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Alright. In that case, we're going to go on the record at this time. Good morning. This is the time set for the public comment and evidentiary hearing in the matter of the application of Caballeros Water Company Incorporated for for an extension of its certificate of convenience and necessity. This is docket number WDash01994ADash26Dash0037. My name is Donna Sansone. I am the administrative law judge assigned to preside over this matter.

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I'll start us off by taking the appearances of the parties. We'll begin with the company. Good morning, your honor. Jeff Crockett appearing on behalf of the applicant, Caballeros Water Company Inc. And with you today? Oh, I'm sorry. With me is George McGann, who's my witness. Alright. Thank you so much. And for staff? Good morning, your honor. Bridget Humphrey on behalf of staff. And with me at council table are stats two witnesses, Connor Tatz and Ross Nemeth. Am I pronouncing your name close to correct? Thank you so much, miss Humphrey. We'll move into procedural items then,

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before we go to public comment. Does anyone does the company or staff have any procedural items or issues that we need to address, starting with mister Crockett? Oh, your honor. Not from the company. Alright. And mister Freckett. Staff. Thank you. In that case, we will move on to public comment. This is the time for any member of the public present to provide comments in this matter. Are there any members of the public who would like to provide comment today on, Caballeros' application? I do not see any in the hearing room. I do see one call in user that may potentially,

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be here for comment. So at this time, if you would like to speak on the application in this matter, if you could select star six on your phone, I believe, that should unmute you. I'll also try to unmute you here. Alright. Is there anyone on the phone that would like to provide public comment today? If so, please go ahead and speak. Hearing none, I'm assuming that that means that they, do not intend to provide comment. So, at this time, let the record reflect that no one has indicated a desire to speak.

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We'll move into opening statements. Mister Crockett, would you like to make an opening statement on behalf of the company? Yes. Your honor. Thank you. Good morning. Again, I'm Jeff Crockett. I represent the applicant, Caballeros Water Company, Inc. Caballeros Water Company provides water service to 61 connections. The company's certificate of convenience and necessity is located southwest of the town of Wickenburg in Maricopa County. In the company's recent rate case, we discovered that there are two so called donut holes within the CCNN. One of the donut holes is the Rancho De Los Caballeros Resort.

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The resort has its own water system and does not receive water service from the water company. This area is not included in the application to extend the company's CCNN today. The second donut hole is an area of approximately 12.8 acres, which includes 15 residences or lots. Caballeros Water Company currently provides water service to the customers in this uncertificated area and the company's existing CCNN completely surrounds this extension area.

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The current ownership only recently acquired Caballeros Water Company in 2022 And so we don't exactly know why this donut hole exists. But in the company's recent rate case in decision '80 1536, the commission ordered Caballeros Water Company to file an application to extend its CCNN to include the second doughnut hole, which has the residences and a couple of lots. So the filing in this docket was made to comply with decision 81,536.

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Caballeros Water Company is requesting that the commission approve an extension of its CCNN to include this 12.8 acres as those are shown in the application and the staff report. The area is located in a portion of Section 21, Township 7 North, Range 5 East, Gila And Salt River Basin Meridian in Maricopa County, Arizona. No new additional no new or additional facilities are needed to serve the customers because the area is currently being served by the water company. Caballeros Water Company will provide water service to the requested extension area under its current

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authorized rates and charges, which were approved by the commission in decision 81536. Caballeros supports the staff report dated 05/04/2026. You will hear testimony from the company's witness that of the four recommendations contained in the staff report, Caballeros Water Company has already complied with three of those recommendations. Additionally, you will hear testimony that the company will comply with the fourth staff recommendation regarding compliance with the Arizona Department of Environmental Quality. I would note that the company filed comments on the staff recommendations on 05/26/2026.

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Caballeros will present one witness George McGahn and he will sponsor five exhibits. Copies of the exhibits have been filed in the docket and were previously hand delivered to the hearing division. So hopefully, you have those, your honor. I know that mister McGahn has a flight to catch this afternoon, and so we would request that when he is done testifying today that he be excused so he can head off to the airport with his wife and daughter. Okay. I would just state in closing that Caballeros Water Company has already been deemed to be a fit and proper entity.

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It holds a CCNN currently. It is currently serving the customers in the requested extension area. And for those reasons, we believe that, the company is fit and proper to receive the Mr. Crockett. Miss Humphrey, would staff like to make an opening at this time? Just briefly, Your Honor. Staff has reviewed the application submitted by the company on this in this matter and has concluded that as Mr. Crockett said, the company is fit and proper to provide service and provision of service to these customers would be in the public interest.

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Staff is recommending approval of the CCNN extension with the conditions set forth in the staff report. Thank you. In that case, we'll move into the presentation of witnesses and evidence. Mister Crocker, are you ready to call your first witness? We are, your honor. The company calls George McGahn. And, mister McGahn, you're welcome to come up to the witness stand here. I do apologize. Usually, we have the court reporter up there, but it appears we have the APS hearing up on this screen for some reason. But I am gonna have our court reporter swear you in. So if you wouldn't mind just following his instructions,

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you should be able to hear them. Yeah. Sir, would you raise your right hand? Do you swear or affirm the testimony you're about to give will be the truth, the whole truth, and nothing but the truth? I do. Thank you. Alright. Mister Crockett, when you're ready, you can begin. Good morning, mister McGahn. Would you please state your name and business address? Yes. George McGahn. 1551 South Vulture Mine Road, Wickenburg, Arizona 85390. By whom are you employed and in what capacity? I'm employed by Rancho de Los Caballeros Ranch and Golf Club. I am the managing director overseeing the resort.

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What are your responsibilities with respect to Caballeros Water Company? It's just it's a freestanding company. We're really there just for man oversight of that. We do we provide financial support, fine we do the financials for them. We do the oversight for the water company. Are you authorized today to testify on behalf of Rancho? Of I'm sorry. On behalf of Caballeros Water Company? Yes. Oh, I apologize. I am an officer within the company. And and to be clear, when you say the company, are you referring to Caballeros Water Company? Yes. K. Thank you.

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Would you please briefly describe your education and professional background? Yeah. I, graduated from the University of Nevada, Las Vegas, with a degree in hotel administration. And since then, I've been working in the hospitality industry. I've probably been about thirty five years as a General Manager or Managing Director or Vice President Managing Director with several different hotel companies, including Starwood, Marriott and Pyramid Hotel Group. Have you testified previously before the Arizona Corporation Commission? No. I have not. Where does Caballeros Water Company provide service?

