On Wednesday, November 3, 2010, Arizona-American Water Company ("AAWC" or "Company"), a wholly owned subsidiary of American Water Works Company (NYSE: AWK), filed an application for a permanent rate increase ("Application") with the Arizona Corporation Commission ("ACC" or "Commission") requesting rate increases for the following districts:
| Name of District |
Revenue
Increase |
Percentage
of Increase |
| Agua Fria Water District |
$17,879,283 |
73.10% |
| Havasu Water District |
$634,247 |
49.10% |
| Mohave Water District |
$2,243,206 |
45.80% |
The Company is also seeking an 11.50 percent return on common equity for a weighted average cost of capital of 8.30 percent.
Under the Company-proposed rate increase, 5/8 x 3/4 - inch meter customers of the three water districts would see the following change in their monthly rates:
| Name of District |
Average
Consumption
(Gallons) |
Present
Charge |
Proposed
Charge |
Dollar
Increase |
Pct.
Increase |
| Agua Fria Water District |
7,362 |
$30.33 |
$55.46 |
$25.13 |
82.89% |
| Havasu Water District |
8,334 |
$45.96 |
$69.05 |
$23.09 |
50.29% |
| Mohave Water District |
7,251 |
$16.92 |
$25.42 |
$8.50 |
50.29% |
On Wednesday, December 22, 2010, ACC Staff issued a letter of sufficiency informing AAWC that its application met the requirements of A.A.C. R14-2-103.
On Thursday, January 6, 2011, RUCO filed an Application to Intervene.
On Tuesday, January 4, 2011, the Administrative Law Judge ("ALJ") assigned to the case issued a Procedural Order scheduling a procedural conference on the matter for 1:30 p.m. on Tuesday, January 18, 2011 at the ACC's offices at 1200 W. Washington in Phoenix. During the procedural conference, the parties to the case discussed possible dates for the evidentiary hearing and other procedural issues.
On Thursday, January 20, 2011, the ALJ assigned to hear the case issued a Procedural Order that sets the time and date for the evidentiary hearing on the matter for 1:00 p.m. on Wednesday, August 17, 2011 at the Arizona Corporation Commission's offices at 1200 W. Washington in Phoenix. The Procedural Order also granted RUCO's request to intervene in the case.
On Monday, March 21, 2011, AAWC filed an affidavit with the ACC stating that on Tuesday, February 22, 2011, a notice of the proposed rate increase, as required by the January 20, 2011 Procedural Order, was published in the following newspapers:
The Daily News-Sun (Sun City area)
Today’s News-Herald (Lake Havasu area)
The Mohave Valley Daily News (Bullhead City area)
AAWC also stated in the affidavit that, as also required by the Procedural Order dated January 20, 2011, the notice was mailed to all of the affected customers as an insert in their February 2011 billing statements.
On Monday, June 6, 2011 RUCO filed a motion seeking a one week extension of the filing deadlines for all written testimony in order to give its engineering consultant additional time to conduct his analysis. None of the other parties to the case objected to RUCO's request.
On Wednesday, June 15, 2011, the ALJ assigned to the case issued a Procedural Order granting RUCO's request for filling extensions.
Direct testimony on required revenue from RUCO and other intervenors was filed on Monday, June 27, 2011.
RUCO is recommending the following:
REVENUE REQUIREMENT - AGUA FRIA DISTRICT
| |
|
(A) |
(B) |
| |
|
COMPANY |
RUCO |
| LINE |
|
OCRB/FVRB |
OCRB/FVRB |
| NO. |
DESCRIPTION |
COST |
COST |
| |
|
|
|
| 1 |
Original Cost Rate Base |
$134,004,764 |
$ 99,675,677 |
| |
|
|
|
| 2 |
Adjusted Operating Income (Loss) |
$572,084 |
$972,665 |
| |
|
|
|
| 3 |
Current Rate Of Return (L2 / L1) |
0.43% |
0.98% |
| |
|
|
|
| 4 |
Required Operating Income (L5 X L1) |
