PHOENIX – The Arizona Corporation Commission held its monthly open meeting on April 12 and 13, 2022. The Commission discussed and voted on several utilities, securities, and railroad items, below are the highlights from the meeting:
Salt River Project Coolidge Generating Station Line Siting Application Denied
The Commission voted 4-1 to adopt Sample Order #3, denying the Certificate of Environmental Compatibility for the expansion of Salt River Project’s Coolidge Generating Station (CGS). The applicant sought to add 16 new simple-cycle natural gas combustion turbine generator units to its existing facilities located near the unincorporated town of Randolph in Pinal County, Arizona. The applicant also sought to construct a new 500 kV transmission line and switchyard to transport the power that would have been generated by the new units, had they been approved. CGS currently consists of 12 simple-cycle natural gas combustion generator units.
Residents and advocacy groups opposed the project moving forward and expressed concerns with additional pollution resulting from the added natural gas turbines. Residents of the community also raised concerns regarding light pollution and the increased noise level from the additional turbines.
EPCOR San Tan Water and Wastewater District Rate Case Approved
The Commission approved a rate case application from EPCOR Water Arizona Inc. (EPCOR) for its San Tan Water and Wastewater Districts (San Tan), formerly Johnson Utilities. This rate case was a unique situation where the rate application was filed while EPCOR was still interim manager of the former Johnson Utilities water and wastewater systems. EPCOR’s San Tan District is located in Pinal County, AZ and provides water service to approximately 30,500 customers and wastewater service to approximately 44,500 customers, current rates for these customers were set in 2010.
An amendment from Chairwoman Lea Márquez Peterson removed a discussion of deconsolidation from the Recommended Opinion and Order, in line with exceptions filed by the Town of Florence. The Commission also adopted an amendment proposed by Commissioner Jim O’Connor which allowed EPCOR to recover in this rate case 30-percent of the $45 million deferred debit that EPCOR was previously authorized to recover in the first rate case following EPCOR’s status as the owner of the systems. This amendment will help mitigate future rate shock to customers of the San Tan District water and wastewater systems while providing EPCOR with sufficient revenue to continue making the necessary improvements to the systems.
As a result of the authorization, customers in the San Tan Water District with a typical 5/8 X ¾-inch meter with an average monthly usage of 5,685 gallons will see an approximate monthly bill decrease of $1.10. Customers in the San Tan Wastewater District with a typical ¾-inch service meter will see a monthly bill increase of $7.06.
Tucson Electric Power Company Purchased Power & Fuel Adjustor Rate Modified
Commissioners voted to modify the impact of Tucson Electric Power Company’s (TEP) rate adjustment resulting from the utility’s Purchased Power and Fuel Adjustment Clause (PPFAC).
The PPFAC rate consists of two components, a forward component, and a true-up component. The forward component consists of the forecasted fuel and purchased power costs for the proceeding 12-months, starting April 1 and ending March 31 of the following year, less the average base rate of $0.029053 per kWh. The true-up component is a reconciliation of any over or under-collected amounts from the preceding year, which are to be credited to or recovered from customers in the following year.
Following the adoption of an amendment offered by Commissioner Jim O’Connor, the forward component will be set to zero, which will lessen the impact to TEP customers. A second amendment from Commissioner O’Connor requires TEP file, on a semi-annual basis, with the Commission its cost savings resulting from its participation in the Western Energy Imbalance Market, the first filing is due July 1, 2022. A third amendment from Chairwoman Lea Márquez Peterson will require TEP to include supporting economic dispatch analysis with its semi-annual filing. This will help ensure TEP’s decisions regarding the future purchase of fuel and power are economic and in the best interest of customers.
The current PPFAC rate, approved in 2021, is $0.003294 per kWh. With the changes approved in Commissioner O’Connor’s amendment, TEP will be changing the rate to $0.008137 per kWh instead of $0.018424 as TEP originally proposed, which will be collected over the next 18 months. Currently, TEP’s PPFAC bank account is approximately $108 million under collected. There were two years of cost deferrals and delayed recoveries due to the COVID-19 pandemic. TEP is seeking recovery for $17.8 million in shifted costs along with what TEP described as $90 million in higher costs due to volatility in the energy wholesale market, both of which have contributed to the $108 million under-collected PPFAC bank balance.