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We provide service to 61 residents, just outside the city limits, of Wickenburg, Southwest I believe it's Southwest of Wickenburg, yes, and in Maricopa County. How long has the current have the current owners owned Caballeros Water Company? They purchased stock in the company back in 2022. Are you familiar with the application for an extension of Caballeros Water Company's CCNN that was filed in this case? Yes. Mister McGahn, do you have before you a copy of, the application which has been marked as exhibit a one?

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Yes. Is exhibit a one a true and correct copy of the company's application? Yes. Did Caballeros Water Company file a supplement to exhibit l to the application? Yes. They did. Is exhibit a two a true and correct copy of the supplement to exhibit l to the application? Yes. It is. Mister McGahn, do you adopt exhibits a one and a two as part of your testimony today? Yes. Are you familiar with the 03/19/2026 procedural order in this case? Yes. Did the procedural order include a copy of the public notice regarding the application that

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was required to be mailed to customers of Caballeros Water Company and and published and published in a local newspaper? Yes. Did Caballeros Water Company mail a copy of the required notice to the company's customers? Yeah. In April 30, we mailed it out to all of our customers with their monthly water bill, plus at the same time, we email it to all of our customers. Is exhibit a three a true and correct copy of the notice of filing affidavit of mailing customer notice that was filed in the docket confirming the mailing of customer notice? Yes.

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Did Caballeros Water Company also publish notice of the application? Yes. One second. And was that published in the Wickenburg Sun on 05/06/2026? Yes. Is the Wickenburg Sun a newspaper of general circulation in the area that is served by Caballeros Water Company? Yes. Mr. McGahn, is exhibit A four a true and correct copy of the notice of filing proof of publication from the Wickenburg Sun that was filed in the docket confirming publication of the notice? Yes. Mister McGahn,

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why is Caballeros Water Company seeking to extend its CCNN? During the last year last year they did the raid case, they discovered that there's two donut holes, in the CCNN. One of those is our ranch itself, the with the resort. I'm sorry. The resort itself, where we provide our own water. So we it's that's why it's carved out. The second is a 12.8 acre land piece of land that, we I don't know why that was carved out, but we are providing water for that at this point in time. Are there existing customers within that second donut hole area?

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Yes. They are. And we're providing the water for them. Are there also some vacant lots that are yet to have customers in that donut hole? Yes. I think there's two lots left. Yes. K. And was this application filed in response to a requirement in decision 81536 in the rate case? Yes. What rates will Caballeros Water Company charge customers in the extension area? We're charging them the same rates that we charge all of our customers, that were approved by the rate case last year. And are those customers currently being charged the the rates that were authorized in decision

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81536? Yes. They are. So there will be no change for those customers? That's correct. Have you reviewed the staff report that has been marked as exhibit s one that was filed in the case on 05/04/2026, and specifically the four recommendations on page four of the staff report? Yes. Mister McGahn, recommendation one states that Caballeros Water Company shall file an updated cross connection and backflow prevention tariff in a new docket within ninety days of the rate case decision.

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Will the company comply with that recommendation? Yes, we actually have already complied with the recommendation. On May 15, we filed an updated cross connection and backflow prevention tariff. Docket was W019999 or 994A26DashO19O. On May 21, the commission issued a notice of administration approval for it. So so is it your testimony that that, backflow prevention and cross connection tariff has been approved? Yes. We got it. Yes. Yes. Mister McGahn,

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recommendation two states Caballeros Water Company shall file an updated curtailment tariff in a new docket within ninety days of a decision in this matter. Will the company comply with that recommendation? Yes. We've already complied with that also. Okay. And was that compliance filing made on 05/15/2026 in docket WDash01994ADash26Dash0191? Yes. That's correct. And did the commission approve that tariff filing? Yes.

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They have also. And what was the date of that approval? May 28. May 28 of this year? 2026. Yeah. I'm sorry. Yes. Thank you. Mister McGahn, recommendation three states that Caballeros Water Company will follow the water reporting requirements as instructed in decision eight one five three six. What does decision eight one five three six require? Decision eight one five three six requires that water comp Caballeros Water Company file in the rate case stock at twelve consecutive months of water data starting with June 2025,

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make sure we use the utilize the new meters installed on the wells. Will Caballeros Water Company comply with recommendation number three? Yes. We've already complied with that, and we've submitted that. K. And was that, that twelve months of water data filed in docket WDashO1994ADash25Dash0061 on 06/10/2026? Yes. It was. Finally, recommendation four states Caballeros Water Company will work with the Maricopa County Environmental Services Department

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or ADEQ to obtain compliance as soon as possible and come into compliance no later than 12/31/2027. What is the company's response regarding this recommendation? We are working with the county at this point in time. I know we're working with Ryan Hall within the environmental services, but we're working within the county to rectify these situations. And Mr. McGahn, is it your understanding that the water company has reached agreement on, how to address these compliance issues with Maricopa County? Yes. And is the company in the process of proceeding to address those two items so

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that the company will come into compliance? Yes. Mr. McGann, do you anticipate any issue with the company meeting the requirement that it come into compliance no later than 12/31/2027? No, I don't see there being any problem. You anticipate that the company will actually come into client compliance much sooner than that? Yes. Mister McGahn, did Caballeros Water Company file comments addressing these staff recommendations? Yes. And those were were those filed in the docket on 05/26/2026? Yes. They were. Mister McGahn, is exhibit a five a true and correct copy of the comments of Caballeros Water

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Company, regarding the staff report that was filed in the docket? Yes. And you, you adopt exhibit a five as part of your testimony today? Yes. Is Caballeros Water Company in compliance with the applicable statutes, rules, and orders of the Arizona Department of Water Resources? To my knowledge, yes. Is Caballeros Water Company in compliance with the statutes, rules and orders of the Arizona Corporation Commission? Yes, to my knowledge. Has Caballeros Water Company received any communication from a customer or other person or entity opposing the extension of the company's CCNN as requested in the application?

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No. Has any customer of Caballeros Water Company or any other person or entity filed a comment in this case? No. Mister McGahn, in your opinion, is Caballeros Water Company a fit and proper entity to provide water service in the requested extension area? Yes. I believe we have the technical expertise, the management expertise and the financial resources to provide a safe and reliable water service. We've demonstrated in the track record we've been doing for the last three years, four years almost. Mr. McGahn, is approval of the requested CCNN extension in the public interest?

