On Thursday, February 28, 2013, Litchfield Park Service Company (“LPSCO” or the “Company”) filed applications with the Arizona Corporation Commission ("ACC" or "Commission") seeking permanent rate increases for the Company's water and wastewater utility operations in Maricopa County.
LPSCO is a Class A utility that provides service to approximately 16,802 water customers and 16,161 sewer customers. The Company’s service area is located in the southwestern portion of the Phoenix metropolitan area, and includes the Town of Litchfield Park, a portion of the City of Goodyear north of Interstate 10, two commercial sites in Avondale (including Estrella Mountain Community College), and an unincorporated area of Maricopa County. LPSCO’s present rates were established in Decision No. 72026, dated December 10, 2010(link is external) and Decision No. 72217, dated March 9, 2011(link is external). The Company is a subsidiary ofLiberty Utilities(link is external) which also owns other public service companies in Arizona including Bella Vista Water Company, Gold Canyon Sewer Company Rio Rico Utilities, Inc. and Black Mountain Sewer Corporation.
According to LPSCO’s applications, the Company had adjusted gross revenues of $11,201,390 from the water utility service and $10,361,603 from the wastewater utility service during the test year ended December 31, 2012 (“Test Year”). Operating expenses for the same period totaled $9,177,014 from the water utility service and $8,489,987 from the wastewater utility service thus resulting in operating incomes of $2,024,376 and $1,871,616 respectively. This produced a Test Year rate of return of 5.68 percent for the water utility service and 7.84 percent for the wastewater utility service when applied to the Company-proposed fair value rate bases of $35,647,602 and $23,877,697 respectively.
LPSCO is requesting an increase of $2,257,160, or 20.15 percent for the water utility service and an increase of $659,088 or 5.36 percent for the wastewater utility service over Test Year adjusted operating revenues. The Company-proposed rates will provide LPSCO with operating incomes of $3,387,127 for the water utility service and $2,268,786 for the wastewater utility service or a 9.50 percent rate of return on invested capital. Under the Company-proposed level of operating revenue, a typical water residential customer with a 5/8 x 3/4-inch meter using an average of 4,277 gallons per month will experience a $4.41, or 28.23 percent, increase in his or her monthly bill from $15.64 per month to $20.05 per month. Under the Company-proposed level of operating revenue, a typical wastewater residential customer will experience an increase of $2.63, or 6.75 percent, from $38.99 per month to $41.62 per month.
In addition to the requested increase in base rates described above, LPSCO is also requesting mechanisms for both water and wastewater service that will allow the Company to establish annual surcharges to recover the costs of specific routine plant items placed into service between general rate case proceedings and a purchased power adjuster mechanism that allows LPSCO to pass through increases in the Company's electric bills to its customers. LPSCO is also proposing a deferral account that will allow it to recover increases in property tax expense over test year levels in future rate case proceedings.
ACC Staff issued sufficiency letters on Thursday, March 28, 2013 informing LPSCO that its applications had met the sufficiency requirements of Arizona Administrative Code R-14-2-103.
On Friday, April, 12, 2013, the Administrative Law Judge ("ALJ") assigned to the case issued a Procedural Order(link is external) which consolidated the water and wastewater dockets and set the date for the evidentiary hearing in the matter for Monday, December 9, 2013 at 1200 W. Washington in Phoenix. A pre-hearing conference has been scheduled for Friday, December 6, 2013 at the same location.
On Monday, April 15, 2013, RUCO filed an application to intervene(link is external) in the case on behalf of residential ratepayers.
On Friday, April 24, 2013, the ALJ assigned to the case issued a Procedural Order(link is external)granting RUCO's request.
On Monday, May 13, 2013, the ALJ assigned to the case issued a Procedural Order(link is external)granting LPSCO's request to correct a public notice.
Direct testimony on issues other than rate design from ACC Staff, RUCO and other intervenors is scheduled to be filed on Wednesday, September 25, 2013. Direct testimony on rate design is due on Friday, October 4, 2013. LPSCO will file rebuttal testimony on Wednesday, October 23, 2013. Surrebuttal testimony from ACC Staff, RUCO and other intervenors is due on Tuesday, November 12, 2013. A final round of rejoinder testimony from the Company will be filed on Wednesday, December 4, 2013.
During the discovery phase of the proceeding, RUCO's staff will analyze LPSCO's applications in order to determine if the Company's recommended rate increases are reasonable.
After the evidentiary hearing and the filing of legal briefs, the ALJ will issue a Recommended Opinion and Order ("ROO") that will be voted on by the five sitting ACC Commissioners during a noticed Open Meeting. The Commissioners can either accept, amend or reject the ROO. A final decision on LPSCO's rate increase request is not expected until sometime during the second quarter of 2014.