ACC approves EPCOR’s interim request: Decision means higher bills for residents, businesses; city vows ‘hostile takeover’

By TERRI HARBER, The Daily News, Mar 29, 2019

BULLHEAD CITY — The Arizona Corporation Commission on Thursday approved interim rates sought by EPCOR Water Arizona Inc., a decision that will raise the monthly bill of Bullhead City customers by about $7.

The vote by the ACC was 3-2 in favor of the Recommended Opinion and Order by Administrative Judge Belinda Martin, which was slightly modified by commissioners, who approved some of their own amendments before taking a final vote on Martin’s order.

Customers in the Mohave district — which includes most of Bullhead City — will see a rate increase of 26.63 percent. North Mohave customers would be told to pay 34.25 percent more.

For Mohave customers, that would be a rise from $26.25 to $33.24 and bills for those in North Mohave would increase from $25.98 to $34.88. All dollar amounts are based on average water usage.

EPCOR’s interim rate request came after the ACC rejected its 2017 case for consolidation and a rate increase on Jan. 25 by a 2-2 vote.

The new rates begin April 1.

Bullhead City Mayor Tom Brady and Council Member Annette Wegemann were at the meeting in Phoenix. So was Steven Wene, the attorney representing the city in the case. All three were among those who spoke one last time before the ACC vote.

Brady said while the earlier proposition of a 59 percent increase for Bullhead City residents has lessened significantly, the increase of about 27 percent remained a hardship for many city residents and businesses.

Unless the rate increase is a lower percentage “in the single digits,” he said, “a lot of our residents won’t have the money to buy medicine, pay their rent, electric bill or buy groceries.”

He also told the commissioners that the Bullhead City Council has hired a consulting company to evaluate the value of the EPCOR water system serving the city.

“We don’t understand why EPCOR is getting such an outrageous increase,” Brady said. “It’s not the American way. … Common people are going to be hurt by these increases.”

According to Brady, Bullhead City operating the system would focus on providing safe drinking water and wouldn’t be primarily profit-driven like EPCOR, which is based in Edmonton, Canada. That city is EPCOR’s sole shareholder.

“We will move forward in condemning them. … It will be a hostile takeover,” Brady said. “We expect our voters will wholeheartedly support our efforts to take over our water company.”

Wene said that interim rates shouldn’t apply in this case. The 2-2 vote by the ACC on Jan. 25 regarding EPCOR’s original consolidation and rate case meant that proposal failed. And the decision stands because EPCOR didn’t attempt to compromise, Wene argued.

He reiterated that EPCOR isn’t suffering from a financial emergency because it hasn’t been able to make the changes spelled out in that initial rate case.

They simply are looking for “more income,” he said.

Wene also contended in his response to Martin’s order that EPCOR’s revenues increased by $2.6 million between 2016 and 2017 — a period in which there was no rate change. There was no evidence provided to the ACC about 2018, he said.

“I don’t understand what the emergency is,” Wegemann said. The rate increase “is going to hurt a lot of residents. It’s going to our hurt our businesses.”

After the decision, City Manager Toby Cotter issued a brief written statement.

“The city totally disagrees with the Arizona Corporation Commission. EPCOR’s case for interim rates was weak,” Cotter wrote. “The city’s residents and businesses deserve more than a rubber stamp by the ACC for the increased rates.”

Two EPCOR Water Arizona districts contain residents of Bullhead City in which there are more than 18,000 customer connections. Two others serve Mohave County residents. The remainder are in the Phoenix area.

ACC Chairman Bob Burns and Commissioners Sandra Kennedy and Boyd Dunn voted in favor of allowing EPCOR to charge interim rates while Commissioners Justin Olson and Andy Tobin voted against the proposal that will affect customers within its 11 water districts across the state.

Most of the changes will result in higher water costs for EPCOR customers.

Olson and Tobin wanted to continue working with EPCOR on the original consolidation case.

“I don’t think this is the appropriate process,” Olson said. “I don’t think this is what interim rates were meant to address.”

He also said the ACC has an obligation to rule on the original consolidation case and that the commission’s failure to issue a final order on it is considered by some (such at Bullhead City) as a final decision.

Tobin said there should be consideration toward customers’ income levels.

In the plan, there’s “no gradualism,” he noted. “Bullhead is looking toward condemnation. And I see no basis for emergency rates.”

He also said he believes the fault lies with EPCOR that the ACC’s rate updating system no longer seems to apply because the original consolidation order was declined.

“I think there is a landing place,” he said.

Burns said the ACC’s tie vote in January on the consolidation case is a “no.”

“Every time we fail to issue a recommended order, (will there be) a move to interim rates?” Burns asked ACC staff.

“This case is unusual. it doesn’t rely on any emergency situation,” said Robin Mitchell, director of ACC’s Legal Division. “The use of interim rates is the exception, not the rule. Normally companies are small, and have issues that require immediate rate relief.”

Interim rates for EPCOR have merit here because “this is a very special case,” said Dunn. “If the ROO (order) had failed, the applicant could proceed with a rehearing or appeal.”

Martin determined EPCOR’s request for interim rates was lawful, allowed by Article 15 of the Arizona Constitution which allows the commission limited but “broad and exclusive rate-making power.”

Further, Martin decided that a 1951 case titled “Arizona Corporation Commission vs. Mountain States Telephone and Telegraph Company” supported EPCOR’s interim rate request. When the ACC failed to grant permanent rate relief within a “reasonable amount of time, a company could receive interim rate relief.”

Attorney General opinion 71-17 echoed that ruling, she noted in her order.

Kennedy, who didn’t participate in the original case but voted to approve EPCOR’s interim rate request, also encouraged ratepayers who might qualify for reductions on their EPCOR water bills to look into it. The utility has low-income, disabled military veteran and deployed service member credits.

Among changes to Martin’s order made by commissioners is that the revenue would be collected through a flat volumetric surcharge so customers would benefit from using less water than average and that EPCOR will include in its next permanent rate change application “geographically adjacent or regional basis rate consolidation options, including cost of service studies for each geographically adjacent or regional district.”

EPCOR is required to file a new permanent rate case by May 1, 2020. It will use 2019 as its test year to determine need based on revenue and spending during this period.