Good morning, everyone. Welcome to our January 14 round of show, open meeting. Hope everyone had a wonderful holiday break, but now it's time to get back to work. And, I know we're gonna build on our successes of 2025. I thought December was going to be my, final open meeting, but I'm going to handle this one, today as well. And, at the end of the meeting, we're going to elect a new chair and vice chair. So it looks like I get an encore. I'm going to I'll do the pledge this morning, since it's my last,
moment as the chair. And then our, vice commissioner Marquez Peterson is going to, do our our, prayer. So if you would please, stand. Pledge first. Let's do the pledge first. I pledge allegiance to the flag of The United States Of America and to the Republic of which it stands, one nation under God, indivisible, with liberty and justice for all. And please remain standing if you'd like and bow your heads if you'd like.
Dear lord, thank you for being here with us today on our first meeting of 2026 for our Arizona Corporation Commission. Please be with us, lord, and and help us lead with integrity and make good decisions, on behalf of all of Arizonans. Lord, be with our staff, our interveners, our utilities, our rate payers, and look after us, Lord, in this upcoming year. In your name, amen. Before we, get moving, I'd like to do a couple of housekeeping items and really that is just acknowledging our corporations division and our IT team, administrative services and everyone else who helped make the launch of our new business filing
portal, Arizona Business Center. This has been a project many years in the making and the new site just launched this week. It was a great success. So I just wanted to say thank you to everyone involved in that for helping make that transition. We have four items today that are subject to 4252. Those agenda items are items twelve, fourteen, fifteen and sixteen. If any parties to those items would like to speak, please come forward. Seeing no one, I'll ask my fellow commissioners.
Chairman Thompson? Yes. My name is Marshall McGruder. I'd like to discuss consent consent agenda item number one. Okay. Go ahead then. Go ahead. Yes. Good morning, chairman Thompson and commissioners. I'm Marshall McGruder, Santa Cruz County Energy Commission for over twenty years, appointed in 2000. I intervened and and or participated in our early rate or line signing case during that period. Five routes are were considered in this project that connected the TEP Canoa Ranch substation
in Green Valley to the UNSC Cantor substation in Santa Cruz County with a 138 kV line. Of the five routes, four and five were deleted early and one and two are the proposed roads routes routes. My favorite, Route 3. That's why I'm talking. Route 3 runs parallel to Interstate 19 starting near the northern terminus Cantor Ranch substation past another TEP's Cantor substation continuing to Cantor.
Route 3 is the shortest, least expensive of these five routes. In 2004, I I proposed and had approved a second transmission line from Kanoa to Cantor about two thirds the length of Route 3. Thus, this 46 kV line provided emergency backup power to the Santa Cruz service area. TP's transmission director told me it is designed to carry 238 kV lines. Thus, Route 3 already has two thirds of the transmission poles in place.
Only one third needs to be constructed. Over 100 of the 250 comments the company received concerned Route Three's impact on the Santa Cruz River Mountain views by residents west of Interstate 19. In Green Valley, view is the most important homeowner value and why they oppose. Thus, I-nineteen however, I-nineteen road segment cuts through a very steep ridge over 100 to a 150 high
feet high on top of which these homes have great mountain views. The monopole, however, only 75 to 85 feet tall, well below the horizon of these homes and would not be seen in front of the mountains. I 19 has four runways, east and west frontage, I, north north and south roads, each separate separated by medians of various widths. The median between I 19 South And West Frontage Road could be a safe monopole
corridor. This eliminates the concerns on Route 3 and is considerably less expensive. I'd estimated to save about $10,000,000 with resulting lower rate base and increases for UNSC ratepayers. I applied to intervene, but the chairman and committee unanimously opposed and thus was unable to present route questions the the question, the route selection, and other issues. I support this project. However, Route 3 superiority was inadequately considered by the committee.
Based on these facts, it should have been. Furthermore, this project will finally meet the 1998 ACC order 62011 that required a second transmission line to Santa Cruz County to be operational not later than thirty one December two thousand three or find $30,000 per month until so. Maybe later is later is better than never. Thank you very much.
I'm available for questions. Thank you, mister McGruder. Is there anyone from TEP that would like to address this? Good morning, Megan. Thank you, mister chairman, mister vice chairman, commissioners. Megan Grapel from Osborne Maladon on behalf of UNS Electric. Mister McGruder was not made a party to this case. He is not a rate payer of UNS Electric any longer. He is not a stakeholder. Most of what he just said wasn't even an evidence in the line sighting proceeding. It was voted unanimously by the committee. We do have mister Breiner on the phone if there are any questions about what he said, but, this wasn't a forty two fifty two item. It still is on consent.
If you have any questions of me, I'm happy to answer them. Thank you. Do my colleagues have any questions? Question? No? Okay. Thank you. Thank you. Mister chairman? Yes. I'd like to we're quite open to statute 40 dash three sixty that it does not require the statute does not require you to be a ratepayer for the utility. I lived in that community until late two thousand three and retired to Phoenix. However, due to large amount of community input,
I got back into gear and tried to get involved in this project, and and that's why I tried to intervene and thus was not able to question the utility concerning this and many other areas of concern. K. Thank you, mister McGruder. Okay. Are there any other items that the commissioners would like to pull from the consent agenda? Vice Chair Myers. Yes. I will go ahead and move that the consent agenda be approved. Are we voting, like, electronically? Or I don't see.
I don't see it either. You don't see our little paddle paddles. Is Voke Vokely then verbally? Okay. Oh. Okay. I don't have that looking to get I'll have them Well, I guess Caroline can call it. Caroline, Caroline, can you do a roll call vote, please? I'll be there. I mean, do it. Sorry. Don't you love me? Just blame it on the technology. Okay. Perfect. Let me go ahead and cast your vote for the consent agenda. The consent agenda passes five to o. And now we'll get on to, the business at hand, which is our regular agenda, vice chair Myers.
Yes. I will move item number 18 for discussion. Judge Haines, it's all yours. Alright. Thank you. Chair, vice chair, commissioners, good morning. Charles Haines from the hearing division. Item number 18 is the application by Joshua Valley for a rate increase. Joshua Valley is a class d water utility serving approximately 1,063 customers in the unincorporated community of Mead View, located approximately 70 miles north of Kingman in Mohave County. Its current rates were set by decision number 75701 in 2016.
