EXHIBIT 6 

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 EXHIBIT 6 

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 1 of 51
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ORIGINAL.

COMMISSIONERS 

TOM FORESE — Chairman DOCKETED 

BOB BURNS 

DOUG LITTLE 

ANDY TOBIN 

BOYD DUNN 

0000181233 

BEFORE THE ARIZONA CORPORATIOM Ktucivtu 

AZ CORP CO4" .! ''0'• 

Arizona Corporation Commission 00CrET C 

JUL 10 2017 

DOCKS

FORMAL COMPLAINT OF DELTON 

MUNDAY AND THOSE SIMILARLY 

SITUATED AGAINST THE ARIZONA 

CORPORATION COMMISSION, JOHNSON 

UTILITIES, LLC AND NON-PUBLIC 

SERVICE COMPANIES, R&R PARTNERS 

INC., JOHNSON INTERNATIONAL INC. 

2011 JUL 10 P I b 

DOCKET NO. WS-02987A-17-0192 

STAFF'S MOTION TO DISMISS 

I. INTRODUCTION. 

The Arizona Corporation Commission ("Commission") Utilities Division ("Staff') hereby 

files its Motion to Dismiss the Complaint filed by Delton Munday and those similarly situated 

(collectively, "Munday"), on the following grounds. Munday's Complaint was brought under 

Arizona Revised Statutes ("A.R.S.") § 40-246, which provides the Commission with jurisdiction to 

hear complaints against regulated public service corporations only. As a matter of law, the 

Complaint cannot state a § 40-246 claim against the Commission or against entities that are not 

regulated by the Commission.' Therefore, the Commission must be dismissed as a Defendant to this 

formal Complaint. Counts Two through Eight of the Complaint should also be dismissed under Ariz. 

R. Civ. P. 12(b)(1) (lack of subject matter jurisdiction) or 12(b)(6) (failure to state a claim upon 

which relief can be granted). 

II. BACKGROUND. 

On June 19, 2017, Munday and those similarly situated2 filed a formal complaint pursuant to 

A.R.S. § 40-246 and Arizona Administrative Code ("A.A.C.") R14-3-106(L), against the 

' The Complaint also improperly names two other entities as Defendants that are not regulated by the 

Commission: R&R Partners Inc. and Johnson International Inc. Because these entities are not 

public service corporations they should be dismissed as well. 

2 Munday seeks designation as a class pursuant to A.A.C. R14-3-104(c) and Ariz. R. Civ. P. 23 

consisting "of individuals who have actually paid an increased sum of money to Johnson Utilities 

as a direct and proximate result of the passage of ACC Decision # 72579." Complaint at 5. 

Munday also requests that Delton Munday be appointed as class representative. 

ORIGINAL Mn lmmomw gm m lIIIIIIIIIIIIIIIIIIIII II

BEFORE THE ARIZONA coRpoRA1Lq1 l,

1_3-

82" 1-r

Dr; Pu _ n

AZCU~P QT?.. 'IShf~;.

Arizona Corporation Commission 0

DOCKETED

Z1111 u v- Jan 10 !3 M=1b

JUL 102011

COMMISSIONERS

TOM FORESE - Chairman

BOB BURNS

DOUG LITTLE

ANDY TOBIN

BOYD DUNN

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DOCKE

DOCKET no. WS-02987A-17-0192

STAFF'S MOTION TO DISMISS

FORMAL COMPLAINT OF DELTON

MUNDAY AND THOSE SIMILARLY

SITUATED AGAINST THE ARIZONA

CORPORATION COMMISSION, JOHNSON

UTILITIES, LLC AND NON-PUBLIC

SERVICE COMPANIES, R&R PARTNERS

INC. JOHNSONINTERNATIONAL INC.

I. INTRODUCTION.

11. BACKGROUND.

The Complaint also improperly names two other entities as Defendants that are not regulated by the

Commission: R&R Partners Inc. and Johnson International Inc. Because these entities are not

public service corporations they should be dismissed as well.

Munday seeks designation as a class pursuant to A.A.C. R14-3-104(c) and Ariz. R. Civ. P. 23

consisting "of individuals who have actually paid an increased sum of money to Johnson Utilities

as a direct and proximate result of the passage of ACC Decision # 72579." Complaint at 5.

Munday also requests that Delton Munday be appointed as class representative.

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ll The Arizona Corporation Commission ("Commission") Utilities Division ("Staff") hereby

12 files its Motion to Dismiss the Complaint filed by Delton Munday and those similarly situated

13 (collectively, "Munday"), on the following grounds. Munday's Complaint was brought under

14 Arizona Revised Statutes ("A.R.S.") § 40-246, which provides the Commission with jurisdiction to

15 hear complaints against regulated public service corporations only. As a matter of law, the

16 Complaint cannot state a § 40-246 claim against the Commission or against entities that are not

17 regulated by the Commission' Therefore, the Commission must be dismissed as a Defendant to this

18 formal Complaint. Counts Two through Eight of the Complaint should also be dismissed under Ariz.

19 R. Civ. P. l2(b)(l) (lack of subject matter jurisdiction) or l2(b)(6) (failure to state a claim upon

20 which relief can be granted).

21

22 On June 19, 2017, Munday and those similarly situated filed a formal complaint pursuant to

23 A.R.S. § 40-246 and Arizona Administrative Code ("A.A.C.") R14-3-l06(L), against the

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Commission; Johnson Utilities, LLC ("Johnson Utilities"); one of Johnson Utilities' unregulated 

affiliates, Johnson International Inc., ("Johnson International"); and R&R Partners, Inc. ("R&R 

Partners").3 Pursuant to A.R.S. § 40-246, the Complaint contained the signatures of thirty-two (32) 

users and consumers of water and wastewater products provided by Johnson Utilities. Munday's 

Complaint states that it is brought on behalf of Munday and the signatories and all those similarly 

situated, and it seeks class designation under A.A.C. R14-3-104(c). 

The various counts and allegations in the Complaint arise from a recent indictment filed in 

the United States District Court for the District of Arizona by the United States of America against a 

former Commissioner and others, alleging bribery, mail fraud, wire fraud and conspiracy.4 The 

indictment refers to several Commission decisions adopted while former Commissioner Gary Pierce 

was a member (2007 to 2015). 

There are eight counts in the Complaint which allege civil Racketeer Influenced and Corrupt 

Organizations Act ("RICO") violations, Conspiracy, Constructive Fraud, Aiding and Abetting, 

Breach of Contract and Bad Faith. The Complaint seeks a refund of monies (that would not have 

been paid but for ACC Decision No. 72579), including interest under the Arizona RICO Act and 

A.R.S. § 12-248); treble damages and attorney's fees (pursuant to the Arizona RICO Act); attorney's 

fees pursuant to the private attorney general doctrine, the common fund doctrine and A.R.S. § 12-

341.01; punitive damages (with respect to constructive fraud, bad faith and conspiracy);5 rescission of 

Commission Decision No. 72579; and a finding of joint and several liability with respect to all sums 

requested, pursuant to A.R.S. § 12-2506(d). 

R&R Partners is not affiliated with Johnson Utilities but is affiliated with James Norton, a person 

named in the recent indictment involving Johnson Utilities. United States v. Pierce, et al., CR-17-

00713-PHX-JJT (D. Ariz. May 23, 2017). 

4 Id. 

5 While not expressly stated in Count Eight, the Complaint also appears to seek compensatory 

damages in several Counts. 

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Commission, Johnson Utilities, LLC ("Johnson Utilities"), one of Johnson Utilities' unregulated

affiliates, Johnson International Inc., ("Johnson International"), and R&R Partners, Inc. ("R&R

Partners").3 Pursuant to A.R.S. § 40-246, the Complaint contained the signatures of thirty-two (32)

users and consumers of water and wastewater products provided by Johnson Utilities. Munday's

Complaint states that it is brought on behalf of Munday and the signatories and all those similarly

situated, and it seeks class designation under A.A.C. R14-3-l04(c).

The various counts and allegations in the Complaint arise from a recent indictment filed in

the United States District Court for the District of Arizona by the United States of America against a

former Commissioner and others, alleging bribery, mail fraud, wire fraud and conspiracy.4 The

indictment refers to several Commission decisions adopted while former Commissioner Gary Pierce

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11 was a member (2007 to 2015).

There are eight counts in the Complaint which allege civil Racketeer Influenced and Corrupt

Organizations Act ("RICO") violations, Conspiracy, Constructive Fraud, Aiding and Abetting,

Breach of Contract and Bad Faith. The Complaint seeks a refund of monies (that would not have

been paid but for ACC Decision No. 72579), including interest under the Arizona RICO Act and

A.R.S. § 12-248), treble damages and attorney's fees (pursuant to the Arizona RICO Act), attorney's

fees pursuant to the private attorney general doctrine, the common fund doctrine and A.R.S. § 12-

18 341 .01 , punitive damages (with respect to constructive fraud, bad faith and conspiracy),5 rescission of

19 Commission Decision No. 72579, and a finding of joint and several liability with respect to all sums

20 requested, pursuant to A.R.S. § 12-2506(d).

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R&R Partners is not affiliated with Johnson Utilities but is affiliated with James Norton, a person

named in the recent indictment involving Johnson Utilities. United States v.Pierce, el al.,CR-l7-

00713-PHX-JJT (D. Ariz. May 23, 2017).

4 Id.

5 While not expressly stated in Count Eight, the Complaint also appears to seek compensatory

damages in several Counts. 28

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III. ARGUMENT. 

A. Standard for Motion to Dismiss. 

The Arizona Administrative Code Rules of Practice and Procedure govern in all cases before 

the Commission.6 To the extent they do not conflict with the A.A.C. Rules, the Rules of Civil 

Procedure for the Superior Courts of Arizona shall govern.7 Because the A.A.C. is silent as to the 

basis on which a motion to dismiss is to be made, the Rules of Civil Procedure govern here. 

Arizona Rule of Civil Procedure 12(b)(6) provides that a complaint may be dismissed if it 

fails to state a claim upon which relief can be granted. A motion to dismiss shall be granted when the 

complainant cannot prove any set of facts that would entitle him to relief under the authority cited.8

"Conclusions of law, inferences or deductions that are not necessarily implied by well-pleaded facts, 

unreasonable inferences or unsupported conclusions from such facts, or legal conclusions alleged as 

facts" are not accepted by the Court as true allegations. 9

B. The Commission Must be Dismissed as a Defendant to this Formal Complaint. 

Munday filed a formal Complaint pursuant to A.R.S. § 40-246 and included the Commission 

as a defendant. A.R.S. § 40-246 does not allow for suits against the Commission itself. Instead, 

A.R.S. § 40-246 authorizes complaints for violations of law, rule, or commission orders by public 

service corporations only. Thus, the statute permits complaints against entities regulated by the 

Commission only.'° 

Nothing in the statute allows a complaint to be filed against the Commission or against 

entities that are not public service corporations subject to the Commission's jurisdiction. As a matter 

of law, the Complaint cannot state a § 40-246 claim against the Commission or against entities that 

6 A.A.C. R14-3-101. 

' Id. 

8 See, e.g., State ex rel. Corbin v. Pickrell, 136 Ariz. 589 (1983); Southwestern Paint & Varnish Co. 

v. Arizona Dept. of Envir. Quality, 191 Ariz. 40 (App. 1997), review granted, affirmed in part 194 

Ariz. 32; and Williams v. Williams, 23 Ariz. App. 191 (1975). 

9 Stauffer v. Premier Serv. Mortg., LLC, 240 Ariz. 575, 578 (App. 2016) quoting Jeter v. Mayo Clinic 

Arizona, 211 Ariz. 386, 389 (App. 2005). 

'° A.R.S. § 40-246. 

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1 111. ARGUMENT.

2 A. Standard for Motion to Dismiss.

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The Arizona Administrative Code Rules of Practice and Procedure govern in all cases before

the Commission.6 To the extent they do not conflict with the A.A.C. Rules, the Rules of Civil

Procedure for the Superior Courts of Arizona shall govern.7 Because the A.A.C. is silent as to the

basis on which a motion to dismiss is to be made, the Rules of Civil Procedure govern here.

Arizona Rule of Civil Procedure l2(b)(6) provides that a complaint may be dismissed if it

fails to state a claim upon which relief can be granted. A motion to dismiss shall be granted when the

complainant cannot prove any set of facts that would entitle him to relief under the authority cited.8

"Conclusions of law, inferences or deductions that are not necessarily implied by well-pleaded facts,

unreasonable inferences or unsupported conclusions from such facts, or legal conclusions alleged as

facts" are not accepted by the Court as true allegations. 9

13 B. The Commission Must be Dismissed as a Defendant to this Formal Complaint.

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Munday filed a formal Complaint pursuant to A.R.S. § 40-246 and included the Commission

as a defendant. A.R.S. § 40-246 does not allow for suits against the Commission itself. Instead,

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A.R.S. § 40-246 authorizes complaints for violations of law, rule, or commission orders by public

service corporations only. Thus, the statute permits complaints against entities regulated by the

Commission only.'°

Nothing in the statute allows a complaint to be filed against the Commission or against

entities that are not public service corporations subject to the Commission's jurisdiction. As a matter

of law, the Complaint cannot state a § 40-246 claim against the Commission or against entities that

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6 A.A.C. R14-3-101 .

7 Id

8 See, e.g., State ex rel. Corbin v. Pickrell, 136 Ariz. 589 (1983), Southwestern Paint & Varnish Co.

v. Arizona Dept. ofEnvir. Quality, 191 Ariz. 40 (App. 1997), review granted, affirmed in part 194

Ariz. 32, and Williams v. Williams,23 Ariz. App. 191 (1975).

9 Stauffer v. Premier Serv. Morty., LLC, 240 Ariz. 575, 578 (App. 2016) quoting Jeter v. Mayo Clinic

Arizona,211 Ariz. 386, 389 (App. 2005).

10 A.R.S. § 40-246.

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are not regulated by the Commission. The Commission must, therefore, be dismissed as a defendant 

in this case. 

C. Count One Should be Stayed Pending the Conclusion of the Criminal 

Proceedings in the Arizona Federal District Court. 

The only named defendant and claim over which the Commission arguably has statutory 

subject matter jurisdiction is Count One, raised against Johnson Utilities brought pursuant to A.R.S. 

§ 40-246. In Count One, Munday seeks total rescission of Decision No. 72579, which it claims 

"obtained its third vote for passage only by means of an illegal agreement, culminating in bribery and 

fraud."" Munday requests "full reparations of all charges which would not have been passed 

through, but for ACC Decision No. 72579 and interest thereon, pursuant to A.R.S. § 12-248."I2

The factual allegations found throughout Count One are the subject of a criminal case pending 

in the U.S. District Court for the District of Arizona." Whether to permit parallel criminal and civil 

proceedings is within the discretion of the reviewing court.I4 In deciding whether to grant a stay of a 

civil proceeding pending the outcome of a parallel criminal proceeding, the court should consider a 

number of factors, including whether civil and criminal proceedings involve the same subject matter, 

and whether resolution of the criminal case would moot, clarify, or otherwise affect various 

contentions in the civil case.°

The Complaint's factual allegations include the same facts as alleged in the eight counts 

contained in the Indictment filed on May 23, 2017 pertaining to fraud, bribery and conspiracy.' 6 That 

criminal case remains open, and the trial is set for October 3, 2017.17 The conclusion of the criminal 

case proceedings has the potential to moot, clarify and/or affect any outcome in the Munday 

Complaint. The subject of the Complaint's Count One is, therefore, premature. Count One of 

Munday's Complaint should be stayed pending resolution of the criminal case. 

" Compl. at 5. 

12 Id 

13 U.S. v. Pierce, et al., No. CR-27-00713-PHX-JJT (D. Ariz. May 23, 2017). 

14 State v. Ott, 167 Ariz. 420, 429, 808 P.2d 305, 314 (App. 1990). 

15 Ott, 167 Ariz. at 429, 808 P.2d at 314. 

16 U.S. v. Pierce, et al., No. CR-1700713-PHX-JJT. 

17 Id., Order June 30, 2017, ECF No. 33. 

4 

1 are not regulated by the Commission. The Commission must, therefore, be dismissed as a defendant

2 in this case.

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c.

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Count One Should be Stayed Pending the Conclusion of the Criminal

Proceedings in the Arizona Federal District Court.

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The only named defendant and claim over which the Commission arguably has statutory

subject matter jurisdiction is Count One, raised against Johnson Utilities brought pursuant to A.R.S.

§ 40-246. In Count One, Munday seeks total rescission of Decision No. 72579, which it claims

"obtained its third vote for passage only by means of an illegal agreement, culminating in bribery and

fraud."'l Munday requests "full reparations of all charges which would not have been passed

through, but for ACC Decision No. 72579 and interest thereon, pursuant to A.R.S. § 12-248."'2

The factual allegations found throughout Count One are the subject of a criminal case pending

in the U.S. District Court for the District of Arizona." Whether to pennis parallel criminal and civil

proceedings is within the discretion of the reviewing court.'4 In deciding whether to grant a stay of a

civil proceeding pending the outcome of a parallel criminal proceeding, the court should consider a

number of factors, including whether civil and criminal proceedings involve the same subject matter,

and whether resolution of the criminal case would moot, clarify, or otherwise affect various

contentions in the civil case.'5

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The Complaint's factual allegations include the same facts as alleged in the eight counts

contained in the Indictment filed on May 23, 2017 pertaining to fraud, bribery and conspiracy.l6 That

criminal case remains open, and the trial is set for October 3, 2017." The conclusion of the criminal

case proceedings has the potential to moot, clarify and/or affect any outcome in the Munday

Complaint. The subject of the Complaint's Count One is, therefore, premature. Count One of

Munday's Complaint should be stayed pending resolution of the criminal case.

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re Con pl. at 5.

12 ld.

13 US v. Pierce, Er al., No. CR-27-00713-PHX-JJT (D. Ariz. May 23, 2017).

14Sraze v. Old, 167 Ariz. 420, 429, 808 P.2d 305, 314 (App. 1990).

15 011, 167 Ariz. at 429, 808 P.2d at 314.

isUS. v. Pierce, et al., No. CR-1700713-PHX-JJT.

17 Id, Order June 30, 2017, ECF No. 33. 28

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D. Counts Two Through Eight of the Complaint Must be Dismissed For Lack of 

Subject Matter Jurisdiction and/or For Failure to State a Claim upon Which 

Relief Can be Granted. 

The Commission should dismiss Counts Two through Eight of the Complaint for lack of 

subject matter jurisdiction or for failure to state a claim upon which relief can be granted. Although 

A.R.S. § 40-246(A) provides a cause of action against a public service corporation for a claimed 

violation of "any" provision of law, the Commission's jurisdiction is limited to the enforcement of 

the laws affecting public service corporations, the enforcement of which is not specifically vested in 

some other officer or tribunal . . . ."18 Thus, claims brought pursuant to a statute that vests 

jurisdiction exclusively in the Superior Court cannot be heard by the Commission. Similarly, the 

Commission has recognized that the "Superior Court should decide 'traditional civil law claims' by a 

customer against a utility including those based on common law actions" such as those grounded in 

tort and breach of contract. 19

I. The Superior Court has exclusive jurisdiction over Count Two of the 

Complaint. 

Count Two of the Complaint alleges violations of the civil RICO statute, A.R.S. § 13-

2314.04,20 which vests exclusive jurisdiction in the Superior Court. A.R.S. § 13-2314.04(B). 

Subpart B provides: 

The Superior Court has jurisdiction to prevent, restrain, and remedy a 

pattern of racketeering activity or a violation of § 13-2312 involving a 

pattern of racketeering activity, after making provision for the rights of 

all innocent persons affected by the violation and after a hearing or 

trial, as appropriate, by issuing appropriate orders. 

" A.R.S. § 40-421. 

19 Rattlesnake Pass, L. L.C. v. Tucson Electric Power Co., Docket No. E-01933A-10-0125, Decision 

No. 73561, at 15-16, IN 43-44, (Ariz. Corp. Comm'n Oct. 17, 2012) citing Trico Elec. Co-op. v. 

Ralston, 67 Ariz. 358, 365, 196 P.2d 470, 474 (1948); Qwest Corp. v. Kelly, 204 Ariz. 25, 32, 59 

P.3d 789, 796 (App. 2002); Campbell v. Mountain States Tel. & TeL Co., 120 Ariz. 426, 432, 586 

P.2d 987, 993 (App. 1978). 

20 This Motion assumes the Complaint's citation to A.R.S. § 23-1404 at Count Two is a typographical 

error, as A.R.S. § 23-1404 does not exist and A.R.S. § 13-2314.04 is Arizona's civil RICO statute. 

5 

l D.

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Counts Two Through Eight of the Complaint Must be Dismissed For Lack of

Subject Matter Jurisdiction and/or For Failure to State a Claim upon Which

Relief Can be Granted.

