Key Points:

• A retirement community is fighting rate increases of 128% and 188% at the Arizona Corporation Commission

• Rates for water and sewer service in the community have not been adjusted in more than 20 years

• About 50 small water utility companies around the state have also not adjusted rates in over 20 years

In May, residents of the retirement community Robson Ranch near Eloy opened their water and sewer bills to find a notice that their utility rates would increase by well over 100% in the next year. For the community residents, the sudden increase was a shock. 

The company serving Robson Ranch, Picacho Water and Sewer, had been acquired by JW Water in 2024. Raul Salmon, a Robson Ranch resident, said a letter from the new owner promised not much would change.

“You open up the bill and there’s the little snake that’s going to bite you,” Salmon said of the proposed rate increases. 

JW Water told Robson Ranch residents that the large rate increases were necessary because Robson Ranch Communities, the previous owner of Picacho Water and Sewer, had not increased rates since both utilities were authorized by the Arizona Corporation Commission to serve the community in 1998 and 1999. 

Salmon said he and his fellow residents had no idea Robson Ranch Communities planned to sell the utilities and did not realize their rates hadn’t been raised in decades.

But the situation in Robson Ranch is not an uncommon one for the Corporation Commission, which regulates all public service utility companies in Arizona. In fact, 54 small water and sewer utility companies in Arizona have also not adjusted their rates in over 20 years, according to data provided by commission staff. 

When utilities delay rate cases for decades before asking the commission to adjust their rates, their customers ultimately bear the brunt of inflation, unrecovered costs and neglected utility infrastructure. The commission often has few mechanisms to protect customers from that rate shock, as public service corporations are legally guaranteed a fair return on their capital investments. 

How small water utilities work

In Arizona, small water utilities are generally defined as any utility company that earns less than $1 million per year, with some earning as little as $250,000 per year.

Water utilities are regulated by multiple entities in Arizona, including the commission, which oversees the business and rate setting aspects of companies that provide water and wastewater services. Over 400 water systems operated by nearly 350 companies are regulated by the commission, according to its website. 

Small water utilities are often owned by individuals or families in rural or less populated areas of Arizona, and some have as few as eight or as many as 1,500 customers. 

Utility companies in Arizona file rate cases to recover the cost of serving customers and establish a rate of return on investments. The commission recommends water utilities file rate cases every five to seven years to ensure rates accurately reflect the cost of service.

“When small utilities do not file rate cases for extremely long periods of time they will almost inevitably end up in a situation where their expenses and capital needs are difficult or impossible to meet,” a 2016 commission decision stated. 

Despite the commission’s recommendation, 92 water utility companies have not filed a rate case application in the last decade. Seventy small water utilities have filed in the last five years, while 64 have filed in the last five to ten years.

Why small water utilities avoid rate cases

For some utility owners, rate cases can be cost prohibitive. An average rate case usually requires a company to provide detailed information on its customers and assets, hire attorneys to represent it at commission hearings, and consult analysts and experts to determine what rates it can reasonably charge. 

Additionally, many small water utilities were created by individuals sometime between the 1950s and 1970s and the ownership was passed on to the next generation as those individuals retired or passed away. Often, the new owners have no knowledge or experience in running a utility company.

Briton Baxter, the current small water ombudsman and director of the commission’s utilities division, gave commissioners an even simpler answer during a hearing on Nov. 6.

“They are afraid of the commission, they don’t want to come to the commission,” Baxter said. 

Commissioner Lea Márquez Peterson said she has made it her mission to ensure the owners of the small water utilities understand that the commission truly is there to support them through rate cases, no matter how long it has been since their last rate adjustment.

“It’s very challenging for single operators or volunteers to operate a water utility in today’s regulatory environment,” Marquez Peterson said. “I have been a proponent of seeing either utilities come in (for a rate case) and … work with our small water ombudsman to repair the utilities or to sell their utilities, whatever it takes.”

The number of water utilities that haven’t filed rate cases in over 20 years has decreased since Marquez Peterson’s 2020 workshop — from 73 to 54. Additionally, data from commission staff indicates that eight companies are currently working with the small water ombudsman on rate cases.

The small water ombudsman has helped complete 42 rate cases since 2016, but Márquez Peterson and commission staff have noted that the commission lacks the resources to require every utility to file a rate case at once.

The customer impact

Picacho Water and Sewer Company was on the list of 73 utility companies that the commission identified in 2020 as being behind on rate adjustments by over 20 years. Now, the new owner is attempting to bring its rates into the 21st century.

According to filings from JW Water, an average customer’s water bill would rise from $33 per month to $67.83, while an average sewer bill would rise from $42 per month to $120.96. The rate case is currently ongoing, and the rates JW Water is differ from those ultimately approved by the commission.

JW Water says the increase is necessary to reflect the actual cost of serving Robson Ranch residents, investments needed to expand its water plant, and a fair rate of return. The company says its current rate of return on Picacho Water and Sewer is -2.15%

Salmon and a group of his neighbors formed the Robson Ranch Task Force to oppose the rate increase at the commission. He said the group is hoping the commission can phase in the increase over time and lower the required revenue the company is allowed to collect, among other things, to prevent rate shock. 

“There’s thing after thing that can bring that rate down for us and, as far as I know, (JW Water) is just not even willing,” Salmon said. “They have to have this money, which is ours, but they want our money because they’re entitled.”