Residential Utility Consumer OfficeLitchfield Park Service Company - 2009 Rate Case Filing
Docket Number: SW-01428A-09-0103 et al.
On March 9, 2009, Litchfield Park Service Company (“LPSCO” or “Company”) filed applications with the Arizona Corporation Commission ("ACC" or "Commission") seeking permanent rate increases for the Company's water and wastewater utility operations in Maricopa County.
LPSCO is a Class A utility that provides service to approximately 15,600 water customers and 14,600 sewer customers of which 14,333 water customers, or 91.9 percent, and 14,129 wastewater service connections, or 96.8 percent, are residential ratepayers. The Company’s service area is located in the southwestern portion of the Phoenix metropolitan area, and includes the Town of Litchfield Park, roughly one-half of Goodyear, a small section of Avondale and an unincorporated area of Maricopa County. LPSCO’s present rates were established in Decision No. 65436, dated December 9, 2002 (Decision No. 65436 adopted a black-box settlement agreement in which RUCO was an intervenor). The Company is a subsidiary of the Algonquin Power Income Fund, a Canadian mutual fund that is based in Toronto, which also owns other public service companies in Arizona including Bella Vista Water Company, Gold Canyon Sewer Company Rio Rico Utilities, Inc. and Black Mountain Sewer Corporation.
According to LPSCO’s applications, the Company had adjusted gross revenues of $6,475,002 from the water utility service and $6,356,372 from the wastewater utility service during the test year ended September 30, 2008 (“Test Year”). Operating expenses for the same period totaled $6,757,896 from the water utility service and $6,192,413 from the wastewater utility service thus resulting in an operating income (loss) of ($282,894) and $163,959 respectively. This produced a Test Year rate of return of negative 0.75 percent for the water utility service and a positive 0.58 percent for the wastewater utility service when applied to the Company-proposed fair value rate bases of $37,930,921 and $28,367,071 respectively.
LPSCO is requesting an increase of $7,509,328, or 115.97 percent for the water utility service and an increase of $5,004,346 or 78.73 percent for the wastewater utility service over Test Year adjusted operating revenues. The Company-proposed rates will provide LPSCO with operating incomes of $4,321,918 for the water utility service and of $3,236,683 for the wastewater utility service or an 11.41 percent rate of return on invested capital. Under the Company-proposed level of operating revenue, a typical water residential customer will experience an increase in rates from $10.80 per month to $20.21 per month (87.63 percent). Under the Company-proposed level of operating revenue, a typical wastewater residential customer will experience an increase in rates from $27.20 per month to $49.22 per month (80.96 percent). In addition to the requested rate increase described above, the Company is also requesting a new hook-up fee tariff and a new pretreatment tariff.
After resolving problems with the Company's original filings, ACC Staff notified LPSCO that its applications ("Water Application" and "Wastewater Application) were sufficient in a letter dated May 8, 2009.
On Thursday, May, 21, 2009, the Administrative Law Judge ("ALJ") assigned to the case issued a procedural order which consolidated the water and wastewater dockets and set the date for the evidentiary hearing in the matter for Monday, January 4, 2010.
On Thursday, May 28, 2009, RUCO filed a motion to intervene in the case on behalf of residential ratepayers.
On June 22, 2009, the ALJ assigned to the case granted RUCO's request.
Direct testimony from ACC Staff, RUCO and other intervenors was filed on Wednesday, November 4, 2009. The Company filed rebuttal testimony on Friday, December 4, 2009. Surrebuttal testimony from ACC Staff, RUCO and other intervenors was filed on Thursday, December 17, 2009. A final round of rejoinder testimony from the Company was filed on Monday, December 28, 2009.
The evidentiary hearing on LPSCO began as scheduled with public comment on Monday, January 4, 2010. The hearing was conducted over approximately seven days and concluded on Friday afternoon, January 15, 2010.
During the evidentiary hearing, attorneys for the parties to the case had the opportunity to cross examine expert witnesses and present their positions on various issues.
On Monday, January 25, 2010, approximately 488 concerned citizens attended an ACC public comment meeting on LPSCO's request for increased water and sewer rates. The meeting was held at 6:30 p.m. in the Sachem Room of the Wigwam Resort, 300 Wigwam Boulevard, Litchfield Park. All five Commissioners listened to the thirty-five customers of LPSCO who chose to express their opinions (for the record) on the Company's request. A representative from RUCO was also on hand to answer questions from concerned ratepayers.
Final accounting schedules from the parties to the case were filed on Monday, February 1, 2010. Initial closing briefs were filed on Wednesday, February 10, 2010. Reply briefs were filed on Wednesday, February 24, 2010.