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Yes. As I discussed earlier, Cabernetas Weld Company has been a proper entity. The company is already providing water service to the customers that are requesting the extension. The extension area is completely encircled by the existing CCNN water company, and there's no other water provider that could provide to such a small area, the 12.8 acres of land. The commission in decision eighty one thousand five hundred and thirty six awarded Caballeros Water Company to extend the CNN to include the a one through a five. Any objection from the company or excuse me,

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staff? No objection, your honor. Oh, with no objection, exhibits a one, a two, a three, a four, and a five are hereby admitted. Thank you, your honor. And I would make mister McGahn available for cross examination at this time. Thank you. Miss Humphrey, do you have any questions for this witness? Just a couple, your honor. Mister Crockett covered pretty much everything I was going to ask, but I have a couple of curiosity questions, I guess. Good morning, Mr. McGann. Good morning. You indicate that the company serves 61 customers, correct? Mhmm. Does that include is that a yes,

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actually? Yes, I'm sorry. And does the 61 customers include the 15 who are in the extension area? Yes. And are those properties residential primarily? Yes. They are residential. Thank you. And with the thoroughness of mister Crockett, that's all I have, your honor. Alright. Thank you. Good morning, mister McGann. I do have some questions for you, but we'll we'll try to get you out of here as soon as we can so that you can make that flight. I'm gonna start us off easy with some clarifying questions. We've already talked about how many lots are included in this,

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but there is a slight discrepancy between the staff report and the engineering report with respect to the number of property owners within the extension area. So on page one of the staff report, it's noted that this, these parcels are owned by nine entities. But on page six of the engineering report, it indicates that the extension area consists of 12 owners and 15 lots. I did go back to page six of the company's application, which is exhibit a one, which we've already admitted, And I tried to count for myself. I counted what seemed to be nine owners between lots 12 through 24 and then

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10 owners if you count the golf course lots 25, 26, and 27. So for clarity's sake, do you know how many different property owners there are within the extension area for those 15 parcels? I do not at this time. No. Okay. Do you believe that it hearing the numbers from staff and kind of hearing my observation from the application, do you have any inferences? Would it be potentially nine, twelve? Well, I know that there's there's probably two or three people that own two houses on

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those properties. Okay. I know that we do because it is, an area that with a lot of snowbirds that do come in. So they do they have their house, and they have a guest house. Okay. I know that that's does have we we have a few of those on around the our property. Yes. Okay. That that's good to know. I'll be sure to ask staff and make sure, we hear from them as well. Now I'm gonna move on to questions related to the notice that that your attorneys already covered of the application and the hearing that you, the company has both mailed, emailed,

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and then published. Mhmm. So we all know that Caballeros was ordered to mail copies of the notice to each customer in the affected service area and to publish the notice in at least one newspaper of general circulation in the proposed extension area. The procedural order that I issued, specified that the deadline for the customer mailing and publication of notice was April 20, and then the deadline for the company to file the certification of notice within our docket was 05/06/2026. Looking at exhibit a three, which is the company's notice of filing of the mailing customer notice.

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It was filed on April 30, and as you already testified, the company attested that the notice was mailed and emailed to all of its customers on 04/30/2026, which would be ten days after the deadline for customer mailing and publication from the procedural order. Then in exhibit a four, which is the company's notice of filing affidavit and proof of publication from the Wickenburg son, which was filed on 05/12/2026 was which was six days after the deadline for the company to provide its certification of notice,

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in the docket, the company attested to the company that the notice was published in the Wickenburg Sun on 05/06/2026, which was over two weeks after the deadline for that customer mailing and publication. In general, timely notice of the application and hearing through customer mailing and publication is an important part of this process as it informs customers of its rights, provides important information to the public, and identifies the process to request to intervene in this case. If you do know, can you provide some insight into why the company was not timely with its customer

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notice, publication of notice, or its certification of notice in this case? Honestly, I think it was somewhat of an oversight with, our president of the company being on property, and then he departed. He's one of those snowbirds, that he departed in the middle of April. So I'll be honest with you. Just I think with the timing of him leaving and then realizing this wasn't completed, then I as soon as we found out about it, we picked it up immediately. So I think it's just it was just an oversight, I'll be honest with you, with the with the timing of their departure in making this happen.

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Alright. I I appreciate the honesty. And like we've already discussed, the customers are already receiving service. Mhmm. So in this case, you know, it isn't customers that have never received service before. I do wanna ask, because I'm curious. Prior to the mailing and emailing of the customer notice on April 30 and the publication of notice, on May 6 in the Wickenburg Sun, did the customers within the extension area receive any kind of notice of the company's application for the CCNN before that? That I'm not aware of.

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Okay. I'm gonna move into some questions related to the company's application. This kind of goes at to the question I just asked, so I I think I already, kinda know the answer to some of these. But I I just wanted to say in general, under the Arizona administrative code, specifically, r fourteen two, four zero two under subsections b five t w and v. Companies applying for a new CCNN or an extension of a CCNN are directed to include with its application, one, copies of any requests for service from landowners in the proposed extension area,

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two, copies of notices that were sent out by the company prior to filing its application to customers within the extension area that had not yet provide written requests for service, and three, either the written response from customers to the company's notice or a description of the actions that the company took to obtain a written notice. It appears from the record there's no written documentation from customers within the extension area related to request for service included in Caballeros' application. But I recognize this is a unique case. So it's my understanding that the parcels within the requested extension area are already receiving

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service from Caballeros. Is there any reason outside of the fact that they're already receiving service, the customers within the extension area are already receiving service from the company, that the company did not include any written documentation from service. No. I think it's because they are already receiving the service. Okay. Thank you. I'm gonna ask a couple of questions about the water system. Do you happen to have a copy of the staff report with you at this time on the desk? I just in case he wants to reference it, you're welcome to approach, mister Crockett.

