The following was presented by Greg Eisert on behalf of the Sun City Home Owners Association (SCHOA). SCHOA has intervened in this proceeding on behalf of Sun City wastewater users that are customers of EPCOR Water Arizona, Inc. (EPCOR). The purpose of my testimony is to address our disagreement with EPCOR’s position regarding full consolidation of its wastewater systems as expressed by EPCOR’s representative Shawn Bradford in testimony taken and dated 8 September 2014.
EPCOR supports full consolidation of it Arizona wastewater districts. By doing so, the company recommends numerous core rate adjustments ranging from an overall average increase of 89% to the citizens of the Sun City District to a decrease of 60%+ to the citizens of the Agua Fria District. In its testimony, EPCOR ponders the reasonableness of long term full consolidation, but trivializes the proof in the number calculations to get there. If one diligently studies the data offered as evidence for both the alternatives, as well as the support for full consolidation, I believe they will agree, most is trivia without solid evidence leading to any change regarding the initial decision of the Commission made in 2012 not to fully consolidate.
To penalize the Sun City Ratepayers (45%+ of the EPCOR ratepayer base) to the tune of 89% or less for that matter, to subsidize the shortcomings and poor planning of others is unconscionable. The numbers simply do not add up now, any more than they did in 2012. There are approximately 28,000 Sun City District users of the EPCOR wastewater system. EPCOR lists 22,116 customers which is misleading as there are 6,000+ condominium users in Sun City which are consolidated under each Association thus the lower number listed as customers. The listing of the lower number depicts a lesser negative impact for the Sun City District ratepayers which is actually not accurate. EPCOR forecasts additional capital improvement costs of $9.3M over the next five (5) years for Sun City District Ratepayers. At the proposed consolidation rate over a five year period, EPCOR would collect an additional $27M to cover the projected $9.3M expenditure/cost increase. If one were to forecast another $12M in capital cost expenditures over the next five years the same increase would again produce $27M to cover the $12M projection. Therefore, over a ten year period, given the noted projections, it would cost Sun City Ratepayers an additional $32.7M beyond the projected capital cost improvements due to full consolidation – Unconscionable!
The Sun City Wastewater District is serviced by the City of Tolleson treatment plant. Youngtown is also part of this district and uses the Tolleson facility. EPCOR is responsible for the transmission capital improvement costs and pays a contracted fee to the City of Tolleson for wastewater treatment. Sun City/Youngtown has not experienced growth since the mid ‘80s as housing is finite. Its wastewater usage is noted at 5.2MGPD (million gallons per day). The Tolleson plant currently has excess capacity of 9.4MGPD. We understand the Tolleson facility offers cost advantages over current EPCOR facilities with the capacity to assist troubled communities with cost issues. All other districts are currently serviced by EPCOR owned facilities. EPCOR did not offer any justifiable proof to offset Sun City’s position, as well as the Commission’s current 2012 ruling, against full consolidation.
The northeast section of the Agua Fria Wastewater District consisting of the planned communities of Corte Bella, Crossriver, Rancho Silverado, Rio Sierra, Dos Rios, Rancho Cabrillo and Coldwater Ranch along with the Sun City West District all are serviced by EPCOR’s NW Valley Regional Water Reclamation Facility located in the Northern section of Sun City. The southern section of the Agua Fria Wastewater District consisting of the planned communities of Russell Ranch and Verrado are serviced by independent facilities owned and operated by EPCOR. The transmission costs as well as plants are operated by EPCOR and we agree they operate on a common process. However, it may be interesting to consider what the Tolleson facility could offer Russell Ranch and Verrado. The evidence submitted by EPCOR still offers zero logic for full consolidation of all districts. Particularly that of Sun City.
Further, on March 13, 2014 and April 10, 2014 (Docket Dates), the Arizona Corporation Commission (ACC) received petitions from the communities of Corte Bella, Cross River, Dos Rios and Coldwater Ranch requesting remedy for their exorbitant high wastewater rates. The consolidated signatory count was approximately 3,400. The petitions clearly listed the signatory remedy expectations. In no case, was there mention nor expectation thereof for “full consolidation” of the EPCOR wastewater districts nor any mention of any action relating to the Sun City wastewater district.
There was no complaint or mention of “full consolidation” until mentioned on page 6, item (3), contained in ACC’s Staff recommendation document dated July 8, 2014.
The matter of “full consolidation” of EPCOR water/wastewater districts was ruled not in the best interest of the public in 2012. It is improper to be discussing and/or voting to overturn a previous decision without a full rate case and should be removed from the current proceedings.
The Anthem and Mohave Districts are so far from adding value to the concept of full consolidation we have no further comment at this time.
Through the implementation of EPCOR’s acquisition for growth policy they have either purchased competitors outright or obtained territory extensions regarding some of the more contentious areas exhibiting exorbitantly high rates. Although, not necessarily the fault of EPCOR for such rate situations, it is certainly not in the best interest of the Sun City Ratepayers to be required to subsidize such unfortunate situations. As noted in our Summary, the numbers exacerbate the poor reasoning of full consolidation for the Sun City District Ratepayers.
All the nice words mentioned within the EPCOR Testimony, “In the long run, all wastewater customers will benefit from predictable, uniform rate structures, reduced regulatory expenses and increased efficiencies” sound good, but are likely to come up way short of actual. Further, given the likelihood of EPCOR’s trend of growth through acquisition may prove detrimental to a consolidated customer base under the regulated umbrella. There is a long history of poor outcomes via acquiring companies to successfully consolidate operations, cost structures etc. Under a scenario not necessarily tied to competitive forces, operational prowess and accountability, the ratepayer likely comes out on the short end. If you don’t believe this, ask the ratepayers screaming about their crazy high costs of service.
It seems we are also dealing with an outdated clause in our State Constitution that restricts our Commissioners from delivering viable alternative solutions for the issues we are currently presented with. I would challenge our Commissioners, Legislators and Utility Executives to develop a State Constitutional Amendment for voter approval.
In the meantime, it is SCHOA’s opinion that given the facts as have been thoroughly examined, debated and decided upon in 2012, by stakeholders and the Commission; that full consolidation of the EPCOR wastewater districts remains an unsuitable solution and should be removed from the current proceedings.
Submitted by Greg Eisert, Chairman, SCHOA Governmental Affairs Committee