$11,122,395 |
$6,172,881 |
| |
|
|
|
| 5 |
Required Rate Of Return On Fair Value Rate Base |
8.30% |
6.19% |
| |
|
|
|
| 6 |
Operating Income Deficiency (L4 - L2) |
$10,550,311 |
$5,200,216 |
| |
|
|
|
| 7 |
Gross Revenue Conversion Factor (RLM-1, Page 2) |
1.6611 |
1.6611 |
| |
|
|
|
| 8 |
Increase In Gross Revenue Requirement (L7 X L6) |
$17,524,862 |
$8,637,951 |
| |
|
|
|
| 9 |
Adjusted Test Year Revenue |
$24,312,187 |
$24,395,221 |
| |
|
|
|
| 10 |
Proposed Annual Revenue (L8 + L9) |
$41,837,049 |
$33,033,172 |
| |
|
|
|
| 11 |
Required Percentage Increase In Revenue (L8 / L9) |
72.08% |
35.41% |
| |
|
|
|
| 12 |
Rate Of Return On Common Equity |
11.50% |
9.50% |
REVENUE REQUIREMENT - HAVASU DISTRICT
| |
|
(A) |
(B) |
| |
|
COMPANY |
RUCO |
| LINE |
|
OCRB/FVRB |
OCRB/FVRB |
| NO. |
DESCRIPTION |
COST |
COST |
| |
|
|
|
| 1 |
Original Cost Rate Base |
$3,627,542 |
$3,630,812 |
| |
|
|
|
| 2 |
Adjusted Operating Income (Loss) |
$(77,102) |
$(119,582) |
| |
|
|
|
| 3 |
Current Rate Of Return (L2 / L1) |
-2.13% |
-3.29% |
| |
|
|
|
| 4 |
Required Operating Income (L5 X L1) |
$301,086 |
$224,855 |
| |
|
|
|
| 5 |
Required Rate Of Return On Fair Value Rate Base |
8.30% |
6.19% |
| |
|
|
|
| 6 |
Operating Income Deficiency (L4 - L2) |
$378,188 |
$344,437 |
| |
|
|
|
| 7 |
Gross Revenue Conversion Factor (RLM-1, Page 2) |
1.6712 |
1.6712 |
| |
|
|
|
| 8 |
Increase In Gross Revenue Requirement (L7 X L6) |
$632,015 |
$575,611 |
| |
|
|
|
| 9 |
Adjusted Test Year Revenue |
$1,266,066 |
$1,280,618 |
| |
|
|
|
| 10 |
Proposed Annual Revenue (L8 + L9) |
$1,898,081 |
$1,856,229 |
| |
|
|
|
| 11 |
Required Percentage Increase In Revenue (L8 / L9) |
49.92% |
44.95% |
| |
|
|
|
| 12 |
Rate Of Return On Common Equity |
11.50% |
9.50% |
REVENUE REQUIREMENT - MOHAVE DISTRICT
| |
|
(A) |
(B) |
| |
|
COMPANY |
RUCO |
| LINE |
|
OCRB/FVRB |
OCRB/FVRB |
| NO. |
DESCRIPTION |
COST |
COST |
| |
|
|
|
| 1 |
Original Cost Rate Base |
$11,567,057 |
$10,292,864 |
| |
|
|
|
| 2 |
Adjusted Operating Income (Loss) |
$(379,959) |
$(379,316) |
| |
|
|
|
| 3 |
Current Rate Of Return (L2 / L1) |
-3.28% |
-3.69% |
| |
|
|
|
| 4 |
Required Operating Income (L5 X L1) |
$960,066 |
$637,434 |
| |
|
|
|
| 5 |
Required Rate Of Return On Fair Value Rate Base |
8.30% |
6.19% |
| |
|
|
|
| 6 |
Operating Income Deficiency (L4 - L2) |
$1,340,025 |
$1,016,749 |
| |
|
|
|
| 7 |
Gross Revenue Conversion Factor (RLM-1, Page 2) |
1.6692 |
1.6692 |
| |
|
|
|
| 8 |
Increase In Gross Revenue Requirement (L7 X L6) |
$2,236,751 |
$1,697,143 |
| |
|
|
|
| 9 |
Adjusted Test Year Revenue |
$ 4,904,260 |
$ 4,981,477 |
| |
|
|
|
| 10 |
Proposed Annual Revenue (L8 + L9) |
$ 7,141,010 |
$ 6,678,621 |
| |
|
|
|
| 11 |
Required Percentage Increase In Revenue (L8 / L9) |
45.61% |
34.07% |
| |
|
|
|
| 12 |
Rate Of Return On Common Equity |
11.50% |
9.50% |
RUCO is also recommending that the ACC disallow recovery of 50 percent of the cost of the company's White Tank water treatment facility.
Direct testimony on required revenue from ACC Staff was filed on Tuesday, June 28, 2011.
RUCO's direct testimony on rate design was filed on Tuesday, July 5, 2011.
AAWC's rebuttal testimony was filed on Friday, July 15, 2011.
On Monday, July 25, 2011, the ALJ assigned to the case issued a Procedural Order scheduling two public comment meetings on AAWC's request for a permanent rate increase. Ratepayers can voice their concerns to ACC Commissioners at 6:00 p.m. on Monday, August 22, 2011, at Sonoran Plaza, located at 19753 N. Remington Drive, Surprise, Arizona 85374, and at 6:00 p.m. on Thursday, August 25, 2011, at Mohave High School, located at 2251 Highway 95, Bullhead City, Arizona, 86442.