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I'm sorry. I did leave a copy on this on the stand as well, your honor. Oh, is this it? Oh. Okay. Okay. Thank you, miss Humphrey. Mhmm. Alright. So, I'm gonna turn to the staff's engineering report, which is attachment two to proposed exhibit s one. Once you get to the engineering report, I'm looking at page four of the report where staff provides an overview of its analysis with respect to Caballeros' water system storage capacity. Mhmm. Staff initially notes that the Caballeros water system had an actual storage capacity below its

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minimum its required minimum storage for 2024, citing that the actual storage capacity of the water system is not sufficient to meet both the average daily demand in the pink peak month of 2024 and the fire flow requirement of a thousand gallons per two minutes for two hours. Staff does indicate though that utilizing its interconnection with the Rancho De Los Caballeros system, Caballeros could have an adjusted storage capacity, which would allow the system to meet that required minimum storage capacity. Now I just wanna confirm in the rare case that additional water is needed for

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something like Fireflow, is the company willing to utilize that interconnection with the Rancho De Los Caballero system to ensure that it can meet water demands? Yes. Alright. Thank you. Let's see. And then I'm going to have us I I was just curious about this. If you could turn to attachment one of the staff report, that's gonna be the map that kinda shows, Yes. The the, you know, the current territory that Caballeros has authorized or has a CCNN to provide service, the extension area that they're requesting.

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And then there's this light green and white area which shows a country club, Acres Water Company with a note that indicates that this particular water system was adjudicated as not a public service corporation. This note made me curious. Do you know if there's been any formal adjudication as to whether the area where the golf club and resort, which is served by that Rancho De Los Caballero's private water system, whether or not it constitutes a public service corporation or not? Not that I'm aware of. No. Okay. Then I'm gonna have us turn to the issue of water loss.

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We're gonna go back to, attachment two, the engineering report. We're gonna go to page three where staff provides a detailed, detailed information related as to why accurate data is so important for the calculation of water loss. Staff notes that the information provided by the company in its 2024 annual report indicated that there was a 0% water loss, which staff later explains is highly unlikely. We would love for our systems to, you know, be able to pump as much as our customers are using,

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but that's generally not the reality. Staff did add that prior to May 2025, quote, the company had completed its water use data sheets based on the assumption that the volume of water pump matched the amount sold, end quote. But after utilizing ADEQ guidelines to estimate water pump based on electrical usage, along with making assumptions for pump efficiency and pumping height, staff was able to estimate that the company's water loss may have been around 10.6% in 2024. Staff reinforced that as a compliance item from the company's recent rate case,

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the company was required to file twelve consecutive months of water data starting in June 2025 and make sure to utilize the new meter installed on the well to be able to accurately capture loss water loss. You did indicate that the company has already, complied with that compliance item. To the best of your knowledge, did the company take measures to report that water data, in that rate case, as a compliance item utilizing the information that came from that meter on the well? Yeah. I know that we had meter issues,

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So through this process, but we have all new meters on our all of our systems at this point in time. Okay. And then, I I I just was curious because staff noted that in the company's 2025 annual report, the company again reported the same amount of water withdrawn and sold for every month in 2025, which is, again, highly unlikely. Staff noted that it would have expected different values for water withdrawn versus water sold for for at least July through December '25, and staff ended its analysis in the report by reiterating the importance of keeping accurate

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data for water pumped, water sold, and authorized used. Do you have any reason do you have any knowledge as to why the company provided the same amount of water withdrawn and sold in its 2025 report? I think that, a lot of it was just the meter system that we we were struggling with the meters on all of the on the system that we had. Now we have the new meters on there, so we can do a much more accurate, presentation on them going forward. And when would you say the company started really being able to utilize those meters

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to be able to get that accurate data? I think it's two or three months ago because I know the last three months, we actually have had 7%. With the last two months, we've averaged 7% water loss. Okay. Okay. So that's why I know that we've been monitoring that a lot. Alright. And our reports will be much more accurate going forward. And then I I just wanna confirm under oath, does the company agree that from this point forward, the company will accurately record and provide the commission with data from the newly installed meters, to provide accurate information to the commission related to the amount of water being pumped

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from the well in all future reports, confluence compliance filings, etcetera? Yes. Alright. Thank you. So in the staff report, staff did indicate that the company was not measuring water loss. I think I heard from you that you said there was a calculation of potentially 7% water loss recently. So I I don't wanna assume. I wanna ask, is the company now, calculating water loss? In the submission we made, if you look at the last two months for for the submission for this, they came out,

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I think, at average 7% for the last two months. Alright. Thank you. And, I wanna confirm that the reason the company had not been calculating water loss prior to that, you know, two to three months ago was due to, the issues with the meters and needing to update that. Meters and pumps and everything else. We we've updated almost everything in our water system. Alright. Perfect. And then, does the company plan to continue to, consistently calculate water loss using the data from those new meters? Yes. Alright. And then has the company taken any specific measures,

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or do they have any plans to take specific measures in the future to ensure that its water loss continues to remain near or below that recommended or acceptable water loss of 10 or less? Yes. We monitor it now. We are monitoring it in with all houses and all, everything within the area. Yes. Alright. Thank you so much. I actually believe that your attorney covered most of my questions about the, staff compliance, recommendations. I guess I just wanted to, confirm at this time, is there anything else that the company wanted to add with respect to their responses?

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I know we have the written responses in exhibit a five, but is there anything else that you'd like to say at this time related to those compliance issues, any details about conversations you're currently having with MCESD or ADEQ, anything of that nature, anything that you'd like to add at this time? No. I think we've been working with the the county and the EDQ for to get all of this information fixed. I mean, alright. One good thing about our owners is they will once they realize there's an issue, we address the issue and fix it immediately. Alright.

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Perfect. I believe those are all of my questions. Thank you so much, mister McGahn. Mister Crockett, do you have any additional questions or redirect for this witness? Your honor, I don't think so. I would note for the record that we did file that water loss information in the rate case docket. If it would be helpful, we can late file that in this docket as an exhibit or you can take judicial notice of it, whichever you would prefer. I I'm fine with taking official notice of, that document from that particular record. I think that's much easier than you having to just file something I already have

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access to as long as the parties are okay with me taking official notice of that document filed within the rate case so I can review it and just confirm mister McGann's testimony. Is that alright with you, mister Crockett? Yeah. It's probably my preference, your honor. And, miss Humphrey, any objection from staff? No objection. Okay. Alright. And and, your honor, I would note that that document contains specific numbers. Mister McGahn testified to approximately 7%, but the the document itself has the actual numbers from the last couple of months.

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And in the rate case, we were required to monitor for twelve months, but the as you will see in the report, the meters, which use lithium batteries failed. We ended up having to to replace those with direct connections. Again, this is detailed in the report. So we've gotten, we believe, the last two months of data that's very accurate and we believe going forward it will continue to be accurate and it shows that we are well below the 10% water loss number. In terms of the in terms of the earlier, monitoring, you know, I'm not sure that mister McGahn was extensively involved in that.

