Oops, there’s been a slight error in calculations.

Fountain Hills water users are already seeing an increase in their water rates from Chaparral City Water Company (CCWC) beginning this month.

But it seems that due to a slight miscalculation, they can expect to see another bump in their bill shortly.

EPCOR, the parent company for CCWC, asked the Arizona Corporation Commission to double check their numbers and subsequently amend the rate decision to correct the error.

On June 26, after the original rate request was approved by commissioners, a new procedural order was issued by the commission.

“It has come to the attention of the commission’s Hearing Division that the rate design set forth (in the original decision) does not properly reflect the decision’s authorized revenue requirement,” the order states.

“…A clerical error… resulted in the development of a rate design that produces approximately $273,000 less than the decision authorized.”

In other words, the commission authorized a total revenue package for the company and then the calculations were done so that the rate schedule achieves that goal.

It was recommended that the correct rate schedule for CCWC be authorized by the commission members at a future meeting.

For a water customer in Fountain Hills with a 3/4-inch meter using an average of 8,000 gallons per month, the adjustment will cost them another 95 cents on their monthly bill. Overall the monthly increase is about $8 with this usage.

This is a fairly average customer, according to EPCOR.

According to EPCOR spokeswoman Rebecca Stenholm, it is uncertain when the commissioners will consider the adjustment.

The commission has an open meeting scheduled for July 22-23, but as of this time there is no agenda posted.

Analysis

Besides the amount of water used when they turn on the tap, there are other aspects of the rate case that may impact customers before CCWC and EPCOR apply for another rate increase.

The firm of Gust Rosenfeld, PLC, which is the town’s legal representative, has provided the town with an analysis of the decision in the CCWC rate case.

The ACC decision also addresses the company’s capital structure, a CAP surcharge and a System Improvement Benefits (SIB) surcharge.

According to the analysis, CCWC has a capital structure that is equity rich, with 85.55 percent equity and 14.45 percent debt.

The ACC staff and RUCO (Residential Utility Consumers Office) both recommended a hypothetical structure of 60/40 to offset some of the equity that is allowed to be included in the rate base.

Staff and RUCO called the capital structure “an unreasonable increase in costs to ratepayers.”

The commission members, however, did not accept that option. They ordered CCWC to file a plan by late October analyzing how the company can achieve “a more balanced, reasonable and appropriate capital structure.”

CCWC purchases nearly all of its water from the Central Arizona Project through the Central Arizona Water Conservation District.

Each year the CAWCD increases the rates that CCWC pays for its CAP allocation to recover increases in costs and revenue shortfalls.

CCWC proposed a CAP surcharge with an annual tariff to recoup those CAP- related increases.

RUCO opposed that method and suggested CCWC should project those costs and include it in the rate request rather than a potential annual surcharge.

The commissioners, however, felt the CAP surcharge was reasonable and granted the request.

CCWC also asked the commissioners for a System Improvement Surcharge (SIB), which, according to the analysis, is designed to allow the company to recover “pre-tax return on investment and depreciation expenses associated with water infrastructure improvements and plant retirements.”

This plan was submitted for review with CCWC planning to complete the improvements prior to its next rate case.

RUCO opposed the SIB, but the commission granted it with staff’s recommendation.

The proposed SIB projects are subject to a “usefulness and prudency review” in the next rate case, which the commissioners ordered CCWC to file prior to June 1, 2018.

The generic list of items related to water infrastructure for which CCWC may recover costs using the SIB formula include supply mains, mains, services, meters and meter installations and hydrants.

All SIB projects must be reviewed by ACC staff and approved by the commission before being included in the surcharge.

SIB projects must be complete and placed in service prior to being included in the surcharge.

There is a surcharge cap which limits the annual SIB surcharge to 5 percent of the revenue requirement authorized by the ACC decision.

CCWC may not request an SIB surcharge for at least 12 months, and the firm is limited to a single request every 12 months.