ACC Staff, RUCO and other intervenors to the case filed surrebuttal testimony on Tuesday, August 2, 2011.
Under RUCO's recommended increase, 5/8 x 3/4 - inch meter customers of the three water districts would see the following change in their monthly rates:
| Name of District |
Average
Consumption
(Gallons) |
Present
Charge |
RUCO
Recommended
Charge |
Dollar
Increase |
Pct.
Increase |
| Agua Fria Water District |
7,362 |
$30.32 |
$40.70 |
$10.39 |
34.25% |
| Havasu Water District |
8,334 |
$45.95 |
$66.94 |
$20.99 |
45.68% |
| Mohave Water District |
7,251 |
$16.91 |
$24.01 |
$7.10 |
42.00% |
A final round of rejoinder testimony was filed by AAWC on Tuesday, August 9, 2011.
On Wednesday, August 17, 2011, the ALJ assigned to hear AAWC's rate increase request issued a Procedural Order that continues the evidentiary portion of the hearing in the matter to a future date to be determined at a procedural conference scheduled for Monday, September 19, 2011. In addition to suspending the hearing, the ALJ also extended the deadline for filing as an intervenor in the case until August 24, 2011.
The Procedural Order was issued in light of Arizona-American's failure to provide proper notice of the rate case proceeding to a large number of its Agua Fria Water District customers. The scheduled first day of the hearing, held on Wednesday afternoon, August 17, 2011, was limited to public comment only.
On Monday, August 22, 2011, over 850 concerned individuals attended the first of the two scheduled public comment meetings on AAWC's Application. Ratepayers voiced their opinions to three of the five sitting ACC Commissioners during the meeting held on Monday, August 22, 2011, at Sonoran Plaza in Surprise, Arizona.
A second public comment meeting was conducted by the ACC on Thursday, August 25, 2011, at Mohave High School in Bullhead City.
During the procedural conference held on Monday, September 19, 2011, the parties to the case discussed possible dates for an evidentiary hearing and the filing of written testimony from new intervenors to the case who requested intervention by the August 24, 2011 filing deadline.
On Friday, September 23, 2011, the ALJ assigned to the case issued a Procedural Order scheduling the evidentiary hearing on the matter for 10:00 a.m. on Monday, December 5, 2011. Additional hearing dates have been scheduled for December 6, 7, 8, 9, 12, 15, and 16, 2011.
Direct testimony from new intervenors was filed on or before Thursday, November 10, 2011.
AAWC filed rebuttal testimony on Thursday, November 17, 2011.
Surrebuttal testimony from any party responding to new intervenors and/or AAWC was filed on Thursday, December 1, 2011.
A pre-hearing conference was held on Friday, December 2, 2011 at 9:00 a.m.
The evidentiary hearing on the Company's rate request began as scheduled on Monday, December 5, 2011, at 1200 W. Washington in Phoenix. Opening statements were heard from the attorney's representing the parties to the case after AAWC customers were given the opportunity to make public comment.
On Wednesday, December 7, 2011, the parties to the case informed the ALJ assigned to hear AAWC's rate request that they expected to reach a global settlement agreement that would be filed on Friday, December 9, 2011. The ALJ granted the parties' request to recess the hearing in order to provide time for the parties to the case to finalize a letter of intent on a proposed settlement agreement.
On Thursday, December 8, 2011, the parties to the case filed a letter of intent with the ACC.
On Thursday, December 15, 2011, the parties to the case filed a proposed settlement agreement ("Settlement Agreement") with the ACC. On that same day, RUCO Director Jodi A. Jerich filed direct testimony in support of the Settlement Agreement.
The evidentiary hearing on the Settlement Agreement concluded on Friday, December 16, 2011. Final arguments were given orally by the attorneys representing the parties to the case at the end of the hearing in lieu of filing closing legal briefs.
After weighing the evidence presented during the proceeding, including comments from concerned ratepayers, the ALJ assigned to the case issued a Recommended Opinion and Order ("ROO") on Tuesday, April 3, 2012 that adopts the proposed settlement agreement.
On Thursday, April 12, 2012 the signatory parties to the proposed settlement agreement filed a response to the ROO which concurred with the ALJ's conclusions and respectfully requested that the Commission adopt the ROO.
During the Regular Open Meeting held on Tuesday, April 24, 2012, the five sitting ACC Commissioners voted to approve the Proposed Settlement Agreement by a vote of 5-0.