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I would just note that that was largely an oversight on the part of the company, just not focusing on that aspect. And so in the rate case that came up and one of the requirements was that we file twelve months of data, which we've done. And you'll see there's a couple of months that are missing because the meters weren't functioning properly. But we we believe that all of that now is behind us and going forward, things are functioning properly, and it looks like water loss is not a major concern. Well, I appreciate that.

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That's really helpful context that, you know, taking that official notice of that document and my being able to review it. I think that that will be incredibly helpful. So I appreciate you mentioning that. Great. And in terms of the in terms of the adeqcom or the Maricopa County compliance, I will just note for the record again that I've had several discussions with an outside consultant that Caballeros is using. They're they've, have a plan that's been agreed to with Maricopa County Environmental Services Department. It's just a matter now of implementing that plan.

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I I don't have the document in front of me, but I leave. They've got about eight weeks to come into compliance, so that should all happen over the next eight weeks. So it should be done long before the deadline that staff had had set in the, staff report. Alright. Thank you, mister Crockett. Anything else? That's all I have. Thank you, your honor. Alright. Miss Humphrey, any final cross? Nothing from staff. Thank you. In that case, mister McGann, you are all set. You are welcome to go. You can sit down, and I don't believe we'll need you, anymore. So thank you so much. Alright. Mister Crockett,

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I'm assuming that Cavieros does not have any additional witness testimony to present at this time? That's correct, your honor. That concludes our direct case. Alright. In that case, we can move over to staff. I wanna make sure our court reporter are you still okay to continue, or would you like a break? I I'm good right now, judge. Thank you. Whenever our natural starting stop and quit in a half an hour or so. Okay. But thank you. Alright. Good to know. Alright. In that case, miss Humphrey, you're welcome to call your first witness. Thank you. Staff calls Connor Tatz.

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Mister Tatz, you're welcome to come up to the witness stand, and then the court reporter will swear you in. Again, it appears we have the APS hearing up for some reason, but you'll be able to hear him over the microphones. Sir, would you raise your right hand? Do you swear or affirm the testimony you're about to give will be the truth, the whole truth, and nothing but the truth? I do. Thank you. Alright, miss Humphrey. Whenever you're ready. Thank you. Mister Connor, would you please state your full name and your business address for the record? My name is Connor Tatz, and my business address is 1200 West Washington Street.

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By whom are you employed and in what position? I'm employed by the Arizona Corporation Commission as a water wastewater engineer. Did you review the application that was filed by Kimberly Harris in this case? Yes. And does attach or do you have the copy of the, staff report in front of you? Yes. And does attachment two to that report contain your engineering analysis? Yes. Was that document prepared by you or at your request? Yes. Do you have any corrections or modifications to make to that report? I do. So I first wanted to address the,

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number of owners for the 15 lots. We are not totally sure if it is 12 or nine owners. Me and Ross will review it afterwards. They in the application, there was a chart showing the 15 lots, and we just sort of had to to tie the number of owners together. It's possible that, two different houses, one was in, like, a trust and one wasn't. So I counted it as two different owners. But we will review that after, and I believe nine owners is going to be correct, but I don't know for sure. But we will make the change afterwards. The other correction I wanted to make was on page five of my engineering report,

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the Caballero's compliance with ADEQ MCESD. In the final version of my report, I stated that MCESD observed no liquid chlorinator installed at the well site. This change was completed without receiving prior approval from MCESD. In the through our process, the final docketed staff version ended up saying that MCESD observed a liquid coordinator installed. I double checked the report I got from MCSD in March, and it was, no liquid coordinator. So I will be changing that back to say that.

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And and with that, I I'm looking at your staff report. It looks to me as or is your engineering report at page five, the next to last paragraph, where, about five lines down, it says, MCED, SD observed a liquid chlorinator, so it should say not no liquid chlorinator. I can't say it. No liquid chlorinator. Is that correct? Yes. Did I have that right? Alright. Thank you. With those changes, are you adopting the engineering report as part of your testimony here today? Yes. You've heard the explanation today, about,

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the, production and storage capacity. Correct? Yes, I have. And you addressed that in your staff report as well, correct? Yep. Did you have concerns as to the slight shortfall of storage that the company has without considering its access to Rancho de Los Caballeros? I do not due to the interconnection with the private water system. And on top of that, this extension doesn't add any customers. You were present when mister McCann was testifying today, were you not? Yes. And he indicated, and and I I think mister Crockett ran through with him,

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that, three of three of the four recommendations that staff made, as conditions for the CCNN extension have been complied with. Are you are you aware of that? So I did see the updated tariffs. I did not see the updated water loss report in the, rate case docket, but I am aware of those recommendations being fulfilled. And you also heard that the company's explanation today as to the compliance issues with ADEQ, did you not? Yes. I did. And do you believe that the steps that they have taken and are taking are

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going to be adequate to to bring them into compliance? Yes. I believe I do. It seems like they are swiftly taking action on these recommendations for the report. And, I did wanna note that with ADEQ compliance, it is a snapshot in time. So the oh, I lost my train of thought. But, yeah, it's it's a snapshot in time, so we wanna give the company time to work with ADEQ and and MCESD before taking action. Do you believe that the company, was it the water company, itself is a fit and proper entity to provide service to these customers?

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Yes, I do. And do you believe that it's in the public interest to grant the CCNN extension? Yes, I do. You have made several recommendations in your engineering report, which we have discussed fairly thoroughly this morning. Does staff continue to support those recommendations? Yes. We do. Thank you. I have no further questions, your honor. Mister Catanz is available for Cross. Mister Crockett, would you have any cross at this time for this witness? Your honor, I just have a few, if I may. Go ahead. Good morning, mister Tatz. Morning. Talking about the recommendations, with regard to recommendation one, the Caballeros Water file an updated cross connection and back flow prevention tariff.

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Have you had a chance to look at that tariff filing in, docket w Dash01994ADash26Dash0190? Yes. I did not extensively look at it, but I did see that there was a approved, cross connection backflow tariff filed. Does that filing address and fully satisfy the staff's recommendation number one? Yes. It does. And I have the same question with regard to recommendation two, the updated curtailment tariff that was filed in a new docket. Did you have a chance to look at that curtailment tariff?