In the application the company proposes a $308,000 or approximately 74% increase in revenues. The proposed rate increase would provide an operating income of $110,000 for a 10.75% return on fair value rate base of $1,029,395 The proposed rate design retains the basic existing structure that incorporates an inverted three tier block rate with monthly minimums increasing with increasing meter size and continues the current residential
rate commodity break over points of 3,010 gallons. Subsequent to the filing of the staff report the company and staff entered into a settlement discussion and subsequently to that a settlement agreement. The settlement adopts a revenue requirement of $693,758 for a $274,806 or 66% increase over test year revenues of $418,952 The settlement uses a 10% return on fair value rate base of $998,000
the settlement also adopts a rate case expense of $30,000 to be recovered through a monthly customer surcharge over three years estimated to be approximately 78¢ per month. The rate impacts of the proposed settlement for a typical residential customer with average monthly consumption would increase from the current bill of $28.44 to approximately $48.69 an approximate 71% increase over current rates. The ROO adopts the settlement revenue requirement and rate based finding that they are the
product of a compromise between staffs and the company's litigation positions. The ROO also adopts the settlements rate of return of 10% and the $30,000 rate case expense. Roo also adopts the settlements rate design as well as various staff direct case recommendations that were unopposed by the company but not addressed within the settlement. There were no exceptions filed but there is a hearing division amendment that I can address at the appropriate time. And with that, I'm available for any questions you may have. Thank you, judge. Now we'll go ahead and hear from staff. Good morning, mister chair, vice chair, commissioners. Britton Baxter on behalf of the utilities division.
Staff supports the Roo and the hearing proposed amendment one and is available for questions. Alright. Thank you. And company? Morning. Good morning, chairman Thompson, commissioners. Appreciate your time. Happy New Year. Haven't seen you all for a few days. First of all, I really would like to say and and express my appreciation to staff because, frankly, you know, these settlement, discussions were very productive. It was very helpful because you get to sit down in a room and explain your position and work through it, and it goes both ways. Sometimes we saw what staff's position were when the company agreed to it. Other times, the company, expressed expressed what they were saying and and it brought a better understanding to staff
because, you know, at the end of the day, we've got an adversarial process where where, you know, this is your position. This is your position. We fight it out. But when you get to these settlements and you and you have a chance to talk it through, it's really helpful to see both sides. And and I think it, especially in this case, it came to a a very good outcome both for the company and and the customers, I think. So I just wanted to express my thanks to staff and, let you know that we we support that process and we support as Rue is written. Thank you. Thank you. And we'll go ahead and go to commissioner questions starting with commissioner Walden.
Thank you. Thank you to staff as well and I appreciate the work that was put in and, with judge Haines Haines. I, thank you for your explanations and justification for why you support the settlement. That was really helpful. I have a question for the company. It it says I'm I'm on page page eight. So that, the water system the high percentage of the plant serving the water system is near the end of its useful life, and you will be needing to attract investment to fund the needed improvements. Are you looking at in the future that you'll be doing a complete overhaul of
that system? Are you able to speak to that? Chairman Thompson, commissioner Walden, maybe not a complete overhaul, but, yes, there's gonna be quite a few, improvements. The system is getting older, and this is one of those systems. You'll see these throughout rural Arizona where you had a lot of construction, a lot of construction, a lot of development in rural Arizona in these isolated communities in the seventies and eighties. Well, these systems now are forty, fifty years old and so you're starting to see a lot of replacements. And especially in this case and this is this is one of those situations where
it's gonna be necessary to make some improvements because as you may recall about four months ago this was the area that was hit by these huge microbursts and storms and they had many many it went without water for a week where we couldn't get water out because literally sections of pipes were were were wiped out. So those have already been replaced, and and it's not gonna be a surprise where you're when you see wells that are 50 years old getting replaced and you're going to see lines that are 50 years old getting replaced.
You know it's it it it would be a very big impact on on the community if we try to do that all in one fell swoop. So it's got to be staged, but that's over the next fifteen, twenty years, like many of these same companies in the same situation, you're gonna see big financing and big investments to, you know, replace these, you know, miles and miles of transmission lines and backbone Alright. Thank you. I I appreciate the explanation. And I I don't have any other questions. Commissioner Marquez Peterson. Yes. Thank you. Thank you to the judge and the staff,
and the the company for, working through the settlement process. I think it's been ten years since the last rate case. Is the owner participating in this process? Is he here, he or she, today, or online? Yes. The the owner is a representative. The owner is now Community Water of America, and the person in that that is supposed to be here just got hung up in traffic. And this meeting went quick, so they were on eighteenth. I didn't think they understood perfectly where we were gonna be up so fast, and that was probably my fault, not hers. But, we understand from now going forward, all my representatives are gonna be here whether it's an owner or this.
This is just a a I think it's a traffic delay that's occurred. But And having just driven it from Tucson, I totally understand that. The traffic was pretty crazy. I appreciate that they're on their way because I think it is important for this case as well as all of the cases, and you're in front of us quite often, that the owners themselves need to participate. Rest assured, I have made that point, and and the owners will be here or at least, you know, a representative. Sometimes, like, Community Water of America, it's it's not the owner per se. It's the representative of the company. So yes. Okay. Thank you. And I have no further questions.
Thank you. Vice chair Myers, nothing from me. Thank you. Commissioner Lopez? No questions. And I have no questions either. So Vice Chair Meyers, would you please move hearing proposed amendment one for Yes. I move hearing one for discussion. Alright. Joe James? Yes. Thank you. Thank you, commissioners. Hearing a division amendment one, is to address a matter. It was brought to my attention. There was an error within the rue with regard to the characterization of the how the settlement agreement handles the test year operating expenses. It doesn't affect any of the downstream numbers, but in the interest of having a clear and accurate order,
it was felt necessary and appropriate to go ahead and offer an amendment to set it straight. So, this amendment does correct the issue, so it will now accurately reflect what's going on in the settlement. Alright. Thank you. And staff? Mister chair, vice chair, commissioners, one comment first. Mister Schilling is online, so I just wanted to point that out for commissioner Marquez Peterson. Staff supports the hearing proposed amendment. And company? Thank you, mister Baxter. I appreciate that. And the company representative, miss Maya, also came in, and she's sitting in the back as well to answer your question. I I got that text right as you asked the question.