For the average residential customer, the PPFAC rate will appear as an approximate $6.49 surcharge per month (797 kWh x $0.008137 per kWh). The approved PPFAC defers a portion of the recovery of the under-collection from customers who are challenged by the continuing impacts of the COVID-19 pandemic and other economic pressures.
Commission Approves Railroad Crossing Projects in Pinal and Pima Counties
The Commission voted to approve two railroad applications at its April Open Meeting, the details are below:
The first project the Commission voted to approve was an application from the Pinal County Public Works Department for the approval of improvements made to the Hanna Road railroad crossing over the tracks of the Union Pacific Railroad Company (UP). The project will include the installation of new active warning devices with flashing lights and gates in both directions that will alert the public to the presence of a train. The project will also include the paving and widening of Hanna Road to accommodate the increased traffic expected surrounding the Inland Port of Arizona, where Nikola Motors production facility is currently located. This will enhance economic development in the area while also increasing public safety.
The second was an application from Pima County Public Works Department requesting approval to construct a grade-separated crossing for Sunset Road over the tracks of the Union Pacific Railroad (UP) near Interstate 10 near Tucson, Arizona. Sunset Road is currently a two-lane road that ends at the I-10 northbound frontage road east of I-10. No railroad crossing currently exists at this intersection. The project will establish a new grade-separated crossing for Sunset Road above the UP tracks. The project will also realign Sunset Road and widen it to increase capacity. The overall project will cost approximately $39 million dollars. Completion of the grade-separated crossing will improve public safety and is in-line with similar safety projects throughout the state.
Arizona Public Service Company Customer Outreach & Education Plan Approved
Commissioners voted unanimously to approve a customer education and outreach plan from Arizona Public Service Company (APS). The plan was a requirement placed on APS by the Commission to ensure customers are properly notified and educated on changes to their rates and plans as a result of the utility’s recent rate case. APS will utilize bill inserts, email, and text messaging to communicate directly with customers regarding forthcoming changes to rate plans and time of use periods among other changes. The customer education and outreach plan focuses on six key areas: new Time-Of-Use hours and education, plan change education and confirmation process, bill redesign, plan comparison education and most economical plan communications, general rate plan education, and adjustors. The first three education areas result directly from the recent rate case, while the remaining focus areas are devoted to ongoing rate education. APS will still be required to submit quarterly reports updating the Commission on its progress in this outreach and education effort.
Arizona Public Service Company Solar Plus Storage Third-Party Contract Approved
Commissioners voted to allow a third-party storage contract for Arizona Public Service Company (APS) to be included in its Power Supply Adjustor (PSA). APS sought expedited approval of inclusion of a new solar plus battery storage project be included in a future PSA. APS has entered into an agreement with Sun Streams PVS, LLC for a project that will provide 215 MW of solar, plus 215 MW of lithium-ion battery storage power capacity of 860 MWh that will be located in Arlington, Arizona. Under the contract, the delivery point is the Hassayampa 500 kV Switchyard. Sun Streams will own and operate the facility, APS has the exclusive right to receive and use the capacity discharged from the facility. APS states that the approval of this agreement will provide APS with peaking capacity to maintain a reliable power supply during peak demand periods.
Commission Sanctions Arizona Insurance Producer and His Company for Multimillion Dollar Investment Scheme Involving Elderly Investors, Revokes Adviser Licenses
The Corporation Commission ordered respondents Ronald Stevenson, the estate of Barbara Stevenson, and American Financial Security, LLC to pay, jointly and severally, $19,459,875 in restitution and $275,000 in administrative penalties for defrauding investors in a debenture scheme. The Commission also revoked the investment adviser representative license of Ronald Stevenson and investment adviser license of American Financial Security, LLC (AFS) for unethical and dishonest conduct.
The Corporation Commission found Mr. Stevenson has been a licensed Arizona insurance producer since 2002. The Commission found Mr. Stevenson met with investors in his Prescott, AZ office and proposed that they invest in debentures issued by EquiAlt, LLC, claiming they were safe and suitable investments. Investors were told their investment money in EquiAlt Debentures would be used to flip, lease, or purchase distressed or foreclosed real estate or land and the investors would receive a 6 to 9 percent return on their principal.
