Arizona Water Company - 2011 Eastern Group Rate Case

Status
Prior
Docket Number
W-01445A-11-0310
Assigned Staff
Dan Pozefsky
Robert Mease

 

Case Information:

PHASE 1

On August  5, 2011, Arizona Water Company ("AWC" or the "Company"), filed an application ("Application") with the Arizona Corporation Commission ("ACC" or "Commission") requesting a permanent rate increase for the Company's Eastern Group systems. 

AWC's Eastern Group is comprised of the Company's Superstition system (which provides service to Apache Junction, Superior and Miami), the Cochise system (which serves customers in Bisbee and Sierra Vista), the San Manuel system, the Oracle system, the SaddleBrooke Ranch system and the Winkelman system.  During the test year ended December 31, 2010, AWC's Eastern Group systems provided water service to approximately 33,700 customers.

AWC is seeking a total revenue increase of $5,268,560 or an increase of 25.68 percent over test year revenues for the Company's Eastern Group.  The revenue increases by system are as follows:

 

System                                                  Revenue Increase                       Pct. Increase

Superstition                                             $ 3,894,582                                    25.86%

Cochise                                                   $    733,087                                    22.19%

San Manuel                                             $    387,458                                    40.88%

Oracle                                                     $    148,456                                   15.00%

SaddleBrooke Ranch                              $      73.713                                    62.95%

Winkelman                                              $      31,264                                    30.63%

In addition to the requested increases in revenue, AWC is also requesting that the Commission approve a  Distribution System Improvement Charge ("DSIC") that would allow for recovery of routine plant improvement costs outside of general rate case filings, and an Off-Site Facilities Fee to cover costs of off-site water production, treatment, delivery, storage and pressure facilities for new customers whose water supply requirements make such plant additions necessary.

Under the Company-proposed rate increase, 5/8 x 3/4 - inch meter customers of the Company's various  Eastern Group systems would see the following change in their monthly rates:

Name of District               Average               Present              Proposed         Dollar           Pct.
                                        Comsumption      Charged             Charged         Increase      Increase
                                        (Gallons)

Superstition                         6,300                  $33.84                $43.84           $9.81         29.00%

Cochise (Bisbee)                4,800                   $32.43               $39.07           $6.64          20.48%

Cochise (Sierra Vista)        8,00                     $25.95                $35.44           $9.49          36.55%

San Manuel                        7,100                    $43.61                $62.54         $18.93         43.41%

Oracle                                5,100                    $43.05                $50.45            $7.40        17.18%

SaddleBrooke Ranch         3,400                    $28.96                $39.96          $11.00        37.98%

Winkelman                         9,400                    $30.74                 $40.45           $9.71        31.58%

 

On Monday, September 6, 2011, ACC Staff issued a letter of sufficiency(link is external) informing AWC that its  Eastern Group Application meets the filing requirements of A.A.C. R-14-2-103.

On Thursday, September 8, 2011, the Administrative Law Judge ("ALJ") assigned to the case issued a Procedural Order(link is external) scheduling a procedural conference for the purpose of discussing dates for an evidentiary hearing and the filing of written testimony with the parties to the case.

On Wednesday, September 14, 2011, RUCO filed an Application to Intevene(link is external) in the case and for a thirty minute delay on the scheduled start time for  the scheduled procedural conference due to a conflict with another scheduled proceeding.

On Thursday, September 15, 2011, the ALJ assigned to the case issued a Procedural Order(link is external) granting RUCO's request to change the time of the scheduled procedural conference to 1:00 p.m. on Monday, September 19, 2011, in Room 100, 1200 W. Washington in Phoenix.

During the procedural conference held on September 19, 2011, attorneys for the parties to the case discussed possible dates for an evidentiary hearing and the filing of written testimony with the ALJ assigned to the case.  A procedural order from the ALJ is expected over the coming week.

On Tuesday, September 20, 2011, the ALJ assigned to the case issued a Procedural Order(link is external) scheduling the evidentiary hearing on the matter for 10:00 a.m. on Monday, May 14, 2012.

On Friday March 2, 2012, ACC Staff filed a request for an extension of time(link is external) to file written testimony.

On Friday, March 2, 2012, the ALJ assigned to the case issued a Procedural Order(link is external) granting ACC Staff's request and rescheduling the pre-hearing conference in the matter from 1:00 p.m. on Wednesday, May 9, 2012, to 1:00 p.m. on Friday, May 11, 2012.  There is no change in the time and date for the evidentiary hearing.

Direct testimony from ACC Staff, RUCO and other intervenors was filed on Tuesday, March 13, 2012.  RUCO opposed the Company's request for a DSIC Surcharge in its direct testimony.

Company rebuttal testimony was filed on Tuesday, April 10, 2012. 