So I didn't wanna look at my phone and go through that, but we're here represented. So thank you. Thank you. Is Mike, does the commissioners have any questions on the hearing amendment? Seeing none, Vice Chair Myers. I move hearing one be approved. Hearing one passes five to zero. Alright. And now I will move item number 18 as amended. And item number 18 passes five-zero as amended. Thank you. Vice Chair Maris. Now I will move item number 19 for discussion. We'll go ahead and start with judge Beatty. Okay. Good morning, chair, vice chair,
commissioners. Elizabeth Beatty on behalf of the hearing division. Excuse me. This matter involves Big Water, excuse me, Big Park Water Company, a class c water utility, and its subsidiary, Little Park Water Company, a class e utility. Both companies are located in Yavapai County, with Big Park serving approximately 3,230 customers and 74 fire lines, and Little Park serving approximately 112 customers. Both companies are currently in compliance with the commission, the Arizona Department of Environmental Quality, and the Arizona Department of Water Resources, and also have both have water losses within,
commission accepted levels. Additionally, miss Morris, the owner of Horse Mesa Ranch filed a motion to intervene in this case, requesting relief. In the applications, the company requests that Little Park be consolidated into Big Park such that Big Park consolidated is the remaining entity. And for the proposed consolidated entity, the company has requested an increase of $544,536 or 25.41% to its proposed test year revenue. And the the proposed, revenue requirement of $2,687,774,
and resulting in an operating income of $401,408, and would produce a rate of return of 7.25% on the proposed consolidated fair value rate base of 5,540,000, and $94. Subsequent to staff's filing of direct testimony, the parties entered into settlement discussions and on 10/14/2025 executed a settlement agreement resolving the disputed issues in the matter. The agreement adopts the proposed consolidation of the companies, finding that it is in the public interest and is consistent with the commission's small
water policy and will produce efficiencies and long term benefits. The settlement agreement, adopts a consolidated revenue requirement of $2,623,235, an increase of 479,998 or 22.4% to the agreed on test year revenues. The agreed upon revenue or excuse me. The yeah. The agreed upon revenue along with operating expenses of 2,000,002, 251,381, dollars produces operating income of 371,855,
an operating margin of 14.18%, and a rate of return of 6.88% on the adopted fair value rate base of $5,404,865. The settlement agreement uses a 9.9% cost of equity and 5.55% cost of debt applied to a capital structure of 30.5 equity and 69.5% debt. In determining the fair value rate base, the parties agreed to include, $2,896,592
in post test year plan positions, which staff determined were prudently incurred and, used and useful. The settlement agreement also adopts staff's recommended adjustments to remove unsupported post test your plant and adjusts, contributions in aid of construction to reflect, 10% of plant that was determined to be, used and useful but unsupported. Additionally, the parties agrees to use staff's recommended depreciation rates and adopted, staff's adjustments to miscellaneous and transportation expenses. The settlement agreement also maintains a three tiered structure,
for the five eighths and three quarter inch and three quarter inch residential meters, with a two tier structure for all other meters. The parties also agreed to maintain Big Park's proposed breakover points with the exception of the one inch meter, which the company, excuse me, the settlement agreement maintained Big Park's current breakover point of 30,000 gallons in, to address miss Morris's concerns. The settlement agreement is expected to, impact Little Park customers, and their typical residential customer uses the one inch meter. Those using average,
the average usage, it would decrease their monthly bill by $9.08 or 7.43%. Or, if they use the median usage, at $8.29 or 8.35%. For Big Park, the average user, their bill would increase by $8.17 or by 21.67%, or the by the median user, $5.31 or 15.97%. The settlement agreement also adopted a rate case expense, not to exceed $150,000, to be recovered over three years via a c a surcharge in the amount,
approximately of 91¢, which will automatically terminate upon the end of the recovery period. And then to address post test your plant projects completed after, June 2025, including an arsenic treatment media replacement project and a booster storage improvement project. The parties agreed to a future improvement surcharge, which is to be approved by staff in the future. And the parties currently estimate a total project cost of $525,760, which would result in an estimated surcharge rate of $1.32
per customer per month. The settlement agreement also adopts the company's request to maintain Big Park's current tank coating surcharge, including the cumulative, cap provision of $320,500. And then last, the company has agreed to provide visual screening around an equipment yard adjacent to miss Morris's property, which will be completed, estimated to be completed with eighteen months within eighteen months of the decision and when available and sufficient cash flows permit. The route adopts the settlement agreement and finds that the consolidation of the companies is in the public ish interest, consistent with the small water policy.
And, the rule also finds that it is just and reasonable and in the public interest to approve the settlement agreement, which the rule also, implements the agreed upon rates for the water service and authorizes the, rate case expense. And the rule also orders a big part consolidated to comply with the terms of the settlement agreement, including the compliance filings. A hearing proposed amendment has been filed, which I can address at the appropriate time. Thank you, judge. Thank you. We'll hear now from utilities. Good morning again, mister chair, vice chair, commissioners.
Brent Baxter again for utilities division staff. Staff supports Theroux as written and is available for any questions. Thank you. We'll hear from the company. Thank you. Good morning. Jay Shapiro, chairman, vice chairman, commissioners. Thank you for accommodating me. I was unable to be there live with you this morning. And, thank you to your honor for a extremely thorough, summary of the case and the settlement. I don't have anything to add except to say that we support it and the rue, and we are available to answer any questions. Great. Thank you. We'll turn now to commissioner questions.
Starting with commissioner Walden. Thank you. I've I've got a couple questions. So, there were concerns expressed by the customers of Big Park, and this question is for the company. So did they it did appear that they may be shouldering more of the consolidated cost burden. Can the company address those concerns? Yes, chairman, commissioner Walden. To be honest, I don't think there was a significant number of concerns. I've seen, much more public comment in other cases. And, I do think, obviously, there's always a question in some customers' minds when you consolidate.
