Arizona Water Company - 2008 Rate Case

Docket Number
Assigned Staff
J. Jerich
T. Coley
R. Moore
W. Rigsby
M. Wood


Case Information:


On August  22, 2008, Arizona Water Company ("AWC" or the "Company"), filed an application with the Arizona Corporation Commission ("ACC" or "Commission") requesting rate relief for all seventeen of the Company's water systems that are currently providing service to customers in a number of communities in the state.  AWC's request would increase operating revenues by $15,441,290 or approximately 37.00% over the Company's adjusted 2007 test year revenues.   AWC is also proposing a 12.40 percent return on common equity.  The Company is seeking rate increases, on a partial rate consolidation basis, for the following systems:


Eastern Group

System                         Revenue Increase                   Percentage Increase

Superstition                    $4,864,542                             40.74%

Bisbee                            $363,319                                21.08%

Sierra Vista                    $61,325                                    4.20%

San Manual                   $402,801                                 49.58%

Oracle                            $69,267                                     6.15%

Winkelman                     $35,361                                   35.82%

Miami                             $53,500                                     2.89%


Western Group

System                          Revenue Increase                 Percentage Increase

Casa Grande                 $5,380,398                              49.20%

Stanfield                         $7,721                                      5.85%

White Tank                     $493,814                                 39.66%

Ajo                                 $98,867                                   20.99%

Coolidge                        $561,173                                 25.34%


Northern Group

System                        Revenue Increase                 Percentage Increase

Lakeside                      $279,355                                 10.79%

Overgaard                  ($45,030)                                   (2.67%)

Sedona                        $2,404,707                               68.29%

Pinewood                    $136,993                                  13.09%

Rimrock                       $273,068                                  53.77%


In addition to the increases in revenue listed above, AWC is seeking a number of pass through mechanisms that allow it to flow through increases or decreases in costs for for purchased power, purchased water, and purchased fuel.  AWC is also requesting an attrition adjuster mechanism, which would  allow the Company to increase rates in order to earn its authorized rate of return as a result of earnings erosion.

On October 15, 2008, ACC Staff filed a sufficiency letter(link is external) informing AWC that the Company’s rate application was sufficient pursuant to A.A.C. R14-2-103.

On October 24, 2008, RUCO filed a motion to intervene(link is external) in the case on behalf of AWC's residential ratepayers.

On November 3, 2008, a procedural conference was held at the ACC's Phoenix office.  During the conference, the parties to the case, including RUCO, discussed a possible extension for filing direct testimony based on the large number of separate water systems included in the application.  ACC Staff proposed a 90-day extension of the normal time clock deadlines for processing the Application.  Although the Company opposed any extension of the deadline, the parties ultimately agreed to extend the normal time clock deadline by 60 days.

On November 4, 2008, the Administrative Law Judge ("ALJ") assigned to the case issued aProcedural Order(link is external) that scheduled the evidentiary hearing on AWC's request for Monday, August 31, 2009, at 9:30 a.m., or as soon thereafter as is practical, at the Commission’s offices, 1200 West Washington Street, Hearing Room 1, Phoenix, Arizona.  The Procedural Order also established the dates for the filing of written testimony and the manner in which AWC would notify the Company's customers of the pending increase in rates.  The ALJ assigned to the case later issued another procedural order which extended the filing deadline on written testimony on rate design and cost of service from Friday, June 12, 2009, to Friday June 26, 2009.

On Friday, June 12, 2009, after conducting a full audit and a cost of capital analysis, RUCO filed direct testimony which presented its recommended levels of revenue and its recommended rate of return for each of AWC's seventeen operating systems.  RUCO is recommending the following increases/(decreases): 


Eastern Group

System                           Revenue Increase                       Percentage Increase

Superstition                      $2,160,482                                    18.09%

Bisbee                              $271,233                                       15.74%

Sierra Vista                     ($163,188)                                     (11.16%)

San Manual                     $302,504                                        37.24%

Oracle                             ($70,482)                                         (6.26%)

Winkelman                      $17,035                                          17.26%

Miami                              $665,054                                         35.94%


Western Group

System                         Revenue Increase                       Percentage Increase

Casa Grande                 $3,699,044                                    33.83%

Stanfield                        $136,067                                     103.00%

White Tank                    $317,918                                       25.54%

Ajo                                 $39,808                                           8.45%

Coolidge                       ($67,182)                                        (3.03%)


Northern Group

System                         Revenue Increase                       Percentage Increase

Lakeside                        ($69,552)                                      (2.72%)

Overgaard                     ($277,183)                                   (16.44%)

Sedona                           $975,545                                      27.73%

Pinewood                      ($7,224)                                          (0.69%)

Rimrock                          $366,377                                      72.19%


RUCO’s recommended increase in operating revenue is $7,145,034 lower than the $15,441,290 level of increase requested by AWC.

RUCO's direct testimony presented its required revenue recommendations on a system-by-system basis as opposed to a partial rate consolidation basis.  RUCO reserved the right to file updated schedules that would reflect consolidated rates, on either a full or partial basis, during the surrebuttal phase of the proceeding.

RUCO, and ACC Staff filed direct testimony on rate design on Friday, June 26, 2009.  AWC filed rebuttal testimony on required revenue on Friday, July 10, 2009.  The Company filed rebuttal testimony on rate design on Friday, July 24, 2009.  Surrebuttal testimony on required revenue from RUCO, ACC Staff, and other intervenors to the case was filed on Friday, August 7, 2009.  Surrebuttal testimony on rate design was filed on Wednesday, August 12, 2009.  Final rounds of Company rejoinder testimony on required revenue were filed on Friday, August 21, 2009.  AWC filed rejoinder testimony on rate design on Wednesday, August 26, 2009.

The evidentiary hearing on AWC's rate increase request was concluded on Friday, September 11, 2009.  RUCO Director Jodi Jerich personally testified on the issue of rate consolidation for approximately three hours on Thursday, September 10.  RUCO's technical analysts faced approximately 5 hours of cross examination by attorneys representing AWC.  RUCO's in house attorney cross examined all but one of the Company's witnesses over the two-week course of the hearing.

Final accounting schedules were filed on Friday, October 2, 2009. 

Initial closing legal  briefs (which were originally scheduled to be filed on Friday, October 9, 2009) were filed on Friday, October 16, 2009.  A final round of reply legal briefs were filed by the parties to the case on Friday, October 30, 2009.

After weighing all of the evidence presented during the proceeding (including public comments and correspondence from concerned ratepayers) the ALJ assigned to the case issued his Recommended Opinion and Order(link is external) ("ROO") on Monday, July 12, 2010.

RUCO filed exceptions to the ROO on Friday, July 30, 2010.  In its exceptions, RUCO took issue with the ALJ's recommendations regarding rate consolidation, the removal of contributions-in-aid-of-construction associated with certain plant items which were reclassified as plant held for future use, and the inclusion of the Company's Valley Vista Well in rate base.

During a Special Open Meeting held on Wednesday, August 11, 2010, the five ACC Commissioners voted to adopt an amended ROO that will partially consolidate rates for all seventeen of AWC's statewide operating systems.