On Thursday, Arizona Corporation Commissioners voted to hold Johnson Utilities, LLC in contempt of the Commission and assessed the company a $5,000 penalty. Johnson Utilities, a water and wastewater operator, has been shrouded in controversy this past year.
In the July 2018 decision, Commissioners voted to appoint an interim manager to run daily operations of Johnson Utilities. The company was ordered to cooperate fully with the interim manager and to supply all necessary documents, records, and other information requested, whether in the possession of Johnson Utilities or its affiliates, Hunt Mgt, LLC or Ultra Management, LLC. EPCOR Water Arizona, Inc. was then selected to serve as interim manager.
In August 2018, EPCOR reported it was not getting full access to and control of Johnson Utilities’ financials. Commissioners immediately called for a hearing to determine whether Johnson and its managers should be held in contempt for not complying with the Commission decision.
Judge Sarah Harpring presided over the contempt hearing August 24 and 27, 2018. On August 28, 2018, a Pinal County Superior Court Ruling ordered Johnson to turn over full and exclusive access to and control over all revenues paid by customers of Johnson for utility service to EPCOR by August 30, 2018. Johnson complied with the Pinal County Court Ruling, and EPCOR is now operating Johnson as interim manager.
On Thursday, Commissioners adopted Judge Harpring’s Recommended Opinion and Order saying Johnson’s refusal to allow EPCOR the access and control needed for EPCOR to conduct the business and affairs of Johnson constituted contempt of the Commission under A.R.S. § 40-424 and assessing a $5,000 penalty to be paid within 60 days of the decision.
EPCOR provided a lengthy update to Commissioners on Thursday detailing the company’s first 30 days as interim manager. Company representatives Jeff Stuck and Troy Day outlined the results of the company’s evaluation of the Johnson systems to date. EPCOR detailed challenges it has found with water quality, continued low water pressure issues, water supply, wastewater treatment plants, and finances. Day stressed the need for a hold on adding new connections to the systems, stating that additional connections will exacerbate the problems in the water and wastewater systems and that EPCOR needs to improve service to existing customers, who “are already at risk.”
EPCOR’s report was filed by Commission staff on October 10, 2018. EPCOR’s report outlines Johnson’s service area, stating it currently services approximately 28,100 water connections and 38,500 sewer connections in a 160 square mile service area. EPCOR states, “based on new water and sewer account data from the last 18 months, the Johnson Utilities customer base has grown by 3,024 sewer connections (168 per month) and 2,034 water connections (113 per month). This rate is equivalent to approximately a 5-percent annual growth.”
Commissioners deliberated the significance of a decision to place a hold on any future connections in the Johnson service area, even on a temporary basis. Discussion addressed concerns about a possible rush on meter applications.
Ultimately, Commissioners voted to approve an order proposed by staff, with an amendment, resulting in a general stay on new meter connections for a 96-hour period, with some exceptions. Corporation Commission staff plan to meet with affected landowners Friday morning to discuss options for a resolution while working to ensure current customers receive water service that meets or even exceeds federal and state regulatory standards. Commissioners plan to reconvene to discuss the matter on Monday, after staff has the opportunity to meet with stakeholders.