Goodman Water Company - 2010 Rate Case

Status
Prior
Docket Number
W-02500A-10-0382
Assigned Staff
T. Coley
J. Jerich
D. Pozefsky
W. Rigsby

 

On Friday September 17, 2010, Goodman Water Company (“GWC” or "Company") submitted an application for an increase in the Company's existing water rates ("Application(link is external)").

GWC provides water utility service to approximately 616 customers of which 612, or 99.4 percent, are residential customers.  The Company serves a development known as Eagle Crest Ranch, which is located in Pinal County two miles south of Oracle Junction on State Highway 77 or approximately 22 miles north of downtown Tucson.

GWC’s present rates were established in Decision No. 69404, dated April 16, 2007 (RUCO was not an intervenor in the proceeding).  Under the approved rates granted in that decision, the average GWC 5/8 x 3/4-inch meter customer bill increased by $36.80 or 122.17 percent to the present average bill of $66.73 per month.

According to GWC’s application, the Company had adjusted gross revenues of $572,751 during the test year ended December 31, 2009 (“Test Year”). Operating expenses for the same period totaled $499,184 resulting in an operating income of $73,567.  This produced a Test Year rate of return of 3.07 percent when applied to the Company-proposed fair value rate base of $2,397,419.

GWC is requesting an increase in revenues equal to $291,083 or an increase of 50.82 percent over Test Year adjusted revenues.  GWC’s proposed rates will provide the Company with operating income of $252,688 and a 10.54 percent rate of return on invested capital.  Under GWC’s proposed level of gross revenues, the average 5/8 x 3/4-inch meter residential customer will experience an increase in rates from $66.73 to $102.19 per month or 53.14 percent.

After the filing on September 17, 2010, GWC's Application was reviewed by ACC Staff over a thirty-day sufficiency period to insure that it met the sufficiency requirements of A.A.C. R-14-2-103 and to determine if the Company should be classified as a Class C water utility1 .

On Monday, October 18, 2010, ACC Staff issued a letter of insufficiency(link is external) informing GWC that discrepancies found in the Company's Application had to be corrected.

On Monday, November 8, 2010, RUCO filed an application to intervene(link is external) in the case shortly after ACC Staff had issued a letter of sufficiency(link is external) informing GWC that its application for increased rates meets the requirements of A.A.C. R14-2-103.

On Tuesday, November 16, 2010, the Administrative Law Judge ("ALJ") assigned to hear the matter issued a Procedural Order(link is external) that scheduled the evidentiary hearing on the matter, granted RUCO's request to intervene and established the filing deadlines for written testimony.

On Monday, December 6, 2010, the ALJ assigned to the case issued a Procedural Order(link is external) granting intervention status to Eagle Crest Ranch residents Lawrence Wawrzyniak and James Schoemperlen.

On Tuesday, February 15, 2011, the ALJ issued a Procedural Order(link is external) scheduling a public comment meeting for  2:00 p.m. on Wednesday, May 18, 2011, at the Desert View Performing Arts Center, 39900 S. Clubhouse Drive, Saddlebrooke, AZ 85739.

On Wednesday, March 16, 2011, the ALJ assigned to the case issued a Procedural Order(link is external)scheduling a telephonic procedural conference for 1:30 p.m. on Wednesday, March 23, 2011 in Room 218, 400 W. Congress in Tucson to discuss a confidentiality issue related to Goodman's shareholder meeting minutes.

Direct testimony from intervenors Wawrzyniak and Schoemperlen was filed on Friday, March 18, 2011.

Direct testimony from ACC Staff and RUCO was filed on Monday, March 21, 2011. 

