News Release

February Open Meeting Highlights

For Immediate Release | 2-5-20
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:

Commission Finds Nonprofit Leaders Scammed Investors

The Arizona Corporation Commission ordered multiple individuals and their affiliated companies to pay a total of $1.24 million in restitution and $80,000 in administrative penalties for defrauding investors.

The Commission found that Robert J. Moss, Jeffrey D. McHatton and Robert D. Sproat and their nonprofit, The Fortitude Foundation, defrauded 12 investors in the sale of unregistered securities in a variety of investments, including a purported operation to recover gold the Japanese Navy hid during World War II in the Philippines. The Commission found that Moss, McHatton and Sprout represented to investors their commitment to a biblically based code of business ethics and principles of honesty, integrity and transparency without disclosing a 2008 California desist and refrain order against Moss for securities fraud. 

The Commission also found that the principal of the gold recovery operation, Vernon Twyman, Jr. and his company, Ventures 7000, LLC, provided the informational materials that The Fortitude Foundation used to solicit investors and that those materials contained misleading projections and omitted to disclose a 1998 S.E.C. judgment against Twyman and the 2008 California order against Moss for securities fraud. The Commission ordered Twyman and Ventures 7000, LLC to pay $744,474 in restitution.

Additionally, the Commission found that Kevin Krause participated in and induced two unregistered and fraudulent securities sales by The Fortitude Foundation. Krause has two prior Commission orders entered against him for committing securities fraud and registration violations, which he did not disclose to investors. The Commission ordered Krause to pay $144,000 in restitution.

All documents relating to this agenda item can be found in the Corporation Commission's online docket a https://edocket.azcc.gov and entering docket number S-20953A-16-0061.

Mesa Man and His Company Lose License to Provide Investment Advice

Today, the Arizona Corporation Commission revoked the investment adviser representative license of William Austin Bailey of Mesa, Arizona, and the investment adviser license of his company, Associated Professional Investments, LLC (“API”).

The Arizona Corporation Commission found Bailey failed to comply with an award against him in a FINRA arbitration in which the claimants alleged breach of fiduciary duty, professional negligence, unsuitable transactions, excessive trading and violation of Arizona securities fraud statutes. The Arizona Corporation Commission also found that Bailey failed to properly disclose the arbitration award in his filings with the Commission after the award was issued in May 2015. Additionally, the Arizona Corporation Commission found that Bailey’s and API’s applications for licensure were inaccurate because they denied that Bailey had petitioned for bankruptcy in the previous ten years.

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-2101A-17-0256.

Commission Orders 90-Day Suspension of Investment Adviser Representative License

The Arizona Corporation Commission ordered a 90-day suspension of the investment adviser representative license of Joseph Donti of Newbury Park, California, requiring him and his affiliated company, Priority Wealth Advisors, Inc., to pay a $5,000 administrative penalty. Additionally, Mr. Donti agreed to withdraw the investment adviser license of his company.

The Commission found Donti and Priority Wealth Advisors, Inc. failed to conduct reasonable due diligence for four of his clients with respect to investments in 1 Global Capital, LLC, which declared bankruptcy in July of 2018.  

In settling this matter, the Mr. Donti and his company 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://edocket.azcc.gov  and entering docket number S-21092A-20-0009

Sun Valley Farms, Unit VI Water Company Rate Increase Approved

Commissioners on Tuesday approved a rate increase for Sun Valley Farms, Unit VI Water Company on a 4-1 vote. Sun Valley Farms had not been in for a rate adjustment in 35 years. This rate increase application follows an emergency rate surcharge that was implemented in December 2018 to cover hardships incurred from purchased water expenses and repair costs. Sun Valley Farms is a Class E public service corporation providing water service to approximately 230 customers in San Tan Valley in Pinal County, Arizona.

Commission staff and the utility agreed to an annual operating revenue of $235,753 which includes a WIFA loan surcharge, estimated to be approximately $65,878. An average residential customer will see a bill increase of approximately 115.9 percent, an average increase of $28.00. Chairman Bob Burns offered an amendment that was adopted which will require the utility to file a new rate application within three years, rather than the originally proposed five years.

All documents related to this agenda item can be found in the Corporation Commission’s online docket at https://edocket.azcc.gov and entering docket numbers W-02425A-19-0186 and W-02425A-19-0189.

Johnson Utilities, Update from Interim Manager

During an update from Johnson Utilities, LLC, the company’s Interim Manager, EPCOR, informed the Arizona Corporation Commission that the design of a third vessel for the Ion Exchange has begun. This vessel that will increase production by 500 gallons per minute at the Main Yard facility. The vessel is expected to be in operation by April of this year.

Promenade Well two is under construction. This well is capable of producing 2.6 million gallons per day into the distribution system. The Promenade Well has very low nitrate concentrations and this well will add additional production and redundancy to the water system. Completion of this project is expected in late spring of this year.