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The Commission should dismiss Counts Two through Eight of the Complaint for lack of

subject matter jurisdiction or for failure to state a claim upon which relief can be granted. Although

A.R.S. § 40-246(A) provides a cause of action against a public service corporation for a claimed

violation of "any" provision of law, the Commission's jurisdiction is limited to the enforcement of

the laws affecting public service corporations, the enforcement of which is not specyically vested in

some other o jicer or tribunal . . . ."lb Thus, claims brought pursuant to a statute that vests

jurisdiction exclusively in the Superior Court cannot be heard by the Commission. Similarly, the

Commission has recognized that the "Superior Court should decide 'traditional civil law claims' by a

customer against a utility including those based on common law actions" such as those grounded in

tort and breach of contract. 19

13

1. 14 The Superior Court has exclusive jurisdiction over Count Two of the

Complaint.

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Count Two of the Complaint alleges violations of the civil RICO statute, A.R.S. § 13-

2314.04,20 which vests exclusive jurisdiction in the Superior Court. A.R.S. § 13-23 l4.04(B).

Subpart B provides:

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The Superior Court has jurisdiction to prevent, restrain, and remedy a

pattern of racketeering activity or a violation of § 13-2312 involving a

pattern of racketeering activity, after making provision for the rights of

all innocent persons affected by the violation and after a hearing or

trial, as appropriate, by issuing appropriate orders.

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18 A.R.S. § 40-421.

19Rattlesnake Pass, L.L.C. v. Tucson Electric Power Co., Docket No. E-01933A-10-0125, Decision

No. 73561, at 15-16, 111143-44, (Ariz. Corp. Comm'n Oct. 17, 2012) citing Trico Elec. Co-op. v.

Ralston,67 Ariz. 358, 365, 196 P.2d 470, 474 (1948), Qwest Corp. v. Kelly, 204 Ariz. 25, 32, 59

P.3d 789, 796 (App. 2002), Campbell v. Mountain States Tel. & Tel. Co., 120 Ariz. 426, 432, 586

P.2d 987, 993 (App. 1978).

20 This Motion assumes the Complaint's citation to A.R.S. § 23-1404 at Count Two is a typographical

error, as A.R.S. § 23-1404 does not exist and A.R.S. § 13-2314.04 is Arizona's civil RICO statute.

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Because exclusive jurisdiction lies in the Superior Court under the Arizona RICO statute, the 

Commission lacks subject matter jurisdiction over Count Two. Count Two must be dismissed with 

prejudice. 

2. The Commission lacks subject matter jurisdiction over the claims 

in Count Three. 

Count Three alleges a conspiracy involving all parties or named defendants. The alleged 

conspiracy in Count Three relates directly to the federal crimes under review in the aforementioned 

criminal investigation. Count One of the indictment alleges a conspiracy under 18 U.S.C. § 371. 

Staff believes the proper forum to determine whether a conspiracy existed in conjunction with the 

crimes alleged in the indictment is the Arizona District Court, not the Commission 21

Finally, the remedy sought with respect to this count appears to be punitive damages and a 

finding that all named defendants are jointly and severally liable.22 Arizona courts have long held 

that the Commission does not have jurisdiction to award money damages.23 This is a judicial power 

vested in the Courts.24 Count Three must be dismissed with prejudice due to lack of subject matter 

jurisdiction. 

3. Count Four should be dismissed for lack of subject matter 

jurisdiction and failure to state a claim upon which relief may be 

granted. 

Count Four of the Complaint alleges Constructive Fraud by the Commission and Johnson 

Utilities. The Complaint alleges that both the Commission and Johnson Utilities had a fiduciary 

obligation to Munday and that both entities breached those duties by conduct that was fraudulent. 

Munday asserts this deception violated public confidence and injured public interests, proximately 

causing damages to Munday. 

21 Further, when the defendants who are not proper parties under A.R.S. § 40-246 are dismissed, 

Johnson Utilities is the only remaining party. A conspiracy must involve at least two parties. 

A.R.S. § 13-1003. Because Johnson Utilities cannot conspire with itself, Count Three must be 

dismissed on this basis alone. 

" See Compl. at 7, Count Three. 

" See Michael R. Turney v. Qwest Corp., Commission Docket No. T-01051B-02-0193, Decision No. 

65425 (Nov. 20, 2002) citing Easton v. Broomfield, 116 Ariz. 576, 582 (1977) and Trico Electric 

Co-op v. Ralston, 67 Ariz. 358, 363, 196 P.2d 470, 473 (1948). 

24 Id. 

6 

1 Because exclusive jurisdiction lies in the Superior Court under the Arizona RICO statute, the

2 Commission lacks subject matter jurisdiction over Count Two. Count Two must be dismissed with

3 prejudice.

2. 4

The Commission lacks subject matter jurisdiction over the claims

in Count Three.

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Count Three alleges a conspiracy involving all parties or named defendants. The alleged

conspiracy in Count Three relates directly to the federal crimes under review in the aforementioned

criminal investigation. Count One of the indictment alleges a conspiracy under 18 U.S.C. § 371.

Staff believes the proper forum to determine whether a conspiracy existed in conjunction with the

crimes alleged in the indictment is the Arizona District Court, not the Commission.21

Finally, the remedy sought with respect to this count appears to be punitive damages and a

finding that all named defendants are jointly and severally liable." Arizona courts have long held

that the Commission does not have jurisdiction to award money damages." This is a judicial power

vested in the Courts.24 Count Three must be dismissed with prejudice due to lack of subject matter

3.

14 jurisdiction.

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Count Four shoul d be dismissed f o r la ck o f s u b ject m a tter

jurisdiction and failure to state a claim upon which relief may be

granted.

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Count Four of the Complaint alleges Constructive Fraud by the Commission and Johnson

Utilities. The Complaint alleges that both the Commission and Johnson Utilities had a fiduciary

obligation to Munday and that both entities breached those duties by conduct that was fraudulent.

Munday asserts this deception violated public confidence and injured public interests, proximately

causing damages to Munday.

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24

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23 21 Further, when the defendants who are not proper parties under A.R.S. § 40-246 are dismissed,

Johnson Utilities is the only remaining party. A conspiracy must involve at least two parties.

A.R.S. § 13-1003. Because Johnson Utilities cannot conspire with itself, Count Three must be

dismissed on this basis alone.

22 See Con pl. at 7, Count Three.

26 23 See Michael R. Turkey v. Qwest Corp., Commission Docket No. T-01051 B-02-0193, Decision No.

65425 (Nov. 20, 2002) citing Easton v. Bloomfield, l 16 Ariz. 576, 582 (1977) and Trico Electric

Co-op v. Ralston, 67 Ariz. 358, 363, 196 P.2d 470, 473 (1948).

24 Id 28

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As discussed above, A.R.S. § 40-246 does not allow complaints against the Commission 

itself. Count Four does not provide any citations to case law to support the nature of the duty owed to 

Munday by Johnson Utilities. The Complaint furthermore fails to distinguish whether the claim is 

based on a common law duty or is a duty arising by statute. In addition, the remedies sought by 

Munday are compensatory and punitive damages.25 As discussed, the Commission has no authority 

to award damages — this authority is solely a judicial function vested in the Superior Court. Even if 

Munday were to amend this Count, he is seeking a remedy that the Commission is without authority 

to award (compensatory and punitive damages). This is something that he cannot cure through 

amendment. Thus, Count Four should be dismissed with prejudice for failure to state a claim upon 

which relief can be granted and for lack of subject matter jurisdiction. 

4. Count Five is against parties that are not regulated by the Commission and 

thus must be dismissed with prejudice. 

In Count Five, Munday alleges that R&R Partners and Johnson International knew that the 

conduct of the Commission and Johnson Utilities' constituted a breach of duty and substantially 

assisted and encouraged said breach causing damages. In other words, Munday alleges that R&R 

Partners and Johnson International aided and abetted the breach of the Commission's and Johnson 

Utilities' duties toward Munday. 

A.R.S. § 40-246 provides for complaints against public service corporations only. This Count 

alleges aiding and abetting violations by the two defendants that are not regulated by the 

Commission. In addition, Munday requests damages under this Count over which the Superior Court 

has jurisdiction, not the Commission. This Count must be dismissed with prejudice. 

5. Count Six fails to state a claim upon which relief can be granted. 

In Count Six, Munday alleges that it had an enforceable contract with Johnson Utilities. 

According to Munday, Johnson Utilities' acts constitute a breach of said contract with damages 

resulting to Munday. The basis for this Count is not clear. There are insufficient facts alleged by 

Munday in this Count regarding the contract itself, and whether it is an actual contract he is referring 

" See Compl. Count Eight, item (e). 

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As discussed above, A.R.S. § 40-246 does not allow complaints against the Commission

itself. Count Four does not provide any citations to case law to support the nature of the duty owed to

Munday by Johnson Utilities. The Complaint furthermore fails to distinguish whether the claim is

based on a common law duty or is a duty arising by statute. In addition, the remedies sought by

Munday are compensatory and punitive damages." As discussed, the Commission has no authority

to award damages .- this authority is solely a judicial function vested in the Superior Court. Even if

Munday were to amend this Count, he is seeking a remedy that the Commission is without authority

to award (compensatory and punitive damages). This is something that he cannot cure through

amendment. Thus, Count Four should be dismissed with prejudice for failure to state a claim upon

which relief can be granted and for lack of subject matter jurisdiction.

ll

4.

12

Count Five is against parties that are not regulated by the Commission and

thus must be dismissed with prejudice.

13 In Count Five, Munday alleges that R&R Partners and Johnson International knew that the

14 conduct of the Commission and Johnson Utilities' constituted a breach of duty and substantially

15 assisted and encouraged said breach causing damages. In other words, Munday alleges that R&R

16 Partners and Johnson International aided and abetted the breach of the Commission's and Johnson

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17 Utilities' duties toward Munday.

A.R.S. § 40-246 provides for complaints against public service corporations only. This Count

alleges aiding and abetting violations by the two defendants that are not regulated by the

Commission. In addition, Munday requests damages under this Count over which the Superior Court

has jurisdiction, not the Commission. This Count must be dismissed with prejudice.

5. CountSzlxfails to stateaclaim upon which relief can be granted.

In Count Six, Munday alleges that it had an enforceable contract with Johnson Utilities.

According to Munday, Johnson Utilities' acts constitute a breach of said contract with damages

resulting to Munday. The basis for this Count is not clear. There are insufficient facts alleged by

Munday in this Count regarding the contract itself, and whether it is an actual contract he is referring

27

28 25 See Con pl. Count Eight, item (e).

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to or whether some common law duty in a nature of a contract is being alleged. In addition, there is 

no legal underpinning that would give the defendants notice as to the nature of the breach and the 

basis for damages claimed. In addition, Munday appears to once again be seeking "damages" that 

can only be awarded by a court with jurisdiction over the matter. Based upon these defects, Court 

Six should be dismissed with prejudice.26

6. There are insufficient facts alleged in Count Seven to survive a 12(b)(6) 

motion. 

Under Count Seven of the Complaint, Munday again does not allege sufficient facts to 

support the claims made. Munday claims in Count Seven that it had an enforceable contract with 

Johnson Utilities. Munday further states that the contract has an implied covenant of good faith and 

fair dealing. Munday alleges that Johnson Utilities' acts constitute bad faith breach of the contract 

with damages resulting to Munday and those similarly situated. But Munday offers no information as 

to the contract itself and whether it arises from an actual contract between the parties or is grounded 

in a common law theory. 

One must assume that it is grounded in common law, because Munday refers to a "special 

relationship," which implies that he is relying upon some common law theory to support his 

allegations. This, combined with the fact that Munday is once again seeking money damages for 

breach of the contract, would make the allegations in this Count more appropriate for the Superior 

Court to resolve. Money damages can only be awarded by a court with jurisdiction over the 

matter.27 Count Seven should be dismissed with prejudice. 

26 While Munday could amend his Complaint to include a sufficient factual and legal basis for Count 

Six, it would be to no avail if the Commission is without authority to order the remedy he is 

seeking, i.e., damages. 

27See Michael R. Turney v. Qwest Corp., Commission Docket No. T-01051B-02-0193, Decision No. 

65425 (Nov. 20, 2002) citing Easton v. Broomfield, 116 Ariz. 576, 582 (1977) and Trico Electric 

Co-op v. Ralston, 67 Ariz. 358, 363, 196 P.2d 470, 473 (Ariz. 1948). 

8 

l

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5

to or whether some common law duty in a nature of a contract is being alleged. In addition, there is

no legal underpinning that would give the defendants notice as to the nature of the breach and the

basis for damages claimed. In addition, Munday appears to once again be seeking "damages" that

can only be awarded by a court with jurisdiction over the matter. Based upon these defects, Court

Six should be dismissed with prejudice."

6

6.

7

There are insujicient facts alleged in Count Seven to survive a 12(b)(6)

motion.

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9

10

11

12

13

Under Count Seven of the Complaint, Munday again does not allege sufficient facts to

support the claims made. Munday claims in Count Seven that it had an enforceable contract with

Johnson Utilities. Munday further states that the contract has an implied covenant of good faith and

fair dealing. Munday alleges that Johnson Utilities' acts constitute bad faith breach of the contract

with damages resulting to Munday and those similarly situated. But Munday offers no information as

to the contract itself and whether it arises from an actual contract between the parties or is grounded

14 in a common law theory.

15

16

17

18

One must assume that it is grounded in common law, because Munday refers to a "special

relationship," which implies that he is relying upon some common law theory to support his

allegations. This, combined with the fact that Munday is once again seeking money damages for

breach of the contract, would make the allegations in this Count more appropriate for the Superior

19 Court to resolve. Money damages can only be awarded by a court with jurisdiction over the

20 matter." Count Seven should be dismissed with prejudice.

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26 While Munday could amend his Complaint to include a sufficient factual and legal basis for Count

Six, it would be to no avail if the Commission is without authority to order the remedy he is

seeking,i.e., damages.

27 See Michael R. Turned v. Qwest Corp., Commission Docket No. T-01051B-02-0193, Decision No.

65425 (Nov. 20, 2002) citing Easton v. Bloomfield, l 16 Ariz. 576, 582 (1977) and Trico Electric

Co-op v. Ralston, 67 Ariz. 358, 363, 196 P.2d 470, 473 (Ariz. 1948).

28

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7. Count Eight — joint and several liability (all). 

The allegation of joint and several liability under A.R.S. § 12-2506(d) is moot within the 

context of A.R.S. §§ 40-246 and 40-248 in light of the mandatory dismissal of all named parties 

except Johnson Utilities and the mandatory dismissal of Counts Two through Seven. Until, and 

unless, Munday amends his Complaint to reflect proper entities and claims, Count VIII must be 

dismissed pursuant to Rules 8(a) and 12(b), Ariz. R. Civ. P. 

IV. CONCLUSION. 

The Commission is without jurisdiction to grant Munday relief except as provided in A.R.S. 

§ 40-248. To the extent relief is available under the statute, Munday's only viable claim, brought 

against Johnson Utilities in Count One, is premature while parallel criminal proceedings are ongoing. 

Count One against Johnson Utilities should be stayed until this parallel case has concluded, at which 

point the Commission will be better positioned to consider the allegations. The remaining Counts 

Two through Eight, and the other named defendants, including the Commission, must be dismissed 

with prejudice as a matter of law. To the extent any of the remaining Counts are not dismissed, they 

should also be stayed, pending the conclusion of the criminal proceedings in the Federal District 

Court. 

RESPECTFULLY SUBMITTED this 10th day of July, 2017. 

Maureen A. fcott 

Deputy Chief of Litigation & Appeals 

Naomi E. Davis, Staff Attorney 

Legal Division 

Arizona Corporation Commission 

1200 West Washington Street 

Phoenix, Arizona 85007 

(602) 542-3402 

mscott@azcc.gov 

ndavis@azcc.gov 

9 

Count Eight -joint and several liability (all).

I v . CONCLUSION.

RESPECTFULLY SUBMITTED this 10th day of July, 2017.

I394» Maureen A. cost

Deputy Chief of Litigation & Appeals

Naomi E. Davis, Staff Attorney

Legal Division

Arizona Corporation Commission

1200 West Washington Street

Phoenix, Arizona 85007

(602) 542-3402

mscott@azcc.2ov

ndavis@azcc.gov

1 7.

2 The allegation of joint and several liability under A.R.S. § 12-2506(d) is moot within the

3 context of A.R.S. §§ 40-246 and 40-248 in light of the mandatory dismissal of all named parties

4 except Johnson Utilities and the mandatory dismissal of Counts Two through Seven. Until, and

5 unless, Munday amends his Complaint to reflect proper entities and claims, Count VIII must be

6 dismissed pursuant to Rules 8(a) and 12(b), Ariz. R. Civ. P.

7

8 The Commission is without jurisdiction to grant Munday relief except as provided in A.R.S.

9 § 40-248. To the extent relief is available under the statute, Munday's only viable claim, brought

10 against Johnson Utilities in Count One, is premature while parallel criminal proceedings are ongoing.

l l Count One against Johnson Utilities should be stayed until this parallel case has concluded, at which

12 point the Commission will be better positioned to consider the allegations. The remaining Counts

13 Two through Eight, and the other named defendants, including the Commission, must be dismissed

14 with prejudice as a matter of law. To the extent any of the remaining Counts are not dismissed, they

15 should also be stayed, pending the conclusion of the criminal proceedings in the Federal District

1 6 C o ur t .

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On this 10th day of July, 2017, the foregoing document was filed with Docket Control as an Utilities 

Division Motion to Dismiss, and copies of the foregoing were mailed on behalf of the Utilities 

Division to the following who have not consented to email service. On this date or as soon as possible 

thereafter, the Commission's eDocket program will automatically email a link to the foregoing to the 

following who have consented to email service. 

Elijah 0. Abinah 

ARIZONA CORPORATION COMMISSION 

Director — Utilities Division 

1200 West Washington Street 

Phoenix Arizona 85007 

B. Lance Entrekin 

THE ENTREKIN LAW FIRM 

5343 North 16th Street 

Suite 200 

Phoenix Arizona 85016 

B 

Assistant to Maureen A. Scott 

Andy Kvesic 

ARIZONA CORPORATION COMMISSION 

Director — Legal Division 

1200 West Washington Street 

Phoenix Arizona 85007 

akvesic@azcc.gov 

LegalDiv@azcc.gov 

Consented to Service by Email 

Gary A. Drummond 

5230 E. Shea Boulevard, Suite 200 

Scottsdale Arizona 85254 

10 

1

2

3

On this 10th day of July, 2017, the foregoing document was filed with Docket Control as an Utilities

Division Motion to Dismiss, and copies of the foregoing were mailed on behalf of the Utilities

Division to the following who have not consented to email service. On this date or as soon as possible

thereafter, the Commission's eDocket program will automatically email a link to the foregoing to the

following who have consented to email service.

4

5

6

Elijah o. Abinah

ARIZONA CORPORATION COMMISSION

Director - Utilities Division

1200 West Washington Street

Phoenix Arizona 85007

Andy Kvesic

ARIZONA CORPORATION COMMISSION

Director - Legal Division

1200 West Washington Street

Phoenix Arizona 85007

akvesic@azcc.gov

Le alDiv a c c . a v

Consented to Service b Email

7

8

9

B. Lance Entrekin

THE ENTREKIN LAW FIRM

5343 North 16th Street

Suite 200

Phoenix Arizona 85016

Gary A. Drummond

5230 E. Shea Boulevard, Suite 200

Scottsdale Arizona 85254

10

11 By:

Assistant to Maureen A. Scott

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Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 11 of 51
EXHIBIT 7 

EXHIBIT 7 

EXHIBIT 7

 EXHIBIT 7 

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 12 of 51
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ORIGINAL 

FREDENBERG BEAMS 

Daniel E. Fredenberg — 020158 

Christian C. M. Beams — 019672 

Catherine S. Adams — 023463 

4747 N. 7th Street, Suite 402 

Phoenix, Arizona 85014 

Telephone: 602/595-9299 

Email: dfredenberg@tblegalgroup.com 

Email: cbeamsriMblegalgroup.com 

Email: cadamsgtblegalgroup.com 

Attorneys for Johnson Utilities, LLC, 

and Johnson International, Inc. 

11 11 11 11 111 111111 

0 0 0 0 1 8 1 5 7 9 

RL 

AZ CORP COMMISSION 

DOCKET CC! rail 

2011 JP_ 26 A 8: 2 3 

Arizona Corporation Commission 

DOCKETED 

JUL 2 6 2017 

DOCKETED II

BEFORE THE ARIZONA CORPORATION COMMISSION 

COMMISSIONERS 

TOM FORESE, Chairman 

BOB BURNS 

DOUG LITTLE 

ANDY TOBIN 

BOYD W. DUNN 

FORMAL COMPLAINT OF DELTON 

MUNDAY AND THOSE SIMILARLY 

SITUATED AGAINST THE ARIZONA 

CORPORATION COMMISSION, 

JOHNSON UTILITIES LLC AND NON 

PUBLIC SERVICE COMPANIES R&R 

PARTNERS INC., JOHNSON 

INTERNATIONAL, INC. 

