REFERENCE TITLE: corporation commission; water ratepayers

State of Arizona Senate Fiftieth Legislature Second Regular Session 2012

SM 1001

Introduced by Senator Melvin

 

A MEMORIAL

 

Urging the Arizona corporation commission to review the rate setting process for private water companies and the impact of this process on the ratepayers.

 

 

(TEXT OF BILL BEGINS ON NEXT PAGE)

 

To the Commissioners of the Arizona Corporation Commission:

Your memorialist respectfully represents:

Whereas, businesses in the competitive marketplace do not have assurances of earning a profit and do not have customers who have to purchase their products; and

Whereas, the Arizona Corporation Commission will increase rates when these increases are due to the utility's investments in capital infrastructure and increased growth in expenses, which are passed directly to the ratepayer; and

Whereas, the private water company makes their investment decisions behind closed doors, the ratepayer is often blindsided by the unforeseen and seemingly inappropriate spike in the ratepayer's utility payments; and

Whereas, in recent years water utilities have been requesting rate increases as high as one hundred per cent resulting in severe "price shock" to customers; and

Whereas, private water companies in Arizona enjoy the ability to hire lawyers and experts to influence the Arizona Corporation Commission to agree to their plans and desires to increase the water rates on the ratepayers; and

Whereas, the costs of these attorneys and experts are passed on to the ratepayers in the rate increases; and

Whereas, private water companies in Arizona from the largest to the smallest share the operational paradigm of securing a source of water, whether it be drilling a well, tapping into Central Arizona Project or the Salt River Project, or building a pipeline from the source, pumping the water, storing the water, distributing the water, and billing the customer; and

Whereas, rate requests submitted by the private water companies to the Arizona Corporation Commission take anywhere from twelve to twenty‑four months or more to process and result in significant expenses that are ultimately borne by the ratepayers; and

Whereas, private water companies in Arizona, which operate in a monopoly environment, have routinely been awarded an eight to ten per cent return on their equity investment, and whereas most ratepayers as well as many companies in highly competitive markets experience much greater financial risks and currently achieve only a one to two per cent return on their investment; and

Whereas, the financial risk to the private water company has been substantially reduced by the substantial return on investment awarded by the Arizona Corporation Commission in favor of the water company; and

Whereas, private water companies in Arizona are not required to have a public domain business plan or contain their rate costs to compete with comparable rates of adjacent water companies; and

Whereas, fresh, clean water is a precious resource in providing basic sustenance for life in Arizona, and must be conserved.

Wherefore, your memorialist, the Senate of the State of Arizona, prays:

1.  That the Arizona Corporation Commission establish a more efficient rate case process that reduces the time and cost of resolving rate requests from private water companies.

2.  That the Arizona Corporation Commission, in setting just and reasonable rates, encourage private water companies to go public with their plans and expected costs during their "planning" phase of any project that will result in rate increases to the ratepayer.

3.  That the Arizona Corporation Commission establish reasonable limits on legal and other rate case costs that can be passed on to the ratepayer.

4.  That the Arizona Corporation Commission, in setting just and reasonable rates, give due consideration to the reduced financial risk faced by private water companies compared to other private businesses that operate in a competitive, nonmonopoly environment when setting just and reasonable rates of return.

5.  That the Arizona Corporation Commission in setting just and reasonable rates, expect the private water company to maintain its water rate at a level consistent with surrounding private water companies or consider consolidating with the surrounding private water companies to keep the water rate the lowest possible for its ratepayers.

6.  That the Arizona Corporation Commission establish reasonable rate structures that encourage and reward ratepayers to conserve water.

7.  That the Secretary of the State of the State of Arizona transmit copies of this Memorial to each Commissioner of the Arizona Corporation Commission.