Judge to Johnson Utilities officials: Comply or go to jail

Pinal County Superior Court Judge Stephen McCarville on Tuesday ordered Johnson Utilities officials to give EPCOR USA financial control of the company by 2 p.m. Thursday, and warned that anyone interfering with the new boss would be arrested.

Johnson Utilities has faced a host of service and environmental issues in its Pinal County water and wastewater service area, which led the Arizona Corporation Commission to vote for EPCOR to take the helm of the company to correct the problems.

But Johnson Utilities officials didn’t like the July order from the commission, and would not allow EPCOR to control the finances of the water and wastewater company run by George Johnson.

Johnson and its affiliates sued unsuccessfully in multiple courts trying to stop the commission’s order, and McCarville’s ruling affirms the commission’s authority to regulate utilities.

“It has now been over one month since the decision was adopted by the Arizona Corporation Commission on July 24, 2018,” McCarville wrote.

“Then as now, Johnson’s operations of its water company are not safe, reliable or adequate. Johnson lacks the ability to financially manage the utility. And yet, the decision’s mandate to appoint an interim manager immediately has not been fulfilled. The court therefore finds that irreparable injury will occur if the request is denied.”

Corporation Commission Chairman Tom Forese said he was pleased with the judge’s order.

“I think it’s as optimistic as I’ve been,” Forese said. “The judge said exactly what we needed him to.”

Johnson lawyer Jeff Crockett said the order is subject to appeal but that the company will comply.

“We are going to comply with a valid order of the court,” he said Tuesday following the judge’s order.

Separate from five separate court actions taken by Johnson Utilities and its affiliates to fight the interim manager order, the company was in a hearing Friday and Monday at the Corporation Commission to determine if the company was in contempt of its July order.

Crockett said at that hearing the commission’s order for EPCOR to take over operations is vague and unworkable.

He also said Monday there was no need for an interim manager because Johnson Utilities is correcting the waterpressure issues, sewer overflows, noxious fumes and other issues that prompted the commission to vote for EPCOR as an interim manager.

“Things are going well in the service area,” Crockett said at Monday’s hearing.

The order from the commission says Johnson Utilities must “cooperate fully” with the interim manager, “supply all necessary documents, records, and other information requested,” and that the interim manager “shall have full authority to conduct the business and affairs of Johnson Utilities ... except as authority is expressly reserved as a right of ownership under Arizona law.”

Johnson Utilities lawyers have argued that “cooperate” is vague, and should not be read to mean that the company must turn over financial control to EPCOR. They also said that certain duties “reserved as a right of ownership” prevent the company from giving financial control to EPCOR.

For example, Johnson Utilities faces several legal actions, including a wrongful-death lawsuit. Company attorneys have said they need control of the revenue to pay for the company’s defense in such cases.

McCarville called this a “valid concern” but one that could be solved. He gave Johnson Utilities and EPCOR until Sept. 7 to work out a plan where such invoices would be paid and EPCOR would ensure only fees that benefit or protect the utility are paid.