News Release

PHOENIX – The Arizona Corporation Commission held its monthly Open Meeting on June 28^th and 29^th, 2022, to discuss and vote on various utilities, railroad, and securities items. The highlights from the meeting are below:

Commission Directs Staff to Prepare Remedy Order for Frontier Communications

The Commission directed Staff to prepare a Remedy Order to bring Frontier Communications of the White Mountains (Frontier) back into compliance following a period of various 911 and other service outages in its service territory. This move comes after several Frontier fiber optic lines were vandalized by shotgun blasts the weekend of June 10^th resulting in service outages. The Remedy Order will outline a plan to improve the reliability of Frontiers services in the area. The Commission requested that the following issues be covered in the Remedy Order:

• Frontier will set up points of interconnection with the Arizona Department of Administration
• Frontier will file its Emergency Response Plan
• Frontier will actively apply for federal funds to use for network improvements
• Frontier will provide a bi-weekly updates to the Commission on its progress in applying for and receiving federal funds
• Frontier is to attend a future Town Hall meeting in St. Johns, Arizona, date TBD
• Frontier is to identify areas in its network where redundancy is needed
• Frontier is to provide a list of priority areas in its network where redundancy is needed
• Enforcement provisions should Frontier not comply with the remedy plan

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-03214A-21-0198.

Commission Approves a Reduction in Southwest Gas’ Delivery Charge Adjustment Rate

The Commission voted to approve a reduction in Southwest Gas’ (SWG) Delivery Charge Adjustment Rate (DCA). SWG filed an application in April 2022 seeking to modify its DCA rate to reflect the current balance in the DCA account. The DCA mechanism adjusts rates annually to reflect any differences between the company’s authorized revenues per customer and its actual revenue per customer. The new DCA rate will be a credit of $0.02096 per therm. This will lower the average residential customer bill with a monthly consumption of 24 therms by $0.50 per month.

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 G-01551A-22-0104.

Tucson Electric Power Company’s Revised Distributed Generation Interconnection Manual Approved

Commissioners approved Tucson Electric Power Company’s (TEP) revised Distributed Generation Interconnection Manual. The creation of these manuals was required following the Commission passing rules dealing with the interconnection of distributed generation facilities. TEP’s manual lays out technical and safety requirements that customers within its service territory must follow when interconnecting a distributed generation system, such as residential and commercial solar projects, to the existing grid. The manual is meant to create a standardization process for customers.

TEP’s manual was initially approved at the Commission’s February 2022 Open Meeting, however, following the passage of amendments at that meeting, a revision to the manual was necessary. The manual was revised to include information regarding Meter Socket Adapters (MSA), detailing their use for generating facilities. The manual was updated to better preserve the Super-Fast Track and Fast Track designations, allowing for faster review tracks for qualified projects. The revised manual also clarifies study cost fees customers are responsible for prior to beginning any study. TEP’s revised manual does not prematurely require inverters to comply with the IEEE sections that are not yet developed or for which equipment is not yet capable of compliance. Further, the manual modified its requirements around transfer trip infrastructure so as not to be overly burdensome, thereby reducing costs for large installations. Finally, the revised manual includes an additional section that provides a list of scenarios meriting an extension of time.

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-01933A-20-0116.

Halcyon Acres Water Users Association, Inc. Rate Increase Approved

The Commission voted to approve a rate increase for Halcyon Acres Water Users Association, Inc. (Halcyon). The company filed an application for a rate increase in October 2021 for the first time since 1964. Halcyon is a Class E non-profit association providing potable water service to approximately 82 residential customers in the Tucson area, in Pima County, Arizona. Under the Commission’s adopted rate design, the increase to median usage customers, exclusive of the Infrastructure Surcharge, is $0.70 (or approximately 1.9%). The increase to median usage customers, inclusive of the Infrastructure Surcharge, is $31.28 (or approximately 83.74%).

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 W-01953A-21-0343.

Corporation Commission Joins with Other State Securities Regulators and the S.E.C. to Settle with a Digital Asset Lending Platform for Unlawful Securities Sales

The Arizona Corporation Commission ordered BlockFi Lending, LLC to pay a $943,396 administrative penalty for offering and selling unregistered securities in the form of interest-bearing digital asset deposit accounts to Arizona investors.