RUCO's analysis determined that 43.12 percent of GWC’s gross plant in service does not meet the used and useful standard.  This represents excess capacity that should not be accorded rate base treatment.  This is reflected in the schedule below which presents RUCO's recommended original cost/fair value   rate base of $1,729,190 which is $673,031 less than the Company-proposed rate base of $2,402,221.  RUCO's recommended operating revenue and operating expense adjustments result in an $86,767 increase in Test Year operating income.  The aforementioned adjustments, result in a $36,000, or 6.21 percent,  decrease in operating revenue as follows:

 

  (A)(B)

  COMPANYRUCO

LINE OCRB/FVRBOCRB/FVRB

NO.DESCRIPTIONCOSTCOST

    

1Fair Value Rate Base $ 2,402,221 $ 1,729,190

    

2Adjusted Operating Income (Loss)        73,883       160,650

    

3Current Rate Of Return (L2 / L1)3.08%9.29%

    

4Required Operating Income (L5 X L1) $    253,194 $    135,754

    

5Required Rate Of Return On Fair Value Rate Base 10.54%7.85%

    

6Operating Income Deficiency (L4 - L2) $    179,311 $     (24,896)

    

7Gross Revenue Conversion Factor (RLM-1, Pg 2)1.6254        1.4460

    

8Increase In Gross Revenue Requirement (L7 X L6) $    291,454 $     (36,000)

    

9Adjusted Test Year Revenue       572,751       580,110

    

10Proposed Annual Revenue (L8 + L9)       864,205       544,110

    

11Required Percentage Increase In Revenue (L8 / L9)50.89%-6.21%

    

12Rate Of Return On Common Equity 11.00%9.00%

 

Because of the small amount of the decrease in required revenue, RUCO is recommending that the ACC make no change to the Company's level of Test Year revenue.  Under RUCO's recommended rate design (which shifts revenue from the monthly minimum charge and into the Company's commodity charge) GWC's ratepayers will have more control over the amount they are billed for and should see little to no change in their monthly water bills at Test Year levels of consumption.

On Wednesday, April 6, 2011, in mutual agreement with the attorneys representing GWC and ACC Staff, RUCO filed a motion(link is external) requesting an extension on the filing dates for the remaining written testimony on Goodman Water Company's request for a permanent rate increase.

On Monday, April 11, 2011, the ALJ assigned to hear Goodman's request granted RUCO's request to extend the filing dates for remaining written testimony.

Goodman's filed its rebuttal testimony on Monday, May 2, 2011.  Rebuttal testimony from intervenors Wawrzyniak and Schoemperlen was also filed on Monday, May 2, 2011. 

On Wednesday, May 18, 2011, an estimated crowd of one-hundred and fifty residents of the Eagle Crest Ranch community attended the scheduled public comment meeting held at the Desert View Performing Arts Center in Saddlebrooke.  Approximately twenty customers of GWC voiced their opinions on the Company's proposed rate increase in front of four of the five sitting ACC Commissioners.

On Friday, May 27, 2011, the ALJ assigned to the case granted a  request for extension of time to file surrebutttal testimony from ACC Staff and issued a Procedural Order(link is external) rescheduling the evidentiary hearing on the matter from 10:00 a.m. Tuesday, June 14, 2011 to 10:00 a.m. to Tuesday, July 26, 2011 at 400 West Congress in Tucson. The Procedural Order also scheduled a public comment session on the noticed June 14th date and a pre-hearing conference that would be convened immediately following public comment.

Surrebuttal testimony from ACC Staff, RUCO and other intervenors to the case was filed on Monday, June 13, 2011.  A final round of Company rejoinder testimony will is due on Tuesday, July 12, 2011.

In its surrebuttal testimony, RUCO is recommending a slight increase of 1.47 percent.  Under RUCO's recommended rate design, a typical customer, on a 5/8 x 3/4-inch meter consuming 5,520 gallons of water, would pay $66.84 or approximately $0.14 less than the current charge of $66.98 for the same amount of consumption. 

On Tuesday, June 14, 2011, residents of Eagle Crest Ranch filled a hearing room and voiced their concerns during the scheduled public comment session held at 400 West Congress in Tucson. The scheduled pre-hearing conference on the July evidentiary hearing was convened immediately following public comment.

The first three days of the evidentiary hearing on the matter began as scheduled on Tuesday, July 26, 2011 and ended on Thursday, July 28, 2011.  Witnesses for GWC, RUCO and ACC Staff faced cross examination from intervenors Wawrzyniak and Schoemperlen and attorneys representing  GWC, ACC Staff and RUCO.  Witnesses also answered questions posed by the ALJ assigned to the case.