No. WS-02987A-17-0192 

JOHNSON UTILITIES, LLC AND 

JOHNSON INTERNATIONAL, 

INC.'S REPLY IN SUPPORT OF 

THEIR MOTION TO DISMISS 

Respondents Johnson Utilities, LLC and Johnson International Inc. (collectively, 

"Johnson") hereby reply in support of their Motion to Dismiss the Complaint. 

The Response to Johnson's Motion to Dismiss fails to provide any legal basis upon 

which the Commission may adjudicate any of the counts contained in the Complaint. Even 

the Complainants concede that many of their counts are within the jurisdiction of the Superior 

Court, rather than the Commission. This Reply is supported by the following Memorandum 

of Law. 

ORIGINAL l lllglllollllloll ll Ulll\lll w llllllllllllllIIIIIIIII

AzcoiiL P C01,,.1l551_. -"II

nocrssr cm QL.

2011 JUL Cb A 8: 23

Arizona Corporation Commission

DOCKETED

FREDENBERG BEAMS

Daniel E. Freudenberg - 020158

Christian C. M. Beams .- 019672

Catherine S. Adams - 023463

4747 N. 7th Street, Suite 402

Phoenix, Arizona 85014

Telephone: 602/595-9299

Email: creams a lhle,<1al2roup.com

Email: cadams(a fblegal2roup.com Q

_>

Attorneys for Johnson Utilities, LLC,

and Johnson International, Inc.

JUL 26 2017

DOCKETEDB

BEFORE THE ARIZONA CORPORATION COMMISSION

COMMISSIONERS

TOM FORESE, Chairman

BOB BURNS

DOUG LITTLE

ANDY TOBIN

BOYD w. DUNN

No. WS-0298'/A-17-0192

18

JOHNSON UTILITIES, LLC AND

JOHNSON INTERNATIONAL,

INC.'S REPLY IN SUPPORT OF

THEIR MOTION TO DISMISS

1

2

3

4

Emanlr dfredenberfz@fblcgalgroupcom

5

6

7

8

9

10

ll

12

13

14

FORMAL COMPLAINT OF DELTON

15 MUNDAY AND THOSE SIMILARLY

16 SITUATED AGAINST THE ARIZONA

CORPORATION COMMISSION.

17 JOHNSON UTILITIES LLC AND NON

PUBLIC SERVICE COMPANIES R&R

PARTNERS INC., JOHNSON

19 INTERNATIONAL, INC.

20

21 Respondents Johnson Utilities, LLC and Johnson International Inc. (collectively,

22 "Johnson") hereby reply in support of their Motion to Dismiss the Complaint.

23 The Response to Johnson's Motion to Dismiss fails to provide any legal basis upon

24 which the Commission may adjudicate any of the counts contained in the Complaint. Even

25 the Complainants concede that many of their counts are within the jurisdiction of the Superior

26 Court, rather than the Commission. This Reply is supported by the following Memorandum

27 fLaw.

28

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MEMORANDUM OF LAW 

I. THE LEGISLATURE HAS PRESCRIBED THE PROCEDURE BY WHICH A 

PARTY MAY OBTAIN RELIEF FROM AN ORDER OF THE COMMISSION. 

SUCH NARROWLY TAILORED PROCEDURE HAS NOT BEEN 

FOLLOWED HERE AND IS FATAL TO THE COMPLAINT. 

While tacitly admitting that the Superior Court has exclusive jurisdiction over the 

Complaint, the Response is centered on a request of this forum to make decisional law by 

applying the "discovery rule." There is no decisional or statutory authority for such a 

sweeping pronouncement. More problematic for that argument, however, is that the plain 

language of the statutes themselves, A.R.S. §§40-254(A) and 40-254.01(A), necessarily 

preclude the mischaracterization of Arizona law advanced in the Response, which seeks to 

engraft the "discovery rule" into the appellate procedure for review of an Order from the 

Commission. 

The Response fails to meaningfully address the following three impediments to the 

continued prosecution of the Complaint. First, Complainants were not parties to the original 

proceeding in Docket WS-02987A-08-0180 and therefore lack standing to challenge 

Decision 72579 at this late date. Second, Decision 72579 was issued on September 15, 201 1. 

and no party in the docket filed for rehearing of that decision within the 20-day period set 

forth in A.R.S. § 40-253(A). Thus, with no request for rehearing, Decision 72579 became 

final (and non-appealable) on October 5, 2011. A.R.S. § 40-254(A) states in relevant part as 

follows: 

Except as provided in section 40-254.01, any party in interest, or the attorney 

general on behalf of the state, being dissatisfied with an order or decision of 

the commission, may within thirty days after a rehearing is denied or 

granted, and not afterwards, commence an action in the superior court 

in the county in which the commission has its office, against the commission 

as defendant, to vacate, set aside, affirm in part, reverse in part or remand 

with instructions to the commission such order or decision on the ground that 

the valuation, rate, joint rate, toll, fare, charge or finding, rule, classification 

or schedule, practice, demand, requirement, act or service provided in the 

order or decision is unlawful, or that any rule, practice, act or service 

provided in the order is unreasonable. (Emphasis added.) 

Similarly, A.R.S. § 40-254.01(A) states as follows: 

2 

MEMORANDUM OF LAW

1. THE LEGISLATURE HAS PRESCRIBED THE PROCEDURE BY WHICH A

PARTY MAY OBTAIN RELIEF FROM AN ORDER OF THE COMMISSION.

SUCH NARROWLY TAILORED PROCEDURE HAS NOT BEEN

FOLLOWED HERE AND IS FATAL TO THE COMPLAINT.

i

Except as provided in section 40-254.0 l , any party in interest, or the attorney

general on behalf of the state, being dissatisfied with an order or decision of

the commission, may within thirty days after a rehearing is denied or

granted, and not afterwards, commence an action in the superior court

in the county in which the commission has its office, against the commission

as defendant, to vacate, set aside, affirm in part, reverse in part or remand

with instructions to the commission such order or decision on the ground that

the valuation, rate, joint rate, toll, fare, charge or finding, rule, classification

or schedule, practice, demand. requirement, act or service provided in the

order or decision is unlawful, or that any rule, practice, act or service

provided in the order is unreasonable. (Emphasis added.)

l

2

3

4

5 While tacitly admitting that the Superior Court has exclusive jurisdiction over the

6 Complaint, the Response is centered on a request of this forum to make decisional law by

7 applying the "discovery rule." There is no decisional or statutory authority for such a

8 sweeping pronouncement. More problematic for that argument, however, is that the plain

9 language of the statutes themselves, A.R.S. §§40-254(A) and 40-254.0l(A), necessarily

10 preclude the mischaracterization of Arizona law advanced in the Response, which seeks to

11 engraft the "discovery rule" into the appellate procedure for review of an Order from the

12 Commission.

13 The Response fails to meaningfully address the following three impediments to the

continued prosecution of the Complaint. First, Complainants were not parties to the original

14 proceeding in Docket W S-02987A-08-0180 and therefore lack standing to challenge

15 Decision 72579 at this late date. Second, Decision 72579 was issued on September 15. 201 l,

16 and no party in the docket filed for rehearing of that decision within the 20-day period set

17 forth in A.R.S. § 40-253(A). Thus, with no request for rehearing, Decision 72579 became

18 final (and non-appealable) on October 5, 201 l. A.R.S. § 40-254(A) states in relevant part as

19 follows:

20

21

22

23

24

25

26

27

28 Similarly, A.R.S. § 40-254.0l(A) states as follows:

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The attorney general on behalf of the state or any party to a proceeding 

before the commission who is dissatisfied with any order of the commission 

involving public service corporations and relating to rate making or rate 

design pursuant to sections 40-243, 40-246, 40-250 and 40-251 may file 

within thirty days after a rehearing is denied or granted, and not 

afterwards, a notice of appeal in the court of appeals to vacate, set aside, 

affirm in part, reverse in part or remand with instructions to the commission 

the order if the court of appeals determines upon a clear and satisfactory 

showing that the order is unlawful or unreasonable. (Emphasis added.) 

Thus, the Legislature has established the following: (1) claims for relief from the 

Order is limited to a party which appeared in the proceeding that is being challenged —

here the Complaint alleges A.R.S. §40-246; (2) jurisdiction lies exclusively in the Superior 

Court or Court of Appeals; and (3) such jurisdiction only commences upon the denial of a 

request for rehearing by the Commission. There is nothing ambiguous in the statutes 

governing modification of an order which would permit even a statutory construction 

analysis, much less an interpretation that the "discovery rule" applies to extend the 30-day 

appeal period indefinitely as proposed in the Response. 

Finally, Decision 72579 remains a valid and final order of the Commission today. 

A.R.S. § 40-252 provides that "[i]n all collateral actions or proceedings, the orders and 

decisions of the commission which have become final shall be conclusive." Thus, the 

Complaint is an impermissible collateral attack on a final and conclusive order of the 

Commission, and the action should be dismissed. 

II. THE COMMISSION LACKS JURISDICTION TO ADJUDICATE THE 

COMPLAINT. 

As explained in depth in Johnson's Motion to Dismiss and below, none of the claims 

in the Complaint can be properly adjudicated before the Commission. 

/// 

28 

3 

The attorney general on behalf of the state or any party to a proceeding

before the commission who is dissatisfied with any order of the commission

involving public service corporations and relating to rate making or rate

design pursuant to sections 40-243, 40-246, 40-250 and 40-251 may file

within thirty days after a rehearing is denied or granted, and not

afterwards, a notice of appeal in the court of appeals to vacate, set aside,

affirm in part, reverse in part or remand with instructions to the commission

the order if the court of appeals determines upon a clear and satisfactory

showing that the order is unlawful or unreasonable. (Emphasis added.)

ll. THE COMMISSION LACKS JURISDICTION TO ADJUDICATE THE

COMPLAINT.

1

2

3

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5

6

7 Thus, the Legislature has established the following: (1) claims for relief from the

8 Order is limited to a party which appeared in the proceeding that is being challenged -

9 here the Complaint alleges A.R.S. §40-246, (2) jurisdiction lies exclusively in the Superior

10 Court or Court of Appeals, and (3) such jurisdiction only commences upon the denial of a

l l request for rehearing by the Commission. There is nothing ambiguous in the statutes

12 governing modification of an order which would permit even a statutory construction

13 analysis, much less an interpretation that the "discovery rule" applies to extend the 30-day

14 appeal period indefinitely as proposed in the Response.

15 Finally, Decision 72579 remains a valid and final order of the Commission today.

16 A.R.S. § 40-252 provides that "[ion all collateral actions or proceedings, the orders and

17 decisions of the commission which have become final shall be conclusive." Thus, the

l g Complaint is an impermissible collateral attack on a final and conclusive order of the

19 Commission, and the action should be dismissed.

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21 As explained in depth in Johnsonls Motion to Dismiss and below, none of the claims

22 in the Complaint can be properly adjudicated before the Commission.

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A. THE PROPER ADMINISTRATIVE BODY TO ADJUDICATE COMPLAINANTS' 

CLAIMS REGARDING RATES AND CHARGES IS THE SUPERIOR COURT OR THE 

COURT OF APPEALS. 

The plain language of the statutes is clear — if a rehearing is denied, the proper course 

of action is to appeal to the Superior Court or the Court of Appeals. See A.R.S. §§40-254(A) 

and 40-254.01(A). 

Specifically, A.R.S. 40-254(A) states that a party in interest "being dissatisfied with 

an order or decision of the commission, may within thirty days after a rehearing is denied or 

granted, and not afterwards, commence an action in the superior court." (Emphasis added). 

Likewise, A.R.S. §40-254.01, which specifically encompasses A.R.S. S40-246, 

states that the attorney general or a party to a proceeding who is dissatisfied with a 

Commission's order "may file within thirty days after a rehearing is denied or granted, and 

not afterwards, a notice of appeal in the court of appeals." (Emphasis added). 

Given the plain language of the statutes, it is clear that the Commission is not the 

proper body to adjudicate the Complaint. Complainants' misuse of Scates v. Arizona Corp. 

Commission, 578 P.2d 612, 118 Ariz. 531 (App. 1978) is yet another red herring and must 

not be considered by the Commission. Complainants falsely argue that Scates held that a 

complaint was properly filed with the commission before the courts. Response, p. 2:25-26. 

In fact, the complainants in the Scates matter followed the proper statutory procedures and 

filed a motion for rehearing after a Commission order was entered. After the motion for 

rehearing was denied, the complainants then filed an action in the Superior Court. Scates, 

579 P.2d at 614. Complainants' reliance on Scates to justify their untimely and improper 

Complaint is disingenuous. Complainants, unlike in the Scales complainants, failed to 

request a rehearing within the statutory time period permitted. 

Pursuant to the plain language of the statutes, the Complainants claims' regarding 

rates and charges must be considered only by the Superior Court or the Court of Appeals. 

B. COMPLAINANTS' CIVIL CLAIMS WERE IMPROPERLY BROUGHT BEFORE 

THE COMMISSION. 

In its Motion to Dismiss, Johnson argues that pursuant to A.R.S. § 12-122, jurisdiction 

over Complainants remaining civil claims lies exclusively with the Superior Court. In fact, 

4 

l A. THE PROPER ADMINISTRATIVE BODY To ADJUDICATE COMPLAINANTS'

CLAIMS REGARDING RATES AND CHARGES IS THE SUPERIOR COURT OR THE

COURT OF APPEALS.

l l

a

B. COMPLAINANTS' CIVIL CLAIMS WERE IMPROPERLY BROUGHT BEFORE

THE COMMISSION.

2

3

The plain language of the statutes is clear - if a rehearing is denied, the proper course

Q of action is to appeal to the Superior Court or the Court ofAppcals. See A.R.S. §§40-254(A)

and 40-254.0 l(A).

6 Specifically, A.R.S. 40-254(A) states that a party in interest "being dissatisfied with

7 an order or decision of the commission, may within thirty days after a rehearing is denied or

8 granted, and not afterwards, commence an action in the superior court." (Emphasis added).

9 Likewise, A.R.S. §40-254.0l, which specifically encompasses A.R.S. S40-246,

10 states that the attorney general or a party to a proceeding who is dissatisfied with a

Commission's order "may tile within thirty days after a rehearing is denied or granted, and

12 not afterwards, a notice of appeal in the court of appeals." (Emphasis added).

13 Given the plain language of the statutes, it is clear that the Commission is not the

14 proper body to adjudicate the Complaint. Complainants' misuse of Scares v. Arizona Corp.

15 Commission, 578 P.2d 612. 118 Ariz. 531 (App. 1978) is yet another red herring and must

16 not be considered by the Commission. Complainants falsely argue that Scales held that

17 complaint was properly filed with the commission before the courts. Response, p. 2:25-26.

lg In fact, the complainants in the Scares matter followed the proper statutory procedures and

filed a motion for rehearing after a Commission order was entered. After the motion for

19 rehearing was denied. the complainants then filed an action in the Superior Court. Scales,

20 579 P.2d at 614. Complainants' reliance on Scares to justify their untimely and improper

21 Complaint is disingenuous. Complainants, unlike in the Scares complainants, failed to

22 request a rehearing within the statutory time period permitted.

23 Pursuant to the plain language of the statutes, the Complainants claims regarding

24 rates and charges must be considered only by the Superior Court or the Court of Appeals.

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27 In its Motion to Dismiss, Johnson argues that pursuant to A.R.S. § 12- l22.jurisdiction

28 over Complainants remaining civil claims lies exclusively with the Superior Court. In fact,

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Complaints concede that Counts Five through Eight, to the extent they are filed against nonpublic utility parties, should have been brought before the Superior Court, rather than the 

Commission. See Response, p. 5:7. 

Complainants failed to respond to Johnson's argument that Complainants' claims for 

conspiracy, constructive fraud, aiding and abetting, breach of contract, bad faith and joint 

and several liability are only properly brought before the Superior Court pursuant to A.R.S. 

§12-122. Thus, Complainants have conceded that Counts Three (Conspiracy), Four 

(Constructive Fraud), Five (Aiding and Abetting), Six (Breach of Contract), Seven (Bad 

Faith) and Eight (Joint and Several Liability) are not proper before the Commission and must 

be dismissed. 

Complainants' only jurisdictional argument with respect to Counts Two through Eight 

is that the Civil RICO statute (Count Two), which specifically provides that claims should 

be brought before the Superior Court, does not specifically prohibit the filing of a civil RICO 

claim before the Commission. This argument goes against the plain language of the statute. 

A.R.S. §13-2314.04(B) states that the "superior court has jurisdiction to prevent, restrain 

and remedy a pattern of racketeering activity or a violation of section 13-2312 involving a 

pattern of racketeering activity..." By arguing that because the statute does not prohibit 

filing a civil RICO claim before the Commission, such a filing is permitted goes against the 

basic rules of statutory construction. "The primary rule of statutory construction is to find 

and give effect to legislative intent." Lavidas v. Smith, 195 Ariz. 2501 8, 987 P.2d 212, 214 

(App. 1999), quoting Mail Boxes, Etc., U.S.A. v. Indus. Comm'n, 181 Ariz. 119, 121, 888 

P.2d 777, 779 (1995). "A statute's language is 'the best and most reliable index' of its 

meaning." Trust v. County of Yuma, 205 Ariz. 272, ¶ 11, 69 P.3d 510, 512 (App. 2003), 

quoting Janson v. Christensen, 167 Ariz. 470, 471, 808 P.2d 1222, 1223 (1991). If the 

legislature had intended for civil RICO claims to be filed before the Commission, it would 

have provided for it in A.R.S. §13-2314.04(B). 

28 

5 

l Complaints concede that Counts Five through Eight. to the extent they are filed against non2 public utility parties, should have been brought before the Superior Court, rather than the

3 Commission. See Response, p. 5:7.

4 Complainants failed to respond to Johnsons argument that Complainants' claims for

5 conspiracy, constructive fraud, aiding and abetting, breach of contract, bad faith and joint

6 and several liability are only properly brought before the Superior Court pursuant to A.R.S.

7 §12-122. Thus, Complainants have conceded that Counts Three (Conspiracy), Four

g (Constructive Fraud), Five (Aiding and Abetting), Six (Breach of Contract), Seven (Bad

Faith) and Eight (Joint and Several Liability) are not proper before the Commission and must

9 be dismissed.

10 Complainants' only jurisdictional argument with respect to Counts Two through Eight

l l is that the Civil RICO statute (Count Two), which specifically provides that claims should

12 be brought before the Superior Court, does not specifically prohibit the filing of a civil RICO

13 claim before the Commission. This argument goes against the plain language of the statute.

14 A.R.S. §l3-23 l4.04(B) states that the "superior court has jurisdiction to prevent, restrain

15 and remedy a pattern of racketeering activity or a violation of section 13-2312 involving a

16 pattern of racketeering activity..." By arguing that because the statute does not prohibit

17 filing a civil RICO claim before the Commission, such a tiling is permitted goes against the

18 basic rules of statutory construction. "The primary rule of statutory construction is to find

19 and give effect to legislative intent." Lavidas v. Smith, 195 Ariz. 250118, 987 P.2d 212, 214

20 (App. 1999), quoting Mail Boxes, Etc., U.S.A. v. Indus. Comm n, 181 Ariz. l 19, 121, 888

21 P.2d 777, 779 (1995). "A statute's language is `the best and most reliable index' of its

22 meaning." Trust v. County of Yuma, 205 Ariz. 272, 11 11, 69 P.3d 510, 512 (App. 2003),

quoting Jenson v. Christensen, 167 Ariz. 470, 471, 808 P.2d 1222, 1223 (1991). If the

23 legislature had intended for civil RICO claims to be tiled before the Commission, it would

24 have provided for it in A.R.S. §l3-23 l4.04(B).

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111. CONCLUSION. 

For the foregoing reasons, the Complaint must be dismissed with prejudice in its 

entirety. 

RESPECTFULLY SUBMITTED this 25th day of July, 2017. 

By: 

FRED G BEAMS 

lel E. Fredenberg 

Christian C. M. Beams 

Catherine S. Adams 

Attorneys for Johnson Utilities, LLC, 

and Johnson International, Inc. 