If you look at it in the instant as we look at it right now when they're separate customers, somebody's always gonna have a plus and somebody's always gonna have a minus. But that's a one time snapshot. The minute you approve a consolidation, these are all the same customers. If tomorrow, Big Park has a well go out, it's gonna be Little Park, former customers, now Big Park customers also contributing. That's the benefit of increasing customer base, which is one of the primary benefits of consolidation. So while, yes, a couple people did appear upset that they may have to pay,
you know, a little bit more than they would otherwise. Over the long term, we look at consolidation as a benefit to all customers of all systems because then everybody shares the burden from that point forward as opposed to just focusing on that one moment snapshot that we can create by looking at the comparable numbers. Thank you. And, yes, and and I do support the the consolidation here. So you do have slightly different different rates. These are interconnected systems, though. Correct? Yes. There is a current interconnection between.
So, yeah, it looked like they were just on the map that they were just separated by some some land in between. Can you speak to having, the two separate rates for the consolidation? Do you mean now? Or Yeah. What we're looking at Currently, Green Park and Green Park have separate rates. I don't believe that there are two separate rates going forward, commissioner Walden. I believe it's a consolidated tariff. They had differences in the breakover point and our it looked like one system would be paying about 0.8¢ a gallon for water and one would be 1¢ a gallon
with the when you average out, like, the the cost and the per gallon. So that's what we were looking at. Looks like we're having different because there's different break over points, differences in the rates. Normally, it would just all be the same. Chairman commissioner Walden, are we looking at the impacts, or are we looking at the actual rates? Because, obviously, the impact would be different on each former customer. So in the in in the rate design, there's the, the break points for 3,000 gallons, 3,000 to 12,000 gallons, and 12,000
plus gallons? Alright. Let me I'm pulling up the rue. I apologize. Just staff could speak to this too. Yeah. May and and maybe, I don't know if mister Jones is online or in the room, but he could also, speak to it. He is the proponent of the rate design for the company. I don't know if Brit can. To be honest, I don't think I can intelligently speak to it, and I'd rather not make it any more confusing. Okay. Alright. It's on page 26 of the rule. And it's, so on the page 26,
the monthly minimum charge, there's two different breakover rates for Big Park and Little Park. But I'm wondering if that's because the little park system, they they use their average uses is twice as much as the big park system, and maybe that was the the rationale. Okay. I'm I'm with you on page 26. And, again, I apologize. It's the one of the momentary downsides of not being able to be with you live. And I don't know if if Brit, mister Baxter can speak to it on behalf of staff,
or if mister Budovic is there and can speak to it. Mister chair, I'd be happy to step in and attempt to answer the question. Mister chair, vice chair, commissioners, commissioner Walden, when a company files a rate case that has a consolidation proposal, staff has to make recommendations on both a stand alone and a consolidated basis because we don't know what the commission's gonna do in terms of consolidating the systems. So I believe what you might be looking at is our recommendations in the direct testimony that had Little Park with different rates based off of the existing rates on
the stand alone. Under the settlement agreement, the proposal was to have one set of rate design for Big Park consolidated, which would include the Little Park customers. Yes. That's what I'm look no. You're absolutely right. That's what I'm looking at on page 26. Yeah. So I see because, I was starting at at line 12 and looking at the those different rates, but I see you have your recommended rates, and that that is the same in those tables. So and then the yeah. Okay. Now that's what that's what it was.
Sorry about that. And thank you for for stepping in to take a look at that. First commission. And then my other question is, so on Little Park, it's, you know, it's much smaller, but they're using twice as much water there. Are there big differences in these residential communities that they have an average water usage that's so much higher than the other system? Chairman, commissioner Walden. And, again, thank you, mister Baxter, for saying better what I was trying to say. I appreciate it. I think Little Park is a little different. I think you have generally,
larger properties. I think, miss Morris's property is a good example, the horse property. So there are some some differences in the community itself that would lead you to have an as, the judge noted, most of the Little Park customers are on one inch meters, which is not always the size of residential meter. Obviously, those are usually five eighths or three quarters. So you just have a larger general amount of water use in Little Park because of the type of community and the type of properties. I don't know if mister Gudovic wants to expand on that.
He is sitting there before you, and could provide further information if you need it, commissioner Walden. No. That that that helped me understand a little bit, and I, I'd wanted to tell staff too, thank you for doing those stand alone rates. I know we had a discussion about that in a in a recent meeting where there were a lot of stand alone rates you had to calculate, and so it's really helpful to look at the stand alone versus the consolidation to see what's the most fair that that you can come up with. So, thank you for for putting that work in and,
you know, for jumping in on that rate table question. I don't have any other questions. Commissioner, Marcus Peterson. Yes. Thank you. And I had the same question on the Big Park customer's feedback. And so thank you, Mr. Shapiro, for already answering that. Also on kind of what was the nature of land use with the large usage in water at Little Park. So I think those have been adequately answered. Also wanted to just thank the company. I see in the notes that you voluntarily implemented kind of best management practices, and those seem like that will be a definite benefit for Big Park. So no no questions or unless there's anything you wanna offer up,
but I think that's a a great direction to go. Thank you. Thank you, chairman and commissioner Marquez Peterson. Vice chair Marquez. Yeah. Just, one small question, I guess. You you're putting in a privacy screen for one customer. Is that what I'm hearing? I can't give me the thoughts the thought pattern behind that. Maybe start with the judge. Right. Chair, vice chair, commissioners. Correct. So it was my understanding that the there is a term in the settlement agreement that is to address, equipment next to miss Morris's property, and that the parties agreed that Big Park would,
agree to put some sort of visual screening on it, if the revenues allow. And so those were the terms of the agreement, and, miss Morris also agreed that that was sufficient with her. So, it is estimated to be completed within eighteen months of the decision. But I also acknowledge that there was no, sort of enforcement of the provision within the settlement agreement, which, miss Morris acknowledged that that was her understanding as well. Okay. So maybe maybe the the company, is was this specifically for visual or aesthetic purposes or was this for sound deadening?
Is there any more to it than that? Thank you, chairman, vice chairman. I respectfully would disagree that we're putting this in for miss Morris, vice chairman. We're putting this in for the company. Its equipment is on one person's property or next to it and in, disproportionately impacts the person who has to look at the equipment. That's just the nature of the business. If I put a storage tank on your property and then I have to cover the storage tank so you don't have to look at it every morning, that's not really for you, sir. That's for the company to hide this equipment because we have that responsibility.
