understand why Staff is just ignoring those prior findings of the Commission,” he said.
The ACC staff also asked about potential water hauling for East Verde Estates Park (EVP).
Williamson testified the community won’t need anywhere near as much water hauling as Mesa del Caballo, where water hauling charges resulted in a five-fold increase in the bill for some customers. He believes EVP residents will end up paying only $85 per customer to cover water-hauling costs during the dry season versus $247 per customer in Mesa del.
“Keep in mind that the hauling requirements for EVP have historically been minimal in comparison to MDC (Mesa del Caballo). In the test year, for example, which was the year with the historically highest water shortages at EVP, hauling costs (for EVP) were around $12,000 (which works out to $85 per customer). At MDC in 2013 (the worst year yet for hauling), costs have topped $88,000 or about $247 per customer.”