The Commission found BlockFi Lending, LLC (BlockFi) and its affiliates at one point held approximately $155.7 million in BlockFi Interest Accounts (BIAs) in 9,891 accounts sold to Arizona residents. The Commission found the BIAs were securities through which investors lent digital assets to BlockFi in exchange for BlockFi's promise to provide variable monthly interest payments to the investor.

The Commission found BlockFi failed to comply with Arizona’s securities registration requirements and, as a result, investors were sold unregistered securities in violation of state law and deprived of critical information and disclosure necessary to understand the potential risks regarding the BIAs. The Commission found that a statement on BlockFi's website also materially overstated the degree to which BlockFi's collateral practices protected its ability to pay investors.

BlockFi previously agreed to cease allowing new investments in the BIAs and will not allow new investments until its securities are properly registered.

The Commission’s consent order was made possible in part by its Securities Division's participation in a multistate working group of the North American Securities Administrators Association (NASAA) that examined BlockFi’s actions.

Commission Finds Peoria Man Defrauded Investors with Ponzi Scheme Involving Real Estate, Revokes IAR License

The Corporation Commission ordered Respondents, investment professional Todd Regan Elliott of Peoria and his affiliated company, Elliott Financial Group, Inc., to pay $805,662 and a $70,000 administrative penalty for defrauding investors with a real estate Ponzi scheme. The Commission also revoked Mr. Elliott’s investment adviser representative license.

The Corporation Commission found the respondents offered and sold securities, notes issued by companies controlled by EquiAlt, LLC, to at least 40 investors, many of whom had no investment experience and some of whom were Mr. Elliott’s long-term investment clients. As a result, the Commission found many of the investors are now struggling financially, living month-to-month.

The Corporation Commission found respondents Elliott and his affiliated company represented to investors that EquiAlt was raising capital to purchase, improve, lease and dispose of distressed real property when in actuality, EquiAlt, LLC was allegedly operating as a nationwide Ponzi scheme. The Commission found the respondents made material misrepresentations and omissions to investors regarding the risk and liquidity during the offering or sale of the securities.

In settling this matter, the respondents admit to the Commission’s findings only for the purpose of this proceeding and agree to the entry of the Commission’s 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-21128A-20-0316.

Commission Sanctions Peoria Securities Salesman for Fraud in Connection with Crypto-based Investment, Revokes Registration

The Corporation Commission ordered Arthur Hoffman of Peoria and his affiliated company, ICA Financial Services, Inc. to pay $170,000 in restitution and a $20,000 administrative penalty for defrauding eight investors with a crypto-based investment fund. The Commission also revoked Hoffman’s registration as an Arizona securities salesman.

The Commission found Hoffman and his affiliated company failed to disclose to investors that the cryptocurrency investment contracts issued by Zima Digital Assets, LLC, were not authorized by Hoffman’s securities dealer. 

Additionally, the Commission found Hoffman classified his client’s cryptocurrency investment as “unsolicited” despite having introduced them to the crypto-based fund.

In January 2020, the principals of Zima Digital Assets, LLC were indicted for wire fraud and money laundering in connection with the cryptocurrency investment fund.

In settling this matter, the respondents admit to the Commission’s findings only for the purpose of this proceeding and agree to the entry of the Commission’s 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-21181A-22-0047.

Commission Finds Scottsdale Man and His Consulting Group Defrauded Investors

The Corporation Commission ordered former securities salesman John V. Feneck and his affiliated company, Feneck Consulting Group, LLC, to pay $676,901 in restitution and a $25,000 administrative penalty for committing investment advisory fraud.

The Commission found Feneck had previously been registered as a securities salesman in other states, but he and his company were not licensed to provide investment advisory services when they recommended to more than 100 clients to invest in mining and energy companies. Additionally, the

Commission found Feneck executed transactions in some of his clients’ brokerage accounts.

The Commission found Feneck and his company failed to disclose to some of their clients that they were receiving consulting fees and stock options from some of the mining and energy companies in which they were advising clients to invest.

 In settling this matter, the respondents admit to the Commission’s findings only for the purposes this proceeding and agree 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- 21191A-22-0112.