On Thursday, September 8, 2011, the parties to the case informed the ALJ assigned to the matter that a settlement agreement in principle had been reached between GWC, intervenors Wawrzyniak and Schoemperlen and RUCO.  The ALJ was also informed that a meeting had been arranged for 3:00 pm on Thursday, September 8, 2011, for the purpose of briefing ACC Staff on the agreement.

As a result of these events, the ALJ assigned to the case issued a Procedural Order(link is external) that vacated the previously scheduled hearing dates for Monday, September 12, 2011 and Tuesday, September 13, 2011, at 400 West Congress in Tucson.

During the procedural conference conducted on Tuesday, September 13, 2011, the parties to the case discussed dates for the filing of a proposed settlement agreement ("Proposed Settlement Agreement"), the filing of testimony on the settlement agreement and an evidentiary hearing on the settlement agreement with the ALJ assigned to the case.  Later that day, the ALJ issued a Procedural Order(link is external) scheduling the evidentiary hearing on the Proposed Settlement Agreement for 10:00 a.m. on Monday, October 31, 2011 at 400 West Congress in Tucson. 

On Thursday, September 15, 2011, a copy of the Proposed Settlement Agreement (link is external)was filed with the ACC as scheduled.

On Wednesday, September 21, 2011, a Notice of Errata(link is external) was filed which corrected information that appeared on page 2 of the Proposed Settlement Agreement.

On Friday, September 23, 2011, a statement on the Proposed Settlement Agreement(link is external)was released by intervenors Wawrzyniak, Schoemperlen and RUCO.

An informational meeting on the Proposed Settlement Agreement was held at 6:30 p.m. on Monday, October 3, 2011, in the theater center of the Summer Institute of Linguistics located at 16131 N. Vernon Drive, Tucson, AZ 85739.  Residents of the Eagle Crest Ranch Community had the opportunity to meet with intervenors Wawrzyniak, Schoemperlen, RUCO director Jodi Jerich and members of RUCO's staff to  learn more about the Proposed Settlement Agreement that was filed on Thursday, September 15, 2011.

Testimony in support of the Proposed Settlement Agreement was filed as scheduled on Tuesday, October 4, 2011. 

ACC Staff filed a supplemental staff report(link is external) on the proposed settlement agreement on Monday, October 24, 2011.  Staff is recommending a similar phase in of the Proposed Settlement Agreement's level of increased revenue, but includes disputed excess plant capacity in rate base.

The evidentiary hearing on the Proposed Settlement Agreement began as scheduled at 10:00 a.m. on Monday, October 31, 2011.  Public comment was taken at the start of the first day of hearing and witnesses for Goodman Water Company, RUCO faced cross examination from the attorney representing Arizona Corporation Commission Staff.  Intervenor Jim Schoemperlen also testified in support of the Proposed Settlement Agreement.

The evidentiary hearing on the proposed settlement agreement concluded on Tuesday, November 1, 2011. During the second day of the hearing both RUCO and intervenor Larry Wawrzyniak testified in support of the Proposed Settlement Agreement and attorneys for Goodman and RUCO cross examined ACC Staff's witness who opposed the Proposed Settlement Agreement.

The parties to the Proposed Settlement Agreement filed a joint closing brief(link is external) on Friday, December 2, 2011.  ACC Staff also filed its closing legal brief(link is external).

On Monday, January 30, 2012, after weighing the evidence in the case, the ALJ assigned to the matter issued a Recommended Opinion and Order(link is external)  ("ROO") that adopts the proposed settlement agreement reached between Goodman and intervenors Lawrence Wawrzyniak, James Schoemperlen and RUCO.

On Wednesday, February 15, 2012, the five sitting ACC Commissioners adopted the ROO by a vote of 5 - 0 during the Regular Open Meeting held at 1200 W. Washington in Phoenix.  Goodman's phased-in rates will go into effect on Thursday, March 1, 2012.

 

 

1 Based on the Company's requested increase over test year revenues.  Under the Commission's time clock rules, a decision on the Company's request for rate relief would have to be made within 270 days (depending on the length of the evidentiary hearing) of the issuance of the letter of sufficiency.