Regulators may give territory to donor

Arizona utility regulators are considering taking away a water company’s lucrative service territory and giving it to a competitor whose executives have donated thousands to the political campaigns of two of the regulators.

Robson Communities donated $23,500 to Arizona Corporation Commissioner Boyd Dunn and $3,000 to Chairman Tom Forese. Commissioner Andy Tobin joined Dunn and Forese in a 3-2 vote forcing Arizona Water Co. to negotiate with Robson over the water-service rights for an 11-square-

mile undeveloped area near Casa Grande.

The Corporation Commission, under different commissioners, had granted Arizona Water the territory in 2004. Attorneys for Robson companies have been challenging that decision unsuccessfully since 2005.

Dunn proposed reversing the grant within a month of taking office, but said the donations from the Robsons are not driving his decisions.

“Any person who gave me a contribution, when I had a chance to talk to them, I made very clear that whatever contribution you make will not make any difference at all in what I decide,” Dunn said. “My decision will be based on the law and it will be based on the best interests of the ratepayers.”

Forese said the suggestion that commissioners were favoring Robson was off base and that he plans to return the donations, which were made for his 2018 state treasurer bid.

Tobin, who received no donations from Robson executives, had first opposed taking the territory from Arizona Water but said he changed his mind because he thinks the way territories are assigned needs review.

The case has drawn the attention of some of the approximately 300 water companies in the state, many of which are small family businesses. They say they fear losing territories to competitors with deeper pockets who are willing to fight at the Corporation Commission.

“I would say we are very concerned,” said Jason Williamson, managing partner of JW Water Holdings, which has three small systems and is not involved in the dispute.

Williamson said Arizona Water has a good reputation and does not deserve to lose the territory. “They are an upright, positive, active corporation and I feel confident they have the public’s best interest in mind,” he said.

Board members of the Yarnell Water Co., also not involved in the case, filed an objection. “This smacks of an illegal government taking for the benefit of a private entity,” they wrote.

With about 200 employees, Arizona Water Co. serves 90,000 customers in small communities such as Sedona, Rimrock, Sierra Vista and Bisbee.

The company was certified to serve two planned housing developments east of Interstate 10 near Casa Grande in 2004. The certification gives a utility the right to serve a particular area and prevents redundant water, electric or gas system from being built.

In 2005, a company called Cornman-Tweedy 560, one of about 50 controlled by the Robson family, announced plans to build the EJR Ranch community, partly in in Arizona Water’s territory and partly in nearby territory of Picacho Water, which is controlled by Robson Communities CEO Ed Robson.

Cornman-Tweedy then asked the Corporation Commission to void Arizona Water’s certification, arguing that the Robsons could better serve EJR Ranch with Picacho’s integrated water and sewer services.

Attorneys for Arizona Water and CornmanTweedy declined to answer questions about the dispute.

Over 12 years, Arizona Water maintained its disputed certification through a series of judges’ recommendations and votes by the Corporation Commission. With a new commission voting on the issue this year, the company’s fortunes changed.

Dunn had been in office only a month when he introduced a five-page proposal in February to delete the territory from Arizona Water’s service area.

Deletions are rare. They usually occur only if a company provides inadequate service or is financially unable to run the system without charging unreasonable rates.

Dunn, a former Superior Court judge who campaigned on promises to be impartial, said he took a proposal from CornmanTweedy officials and introduced it as his own. He said it was a good way to get the parties to talk about the case’s issues.

As part of a review of the case, administrative law Judge Sarah Harpring sided with two judges who earlier recommended Arizona Water maintain the extention.

The commission staff, which commissioners often defer to, agreed with the judge.

Dunn went forward anyway.

His amendment said “the public interest would not be served” if Arizona Water maintained the right to serve the contested area, even if “no evidence has been presented to call into question” its ability to serve the property.

Testifying at the February hearing, an attorney for Arizona Water said Dunn’s proposal defies basic rules of utility regulation in the state.

“There is literally zero evidence in this record that would allow the commission to make that finding (that the company provides inadequate service),” Arizona Water attorney Meghan Grabel said.

Jeffrey Crockett, the attorney for CornmanTweedy, argued that Arizona Water wasn’t losing any value because nothing has been developed on the vacant farmland.

Dunn said he proposed deleting the territory to encourage an end to the debate.

He failed to convince anyone other than Forese. His amendment lost on a 3-2 vote.

The February vote should have ended the matter. But the commissioners made an unusual decision.

They never entered the February vote as an official order. Normally, the commissioners vote on a matter, then sign a written order that is legally binding. Instead, Tobin asked for the issue to be reconsidered at an April meeting, where he voted with Dunn and Forese to force the companies into settlement talks.

Commissioners Doug Little and Robert Burns, now in the minority, said the procedure put the commission in legal jeopardy.

“I think that was very poorly handled,” Burns said. “Not only did Dunn not continue the (certification) but so did Forese, and he has Robson’s support as well. The impression of undue influence certainly raises its head in that situation.”

Arizona Water’s attorney, Grabel, said in a filing the company will pursue settlement talks, but the company also has formally asked for a rehearing.

The commission’s new chief attorney, Andy Kvesic, said he saw no problem with the process.

Johnson Utilities’ rates will be reviewed by the commission because its owner, George Johnson, has been indicted on charges including bribing a former commissioner. But the commissioners have not suggested revoking its certification.