EPCOR Seeks Revenue Hike & Water District Consolidation

Editor’s Note: This article no longer contains the most recent information or proposed rates. Please see this May 7, 2018 article for the latest information.

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(This article, originally published Oct. 27, 2017 was updated Nov. 7, 2017 to include mention of the System Improvement Benefit request. It was updated again in March, 2018 to note the March 8 public meeting in Anthem. It remains published here for archival purposes.) 

The water utility serving Anthem’s east side aims to consolidate its 11 Arizona districts and create a new rate structure that would spike rates for the average Anthem customer 42 percent in the first year then drop each of the next four years, ultimately to a level roughly 12 percent below today’s rates.

If the districts stay separate, EPCOR proposes that Anthem residents pay a “stand-alone rate” that would be even higher—a 52 percent increase that would begin in the first year and remain indefinitely, and in the future could go up further.

“We are very much in favor of consolidation,” Roger Willis, president of the Anthem Community Council, said in an interview. Council voted at its Oct. 25 board meeting to intervene in EPCOR’s rate case, which is subject to approval by the Arizona Corporation Commission. Intervention allows the council, likely along with ratepayer representatives from other districts, to weigh in formally with objections and evidence. EPCOR will hold a public meeting in Anthem Nov. 6 to explain the proposal and process and answer questions [details at the bottom of this article].

Anthem is not the only EPCOR district with a lot at stake. Customers in Sun City would see rates more than double over the five-year period under the consolidation proposal. In all, EPCOR is looking to generate an additional $21.5 million per year over the next five years — for a total of 107.6 million — to deal with increased operating costs and capital expenditures.

“Anthem customers will benefit from consolidation,” EPCOR spokesperson Rebecca Stenholm said in a phone interview.

That’s true in relation to the proposed cost increases for other districts, and it’s true in the long run (from the fifth year onward). But the consolidation proposal would mean an additional $2.7 million in revenue from Anthem customers during the five-year phase-in period, according to calculations done by EPCOR for North Phoenix News.

Under the proposed stand-alone rates—should the state’s decision go that route—EPCOR would seek to extract an additional $20.3 million from Anthem customers over the five years.

EPCOR’s proposal also seeks a surcharge known as a System Improvement Benefit (SIB) that would help cover expected future costs of replacing pipelines, valves, meters and hydrants. The request is for a 45-cent monthly charge per customer in the first year, to rise incrementally in subsequent years. The idea, EPCOR says, it to avoid more significant, sudden rate hikes down the road.

Water vs. Wastewater Consolidation

The proposal is separate from EPCOR’s consolidation of five wastewater districts, a plan that was approved by the Corporation Commission in June. In that merging of wastewater service areas, the utility said the average Anthem customer’s wastewater portion of the bill would drop by about 35 percent.

The new water-district consolidation proposal was requested by the state’s Corporation Commission. EPCOR plans a public meeting in Anthem Monday, Nov. 6 to explain the proposal and answer questions [details below]. The Corporation Commission will hear the case in May 2018 and will ultimately determine whether EPCOR should consolidate water districts or continue operating them independently, and what the rates will be. If settled on the expected timeline, the new rates could go into effect in late 2018.

“The rates that are proposed are not final,” Stenholm said in a telephone interview. “They’re likely to change.”

Rate Logic

Anthem water rates have not changed in nine years based on an analysis of 2008 rates, Stenholm said, and other EPCOR districts’ last rate changes range from four to 22 years ago.

The proposed rate structure would have all Arizona EPCOR customers paying the same rate for water after five years, even though true costs of serving customers in each district vary widely. Stenholm explained: A smaller district, like Willow Valley, is very expensive to operate on a per-customer basis, given that it has many of the same infrastructure costs as a larger district.

Under this logic, Anthem’s 9,000 customers would benefit in the proposal compared to the 30,000 customers in Sun City.

Costs Behind the Proposal

The proposed rates are based on increasing operating costs, including increased maintenance costs on aging equipment and things as diverse as higher electricity prices and the rising cost of chemicals used to treat water.

Also considered is what EPCOR says are $150 million in capital expenditures made in recent years to water facilities across the 11 districts, costs that have not been recovered from ratepayers, as well as $430 million in capital expenditures it expects over the next 10 years (including $20 million for Anthem). These infrastructure costs are atop normal operating expenses and, Stenholm explained, akin to the major repairs needed on an aging car.

A relatively new facility, like the one in Anthem, might just need “an oil change, new tires and some belts” in the early years, she said, but eventually it’ll need a new transmission, then at some point it’s time for a new car.

“Economies of scale are an important factor in consolidation,” Stenholm said. “We’re providing the same service across all those districts.”

EPCOR’s proposal also asks for approval to provide assistance programs for low-income residents and disabled veterans.

Public Meeting: EPCOR Water Rates

6 p.m. Thursday, March 8, 2018
Anthem Civic Building
3701 W. Anthem Way
EPCOR presents its proposal in this second public meeting on the topic held in Anthem. 

Be Heard

Residents can also submit comments by mailing a letter referencing Docket No. WS-01303A-17-0257 to the following address, or by visiting www.azcc.gov and clicking on “I want to” and “submit a public comment”.

Arizona Corporation Commission
Consumer Services Section
1200 West Washington
Phoenix, AZ 85007

More to Read

• EPCOR Seeks Wastewater Surcharge (a separate case)
• About EPCOR’s Anthem Wells & Recharging
• EPCOR’s Wastewater Rate Case (Decided in June)
• Where Our Water Comes From
• More Articles About Water
• More Anthem News