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Yes. Once again, I did not extensively look at it, but I did see it was approved and that does satisfy recommendation two. Okay. And on recommendation three regarding reporting of water, I think you testified that you did not have a chance yet to look at that document in the rate case docket. Is that correct? No. I did not see that, docket. Okay. That's all I have, your honor. Thank you, mister Tatz. Alright. Thank you, mister Crockett. Mister Tatz, I have a couple of, questions for you, myself. I'm gonna start with a, kind of clarifying administrative question.

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I just didn't see this in any of the documentation. It's alright if you don't know. I'll be sure to ask the staff analyst as well. Do you know when Caballeros was first granted a CCNN by the commission? I do not know. Okay. No no problem. I'm going to now turn to, questions, about the water system. In both the staff report and the engineering report, staff indicates that according to an MCESD compliance status report completed on 04/03/2026, MCESD has determined that Caballeros is currently delivering water that does not meet water quality

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standards as required by Arizona administrative code title 18 chapter four. Do you have any understanding about why MCESD found that Caballeros did not meet the water quality standards? Was it specifically due to those two major deficiencies in the MCESD compliance status report, which would be that liquid chlorinator as well as the well vent and well air relief assembly for the water system, or is it something else? Yes. It is because those two major deficiencies that they cannot determine if it's currently delivering

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water quality standards. Alright. Thank you. Let me make sure. Okay. That question was already covered. In staff's analysis of whether the company has sufficient production and storage capacity to provide, service in the proposed extension area, did staff account for water loss at all? I don't believe within demand and storage that it does account for water loss. Okay. And staff ultimately concludes that Caballeros has sufficient production capacity and with the utilization of interconnection has sufficient storage capacity to serve

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its current customer base. I'm assuming, but just want to confirm in coming to this conclusion, staff is including the customers that are already being served as in the extension area in its, quote, current customer base. Is that correct? Yes. So this calculation was done including those customers, and we do believe that they have sufficient storage capacity currently. Alright. Thank you. Moving on to questions concerning staff's conclusions and recommendations in the engineering report, specifically looking at page eight of the engineering report, which is the recommended forward number compliance items.

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We've already discussed this a couple of times, so I'm gonna make sure to try to narrow my questioning. I am curious. I believe the reason for this, compliance item stems from staff releasing a updated cross connection backflow prevention tariff and curtailment tariff in March of this year. Do you know, if staff updates were for these tariff types generally, or were they specific to Caballeros? They were not specific to Caballeros. We updated it, in March, and we are recommending that for basically every new CCNN and rate case that those

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are updated. Okay. And, do you happen to know generally what types of updates staff made to each of these tariffs? I do not. Okay. Sorry. No problem. Now I I wanted to get some clarification on if staff is still recommending that, within the decision, the compliance item related to the filing a new or updated tariff within ninety days. From what we've discussed and what I've been able to kind of see in the record is that the company has already filed those updated tariffs, and it appears that the commission itself has actually approved those tariffs or found them

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to be administratively, complete. Is staff still seeking, this recommendation, or do they find that, the company has already met that kind of compliance item? Since we have found that they have already met these and that I have to update the report anyways for for other reasons, I am happy to remove those recommendations. Okay. At this time, do staff have any additional comments, amendments, or recommendations related to it would be recommended compliance item one or two? No. Alright. And then I would like the I believe you've already actually provided answers to all of those.

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Your attorney did a good job of, covering a lot of the MCESD compliance, outstanding issues. In your opinion, is there a need for a regulated water utility service to serve the extension area? Can you repeat the question? In your opinion, from your review of the available evidence, is there a need for regulated a regulated water utility service to serve the extension area? No. So I know that they're already providing that service. But in general, do you believe that those 15 lots that they need regulated utility services provided to

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them? I'm sorry. Yeah. I was still a bit confused by the question. Yes. Because those are residential lots. They do need a regulated water provider. Alright. Thank you. I apologize. It was very confusing how I asked it. My final question is, in your opinion, does the company have the technical, managerial, and financial, capability to serve the proposed extension area? Yes. Alright. Those are all of my questions. Miss Humphrey, do you have any additional redirect? I do not. Thank you, your honor. Mister Crockett, any final cross? Alright. Mister Tatz, I believe we are all done with you. You're welcome to sit down. Thank you. Thank you. Miss Humphrey, does staff have I can give you a moment.

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Thank you. Thank you for your indulgence, your honor. Staff calls as its final witness, Ross Namath. Neiman. Nemeth. He's gonna tell us how to pronounce it. You're welcome to step up here to the witness stand. Again, I will have the court reporter swear you in, but don't be thrown off by the screen that does not show the court reporter. Whenever you're ready, Adam, would you mind swearing in this witness? Sir, would you raise your right hand? And do you swear or affirm the testimony you're about to give will be the truth, the whole truth, and nothing but the truth? I do. Thank you. Thank you. Go ahead, miss Humphrey.

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Thank you. Please state your name and your business address for the record. Ross Nemeth, and the business address is, 1200 West Washington Street. Thank you. Were you assigned to review the application in this matter? I was. And what is your job title with the commission? A public utility analyst. And I I think I forgot to ask you. Are you employed by the commission? I am an employee of the Arizona Corporation Commission. Yes. Thank you. You should have in front of you what's been marked as exhibit s one, which is the staff report in this case. Do you have that? Yes. And was that staff report prepared by you or at your direction?

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Yes. Do you have any changes or modifications to make to the staff report? Yes. Just based off what, Connor said earlier, we're gonna double check on the, owners in the property lots and then take a second look at those, recommendations that might have already been completed by the company. Company. When you looked at the owners, did you take that information from the application itself? Yes. Thank you. I just wanted to clarify that. Are you adopting the staff report, as part of your sworn testimony here today? Yes. Your Honor, we would move for the admission of Exhibit S-one. Any objection from the company?

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No, Your Honor. With no objection, Exhibit S-one is hereby admitted? In most CCNN cases, including extension of CCNN cases, a request for services is normally required in order to obtain a CCNN. Is that correct? That's correct. In this case, there were no there were no requests for services. Is that correct? Yes. And, that is because I'm assuming that, the company is already serving all of those customers. That is correct. And as a matter of fact, back in in decision number, 81536, the commission actually ordered the company to come in and seek a CCNN extension for

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those customers. Correct? Yes. Thank you. Did you assess whether the company is a fit and proper energy to provide water service in this case? Yes. Do you believe that they have the financial, managerial, and, technical experience to operate this company? I do. Believe that it's in the public interest for the CCNN extension to be granted in this case? Yes. And, you've heard the discussion this morning about the recommendations that were made, in both in your staff report and in the engineering report attached to the staff report. Do you agree that, that we can eliminate recommendations one and two since those have already been established?

