Following a presentation from Arizona Water Company executives on Tuesday, Jan. 14, the Sedona City Council decided to assume a neutral position on AWC’s proposal to increase water rates in Sedona by almost 50% rather than sending a letter in support of or opposition to the proposal to the Arizona Corporation Commission as part of AWC’s case for a rate increase.

Councilman Derek Pfaff recused himself from the discussion, as AWC is a client of his law firm.

“The current rates the customer are paying today is based on the cost information of 2017,” Nick Liu, the AWC vice president for rates and revenues, told the council. “It has been quite outdated, it has been more than six years compared to now, and those rates are not adequate enough for Arizona Water to really provide the service, to provide the safe and reliable service, to recover our cost.”

“We have made substantial capital investments since 2017,” Liu added.

AWC Division Manager John Snickers said that AWC is planning further capital projects in Sedona, including the replacement of water mains with enlarged eight-inch pipes along Apache Trail and Navahopi Drive in Uptown in combination with the construction of a booster station.

Vice Mayor Holli Ploog said that when reading AWC’s written justification for the rate increase, “some of that had to do with the rate of return. You were talking about your investors deserve an appropriate rate of return.”

Liu agreed. “We understand we got a lot of feedback from the community,” he said. “We’re not the only utility that’s requesting a rate increase.”

Liu said the average customer would see an increase of $15.62 on their monthly bill, “which is equivalent to about 36%.” He explained that AWC arrived at the 36% figure by first combining existing surcharges with the current base rate and using that figure as a basis for calculating the proportional increase; if the rate of increase were to be calculated on the basis of the existing rate alone, it would be 48%. The current surcharges will be folded into the proposed rate increase.

“Can surcharges find their way back into the bill, then, once they’re reset to zero?” Councilman Brian Fultz asked.

“There is a potential we might introduce surcharges in the future,” Liu said, and later confirmed that AWC plans to apply to the ACC for approval of a new surcharge concurrently with the rate case, which would be a less lengthy process than the rate case and likely not involve public hearings.

“How’s that any different?” Fultz asked. “Surcharge just sounds like another form of ‘I’m raising your bill.’”

Fultz then described the ACC’s probable response to AWC’s request for a surcharge as rubber-stamping.

“I wouldn’t use the word ‘rubber-stamp,’” Liu said.

“The reality is, the ACC is awfully friendly to utilities,” Fultz said. “What I hear you saying is it is very likely that an additional surcharge fee, amount TBD, will get added on to this.”

“That is correct,” Liu said.

“Our residents want to know,” Fultz said. “Even a dollar or two additional surcharge two years from now after you presumably get this, they’re not going to be real happy about it.”

Liu said that AWC plans to continue its bill assistance program for low-income customers.

Councilman Pete Furman wanted to know how much the city of Sedona is paying for its water.

“I believe we are spending something around $200,000 a year and it will go up to just shy of $300,000,” City Manager Anette Spickard said.

Council declined to send a letter for or against the rate increase.

“I don’t think there’s anything we as a city should chime in on,” Councilwoman Melissa Dunn said, and suggested the city and residents “figure out how to deal with” the rate increase even if they might not be happy with it.

“I don’t see where our advocacy actually will result in any particular outcome,” Fultz said. “The structure of how all this works pretty much assures that there will be a rate increase. I don’t think there’s any doubt about it.”

Mayor Scott Jablow and Furman also expressed a lack of interest in taking a position for or against the increase.

The ACC will hold a public comment meeting on the proposed rate increase on Wednesday, Jan. 29, and a public hearing on Monday, March 17.