For Immediate Release | 12-12-19
Media Contact | Nicole Capone
Direct | 602-542-0713
PHOENIX — The Arizona Corporation Commission held its monthly Open Meeting to discuss and vote on various utilities and securities agenda items. Here is a brief recap of the meeting highlights:
Unanimous Commission Decision Paves Way for New Solar Development in Arizona
Commissioners on Tuesday finalized tariffs that include contract term lengths for Qualifying Facilities (QF) and their host utility companies, ending a period of uncertainty where contract terms were not defined. This decision allows capital investment into Arizona to build and scale QF generation. This decision paves the way for solar and other renewable projects to come into the state.
Commissioners Sandra Kennedy and Lea Marquez Peterson offered a joint amendment, and fellow Commissioners voted to adopt, a contract term of 18 years. This decision also stipulates that utility companies must make regular reports as part of their Integrated Resource Planning process to the Commission outlining QF activity in their territories.
The Public Utility Regulatory Policies Act of 1978 (PURPA) defines a QF as a small power production facility or co-generation facility that has the right to be served by and sell to its host electric utility at the host utility’s avoided cost rate. A small power production facility is a generating facility of 80 MW or less whose primary source of energy is renewable. A co-generation facility is a generating facility that sequentially produces electricity and another form of useful thermal energy, such as heat or steam, in a way that is more efficient than the separate production of both forms; a co-generation facility typically uses oil, coal, or natural gas as a primary energy source.
Under the current PURPA Policy in Arizona, the contract term length is not defined in policy. Operators of Qualifying Facilities desired a 15-year fixed price contract with host utilities, arguing that longer term contracts allow for QF’s to attract and retain capital investments which take time, and that extended contract terms allow more stability. Arizona Public Service Company, Tucson Electric Power Company, and UNS Electric, Inc. all argued for 2-year contract terms, stating that shorter contracts are in the public interest as they can be reviewed more frequently to ensure accuracy and relevancy. Commissioners today approved 18-year contract terms.
Corporation Commission Approves Same Day/Next Day Filing Service in Corporations Division
Commissioners on Tuesday unanimously approved a proposal from the Corporation Commission’s Corporations Division to implement same day/next day filing service. The new filing service will ensure that Arizona continues to be competitive in attracting businesses to the state and growing the economy. “This will be a great opportunity for Arizona’s economy which will make us more attractive to those seeking to do business in the region,” said Commissioner Boyd Dunn.
“There will be a lot of people in the business community throughout the state that will be excited that we are now offering this service”, said Commissioner Justin Olson.
The Arizona Corporation Commission’s Corporations Division will now provide same day/next day service for document filings, a service that was previously not offered. Corporations Division Director Tanya Gibson identified a need for same day/next day service from the business community throughout the state.
“We are proud to be able to offer same day/next day service. Our focus has been on enhancing the customer experience and this is a big step toward that goal. We appreciate the support of our Commissioners and are excited to continue to make Arizona more attractive to new business,” said Tanya Gibson.
This service will not conflict with or replace the regular expedited processing; it will be in addition to the regular expedited processing. Two-hour service will be offered for $400, same day service will be offered for $200 and next day service will be offered for $100.
“I really appreciate the Corporations Division tackling this issue and providing additional resources to the business community in the state,” said Commissioner Lea Márquez Peterson.
Commission staff formulated the fee structure after conducting extensive research of other jurisdictions in our region and nationwide to come up with a fee structure that will make Arizona competitive and attractive to those seeking to do business in the Southwest.
Tucson Electric Power Company and the University of Arizona Partner for Renewable Goal
Commissioners approved an application from Tucson Electric Power Company (TEP) that would allow it to partner with the University of Arizona (UA) to provide the University with more renewable power that will allow UA to reach their renewable goals over the next twenty years.
TEP in August filed an application for approval of a special contract with UA for a 20-year agreement that will allow TEP to partner with UA to support the University’s renewable energy goals. This partnership allows UA to completely offset its Scope Two Emissions, which is the indirect source of emissions derived from the purchase of electricity. Under the agreement, TEP will dedicate a portion of the power generated from two new renewable energy projects, one solar and one wind, to serve the University for a contract period of twenty years. UA will pay 100 percent of all approved generation, transmission, and distribution charges for the term of the contract, plus an additional contribution to offset future integration costs for all customers.
