Gold Canyon Sewer Company - Rate Case Filing

Docket Number
Assigned Staff
M. Diaz Cortez
R. Moore
W. Rigsby
S. Wakefield
D. Pozefsky


On January 13, 2006, Gold Canyon Sewer Company (“GCSC” or “Company”) filed an application with the Arizona Corporation Commission (“ACC” or “Commission”) seeking rate relief in the amount of $2,474,767, which represents a 101 percent increase over adjusted operating revenues of $2,451,576 recorded during the test year ended October 31, 2005.

On February 17, 2006, ACC Staff issued a Letter of Sufficiency informing the Company that its application meets the filing requirements of A.A.C. R14-2-103.

On February 27, 2006 the administrative law judge ("ALJ") assigned to the case issued a procedural order that established the rules for discovery and the original filing dates for testimony.  

On March 3, 2006, a second procedural order was issued rescheduling the hearing date.  

RUCO filed a motion to intervene in the case with the ACC’s Hearing Division on March 15, 2006.  

On June 20, 2006, in response to a request by ACC Staff, the ALJ assigned to the case issued a revised procedural order that modified the filing dates for the remainder of the pre-filed testimony.  

On August 9, 2006, the ALJ assigned to the case issued a procedural order scheduling a public comment session on September 13, 2006 at 6:00 p.m. in the Superstition Room of the Mountainbrook Village Activities Center at 5674 Marble Drive in Gold Canyon, AZ.  Also on August 9, 2006, Commissioner Kris Mayes filed a letter in the docket addressing the odor issue in the case.

During the discovery phase of the proceeding (the period prior to hearing) RUCO’s staff issued data requests to obtain further information on Gold Canyon's application and conducted a full audit and cost of capital analysis.

ACC Staff1 , RUCO and other intervenors to the case filed their direct testimony on Friday, June 16, 2006.  RUCO's direct testimony position is as follows:







  Fair Value Rate Base$16,108,688$13,368,387


  Adjusted Operating Income (Loss)$171,878$538,818


  Current Rate Of Return (L2 / L1)1.07%4.03%


  Required Operating Income (L5 X L1)$1,691,412$1,177,755


  Required Rate Of Return On Fair Value Rate Base10.50%8.81%


  Operating Income Deficiency (L4 - L2)$1,519,534$638,937


  Gross Revenue Conversion Factor (RLM-1, Pg 2)1.62861.6286


  Increase In Gross Revenue Requirement (L7 X L6)$2,474,767$1,040,595


  Adjusted Test Year Revenue$2,496,380$2,496,369


  Proposed Annual Revenue (L8 + L9)$4,971,147$3,536,964


  Required Percentage Increase In Revenue (L8 / L9)99.13%41.68%


  Rate Of Return On Common Equity10.50%9.04%



Under RUCO's recommended rates, residential customers would see an increase of $14.83 per month as opposed to the Company-proposed increase of $35.34 per month.

The Company filed rebuttal testimony on July 27, 2006.  ACC Staff, and RUCO filed surrebuttal testimony on Wednesday, August 30, 2006.  Gold Canyon will file a final round of rejoinder testimony on Wednesday, September 13, 2006.

In its surrebuttal testimony, RUCO revised its earlier recommendations downward as can be seen in the following comparison:







1Fair Value Rate Base$16,108,688$15,743,898$13,368,387$13,062,308


2Adjusted Operating Income (Loss)$171,878$241,749$538,818$552,940


3Current Rate Of Return (L2 / L1)1.07%1.54%4.03%4.23%


4Required Operating Income (L5 X L1) $1,691,412 $1,653,109 $1,177,755 $1,115,521


5Required Rate Of Return On Fair Value Rate Base10.50%10.50%8.81%8.54%


6Operating Income Deficiency (L4 - L2)$1,519,534$1,411,360$638,937$562,581


7Gross Rev. Conversion Factor (SURR RLM-1, Pg 2)1.62861.62861.62861.6286


8Increase In Gross Revenue Requirement (L7 X L6)$2,474,767$2,298,590$1,040,595$916,239


