On April 1, 2008, Johnson Utilities, LLC (“Johnson” or the “Company”) filed a rate application (Application) with the Arizona Corporation Commission ("ACC" or "Commission"). Johnson a is a Class A utility that provides both water and wastewater service to approximately 15,800 water customers and 21,600 wastewater customers of, which over 98 percent are residential ratepayers. The Company provides service in an area of approximately forty-five square miles southeast of Queen Creek in various parts of Pinal County, Arizona. This is the Company’s first rate-case since its original certificate of convenience and necessity was approved in Decision No. 60223, dated May 27, 1997.
According to Johnson’s Application, the Company had adjusted gross revenues of $13,172,899 for the Water Division and $11,288,663 for the Wastewater Division during the test year ended December 31, 2007 (“Test Year”). Operating expenses for the same period totaled $11,054,738 for the Water Division and $10,696,172 for the Wastewater Division thus resulting in an operating income of $2,118,161 and $592,491 respectively. This produced a Test Year rate of return of 32.06 percent for the Water Division and 3.09 percent for the Wastewater Division when applied to the Company-proposed fair value rate base of $6,607,841 and $19,149,173 respectively.
The Company’s Water Division is requesting a decrease of $2,233,480, or –16.96 percent over Test Year adjusted operating revenues; while the Wastewater Division is requesting an increase of $2,239,804 or 19.84 percent over Test Year adjusted operating revenues. The Company-proposed rates will provide Johnson’s Water Division with operating income of $689,198 or a 10.5 percent rate of return on invested capital; while Johnson’s Wastewater Division with operating income of $1,997,259 or a 10.5 percent rate of return on invested capital.
Under the Company-proposed levels of operating revenue, a typical residential water customer will experience a decrease in rates from $42.59 per month to $37.47 per month (-12.02 percent). A typical residential wastewater customer will experience an increase in rates from $38.50 per month to $46.53 per month (20.86 percent).
On Wednesday, February 4, 2009, RUCO filed direct testimony which presented its recommended levels of revenue and its recommended rate of return/operating margin for both the water and sewer divisions. Johnson filed rebuttal testimony on Tuesday, March 10, 2009. RUCO filed surrebuttal testimony on Tuesday, March 31, 2009. The Company filed its rejoinder testimony on Tuesday, April 17, 2009.
The evidentiary hearing on Johnson's rate application began at 10:00 am on Thursday, April 23, 2009 at the ACC's Phoenix offices at 1200 W. Washington. During the first days of the hearing, witnesses faced cross examination from attorneys representing RUCO and intervenor Swing First Golf LLC ("Swing First"). The Administrative Law Judge ("ALJ") suspended the hearing in order to allow attorneys for the Company, ACC Staff and RUCO the opportunity to conduct discovery and file two rounds of legal briefs on a transcript of a recording of a conversation between the witness for Swing First and a manager for Johnson Utilities (the transcript was offered as an exhibit by Swing First's attorney).
RUCO filed its initial brief on the transcript on Monday, May 11, 2009.
A procedural conference was conducted on Thursday, July 23, 2009 to hear oral arguments on the admissibility of the transcript.
The evidentiary hearing on Johnson concluded on Wednesday, October, 7, 2009 at 4:00 p.m. at 1200 W. Washington in Phoenix. Final schedules were filed on Friday, October 30, 2009. Initial closing legal briefs were filed on Friday, November 20, 2009. A second round of reply briefs were filed on Friday, December 11, 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 a Recommended Opinion and Order ("ROO") on Friday May 7, 2010.
On Tuesday, May 18, 2010, RUCO filed exceptions to the ROO related to operating margin, environmental remedies and Central Arizona Groundwater District ("CAGRD") fees.
During the Regular Open Meeting held on Wednesday, May, 26, 2010, the five sitting ACC Commissioners agreed to suspend their final decision on Johnson's rate application until the next scheduled Open Meeting. The parties to the case were asked to file affidavits providing additional information in order to help the five sitting Commissioners make their final decision on the ROO that is before them.
As requested by ACC Chairperson Kris Mayes, RUCO filed an affidavit presenting various operating margins for Johnson on Friday, June, 4, 2010.
During a Special Open Meeting held on Wednesday, August 11, 2010, the five ACC Commissioners voted to adopt an amended ROO which will result in a rate decrease for Johnson's water and wastewater customers.