On Friday, April 20, 2012, AWC approached the ACC's Utility Division and expressed the Company's desire to enter into settlement discussions with the parties to the case.

On Tuesday, April 24, 2012, ACC Staff filed a notice(link is external) advising the five ACC Commissioners that settlement discussions would begin no earlier than April 27, 2012, and that all parties in the matter would be invited and given the opportunity to attend all settlement discussions.  The filing also proposed a revised schedule for the filing of a possible settlement agreement and written testimony.

In a notice(link is external) filed on Tuesday, April 24, 2012, Arizona Water Company invited all of the parties to its Eastern Group rate case proceeding to take part in settlement talks.  Discussions were scheduled to begin at 9:30 a.m. on Friday, April 27, 2012 in the Commissioners' Conference Room, 2nd Floor, 1200 W. Washington in Phoenix.

On Wednesday, April 25, 2012, the ALJ assigned to the case issued a Procedural Order(link is external) that modified the procedural schedule to accommodate settlement discussions.

Settlement talks on AWC's Eastern Group rate case proceeding began as scheduled on Friday, April 27, 2012, but failed to produce an agreement between the parties to the case.

Surrebuttal testimony from ACC Staff, RUCO and other intervenors was filed on Monday, May 7, 2012. 

A final round of rejoinder testimony from the Company was filed on Friday, May 11, 2012. 

Also on Friday, May 11, 2012, a pre-hearing conference was held at the ACC's Phoenix offices at 1:00 p.m. 

The evidentiary hearing on the matter began as originally scheduled on Monday, May 14, 2012, and was concluded on Thursday, May 24, 2012.

Final accounting schedules from AWC and ACC Staff were filed on Friday, June 8, 2012.

RUCO filed its final accounting schedules on Monday, June 4, 2012.

On Wednesday, June 13, 2012, RUCO filed a motion(link is external) seeking the admission of a late filed exhibit, or as an alternative, asks the Commission to take judicial notice of the Comments of the Alaskan Attorney General on a DSIC-type mechanism, similar to the one requested by AWC in this case, which were filed before the Regulatory Commission of Alaska on May 31,2012.

On Thursday, June 21, 2012, the ALJ assigned to the case issued a Procedural Order(link is external) that denied admission of the Alaska Attorney General's comments on DSIC-type mechanisms.  The order took limited official notice of the comments, pointing out that assertions made and conclusions drawn in the document may not be treated as facts that have been established by the evidence in this matter but instead must be specifically identified as assertions made or conclusions drawn by the Alaska Attorney General.

RUCO filed its opening legal brief as scheduled on Tuesday, June 26, 2012.

A final round of reply briefs were filed by the parties to the case on Wednesday, July, 11, 2012.

After weighing the evidence presented in the case, the ALJ issued a Recommended Opinion and Order(link is external) ("ROO") on Wednesday, January 30, 2013.  The ALJ is recommending that the Commission deny AWC's request for a DSIC.  Exceptions to the ROO are due by Friday, February 8, 2013.

On Friday, February 8, 2013, RUCO filed exceptions(link is external) to the ALJ's recommended 10.55 percent return on common equity.

By a vote of 5-0 the ACC voted to approve AWC's request for a rate increase for it's Eastern Group water systems during the Regular Open Meeting held on Tuesday, February 12, 2013.

In addition to awarding AWC a 10.55 percent return on common equity, the Commission also ordered that the Docket will remain open in order to allow the parties to the case, and any other party that wishes to intervene, to enter into settlement discussions on a DSIC mechanism that will allow utilities to recover the costs of routine plant additions between general rate case proceedings ("Phase 2"). A final decision on the matter will be voted on by the ACC no latter than its Regular Open Meeting scheduled for Tuesday and Wednesday, June 11, and 12, 2013.  On Wednesday, February 20, 2013, the Commission issued Decision No. 73736(link is external), establishing new rates and charges for AWC's Eastern Group systems.

 

PHASE 2

On Thursday, February 21, 2013, the ALJ assigned to hear Phase 2 of the proceeding issued a Procedural Order(link is external) that scheduled the evidentiary hearing on the DSIC issue for 10:00 a.m. on Monday, April 8, 2013, at 1200 W. Washington in Phoenix.  The Procedural Order also established the dates for settlement discussions, the filing of a proposed settlement agreement, written testimony and legal briefs.  The Procedural Order further granted intervenor status to Liberty Utilities ("Liberty Utilities"), EPCOR Water Arizona, Inc. ('EPCOR"), Global Water Utilities ("Global Water") and to Arizona Investors Council ("AIC").

Also on Thursday, February 21, 2013, ACC Staff filed a notice(link is external) informing all interested parties that that a meeting for the purpose of engaging in settlement discussions has been scheduled for Monday, March 4, 2013, at 10:00 a.m. in the Commissioners’ Conference Room at the Arizona Corporation Commission, 1200 West Washington Street, Phoenix, Arizona 85007.

