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RESIDENTIAL UTILITY CONSUMER OFFICE (RUCO)

RESIDENTIAL UTILITY CONSUMER OFFICE (RUCO). Pat Quinn Director 602 364-4838 Email pquinn@azruco.gov. Water/Wastewater What You Need to Know September 17, 2014 Agenda EPCOR Agua Fria Wastewater Consolidation Docket No. SW-01303A-09-0343

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RESIDENTIAL UTILITY CONSUMER OFFICE (RUCO)

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  1. RESIDENTIAL UTILITY CONSUMER OFFICE (RUCO) Pat Quinn Director 602 364-4838 Email pquinn@azruco.gov

  2. Water/Wastewater • What You Need to Know • September 17, 2014 • Agenda • EPCOR Agua Fria Wastewater Consolidation Docket No. SW-01303A-09-0343 • 2. EPCOR’s Pending Sun City Rate Case Docket No. WS-01303A-09-0343 • 3. Arizona Corporation Commission’s Docket on Changing the Way APS Files Rate Cases

  3. Agua Fria wastewater Consolidation EPCOR Case • Cost of Service • -Rate Base X Return + Expenses • -Cost of service varies by community • -Consolidation does not use cost of service by community but by total company costs • RUCO Position • -Represents all residential customers • -Any change in rates requires full cost of service rate case • -Stale test years • -Commission and Company want to open up the rate cases from 2008, 2010 and a just filed 2014 • -Cost savings of consolidation • -Current revenue requirement considering all factors and parties • -Current rate design

  4. EPCOR – CONSOLIDATED WASTEWATER RATE PROPOSAL CURRENT RATES RECOMMENDED SYSTEMTOTAL Note (3)RATEINC (DEC) PERCENT Agua Fria Note (1) $ 121.91 $ 34.30 ($ 87.61) ( 71.86 %) Anthem Note (2) $ 56.26 $ 34.30 ($ 21.95) ( 39.02 %) Mohave WWater $ 82.79 $ 34.30 ($ 48.49) ( 58.57 %) Sun City $ 18.11 $ 34.30 $ 16.19 89.40 % Sun City West $ 30.96 $ 34.30 $ 3.34 10.79 % Note: (1) Agua Fria and Anthem – Current rates reflect rates scheduled to go into effect on January 1, 2015. Note: (2) Mohave Wastewater -- Current rates reflect pending increase in rates as filed in Docket No. WS-01303A-14-0010 Note: (3) All rates based on average usage of 7,000 gallons per month

  5. aguafria consolidated • What can you do? • -Contact the Corporation Commissioners • -Let them know your position through emails, calls or voicemails, letters, petitions • Timeline • -It appears the commission wants to hear this quickly, before end of the year • -Cost of service rate case would take minimum of a year • -It was on the open meeting for September 9th but was pulled • -It will probably show up in some form on the October open meeting

  6. EPCor 2014 rate case filing • Recent Commission decision in EPCOR's Chaparral rate case (Fountain Hills) • -Majority of Commissioners sided with the company on rate of return and depreciation. -against recommendations of the ALJ, Staff and RUCO -two adjustments alone increased the rates over 26% • -Approved a System Improvement Benefit (SIB) • -doubles rates over the next 5 years • -Approved several other increases tank maintenance and declining usage • -All this added up to a 43% increase for the residential customer, Order approved by Commission says a 20.3 % • -Fountain Hills reviewing options

  7. BUT IT’S GOING TO GET WORSE CURRENTINITIAL SIB INCREASE INCREASE ADJUSTED YEARRATE PER MONTHPERCENTAGE RATES 2014 $ 37.85 $ 7.68 -0- $ 45.53 2015 $ 45.53$ 1.76 3.87 % $ 47.29 2016 $ 47.29 $ 1.69 3.72 % $ 48.99 2017 $ 48.99 $ 1.73 3.79 % $ 50.71 2018 $ 50.71 $ 1.73 3.80 % $ 52.45 2019 $ 52.45 $ 1.67 3.65 % $ 54.11 The Order as approved by the Commission states that the rate increase on the average residential ratepayer is $7.68 per month or 20.3%. In reality, the rates increase each year and at the end of year five the rate has increased to $54.11, a percentage increase of 43.0%.

  8. WE’RE NOT FINISHED YET • COMMISSIONERS APPROVAL vs. ALJ • Additional Depreciation Expense through the use of the Group Depreciation Method as opposed to the modified Vintage method, and the continuation of over-depreciating Utility Plant Assets. • Changing the Rate of Return on Rate Base from 8.06 percent to 8.95 percent. • ADDITIONAL APPROVALS • Declining Usage $ 22,174 • Tank Maintenance Expense (18years) $ 202,184 • Additional Post Test Year Plant over what • RUCO recommended $ 2,278,882 • System Improvement Benefit $ 1,502,514

  9. epcor 2014 sun city rate case • What is in the Sun City rate case • -Filing includes all the issues that were approved in Chaparral case • -Tank maintenance, declining usage, SIB, depreciation, post test year plant • -Adds new issues: Obama Care (insurance cost increases) • -Actual rate increase over next 5 years is double because of SIB • - $3.82 vs $7.64 22% vs 44% • -All numbers come from the EPCOR filing

  10. REVENUE PROPOSED BY EPCOR Current Revenues $ 10,265,553 Total Revenues Requested (this filing)$ 11,912,007 Company Increase Requested $ 1,646,454 Percent Increase - Overall16.04 % Percent Increase – Residential (Note 1) 22.00 % SIB Revenue Increases (over 5 years)$ 1,233,692 Percent Increase - Overall With SIB 28.05 % Percent Increase - Residential With SIB 44.05 % (Note 1 – 5/8’ X ¾” and ¾” = 90% of residential ratepayers)

  11. SIB RATE INCREASE TO RESIDENTIAL RATEPAYERS INITIAL SIB CURRENT INCREASE ADJUSTED YEARRATE PER MONTHRATES 2014 $ 17.35$ 3.82 $ 21.17 2015 $ 21.17$ .79 $ 21.96 2016 $ 21.96 $ .76 $ 22.72 2017 $ 22.72 $ .84 $ 23.56 2018 $ 23.56 $ .70 $ 24.26 2019 $ 24.26 $ .72 $ 24.98 Overall increase from current rates 44.03%

  12. epcor 2014 sun city rate case • Current Status • -Original schedule • -Filed case found sufficient 4/4/14, interveners' testimony due 10/3, hearing 12/2 • -Schedule suspended 9/12 • -Staff and RUCO been working with company since April • -Company can't defend the accuracy of their beginning numbers • -Numbers constantly changing • -Not ready to file case • -They will have to file new accurate data and schedules • -Numbers we have shown you today will change but we don't know degree or direction • -Schedule is now on a month to month process where the company, staff and RUCO meet with ALJ to discuss where we are and how to proceed • -Watch docket and we will try to keep you advised

  13. aps request to change rate case process • Requested change • -Normally in a rate case the revenue requirement and the rate design are looked at simultaneously • -APS wants to bifurcate the rate design from the revenue requirement determination • -Based on discussion at the September 9th open meeting it appears that the majority of the Commissioners support this idea • -There was no written document describing this new process • -Everyone at the meeting besides the Commission, the Staff and APS spoke against the proposal • -The Commission didn't vote on the item but instead directed the Staff to draft a proposal • -All parties will get a chance to make comments on the proposal • -We will keep you informed to the schedule since this could move pretty fast

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