ORIGINAL and 13 copies of the foregoing filed 

this 25th day of July, 2017, with: 

Docket Control 

Arizona Corporation Commission 

1200 West Washington 

Phoenix, Arizona 85007-2996 

COPY of the forgoing sent this 25th day 

of July, 2017 to the following: 

B. Lance Entrekin, Esq. 

lance@entrekinlaw.com 

administrator@entrekinlaw.com 

The Entrekin Law Firm 

5343 North 16"' Street, Suite 200 

Phoenix, AZ 85016 

Consented to Service by Email 

Andy Kvesic, Director 

LegalDiv@azcc.gov 

utildivservicebvemail@azcc.gov 

LegalDivision 

ARIZONA CORPORATION COMMISSION 

1200 West Washington Street 

Phoenix, AZ 85007 

Consented to Service by Email 

'A6 

l Ill. CONCLUSION.

2 For the foregoing reasons, the Complaint must be dismissed with prejudice in its

3 entirety.

RESPECTFULLY SUBMITTED this 25th day ofJuly, 2017.

FRED G BEAMS

By:

tel E. Freudenberg

Christian C. M. Beams

Catherine S. Adams

Attorneys for Johnson Utilities, LLC,

and Johnson International, Inc.

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I 1 ORIGINAL and 13 copies of the foregoing filed

12 this 25'h day of July, 2017, with:

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Docket Control

Arizona Corporation Commission

1200 West Washington

Phoenix, Arizona 85007-2996

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16 COPY of the fOrgoing sent this 25"1 day

of July, 2017 to the following:

W

0

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B. Lance Entrekin, Esq.

lance(a entrekinlaw.com

administrator a entrekinlaw.com

The Entrekin Law Firm

5343 North l6"' Street, Suite 200

Phoenix. AZ 85016

Consented to Service by Email

W .

Andy Kvesic, Director

Les1all)i a a7cc.l1ov

us ldivserviccbvcmai 1 @azcc.gov

Legal Division

ARIZONA CORPORATION COMMISSION

1200 West Washington Street

Phoenix, AZ 85007

Consented to Service by Email

/

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Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 18 of 51
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Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 19 of 51
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COMMISSIONERS 

TOM FORESE — Chairman 

BOB BURNS 

ANDY TOBIN 

BOYD DUNN 

JUSTIN OLSON 

IN THE MATTER OF THE FORMAL COMPLAINT 

OF DELTON MUNDAY AND THOSE SIMILARLY 

SITUATED AGAINST THE ARIZONA 

CORPORATION COMMISSION, JOHNSON 

UTILITIES, LLC, AND NON PUBLIC SERVICE 

COMPANIES R&R PARTNERS, INC., AND 

JOHNSON INTERNATIONAL, INC. 

Open Meeting 

November 7, 2017 

Phoenix, Arizona 

BY THE COMMISSION: 

* * * * * * 

BEFORE THE ARIZONA CORPORATION 

Arizona Corporation Conunission 

DOCKETED 

NOV 17 2017 

DOCKETED B 

DOCKET NO. WS-02987A-17-0192 

DECISION NO. 76467 

ORDER 

* * * * 

Having considered the entire record herein and being fully advised in the premises, the Arizona 

Corporation Commission ("Commission") finds, concludes, and orders that: 

FINDINGS OF FACT 

I. Procedural History 

1. On June 19, 2017, Delton Munday, et al. ("Munday Group" or "Complainants")1 filed 

a Formal Complaint ("Complaint") with the Commission against the Commission, Johnson Utilities. 

I.LC ("Johnson Utilities"), Johnson International, Inc. ("Johnson International"), and R&R Partners, 

Inc. ("R&R") (collectively "Respondents"). 

2. On July 10, 2017, the Commission's Utilities Division ("Staff") filed a Motion to 

Dismiss. 

3. Also on July 10, 2017, Johnson Utilities and Johnson International (collectively 

-Respondents Johnson") filed a Motion to Dismiss. 

I he Munday Group is comprised of thirty-two water and wastewater customers of Johnson Utilities, LLC. 

SHeslalComplaints‘l 70 I 920rd.Amended.docx 

\\ Ia \\\ \\\ W mm W um um ow x \\ \\ ll \\ \\\ \\ \\l \\ mu \\

00001 83979

BEFORE THE ARIZONA CORPORATIONC\JLylMlUk'l\'I`

Arizona Corporation Commission

DOCKETED

NOV 17 2017

DOCKETED B

TOM FORESE - Chairman

BOB BURNS

ANDY TOBIN

BOYD DUNN

JUSTIN OLSON

DOCKET no. WS-02987A-17-0192

DECISION no. 76467

ORI)ER

IN THE MATTER OF THE FORMAL COMPLAINT OF DELTON MUNDAY AND THOSE SIMILARLY SITUATED AGAINST THE ARIZONA CORPORATION COMMISSION, JOHNSON UTILITIES, LLC. AND NON PUBLIC SERVICE COMPANIES R&R PARTNERS, INC., AND JOI-INSON INTERNATIONAL, INC.

Open Meeting

November 7, 2017

Phoenix, Arizona

l

2 COMMISSIONERS

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13 BY THE COMMISSION:

* * * * * * * * * * 14

15 Having considered the entire record herein and being fully advised in the premises, the Arizona

16 Corporation Commission ("Commission") finds, concludes, and orders that:

FINDINGS OF FACT

1. Procedural Historv

17

18

19 l. On June 19, 2017, Delton Munday, et al. ("Monday Group" or "Complainants")' filed

20 a Formal Complaint ("Complaint") with the Commission against the Commission, Johnson Utilities,

21 LLC ("Johnson Utilities"). Johnson International, Inc. ("Johnson International"), and R&R Partners,

22 Inc. ("R&R") (collectively "Respondents").

23 2. On July 10, 2017. the Commission's Utilities Division ("Staff") filed a Motion to

24 Dismiss.

25 3. Also on July 10, 2017. Johnson Utilities and Johnson International (collectively

26 "Respondents Johnson") filed a Motion to Dismiss.

27

28 ' The Munday Group is comprised of thirty-two water and wastewater customers of Johnson Utilities, LLC.

S:\SHesla\Complaints\l70 I 920rd.Amendcd.docx l

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 20 of 51
DOCKET NO. WS-02987A-17-0192 

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4. On July 13, 2017. the Munday Group filed a Response to Respondents Johnson's 

Motion to Dismiss. 

5. Also on July 13. 2017, the Munday Group filed a Response to Staff's Motion to Dismiss. 

6. On July 14, 2017, R&R filed a Joinder in Staff's Motion to Dismiss. 

7. On July 26, 2017, Respondents Johnson filed a Reply in Support of their Motion to 

Dismiss. 

8. Staff did not file a Reply in support of its Motion to Dismiss. 

II. Complaint 

9. The Munday Group is comprised of thirty-two water and wastewater customers of 

Johnson Utilities. The various counts and allegations contained in the Complaint arise from a recent 

indictment filed by the United States of America in the United States District Court of Arizona against. 

among others, former Commissioner Gary Pierce, alleging bribery, mail fraud, wire fraud, and 

conspiracy (the "federal trial").2 The Complaint alleges that former Commissioner Gary Pierce 

accepted bribes from Mr. George Johnson, owner of Johnson Utilities and Johnson International, in 

exchange for voting in favor of Johnson Utilities on matters before the Commission. 

10. In Count One. the Munday Group alleges that Johnson Utilities illegally bribed former 

Commissioner Gary Pierce to obtain the deciding vote necessary to pass Decision No. 72579 

(September 15.2011).' As relief, the Munday Group requests a total rescission of Decision No. 72579, 

and, pursuant to A.R.S. § 40-248(A),4 an award of full reparations for all rate charges (plus interest) 

authorized by the Commission as a result of that Decision. 

11. In Count Two, the Munday Group asserts a claim against all Respondents for violations 

2 United States v. Pierce, et al., CR-17-00713-PHX-JJT (D. Ariz. May 23, 2017). 

3 Decision No. 72579 ordered, among other things, the change of the wastewater late fee from $40.00 per month to 1.5% 

per month; the addition of $18,244,755 in previously disallowed wastewater plant; the reinstatement of hook-up fees for 

the water and wastewater divisions; the establishment of a rate of return of 8.0% for the wastewater division; and the 

authorization for the Company to petition the Commission to update its rates to allow the recovery of income tax expense. 

That Decision passed by a vote of three to one, with one vote being excused. 

A.R.S. § 40-248(A) provides, in pertinent part: 

When complaint is made to the commission concerning any rate...or charge by any public service 

corporation, and the commission finds, after investigation, that the corporation has made an excessive or 

discriminatory charge, the commission may order that the corporation make reparation to the complainant 

with interest at the legal rate from the date of collection.... 

2 76467 DECISION NO. 

DOCKET no. WS-02987A-17-0192

l 4. On July 13, 2017, the Munday Group tiled a Response to Respondents Johnson's

2 Motion to Dismiss.

3 5.

4 6.

5 7.

Also on July 13, 2017, the Munday Group filed a Response to Staffs Motion to Dismiss.

On July 14, 2017, R&R filed a Joiner in Staff's Motion to Dismiss.

On July 26, 2017, Respondents Johnson filed a Reply in Support of their Motion to

6 Dismiss.

7 8. Staff did not file a Reply in support of its Motion to Dismiss.

8 11. Com faint

9 9.

10

l l

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13

14

The Munday Group is comprised of thirty-two water and wastewater customers of

Johnson Utilities. The various counts and allegations contained in the Complaint arise from a recent

indictment filed by the United States otlAmerica in the United States District Court of Arizona against,

among others, fanner Commissioner Gary Pierce, alleging bribery, mail fraud, wire fraud, and

conspiracy (the "federal trial").2 The Complaint alleges that former Commissioner Gary Pierce

accepted bribes from Mr. George Johnson, owner of Johnson Utilities and Johnson International, in

15

16

exchange for voting in favor of Johnson Utilities on matters before the Commission.

10. In Count One, the Munday Group alleges that Johnson Utilities illegally bribed former

17 Commissioner Gary Pierce to obtain the deciding vote necessary to pass Decision No. 72579

18

19

20

(September 15, 201 l).3 As relief, the Munday Group requests a total rescission of Decision No. 72579,

and, pursuant to A.R.S. § 40-248(A)," an award of full reparations for all rate charges (plus interest)

authorized by the Commission as a result of that Decision.

21 11. In Count Two, the Munday Group asserts a claim against all Respondents for violations

22

23

24

25

z Uniled S1ates v. Pierce et al., CR-l7-007l 3-pHx-JJT (D. Ariz. May 23, 2017).

8 Decision No. 72579 ordered among other things, the change of the wastewater late fee from $40.00 per month to l.5%

per month, the addition of $l8244,755 in previously disallowed wastewater plant: the reinstatement of hook-up fees for

the water and wastewater divisions, the establishment of a rate of` return of 8.0% for the wastewater division, and the

authorization for the Company to petition the Commission to update its rates to allow the recovery of income tax expense.

That Decision passed by a vote of three to one, with one vote being excused.

* A.R.S. §40-248(A) provides, in pertinent pan:

26

27

When complaint is made to the commission concerning any rate...or charge by any public service

corporation and the commission finds, after investigation, that the corporation has made an excessive or

discriminatory charge, the commission may order that the corporation make reparation to the complainant

with interest at the legal rate from the date of collection....

28

2 DECISION no. 76467

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 21 of 51
DOCKET NO. WS-02987A-17-0192 

1 of Arizona's civil Racketeer Influenced and Corrupt Organizations Act ("RICO").5 As relief, the 

2 Munday Group requests treble damages and attorneys' fees under the RICO statute. 

3 12. In Count Three, the Munday Group asserts a claim against all Respondents for 

4 conspiracy. As relief, the Munday Group requests punitive damages. 

13. In Count Four, the Munday Group asserts a claim against the Commission and Johnson 

tflitics for constructive fraud. As relief, the Munday Group requests punitive damages. 

7 14. In Count Five, the Munday Group asserts a claim against Johnson International and 

R&R for aiding and abetting. 

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15. 

contract. 

16. 

In Count Six, the Munday Group asserts a claim against Johnson Utilities for breach o f' 

In Count Seven, the Munday Group asserts a claim against Johnson Utilities for acting 

in bad faith in breaching its an implied covenant of good faith and fair dealing. As relief, the Munday 

Group requests punitive damages. 

17. In Count Eight, the Munday Group asserts an allegation of joint and several liability 

amongst all Respondents pursuant to A.R.S. § 12-2506(d).6

18. The Munday Group also requests attorneys' fees pursuant to the private attorney general 

doctrine, the common fund doctrine, and A.R.S. § 12-3401.01.7

s The Complaint mistakenly cites A.R.S. § 23-1404 as the applicable RICO statute; we note that the correct citation for that 

statute is A.R.S. § 13-2314.04, which provides, in pertinent part: 

A. A person who sustains reasonably foreseeable injury to his person, business or property by a pattern 

of racketeering activity... may file an action in superior court for the recovery of up to treble damages 

and the costs of the suit.... 

B. The superior court has jurisdiction to prevent, restrain and remedy a pattern of racketeering 

activity.... 

A.R.S. § 12-2506(D) provides: 

The liability of each defendant is several only and is not joint, except that a party is responsible for the 

fault of another person, or for payment of the proportionate share of another person, if any of the following 

applies: 

1) Both the party and the other person were acting in concert. 

2) The other person was acting as an agent or servant of the party. 

3) The party's liability for the fault of another person arises out of a duty created by 

the federal employers' liability act, 45 United States Code section 51. 

'The parties did not brief the issue of whether the Commission has authority to award attorneys' fees pursuant to the private 

attorney general doctrine, the common fund doctrine, or A.R.S. § 12-3401.01. We will therefore hold that issue in abeyance 

for determination at a later date. 

3 DECISION NO. 

76467 

DOCKET no. WS-02987A-17-0192

1

2

3

5

7 14.

of Arizona's civil Racketeer Influenced and Corrupt Organizations Act ("RICO").5 As relief, the

Munday Group requests treble damages and attorneys' fees under the RICO statute.

12. In Count Three, the Munday Group asserts a claim against all Respondents for

4 conspiracy. As relief, the Munday Group requests punitive damages.

13. In Count Four, the Munday Group asserts a claim against the Commission and Johnson

6 Utilities for constructive fraud. As relief, the Munday Group requests punitive damages.

In Count Five, the Munday Group asserts a claim against Johnson International and

9 15.

8 R&R for aiding and abetting.

In Count Six, the Munday Group asserts a claim against Johnson Utilities for breach of

10 contract.

11 16.

12

13

14

16 18.

In Count Seven. the Munday Group asserts a claim against Johnson Utilities for acting

in bad faith in breaching its an implied covenant of good faith and fair dealing. As relief. the Munday

Group requests punitive damages.

17. In Count Eight, the Munday Group asserts an allegation of joint and several liability

15 amongst all Respondents pursuant to A.R.S. § 12-2506(d).6

The Munday Group also requests attorneys' fees pursuant to the private attorney general

17 doctrine, the common fund doctrine, and A.R.S. § 12-3401 .01 .7

18

19

20

21

B.

5 The Complaint mistakenly cites A.R.S. §231404 as the applicable RICO statute, we note that the correct citation for that

statute is A.R.S. § 1323 14.04, which provides, in pertinent part:

A. A person who sustains reasonably foreseeable injury to his person business or property by a pattern

of racketeering, activity...may file an action in superior court for the recovery of up to treble damages

and the costs of the suit....

The superior court has jurisdiction to prevent restrain and remedy a pattern of racketeering

22 actrvity....

23

24

6A.R.S. § l2-2506(D) provides:

The liability of each defendant is several only and is not joint, except that a party is responsible for the

fault ofanother person, or for payment of the proportionate share of another person, if any of the following

applies:

25 1)

2)

3) 26

Both the party and the other person were acting in concert.

The other person was acting as an agent or servant of the party

The party's liability for the fault of another person arises out of a duty created by

the federal employers' liability act, 45 United States Code section 5 I .

27

28

7 The parties did not brief the issue of whether the Commission has authority to award attorneys' fees pursuant to the private

attorney general doctrine. the common fund doctrine, or A.R.S. § 123401 .01 . We will therefore hold that issue in abeyance

for determination at a later date.

76467

3 DECISION NO.

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DOCKET NO. WS-02987A-17-0192 

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III. Motions to Dismiss 

Staff 

19. Staff argues that the Complaint should be dismissed as to all Respondents not regulated 

by the Commission because A.R.S. § 40-246 only authorizes complaints for violations of law 

committed by public service corporations.8 As a result, Staff contends that the Commission, Johnson 

International, and R&R should be dismissed as Respondents to the Complaint. 

20. Staff recommends that Count One be stayed pending the conclusion of the federal trial. 

According to Staff, Count One is the only cause of action over which the Commission potentially has 

jurisdiction. Since the factual allegations contained in Count One are the subject of the federal trial, 

Staff notes that the conclusion of that trial has the potential to moot, clarify, and/or affect the outcome 

of the Complaint. 

21. Staff argues that Counts Two through Eight should be dismissed for lack of subject 

matter jurisdiction and/or failure to state a claim upon which relief can be granted. Although A.R.S. § 

40-246(A) provides a cause of action against a public service corporation, Staff asserts that the 

Commission's jurisdiction over such a cause of action is limited to the enforcement of the laws 

affecting public service corporations. As a result, Staff asserts that claims brought pursuant to statutes 

that vest jurisdiction in another tribunal, as well as claims based upon civil common law theories, are 

not within the jurisdiction of the Commission and should be dismissed. 

Respondents Johnson 

22. Respondents Johnson argue that the Complaint must be dismissed in its entirety because 

it fails to provide a legal basis upon which the Commission may adjudicate any of the Counts contained 

in the Complaint. With respect to Count One, Respondents Johnson assert that the Munday Group 

8 A.R.S. § 40-246(A) provides: 

Complaint may be made by the commission of its own motion, or by any person or association of 

persons by petition or complaint in writing, setting forth any act or thing done or omitted to be done 

by any public service corporation in violation, or claimed to be in violation, of any provision of law 

or any order or rule of the commission, but no complaint shall be entertained by the commission, except 

upon its own motion, as to the reasonableness of any rates or charges of any gas, electrical, water or 

telephone, unless it is signed by the mayor or a majority of the legislative body of the city or town within 

which the alleged violation occurred, or by not less than twenty-five consumers or purchasers, or 

prospective consumers or purchasers, of the service. 

(emphasis added). 

4 DECISION NO. 76467 

DOCKET no. WS-02987A-17-0192

l 111. Motions to Dismiss

2 Staff

3 19.

4

5

6

7 20.

8

9

10

Staff argues that the Complaint should be dismissed as to all Respondents not regulated

by the Commission because A.R.S. § 40-246 only authorizes complaints for violations of law

committed by public service corporations.8 As a result, Staff contends that the Commission, Johnson

International, and R&R should be dismissed as Respondents to the Complaint.

Staff recommends that Count One be stayed pending the conclusion of the federal trial.

According to Staff. Count One is the only cause of action over which the Commission potentially has

jurisdiction. Since the factual allegations contained in Count One are the subject of the federal trial,

Staff notes that the conclusion of that trial has the potential to moot, clarity, and/or affect the outcome

l l of the Complaint.

12 21.

13

14

15

16

17

18

19

20

Staff argues that Counts Two through Eight should be dismissed for lack of subject

matter jurisdiction and/or failure to state a claim upon which relief can be granted. Although A.R.S. §

40-246(A) provides a cause of action against a public service corporation. Staff asserts that the

Commission's jurisdiction over such a cause of action is limited to the enforcement of the laws

affecting public service corporations. As a result, Staff asserts that claims brought pursuant to statutes

that vest jurisdiction in another tribunal, as well as claims based upon civil common law theories, are

not within the jurisdiction of the Commission and should be dismissed.

Respondents Johnson

22.

21

22

Respondents Johnson argue that the Complaint must be dismissed in its entirety because

it fails to provide a legal basis upon which the Commission may adjudicate any of the Counts contained

in the Complaint. with respect to Count One, Respondents Johnson assert that the Munday Group

23

24

25

26

27

28

8 A.R.S. §40-246(A) provides:

Complaint may be made by the commission of its own motion, or by any person or association of

pemonsbypedUonorcompMhnhiwHHngunUnghm1hanyactor tMngdoneoronUuedtobedone

by any public service corporation in violation. or claimed to be in violation, of any provision of law

or any order or ruleof the commission, but no complaint shall be entertained by the commission, except

upon its own motion, as to the reasonableness of any rates or charges of any gas, electrical, water or

telephone, unless it is signed by the mayor or a majority of the legislative body of the city or town within

which the alleged violation occurred, or by not less than twenty~five consumers or purchasers, or

prospective consumers or purchasers, of the service.

(emphadsaddedl

DECISION no. 76467 4

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lacks standing to challenge Decision No. 72579 because the Complainants were not parties to that 

proceeding. According to Respondents Johnson, Decision No. 72579 became final and non-appealable 

on October 5, 2011. Respondents Johnson further argue that the Complaint is an impermissible 

collateral attack on a final and conclusive order of the Commission. 