On Monday, February 25, 2013, the ALJ assigned to the case issued a Procedural Order(link is external) correcting a date for settlement discussions.

On Wednesday February 27, 2013, the ALJ assigned to the case issued a Procedural Order(link is external) that granted a request to intervene filed by the Water Utility Association of Arizona (“WUAA”) despite the fact that the request was filed five days after the deadline for intervention.

On Wednesday, March 20, 2013, AWC filed a motion(link is external) requesting that the current deadline for filing initial testimony on March 22, 2013, be vacated, and that a single round of testimony be filed by April 2, 2013, discussing the settlement agreement.  AWC stated in its motion that Staff and RUCO are in agreement with the proposed modification of the procedural schedule, and that “the request has been circulated to as many of the intervenors as possible and no objections have been raised.

On Thursday, March 21, 2013, the ALJ assigned to the case issued a Procedural Order(link is external) granting AWC's request to modify the existing filing schedule and vacated the March 22 and April 5, 2013 filing dates for pre-filed written testimony on the settlement agreement.

On Monday, April 1, 2013, ACC Staff filed a copy of the proposed settlement agreement(link is external) (Settlement Agreement) with the Commission.  The signatories to the agreement include ACC Staff, AWC, AIC, EPCOR, Global Water, Liberty Utilities, and WUAA.  The Settlement Agreement adopts a System Improvement Benefits ("SIB") surcharge mechanism that allows for recovery of routine plant additions between general rate case proceedings.  RUCO was not a signatory to the Settlement Agreement.

On Tuesday, April 2, 2013, the signatories filed their testimony in support of the Settlement Agreement.  RUCO filed testimony in opposition to the Settlement Agreement.  RUCO also filed a request(link is external) to keep the record in the underlying matter open for further consideration in the upcoming hearing on the Settlement Agreement

On Thursday, April 4, 2013, the ALJ assigned to the case issued a Procedural Order granting RUCO's request to keep the record in the underlying matter open for further consideration.  Also on Thursday, April 4, 2013, ACC Staff filed a motion to strike parts of RUCO's testimony in opposition to the settlement agreement that deals with the legality of the SIB surcharge mechanism.

On Friday, April 5, 2013, RUCO filed a response(link is external) to ACC Staff's Motion to Strike.

The evidentiary hearing on the matter began as scheduled on Monday, April 8, 2013 and concluded on Thursday, April 11, 2013.

RUCO filed its post hearing brief(link is external) on Monday, April 29, 2013.  RUCO opposes the SIB mechanism which it believes is illegal under the Arizona Constitution.

After weighing all of the evidence presented during the Phase 2 proceeding, the ALJ assigned to hear the matter issued a Recommended Order and Opinion(link is external) ("ROO") on Tuesday April 28, 2013.  The ROO adopts the proposed SIB mechanism with additional filing requirements.  The ALJ is also recommending a lower 10.00 percent return on common equity for AWC.

On Thursday, June 6, 2013, RUCO filed comments(link is external) on the ROO.

Per Decision No. 73736, dated February 20, 2013(link is external), the Commission considered the ROO during its Regular Open Meeting held on Wednesday, June 12, 2013.  After approximately two hours of discussion, the five sitting Commissioners voted 4 to 1 to adopt an amended ROO which rejected the ALJ's recommended 10.00 percent return on common equity.

On Tuesday, June 12, 2013, Commissioner Susan Bitter Smith filed a letter(link is external) in the docket praising the adoption of the SIB mechanism.

On Thursday, June 27, 2013, the Commission issued Decision No. 73938(link is external) which adopted the SIB mechanism.  The Decision also included a dissenting opinion(link is external) by Commissioner Brenda Burns which addressed the 10.30 percent return on common equity granted to AWC.

 

APPLICATION FOR REHEARING

On Wednesday, July 17, 2013, RUCO filed an Application for Reheaing of Decision No. 73938(link is external) ("Application for Rehearing") with the ACC. 

In its Application for Rehearing, RUCO is requesting that the Commission reopen the AWC Eastern Group rate case for the purpose of rehearing the SIB and return on common equity issues.  RUCO argues that the adoption of both the SIB mechanism and the higher 10.55 percent return on common equity awarded to AWC constitutes a double count.  RUCO also challenges the legality of the SIB mechanism.

The Commissioners have twenty days to act on RUCO's request.  If the Commissioners do not act on RUCO's request for rehearing within the twenty day period, the request is denied by operation of law.  RUCO would then have the option of appealing Decision No. 73938 in the Arizona Court of Appeals.

On Thursday, August 1, 2013, AWC filed a response(link is external) to RUCO's Application.