For Immediate Release | 11-08-18   
 Media Contact | Nick Debus   
 Direct | 602-542-0728   
 E-Mail | ndebus@azcc.gov   
     
 

Arizona Corporation Commission November Open Meeting Highlights

 
 
PHOENIX — The Arizona Corporation Commission on Wednesday held its monthly Open Meeting to discuss and vote on various water, electric, gas, securities and tax reform agenda items. Here’s a brief recap of the meeting highlights:
Johnson Utilities, LLC Interim Manager Update
Commissioners heard from the interim manager of a troubled Pinal County water utility company during Wednesday’s meeting. EPCOR Operations Director Jeff Stuck, and Vice President of Operations Troy Day provided an update on the company’s efforts to restore water safety and quality, customer service, and company finances. Stuck reported on the recent completion of a billing audit to ensure customers are being charged appropriately, ongoing customer service training, and the need to put together a “targeted market compensation analysis” saying the pay for current employees “is pretty low.”
During the update, Day admitted maintaining proper operations “has been an ongoing challenge” citing recent sanitary sewer overflow incidents that have occurred since EPCOR took over as interim manager. A copy of EPCOR’s presentation will be filed to docket number WS-02987A-18-0050.
Limit on New Meter Connections in Johnson Utilities’ Service Area
During last month’s Open Meeting, Day asked Commissioners to put a hold on any new water meter and wastewater connection applications reporting low water pressure issues would be exacerbated if additional connections were allowed in the system. Commissioners agreed to a pause in new meter issuance and asked EPCOR, homebuilders, and Corporation Commission staff to come to an agreement. Following multiple stakeholder meetings between Corporation Commission staff and representatives of the development and home building community, a compromise solution was reached and implemented by Commissioners. Commissioners voted to allow EPCOR to install no more than 28 new homes per month to be allocated as one home per builder per community per month. Additional connections may be allocated if specific conditions are met.
Commissioners and Corporation Commission staff are sensitive to the impact a complete stay on new meter applications would have on the economic development in a fast-growing area of the Valley and were diligent in balancing the needs of current ratepayers and new development in the area. This vote to allow some new meter applications is an indication that Commissioners are working to ensure that current customers are receiving reliable utility services, while also ensuring that there is not a negative impact on economic development in San Tan Valley. The Commission will review this decision periodically with the ability to add or subtract from the number of new meters dependent on the impact to current capacity.
All documents related to this agenda item can be found in the Corporation Commission’s online docket at http://edocket.azcc.gov and entering docket number WS-02987A-18-0050.
Biennial Transmission Assessment Approved
Commissioners voted to approve the state’s Tenth Biennial Transmission Assessment effectively confirming the ability of current and future transmission facilities to meet the state’s energy requirements for the next ten years. The Corporation Commission performs a biennial review of ten-year transmission plans filed by companies who are responsible for transmission facilities throughout Arizona. Companies filed ten-year transmission plans in January, then the Corporation Commission held two public workshops in June and September. These workshops serve to fine-tune the transmission assessment, which determines the adequacy of the existing and planned transmission facilities to meet the present and future energy needs of Arizona. 
All documents related to this item can be found in the Corporation Commission’s online docket at http://edocket.azcc.gov and entering docket number E-00000D-17-0001.
Corporation Commission Adopts New Gas Master Meter Policy
Commissioners on Wednesday approved and implemented a new policy regarding gas-related master meter systems in the state.
The policy was drafted by Commissioner Boyd Dunn following his opening of a generic docket to investigate the health and safety risks posed by these systems in 2017. Following the first workshop in January 2018, Commissioner Dunn drafted his proposed policy which was filed to the docket August 1, 2018. A second workshop was held August 13 to discuss the proposed policy change. Corporation Commission staff filed their recommendation that the proposed policy change be adopted and implemented on October 2. Passage of the new policy will ultimately move the matter to the formal rulemaking process.
“There is no question about the safety significance of this issue,” said Commissioner Boyd Dunn. “The potential risk at schools, churches, hospitals, and other facilities is unacceptable and this policy is a signal that this Commission is committed to protecting the public safety of Arizona.”
Natural gas and propane master meter systems are common throughout Arizona, with over 900 such systems in operation currently. These systems are run by the owners of the property on which they exist, making these property owners gas operators, bringing with it the burden of complying with state and federal regulations. Many of these systems are antiquated and nearing the end of their lifecycles, posing a threat to public safety statewide.
“We have had 130 master meter systems go out of service since this conversation began last September,” said Interim Safety Division Director Dennis Randolph.
The new policy adopted today asks current owner-operators of gas-related master meter systems to come into compliance with federal and state regulations within five years. During this grace period they will not be fined for being out of compliance, however the Corporation Commission retains its authority to shut down systems that pose an immediate and direct safety risk to the public.
Alternatively, owner-operators can opt to have their master meter systems converted to a traditional gas system operated by a regulated public service corporation. This option alleviates the burden of managing and servicing the gas system themselves.
All documents related to this agenda item can be found in the Corporation Commission’s online docket at http://edocket.azcc.gov and entering docket number G-00000C-17-0284.
Commissioners Approve Taxable Income Requirements for Advances and Contributions in Aid of Construction
Commissioners discussed and approved an order addressing methods of funding the income tax liabilities that accompany the receipt of Advances and Contributions in Aid of Construction. These receipts are now taxable to water and wastewater utilities under the provisions of the new Tax Cuts and Jobs Act.
Water and Wastewater utilities often receive Contributions and Advances in Aid of Construction from developers or ratepayers to build infrastructure to serve new developments and/or customers within their existing service territories. These funds can be collected in various ways. Commissioners discussed three methods:
·         Method 1 – Full gross-up
·         Method 2 – Self-pay
·         Method 3 – a sharing agreement
The Commission approved the use of a sharing arrangement that makes developers responsible for 55 percent of the tax liability. Commissioners endorsed this method because it more closely reflects the cost to the utility taking into consideration the tax benefits associated with new infrastructure.
The Commission approved the three above methods for Class C, D, and E water and wastewater systems. Class A and B companies may use only methods 2 and 3.
The matter will be discussed again at the upcoming December 17 Open Meeting to continue refining amendments that Commissioners and stakeholders felt needed more time to be worked on.
All documents related to this agenda item can be found in the Corporation Commission’s online docket at http://edocket.azcc.gov and entering docket number AU-00000A-17-0379.
Various Companies Pass Tax Act Savings Back to Ratepayers
·         Rose Valley Water Company – Corporation Commission staff calculated that Rose Valley Water Company has received approximately $42,842 in savings as a result of the Tax Act. The company will refund these savings to its ratepayers using a one-time bill credit in the amount of $13.71 for residential customers on a 5/8 x 3/4- inch meter.
·         Alliant Gas, LLC – Corporation Commission staff calculated the company’s savings as a result of the Tax Act to be approximately $79,980. Alliant Gas, LLC, for its Page Division, will return the savings to ratepayers through a monthly bill credit on a consumption basis of $0.0671 per therm to each customer. This will result in a monthly bill credit of approximately $1.12 to a residential customer with an average consumption of 20 therms.
·         Pueblo Del Sol Water Company – Corporation Commission staff concurred with the analysis found in Pueblo Del Sol Water Company’s compliance filing that the Tax Act would result in an increase to its authorized revenue requirement, to account for the higher 21% federal income tax rate. Because the company was not seeking an upward adjustment to its revenue requirement and the related rates, staff recommended, and Commissioners agreed, that Pueblo Del Sol Water Company be exempted from further Tax Act compliance requirements.
All documents related to these agenda items can be found in the Corporation Commission’s online docket at http://edocket.azcc.gov and entering the following docket numbers:
Rose Valley Water Company – W-01539A-18-0323
Alliant Gas, LLC – G-20889A-18-0324
Pueblo Del Sol Water Company – W-02208A-18-0313
 
