On Monday, August 29, 2011, Pima Utility Company ("Pima" or "Company") filed applications requesting permanent rate increases for its Water and Wastewater Divisions with the Arizona Corporation Commission ("ACC" or "Commission"). The Company provides service to customers living in the community of Sun Lakes.
In addition to the proposed rate increase, Pima also requested that the Commission allow it to collect income tax expense despite the fact that the Company has chosen to be organized as a subchapter S corporation that, as a corporate entity, does not pay income taxes (taxes are passed through to shareholders who pay their proportionate share of taxes based on their individual tax situation).
During the ACC's Regular Open Meeting held on Thursday, November 8, 2012, four of the five sitting Commissioners adopted an amended Recommended Opinion and Order, by a vote of 3 to 1, that denied the collection of income taxes in rates. On Wednesday, November 21, 2013 the Commission issued Decision No. 73573 establishing new rates and charges for the Company.
On Friday, February 22, 2013, the Commission issued Decision No. 73739 adopting an Income Tax Policy Statement which allows for pass-through entities (i.e., limited liability companies, Subchapter S corporations, and partnerships), as well as sole proprietorships, to impute income tax expense in the cost of service which can be passed on to ratepayers in the form of higher rates.
On Friday, March 29, 2013, Pima filed a petition to amend Decision No. 73573 in order to recover income tax expense under the Commission's revised policy.
On Tuesday, April 2, 2013, RUCO filed a response in opposition to Pima's petition to amend Decision No. 73573.
On Monday, April 8, 2013, Pima filed a reply to RUCO's response.
On Wednesday, May 1, 2013 ACC Staff issued its Staff Report and Proposed Order on the matter recommending that Pima's request to recover income taxes in rates be approved.
By a final vote of 4 to 1, ACC Commissioners approved Pima's request and allow the Company to raise its rates to recover shareholder's personal income taxes. The Commission approved Pima's request during the Regular Open Meeting conducted on Thursday, June 27, 2013.
On Tuesday, July, 16, 2013, the Commission issued Decision No. 73993 establishing Pima's new rates and charges.
RUCO's MOTION TO REHEAR DECISION NO. 73993
On Wednesday, July 31, 2013, RUCO filed a Motion to Rehear Decision No. 73993 ("Motion for Rehearing") with the ACC. In its Motion for Rehearing, RUCO is requesting that the Commission reopen the Pima rate case for the purpose of rehearing the income tax issue. RUCO argues that the imputation of an income tax expense that does not exist will result in a higher rate of return that what was authorized in the Commission's Decision. The Commissioners have twenty days to act on RUCO's request. If the Commissioners do not act on RUCO's Motion for Rehearing within the twenty day period, the request is denied by operation of law. RUCO would then have thirty days to appeal Decision No. 73993 in the Arizona Court of Appeals.