Court Decision May Have 'Monstrous' Effect On Utility Rates

A new court decision in Arizona may make it more difficult for water utilities to raise rates in that state.

The Arizona Court of Appeals Division One vacated a decision by the state’s rate regulator, the Arizona Corporation Commission (ACC), in an opinion handed down in August.

The court said the regulator acted unconstitutionally when it approved “utility rate surcharges to recoup capital expenditures made between rate cases,” according to an assessment by the law firm Osborn Maledon.

The case began last year over a surcharge for certain consumers.

The Residential Utility Consumer Office (RUCO), a state office aimed at ratepayer protection, “sued the Arizona Corporation Commission over a decision to grant a rate hike to Arizona Water Co. affecting about 33,000 customers in Apache Junction, Superior, Miami, Bisbee, Sierra Vista and other rural areas,” The Arizona Republic reported.

In part, RUCO had “argued that the approved system improvement charges are unconstitutional because the charges violate the requirement that the ACC determine the fair value of the utility’s property when setting rates,” the law firm reported.

The decision could have wide-ranging impacts on water utilities in Arizona.

“The court decided that some automatic rate changes violate the state constitution, which requires the five elected commissioners to evaluate rate increases,” the Republic reported.

Pat Quinn, the former director of RUCO, explained the significance of the case.

“It’s a small case for a small water company, but the ramifications of that decision are monstrous,” Quinn said, per the report. “The way some of us, most of us, interpret that order says that it affects adjustor mechanisms, which electric, gas and water companies have been putting in for years.”

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