Forest Bio-Energy Requirements for Electric Utilities
Commissioners discussed the need to “act now” to restore healthy forest conditions in Arizona and engage in forest bioenergy efforts to generate electricity. According to various reports from 2002 to 2017, the state has lost over 5.2 million acres and 29 human lives to wildfires in Arizona. These wildland fires have cost Arizona taxpayers and ratepayers over $162 million in direct and indirect costs. More specific to utilities, wildland fires in Arizona pose a risk to electric transmission and distribution infrastructure and increase the cost of service and risk to electric providers and water treatment facilities.
Commissioners directed Utilities staff to work with industry and stakeholders to create a guiding policy for the Corporation Commission. Utilities Division Director Elijah Abinah told Commissioners he would have a proposed policy posted to the Corporation Commission’s online docket by the next Open Meeting December 17. View all related documents in docket E-00000Q-17-0138.
Retail Electric Competition
The Corporation Commission will begin to have a comprehensive discussion on retail electric competition in Arizona. The Commissioners discussed holding a workshop in December with Commissioners Dunn and Burns as co-chairs of the effort. The Commission also directed staff to develop a policy on electric vehicles for their consideration during the December 17 Open Meeting. Information related to upcoming workshops and communication will be posted in the Commission’s online docket RU-00000A-18-0284.
Robert H. Shapiro, WMF Management, LLC and Affiliates Ordered to Pay $3.73 Million
The Arizona Corporation Commission ordered Robert H. Shapiro of California and his affiliated companies to pay $3,582,894 in restitution and $150,000 in administrative penalties for defrauding investors.   
The Corporation Commission found that Shapiro and his affiliated companies—WMF Management, LLC, Woodbridge Group of Companies, LLC, and four Woodbridge Investment Fund limited liability companies—sold an unregistered investment product called a First Position Commercial Mortgage. The Commission found that the Woodbridge Investment Funds were commercial lenders that made loans secured by commercial property and raised a total of $38,428,877 from investors to fund the loans. Further, the Commission found that Shapiro and his affiliated companies failed to inform investors about the risks of the loans and about the enforcement orders issued against them by other securities regulators. Shapiro and his affiliated companies were not registered to sell securities in Arizona.
To date, the Woodbridge Funds have repaid a total of $34,845,983 to the Arizona and non-Arizona investors. For more details about this case, view the full text of the Commission’s order, S-20988A-16-0354. To learn more about how to research an investment adviser or file a complaint, visit http://azinvestor.gov/.
 
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The Arizona Corporation Commission was established by the state’s constitution to regulate public utilities and business incorporation. The five Commissioners elected to the Corporation Commission oversee executive, legislative, and judicial proceedings on behalf of Arizonans when it comes to their water, electricity, telephone, and natural gas resources as well as the regulation of securities, pipeline, and railroad safety. To learn more about the Arizona Corporation Commission and its Commissioners, visit .