On April 1, 2008, Johnson Utilities, LLC (“Johnson” or the “Company”) filed a rate application (Application) with the Arizona Corporation Commission ("ACC" or "Commission") requesting a decrease of $2,233,480, or a negative 16.96 percent over Test Year adjusted operating revenues, for the Company's Water Division and an increase of $2,239,804 or 19.84 percent over Test Year adjusted operating revenues for Johnson's Wastewater Division.
During a Special Open Meeting held on Wednesday, August 11, 2010, the five sitting ACC Commissioners voted to adopt Decision No. 71854, which decreased Johnson's water and wastewater revenues by $3,398,960 and $1,667,019 respectively, thus resulting in lower rates for Johnson's water and wastewater customers.
On Wednesday, March 2, 2011 Johnson petitioned the ACC to amend Decision No. 71854 ("Petition"), which established the Company's current rates and charges.
In its Petition, Johnson sought the following amendments:
1. A change in the $40 per month late fee in the Company's wastewater division tariff to a late fee of 1.5% per month on the unpaid account balance, consistent with the Company's water division tariff.
2. The addition, back into to rate base, of $18,244,755 in wastewater division plant which the Company claims was erroneously disallowed in the rate case. The amount consists of: (i) a $10,892,391 deduction to rate base for alleged inadequately supported wastewater plant costs; and (ii) a $7,352,364 deduction to rate base for alleged affiliate profit associated with affiliate-constructed wastewater plant.
3. The removal, from rate base, of $6,931,078 in unexpended test year hook-up fees.
4. The reinstatement of the Company's previously authorized hook-up fees for new water and sewer connections.
5. The establishment of a rate of return for the Company based upon its weighted average cost of capital in the range of 8.1 8% to 11.89%.
6. the Reclassification of $2,201,386 of wastewater plant erroneously as post test year wastewater plant in the rate case application to test year plant-in-service.
7. The inclusion, in the Company's plant-in-service account, of $1,021,076 in post test-year wastewater plant which is necessary to serve the test year-end level of customers.
8, The inclusion of imputed income tax expense in the Company's revenue requirement, consistent with the understanding hereinafter described.
On Wednesday, April 6, 2011, at the direction of the five ACC Commissioners, the Administrative Law Judge ("ALJ") assigned to hear Johnson's Petition issued a Procedural Order scheduling a procedural conference for 11:30 a.m. on April 12, 2011 to allow the parties to the case (including RUCO) to discuss procedural issues including a timeframe for the parties to file responses to the Petition.
During the procedural conference held on April 12, 2011, the ALJ adopted the recommendations of the parties to the case as to how the Commission should proceed on the matter.
Attorney's for ACC Staff and RUCO filed their responses to Johnson's Petition on June 1, 2011. Also on that date Johnson filed a document which shows the rate impact of its request.
Johnson's reply to the responses was filed on June 15, 2011.
During a scheduled Open Meeting on July 12, and 13, 2011, four of the five ACC Commissioners voted to reopen Dec. No. 71854 for the limited purpose of reconsidering Johnson's Petition.
On Tuesday, August 2. 2011, a public comment meeting on Johnson's Petition was held at at 6:00 p.m. at the Sun City Anthem at Merrill Ranch Union Center, 3925 Sun City Boulevard, Florence, AZ 85132.
Over one hundred residents served by Johnson Utilities attended the public comment meeting and over thirty concerned individuals voiced their opinions on Johnson's Petition. All five ACC Commissioners were in attendance for the public comment meeting.
During an Open Meeting held on Thursday, August 11, 2011, the five sitting Commissioners decided to delay their vote on Johnson's Petition in order to give ACC Staff time to write a proposed order, containing changes to the Company's Petition that Johnson had agreed to, so the five Commissioners could see the impact of the changes and vote on the proposed order during a future scheduled open meeting.
On Friday, August 26, 2011, ACC Staff filed a memorandum related to possible changes to Decision No. 71854 for the purpose of aiding Commissioners in considering the changes agreed to by Johnson. Later that same day, ACC Staff filed a Sample Form of Order Amending Decision No. 71854.
During the Regular Open Meeting held on Tuesday, September 6, 2011, the five sitting Commissioners adopted ACC Staff's proposed order by a vote of 3 yes, 1 no and 1 abstention.
On Thursday, September 15, 2011, the Commission issued Decision No. 72579 which established revised rates and charges for Johnson. The Decision also included a dissenting opinion by Commissioner Sandra D. Kennedy explaining why she voted against the proposed order.
Under the new rates adopted by the Commission, a typical residential wastewater customer, on a 3/4-inch meter, will experience an increase of $6.56 or approximately 20% over the rates formerly approved for Johnson Utilities in Decision No. 71854, from $32.79 to $39.35
Under the Commission's final decision, Johnson's new rates will go into effect on October 1, 2011, and the Company cannot file for new rates using a test year ending earlier than December 31, 2012. The decision does, however, allow Johnson to seek an amendment that will allow the Company to recover income taxes from its ratepayers (even though Johnson is a limited liability company that has elected not to pay taxes as a corporate entity) should the Commission approve such a policy in the future.