Black Mountain Sewer Corporation - 2008 Rate Case

Docket Number
Assigned Staff
R. Moore
W. Rigsby
M. Wood


Case Information:


On Friday, December 19, 2008, Black Mountain Sewer Corporation (“BMSC” or “Company”) filed an application for a permanent rate increase(link is external) (“Application”) with the Arizona Corporation Commission (“ACC” or “Commission”). BMSC is a Class B utility that provides wastewater service to approximately 2,106 customers of which 1,972, or 93.6 percent, are residential ratepayers. BMSC’s service territory is located in Carefree, which is just north of the City of Scottsdale in Maricopa County. The Company’s present rates were established in Decision No. 69164, dated December 5, 2006 (RUCO was an intervenor in that proceeding). The Company is a subsidiary of the Algonquin Power Income Fund, a Canadian mutual fund based in Toronto, which also owns other public service companies in Arizona including Bella Vista Water Company, Gold Canyon Sewer Company and Litchfield Park Service Company.

According to BMSC’s application, the Company had adjusted gross revenues of $1,580,170 during the test year ended June 30, 2008 (“Test Year”). Operating expenses for the same period totaled $1,664,655 thus resulting in an operating loss of $84,485. This produced a Test Year rate of return of negative 2.27 percent when applied to the Company-proposed fair value rate base of $3,723,245.

BMSC is requesting an increase of $913,762, or 57.8 percent over Test Year adjusted operating revenues. The Company-proposed rates will provide BMSC with operating income of $476,575 or a 12.8 percent rate of return on invested capital.

Under the Company-proposed level of operating revenue, a typical residential customer will experience an increase in rates from $45.64 per month to $71.08 per month (55.74 percent).

In addition to the requested rate increase described above, the Company is also requesting a new hook-up fee tariff and a new pretreatment tariff.

On Tuesday, January 20, 2009, ACC Staff notified BMSC that its Application was sufficient.

On Friday, January 23, 2009, the Administrative Law Judge ("ALJ") assigned to the case issued a procedural order(link is external) setting the evidentiary hearing in the matter.

On Monday, April 13, 2009, RUCO filed a motion to intervene(link is external) in the case on behalf of residential ratepayers.

On June 12, 2009, ACC Staff filed a motion seeking a 60-day extension due to the resignation of the analyst assigned to the case.

On June 15, 2009, the attorney's for Black Mountain filed a response to ACC Staff's motion opposing the requested 60-day extension.

On Tuesday, June 30, 2009, the ALJ assigned to the case granted ACC Staff's request during a scheduled procedural conference on the matter. The ALJ asked the parties to the case to provide him with a revised schedule for the evidentiary hearing and for filing written testimony.

On Monday, July 20, 2009, the ALJ assigned to the case issued a revised procedural order(link is external) that scheduled the evidentiary hearing in the matter for 9:30 a.m. on Wednesday, November 18, 2009. The previously scheduled hearing for 9:30 a.m. on Monday, September 21, 2009 will be held as a public comment session.

Direct testimony from RUCO and other intervenors was filed on Friday, September 18, 2009.

RUCO is recommending the following revenue increase:





















Fair Value Rate Base

$ 3,723,245

$ 3,745,364




Adjusted Operating Income (Loss)

$ (84,485)

$ (27,286)




Current Rate Of Return (L2 / L1)






Required Operating Income (L5 X L1)

$ 476,575

$ 278,281




Required Rate Of Return On Fair Value Rate Base






Operating Income Deficiency (L4 - L2)

$ 561,060

$ 305,567




Gross Revenue Conversion Factor (RLM-1, Pg 2)






Increase In Gross Revenue Requirement (L7 X L6)

$ 913,763

$ 489,604




Adjusted Test Year Revenue

$ 1,580,170

$ 1,580,170




Proposed Annual Revenue (L8 + L9)

$ 2,493,933

$ 2,069,774




Required Percentage Increase In Revenue (L8 / L9)






Rate Of Return On Common Equity




The Company filed rebuttal testimony on Tuesday, October 20, 2009. RUCO, ACC Staff and other intervenors to the case filed surrebuttal testimony on Monday, November 9, 2009. A final round of rejoinder testimony from the Company was filed on Monday, November 16, 2009. A pre-hearing conference was held at 10:00 am on Tuesday, November 17, 2009.


The rescheduled evidentiary hearing on BMSC concluded on Wednesday, November 25, 2009. Initial closing briefs were filed on Monday, December 14, 2009. A second round of reply briefs were filed on Monday, December 21, 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 Tuesday, August 3, 2010.

On Thursday, August 12, 2010, RUCO filed exceptions to the ALJ's ROO.

During the Regular Open Meeting held on Tuesday, August 24, 2010, the five ACC Commissioners voted to approve the ALJ's recommended rate increase and surcharge to cover the costs of decommissioning BMSC's wastewater treatment facility located in the Boulders HOA community.