W-02023A-25-0087

The docket for Joshua Valley Utility Company identifies the following areas of growth and associated key considerations:

Customer Growth
- The Arizona Corporation Commission requested Joshua Valley Utility Company to complete a customer growth spreadsheet for each water system, detailing historical and projected customer numbers. This is to be provided using a specific template, with a tab for each system, indicating the commission’s focus on tracking and managing increases in the customer base as a key part of the rate case evaluation. The main consideration here is ensuring accurate, system-specific data is supplied for regulatory review and planning 1.

Plant Additions and Infrastructure Expansion
- The company has added significant plant assets, with staff verifying $574,729 in documented, prudently incurred, and used-and-useful additions, as well as $154,892 in physically verified but undocumented additions. There is also a focus on post-test year plant additions through December 31, 2025, with approximately $274,719 in documented, prudently incurred assets being added. The key considerations are:
- Documentation: Ensuring all additions are properly documented with invoices or physical verification.
- Used and Useful Standard: Additions must be actively serving customers and not just planned or estimated; for example, staff recommended removing $16,042.30 in estimated (not actual) additions.
- Capital Needs: The docket highlights the necessity of capital investment to replace aging assets and maintain system reliability, especially as a large percentage of the water system is near the end of its usable life.
- Regulatory Scrutiny: The commission closely reviews the prudence, necessity, and timing of additions, only allowing recovery of costs for assets that are in service and beneficial to customers by the test year cutoff or shortly thereafter 2 1.

Overall, the areas of growth revolve around customer base expansion and infrastructure investment. Key considerations include accurate reporting, documentation, regulatory compliance, prudent investment, and the ongoing need to ensure system reliability and water quality for a growing customer population.

The financial and timeline risks and concerns discussed in this docket include:

Financial Risks and Concerns:
- Joshua Valley Utility Company is a small, rural utility that has been underfunded for years, resulting in higher operating costs per customer and limited economies of scale. This underfunding has led to an operating loss of $125,770 in the un-audited test year and a request for a 73% revenue increase ($308,773) to cover rising operational expenses and necessary system repairs and improvements 1, 1.
- The company faces immediate capital needs to address system reliability, water quality, and resiliency obligations, as a significant portion of the water system is nearing the end of its useful life and requires substantial reinvestment 2, 2.
- There are concerns about the ability to raise capital due to the company’s small size and remote location, which increases business risk compared to larger water companies. The company argues for a higher return on equity (10.75% vs. staff’s 10.00%) to reflect these risks and support necessary improvements 2, 2.
- The requested rate case expense surcharge of $30,000 is considered reasonable by the company, especially since similar or higher surcharges were approved for other companies. However, additional case-related tasks remain, suggesting the expense may increase further 2, 2.
- There are discrepancies in accounting and salary expenses between company and staff calculations, causing debate over what constitutes recurring versus non-recurring costs 2.

Timeline Risks and Concerns:
- Some plant additions and repairs, such as backup generators and HVAC equipment, have not yet been completed or put into service. Staff data requests specifically ask for updates on the timeline for completion of these projects, which introduces uncertainty regarding system upgrades and the associated costs 2.
- The procedural schedule and regulatory time clock have been suspended to allow for settlement discussions between the company and commission staff, creating potential delays in finalizing rate decisions and implementing necessary improvements 3.
- The company's ability to meet its capital improvement goals depends on timely approval of its requested rate increases and surcharges, as well as successful resolution of outstanding accounting and regulatory issues 2, 3.

In summary, the key risks are financial instability due to underfunding, needed system reinvestment, higher relative costs due to small scale and isolation, uncertainty in regulatory approval timelines, and delays in critical infrastructure upgrades 2, 1, 3, 2.

The stakeholders in the Joshua Valley Utility Company rate case docket (W-02023A-25-0087) and their positions are as follows:

Stakeholders:
- Joshua Valley Utility Company (the utility applying for a rate increase)
- Arizona Corporation Commission (regulatory body, including its Utilities Division Staff)
- Moyes Sellers & Hendricks, Ltd. (legal counsel for Joshua Valley Utility Company, specifically Steve Wene)
- Customers/residents of the service area (notably Meadview, AZ)
- Southwestern Utility Management (management company referenced in public notices)
- Individual Commission staff and legal counsel (named in correspondence and data requests)

Positions:

For (or proposing) the rate increase and related adjustments:
- Joshua Valley Utility Company: Requests a 73% revenue increase ($308,773), a $30,000 rate case expense surcharge, annualized salaries/benefits, restoration of accounting costs, reclassification of CPA expenses, and a 10.75% return on equity, arguing these are necessary due to underfunding, high operating costs, and needed system investments 1 2 2.
- Moyes Sellers & Hendricks, Ltd. (Steve Wene): Legal representative filing the rate case and supporting motions on behalf of Joshua Valley Utility Company 3 3.