23. Respondents Johnson assert that Count Two is not within the jurisdiction of the 

Commission because Arizona's civil RICO statute explicitly provides that "the superior court has 

jurisdiction to prevent, restrain, and remedy a pattern of racketeering activity...."9 Respondents 

Johnson argue that if the legislature had intended for civil RICO claims to be filed before the 

Commission, the legislature would have provided for that in the statute. 

24. Respondents Johnson also assert that the Commission does not have jurisdiction to 

adjudicate the civil common law claims brought in Counts Three through Eight of the Complaint. 

Respondents Johnson argue that claims based on conspiracy, constructive fraud, aiding and abetting, 

breach of contract, bad faith, and joint and several liability are only properly brought before the 

Superior Court, pursuant to A.R.S. § 12-122.10 As a result, Respondents Johnson maintain that Counts 

Three through Eight must be dismissed from the Complaint. 

R&R 

25. In its Joinder to Staff's Motion to Dismiss, R&R argues that it should be dismissed from 

the Complaint because R&R is not a public service corporation subject to the jurisdiction of the 

Commission. R&R further argues that it was not properly served a copy of the Complaint. R&R 

requests that Staff's Motion to Dismiss be granted, and that R&R be dismissed from this proceeding. 

Munday Group 

26. In its Response, the Munday Group states that it does not dispute that the Commission 

only has jurisdiction to adjudicate claims against public service corporations. The Munday Group also 

states that the only reason it included non-regulated entities in the Complaint was to preserve 

"administrative exhaustion requirements."' 

9 Respondents Johnson Reply Brief at 5, quoting A.R.S. § 13-2314.04(B). 

19 A.R.S. § 12-122 provides: "The superior court, in addition to the powers conferred by constitution, rule or statute, may 

proceed according to the common law." 

11 Munday Group Response Brief at 1. 

5 DECISION NO. 

76467 

DOCKET no. WS-02987A-17-0192

l

2

lacks standing to challenge Decision No. 72579 because the Complainants were not parties to that

proceeding. According to Respondents Johnson, Decision No. 72579 became final and non-appealable

3 on October 5, 201 l. Respondents Johnson further argue that the Complaint is an impermissible

4 collateral attack on a final and conclusive order of the Commission.

5 23. Respondents Johnson assert that Count Two is not within the jurisdiction of the

6

7

8

9

10 24.

11

12

13

14

15

16

Commission because Arizona's civil RICO statute explicitly provides that "the superior court has

jurisdiction to prevent, restrain, and remedy a pattern of racketeering activity...."° Respondents

Johnson argue that if the legislature had intended for civil RICO claims to be filed before the

Commission, the legislature would have provided for that in the statute.

Respondents Johnson also assert that the Commission does not have jurisdiction to

adjudicate the civil common law claims brought in Counts Three through Eight of the Complaint.

Respondents Johnson argue that claims based on conspiracy. constructive fraud, aiding and abetting,

breach of contract. bad faith, and joint and several liability are only properly brought before the

Superior Court, pursuant to A.R.S. § 12-122.'0 As a result. Respondents Johnson maintain that Counts

Three through Eight must be dismissed from the Complaint.

R&R

17 25.

18

19

20

In its Joiner to Staffs Motion to Dismiss, R&R argues that it should be dismissed from

the Complaint because R&R is not a public service corporation subject to the jurisdiction of the

Commission. R&R further argues that it was not properly served a copy of the Complaint. R&R

requests that Staffs Motion to Dismiss be granted, and that R&R be dismissed from this proceeding.

21

22 26.

23

24

25

Mundav Group

In its Response, the Munday Group states that it does not dispute that the Commission

only has jurisdiction to adjudicate claims against public service corporations. The Munday Group also

states that the only reason it included non-regulated entities in the Complaint was to preserve

"administrative exhaustion requirements."' I

26

27

28

9 Respondents Johnson Reply Brief at 5, quoting A.R.S. § 1323 l 4.04(B).

10A.R.S. § 12-122 provides: "The superior court, in addition to the Powers conferred by constitution, rule or statute, may

proceed according to the common law."

" Munday Group Response Brief at l.

76467

5 DECISION no.

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 24 of 51
DOCKET NO. WS-02987A-17-0192 

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27. The Munday Group further states that it does not object to the Complaint being stayed 

pending the outcome of the federal trial. However, the Munday Group requests that the Complaint be 

stayed until the earliest of the following two occurrences: 

(a) One of the defendants in the federal trial pleads guilty to a crime; or 

(b) The conclusion of the federal trial. 

28. The Munday Group also states that it has no objection to the Commission deferring to 

the Superior Court on their alleged violations of the RICO statute in Count Two. 

29. The Munday Group argues that the Commission has jurisdiction over the remaining 

Counts Three through Eight because the Commission has the authority to order money damages; 

Johnson Utilities is a public fiduciary; and Johnson Utilities has a contract with its customers. 

I V. Discussion 

Standard of Review 

30. When determining a Rule 12(b)(6) motion to dismiss, the Commission must look only 

to the Complaint itself and consider the factual allegations contained therein.'2 The Commission must 

also assume the truth of the factual allegations and indulge all reasonable inferences therefrom." The 

motion to dismiss should be denied unless it appears certain that the claimant(s) would be entitled to 

no relief under any state of facts which is susceptible of proof under the claim as stated.I4 The 

Commission has historically disfavored granting motions to dismiss, electing to allow most cases to 

proceed to a hearing in order to develop a full and complete evidentiary record. 

Resolution 

31. The Commission has broad constitutional and statutory powers over many aspects of 

public service corporations,I 5 and over its long history, "the Commission has developed specialized 

expertise in matters related to its regulation of the service and financial aspects of public service 

corporations."I6 However, Arizona courts have concluded that claims based upon "theories of tort and 

contract are far afield of the Commission's area of expertise and statutory responsibility, and are the 

'2 Cullen v. Auto-Owners Ins. Co., 218 Ariz. 417, 420, 189 P.3d 344, 346 (2008). 

13 Id. 

14 Long v. Portland Cement Co., 89 Ariz. 366, 368, 362 P.2d 741, 742 (1961). 

'5 Campbell v. Mountain States Telephone & Telegraph Co., 120 Ariz. 426, 427. 586 P.2d 987, 988 (Ariz. App. I 978 ) 

16 Id. at 431, 586 P.2d at 992. 

6 76467 DECISION NO. 

DOCKET NO. WS-02987A-l7-0192

l 27.

2

3

4

5

The Munday Group further states that it does not object to the Complaint being stayed

pending the outcome of the federal trial. However, the Munday Group requests that the Complaint be

stayed until the earliest of the following two occurrences:

One of the defendants in the federal trial pleads guilty to a crime, or

The conclusion of the federal trial.

6 28.

8

9

10

(a)

(b)

The Munday Group also states that it has no objection to the Commission deferring to

7 the Superior Court on their alleged violations of the RICO statute in Count Two.

29. The Munday Group argues that the Commission has jurisdiction over the remaining

Counts Three through Eight because the Commission has the authority to order money damages,

Johnson Utilities is a public fiduciary, and Johnson Utilities has a contract with its customers.

ll Iv. Discussion

12 Standard of Review

13 30.

14

15

16

When determining a Rule l2(b)(6) motion to dismiss, the Commission must look only

to the Complaint itself and consider the factual allegations contained therein.12 The Commission must

also assume the truth of the factual allegations and indulge all reasonable inferences therefrom." The

motion to dismiss should be denied unless it appears certain that the claimant(s) would be entitled to

17 no relief under any state of facts which is susceptible of proof under the claim as stated.14 The

18

19

20

Commission has historically disfavored granting motions to dismiss, electing to allow most cases to

proceed to a hearing in order to develop a full and complete evidentiary record.

Resolution

21 31.

22

23

24

25

The Commission has broad constitutional and statutory Powers over many aspects of

public service corporations,'5 and over its long history, "the Commission has developed specialized

expertise in matters related to its regulation of the service and financial aspects of public service

corporations."'6 However, Arizona courts have concluded that claims based upon "theories of tort and

contract are far afield of the Commission's area of expertise and statutory responsibility, and are the

26

27

28

inCullen v. Auto-Owners Ins. Co., 218 Ariz. 417, 420, 189 P.3d 344, 346 (2008).

13ld.

14 Long v. Portland Cement Co., 89 Ariz. 366, 368 362 P.2d 741 742 (l96l).

15Campbell v. Mountain States Telephone & Telegraph Co., 120 Ariz. 426 427. 586 P.2d 987, 988 (Ariz. App. l 978).

16 Id. at 43 I, 586 p.2d at 992.

6 DECISION no. 76467

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type of traditional claims with which our trial courts of general jurisdiction are most familiar and 

capable of dealing.-17

32. In Count One, the Munday Group alleges that the rates and charges that resulted from 

the issuance of Decision No. 72579 are unlawful and/or unreasonable. Pursuant to A.R.S. § 40-246(A). 

the reasonableness of any rates or charges may be challenged by a complaint signed by not less than 

twenty-five consumers.I8 We therefore find that the Munday Group has alleged a prima facie case 

against Johnson Utilities in Count One. Accordingly, Respondents Johnson's Motion to Dismiss Count 

One is denied. 

33. With respect to Count Two, the Munday Group states that it has no objection to the 

Commission deferring to the Superior Court on its RICO claim. Given that there is no objection to 

dismissing Count Two, and given the clear language of A.R.S. § 13-2314.04 that the Superior Court 

has jurisdiction to adjudicate RICO claims, we find that Count Two should be dismissed.°

34. Counts Three through Seven of the Complaint assert claims based upon theories of tort 

and contract law. As discussed above, since the Commission does not have jurisdiction to adjudicate 

claims based upon theories of tort and contract law, we find that Counts Three through Seven should 

he dismissed.2°

35. The Complaint asserts various claims against parties that are not public service 

corporations, namely the Commission, Johnson Internationa1,21 and R&R.22 However, as the Munday 

Group concedes, the Commission's jurisdiction to adjudicate complaints is limited to public service 

corporations. Accordingly, we find that the Commission, Johnson International, and R&R should be 

dismissed as Respondents to the Complaint. Since Johnson Utilities is the only remaining Respondent 

to this proceeding, we also find that Count Eight (asserting joint and several liability amongst all 

" Id. at 432, 586 P.2d at 993. The Arizona Supreme Court has also held that "the construction and validity of a contract are 

judicial functions for the courts, not the Commission." Id. at 431, 586 P.2d at 992, citing Trico Electric Cooperative v. 

Ralston, 67 Ariz. 358, 196 P.2d 470 (1948). 

IS The Complaint contains the signatures of thirty-two water and wastewater customers of Johnson Utilities. 

19 The Munday Group's requests for treble damages and attorneys' fees under the RICO statute are also dismissed. 

20 The Munday Group's request for damages (punitive or compensatory) is also dismissed. 

21 Johnson International is an affiliate of Johnson Utilities, but is not a public service corporation regulated by the 

Commission. 

22 R&R is affiliated with James Norton, a defendant in the federal trial, but is not a public service corporation regulated by 

the Commission. 

7 DECISION NO. 76467 

DOCKET no. WS-02987A-17-0192

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3 32.

4

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8

type of traditional claims with which our trial courts of general jurisdiction are most familiar and

capable of dealing."'7

In Count One, the Munday Group alleges that the rates and charges that resulted from

the issuance ofDecision No. 72579 are unlawful and/or unreasonable. Pursuant to A.R.S. §40-246(A),

the reasonableness of any rates or charges may be challenged by a complaint signed by not less than

twenty-five consumers.'8 We therefore find that the Munday Group has alleged a prima facie case

against Johnson Utilities in Count One. Accordingly, Respondents Johnson's Motion to Dismiss Count

One is denied.

9 33.

10

11

12

13 34.

14

15

16

with respect to Count Two, the Munday Group states that it has no objection to the

Commission deferring to the Superior Court on its RICO claim. Given that there is no objection to

dismissing Count Two, and given the clear language of A.R.S. § 13-2314.04 that the Superior Court

has jurisdiction to adjudicate RICO claims, we find that Count Two should be dismissed.l9

Counts Three through Seven of the Complaint assert claims based upon theories of tort

and contract law. As discussed above, since the Commission does not have jurisdiction to adjudicate

claims based upon theories of tort and contract law, we find that Counts Three through Seven should

be dismissed.20

17 35.

18

19

20

21

22

The Complaint asserts various claims against parties that are not public service

corporations, namely the Commission, Johnson International,2I and R&R.22 However, as the Munday

Group concedes, the Commission's jurisdiction to adjudicate complaints is limited to public service

corporations. Accordingly, we find that the Commission. Johnson International, and R&R should be

dismissed as Respondents to the Complaint. Since Johnson Utilities is the only remaining Respondent

to this proceeding, we also find that Count Eight (asserting .joint and several liability amongst all

23

24

25

26

27

28

17ld. at 432, 586 P.2d at 993. The Arizona Supreme Court has also held that "the construction and validity of a contract are

judicial functions for the courts, not the Commission." ld. at 431 586 P.2d at 992, citing Trice Eleclric Cooperative v.

Ra/sion, 67 Ariz. 358. 196 p.2d 470(l948).

is The Complaint contains the signatures of thirty-two water and wastewater customers of Johnson Utilities.

19 The Munday Group's requests for treble damages and attorneys fees under the RICO statute are also dismissed.

20 The Munday Group's request for damages (punitive or compensatory) is also dismissed.

Eu Johnson lntemational is an affiliate of Johnson Utilities, but is not a public service corporation regulated by the

Commission.

22 R&R is affiliated with James Norton, a defendant in the federal trial. but is not a public service corporation regulated by

the Commission.

76467

7 DECISION no.

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DOCKET NO. WS-02987A-17-0192 

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Respondents) is moot, and should therefore be dismissed. 

36. The Munday Group requests that Count One be stayed pending the earlier of a guilty 

plea by one of the defendants in the federal trial, or the conclusion of that trial. However, we find that 

a more prudent course of action would be to stay Count One until all appeals, if any, have been 

exhausted, so that there is finality to the results of the federal trial. We also find that it is reasonable 

and appropriate to order the Munday Group to file notice in this docket once the federal trial has 

concluded, and all appeals, if any, have been exhausted. 

CONCLUSIONS OF LAW 

1. Johnson Utilities, LLC is a public service corporation within the meaning of Article XV 

of the Arizona Constitution and A.R.S. § 40-246. 

2. The Commission has jurisdiction over Johnson Utilities, LLC and the subject matter of 

this docket. 

3. No evidence has been presented in this matter and the allegations contained in the 

Formal Complaint have not yet been adjudicated. 

4. As discussed herein, the Formal Complaint in its entirety should be dismissed, with 

prejudice, as to the Arizona Corporation Commission, Johnson International, Inc., and R&R Partners. 

Inc. 

5. As discussed herein, Counts Two through Eight of the Formal Complaint should be 

dismissed, with prejudice. 

ORDER 

IT IS THEREFORE ORDERED that the Formal Complaint is hereby dismissed, with 

prejudice, as to Respondent Arizona Corporation Commission, Respondent Johnson 

International, Inc., and Respondent MR Partners, Inc. 

IT IS FURTHER ORDERED that the Formal Complaint is hereby dismissed, with prejudice 

as to Counts Two through Eight. 

IT IS FURTHER ORDERED that the Formal Complaint is hereby stayed, as to Count One 

against Johnson Utilities, LLC. 

IT IS FURTHER ORDERED that Complainants and Respondent Johnson Utilities, LLC shall 

8 

76467 

DECISION NO. 

DOCKET no. WS-02987A-17-0192

1

2

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6

Respondents) is moot, and should therefore be dismissed.

36. The Munday Group requests that Count One be stayed pending the earlier of a guilty

plea by one of the defendants in the federal trial, or the conclusion of that trial. However, we find that

a more prudent course of action would be to stay Count One until all appeals, if any, have been

exhausted, so that there is finality to the results of the federal trial. We also find that it is reasonable

and appropriate to order the Munday Group to file notice in this docket once the federal trial has

7 concluded. and all appeals, if any, have been exhausted.

8 CONCLUSIONS OF LAW

9 l. Johnson Utilities, LLC is a public service corporation within the meaning of Article XV

10 of the Arizona Constitution and A.R.S. §40-246.

The Commission has jurisdiction over Johnson Utilities, LLC and the subject matter of

13

ll 2.

12 this docket.

3. No evidence has been presented in this matter and the allegations contained in the

14 Formal Complaint have not yet been adjudicated.

15 4. As discussed herein, the Formal Complaint in its entirety should be dismissed, with

16 prejudice, as to the Arizona Corporation Commission, Johnson International, Inc., and R&R Partners,

17 Inc.

18 5. As discussed herein, Counts Two through Eight of the Formal Complaint should be

19 dismissed. with prejudice.

26

20 ORDER

21 IT IS THEREFORE ORDERED that the Formal Complaint is hereby dismissed, with

22 prejudice, as to Respondent Arizona Corporation Commission, Respondent Johnson

23 International, Inc., and Respondent R&R Partners, Inc.

24 IT IS FURTHER ORDERED that the Formal Complaint is hereby dismissed, with prejudice

25 as to Counts Two through Eight.

IT IS FURTHER ORDERED that the Formal Complaint is hereby stayed. as to Count One

27 against Johnson Utilities, LLC.

28 IT IS FURTHER ORDERED that Complainants and Respondent Johnson Utilities, LLC shall

76467

8 DECISION no.

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 27 of 51
DOCKET NO. WS-02987A-17-0192 

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file with Docket Control a joint status report on the proceedings in United States v. Pierce, et aL, CR17-00713-PHX-JJT (D. Ariz. May 23, 2017) within ten (10) calendar days after that matter is resolved. 

IT IS FURTHER ORDERED that Complainants shall file with Docket Control, as a 

compliance item in this docket, notice once all criminal proceedings involving the indictment of former 

Commissioner Gary Pierce have concluded, and all appeals, if any, have been exhausted. The notice 

shall also include a statement indicating whether the Complainants would like to proceed with their 

Formal Complaint. 

IT IS FURTHER ORDERED that this Decision shall become effective immediately. 

BY ORDER OF THE ARIZONA CORPORATION COMMISSION. 

COMMISSIONER DUNN 

COMMISSIONER TOBIN CO IONER OLSO OMMISSIONER B RNS 

DISSENT 

DISSENT 

SMH/rt 

IN WITNESS WHEREOF, I, TED VOGT, Executive Director of 

the Arizona Corporation Commission, have hereunto set my 

hand and caused the official seal of the Commission to be affixed 

at the c4pitol, in the City of Phoenix, this 44% day 

of pin vt.ht 2017. 

TED VOGT 

EXECUTIVE DIRECTOR 

9 DECISION NO. 

76467 

DOCKET no. WS-02987A-l 7-0192

l file with Docket Control adjoint status report on the proceedings in United States v. Pierce et al., CR2 17-00713~PHX-JJT (D. Ariz. May 23, 2017) within ten (10) calendar days after that matter is resolved.

3 IT IS FURTHER O RDERED th at Complainants shall file with Docket Control, as a

4 compliance item in this docket, notice once all criminal proceedings involving the indictment of former

5 Commissioner Gary Pierce have concluded, and all appeals, if any, have been exhausted. The notice

6 shall also include a statement indicating whether the Complainants would like to proceed with their

/

CHAIRMAN RESE COMMISSIONER DUNN

4

CO IONER OLSO

24

COMMISSIONER BURNS

IN WITNESS WI IEREOF, 1, TED VOGT, Executive Director of

the Arizona Corporation Commission, have hereunto set my

hand and caused the official seal of the Commission to be affixed

at the C , in the City of Phoenix, this I 'I "* day

of 2017.

piton

I\70v¢h*~4¢/

TED VOGT

EXECUTIVE DIRECTOR

DISSENT

SMH/rt

7 Formal Complaint.

8 IT IS FURTHER ORDERED that this Decision shall become effective immediately.

9 BY ORDER OF THE ARIZONA CORPORATION COMMISSION.

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14 COMMISSIONER TOBIN

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22 DISSENT

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76467

9 DECISION no.

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 28 of 51
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SERVICE LIST FOR: DELTON MUNDAY, ET AL. v. JOHNSON 

UTILITIES, LLC 

DOCKET NO.: 

B. Lance Entrekin 

THE ENTREKIN LAW FIRM 

5343 North 16th Street 

Phoenix, AZ 85016 

Attorneys for the Munday Group 

lance a entrekinlaw.com 

administratord:entrekinlaw.com 

Consented to Service by Email 

Gary Drummond 

5230 E. Shea Boulevard, Suite 200 

Scottsdale, AZ 85254 

Daniel E. Fredenberg 

Christian C. M. Beams 

Catherine S. Adams 

FREDENBERG BEAMS 

4747 N. 7th Street, Suite 402 

Phoenix, AZ 85014 

Attorneys for Johnson Utilities, LLC and 

Johnson International, Inc. 

