On August 29, 2008, Far West Water and Sewer Company (“Far West” or the “Company”) filed an application with the Arizona Corporation Commission ("ACC" or "Commission") for an increase in permanent rates (“Application”) for the Company’s Sewer Division. Far West’s Sewer Division is a Class A utility that provides wastewater service to approximately 7,237 customers of which 7,199, or 99.5 percent, are residential ratepayers. Far West’s service territory is located along Interstate 8, just east of the City of Yuma, in an unincorporated portion of Yuma County known as the foothills area. The Company’s present rates were established in Decision No. 69335, dated February 20, 2007 (RUCO was an intervenor in that proceeding). Far West was ordered to file its Application under Decision No. 69335. The Company is a closely held C corporation.
According to Far West’s Application, the Company’s Sewer Division had adjusted gross revenues of $2,139,964 during the test year ended December 31, 2007 (“Test Year”). Operating expenses for the same period totaled $2,999,582 thus resulting in an operating loss of $859,617. This produced a Test Year rate of return of negative 3.67 percent when applied to the Company-proposed fair value rate base of $23,415,596 (the Company has not performed a reconstruction cost new study and is treating its original cost rate base as its fair value rate base).
Far West is requesting an increase of $4,595,748, or 214.8 percent over Test Year adjusted operating revenues. The Company-proposed rates will provide Far West with operating income of $1,962,224 or an 8.38 percent rate of return on invested capital.
Far West is proposing that the rate increase be phased-in over a three year period. Under the Company-proposed phase-in plan, a typical residential customer will experience a $32.63 increase in rates from $21.75 per month to $54.38 per month (150.0 percent) in the first phase. In Phase 2, a typical residential customer will experience a $9.78 increase in rates from $54.38 per month to $64.16 per month (18.0 percent). In the third and final phase, a typical residential customer will experience a $10.16 increase in rates from $64.16 per month to $74.32 per month (15.8 percent).
Far West states that the rate increase is needed in order to recover approximately $20 million in plant improvements that were required by two consent agreements that the Company entered into with the Arizona Department of Environmental Quality (“ADEQ”).
On Wednesday, November 12, 2008 RUCO filed a request for intervention which was approved by the ACC's Hearing Division.
On Friday, December 19, 2008, Far West filed an application for interim emergency rates.
On Tuesday, January 27, 2009, the Administrative Law Judge ("ALJ") assigned to the case issued a procedural order which suspended the time clock on Far West's permanent rate proceeding and vacated the procedural schedule and hearing date that was established in a prior procedural order.
On Wednesday, September 2, 2009, the Administrative Law Judge ("ALJ") assigned to the case issued a Recommended Opinion and Order ("ROO") on Far West's request for emergency interim rates. The ALJ recommended that the ACC deny Far West's request. The ALJ also recommended that Far West's management provide a plan on how to complete improvements to its sewer system and that ACC Staff investigate the possibility of appointing an interim manager.
At the ACC's Regular Open Meeting on September 22, 2009, the five ACC Commissioners agreed to pull Far West's request from the agenda and delay voting on it until the next Regular
Open Meeting. The Commission's decision to pull the request was made after attorneys for the Company reported that an unaffiliated business entity, that belongs to the owners of Far West, was in the process of securing a $5.5 million loan. According to Far West's attorneys, the loan proceeds would be contributed to the Company and recorded on Far West's books as paid in equity capital (as opposed to additional debt). The funds would then be used to pay off creditors in order to complete ADEQ mandated wastewater plant improvements. The additional equity capital would eliminate the need for the interim rates requested by Far West. The thirty-day delay would give Far West time to arrange the $5.5 million equity infusion.
During subsequent Open Meetings held in October and November, the five Commissioners decided to postpone a vote on the Company's interim rate request in order to give Far West time to finalize the loan agreement. At the Regular Open Meeting held on November 19, 2009, Far West reported that funding of the loan was expected to occur within the next two weeks. The Commissioners heard public comment from Far West ratepayers and agreed to postpone their vote once more.
At the Regular Open Meeting held on Wednesday, December 16, 2009, the five sitting Commissioners adopted an amended ROO that denied the Company's request for interim rates. According to the Company's attorney, Far West expected to receive the aforementioned loan proceeds on Friday, December 18, 2009.
On December 17, 2009, The ALJ assigned to the case issued a procedural order scheduling a procedural conference for Wednesday, January, 20, 2010 for the purpose of discussing how the permanent rate case should proceed.