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Yes. And so three and four would remain, is that correct? Yes. And staff does believe those recommendations, those required conditions are important to this case to ensure that we have compliance with all of the requirements? Yes. Thank you. I have no further questions, your honor. Mr. Nemeth is available for Cross. Okay, miss Humphrey and mister Crockett. Any questions for this witness? I'm trying to think of one, but I can't come up with that. So no. Thank you, your honor. Okay. Well, maybe my, question will inspire, questions potentially, and that's why we have the final chance for questions for redirect and for cross

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examination. In that case, I'll move on to my questions. Mister Nemeth, I'm gonna ask you the same question that I started, mister Tatz with. Do you know when Caballeros first was granted a CCNN by the commission? None off the top of my head. Okay. I I just wanna note generally for the record, I did some research of commission records prior to our hearing and found that it appears that Caballeros was first granted a CCNN in decision number 38595, which was issued back on 08/02/1966.

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Do the parties have any objection of my taking official notice of this decision number and decision date? I'll start with the company. No, your honor. And I would state for the record, I looked as well. And I didn't get into the the catacombs here at the commission, but there's certainly nothing in e docket or any of the orders that appear in e docket that identify that date. Okay. Miss Humphrey? No objection. Alright. In that case, I will take official notice of that. I had to dive within decision to type in decision, and it it took me down a rabbit trail.

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And I found this one, which was kinda kinda wild to see a decision back in 1966. Alright. Let's see. We've already talked about the discrepancies in the number of land owners. I I just wanted to ask kind of a clarifying question related to, request for service. I I I believe that we've already, you know, noted that the customers within the extension have already been receiving service. It seems like that's always been the case as far as we know. But I wanted to, I guess, have it stated more clearly,

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as to staff's position, whether these provisions of the ACC are applicable in this case or why they may not necessarily, be applicable. Because typically, this is required information with the application. If you can, can you provide me with some clarification, from staff's position as to why this section of the Arizona, administrative code isn't necessarily applicable per se in this case. Thank you. Just to reiterate, it is a special, case. Well, it is typical that, the request happens first. In this case, it was an order stemming from, staff to ask to have this donut hole filled,

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so that's what makes it the kinda special case here. And I'm assuming, that you heard the mister McGahn's testimony this morning. He he did mention that as far as he's aware, there hasn't been any comment from any customers related to this. I certainly know there's not any in the docket. The staff take that, lack of comment as additional evidence potentially signifying that this is, the customers might have known to an extent, you know, that they were gonna receive water service from this company. They just didn't know the, more bureaucratic technicalities of why this proceeding was happening.

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Does that let me clarify that. Do you think that that additional information provided from the company's witness aids staff's conclusion that the request for service were not necessary in this case? Yes. Okay. Thank you. Let's see. In the application, Caballeros indicates that it does not have a city or county franchise because it does not utilize any public roads or rights of way. Looking at page two of the staff report, staff appears to rely on Caballeros' assertion related to not needing a franchise.

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Has staff taken any, action to independently confirm that Caballeros does not need a city or county franchise? Staff, consulted with each other and found that this was, alright in this case. Alright. Thank you. Let's see. Did staff reach any conclusions as to whether there is a need for regulated water utility service to serve the extension area. That's the same question I asked mister Tatz, hopefully more eloquently stated. Yes. Alright. Thank you. I believe those are all of my questions. Miss Humphrey, any, final redirect? No, your honor. You're very thorough. Thank you.

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And, mister Crockett, any final questions for this witness? No, your honor. But I would I would note with regard to the notice issue, and I haven't looked at the specific rule that you've cited this morning, but typically in the commission's rules, there's a waiver provision that's there. And so if it would be helpful here, the company, would request a waiver of that notice requirement due to the specific circumstances of this case being that customers are already receiving, service from the water company. And I would I would submit that that is in effect notice of of the

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application. That was a holdup that I was experiencing as you all noticed through my questioning. I just wanna make sure that we're dotting our i's and crossing our t's. It sounds like staff is going to have to file an amended staff report anyway. It looks like we have some details. So I'm certainly open to, you know, maybe some late filed exhibits that really, make us whole, at the end of the day. We can talk about that in just a moment. I'm gonna let mister Nemeth step down if we have no, additional questions for him. I do not. Alright. Thank you, mister Nemeth. You are all done. You can go ahead and step down.

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Miss Humphrey, does staff have any additional witnesses? That concludes staff's case. Alright. And, I will be conferring with staff just in terms of timing, if if if we can do that briefly. I'm assuming one deadline for filing this. Yeah. Okay. Let's quickly start with closing statements then, and then we can move on to kind of that procedural stuff. Mister Crockett, at this time, would you like to make any closing statements on behalf of Caballeros? Yes, your honor. Thank you. I'll just I'll be very brief, and I guess I'll begin with the issue of the request for service.

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Because this this is a unique circumstance in my experience and because the commission ordered the company to file this application. And in fact, it even at one point offered to have staff assist with the preparation of the application, probably didn't occur to us to request from the customers a request for service. And I think that it could have also potentially been confusing to them when they're already receiving service from the company to now get a letter saying, hey. Would you like to receive service from the company? So that together with the the order that we file the application,

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we just didn't didn't really think that we would need to do that. So like I said, we we'll we can talk about that in a minute. If there's something we need to do to try to make whole on that issue, we can certainly do that. With regard to the closing statement here, I think that the record is clear that Caballeros Water Company is fit and proper to hold a CCNN. They're already serving, these customers that have service. We as you heard in the testimony, there's a couple of lots where there is no service currently, no residents. But they they're currently providing service. They're providing it pursuant to,

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their CCNN. We had thought at one point as well that they could probably do it pursuant to their run along rights because this area is surrounded by existing CCNN area. But in any event, we think that, the company has submitted a complete application, that it meets the requirements of the commission for approving a CCNN. There is effectively no other entity that could provide service to these customers. So given that the company has demonstrated its fit and proper, that it's got the technical, managerial, and financial expertise to provide service that it's currently serving,

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that it's, committed to serving under the existing rates and charges approved in its recent rate case. All of those things support, approving the extension of the CCNN. Thank you. Thank you, mister Crockett. Miss Humphrey, any closing at this time? Just briefly, your honor. Thank you. This is a little bit of an unusual case. Not that I we've seen this happen before at the Commission, but it is somewhat unusual. And for that reason, the need for a request for service has been sort of confusing in this one, I guess. I think I think, technically, you could argue that by accepting service every month that they receive water service,

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they are in essence the comp customers are in essence requesting service on an ongoing basis. Whether we treat it that way, whether we say that we can waive the requirement, staff would not oppose to that. But but it it it's a common sense argument really in this case that they're already serving they're already receiving service, so, that should eliminate the need to to do additional, requests for service. In looking at this case, the company, of course, has already been deemed to be fit and proper. I think staff had a few concerns because of the noncompliance issues.