On Friday, April 2, 2010, RUCO filed a request for reconsideration of procedural order, asking the ALJ to reconsider his decision to bifurcate the hook-up fee issue in the case to the extent that it limits the ALJ’s ability to considerer how proposed hook-up fee tariff's treatment of contributions-in-aid-of-construction will impact the Company's rate base.
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 his Recommended Opinion and Order ("ROO") which adopted RUCO's recommendation for phased-in rates.
On Thursday, October 14, 2010, RUCO filed exceptions to the ROO seeking a disallowance of $3.5 million in test year plant additions.
During the Regular Open Meeting held on Wednesday October 20, 2010, the five ACC Commissioners agreed to delay their final vote on the ROO in order to give the parties to the case time to analyze a proposed rate design offered by the City of Litchfield Park.
On Friday, November 19, 2010, RUCO filed supplemental information on the City of Litchfield Park's proposed rate design amendment and information on a phase-in surcharge.
During the Regular Open Meeting held on Monday, November 22, 2010, the five sitting ACC Commissioners passed an amended Recommended Opinion and Order that adopted an 8.01 percent cost of common equity that RUCO recommended in its direct testimony. The amended order also adopted a revised rate design and phased-in rates.
On Friday, December 10, 2010 the ACC issued Decision No. 72026 establishing LPSCO's new rates and charges.
On Wednesday, December 29, 2010, LPSCO filed an Application for Rehearing seeking to overturn the Arizona Corporation Commission's Decision to adopt an 8.01 percent return on common equity which resulted in lower rates for the Company's ratepayers.
By a vote of 4 to 1, the five sitting ACC Commissioners voted to grant LPSCO's request for a rehearing during an ACC Staff Meeting held on Tuesday, January 18, 2011.
On Wednesday, January 26, 2011, attorneys for LPSCO, Arizona Corporation Commission Staff, The City of Litchfield Park and RUCO appeared before an Administrative Law Judge ("ALJ") during a scheduled procedural conference to discuss a number of issues associated with the rehearing of LPSCO's request for a permanent rate increase. The procedural conference, held at the ACC's Phoenix offices at 1200 W. Washington, was called to order at 11:00 a.m. and lasted approximately one hour. ACC Commissioner Sandra Kennedy, who voted against the rehearing, was present during the conference and expressed her desire to hold a future public comment meeting in LPSCO's service area.
On Friday, January 28, 2011, LPSCO filed a request for clarification seeking to limit the rehearing to the return on common equity issue and to prevent RUCO and the The City of Litchfield Park from presenting new witnesses in the matter.
On Wednesday, February 16, 2011, ACC Commissioner Paul Newman filed a letter requesting that the Commission reconsider its recent decision to rehear the LPSCO rate case. In his letter, Commissioner Newman expressed concerns regarding the incurrence of additional rate case expense, which could ultimately be borne by ratepayers, and the drain on the parties’ resources, as well as limited Staff and Commission resources. Commissioner Newman also cited the extensive public comments received in the case before and after the issuance of Decision No. 72026, and following the vote to revisit the issues on rehearing. Commissioner Newman asked that the Commission’s decision, during the January 18, 2011 Staff Open Meeting, to grant rehearing/reopening of Decision No. 72026 be placed on the next available Open Meeting agenda, with notice and an opportunity to be heard for the parties.
On Thursday, February 24, 2011, RUCO filed a response to Commissioner Newman's February 16, 2011 correspondence. RUCO's filing also responded to LPSCO's request for clarification filed on Friday, January 28, 2011.
During the Regular Open Meeting held on Tuesday, March 2, 2011, LPSCO's attorney offered two amendments to Commission Decision No. 72026: the first of which would increase LPSCO's return on common equity from 8.01 percent to 9.00 percent and the second of which would forgo carrying charges on uncollected revenues during the phase-in period for the Rates approved by the ACC in December 2010. The Commissioners agreed to delay their vote, on whether or not to go forward with the rehearing, for several hours, in order to give LPSCO, The City of Litchfield Park, ACC Staff and RUCO the opportunity to reach a possible settlement agreement on the Company's proposed amendments.
Discussion on a possible settlement continued through Wednesday morning just prior to the beginning of the Regular Open Meeting held at 10:00 a.m. on March 2, 2011 at 1200 W. Washington in Phoenix. However, the parties to the case were unable to forge a satisfactory agreement.
After being informed that the parties were unable to reach a settlement agreement, four of the five ACC Commissioners, who were present during the Regular Open Meeting, voted 4-0 to reverse their January 18, 2011 decision to rehear the LPSCO rate case.
On Wednesday, March 9, 2011, the Commission issued Decision No. 72217 which brings closure to the rehearing matter.
LPSCO now has the option of appealing Decision No. 72026 if it wants to.