Water Utility Seeks Major Rate Hike Amid Rising Costs

Sedona residents may soon see their water bills nearly double if the Arizona Water Company (AWC) secures approval from the Arizona Corporation Commission (ACC) for a proposed rate increase. AWC, which is the second largest private water supplier in Arizona, has submitted an application to raise rates for its Northern Group service area, impacting Sedona and several surrounding communities.

The proposed increases are significant: residential customers could face a 48.73% hike, while commercial users might see rates rise by 47.22%. Private fire service charges are also set to increase by 50.46%. Industrial water users, however, would remain unaffected by this proposal.

According to AWC’s application, the utility reported an adjusted operating income of $1.6 million and a capital base totaling $74.7 million, resulting in a return rate of just 2.18%. The proposed changes aim to generate an additional $7.46 million, bringing the total revenue increase to approximately 48% over current base rates. This adjustment would lead to a projected rate of return of 4.54% based on a fair value rate base of $157.9 million.

Local resident Rosemary Mays expressed her concern in a letter to the ACC. “This is an extraordinarily high percentage and it is not affordable,” she wrote. “There is no way to cut back on consumption by that amount or to increase my income to cover this increase.” Mays isn’t alone in her opposition; feedback from 57 residents of AWC’s Northern Group has also been logged against the projected rate hikes.

Another Sedona resident, Seth Ellis, emphasized the burden this would impose on retirees, many of whom are on fixed incomes. “I am shocked at the audacity of this request for such a huge increase in water rates,” he noted, underscoring the widespread dissatisfaction with the proposed changes.

AWC’s Vice President of Rates and Revenue, Nick Y. Liu, indicated that with existing surcharges, the actual bill might rise by about 35%. Currently, these surcharges comprise roughly 10% of customers’ total bills. 

This rate adjustment follows a recent voter-approved franchise agreement allowing AWC to use public rights-of-way for water services in Sedona, passed with a substantial majority. Resident Sam Kaplan remarked that had there been indications of such a significant rate increase at the time, it might have influenced voter decisions.

Inflation is cited as a primary driver for the proposed costs, which have not been adjusted since August 2019. Liu explained further that investments have been made to replace aging infrastructure and comply with the federal Safe Drinking Water Act.

The implications of a nearly 50% increase are substantial, especially for those on fixed incomes. “I am going to have to consider getting a well,” said Susan Brooks, expressing her concerns regarding the impending financial strain.

Beyond rate hikes, AWC is requesting the ACC’s approval for various financial recovery mechanisms, including a Sustainable Water Adjustor Mechanism and a Wildfire Protection and Public Safety surcharge. These changes aim to ensure a sustainable and robust water supply system while addressing the cost of modernizing aging infrastructure.

AWC plans to uphold its Utility Bill Assistance Program, which offers qualifying low-income customers and active military personnel a $10 discount on their bills. Residents can submit comments regarding these proposed changes ahead of the ACC hearing scheduled for March 17 at 10 a.m. Details to submit remarks can be found by referencing Docket Number “W-01445A-24-0117”.

For inquiries about how the proposed increases may affect individual bills, residents can contact the Arizona Water Company directly at their Phoenix address or through their provided telephone and email contacts.