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But in looking at what the company has done and the fact that they've already come in and and really addressed three out of four of them before we even come to hearing is a good indication that we can count on the company to to correct any problems that they had in the past, and they seem to be on a path, to to manage this properly. So we do agree that the that the CCNN extension should be granted and ask that that that you order that and, with conditions three and four remaining. Thank you. You, miss Humphrey. Before we wrap up, I believe we've admitted all exhibits that had been offered for today,

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but let's talk about what happens now. I'm gonna start with the staff report, because I think that that may be the easiest. Staff, if you wanna take a moment, I usually look at, like, ten days after the hearing for filing an amended staff report. Does does that sound reasonable? Staff is indicating to me that ten days Okay. Would be are you talking ten business days or ten calendar days? I have no issue with either. It's really whatever I I don't know what staff's load is right now, so I'm good either way. Okay. You're the stat nobody seems to care.

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So I think we can just do ten days. Okay. Ten days. So that will just be ten days. Me the opposite? No. Oh, you. But we'll we'll go with ten calendar days then. And, of course, if that falls on a weekend, then that moves to the next, business day. But we'll we'll do, ten days. I'll ask mister Crockett in light of the types of, amendments that staff is gonna be making. It sounds like clarifying, you know, the number of owners, clarifying that there is not a liquid chlorinator, on the well, and that they, potentially will be removing recommendations one and two.

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Would the company like any time, to be able to respond to the amended staff report, or do they feel comfortable, not setting out that time, I guess? We we'd like an opportunity to respond, but it can be very brief. Five five days, calendar days would be sufficient on that. Alright. That's fine with me. You know, and, obviously, if staff needs to do any additional discovery on on the chlorinator issue, we can do that. I'll tell you just for your your own information, your honor, that the there's never been a chlorinator on the,

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the system, and we've clarified that with Maricopa County. What they've done to chlorinate is what's called batch chlorination, which is, I think, literally to pour chlorine into the water storage tank. Well, Maricopa County has come back and said, well, that in and of itself is a chlorination system. And so we've been working out an agreement with Maricopa County over how how that's gonna proceed. And so that's that's being done right now. And the other issue was the vent pipe on the well and we agree that that needs to be done and that work is also being scheduled. So both of those things will get wrapped up fairly short order.

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We can, if if it would be helpful to your honor as a compliance item, we could file a report on that after a certain period of time if that would be necessary. But I I don't believe that's necessary. I also don't believe staff is asking for that in the staff report. They just generally noted that they would like to see them in compliance, by the end of twenty twenty seven. I believe at this point from hearing both attorneys, it seems like, everyone's in agreement that the company will be able to do that, notwithstanding having to file something officially in the record.

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Am I understanding that correctly, miss Humphrey, or would staff like to see a filing from the company as, like, a compliance item? I don't think we need a compliance item on this. I I I think this is very Okay. Again, ADEQ is the entity that you need to get in compliance with. We're just, you know, reviewing that, in the areas that the commission does have oversight on and making sure that, we have a fit and proper entity providing water service in the areas. Okay. So, ten calendar days for the amended staff report and then that five days,

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for any company response. That that's fine by me. Let's turn to the discussion we've been having about request for service. I believe that we have, you know, both parties positions. If the company is amenable to filing something, you know, I can give that send same ten, you know, calendar day period, to file either, you know, as the company sees fit, a a request, to waive that provision or, an argument why that provision a legal argument why that provision is not relevant in this case. Since we already have the record open for those ten days,

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that may be a a good period of time to also hold open for anything that the company would like to file. Mister Crockett, how do you feel about that? Your honor, that's fine. I, I would envision filing a request for a waiver to explain the circumstances here. As mister McGahn testified, a lot of the residents are winter visitors, and they've flown north for the winter already or for the summer. So getting a hold of people to try to get requests for service would be maybe challenging. And, again, I we would have a concern that it would also create customer confusion.

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So I think we're gonna go the waiver route, and we'll file something requesting that. Alright. Miss Humphrey, would staff like a period of time to respond to that? I don't anticipate needing a response, but just in case, I'd like to have five days to respond to it. So we can keep that ten and five for both of these, late, filed items. That works for me, and I think that that will really make sure that we we have no no issues at all here. So I appreciate the party's, willingness to, make those additional filings and just make sure that we we have this record.

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And and it would be my suggestion. I think perhaps, mister Crockett and I can get together on a on a couple of these issues, and and resolve them. For example, the the issue of the ownership, that came from the company's application. So I imagine we can sit down and talk about that and probably the waiver and perhaps file something joyfully to expedite this. I love stipulating filings. I love when parties work together. That's really you know, it makes everyone's job easier, so I am more than amenable to that. I'm not particular about the form that these need to be filed in.

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I just, you know, wanna make sure that we have this information in the record, so that we can have an accurate and, full decision. So I appreciate that. Thank you, miss Humphrey. With that, is there any other procedural issue item that I may have forgotten along the way that we need to cover, mister Crockett? Nothing that I'm aware of. Thank you, Ronda. Miss Humphrey? Nothing. Yeah. I'm going to quickly have us go off the record, for just a moment. I'm gonna ask our court reporter, Adam. At this time, do you have any questions, or is there anything you need clarified before we go today?

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No, Joseph. Thank you very much. Appreciate it. Alright. Thank you so much. I'm gonna go back on the record. While we were off the record, I confirmed with the court reporter, that they did not need anything clarified. In that case, I don't believe we have anything else that we need to address before we adjourn. I wanna thank you all for your participation today. We will keep the record open for the ten calendar days for the initial filings and then five calendar days for any responses that parties may like to file. Once that is completed, this matter will be taken under advisement.

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Any recommended opinion and order will be issued for the commission's consideration at a future open meeting. I wanna thank you all again. This hearing is adjourned. Thank you. Thank you,