Okay. That makes that's a lot clearer. Thank you very much. I I have no further questions. Mister Lopez. Got a couple questions. So on the, plant improvement surcharge, the dollar 32 per customer per month to recover approximately and, again, I I know this is a future future project for the 05/2020, 5,000. Approximately, how long would that surcharge be in place in order to recover that? Yeah. I have an estimation on how many years it would take to recover that. Chairman, mister Lopez, I don't actually know the answer to that question either. I apologize for being stumped one and a half times in the same open meeting,
but I don't know. I I assume the surcharge would continue until, because it's tied to a loan payment, essentially. So I assume that it would continue until there's another rate case and that charge goes away. Because as long as there is a loan payment related to that plan, there will continue to be a need for the surcharge. Unfortunately, this is what rate makers like staff and the company have to do when supply chains and, the world we live in today no longer delivers parts, overnight like Amazon. We've had a just a difficult time completing this rather than have to come back
in when it's complete in six or twelve months and file another rate case. This was the remedy, But, unless I get corrected, by staff or mister Jones, who I'm sure is listening, I believe that this surcharge is in place to allow the company to have sufficient funds to service the debt, and therefore, it would stay as long as the debt does or until another rate case in which another mechanism like just straight typical rate based return recovery would be used. Yeah. And I fully understand purposing behind it and its intention. Just looking for, again,
the customer's, you know, expectation on how long the surcharge would exist for for them. So, I mean, a year Understood. Ten years, that's kinda where, you know. Again, if I can ask mister Gutovic, to tell us the term of the loan, he is sitting there, and he should know that, and then that would give you some idea. Chairman Thompson, vice chair Myers, commissioners, the intent is that to pay the loan, of course, which is a twenty year note. And we have approximately seventeen more years on that, sixteen to seventeen more years. The intent was at the next rate case,
it would get rolled into the rates. But because we couldn't meet the post test tier plant, twelve months to finish this project included as part of rate base, this was the mechanism in order to have the cash flows available to service the debt. Okay. So intention to fill the gap until next right case to close it out and bring it to pull the plan. Correct. Okay. Next question. I Sorry. Sorry. Didn't go up, commissioner Lopez. Vice chair. Vice chair. I'd just like to add too. In the settlement agreement in exhibit e, subsection d,
there is a sunset provision on the surcharge, and it's 12/31/2031. But I also agree with what mister Gutovic and mister Shapiro said that the next time the company files a rate case, that project can be rolled into rate base at that time. Okay. And if if for for ever foreseeable future, they don't come in by, the deadline of that, it would wind up going away and Correct. Kinda. Yes. But I I would fully anticipate the company filing another rate case Within six years. Within the next five years or so. Okay. Thank you,
Brett. Next one is is around the, the five year extension on the, tank maintenance. You can give me some color on what, how the maintenance is going right now. You know, fully understood that within settlement agreement that it was it was something that was, you know, beneficial and, working well and wanting to extend it again. Can you explain a little bit more about so the balances that are left in there and how long this will go for? Because it did it did we do have a cap still retained within it. So, my question is, like, is this something that's ongoing in perpetuity and would be brought up again in another
in the next rate case? Or, if you were to hit that cap and stop it, before the next rate case, does that mean take maintenance would end, or is that balance then, in again, gonna be continuing the maintenance? So if you can just give me more color on the take maintenance. Yeah. Thank you, chairman, commissioner Lopez. You're gonna recover tank maintenance expense one way or another, either through something, like, separate, like, surcharge or mechanism like this or through rate case, recovery of operating expenses. Tank maintenance is a and you happen to have an expert sitting right there on
tanks, so he can certainly add mister Gutovic. Actually, he's a tank maker. So he can certainly add in, any color to this. But the idea is you're gonna capture it one way or another. This way, it's captured with a cap, with some controls, with some effort to to kinda match the actual cost. And in every rate case, any company would reevaluate whether or not having it as a separate cost continues to be the better way to do it or whether rolling it into operating expenses. I know, at least when I represented them years ago, Arizona Water Company has a similar tank maintenance funding program.
So you're always doing tank maintenance or tank coating or tank something, and that cost is a recoverable cost. You need a mechanism to recover it. There are two ways. This is the one that this company has historically used. And again, I'll defer to mister Gutovic, an expert on tanks if he wants to add anything to that. Chairman Thompson, vice chairman Myers, commissioners, the tank painting surcharge has actually been a really nice, addition in our previous rate case prior to the twenty years prior to that, it's allowed us to be on a schedule, to recover funds and allocate them directly over to getting tanks painted.
And we've done, I believe, six or seven paintings, either both interior, exterior, or or one or the other. So it has allowed us to really extend the life of our tanks, whereas previously, if cash flow is allowed, we would be able to do a tank painting. But if we didn't have the cash, we couldn't do it. And therefore, we we find a lot of benefit in in the surcharge. Alright. Thank you. That's all the questions I had. I just wanna real quick go back go back to the screening. What what's the what is the cost estimated cost on that screening
for the property owner? It it's chairman, the the cost isn't the property owner's cost. It's the company's cost. And it'll be I think the estimated cost was approximately $20,000. And is the the screening, is it because the your equipment is on her property or on your property that she sees it? I'm gonna ask mister Gutebick to answer that question, chairman, so we can get it accurate, but she definitely sees it. That is the issue. But whether it's on property we own or property we have an easement over,
I mister Gutovic will have to answer. Chairman Thompson, vice chair of Mayors, commissioners, our property that is in discussion is three sides available for view with only one neighbor as a driveway circles around our property. So it is her and a couple other, residents in the area that would benefit, from the screening. And the screening, currently, what we have is just a chain link fence. And the concept is those plastic slats that go in between and weave through,
to obviously not see our equipment, but we also use the yard to store, materials like a b and and dirt and so forth. And I know the the cost $20,000 is pretty minuscule in the grand scheme of things, but for consistency purposes, we have a $6,000,000 water tank in Sedona that was buried because of aesthetics that we put back onto the city and the residents that were requesting that to be hidden. And we also did the same thing in Tucson with TEP on some large KV
lines that a handful of customers were requesting to be hidden. We said, sure, they can hide it as long as you're paying for it. And so I'm apprehensive of putting even though it's a minuscule number in the grand scheme of things, but putting 20,000 onto the backs of all the other rate payers for just a few that benefit from the screening. And so, be cognizant of that when you, come in for your next rate case because it will probably be disallowed. One follow-up. Yes. Are there safety concerns with this visual
blockage? Could is there a concern about the the safety of the equipment in there by that's being addressed by hiding it? Chairman Thompson, vice chair Myers, commissioners, no. There would not necessarily be a safety concern. And and if I may, chairman and vice chairman, respectfully, if you if you live in a place where you have views of Oak Creek Canyon and you have to look out your window and look at a water utilities equipment in your house that you're paying for, I would find that offensive if I were to. But at the same time,
sir, we you probably should buy the property if you don't want a water something behind you. Right? When you buy your property, if you have a vacant lot next to you, you can't complain when something gets built there unless you wanna buy the property yourself. And so, it's tough for me to buy into, the whole paying for something that benefits a few. And again, we've consistently put that cost back on not the rate payers as a whole, but the few that have requested that.