Michael S. Rubin 

DICKINSON WRIGHT PLLC 

1850 N. Central Avenue, Suite 1400 

Phoenix, AZ 85004 

Attorneys for R&R Partners, Inc. 

Mitubin:iidickinson-wright.com 

Consented to Service by Email 

WS-02987A-17-0192 

Andy Kvesic, Director 

Legal Division 

ARIZONA CORPORATION COMMISSION 

1200 West Washington Street 

Phoenix, AZ 85007 

Legall)i\ a anc.$2()\ 

utildivservicebvemail(a,azcc.um 

Consented to Service by Email 

10 DECISION NO. 

76/167 

SERVICE LIST FOR: DELTON MUNDAY, ET AL. v. JOHNSON

UTILITIES, LLC

WS-02987A-17-0192

4

1

2 DOCKET NO.:

3 B. Lance Entrekin

THE ENTREKIN LAW FIRM

5343 North 16th Street

5 Phoenix, AZ 85016

Attorneys for the Munday Group

6 .lance((cntrckin1uw.com

7 administrator"acntrckin1z1w.com

Consented to Service b Email

8

9

Gary Drummond

5230 E. Shea Boulevard, Suite 200

Scottsdale, AZ 85254

10

ll

12

13

14

Daniel E. Freudenberg

Christian C. M. Beams

Catherine S. Adams

FREDENBERG BEAMS

4747 N. 7th Street, Suite 402

Phoenix, AZ 85014

Attorneys tor Johnson Utilities, LLC and

Johnson International. Inc. 15

16

17

18

19

Michael S. Rubin

DICKINSON WRIGHT PLLC

1850 N. Central Avenue, Suite 1400

Phoenix, AZ 85004

Attorneys for R&R Partners, Inc.

\1Ruhin Z/dickinson-wris1ht.com

Consented to Service b Email

20

21

22

23

Andy Kvesic, Director

Legal Division

ARIZONA CORPORATION COMMISSION

1200 West Washington Street

Phoenix, AZ 85007

l.cuz\1l)i\ al 11464

ulildivscrx icon cmnil21 tn/ccum

24 Consented to Service b Email

25

26

27

28

76467

10 DECISION no.

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 29 of 51
SERVICE LIST FOR: DELTON MUNDAY, ET AL. v. JOHNSON 

UTILITIES, LLC 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

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21 

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24 

25 

26 

27 

28 

DOCKET NO.: 

B. Lance Entrekin 

THE ENTREKIN LAW FIRM 

5343 North 16th Street 

Phoenix, AZ 85016 

Attorneys for the Munday Group 

I ance(frentrek in law.com 

administrator(dentrekinlaw.com 

Consented to Service by Email 

Gary Drummond 

5230 E. Shea Boulevard, Suite 200 

Scottsdale, AZ 85254 

Daniel E. Fredenberg 

Christian C. M. Beams 

Catherine S. Adams 

FREDENBERG BEAMS 

4747 N. 7th Street, Suite 402 

Phoenix, AZ 85014 

Attorneys for Johnson Utilities, LLC and 

Johnson International, Inc. 

Michael S. Rubin 

DICKINSON WRIGHT PLLC 

1850 N. Central Avenue, Suite 1400 

Phoenix, AZ 85004 

Attorneys for R&R Partners, Inc. 

MRubiradickinson-wright.com 

Consented to Service by Email 

WS-02987A-17-0192 

Andy Kvesic, Director 

Legal Division 

ARIZONA CORPORATION COMMISSION 

1200 West Washington Street 

Phoenix, AZ 85007 

I .egalDiv@azcc.gov 

uti ldivservicebyemail'ri;anc.gov 

Consented to Service by Email 

76467 

11 DECISION NO. 

SERVICE LIST FOR: DELTON MUNDAY, ET AL. v. JOHNSON

UTILITIES, LLC

WS-02987A-17-0192

( .

B. Lance Entrekin

THE ENTR EK I N LAW FI R M

5343 North 16'h Street

Phoenix, AZ 85016

Attorneys for the Munday Group

1ance'acntickinlauzcom

administrator aentrekin1aw.co1n

1

2 DOCKETNO.:

3

4

5

6

7

Consented to Service b Email

8

9

Gary Drummond

5230 E. Shea Boulevard, Suite 200

Scottsdale, AZ 85254

10

11

12

Daniel E. Freudenberg

Christian C. M. Beams

Catherine S. Adams

FREDENBERG BEAMS

la 4747 N. 7th Street, Suite 402

Phoenix, AZ 85014

14 Attorneys for Johnson Utilities, LLC and

Johnson International, Inc.

15

16

17

18

Michael S. Rubin

DICKINSON WRIGHT PLLC

1850 N. Central Avenue, Suite 1400

Phoenix, AZ 85004

Attorneys for R&R Partners, Inc.

Mu1winjudl tso1i-"right.com

19 Consented to Service b Email

20

21

22

23

Andy Kvesic, Director

Legal Division

AR I ZONA COR POR ATI ON COMMI S S I ON

1200 West Washington Street

Phoenix, AZ 85007

LCL'ZllDlV{(I8E1ZCC.QOV

utildivservicehvcmail'ri?azcc.uov

Consented to Service b Emai l 24

25

26

27

28

76467

11 DECISION no.

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 30 of 51
EXHIBIT 9 

EXHIBIT 9 

EXHIBIT 9

 

EXHIBIT 9 

 

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 31 of 51
OR I INAL NEW APPLICATION 

BEFORE THE ARIZONAMMFATIC 

AZ CORP 

COMMISSIONERS COMMISSION 

2 COCKET COUTRot 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

TOM FORESE, Chairman 

BOB BURNS 

ANDY TOBIN 

BOYD DUNN 

JUSTIN OLSON 

LA DEC 29 r) n't 

IN THE MATTER OF THE APPLICATION 

OF JOHNSON UTILITIES, L.L.C., FOR A 

DETERMINATION OF THE FAIR VALUE 

OF ITS WATER AND WASTEWATER 

UTILITY PLANT AND PROPERTY, FOR 

INCREASES IN ITS RATES AND CHARGES 

FOR WATER AND WASTEWATER 

UTILITY SERVICE, AND FOR RELATED 

APPROVALS. 

1(1,111 illl II) 

WS-02987A-17-0392 

DOCKET NO. WS-02987A-17-

APPLICATION 

Arizona Corporation Commission 

DOCKETED 

DEC 2 9 2017 

Johnson Utilities, L.L.C. ("Johnson Utilities" or the "Company") hereby applies 

for an order establishing the fair value of its plant and property used for the provision of 

14 water utility service and wastewater utility service, and for permanent increases in its rates 

15 and charges for water utility service and wastewater utility service as described in this 

16 application ("Application") and the accompanying attachments. In support thereof, 

17 Johnson Utilities states as follows: 

18 1. Johnson Utilities is an Arizona public service corporation engaged in 

19 providing water and wastewater utility services in portions of Pinal County, Arizona, 

20 pursuant to certificates of convenience and necessity granted by the Arizona Corporation 

21 Commission ("Commission") in Decision 60223 (May 27, 1997) and extended in 

22 subsequent dockets. As of the test year period which ended June 30, 2017, Johnson 

23 Utilities was providing water service to approximately 25,615 service connections and 

24 wastewater service to approximately 35,320 sewer laterals. The Company's wastewater 

25 CC&N is larger than its water CC&N which largely accounts for the difference in service 

26 connections. 

27 2. For purposes of Arizona Administrative Code ("A.A.C.") R14-2-

28 103(A)(3)(q), Johnson Utilities is classified as a Class "A" utility for both its water and 

OR INAL IIIUNIIUNI UI!! UIIHH UH ll y y1144414434 III

COMMISSIONERS

N EW IWPLICATIO N

BEFORE THE AR1zonAl¢;QgRQ§AT1o

A

288§a°851»¢48§¢o~

2311 [FC 29 I 9: FH,

WS-02987A-17-0392

TOM FORESE, Chairman

BOB BURNS

ANDY TOBIN

BOYD DUNN

JUSTIN OLSON

DOCKET no. WS-02987A-l7-

APPLICATION

Arizona Corporation Cumnnission

DOCKE TE D

[N THE MATTER OF THE APPLICATION

OF JOHNSON UTILITIES, L.L.C., FOR A

DETERMINATION OF THE FAIR VALUE

OF ITS W ATER AND W ASTEW ATER

UTILITY PLANT AND PROPERTY, FOR

INCREASES IN ITS RATES AND CHARGES

FOR WATER AND WASTEWATER

UTILITY SERVICE, AND FOR RELATED

APPROVALS. DEc 292m7

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12 Johnson Utilities, L.L.C. ("Johnson Utilities" or the "Company") hereby applies

13 for an order establishing the fair value of its plant and property used for the provision of

14 water utility service and wastewater utility service, and for permanent increases in its rates

15 and charges for water utility service and wastewater utility service as described in this

16 application ("Application") and the accompanying attachments. In support thereof,

17 Johnson Utilities states as follows:

18 l . Johnson Utilities is an Arizona public service corporation engaged in

19 providing water and wastewater utility services in portions of Pinal County, Arizona,

20 pursuant to certificates of convenience and necessity granted by the Arizona Corporation

21 Commission ("Commission") in Decision 60223 (May 27, 1997) and extended in

22 subsequent dockets. As of the test year period which ended June 30, 2017, Johnson

23 Utilities was providing water service to approximately 25,615 service connections and

24 wastewater service to approximately 35,320 sewer laterals. The Company's wastewater

25 CC&N is larger than its water CC&N which largely accounts for the difference in service

26 connections.

27 For purposes of Arizona Administrative Code ("A.A.C.") Rl4-2-

28 l03(A)(3)(q), Johnson Utilities is classified as a Class utility for both its water and

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 32 of 51
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wastewater divisions. 

3. Johnson Utilities' business office is located at 5230 E. Shea Boulevard, 

Suite 200 Scottsdale, Arizona 85254 and its telephone number is (480) 998-3300. 

4. The Company's primary management contact is Brad Cole. Mr. Cole is the 

Chief Operating Officer of Hunt MGT, L.L.C. ("Hunt Management"). Hunt Management 

has a management services agreement whereby it provides Johnson Utilities with certified 

operators, field technicians, laborers, customer service personnel, meter reading personnel, 

billing and collection personnel, bookkeeping and accounting personnel, as well as various 

other services. Mr. Cole oversees the provision of employees and services to Johnson 

Utilities on behalf of Hunt Management. 

5. The person responsible for overseeing and directing the conduct of this rate 

application is Mr. Cole. Mr. Cole will be assisted by the Company's rate case consultant, 

Thomas J. Bourassa, and by counsel undersigned. Mr. Cole's mailing address is 5310 E. 

Shea Boulevard, Suite 2, Scottsdale, Arizona 85254; his telephone number is (480) 998-

3300; and his e-mail address is bcole@azvision.net. Mr. Bourassa's mailing address is 139 

W. Wood Drive, Phoenix, Arizona 85029; his telephone number is (602) 246-7150; and 

his e-mail address is Qbll4@cox.net. All discovery, data requests and other requests for 

information concerning this Application should be directed to Messrs. Cole and Bourassa 

via e-mail, with a copy to counsel undersigned at jeff@jeffcrockettlaw.com and a copy to 

Gary Drummond, General Manager of Johnson Utilities, at gdrummond@azvision.net.

6. Johnson Utilities' current rates and charges for utility service were approved 

by the Commission in Decision 71854 (August 25, 2010), as amended by Decisions 71910 

(September 28, 2010), 72089 (January 20, 2011), 72579 (September 15, 2011), 73284 (July 

30, 2012), 73617 (December 12, 2012), 73992 (July 16, 2013), 74695 (August 12, 2014), 

74701 (August 21, 2014), 75129 (June 26, 2015), using a test year ended December 

31,2007. 

7. Increases in the Company's operating expenses have outpaced increases in 

revenues since the last rate case. Thus, Johnson Utilities is requesting rate increases for 

- 2 - 

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wastewater divisions.

2 Johnson Utilities' business office is located at 5230 E. Shea Boulevard,

3 Suite 200 Scottsdale, Arizona 85254 and its telephone number is (480) 998-3300.

4 4. The Company's primary management contact is Brad Cole. Mr. Cole is the

5 Chief Operating Officer of Hunt MGT, L.L.C. Hunt Management"). Hunt Management

6 has a management services agreement whereby it provides Johnson Utilities with certified

7 operators, field technicians, laborers, customer service personnel, meter reading personnel,

8 billing and collection personnel, bookkeeping and accounting personnel, as well as various

9 other services. Mr. Cole oversees the provision of employees and services to Johnson

10 Utilities on behalf of Hunt Management.

1 I 5. The person responsible for overseeing and directing the conduct of this rate

12 application is Mr. Cole. Mr. Cole will be assisted by the Company's rate case consultant,

13 Thomas J. Bourassa, and by counsel undersigned. Mr. Cole's mailing address is 5310 E.

14 Shea Boulevard, Suite 2, Scottsdale, Arizona 85254; his telephone number is (480) 998-

15 3300, and his e-mail address is bcole@azvision.net. Mr. Bourassa's mailing address is 139

16 W. Wood Drive, Phoenix, Arizona 85029, his telephone number is (602) 246-7150; and

17 his e-mail address is tibll4@cox.net. All discovery, data requests and other requests for

l g information concerning this Application should be directed to Messrs. Cole and Bourassa

19 via e-mail, with a copy to counsel undersigned at jeff@jeffcrockettlaw.com and a copy to

20 Gary Drummond, General Manager of Johnson Utilities, at gdrummond@azvision.net.

21 6. Johnson Utilities' current rates and charges for utility service were approved

22 by the Commission in Decision 71854 (August 25, 2010), as amended by Decisions 71910

23 (September 28, 2010), 72089 (January20, 2011), 72579 (September 15, 2011), 73284 (July

24 30, 2012), 73617 (December 12, 2012), 73992 (July 16, 2013), 74695 (August 12, 2014),

25 74701 (August 21, 2014), 75129 (June 26, 2015), using a test year ended December

26 31,2007.

27 7. Increases in the Company's operating expenses have outpaced increases in

28 revenues since the last rate case. Thus, Johnson Utilities is requesting rate increases for

-2-

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 33 of 51
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both its water and wastewater divisions. Because the rate bases for the water and 

wastewater divisions are both negative, a rate of return approach is not appropriate. 

Accordingly, the revenue requirements were determined based on an operating margin 

approach rather than a cost of capital approach. The Company is proposing a 10.0% 

operating margin for both the water and wastewater divisions. 

8. The Company agrees to use its original cost rate base as its fair value rate 

base in this proceeding to minimize disputes and reduce rate case expense. 

9. Filed with this Application and included in the Direct Testimony of Thomas 

J. Bourassa are the schedules required pursuant to A.A.C. R14-2-103 for a rate application 

by a Class "A" utility. The test year utilized by Johnson Utilities in connection with the 

preparation of the rate schedules is the 12-month period ended June 30, 2017, as required 

by Decision 76336 in Docket WS-02987A-08-0180. Johnson Utilities requests that the 

Commission utilize this test year in connection with this Application, with appropriate 

adjustments to obtain a normal and more realistic relationship between revenues, rate base 

and expenses during the period in which the rates will be in effect. 

10. During the test year, Johnson Utilities' adjusted gross revenues from the 

water division were $11,675,735. The adjusted operating income from the water division 

was $(552,056), or an adjusted operating margin of negative 4.73%, leading to an operating 

income deficiency of $1,986,169 based upon a 10% operating margin. The adjusted fair 

value rate base is $(102,398). Johnson Utilities requests to increase revenues by 

approximately $2,665,399 to provide a 10.0% operating margin for the water division, 

which is a 22.83% increase over the adjusted and annualized test year revenues. 

11. During the test year, Johnson Utilities' adjusted gross revenues from the 

wastewater division were $18,659,983. The adjusted operating income from the 

wastewater division was $(115,463), or an adjusted operating margin of negative 0.62%, 

leading to an operating income deficiency of $2,288,624 based upon a 10% operating 

margin. The adjusted fair value rate base is $(1,881,391). Johnson Utilities requests to 

increase revenues by approximately $3,071,633 to provide a 10.0% operating margin for 

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1 both its water and wastewater divisions. Because the rate bases for the water and

2 wastewater divisions are both negative, a rate of return approach is not appropriate.

3 Accordingly, the revenue requirements were determined based on an operating margin

4 approach rather than a cost of capital approach. The Company is proposing a 10.0%

5 operating margin for both the water and wastewater divisions.

6 8. The Company agrees to use its original cost rate base as its fair value rate

7 base in this proceeding to minimize disputes and reduce rate case expense.

8 9. Filed with this Application and included in the Direct Testimony of Thomas

9 J. Bourassa are the schedules required pursuant to A.A.C. R14-2-103 for a rate application

10 by a Class "A" utility. The test year utilized by Johnson Utilities in connection with the

11 preparation of the rate schedules is the 12-month period ended June 30, 2017, as required

12 by Decision 76336 in Docket WS-02987A-08-0180. Johnson Utilities requests that the

13 Commission utilize this test year in connection with this Application, with appropriate

14 adjustments to obtain a normal and more realistic relationship between revenues, rate base

15 and expenses during the period in which the rates will be in effect.

16 10. During the test year, Johnson Utilities' adjusted gross revenues from the

17 water division were $11,675,735. The adjusted operating income from the water division

l g was $(552,056), or an adjusted operating margin of negative 4.73%, leading to an operating

19 income deficiency of $1,986,169 based upon a 10% operating margin. The adjusted fair

20 value rate base is $(l02,398). Johnson Utilities requests to increase revenues by

21 approximately $2,665,399 to provide a 10.0% operating margin for the water division,

22 which is a 22.83% increase over the adjusted and annualized test year revenues.

23 l l . During the test year, Johnson Utilities' adjusted gross revenues from the

24 wastewater division were $l8,659,983. The adjusted operating income from the

25 wastewater division was $(l l5,463), or an adjusted operating margin of negative 0.62%,

26 leading to an operating income deficiency of $2,288,624 based upon a 10% operating

27 margin. The adjusted fair value rate base is $(l,88l,39l). Johnson Utilities requests to

28 increase revenues by approximately $3,071,633 to provide a 10.0% operating margin for

-3 -

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 34 of 51
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the wastewater division, which is a 16.46% increase over the adjusted and annualized test 

year revenues. 

12. As shown on Schedule H-2, page 1 for the water division, the present 

monthly bill for a 3/4-inch metered customer using an average of 6,380 gallons is $29.10. 

The proposed monthly bill for a 3/4-inch metered customer using an average of 6,380 

gallons would be $35.97, an increase of $6.87, or 23.62% above the present rates. In 

addition, the Company is proposing certain changes to its service line and meter installation 

charges, as well as changes to certain of its other miscellaneous charges. 

13. As shown on Schedule H-2, page 1 for the wastewater division, the present 

monthly bill for a residential wastewater customer is $40.98. The proposed monthly bill 

for a residential customer is $48.21, an increase of $7.23, or 17.64% above the present 

rates. The Company is also proposing changes to certain of its miscellaneous charges. 

14. Johnson Utilities submits that its current rates and are inadequate to allow 

the Company to obtain debt, maintain a sound credit rating, and/or enable the Company to 

attract additional capital on reasonable and acceptable terms in order to continue the 

investment in utility plant necessary to adequately serve customers. 

15. Attached to this Application as Attachment 1 are the water plant and 

wastewater plant descriptions for Johnson Utilities. 

16. Attached hereto as Attachment 2 are Johnson Utilities' completed water use 

data sheets for the Johnson Ranch water system (PWS 11-128) and Anthem at Merrill 

Ranch water system (PWS 11-136) for the test year. 

17. Filed in support of this Application as Attachment 3 is the Direct Testimony 

of Brad Cole, providing an overview of Johnson Utilities and its operations. 

18. Also filed in support of this Application as Attachment 4 is the Direct 

Testimony of Thomas J. Bourassa providing an overview of Johnson Utilities' rate 

application, discussing the revenue requirement, including the "A" through "F" schedules, 

describing the development of the rate base and income statement adjustments, discussing 

the proposed rates, including the "H" schedules, discussing the effects of the proposed 

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1 the wastewater division, which is a 16.46% increase over the adjusted and annualized test

2 year revenues.

3 12. As shown on Schedule H-2, page l for the water division, the present

4 monthly bill for a 3/4-inch metered customer using an average of 6,380 gallons is $29.10.