Against the rate increase or specific proposals:
- Customers/Residents:
- Ruth Chapman: Opposed to the rate increase, stating "we cannot afford it" 4.
- Brian Kolvenbach: Opposed, citing hardship due to fixed income 5.
- Other customer feedback: Critiques the scale of the proposed increases (meter charges, service charges, water use rates), arguing they are extreme for a retirement community and not matched by similar income increases; suggests smaller, more reasonable increases would be appropriate 6.

Neutral/Regulatory (not explicitly for or against, but making recommendations or facilitating process):
- Arizona Corporation Commission Utilities Division Staff: Reviews the application, issues data requests, files staff reports with recommendations, and facilitates procedural matters such as scheduling and consent to email service. Staff recommends approval of a rate increase "in accordance with staff's recommendations," but the specific recommendation (e.g., amount) may differ from the company's proposal 7.

Summary:
- Joshua Valley Utility Company and its counsel support the proposed rate increases and related surcharges.
- Many customers oppose the increase, especially the magnitude of the proposed changes.
- The Commission Staff acts in a regulatory and advisory capacity, with independent recommendations which may not fully align with the company's proposal.

Key events and submissions in the Joshua Valley Utility Company rate case proceeding (Docket No. W-02023A-25-0087) are as follows:

- April 25, 2025: Joshua Valley Utility Company filed an application for a rate increase with the Arizona Corporation Commission (ACC) 1.
- April 30, 2025: A procedural order regarding consent to email service was issued 1.
- May 1, 2025: Joshua Valley filed a compliance filing regarding public notice 1.
- May 23, 2025: The ACC Utilities Division (Staff) filed a letter of sufficiency, classifying the utility as a Class D and confirming the application met requirements 1.
- August 6, 2025: Staff filed its report recommending approval of the rate increase in accordance with its recommendations 1.
- August 18, 2025: Joshua Valley filed a response to the staff report, disputing some staff-recommended adjustments and return on rate base 1.
- August 22, 2025: By procedural order, staff was directed to provide a written response or supplemental staff report addressing its rationale for recommended adjustments and return on rate base 1.
- August 26, 2025: Joshua Valley filed a notice of settlement discussions. That same day, Joshua Valley and Staff jointly filed a motion to suspend the procedural schedule and time clock for settlement discussions, which was granted by the Commission 2, 1.

The procedural schedule and statutory time clock are currently suspended to allow for settlement discussions between the company and staff 1.

The docket W-02023A-25-0087 concerns the application by Joshua Valley Utility Company for a rate increase. The company requested a 73% revenue increase (about $308,773), citing increased operational expenses and the need for system repairs and improvements, after reporting an operating loss of $125,770 for the test year ending December 31, 2024. The rate increase would affect residential, commercial, and irrigation customer classes. Customer input was solicited, and intervention procedures were outlined 1.

Key issues reviewed include:
- Accounting and labor costs: Joshua Valley advocated for $9,280 in recurring annual accounting expenses and proposed salary and benefit adjustments reflecting a 6% wage market increase and full recognition of benefit expenses, resulting in a net increase of about $9,482 in salaries and benefits 2.
- Rate case expense: The company estimated its rate case expense at $30,000.
- Plant additions/repairs: The company responded to detailed data requests from Commission staff about plant additions, meter replacements, office building costs, and allocation of costs with grants and contributions in aid of construction 2, 2.
- Water loss: Staff found that water loss had dropped from 16.1% during the test year to 8.2% based on more recent data, now within acceptable limits. The company serves over 1,000 connections with five wells and four storage tanks, and is in compliance with ADEQ, ADWR, and ACC requirements 3.

As of August 26, 2025, the procedural schedule was suspended to allow Joshua Valley and ACC Staff to pursue settlement discussions. If a settlement is not reached, a new schedule will be proposed 4.