San Tan Valley Area Information

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ACC Orders Johnson Utilities to Refund Customers for Paying Income Taxes

Update on Interim Manager Activity

In July, the Commission appointed an interim manager to run the company following an investigation into the company’s operations. EPCOR was granted access to company financials and facilities on August 30 after initial legal challenges were made by Johnson Utilities. The selected Interim Manager, EPCOR, provided an update to Commissioners Tuesday outlining what it found in the 12 days EPCOR has been acting as interim manager. EPCOR representatives told Commissioners they have completed site visits to more than 45 Johnson Utilities sites and are now developing budgets, schedules, and capital project lists.

EPCOR Vice President Troy Day stated, “Every day we find new issues.” When asked about available resources Day reported he felt EPCOR had sufficient resources and access available to be able to do its job in the interim manager role. Day said his company would provide a full assessment report to the Commission, as required by the interim manager agreement, by the end of September.

Commissioners discussed several additional items relating to company service concluding it would be best to let the interim manager complete its initial assessment before voting on additional financial and operational agenda items.

Certificate of Convenience and Necessity Moves to Hearing Status

During last month’s Open Meeting, Commissioners asked staff to evaluate the revocation of Johnson Utilities’ Certificate of Convenience and Necessity (CC&N), which provides Johnson the exclusive right to provide water and wastewater service within a designated territory. Commissioners voted Tuesday to direct staff to refer this issue to a hearing to fully investigate and provide due process for parties to be heard. During the process, Corporation Commission staff will make recommendations concerning, and ultimately an Administrative Law Judge will be required to determine whether any of the following options is appropriate:

  • completely revoke the utility’s entire existing CC&N;
  • alter the utility’s CC&N by deleting areas that have no customers, no existing infrastructure, and where there have been no updated requests for service filed by September 28, 2018; and,
  • alter the utility’s CC&N by deleting areas in the CC&N that have no customers, but where there have been updated requests for service filed by September 28, 2018, and where there is no existing infrastructure; and,
  • alter the utility’s CC&N by deleting any other portion for which a party believes deletion is in the public interest.

[READ MORE: What Happens if Johnson's CC&N is Revoked?]

The Commissioners’ decision also directs staff to evaluate whether it is in the public interest for Southwest Environmental Utilities LLC to continue to hold its CC&N. The AZCC will open a new docket to investigate this matter.

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 and WS-02987A-06-0077.

Tax Revenue to Return to Ratepayers

Commissioners also ordered Johnson Utilities to prospectively cease collecting federal and state income taxes from ratepayers, and the company was directed to refund all such tax revenues recovered after March 31, 2018 as a one-time bill credit.

Staff reviewed the amount of income taxes being recovered in the company’s currently authorized revenue requirement. For the water division, the company is currently collecting $125,072 in income taxes from ratepayers. For the wastewater division, the company is currently collecting $457,557 in income taxes from ratepayers.

Based on staff’s recommendations, a residential customer on a 3/4-inch meter will receive a one-time bill credit of $2.78 for the water division and $8.71 for the wastewater division.

Commissioners also ordered that Johnson Utilities is not allowed to recover an income tax gross-up on funds received under existing or new Advances in Aid of Construction agreements and is prohibited from requesting an administrative fee from developers who are parties to AIAC, or Line-Extension Agreements.

All documents relating 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-17-0392.

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