And so, I'm just bringing that up for your future endeavors. Okay. Well, I understand. I would argue that the quiet enjoyment of the customer is the obligation of the utility, and I would assert in a future rate case that that's exactly what we covered. But that's a question for tomorrow, not today, I guess. Right. Appreciate the concern being expressed because, a, it'll make sure that we keep those costs at a minimum. Thank you. Thank you. That's all I had. So vice chair Myers, would you or or let's, motion for hearing amendment. So I will move,
the hearing amendment number one be discussed. Vice chair commissioners. Hearing division amendment number one, was filed to replace page three of schedule h three contained in the settlement agreement, which is attached to the RUEZ exhibit a. And it just, revises to correct, typographical errors to the administrative code that's referenced on that page. No exceptions have been filed. Thank you. We'll hear now from staff. Mister chair, vice chair, commissioner, staff supports hearing proposed amendment one. And company. As does the company, chairman. Thank you.
Thank you. Any questions from the commissioners on hearing amendment one? Seeing none. Alright. Vice chair of ours. I move hearing number one be approved. Hearing amendment one passes five-zero. Before we move this to to vote, I just wanted to ask another question just to follow-up to chairman Thompson's comments. So, you know, we're talking about consistency and, you know, if it's not I could see, like, if it's someone else's land, if it's not their land, do we want to amend the directive in the order that says that this must
be built by 2026 or the future date in 2026? Because I think we we I would entertain doing a verbal amendment to take out that language that orders it to be built. If I may chairman. Yes. I I think, and I don't mean to speak for miss Morris. I'm not sure if she's on the line, but, miss Morris did actively participate in this case, brought up a few concerns, and, that would be contrary to what I think she would view as her settlement agreement and her agreement not to further contest issues in this rate case.
So I would at least, if you're going to go down that road, hope that she's available and could at least speak to it from her perspective. Oh, hi. This is Mary Morris. I'm the intervener in the case. Yes. And, yes. One of the, concessions, that we worked out was that within, I think, six months, of the rate increase being approved that a privacy fence would be installed by, Big Park Water. That's very important to us. And, chairman, commissioner Walden, I I guess I would if it gives you some comfort, that investment's not gonna drive the company in for a rate case.
So it's gonna be some time before any returns are being earned on that investment in rate base if ever because that requires a future rate case. So, it won't cost the customers anymore to have it done according to the schedule that miss Morris agreed to in her agreement to settle. What what do you mean it's not gonna cost them them more? Come back for a future rate. Yeah. Oh, it'd be done in a future rate case. Exactly. Exactly. Yeah. But the the directive is in this this rate case. So if we're saying that we we don't wanna allow this in the future,
we could remove the the directive. I mean, if the, you know, company wants to to build this, they can build it, but it doesn't have to be put into the rates. And I understand that, we do have, you know, an individual who intervene, but the commission isn't bound by the settlement agreement. We are able to make changes, and then it would be up to the party to determine if they want to accept the the change settlement agreement. Understood. I just wanna make sure she had a chance to be heard. That was my No. I I understand. Thank you,
commissioners. I appreciate the opportunity to talk, and I will once again urge you strongly to honor the settlement. It's been very, amiable up until this point. Both Big Clark and I have been able to come through mutual agreement. This is a very minor expense in terms of, what needs to happen. And, I would strongly, appeal to your, you know, good sense and, respect our our settlement agreement to, not not remove the six months or not remove any time frame from it. So thank you for your consideration.
Mister chair. So I'm looking at this a little bit differently. I know they said there's no safety concerns but, I've seen other industry, I guess, that that when they store equipment and and product and things like that on a lot, they want it visually hidden so that it's not, you know, thieves aren't tempted. So I think there are security issues that this addresses as well and a lot of times you'll see, fences and stuff built with Block or whatever. And these guys are talking about slats and a chain link fence. So, you know, to me, it seems like it was done, you know, rather inexpensively. They're not trying to gold plate this.
Right? They're they're trying to do something that that, would provide some security for their their equipment, their supplies, their, you know, their excavating equipment, whatever it is. And at the same time, address the concerns of of a couple of the constituents there. So I'm not seeing this as much as an aesthetic, improvement as I am at this point a a a way to screen and and secure their their equipment. So what you're saying is it should be on the backs of the company and not on the right I'm saying that your point is extremely valid and and I
totally get it and under normal circumstances, I would completely agree. But in this case, security is the job of the company and may you know, if they one thief coming in and stealing, you know, piles of pipe and whatnot could easily reach the cost of this the slats that they're talking about putting in. So to me, it seems like this might actually end up being a a, benefit to the rate payers. May I ask a question? So what's the current setup now? It's a it's it is a chain link fence, and then you're talking about adding slats around it. Are you storing equipment and things on that area?
Chairman Thompson, vice chair Myers, chairman commissioners. Yes. We we do store store equipment on-site. We have a ConEx box there as well. So we do store could be, you know, tractors or whatever, and then we store materials as well. It goes in and out. It just depends on where we're working or we have a surplus of stuff that we need to store for for example, when we did our, well three project, we stored actually most everything there because the Well 3 project didn't have any space.