The Pecan Effluent Filter project phase one has been completed. This added eight filters to the existing five filter set. Phase two will take the total filter count to 16 and will be completed by spring of 2020. This upgrade will produce cleaner effluent and adds redundancy to the process.

The Pecan expansion project is also underway. Design of the facility to take the production from 3.0 million gallons per day to 4.0 million gallons per day to keep up with demand is in process. The project is expected to take about 18 months to complete and will improve the process and address the undersized influent pump station, effluent pump station and other components of the facility.

Odor alleviation efforts include sealing up headworks, regulating water levels, chemical addition to wetlands, increasing contact time with aerators, removing old sludge from deep settling zones and increasing the ecosorb misting system. These projects are all complete and EPCOR reported that they are seeing improvements from them. A significant reduction in odors has been observed through H2S loggers located around the community surrounding the facility. There has not been an exceedance (>.03) in over 11 weeks.

As of February 3, $8.5 million was on hand. EPCOR stated in previous Open Meetings that Johnson was anticipating upcoming cash flow challenges.

Johnson Utilities is developing a finance plan to assure funding for the company’s Capital Improvement Plan approved in Decision No. #77330. Ongoing refinements to this plan continue to be evaluated. EPCOR as the company’s interim manager is also preparing for its rate case with an August 31, 2019 test year to be filed by February 14, 2020.

All documents related to this agenda item can be found in the Corporation Commission’s online docket at https://edocket.azcc.gov and entering docket number WS-02987A-18-0050 and WS-02987A-15-0284.

APS Gives Rate Comparison Tool Update and Discusses Customer Service Initiatives

Daniel Froetscher, president and chief operating officer for Arizona Public Service Company (APS) informed Commissioners that a total of 9,970 checks have been mailed to the customers who were placed on less-than optimal rate plans as a result of using the company’s online rate comparison tool. The company credited customers for the amount they overpaid and issued customers a $25 credit, with this came a letter explaining the reason for the refund.

Regarding customer service enhancements, APS told Commissioners that it implemented an outbound calling campaign where call center advisors are making calls to APS customers to ensure their rate selection is the most efficient. Letters and postcards are being mailed to customers to make sure they are on the most economical rate plan as well. APS has two community events planned, one in Yuma on February 6 and one in Sun City on February 11. APS advisors will be present to answer questions regarding billing and will assist customers in setting up low income payment plans.

The company’s customer advisory board is in the recruitment and on-boarding stages. The board is set to meet in April. The company is also establishing a secret shopper service that will measure quality of service. This service will begin in early April.

The company’s new rate comparison tool is up and running. The methodology for the tool comes from 12 months of historic billing data, however approximately 1/5 APS customers are unable to use the tool. The customers who are unable to use the tool include rooftop solar, non- AMI customers and customers with less than three months of account history with APS.

Commissioners asked staff to issue an RFP (request for proposal) to confirm the accuracy of the tool. APS will pay for this third-party investigation and it was made clear that this charge will not be expensed to APS customers, but instead the cost will be absorbed by APS shareholders. The RPF was issued on January 16 and responses are due back by February 6. Staff informed Commissioners that they plan to review the REF responses on February 7 and hope to make their selection early next week and have a consultant in place by February 10.

All documents related to this agenda item can be found in the Corporation Commission’s online docket at https://edocket.azcc.gov and entering docket number E-01345A-19-0003.

Order to Show Cause against Qwest Corporation dba CenturyLink QC Service Outages Ordered  

Commissioners directed Staff to prepare and file an Order to Show Cause regarding the Commission's inquiry/investigation of Qwest Corporation dba CenturyLink QC 911 outages.

Evidence shows that lines belonging to Qwest Corporation dba CenturyLink QCO have experienced service interruptions in Pima County on several occasions, most recently in Page, Arizona. On Friday, January 3, the 911 switchboard in Page was not processing toll or 911 calls for 18 hours. This occurred due to a radio issue on a local provider network. 1,706 lines in the Page switch were toll and 911 isolated. 1,644 lines were successfully re-routed to the Flagstaff Police Department. Commissioners echoed that 911 outages are a public safety/health issue and dangerous, especially in rural Arizona.  

The Order to Show Cause against CenturyLink will investigate the outages and get to root cause of why the service outages occurred causing CenturyLink not being able to provide continuous and reliable service to its customers.

All documents related to this agenda item can be found in the Corporation Commission’s online docket at https://edocket.azcc.gov and entering docket number T-00000A-19-0179.

A complete list of agenda items and a broadcast of the Commissioner’s February 4-5, 2020 meeting is available on the Corporation Commission’s website: http://azcc.gov/live.

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About us:
The Arizona Corporation Commission was established by the state’s constitution to regulate public utilities and business incorporation. The Corporation Commission is Arizona’s co-equal, fourth branch of government. 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 http://azcc.gov.

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