Johnson Utilities’ Interim Manager Tells ACC “Every Day We Find New Issues”

The Arizona Corporation Commission took several actions this week regarding Johnson Utilities’ service, billing, and monopoly authority to operate. The controversial company provides water and wastewater services to customers in Pinal County.

In July, the Arizona Corporation Commission (ACC) appointed an interim manager, EPCOR, to run the company following an investigation into the company’s operations. EPCOR was granted access to company financials and facilities on August 30 after initial legal challenges were made by Johnson Utilities. The selected Interim Manager, EPCOR, provided an update to Commissioners Tuesday outlining what it found in the 12 days EPCOR has been acting as interim manager. EPCOR representatives told Commissioners they have completed site visits to more than 45 Johnson Utilities sites and are now developing budgets, schedules, and capital project lists.

EPCOR Vice President Troy Day stated, “Every day we find new issues.” When asked about available resources Day reported he felt EPCOR had sufficient resources and access available to be able to do its job in the interim manager role. Day said his company would provide a full assessment report to the Commission, as required by the interim manager agreement, by the end of September.

During last month’s Open Meeting, Commissioners asked staff to evaluate the revocation of Johnson Utilities’ Certificate of Convenience and Necessity (CC&N), which provides Johnson the exclusive right to provide water and wastewater service within a designated territory. Commissioners voted Tuesday to direct staff to refer this issue to a hearing to fully investigate and provide due process for parties to be heard. During the process, Corporation Commission staff will make recommendations concerning, and ultimately an Administrative Law Judge will be required to determine whether any of the following options is appropriate:

• completely revoke the utility’s entire existing CC&N;
• alter the utility’s CC&N by deleting areas that have no customers, no existing infrastructure, and where there have been no updated requests for service filed by September 28, 2018; and,
• alter the utility’s CC&N by deleting areas in the CC&N that have no customers, but where there have been updated requests for service filed by September 28, 2018, and where there is no existing infrastructure; and,
• alter the utility’s CC&N by deleting any other portion for which a party believes deletion is in the public interest.

Commissioners also ordered Johnson Utilities to prospectively cease collecting federal and state income taxes from ratepayers, and the company was directed to refund all such tax revenues recovered after March 31, 2018 as a one-time bill credit.

Staff reviewed the amount of income taxes being recovered in the company’s currently authorized revenue requirement. For the water division, the company is currently collecting $125,072 in income taxes from ratepayers. For the wastewater division, the company is currently collecting $457,557 in income taxes from ratepayers.

Based on staff’s recommendations, a residential customer on a 3/4-inch meter will receive a one-time bill credit of $2.78 for the water division and $8.71 for the wastewater division.

Commissioners also ordered that Johnson Utilities is not allowed to recover an income tax gross-up on funds received under existing or new Advances in Aid of Construction agreements and is prohibited from requesting an administrative fee from developers who are parties to AIAC, or Line-Extension Agreements.

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