5 The proposed monthly bill for a 3/4-inch metered customer using an average of 6,380

6 gallons would be $35.97, an increase of $6.87, or 23.62% above the present rates. In

7 addition, the Company is proposing certain changes to its service line and meter installation

8 charges, as well as changes to certain of its other miscellaneous charges.

9 13. As shown on Schedule H-2, page l for the wastewater division, the present

10 monthly bill for a residential wastewater customer is $40.98. The proposed monthly bill

11 for a residential customer is $48.21, an increase of $7.23, or 17.64% above the present

12 rates. The Company is also proposing changes to certain of its miscellaneous charges.

13 . 14. Johnson Utilities submits that its current rates and are inadequate to allow

14 the Company to obtain debt, maintain a sound credit rating, and/or enable the Company to

15 attract additional capital on reasonable and acceptable terms in order to continue the

16 investment in utility plant necessary to adequately serve customers.

17 15. Attached to this Application as Attachment l are the water plant and

18 wastewater plant descriptions for Johnson Utilities.

19 16. Attached hereto as Attachment 2 are Johnson Utilities' completed water use

20 data sheets for the Johnson Ranch water system (PWS ll-128) and Anthem at Merrill

21 Ranch water system (PWS 11-136) for the test year.

22 17. Filed in support of this Application as Attachment 3 is the Direct Testimony

23 of Brad Cole, providing an overview of Johnson Utilities and its operations.

24 18. Also filed in support of this Application as Attachment 4 is the Direct

25 Testimony of Thomas J. Bourassa providing an overview of Johnson Utilities' rate

26 application, discussing the revenue requirement, including the "A" through "F" schedules,

27 describing the development of the rate base and income statement adjustments, discussing

28 the proposed rates, including the "H" schedules, discussing the effects of the proposed

-4-

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 35 of 51
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rates on customers' bills, and addressing the Company's request for (i) a Purchased Power 

Adjustment Mechanism ("PPAM") and (ii) a Property Tax Adjustment Mechanism 

("PTAM"). The Company is not submitting "G" Schedules as discussed in Mr. Bourassa's 

testimony 

19. Included in Mr. Cole's Direct Testimony as Exhibit Cole Direct 1 is a copy 

of the proposed plan of administration ("POA") for Johnson Utilities' requested PPAM. 

Included with Mr. Cole's Direct Testimony as Exhibit Cole Direct 2 is a copy of the 

proposed POA for Johnson Utilities' requested PTAM. 

WHEREFORE, Johnson Utilities requests the following relief: 

A. That the Commission, upon proper notice, conduct a hearing in accordance 

with A.R.S. § 40-251 and determine the fair value of Johnson Utilities' utility plant and 

property devoted to providing water utility service; 

B. That, based upon such determination, the Commission approve permanent 

adjustments to the rates and charges for water utility service and wastewater utility service 

provided by Johnson Utilities, as set forth herein; 

C. That the Commission approve Johnson Utilities' request for a PPAM and 

PTAM; and 

D. That the Commission authorize such other and further relief as may be 

appropriate. 

RESPECTFULLY submitted this 29' day of December, 2017. 

CROCKETT LAW GROUP PLLC 

Jeff tt, Esq. 

21.8 E. Camelback Road, Suite 305 

Phoenix, Arizona 85016 

Phone: (602) 441-2775 

E-mail: jeff@jefferockettlaw.com 

Attorney for Johnson Utilities, L.L.C. 

5 

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That the Commission authorize such other and further relief as may be

4 "vs"

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4 4 1 4 49\

I

B . I J

Jeff y . Cr tt, Esq.

21 8 E. Camelback Road, Suite 305

Phoenix, Arizona 85016

Phone: (602)441-2775

E-mail: ieff@jeffcrockettlaw.com

Attorney for Johnson Utilities,L.L.C.

1 rates on customers' bills, and addressing the Company's request for (i) a Purchased Power

2 Adjustment Mechanism ("PPAM") and (ii) a Property Tax Adjustment Mechanism

3 ("PTAM"). The Company is not submitting "G" Schedules as discussed in Mr. Bourassa's

4 testimony

5 19. Included in Mr. Cole's Direct Testimony as Exhibit Cole Direct 1 is a copy

6 of the proposed plan of administration ("POA") for Johnson Utilities' requested PPAM.

7 Included with Mr. Cole's Direct Testimony as Exhibit Cole Direct 2 is a copy of the

g proposed POA for Johnson Utilities' requested PTAM.

9 WHEREFORE, Johnson Utilities requests the following relief:

10 A. That the Commission, upon proper notice, conduct a hearing in accordance

11 with A.R.S. § 40-251 and determine the fair value of Johnson Utilities' utility plant and

IN properly devoted to providing water utility service,

13 B. That, based upon such determination, the Commission approve permanent

14 adjustments to the rates and charges for water utility service and wastewater utility service

IN provided by Johnson Utilities, as set forth herein,

16 C. That the Commission approve Johnson Utilities' request for a PPAM and

17 PTAM; and

18 D.

19 appropriate.

20 RESPECTFULLY submitted this 29th day of December, 2017.

21 CROCKETT LAW GROUP PLLC

22

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Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 36 of 51
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ORIGINAL and thirteen (13) copies filed 

this 29th day of December, 2017, with: 

Docket Control 

ARIZONA CORPORATION COMMISSION 

1200 W. Washington Street 

Phoenix, Arizona 85007 

6 

ORIGINAL and thirteen (13) copies filed

this 29th day of December, 2017, with:

1

2

Docket Control

3 ARIZONA CORPORATION COMMISSION

1200 W. Washington Street

4 Phoenix, Arizona 85007

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-6-

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 37 of 51
EXHIBIT 10 

EXHIBIT 10 

EXHIBIT 10

 EXHIBIT 10 

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 38 of 51
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BEFORE THE ARIZONA CORPORATION COMMISSION 

TOM FORESE 

Chairman 

BOB BURNS 

Commissioner 

ANDY TOBIN 

Commissioner 

BOYD DUNN 

Commissioner 

JUSTIN OLSON 

Commissioner 

Arizona Corporation Commission 

DOCKETED 

SEP 2 0 2018 

DONIEVED 

IN THE MATTER OF THE APPLICATION 

OF JOHNSON UTILITIES, L.L.0 FOR A 

DETERMINATION OF THE FAIR VALUE 

OF ITS WATER AND WASTEWATER 

UTILITY PLANT AND PROPERTY, FOR 

INCREASES IN ITS RATES AND 

CHARGES FOR WATER AND 

WASTEWATER UTILITY SERVICE, AND 

FOR RELATED APPROVALS. 

Open Meeting 

September 11, 2018 

Phoenix, Arizona 

BY THE COMMISSION: 

DOCKET NO. WS-02987A-17-0392 

DECISION NO. 76889 

ORDER 

DISCONTINUED INCOME TAX 

EXPENSE RECOVERY IN 

COMMISSION AUTHORIZED WATER 

AND WASTEWATER DIVISIONS 

REVENUE REQUIREMENTS, 

PURSUANT TO DECISION NOS. 71854, 

72579, 73992, 74695 

• • 

Having considered the entire record herein and being fully advised in the premises, the Arizona 

Corporation Commission ("Commission") finds, concludes and orders that: 

FINDINGS OF FACT 

1. On August 24, 2010, the Arizona Corporation Commission ('Commission") 

approved Decision No. 71854, which established rates for the Johnson water and wastewater 

divisions. The decision authorized a revenue requirement for the water division of $9,773,939 and 

for the wastewater division of $9,686,995. The revenue requirements as authorized in this decision, 

did not include the recovery of income tax expense for either division, which the Company had 

requested in its application. 

4

lm I!11ll1l¥l31 QUO un llllllllIIMIIIIIIIIIII Ill

BEFORE T H E ARIZONA CORPORATION COMMISSION

Arizona Corporation Commission

DOCKETED

SEP 2 0 2018

Doanaens

l

2 TOM FORESE

Chairman

3 BOB BURNS

Commissioner

4 ANDY TOBIN

Commissioner

5 BOYD DUNN

Commissioner

6 JUSTIN OLSON

Commissioner

3

IN THE MATTER OF THE APPLICATION

OF JOHNSON UTILITIES, L.L.C FOR A

DETERMINATION OF THE FAIR VALUE

OF ITS WATER AND WASTEWATER

UTILITY PLANT AND PROPERTY, FOR

INCREASES IN ITS RATES AND

CHARGES FOR WATER AND

WASTEWATER UTILITY SERVICE, AND

FOR RELATED APPROVALS.

DISCONTINUED INCOME TAX

EXPENSE RECOVERY IN

COMMISSION AUTHORIZED WATER

AND WASTEWATER DIVISIONS

REVENUE REQUIREMENTS,

PURSUANT TO DECISION nos. 71854,

72579, 73992, 74695

Open Meeting

September l l, 2018

Phoenix, Arizona

* 4 * * 1 ¢ s *

7

8 DOCKET no. WS-02987A-l 7-0392

9 DECISION no. 76889

10 ORDER

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18 BY THE COMMISSION:

19 * *

20 Having considered the entire record herein and being fully advised in the premises, the Arizona

21 Corporation Commission ("Commission") finds, concludes and orders that:

22 FINDINGS OF FACT

23 1. On August 24, 2010, the Arizona Corporation Commission ("Commission")

24 approved Decision No. 71854. which established rates for the Johnson water and wastewater

25 divisions. The decision authorized a revenue requirement for the water division of $9,773,939 and

26 for the wastewater division of $9,686,995. The revenue requirements as authorized in this decision,

27 did not include the recovery of income tax expense for either division, which the Company had

28 requested in its application.

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 39 of 51
Pane 2 Docket No. WS-02987A-17-0392 

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On September 15, 2011, the Commission issued Decision No. 72579, that reopened 

Decision No. 71854 and allowed the Company: 

a. To change the wastewater late fee from $40 per month to 1.5% per month. 

b. To add back to rate base $18,244,755 in disallowed plant, which includes the 

$10,892,39 disallowance for inadequately supported plant and the $7,352,364 

disallowance related to affiliate profit. 

c. To reinstate the hook-up fee tariffs for water and wastewater divisions. 

d. An 8.0 percent rate of return for the wastewater division. 

e. To request income tax expense prospectively in a future A.R.S. 40-252 

Petition if the Commission changes its policy relating to imputed income tax 

expense. 

3. These modifications resulted in a revenue requirement of $11,591,861 for the 

wastewater division, which is an increase of $1,904,866 over the $9,686,995 authorized in Decision 

No. 71854. 

4. On February 21, 2013, the Commission issued Decision No. 73379 that allowed for 

income taxes to be calculated at the lower of (i) the income tax allowance using the weighted average 

effective tax rate for the combined ownership: and (ii) the income tax allowance assuming the tax 

pass-through entity is a stand-alone Subchapter C corporation, for pass-through entities. 

5. On March 8, 2013, the Company filed a petition to amend Decision No. 71854. The 

Company included schedules that appropriately fulfilled the income tax policy requirements and the 

resulting recognition of an income tax allowance. Staff confirmed the calculations and agreed that 

the Company sought to collect for income taxes using the lower of the two approved methods for 

pass-through income taxes. The increase to the revenue requirement for the water division was 

$125.071. and the increase to the revenue requirement for the wastewater division was $747.274. 

6. On July 16. 2013, the Commission issued Decision No. 73992, that determined that 

the Company complied with the Commission's new policy and adopted the new rates, with a 

conclusion that they resulted in just and reasonable rates. The Commission also approved a 

Decision No. 76889 

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Page 2 Docket No. WS-02987A- l7-0392

2. On September 15, 201 l, the Commission issued Decision No. 72579, that reopened

Decision No. 71854 and allowed the Company:

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To change the wastewater late fee from $40 per month to 1.5% per month.

To add back to rate base $18,244,755 in disallowed plant, which includes the

$ l 0,892,39 disallowance for inadequately supported plant and the $7,352,364

disallowance related to affiliate profit.

To reinstate the hook-up fee tariffs for water and wastewater divisions.

An 8.0 percent rate of return for the wastewater division.

e. To request income tax expense prospectively in a future A.R.S. 40-252

Petition if the Commission changes its policy relating to imputed income tax

3.

expense.

These modifications resulted in a revenue requirement of $1 1,591,861 for the

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14 wastewater division, which is an increase of $1 ,904,866 over the $9,686,995 authorized in Decision

On February 21, 2013, the Commission issued Decision No. 73379 that allowed for

income taxes to be calculated at the lower ot(i) the income tax allowance using the weighted average

effective tax rate for the combined ownership, and (ii) the income tax allowance assuming the tax

pass-through entity is a stand-alone Subchapter C corporation, for pass-through entities.

On March 8, 2013, the Company filed a petition to amend Decision No. 71854. The

Company included schedules that appropriately fulfilled the income tax policy requirements and the

resulting recognition of an income tax allowance. Staff confirmed the calculations and agreed that

the Company sought to collect for income taxes using the lower of the two approved methods for

pass-through income taxes. The increase to the revenue requirement for the water division was

$125,071 . and the increase to the revenue requirement for the wastewater division was $747.274.

6. On July 16, 2013, the Commission issued Decision No. 73992, that determined that

the Company complied with the Commission's new policy and adopted the new rates, with a

15 No. 71854.

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28 conclusion that they resulted in just and reasonable rates. The Commission also approved a

76889 Decision No.

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 40 of 51
Pace 3 Docket No. WS-02987A-17-0392 

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requirement that Johnson file a full rate case for its water and wastewater divisions by no later than 

June 30. 2015, using a 2014 calendar year test year. 

7. On April 4, 2013, the Residential Utility Consumer Office ("RUCO") filed a 

Response to the Petition, filed by the Company on March 8, 2013, objecting to the Company's 

recovery of income tax expense and to the methodology proposed for calculating the expense 

amount. RUCO claimed that the manner in which Decision No. 73992 imputes the income tax 

expense is arbitrary, capricious, and an abuse of discretion, because the expense amount is not based 

on the Company shareholders' actual income taxes. Ultimately the Company and RUCO settled. 

Staff opposed the settlement agreement and was not a signatory. 

8. On August 12, 2014, in Decision No. 74695. the Commission approved the 

settlement agreement between the Company and RUCO, which included the following provisions: 

1 ) to decrease the Company's wastewater rates to reflect a reduction in the imputed income tax rate 

from 36.6558 percent to 25 percent. which resulted in an approximately $286,000 decrease; 2) to 

require Johnson to file a full rate case no later than June 30, 2016. using a 2015 calendar test year; 

and 3) to require Johnson to tile a yearly earnings reports, using a prescribed form. 

9. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 ("Tax Act- ) was signed 

into law. The Tax Act impacted regulated utilities in several ways, among them was that it reduced 

the federal corporate income tax rates to a flat rate of 21 percent, effective January 1. 2018. In 

anticipation of the Tax Act, the Commission opened Docket No. AU-00000A-17-0379, on 

December 20, 2017. On December 22, 2017, the Commission's Utilities Division Staff ("Staff') 

sent a letter to all regulated utilities in Arizona that asked two questions: 1) Do the current 

Commission-approved rates being charged to ratepayers include the recovery of federal income 

taxes. and 2) if the answer to Question No. 1 is "Yes", please submit a detailed plan explaining how 

you intend to assure the timely pass through to ratepayers of all resulting revenue requirement 

implications accompanying this Legislation.-

10. On January 31. 2018. the Commission held a workshop to discuss the impact of the 

Legislation on existing and future rates. On February 26, 2018. the Commission issued Decision 

No. 76595, which required that Class A. B. and C utilities apply regulatory accounting treatment to 

Decision No. 76889 

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Page 3 Docket No. WS-02987A-I 7-0392

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requirement that Johnson file a full rate case for its water and wastewater divisions by no later than

June 30, 2015, using a 2014 calendar year test year.

7. On April 4, 2013, the Residential Utility Consumer Office RUCO") filed a

Response to the Petition, filed by the Company on March 8, 2013, objecting to the Company's

recovery of income tax expense and to the methodology proposed for calculating the expense

amount. RUCO claimed that the manner in which Decision No. 73992 imputes the income tax

expense is arbitrary, capricious, and an abuse of discretion, because the expense amount is not based

on the Company shareholders' actual income taxes. Ultimately the Company and RUCO settled.

Staff opposed the settlement agreement and was not a signatory.

8. On August 12, 2014, in Decision No. 74695, the Commission approved the

settlement agreement between the Company and RUCO, which included the following provisions:

12 l) to decrease the Company's wastewater rates to reflect a reduction in the imputed income tax rate

13 from 36.6558 percent to 25 percent, which resulted in an approximately $286,000 decrease, 2) to

14 require Johnson to file a full rate case no later than June 30, 2016, using a 2015 calendar test year,

15 and 3) to require Johnson to File a yearly earnings reports, using a prescribed form.

9. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 ("Tax Act") was signed

In

taxes, and 2) if the answer to Question No. l is "Yes",

16

17 into law. The Tax Act impacted regulated utilities in several ways, among them was that it reduced

18 the federal corporate income tax rates to a flat rate of 21 percent, effective January l. 2018.

19 anticipation of the Tax Act, the Commission opened Docket No. AU-00000A-l 7-0379, on

20 December 20, 2017. On December 22. 2017, the Commission's Utilities Division Staff ("Staff")

21 sent a letter to all regulated utilities in Arizona that asked two questions: l) Do the current

22 Commission-approved rates being charged to ratepayers include the recovery of federal income

23 please submit a detailed plan explaining how

24 you intend to assure the timely pass through to ratepayers of all resulting revenue requirement

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implications accompanying this Legislation."

10. On January 3 l, 2018, the Commission held a workshop to discuss the impact of the

27 Legislation on existing and future rates. On February 26, 2018, the Commission issued Decision

28 No. 76595, which required that Class A, B, and C utilities apply regulatory accounting treatment to

Decision No. 76889

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 41 of 51
Page 4 Docket No. WS-02987A-17-0392 

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account for the impact of the Tax Act as of January 1, 2018, by either: a) applying for a tax expense 

adjustor mechanism within 60 days, b) filing an intent to file a rate case within 90 days, or c) filing 

any other such application to address the ratemaking implications of the Tax Act within 60 days. 

11. On March 29, 2018, the Commission issued Decision No. 76631, that updated the 

Tax Policy adopted in Decision No. 73739, and accordingly, the Commission no longer allows 

recovery of income tax expense recovery for Class A through Class C pass-through entities. 

12. On December 29, 2017, Johnson filed a rate application as directed by the 

Commission. It was the Company's intention that the income tax issue be resolved within the rate 

case. On March 1, 2018, Johnson filed a Motion for Continuance and Stay requesting that the rate 

case proceeding be stayed pending a final determination in United States v. Gary Leonard Pierce, et 

al., Case No. CR-17-00713-001-PHX-JJT. The requirement of the parties to provide written 

testimony was suspended until further order of the Commission. Additionally, the Company's 

Motion for Continuance and Stay was held in abeyance pending the outcome of the Complaint and 

Order to Show Cause proceeding against Johnson Utilities in Docket No. WS-02987A-18-0050. 

13. On January 18, 2018, the Company responded to the questions posed by Commission 

Staff on December 22. 2017, indicating that its current rates do include recovery of income taxes at 

a level higher than new flat federal tax rate of 21 percent resulting from the Tax Act of 2017, but 

also indicating that the proper rate adjustments to reflect the Tax Act would he addressed in the 

pending rate application. Because the timing and processing of the rate application has been 

suspended, and it remains unclear when it will resume and on what schedule, Staff believes it is 

appropriate to address the issue of income taxes now. 

STAFF ANALYSIS AND RECOMMENDATIONS 

Adjustment to Federal Income Taxes and Discontinuance of Federal and State Income Tax Recovery 

14. Staff reviewed the amount of income taxes being recovered in the Company's 

currently authorized revenue requirement. For the water division, the Company is currently 

collecting $125,072 in income taxes from ratepayers. For the wastewater division, the Company is 

currently collecting $747.272 in income taxes from ratepayers. 

Decision No. 76889 

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Page 4 Docket No. WS-02987A-17-0392

l,

pending rate application.

Staff reviewed the amount of income taxes being recovered in the Company's

l account for the impact of the Tax Act as of January 2018, by either: a) applying for a tax expense

2 adjustor mechanism within 60 days, b) filing an intent to file a rate case within 90 days, or c) filing

3 any other such application to address the ratemaking implications of the Tax Act within 60 days.

4 II. On March 29, 2018, the Commission issued Decision No. 76631, that updated the

5 Tax Policy adopted in Decision No. 73739, and accordingly, the Commission no longer allows

6 recovery of income tax expense recovery for Class A through Class C pass-through entities.

