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Questions raised in EPCOR interim rates case

February 21, 2019

BULLHEAD CITY — An administrative law judge spent hours Wednesday hearing from people representing numerous interests involved in EPCOR Water Arizona’s interim rates case filed with the Arizona Corporation Commission.

EPCOR contends the ACC members’ 2-2 vote last month doesn’t qualify as a decision on its consolidation and rate case filed about a year and a half ago.

The original case proposed by EPCOR would unify all of its 11 water districts in Arizona. Two districts contain residents of Bullhead City. Two others serve Mohave County residents. Most of the other districts are in the Phoenix area.

EPCOR cited as a primary reason for seeking interim rates that too much time had passed without a clear decision by the ACC on the original case. EPCOR argued that the lack of direction has created an emergency situation for the company.

Attorney Steve Wene, representing Bullhead City, said the interim proposal isn’t needed and that EPCOR’s argument for it is invalid.

The decision was made during a time extension to which all parties agreed, Wene argued. And whether EPCOR is in financial distress because of the lengthy decision-making process isn’t known.

“Here, I don’t think either (situation) exists,” Wene said.

ACC staff supported EPCOR’s argument for interim relief and recommended the water company file a rate case by Dec. 31, using 2018 as its test year.

The Residential Utility Consumer Office doesn’t believe EPCOR is in an emergency, either.

Daniel Pozefsky, RUCO’s chief counsel, said RUCO isn’t aware of any rule or law that would support an interim rate application stemming from one case “to serve as the basis for interim rates in a future rate case.”

Representatives for other water districts agreed with Bullhead City. The ACC, said Jeffrey Crockett, the attorney for Paradise Valley Resorts, “should err on the side of rate payers.”

After many of the participants made remarks about how they viewed EPCOR’s request, several witnesses were interrogated by the army of attorneys.

Sheryl Hubbard, director of EPCOR’s regulatory and rates division, said the ACC staff’s desire to see her company file a new rate case and base it on the company’s activities during 2018 would be far from optimal and that it would be better to use 2020 as a test year instead.

The original test year was 2016. Expenditures, revenues and a variety of other company activities were evaluated to help determine how to set new water rates.

Many of the questions posed to Hubbard and other witnesses came from information presented during that evaluation period.

Crockett asked Hubbard a string of questions about whether billing customers based on a flat surcharge or volume would be easier when it could come time to calculate refunds for those rate payers.

The attorney also asked Hubbard whether her employer was in an emergency in the sense of how a layperson would define it.

“I don’t believe the company is in dire financial need,” she replied.

Hubbard told another attorney that EPCOR’s goal with interim rates is to take the company forward until there’s resolution of the 2017 case or a new case.

Jeffrey Michlik, a public utilities analyst for RUCO, was asked how EPCOR developed rates for each district. Briton Baxter, a public utility manager for ACC, was asked by Administrative Law Judge Belinda Martin whether it would be fairer to charge low-income customers by the amount of water they use.

Martin has been listening to the proceedings and will write an order for the commissioners, who will meet to discuss the matter and decide whether to allow the interim rates to proceed.

The attorneys will provide final arguments today.

Bullhead City Mayor Tom Brady, City Council Member Annette Wegmann and H20 Committee head Al Scigliano each spoke Tuesday during the public comment period. The Bullhead City officials stressed that a significant number of residents already struggle financially and that a substantial water rate increase would make things worse. Scigiano said his neighborhood water infrastructure might not even be owned by EPCOR so the proposal for interim rates might not apply to those residents.

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