9Adjusted Test Year Revenue$2,496,380$2,496,380$2,496,369$2,496,380


10Proposed Annual Revenue (L8 + L9)$4,971,147$4,794,970$3,536,964$3,412,619


11Required Percentage Increase In Revenue (L8 / L9)99.13%92.08%41.68%36.70%


12Rate Of Return On Common Equity10.50%10.50%9.04%8.60%

On Monday, September 25, 2006 during the scheduled pre-hearing conference, the Company informed the ALJ that their lead attorney was recovering from a recent injury and would not be able to take part in the hearing for about a month.  The Company agreed to waive the time clock rules for 30 days.  On September 28, 2006 the ALJ assigned to the case issued a revised procedural order rescheduling the evidentiary hearing on the Company's rate increase request.  The original noticed hearing set for 10:00 a.m. on October 3, 2006 served as a public comment session for anyone who wanted to express an opinion on the Company's requested rate increase.  

The rescheduled evidentiary hearing on the Company's request for a rate increase began on Wednesday, November 1, 2006.  Witnesses from the Company and RUCO's cost of capital witness testified over a three day period.  The hearing was recessed on Friday afternoon, November 3, 2006  and resumed on Monday, December 4, 2006.  During that time RUCO's witness on revenue requirements testified along with witnesses for ACC Staff and Mr. Trevor Hill, a former official of Algonquin Water Resources of America.  Prior to the resumption of the hearing on December 4, 2006, the Company filed the testimony of Mr. Hill (November 13, 2006) and on November  22, 2006, RUCO filed its response to Mr. Hill's testimony.  After two full days, the hearing was recessed again on Tuesday afternoon, December 5, 2006  and resumed on Monday, December 11, 2006.  During that time the remaining ACC Staff witness testified along with three rebuttal witnesses for the Company.

The evidentiary hearing for Gold Canyon Sewer Company was concluded at 2:00 p.m. on Monday, December 11, 2006.  Initial briefs were filed on Friday, January 19, 2007 by the attorneys who represent the various parties to the case.  Reply briefs were filed as scheduled on Friday, February 2, 2007.  After weighing all of the evidence presented during the proceeding, the ALJ assigned to the case issued his Recommended Opinion and Order ("ROO") on June 6, 2007.

On June 15, 2007 RUCO filed exceptions to the ROO, arguing against the ROO's recommendations on the excess capacity and rate case expense issues which RUCO raised during the proceeding.

At the regular open meeting held on June 26, 2007 at 1200 W. Washington in Phoenix, the five Commissioners adopted two proposed amendments to the ROO.  One was a Hearing Division amendment that corrected errors in the ROO and the other was an amendment submitted by Commissioner Kris Mayes which reduced the amount of recoverable rate case expense from $160,000 to $70,00 (resulting in a $0.34 reduction in monthly rates).  After a lengthy debate and discussion on the ROO and other rate-lowering amendments (including one seeking adoption of RUCO's recommended hypothetical capital structure and another supporting RUCO's excess capacity position) which were submitted by Commissioner Mayes, the amended order passed by a final vote of three to two.

On July 18, 2007 RUCO filed an Application for Rehearing 

requesting that the ACC reconsider its decision to increase Gold Canyon's rates



RUCO stated in its filing that the 72.02 percent increase is not reasonable or fair to Gold Canyon customers under the facts and circumstances of the case. RUCO also stated that the final decision heavily favors the sewer company’s interests over the interests of the ratepayers







RUCO submitted the application on the final day of a twenty day period in which parties to utility rate case proceedings can request a rehearing on final decisions rendered by the ACC. The Commission has twenty days to consider RUCO’s request and act on it. If no action is taken during the twenty day period the decision stands.