Johnson Utilities Meter Management Program Lifted in Regions’ 1 and 2
Commissioners voted 4-1 to lift the Meter Management Program in Johnson Utilities’ Regions 1 and 2.
The Commission found that the utility has obtained sufficient water supply to lift the meter management restrictions in water regions 1 and 2 required under Commission Decisions 76937
Johnson Utilities Revised Hook-up Fee Tariffs
On September 17, 2019 the Company through its interim manager EPCOR filed an application to revise the Company’s hook-up fee (“HUF”) tariff for both its water and wastewater systems.
Raising the HUF will provide additional funding from developers to pay for the required infrastructure investments needed to serve Johnson’s growing customer base, especially in areas expected to be favorably impacted by the lifting of the Meter Management Program.
The Commission found that the higher HUF request should be approved.
Johnson Utilities Granted Extension in Rate Application
Commissioners granted Johnson Utilities a time extension allowing the company to file its new rate application by February 14, 2020, instead of by December 31, 2019, as previously authorized. The new rate case filing will continue to be based on a test year ending August 31, 2019.
The company’s Interim Manager, EPCOR, informed the Arizona Corporation Commission that it needs the six-week extension of time in order to prepare a complete rate application with all the required supporting schedules and pre-filed testimony. EPCOR stated that because of the non-calendar-year test year, it was necessary to create test year-end closing entries, an accounting prerequisite not routinely complete within mid-year monthly closing of the books.
EPCOR stated that it had these test year end closing entries developed by a third-party Certified Public Accounting Firm and the process took significantly longer than originally anticipated, in part due to the need to prepare tax entries unique to Johnson.
EPCOR stated that it recently received the completed results and is now able to move forward with preparing the full rate case application.
Arizona Public Service Company New CEO Appears before Corporation Commission
On Wednesday, Arizona Public Service Company (APS) new CEO, Jeff Guldner, appeared before the Commission to discuss the APS rate comparison tool, the implementation of effective Customer Outreach and Education Program, proforma billing and the issues contained in the letters from Commissioner Olson (November 15 & 26, 2019) and Commissioner Dunn (November 20, 2019).
Jeff Guldner opened on an apologetic note by stating, “I want to personally apologize to those customers who were affected by that error (online rate comparison tool). It is our responsibility to do better and you have my commitment that we will do better.”
APS’s rate comparison tool caused about 10,000 customers to be placed on inaccurate plans. Ted Geisler, APS’s chief information officer said, “I am responsible for the IT organization and the work performed in that organization. On this rate comparison tool, we failed to adequately build and test the tool to ensure it was 100 percent accurate. As a result, I take full responsibly for it.”
Geisler told Commissioners that the rate comparison tool plan failed due to the inaccurate mapping of inputs during peak usage hours. The plan calculated rate charges during the hours of 2 p.m. to 7 p.m., instead of 3 p.m. to 8 p.m., which are peak energy hours for APS customers. Geisler continued by saying that about 48,000 customers switched plans from February through November, but that 38,000 out of 48,000 customers were on the most economic plan. The remaining 10,000 customers are those who were negatively affected by the tool.
To remedy this mistake, APS said they are crediting customers for the amount they overpaid and that these customers will be given an additional $25 credit to their account for the inconvenience.
APS is in the process of creating a new online rate comparison tool and are thoroughly testing it before its launch. The company hired the Brattle Group, who provides consulting services in economics, finance and regulation to corporations, law firms and public agencies, to test the accuracy of the new tool.
Ahmad Faruqui of the Brattle Group presented an assessment of APS’s comparison tool to the Commission. He told Commissioners that Brattle’s calculations of the customer’s best rate for each customer match those of APS for 99.9 percent of customers in the sample. Brattle is continuing to analyze the remaining 0.1 percent.
APS mentioned changes it will be making to improve its customer service which include creating a customer advisory panel, initiating an APS mobile service team who will provide in-person support to customers and establishing an internal review process to better identify problems.
