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Global Water seeking rate hikes
Tuesday, June 30, 2009
Unlike some communities where water and other utilities are controlled municipally, the majority of Maricopa water and sewer utilities are provided by Global Water, a private business that seeks profit from the water and sewer services they provide.
Global Water, including both Santa Cruz Water and Palo Verde Utilities, is currently seeking a rate increase through an application with the Arizona Corporation Commission (ACC). The ACC is the governing body that decides if and how much a utility can receive when they apply for such an increase in rates.
After submitting several individual applications for a rate increase for their six Arizona businesses, Global Water was granted consolidation of the cases, which will be heard starting on December 14, 2009. The hearing is scheduled for 10:00 AM that day at the ACC offices at 1200 W. Washington Street, Hearing Room #1 in Phoenix. (A pre-hearing conference to schedule witnesses and the “conduct of the hearing” is set for December 10 also at 10:00 AM.)
The language of Global Water’s petitions for increases states that they are seeking “the establishment of just and reasonable rates and charges for utility service designed to realize a reasonable rate of return on the fair value of its property throughout the state of Arizona.”
Asking for a rate increase
Ed Borromeo, general manager for the Maricopa and Casa Grande Region, and Carmelle Rodriguez, director of human capital and communications, met with this reporter to discuss the rate increases, which had been rumored.
The rumors are true; Global Water has applied for the opportunity to present its case for rate increases. Since February, when their paperwork was first filed, they have jumped the hurdles the ACC requires to meet paperwork “sufficiencies.” As of now, they have met their paperwork requirements and hearings have been set in December.
According to Borromeo, Global Water realized in fall 2008 that the economic situation had decreased their revenues extensively. The Maricopa housing delinquencies and vacancies meant that they were not getting the funds in to cover their expenses. Things were “looking grizzly,” said Borromeo.
They embarked on a “cost reduction campaign,” which resulted in 30% of their staff being cut. In Maricopa, that meant six of 28 staffers lost their jobs at the end of April 2009. Accounting and customer service personnel were some of the staff laid off.
All non-essential cuts have been made and, as of Labor Day 2008, all requests for expenditures became subject to more stringent review.
However, Maricopa housing foreclosures resulted in less usage and lower revenues, so GW decided in February 2009 that it was time to apply for a rate increase.
Why have they sought rate increases at this time? It would seem an inauspicious time for rate increases since customers are economically strained due to the recession.
Borromeo, when questioned why they are asking for a rate increase now, said that Global Water had not had a rate increase “since 1999.” He expressed concern that investors would not find investment in Global Water attractive with their current rate of return.
Further questioned as to how investment could be expected to offer good returns with all other investments down, Borromeo expressed concern that utility service expansion could be curtailed in Maricopa if they could not interest more investors.
However, Borromeo also stated that they have additional infrastructure already built that has not been utilized since the demand has decreased.
How much and when?
A “40% increase” has been part of the rumors, but Borromeo would not mention a figure.
According to Global Water President Trevor Hill’s testimony in the 713-page document submitted to the ACC, the impact they are requesting for Palo Verde Utilities could result in a 119.2% increase in sewer charges phased in over three years for the average residential user, with 15.6% for water increases.
An example: A monthly sewer bill of $33 would increase to $71.11 in three years; a $42.75 water bill would increase to $49.75.
In information supplied by Global Water, they state that water bills, based on average usage in 2008 would be:
They have not asked for “interim” emergency relief with a rate increase until the application is settled. April 2010 could be the earliest that Maricopans might see an increase, according to Borromeo.
- “Current rate for average usage of 7,827 gallons (5/8” & 3/4" meter): $42.75.
- If GW receives the requested rate increase for average usage of 7,827 gallons (5/8” & 3/4" meter): $49.75.”
GW’s campaign: educate and reduce usage
In their rate increase application, Global Water President Trevor Hill testifies to Global Water’s efforts to reduce water usage and gives Maricopa as an example of how they have encouraged water recycling. They have, claims Hill, saved over “1.5 billion gallons” for outdoor usage by replacing fresh water with recycled water.
Attempting to get “community leaders” empathetic to their situation, Global Water has conducted meetings with HOA Boards and other residents.
Their ACC application also stated that they “Propose shifting revenue requirements away from residential customers and toward large users of recycled water.”
Some of those large users of recycled water are the HOAs, which might also raise fees to homeowners if the water rates increase. So, the money is still going to come from homeowners’ pockets.
More tiers…More tears?
Global Water is proposing more tiers in their new rate structure. They suggest that they will offer rebates to those who reduce their usage and charge more per gallon for those who use more gallons.
The section of the ACC application, “Steps to Limit Rate Impact” includes, “The Global Water Utilities recognize the hardship that this rate increase will impose on its customers.”
- Global Water has proposed an “innovative Rebate Threshold,” where water customers will benefit if they use less water than the norm:
- “Current rate for usage of 7,001 gallons per month (5/8” & 3/4" meter): $43.20. Requested rate for 7,001 gallons per month (5/8” & 3/4" meter): $37.93.”
But, do they? They continue in the section on rate impact limiting to state that certain expenses will be excluded from the increases, like executive compensation. They claim the proposed “phase-in rates for Palo Verde which will move Palo Verde to a reasonable return over the next 4 years. In the first year, the rate phase-in will save customers approximately $4,726,000.”
This supposed savings is reminiscent of a person who shops actively at a sale and exclaims how much they have saved when they would have saved more by just staying home. If the rate increase is not instituted, the Maricopa customers of Palo Verde will save all of the money – beyond what they’re already paying.
More to come -- Read Part 2 in the July 15th issue: How the ACC makes its decisions and what the proposed rate tiers are.
To Contact the Arizona Corporation Commission:
If you would like to offer your comments on the Global Water rate increase application, contact the ACC. You will need to reference the Docket numbers (see below).
By e-mail: email@example.com
By postal mail:
Arizona Corporation Commission/
1200 W. Washington Street
Phoenix, AZ 85007
Docket numbers must be referenced in your letter/e-mail so comments can be filed properly for review. Please include ALL of the following Docket Numbers:
Global Water is encouraging conservation by the use of recycled water.