So we kept moving it back and forth from from location. Because previously, commissioner Myers had mentioned the the security of of the site too, and I didn't seem like there was a lot of concern from the company as to as to that issue. I actually mentioned safety, not necessarily Oh. Security because Oh, okay. Yeah. This was a different topic. That was a different topic. Okay. And if I may, I honestly believe chairman, commissioner Walden, vice chairman, this secures the risk against a lawsuit. If I'm a property owner and I've got something that is,
more obtrusive to me than my neighbors, that is a government benefit in a sense, then I have a claim. Whether that claim is valid or not, I don't know. But there's a lot of lawyers that will sue just about anybody for anything, and I don't want five property owners joining together up in Oak Creek and suing this company for an eyesore. So, again, I understand that your concerns are about, are not focused on the aesthetics, but these people have a right to the client enjoyment of their property. And for the same reason, the government can't do something that overly in debt that inversely or disproportionately impacts a
customer with their facilities, we have that same obligation. Unfortunately, this is where the property is located, and, unfortunately, a few customers are impacted by it detrimentally. Not necessarily because they moved there, but because that's where we store our property. So we we minimize the risk of a dispute over this as we continue to use the site. Yeah. And and it it is a a sort of, like, conservative build versus putting in stonework and, you know, something that's, like, some aesthetically beautiful wall versus just slats in the chain link fence.
So I I do appreciate that part of it that you're not trying to go, like, whole hog and trying to make this thing beautiful, just concealing it. So what if we, instead were to and we've done this plenty of times in other cases where we've said that approval, isn't or shouldn't be viewed as a approval by the commission for future recovery and rates. So basically say something like approval of the privacy screen and fence shall not be viewed as approved by the commission for future recovery and rates.
That way, it it can be a stand alone. We look at it Yeah. But future rate. Then if, I guess, they don't stick to the being conservative, then there's some flexibility in what gets covered in a future rate case. Yeah. Yeah. So do you wanna do you wanna make that as a verbal then? I think that covers what your concern was as well. Commissioners, I'd like to make a statement. There's something important for you to understand. Yes, please. Yavapai County Planning and Zoning has requirements that state that,
there is screening required. So I would very likely go to the county and set and ask them for help, if this is not approved. And there is regulations, in their planning and zoning, ordinances. Oh, it's well, ma'am, it's it's we're looking to approve it. What we're saying is we don't want the rest of the customers in Big Park and Little Park to pay for the screening on your property. So it's something that the company will either eat or the five individuals that are asking for the screening, can pay for. Alright. I thought we settled on that.
Thank you. Okay. Thank you. And I think in a in a future rate case when this comes for recovery, any local, like, municipal ordinances and zoning is is is considered in that rate case too. Is that correct? To staff, to Britt? Mister chair, vice chair, commissioners, I was happy just to sit on the sideline and watch this conversation play out. I don't disagree with anything that's been said, but to answer commissioner Walden's question directly, yes. We would contemplate any local zoning requirements. We do the same for rate design like the one inch meters.
It's likely due to a fire flow requirement from the local fire jurisdiction. So we would evaluate that. From staff's perspective, we understand that the company's put on notice even just by this discussion. Having a a verbal amendment that would kinda put it in the decision will help us out because quite frankly, the next time they file a rate case, we're gonna be looking at the big projects, the well improvements, the storage tanks, the booster pump stations like we did in this case. And if this project ends up ends up being $1,015,000,
it might not reach that materiality threshold that staff would evaluate. So from staff's perspective, having it kind of codified in the decision that the company's on notice, that'll draw future staff's attention to it, and we'll make sure we look at it. And I think if there are municipal requirements, there would then be a considered a partial recovery for for what's required under those regulations. So, I, will offer a verbal amendment to, change the language that ends in line, page 35,
line 21. Approval of the privacy screen or fence shall not be viewed as approved by the commission for future recovery in rates. Do I need to repeat that for anyone? Yes. If you wouldn't mind, commissioner. I just wanna make sure that we're saying that it's not being approved in this case. It'll be subject to determination in the next rate case. Case. Thank you. So it says, approval of the privacy screen or fence shall not be viewed as approved by the commission for future recovery in rates.
So it doesn't this amendment would not tie any future commission's hands that they have to approve this project in in the rates. That would be, I think, determine what would be recovered would be determined in the future future rate case. Yeah. Chairman, Christian Walden, thank you. That's always the case and we would expect to meet that burden and that language is fine with the company. K. We're good stuff. Okay. Vice chair Myers, would you move verbal amendment? Rachel, commissioner Walden, verbal amendment one. Yes. I move Walden verbal amendment number one for approval.
Yeah. Maybe. There it goes. It was there. Okay. So, Walden verbal amendment one passes five o. Vice chair Myers. And now I will move the item 19 as amended for approval. And item 19 passes as amended five-zero. Thank you. So our next item is item 20. It's the one that I know everybody has been sitting on the edge of your seat waiting for. Our final item is the election of a new chair and vice chair. We will do our chair election first and then move on to our vice chair.
I don't necessarily know that there's a method to handle, the nominations and our subsequent votes, but maybe I'll start by just opening the floor to my fellow commissioners and ask if you have any comments or questions. Not at this point. No? No comments or questions? Okay. So with that, I will nominate, Vice Chair Myers to be our, new chair, for this year. Would anyone like to second the motion? I'll second. Seconded by, Commissioner Walden. Any additional comments or feedback or alternative suggestions from my fellow commissioners?
I'd like to make a comment. Yes, please. I wanted I don't know the appropriate time, but I just wanna thank, Kevin Thompson for his leadership as chair as we transition. Appreciate that we're taking on new leadership and that we're gonna continue to focus on being transparent, working with the public, communicating, and really bettering our processes and protecting our rate payers. So, I am supportive of Nick Myers as chairman. Great. Thank you. I I I would also like to thank, former chairman or chairman Thompson for the next two seconds, for his his leadership. I think as we've demonstrated too,
like, for this commission is very concerned with doing the right thing for rate payers, and sometimes we get into the weeds. Maybe other people think we're getting in the weeds too much, but I feel like, our chairman's been very just and fair in conducting these meetings, and I feel confident that commissioner Myers, our vice chair, soon to be chair, commissioner, depending on the vote, will be the same, and, we'll be able to conduct these meetings with, the same the same attitude to allow that open discussion and be transparent in how we arrive at our decisions.