The Corporation Commission found that some investors were in their 70s and 80s at the time of their investment. One investor was 97 years old when Mr. Stevenson sold her a three-year EquiAlt Debenture.
The Corporation Commission found the respondents failed to disclose to investors that they were getting paid commissions, derived from a percentage of the principal investment amount; furthermore, subscription agreements given to investors by the respondents stated they did not receive commissions. Also, the Commission found Mr. and Mrs. Stevenson and AFS failed to disclose to investors two civil lawsuits naming Ronald Stevenson and AFS as defendants.
The Corporation Commission found that, despite Respondent Mr. Stevenson's characterization that the EquiAlt Debentures were appropriate for low-risk investors, the investment was highly speculative and not suitable for some investors who did not want to invest in high-risk investments. Further, the Commission found that Mr. Stevenson and AFS misrepresented the liquidity of the EquiAlt Debentures to investors.
In February of 2020, the U.S. Securities and Exchange Commission (SEC) filed a complaint against EquiAlt, LLC and its principals. In its complaint, the SEC alleged that EquiAlt had been conducted as Ponzi scheme since 2011 and raised over $170 million from the sales of EquiAlt Debentures to over 1,100 investors nationwide.
Commission Finds Former Phoenix Man Defrauded Investors with Crypto Currency Investment
The Corporation Commission ordered Carlos Parra formerly of Phoenix to pay $73,500 in restitution and pay a $20,000 administrative penalty for defrauding investors with a crypto currency investment program.
The Corporation Commission found that Parra offered and sold unregistered securities in 14 transactions for a total of $219,500. The investors bought interests in a company that was supposed to purchase and trade crypto currencies and pay investors from the trading profits.
The Corporation Commission found Parra mostly promoted the investment program in presentations to groups at hotels, a church, a business office, a radio station with broadcasts primarily in Spanish and directed at the Latino, Christian community.
However, the Corporation Commission found Parra made material misrepresentations and omissions when selling these investments, including promising returns of over 300 percent in a year's time while failing to disclose the risk of investing in a multilevel marketing business. The Commission found Parra failed to disclose the risks associated with crypto currency investments and to disclose that earlier investors had not been able to withdraw principal and interest as promised.
Commission Sanctions Florida Man and His Companies for Securities Fraud Involving Crypto Currency
The Corporation Commission issued a default order against respondents Richard K. Hainsworth III of Florida and his two limited liability companies, ordering them to pay $69,425 in restitution and a $20,000 administrative penalty for committing securities fraud.
The Corporation Commission found 21 investors learned about Hainsworth III’s and TreyTrades, LLC of Arizona’s and TreyTrades, LLC of Florida’s alleged trading business primarily through the respondents' social media posts and referrals from mutual acquaintances.
The Commission found investors bought into the investment program with the expectation that their funds would be used for trading currencies, stock and crypto currencies. However, the Corporation Commission found the respondents made material misrepresentations and omissions to investors when selling these investments while not registered with the Commission’s Securities Division as a securities salesman or dealer.
The Commission found that Hainsworth and his companies represented to investors that they had a large clientele with dozens of investors who each invested between $5,000 and $200,000. The Commission found the respondents represented that they had generated $1.3 million of profit in several months when, in fact, no investor invested more than $17,000, there was no evidence of any profits, and no clients were ever paid a return. Additionally, the respondents failed to inform later investors that several previous investors had received no return.
Commission Orders $1.16 Million in Restitution for Investors Defrauded by Crypto Currency Investment Scheme
The Corporation Commission ordered My Trader Coin to pay $1,162,747 in restitution to investors and a $75,000 administrative penalty for operating a multilevel-marketing scheme for investments in worthless crypto currency companies.
The Corporation Commission found My Trader Coin, also known as MTCoin, told investors their funds would be used to purchase and trade cryptocurrencies, paying investors from anticipated trading profits.
However, the Commission found My Trader Coin was not a registered Arizona securities dealer, and that the company made material misrepresentations and omissions when selling these investments, including promising returns of over 300 percent in a year's time, failing to disclose the risk of investing in a multilevel marketing business, failing to disclose the risks associated with crypto currency investments, and failing to disclose that earlier investors had not been able to withdraw principal and interest as promised.