Arizona Water Company (Western Group) - Rate Case Filing

On August 14, 2004, Arizona Water Company ("Arizona Water" or "Company") filed an application for a permanent rate increase with the Arizona Corporation Commission ("ACC" or "Commission") for each of the five water systems that comprise the Company’s Western Group.  The case involves water systems that provide service to customers located in Casa Grande, Stanfield, White Tanks, Ajo and Coolidge.

On October 6, 2004 RUCO filed a request for intervention, which was approved by the ACC's Hearing Division.  The case then entered the discovery phase of the proceeding.  During this period RUCO's analysts performed an audit of the Company's books and records and conducted a cost of capital analysis to determine if Arizona Water's proposed increases were justified. 

On April 20, 2005 RUCO filed direct testimony, containing its recommended level of revenue and return on invested capital.  A comparison of Arizona Water's proposed revenue increases and RUCO's recommendations are as follows:

		Company		Company		RUCO		RUCO
		Requested		Requested		Recommended		Recommended
		Increase (Decrease)		Increase (Decrease)		Increase (Decrease)		Increase (Decrease)
System		($)		(%)		($)		(%)
Ajo Heights		$88,571		21.64%		$52,289		12.94%
Casa Grande		$1,843,802		25.26%		$15,481		0.21%
Coolidge		$489,901		35.94%		$50,532		3.72%
Stanfield		$11,601		10.07%		$534		0.46%
White Tank		$220,188		28.91%		($8,568)		-1.13%

The figures illustrated here do not include the amount of increase that will result if the Company's request for an arsenic cost removal mechanism ("ACRM") surcharge is approved by the Commission.  The ACRM will allow the Company to recover costs associated with arsenic removal in order to meet the U.S. Environmental Protection Agency's ("EPA") revised standard of ten parts per billion which goes into effect on January 23, 2006.  The ACRM surcharge will impact the Casa Grande, Stanfield and White Tank systems.  In addition to the ACRM, the above figures do not reflect any pass through costs for incremental increases or decreases in Arizona Water's purchased pumping power or purchased water costs that are currently being passed on to Western Group customers through the Company's purchased pumping power adjustor mechanism ("PPAM") and purchased water adjustor mechanism ("PWAM") surcharges.  RUCO has recommended that the Commission eliminate both the PPAM and PWAM surcharges.  RUCO has also recommended that the Company not be permitted to recover deferred Central Arizona Project ("CAP") water expenses until ratepayers in the Casa Grande, Coolidge and White Tank systems are actually receiving treated CAP water.  RUCO is also recommending that $824,374 in legal costs be removed from the Company's proposed rate base for the Casa Grande system. 

Arizona Water filed rebuttal testimony on May 13, 2005.  RUCO filed surrebuttal testimony on May 25, 2005.  The Company filed its rejoinder testimony on June 10, 2005.   Because of settlement negotiations involving the Company's request for CAP cost recovery (and a two-day extension on the original filing date for rejoinder testimony),  the formal evidentiary hearing on this case was rescheduled for Friday, June 17, 2005 at 9:30 a.m.  Public comment on Arizona Water's requested rate increase was heard on Thursday, June 16, 2005 at 10:00 a.m. prior to a pre-hearing conference at the ACC's Phoenix office at 1200 W. Washington (the original noticed time, date and location for the hearing).  

During the evidentiary hearing, which lasted for six days, RUCO's witnesses were cross-examined by Arizona Water's legal team on all of the major issues in the case.  RUCO's attorney cross-examined witnesses for the Company, the City of Casa Grande and ACC Staff.  The hearing concluded on Friday afternoon, June 24, 2005.  Closing Briefs and Reply Briefs were filed, as scheduled, on August 1, 2005 and August 22, 2005 respectively.

After weighing the evidence presented in the case, the presiding administrative law judge ("ALJ") issued her recommended opinion and order ("ROO") on October 4, 2005.  The ROO adopts several of the key issues that RUCO argued in the case, such as the removal of the Casa Grande legal costs from rate base, the elimination of the PPAM and PWAM surcharges, and the lag in the number of days in which income tax payments are  calculated (for the purpose of determining the level of cash working capital that is recovered in rates).  The ROO also adopts an ACC Staff recommendation (supported by RUCO) that will allow Arizona Water to recover the Company's deferred CAP expenses through a hook-up fee, that will be charged to future homebuyers, as opposed to recovering the CAP expenses in the rates that will be paid by existing customers.

During the regular open meeting scheduled for October 18 and 19, 2005, the ROO was discussed by the five ACC Commissioners.  Over the course of the meeting, representatives from Frito-Lay and Abbott Laboratories presented their concerns about the recommended rate design contained in the ROO, and attorneys for AWC argued their exceptions to the ROO.  RUCO's attorney urged the five commissioners to adopt the ROO in its entirety.  After approximately two hours the item was rescheduled for further discussion, and a possible vote, at a latter date.  During the open meeting, the Company agreed to waive the time clock rules in the case.

After a brief discussion and a favorable vote on an amendment that revised the rate design contained in the original ROO, the amended ROO was approved by a vote of 5-0 at the regular open meeting held on Wednesday, November 9, 2005, at the ACC's office located at 1200 W. Washington in Phoenix.

Return to Pending Cases

Top of Page