Regulators are concerned with details of Surprise water deal

State regulators are concerned that the possible sale of Circle City Water Co. to the city of Surprise could leave a developer that owns 5,000 acres of land near Lake Pleasant without a guaranteed water supply.

Surprise is conducting a special election that ends Tuesday for voters to decide if the city should take over the small water company with 187 customers. If voters approve, the City Council will negotiate the deal.

The developer, Lake Pleasant 5000 LLC, owns undeveloped land that is within the Circle City water territory but is two to three miles outside the city of Surprise.

The Arizona Corporation Commission regulates Circle City and other utilities in the state, and two of the commissioners, Chairman Tom Forese and Andy Tobin, wrote to the city to share their concern for the developer.

“The commission has the obligation to ensure that the customer is not hung out to dry,” said Andy Kvesic, the chief counsel for the Corporation Commission.

Kvesic said that because the city and water company are proposing a “friendly condemnation,” the price likely has already been negotiated and agreed upon for the sale. The city needs voter approval, however, before it can execute that deal.

City officials have only said the price could be between $10 million and $30 million.

The Corporation Commission wants to know how the developer will be served if the deal goes through. If the city isn’t going to serve the land, the commission will have to assign the property to another water company that can serve it, Kvesic said.

“The problem is we do not know everything that is going on,” Kvesic said. “We’ve got a lot of questions and not as many answers.”

Circle City has an allocation of Colorado River water from the Central Arizona Project, and Circle City signed an agreement with the developer stating that water would be used to supply the development once it was needed, Forese and Tobin said in their letter to the city.

“I think Surprise will provide the water to the developer, but through some other agreement,” Kvesic said.