As of the meeting’s close, the Commission is moving forward with the request for proposal that was ordered in June to investigate APS’s customer outreach and education. Staff is preparing a separate request for proposal to investigate the rate comparison tool.
Commission Revokes Licensee-Registration of Chandler Investment Professional, Orders Penalty
In its default order, the Arizona Corporation Commission revoked the investment adviser representative license and securities salesman registration of Robert C. High II of Chandler and fined him $25,000 for his dishonest and unethical conduct regarding a client’s investment account.
The Commission found Mr. High made withdrawals from a client’s account, depositing the money into another account he controlled. The Commission found Mr. High did not have the client’s consent to transfer the funds.
Commission Revokes Registration and Denies Invest Adviser Rep Application of Gilbert Man
The Arizona Corporation Commission revoked the securities salesman registration of Gilbert resident Zachary Wagner and ordered him as well as his affiliated company, Wagner Capital Management, to pay $55,928 in restitution and a $15,000 administrative penalty for his securities violations. Also, the Commission denied Wagner’s application to become an investment adviser representative in Arizona.
The Commission found Mr. Wagner and his company were not registered to sell securities or licensed to provide investment advice in Arizona when they began managing a client’s funds. Further, the Commission found Wagner committed fraud by using a significant portion of the investor’s funds for personal use instead of investing in securities as represented.
In settling this matter, Wagner admits to the Commission’s findings and agrees to the entry of the consent order. All documents relating to this agenda item can be found in the Corporation Commission's online docket at https://edock t.azcc.gov
and entering docket number S-21072-19-0061
Tempe Woman Commits Securities Fraud
The Arizona Corporation Commission ordered Venessa R. Sandoval of Tempe to pay restitution of $525,668 and a $25,000 administrative penalty for fraudulently selling securities in connection with a real estate rental company. The Commission found Ms. Sandoval met with six investors in their Arizona homes to sell limited liability company interests on behalf of Pacific Capital Enterprises, LLC. The Commission found that Sandoval failed to disclose to investors that the company did not have legal title to any real estate at the time and failed to disclose to two investors that the Commission had issued a temporary order to cease and desist, alleging securities violations against the person who managed Pacific Capital Enterprises, LLC.
Pacific Capital Enterprises, LLC and other respondents had previously consented to a Commission order in March 2019. All documents relating to this agenda item can be found in the Corporation Commission's online docket at https://edocket.azcc.gov
and entering docket number S-21035A-17-0391
Fountain Hills Man Sanctioned for Unlawful Securities Sales
Jack Combs of Fountain Hills was ordered by the Arizona Corporation Commission to disgorge $221,713 in commissions he earned by offering and selling unregistered securities in multiple real estate companies doing business in Arizona. After the disgorgement amount is paid, Mr. Combs is required to pay a $25,000 administrative penalty to the state of Arizona.
The Arizona Corporation Commission found Combs was not registered as a securities salesman when he provided investors with documents containing material misrepresentations about the performance of the real estate companies, about his professional qualifications as well as those of the companies’ managing officer and about the risk associated with the investment. To date, most investors have not received any return of their investment principal.
In settling this matter, Combs neither admitted nor denied the Commission’s findings, but agreed to the entry of the consent order. All documents relating to this agenda item can be found in the Corporation Commission's online docket at https://edock t.azcc.gov
and entering docket number S-21073A-19-0063
Commission Orders Companies to Pay $14.2 Million in Restitution to 150 Investors
The Arizona Corporation Commission ordered American Realty Partners, LLC and Corix Bioscience, Inc. to pay $14.2 million in restitution and administrative penalties totaling $700,000 for defrauding more than 150 investors.
The Arizona Corporation Commission found American Realty Partners, LLC and Corix Bioscience, Inc., formerly American Housing Income Trust, Inc., were not registered as securities dealers or salesmen when they fraudulently sold unregistered securities in companies that were in the “fix-and flip” real estate industry, inducing investors with false and misleading statements during the offering process. Additionally, the Arizona Corporation Commission found certain investment proceeds were misappropriated. To date, most investors have not received any return of their investment principal.
A complete list of agenda items and a broadcast of the Commissioner’s December 11-12, 2019 meeting is available on the Corporation Commission’s website: http://azcc.gov/live