During the procedural conference, held on Wednesday January 20, 2010, A new attorney for Far West requested a 6 to 8 week continuance of the procedural conference in order to put together a plan for going forward with the permanent rate case. The Company also agreed to file a report on the aforementioned loan funding on February 4, 2010, and to provide a report on the status of the new wastewater plant.
On Thursday, January 21, 2010, the ALJ assigned to Far West Sewer's request for a permanent rate increase issued a procedural order which scheduled a procedural conference for 10:00 a.m. on Wednesday, March 24, 2010 at 400 W. Congress in Tucson, for the purpose of discussing a procedural schedule on the Company's rate increase request. Far West was also ordered to file a report addressing the payment of its annual ACC assessment by Thursday, February 4, 2010.
During the procedural conference held on Wednesday, March 24, 2010 in Tucson, the attorney representing Far West announced the Company's intention to withdraw its Application. Far West's Attorney also stated that the sewer company intended to file a new rate application sometime during the Spring of 2011 after an ADEQ consent decree is satisfied and new wastewater treatment plant has been put into service. Later that day, the Company filed a Motion to Withdraw Application with the ACC.
On Tuesday, April 13, 2010, the ALJ assigned to the case issued a procedural order that leaves the existing docket open for compliance purposes only (i.e. the filing of reports and ACC Staff's study on the possible appointment of an interim manager).
On December 3, 2010, ACC Staff filed a request for a procedural conference to discuss Far West’s progress in obtaining capital, completing its capital projects, the status of the Company’s rate filing, and Staffs investigation into the need for an interim operator. ACC Staff's request was granted by the ALJ assigned to the case who issued a Procedural Order scheduling a telephonic procedural conference for Wednesday, January 5, 2011.
During the scheduled telephonic procedural conference, Far West agreed to take part in an informational meeting concerning the status of the Company's wastewater plant construction and financing. On Monday, January 31, 2011, Far West filed a notice of the aforementioned meeting which contained a copy of the meeting agenda.
On Thursday, February 3, 2011, Far West's attorney e-mailed a set of documents to be handed out to participants at the scheduled informational meeting.
The informational meeting concerning the status of Far West Water & Sewer Company's wastewater treatment plant construction and financing was held from 10:00 a.m. to 12:00 p.m. on Friday, February 4, 2011 at RUCO's offices at 1110 W. Washington in Phoenix.
During the meeting, Far West's attorney updated members of ACC Staff, RUCO, and intervenors Barbara and Robert Gilkey and Robert Rist on the current status of the Company's wastewater plant upgrades, payments to vendors, and a planned future issuance of preferred stock. Officers of Far West and their financial advisor answered questions that were posed to them during the meeting.
On Friday, February, 18, 2011, the ALJ assigned to the case issued a procedural order scheduling a telephonic procedural conference, to discuss the status of the docket, for 10:00 a.m. on Wednesday, March 23, 2011.
During the March 23, 2011 telephonic procedural conference, Company representatives, ACC Staff, RUCO and Intervenors Mr. and Mrs. Gilkey and Mr. Robert Rist discussed a pending complaint from Palm Shadows residents relating to strong odors and spills, the need to resolve an existing financing agreement, the completion of Section 14, the decommissioning of Palm Shadows and the Company acquiring or being required to secure additional management assistance. Although the Company initially indicated the financing would be complete by March 31, 2011, and Section 14 would be completed within 30 days thereafter, the Company now asserts that due to Mr. Capestro’s recent hospitalization, deadlines will be delayed by 30 days. Staff, RUCO and intervernors indicated concerns about on-going delays in completion of financing arrangement and Section 14 and decommissioning of Palm Shadows. The ALJ or Staff may institute additional proceedings regarding additional management if the initial deadlines are not met.
Far West has been filing a series of status reports with the Commission in order to keep the parties to the case updated on the progress of the wastewater treatment plant upgrades.
On Friday, August 10, 2012, Far West filed a motion requesting that the docket be closed in light of ACC Staff's issuance of a letter of sufficiency on Far West's application for a permanent increase in rates that was filed with the Commission on Friday, July 6, 2012.
On Tuesday, July, 2, 2013, the ALJ assigned to the case issued a procedural orderproviding parties with the opportunity to file objections to Far West’s Motion by July 26, 2013. The order placed the parties on notice that if no objections are received, then the matter may be administratively closed.
On Thursday, August 1, 2013, the ALJ assigned to the case issued a Procedural Orderthat administratively closed the matter.