Great. Thank you. And mister chair, I'll go ahead and say my piece. Okay. So I I would also like to to personally thank, Chairman Thompson for his his steady leadership and the professionalism and his commitment to this commission over the past year. His approach to managing the organization and maintaining decorum, navigating through some of the numerous political landmines that has helped strengthen both this institution and the public's confidence in our work. The progress we've made as a commission is in no small part due to his
willingness to lead all with that fairness and respect and clear sense of purpose. So thank you for for laying that groundwork. Thank you. Jerk. Embarrass me even more. Yeah. So I wanna thank you also, Terrence Thompson, for for all of your efforts. Again, with me and Rachel coming in brand new. You know, you and your staff have been extremely helpful in helping us, you know, navigate and, you know, come up to speed very quickly. And, we're very happy, and that was it went a long way in making sure that, myself and commissioner Walden could could really be helpful in helping the community and being,
you know, brought up to speed and and educated, to to helping out, as best we can. And, again, the example of your leadership is, I think permeated also throughout a lot of the staff and to the utilities and is the the way the meetings have been operating smoothly. And, and I coming in expecting, you know, back to back, all day, you know, forty eight hour meetings was was what I was was told to anticipate. But, with your leadership and your staff leadership, we were able to to make this a lot more time effective and and cost effective for the ratepayers too. So, thank you very much for your time. And,
future whoever the next chair is, they do have some big shoes to fill in my opinion. So you set a very good example for chairmanship for the for the commission. So thank you. Thank you. And and I would like to thank all of you as, my colleagues. You've made this job a lot easier. Thank you staff for all that you've done to help our office, and help keep this train on the tracks. It's it's been a it's been a fun year and I know that, that we're going to be in capable very capable hands moving forward keeping this organization, running smoothly. So with that, we have the nomination on the floor for, Commissioner Vice Chair Myers,
for a one year term as chair and that would be effective immediately upon adjournment of this meeting. So, all those in favor please cast your votes. And congratulations Chair Myers. The vote is four to one, passes four to one with, Vice Chair Myers, now Chair Myers, abstaining. And, finally, we will nominate and elect our new vice chair. I'll start by opening the floor to see if any of my fellow commissioners have any comments or questions. Comments or questions? With that, I will ask if there is a nomination for a vice chair.
Yes, mister chair. I will nominate, Commissioner Walden as the vice chair. Would anyone like to second that motion? I would like to second that nomination. K. We have a first and a second. The nomination are, are there any additional comments or feedback, or alternative suggestions from my fellow commissioners? Hearing none, the nomination on the floor is to elect Commissioner Walden to a one year term as the vice chair effective immediately upon adjournment of this meeting. All those in favor please cast your vote. And congratulations, Commissioner Walden, now Vice Chair Walden. That passes four to one with Commissioner Walden abstaining.
Would either of you like to make any statements? I would actually. But before I provide my remarks, I'd like to first invite Executive Director Doug Clark, up to the dais to recognize and thank Chair Thompson on behalf of the commission and staff for your outstanding leadership. Thank you very much. It's been a pleasure and an honor to work with you as chair over the last year. The staff have enjoyed your leadership and the persons in your office to work with. You've been nothing but communicative and open to recommendations and discussion.
The people of Arizona have been well served by your leadership. Thank you. I wanna personally thank you for that. Thank you. Alright. Let's see. Was was that it? We do have a memento for your, leadership Let's do that. That will be awarded later in the day. Okay. Okay. Alright. Well, so as far as my my remarks, I just want to thank my colleagues, for the confidence that you all have placed in me by electing me to serve as the next chair. I'm extremely proud of the work, as I've already said, that this commission has done together. Over the past several years this body has made some very meaningful improvements in how
we deliberate, how we engage the public, how we approach responsibility to provide fair, consistent, transparent utility regulation and those improvements did not happen by accident. They are all the result of serious efforts by the commissioners, the dedicated staff, legal counsel, all who care deeply about getting this work accurate and correct. As chair, my primary goal is to continue with the well, let me rephrase that. As chair, my primary goal is is continuity, continuing the work that's working well,
making thoughtful and incremental improvements where they're needed. I believe strongly that stability and professionalism are the strengths of this institution, especially at a time when utility issues are becoming more complex and more consequential. I have five key priorities that will guide my chairmanship. First, I I want to emphasize my commitment to open, orderly and transparent meetings, clear structure and disciplined agendas, predictable public comment process helps everyone from commissioners and staff to stakeholders and
must continue to improve how we communicate with constituents. When rates change, when policies are adopted, or when federal actions affect state decisions, people deserve to know not only what is happening but why. Helping the public connect commission decisions to real world impacts, like their monthly bills helps to build trust and credibility. Third, I want to continue strengthening our culture of empowering staff and legal counsel. We may not always agree and many times we don't, but that's healthy and the commission is at its best when staff feels comfortable in
challenging our assumptions. You know raising their concerns, explaining complex issues openly, clear explanations in public meetings, protect the integrity of our decisions and strengthen public understanding. Fourth, we'll keep pushing forward on efficiency and modernization from internal processes to how we handle increasingly complex dockets. That includes using better tools, clearer workflows, committee structures that allow commissioners to do deeper work while respecting the authority of the full commission. Finally, I believe it's critical that we can continue if not expand our engagement at the
federal level. Federal policy increasingly shapes the utility landscape and Arizona must remain an active credible voice in those conversations. Collaboration and not isolation is what best serves our rate payers and our economy. So again I want to thank my fellow commissioners, for all of your professionalism and willing to work through, difficult issues. I want to thank our staff and council for their expertise, patience and dedication to this public service. And I'd like to, and I look forward to working with all of you to build on the progress that we've made under the leadership of Chair Thompson,
and prior chairs and to guide this commission with fairness, transparency and respect for the people that we serve. So thank you again for the trust you placed in me, and I'm honored to serve. Thank you. Mister Walden. So that ditto. That was excellent. That was excellent. I didn't I didn't write a speech. I, I'm excited to be able to work alongside, chair Myers. He's always done the right things for the right reasons for the commission. He's been a community community leader back in Johnson Utilities. I will always remember the stories from his first campaign where he was hauling water
to people that were elderly, when they didn't have water to make sure that they had that vital service. And I know under his leadership that the strength and wise decisions of the commission will continue. Thank you. If there is no further business of the organization, we are adjourned.