On August 1, 2007 four of the five ACC Commissioners voted to approve RUCO's request to rehear three specific issues in the Gold Canyon rate case.  The vote came after approximately thirty minutes of contentious debate among the five Commissioners during a regularly scheduled staff meeting at the ACC's Phoenix office







No date or time was set for the rehearing which will deal with the issues of excess capacity, hypothetical capital structure and rate case expense.








On August 28, 2007 the ALJ assigned to the case issued a procedural order which scheduled a procedural conference for Wednesday, September 5, 2007 at 3:00 p.m. at the Commission's Phoenix office.  During the scheduled procedural conference the parties to the case discussed possible dates for a hearing and other procedural issues (such as the filing of written testimony).  The parties agreed that RUCO should file rehearing (direct) testimony on Friday, September 28, 2007.  This will be followed by a round of responsive testimony from the Company and ACC Staff on Friday, October 26, 2007.  Responses to discovery requests will be provided in seven calendar days from the date of receipt.  The rehearing in the matter was tentatively scheduled for Tuesday, November 13, 2007 at the Commission's Phoenix Office at 1200 W. Washington.  

On September 14, 2007, the ALJ assigned to the case issued a procedural order 

setting the date of the evidentiary hearing for 10:00 a.m. on November 13, 2007 at the ACC's Phoenix office at 1200 W. Washington.


RUCO filed its Rehearing (direct) Testimony a

s scheduled on September 28, 2007.


On October 10, 2007, Gold Canyon filed a request seeking an extension of time to file the Company's responsive testimony that is due on October 27, 2007. 

On October 12, 2007, ACC Staff filed a request for an extension of time to its responsive testimony.

On October 15, 2007, the ALJ assigned to the case issued a procedural order 

granting Gold Canyon's and ACC Staff's requests.  Responsive testimony was filed on Tuesday, October 30, 2007.


Due to a fire at the Arizona Corporation Commission building, the rehearing for Gold Canyon Sewer Company was rescheduled for 10:00 a.m. on November 14, 2007 at the Arizona State Capital Executive Tower Building. The rehearing was recessed at 5:00 p.m. All three of RUCO's witnesses testified during the first day of the rehearing and were cross-examined by the Company's attorney, lawyers for ACC Staff, ALJ Dwight Nodes and Commissioner Kris Mayes. On December 12, 2007, the ALJ issued a Procedural Order that rescheduled the rehearing for February 25 and 26, 2008, at the Commission's Phoenix office at 1200 W. Washington. During the second day of the rehearing, RUCO's attorney cross-examined witnesses for the Company.

The third day of the rehearing was held on March 31, 2008, at the Commission's Phoenix office at 1200 W. Washington. During day three, RUCO's attorney cross- examined witnesses for ACC Staff who testified on the hypothetical capital structure, rate case expense and excess capacity issues that are the subject of the proceeding. ACC Staff witnesses were also cross-examined by Gold Canyon's attorney, ALJ Dwight Nodes, ACC Chairman Mike Gleason, Commissioner Kris Mayes and Commissioner Gary Pierce. The rehearing was recessed around 12:30 p.m. RUCO's policy witness was unable to testify as scheduled due to an unexpected illness.

On April 1, 2008, rehearing supplemental testimony on the hypothetical capital structure issue was filed by RUCO.

After the third day of hearing, the attorneys for the parties to the case decided that no additional days of hearing would be needed. RUCO agreed to withdraw its supplemental testimony on the hypothetical capital structure issue in the case but gave judicial notice of the 2006 Algonquin Power Income Fund Annual Report that was contained in the testimony. RUCO filed its rehearing closing brief as scheduled on May 5, 2008. Reply briefs were filed on May 22, 2008.

After the filing of reply briefs, Judge Nodes issued his Recommended Opinion and Order ("ROO").

At a scheduled Open Meeting, the five ACC Commissioners voted to adopt RUCO's positions on excess capacity and capital structure.  The Commission later voted on a second Decision which clarified the intent of the first Decision.


1 ACC Staff filed its direct testimony on its recommended level of revenue and recommended rate design on Friday, June 23, 2006.