7 12. On December 29, 2017, Johnson filed a rate application as directed by the

8 Commission. It was the Company's intention that the income tax issue be resolved within the rate

9 case. On March l, 2018, Johnson filed a Motion for Continuance and Stay requesting that the rate

10 case proceeding be stayed pending a final determination in United States v. Gary Leonard Pierce, et

1 1 aL, Case No. CR-17-00713-001-PHX-JJT. The requirement of the parties to provide written

12 testimony was suspended until further order of the Commission. Additionally, the Company's

13 Motion for Continuance and Stay was held in abeyance pending the outcome of the Complaint and

14 Order to Show Cause proceeding against Johnson Utilities in Docket No. WS-02987A-I 8-0050.

15 13. On January 18, 2018, the Company responded to the questions posed by Commission

16 Staff on December 22, 2017, indicating that its current rates do include recovery of income taxes at

17 a level higher than new flat federal tax rate of 21 percent resulting from the Tax Act of 2017. but

18 also indicating that the proper rate adjustments to reflect the Tax Act would be addressed in the

19 Because the timing and processing of the rate application has been

20 suspended, and it remains unclear when it will resume and on what schedule, Staff believes it is

21 appropriate to address the issue of income taxes now.

22

23 STAFF ANALYSIS AND RECOMMENDATIONS

24 Aayustment to Federal Income Taxes and Discontinuance 0/Federal and Slate Income Tax Recovery

25 14.

26 currently authorized revenue requirement. For the water division, the Company is currently

27 collecting $125,072 in income taxes from ratepayers. For the wastewater division, the Company is

28 currently collecting $747,272 in income taxes from ratepayers.

76889 Decision No.

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 42 of 51
Page 5 Docket No. WS-02987A-17-0392 

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15. Staff analyzed tax savings from January through September 2018, due to 

implementation of the Tax Act, and the change in the Commission's pass-through policy. The Tax 

Act exempts 20 percent of Qualified Business Income ("QBI") from taxation for flow through 

entities and to reduce income taxes accordingly. Staff finds it appropriate to refund tax savings 

related to the Tax Act from January through March 2018, because of the effective date of Decision 

No. 76631. Staff determined that Johnson had tax savings resulting from the Tax Act of $8,294 for 

the water division and $16,082 for the wastewater division, because these amounts are de minimis 

they should be included in the first annual compliance tiling true-up. 

16. Staff recommends that the Commission order Johnson to refund Staffs 

recommended tax savings that result from the elimination of federal and state income tax expense 

from April through September 2018. Staffs analysis indicates that the Company's authorized 

revenue requirement for the water division should decrease from $9,899,013 to $9,773,94, a total 

reduction of $125,072. For the wastewater division, the Company's authorized revenue requirement 

should decrease from $12,049,418 to $1 1,591,862. a total reduction of $457,557. Staff recommends 

the Commission approve Johnson's revised tariffs depicted in Schedule BAB-1(Water), page 2 for 

the water division and Schedule BAB-1(Wastewater), page 2 for the wastewater division. The 

revised tariff schedules reflect rates that eliminate federal and state income tax expenses from 

authorized revenue requirements for both divisions effective September 1. 2018. 

17. Based on Staffs recommendations, a residential customer on a 3/4-inch meter will 

receive a one-time bill credit of $2.78 for the water division and $8.71 for the wastewater division. 

Staffs recommendation is depicted on Schedule BAB-1(Water). page 3 for the water division and 

Schedule BAB-1(Wastewater), page 3 for the wastewater division. 

Repurchase of the right to receive the refiaid payments for AIAC 

18. As discussed on pages 68 and 69 of Commission Decision No. 76785 issued in 

Docket No. WS-02987A-18-0050, on July 24, 2018, Johnson Utilities has thousands of line 

extension agreements ("LXAs") and there is a secondary market that purchases the revenue streams 

from the LXAs. According to the Company, generally these LXAs provide Johnson Utilities with 

the right of first refusal should a developer want to sell the revenue streams from an LXA. From 

Decision No. 76889 

Page 5 Docket No. WS-02987A-l 7-0392

l 15. Staff analyzed tax savings from January through September 2018, due to

implementation of the Tax Act, and the change in the Commission's pass-through policy. The Tax

Act exempts 20 percent of Qualified Business Income ("QBl") from taxation for flow through

2

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4 entities and to reduce income taxes accordingly. Staff finds it appropriate to refund tax savings

related to the Tax Act from January through March 2018, because of the effective date of Decision

No. 7663 l. Staff determined that Johnson had tax savings resulting from the Tax Act of $8,294 for

the water division and $16,082 for the wastewater division, because these amounts are de minimis

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they should be included in the first annual compliance filing true-up.

16. Staff recommends that the Commission order Johnson to refund Staffs

10 recommended tax savings that result from the elimination of federal and state income tax expense

I I from April through September 2018. Staffs analysis indicates that the Company's authorized

12 revenue requirement for the water division should decrease from $9,899,013 to $9,773,94, a total

13 reduction of $125,072. For the wastewater division, the Company's authorized revenue requirement

14 should decrease from $l2,049,418 to $1 1,59 l ,862, a total reduction of $457,557. Staff recommends

15 the Commission approve Johnson's revised tariffs depicted in Schedule BAB-1(Water), page 2 for

16 the water division and Schedule BAB-l(Wastewater), page 2 for the wastewater division. The

17 revised tariff schedules reflect rates that eliminate federal and state income tax expenses from

18 authorized revenue requirements for both divisions effective September l, 2018.

19 17. Based on Staffs recommendations, a residential customer on a 3/4-inch meter will

20 receive a one-time bill credit of $2.78 for the water division and $8.71 for the wastewater division.

21 Staffs recommendation is depicted on Schedule BAB-1(Water), page 3 for the water division and

22 Schedule BAB-l(Wastewater), page 3 for the wastewater division.

23 Repurchase of the right to receive the refundpaymentsfor AlA C

24 18. As discussed on pages 68 and 69 of Commission Decision No. 76785 issued in

25 Docket No. WS-02987A-I8-0050, on July 24, 2018, Johnson Utilities has thousands of line

26 extension agreements ("LXAs") and there is a secondary market that purchases the revenue streams

27 from the LXAs. According to the Company, generally these LXAs provide Johnson Utilities with

28 the right of first refusal should a developer want to sell the revenue streams from an LXA. From

76889 Decision No.

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 43 of 51
Page 6 Docket No. WS-02987A-17-0392 

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this point forward, Johnson Utilities is to provide the Commission with 90-days advanced notice of 

its intent to exercise this right of first refusal. Likewise, Johnson Utilities is to provide the 

Commission with 90-days advanced notice of its intent to not exercise this first refusal right with 

the result being that the right is purchased by Annuity Holdings or any other Johnson Utilities 

Affiliate or related entity. 

Income Tax Gross-up on AIAC and Administrative Fee Limitation: 

19. Since, Johnson Utilities is a tax pass-through entity, and as such not authorized to 

recover income taxes under the Commission's current Income Tax Policy as discussed previously 

in this Staff Memorandum. Johnson is not allowed to recover an income tax gross-up on funds 

received under existing or new AIAC agreements. Further. Johnson is prohibited from requesting 

an administrative fee from developers who are a party to such AIAC agreements. 

C'ompliance Filing 

20. Staff recommends that the Commission order Johnson to make a compliance filing 

that summarizes the actual amount of tax savings refunded to its customers due to the impact of the 

Fax Act for each division. This compliance filing shall compare an updated calculation of tax 

savings to the amount of tax savings approved for refund by the Commission and propose an 

appropriate mechanism for accounting for the variance. Staff recommends that the Commission 

order Johnson to make this compliance filing no later than 90 days from the effective date of the 

decision in this proceeding. 

21. Staff further recommends that Johnson tile a revised tariff for the water and 

wastewater divisions for Commission Staff review no later than 30 days from the effective date of 

the decision in this proceeding. 

CONCLUSIONS OF LAW 

1. Johnson Utilities LLC is a public service corporation within the meaning of Article 

XV of the Arizona Constitution. 

2. The Commission has jurisdiction over Johnson Utilities LLC, and the subject matter 

of this filing. 

76889 Decision No. 

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Page 6 Docket No. WS-02987A~ l7-0392

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this point forward, Johnson Utilities is to provide the Commission with 90-days advanced notice of

its intent to exercise this right of first refusal. Likewise, Johnson Utilities is to provide the

Commission with 90-days advanced notice of its intent to not exercise this first refusal right with

4 the result being that the right is purchased by Annuity Holdings or any other Johnson Utilities

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Affiliate or related entity.

6 Income Tax Gross-up on AIAC and Administrative Fee Limitation:

Since, Johnson Utilities is a tax pass-through entity, and as such not authorized to

8 recover income taxes under the Commission's current Income Tax Policy as discussed previously

in this Staff Memorandum, Johnson is not allowed to recover an income tax gross-up on funds

10 received under existing or new AIAC agreements. Further. Johnson is prohibited from requesting

an administrative fee from developers who are a party to such AIAC agreements.

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Compliance Filing

20. Staff recommends that the Commission order Johnson to make a compliance filing

14 that summarizes the actual amount of tax savings refunded to its customers due to the impact of the

Tax Act for each division. This compliance filing shall compare an updated calculation of tax

savings to the amount of tax savings approved for refund by the Commission and propose an

17 appropriate mechanism for accounting for the variance. Staff recommends that the Commission

order Johnson to make this compliance filing no later than 90 days from the effective date of the

19 decision in this proceeding.

Staff further recommends that Johnson file a revised tariff for the water and

wastewater divisions for Commission Staff review no later than 30 days from the effective date of

the decision in this proceeding.

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26 2 .

CONCLUSIONS OF LAW

l. Johnson Utilities LLC is a public service corporation within the meaning of Article

XV of the Arizona Constitution.

The Commission has jurisdiction over Johnson Utilities LLC, and the subject matter

27 of this filing.

28

Decision No. 76889

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 44 of 51
Paue 7 Docket No. WS-02987A-17-0392 

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ORDER 

IT IS THEREFORE ORDERED that Johnson Utilities LLC shall adopt Staff's 

recommended monthly bill credits as discussed herein, as a reduction to its authorized rates. 

IT IS FURTHER ORDERED that the bill credits approved herein are adopted and shall be 

effective for all customer classes in the Johnson Utilities LLC's service areas, in the first billing 

cycle in October 2018. 

IT IS FURTHER ORDERED that Johnson Utilities is to provide the Commission with 90-

days advanced notice of its intent to exercise or not exercise first right of refusal in purchasing 

revenue streams from developers related to its LXAs. 

IT IS FURTHER ORDERED that Johnson Utilities LLC is not allowed to recover an income 

tax gross-up on funds received under existing or new AIAC agreements, CIAO, or mainline 

extension agreements and is prohibited from requesting an administrative fee from developers who 

are a party to any AIAC agreements. 

IT IS FURTHER ORDERED that Johnson Utilities LLC shall make compliance fi lings as 

discussed herein. 

Decision No. 76889 

|

Page 7 Docket No. WS-02987A-l 7-0392

l

I I

ORDER

2 IT IS THEREFORE ORDERED that Johnson Utilities LLC shall adopt Staffs

3 recommended monthly bill credits as discussed herein. as a reduction to its authorized rates.

4 IT IS FURTHER ORDERED that the bill credits approved herein are adopted and shall be

5 effective for all customer classes in the Johnson Utilities LLC's service areas, in the first billing

6 cycle in October 2018.

7 IT IS FURTHER ORDERED that Johnson Utilities is to provide the Commission with 90-

8 days advanced notice of its intent to exercise or not exercise first right of refusal in purchasing

9 revenue streams from developers related to its LXAs.

10 IT IS FURTHER ORDERED that Johnson Utilities LLC is not allowed to recover an income

tax gross-up on funds received under existing or new AIAC agreements, CIAC, or mainline

12 extension agreements and is prohibited from requesting an administrative fee from developers who

13 are a party to any AIAC agreements.

14 IT IS FURTHER ORDERED that Johnson Utilities LLC shall make compliance filings as

15 discussed herein.

16 . .

17 . .

18 .

1 9 ...

20

2 1

22 .

23 .

2 4 ...

2 5 ...

2 6 . . .

27 ..

2 8 . . .

Decision No. 76889

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 45 of 51
Page 8 Docket No. WS-02987A-17-0392 

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IT IS FURTHER ORDERED that Johnson Utilities LLC shall notify its affected customers 

of the revised schedules of rates and charges authorized herein by means of a message in its next 

regularly scheduled billing, and by posting a notice on its website. 

IT IS FURTHER ORDERED that this Decision shall become effective immediately. 

BY THE ORDER OF THE ARIZONA CORPORATION COMMISSION 

CH MAN FORESE COMMISSIONER DUNN 

COMMISSIO ER TOBIN MMISSIONER 0 ON COMMISSIONE' :URNS 

DISSENT: 

DISSENT: 

IN WITNESS WHEREOF, I, MATTHEW J. NEUBERT, 

Interim Executive Director of the Arizona Corporation 

Commission. have hereunto, set my hand and caused the 

official seal of this Commission to be affixed at the Capitol, in 

the City of Phoenix, this ‘ ?- traay of 

rnbio , 2018. 

MATTHEW J. EUBERT 

INTERIM EXECUTIVE DIRECTOR 

EOA:BAB: vsc/WVC 

Decision No. 76889 

I A

Page 8 Docket No. WS-02987A-l7-0392

l

2

IT IS FURTHER ORDERED that Johnson Utilities LLC shall notify its affected customers

of the revised schedules of rates and charges authorized herein by means of a message in its next

3

4

regularly scheduled billing, and by posting a notice on its website.

IT IS FURTHER ORDERED that this Decision shall become effective immediately.

5

6 BY THE ORDER OF THE ARIZONA CORPORATION COMMISSION

/

7

I

8

CH MAN FORESE COMM SIONER DUNN

9

. / /

10 /

./

/ 9 9 / I 4 ! A

1 . | COMMISSIO ER TOBIN MMISSIONER O ON COMMISSIONE URNS

. 1

12

13

14

15

IN WITNESS WHEREOF. I, MATTHEW J. NEUBERT,

Interim Executive Director of the Arizona Corporation

Commission, have hereunto, set my hand and caused the

official seal of this Commission to be affixed at the Capitol, in

City Phoenix, this day of

9 2018.

/

.~.

. _

\

16

the of

X

/ . . . . . - : . .

.

.

.

17

` ~/W\ x

18

19

MATTHEW J. EUBERT

INTERIM EXE UTIVE DIRECTOR

20

DISSENT: 21

22

DISSENT:

23

EOA:BAB: vsc/WVC

24

25

2 6

27

28

76889 Decision No.

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 46 of 51
Paige 9 Docket No. WS-02987A-17-0392 

Johnson Utilities LLC 

Docket No. (WS-02987A-17-0392) 

3 

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12 

13 

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25 

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Albert Acken 

RYLEY CARLOCK & APPLEWHITE 

One North Central Avenue, Suite 1200 

Phoenix, AZ 85004 

Scott Holcomb 

DICKINSON WRIGHT PLLC 

1850 N. Central Avenue, Suite 1400 

Phoenix, AZ 85004 

Clifford Mattice 

TOWN OF FLORENCE 

775 N. Main Street 

PO Box 2670 

Florence, AZ 85132 

Kevin Costello 

KENT VOLKMER PINAL COUNTY ATTORNEY 

30 N. Florence Street 

Florence, AZ 85132 

Michele Van Quathem 

LAW OFFICES OF MICHELE 

VAN QUATHEM, PLLC 

7600 N 15th St, Suite 150-30 

Phoenix, AZ 85020 

Daniel Pozefsky 

RUCO 

1110 West Washington, Suite 220 

Phoenix, AZ 85007 

Craig Marks 

CRAIG A. MARKS, PLC 

10645 N. Tatum Blvd. 

Suite 200-676 

Phoenix, AZ 85028 

Jeffrey Crockett 

CROCKETT LAW GROUP, PLLC 

2198 E. Camelback Rd., Suite 305 

Phoenix, AZ 85016 

Andy Kvesic 

ARIZONA CORPORATION COMMISSION 

Director, Legal Division 

1200 West Washington Street 

Phoenix, Arizona 85007 

LegalDiv@anc.gov 

utildivservicebyemaiVEZazee.gov 

Consent to Service by Email 

Decision No. 76889 

Page 9 Docket No. WS-02987A-17-0392

l Johnson Utilities LLC

Docket No. (WS-02987A-l 7-0392)

2

3

4

5

Albeit Acken

RYLEY CARLOCK & APPLEWHITE

One North Central Avenue, Suite 1200

Phoenix, AZ 85004

6

7

Scott Holcomb

DICKINSON WRIGHT PLLC

1850 N. Central Avenue, Suite 1400

Phoenix, AZ 85004

8

9

10

Clifford Mattice

TOWN OF FLORENCE

775 N. Main Street

PO Box 2670

Florence, AZ 85132

12

Kevin Costello

KENT VOLKMER PINAL COUNTY ATTORNEY

30 N. Florence Street

Florence, AZ 85132 13

14

15

Michele Van Quathem

LAW OFFICES OF MICHELE

VAN QUATHEM, PLLC

7600 N 15th St Suite 150-30

Phoenix, AZ 85020

16

17

18

Daniel Pozefsky

RUCO

l l 10 West Washington, Suite 220

Phoenix AZ 85007

19

20

2 1

Craig Marks

CRAIG A. MARKS, PLC

10645 n. Tatum Blvd.

Suite 200-676

Phoenix, AZ 85028

22

23

Jeffrey Crockett

CROCKETT LAW GROUP PLLC

2198 E. Camelback Rd. Suite 305

Phoenix, AZ 85016

2 4

Andy Kvesic

ARIZONA CORPORATION COMMISSION 25

26

27

Director, Legal Division

1200 West Washington Street

Phoenix, Arizona 85007

L§§;~1ll?iv@a/44£92

utild. ivservicebvemailZliazccgov

Consent to Service by Email

28

Decision No. 76889

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 47 of 51
WS-02987A-17-0392 

Johnson Utilities (Waste Water) 

Docket No. WS-02987A-17-0392 

Amended Schedule BAB-1 (Wastewater) 

Page 1 of 2 

INCOME TAX REFUND CALCULATION 

Revenue requirement from Company's latest rate case S12,049,418 

Staffs revenue requirement using 0 percent tax rate 11,591,861 

Difference $457,557 

MONTHLY INCOME TAX REFUND CALCULATION 

Step 1 - Find the Equivalent Bills 

('ol A Col B 

NARUC 

Meter Size Multiplier 

I col c I Col D 

Number of 

Number of Months in 

Customers Year 

I I Col E I 

Equivalent 

Bills 

ColBxCXD 

5/8"x 3/4" Meter 1 x 0 x 12 = 

3/4" Meter 1.5 x 21,454 x 12 = 386,172 

1" Meter 2.5 x 82 x 12 ,_ 2,460 

11/2" Meter 5 x 30 x 12 = 1,800 

2" Meter 8 x 25 x 12 = 2,400 

3" Meter 15 x 2 x 12 = 360 

4" Meter 25 x 3 x 12 = 900 

6" Meter 50 x 0 x 12 = 

21,596 394,092 

Col C - Excludes Effluent 

Step 2 - Find the Monthly Refund Amount 

$457,557 Total Annual Income Tax Refund Amount (From Staff Calculation) 

394,092 Divided by: Total Number of Equivalent Bills (From Step 1) 

$1.16 Monthly Surcharge for 5/8"x 3/4" Customers 

Step 3 - Find the Monthly Refund for the Remaining Meter Size Customers 

Col A I 1 Col B I I Col C I I Col D 

5/8"x 3/4" Surcharge by 

NARUC Customers' Meter Size 

Meter Size Multiplier Surcharge Col B x C 

5/8"x 3/4" Meter 1 x $1.16 = $1.16

3/4" Meter 1.5 x $1.16 = $1.74

1" Meter 2.5 x $1.16 = S2.90

l'/2" Meter 5 x $1.16 = $5.81 

2" Meter 8 x S1.16 = $9.29 

3" Meter 15 x $1.16 = $17.42 

4" Meter 25 x $1.16 = $29.03 

6" Meter 50 x $1.16 = $58.05 

Decision No. 76889 

WS-02987A-17-0392 I

Johnson Utilities (Waste Water)

Docket No. WS-02987A-I7-0392

Amended Schedule BAB-l (Wastewater)

Page l of 2

INCOME TAX REFUND CALCULATION

Revenue requirement from Company's latest rate case

Staff's revenue requirement using 0 percent tax rate

Difference

$12,049,418

11,591861

$457,557

MONTHLY INCOME TAX REFUND CALCULATION

I I Ste l - Find the E uivalent Bills

Col A Col B - Col C - Col E

Equivalent

Bills

Meter Size ColBxCXD

5/8"x 3/4" Meter

3/4" Meter 386,172

2.460

1,800

2,400

360

900

l" Meter

IW' Meter

2" Meter

3" Meter

4" Meter

6" Meter

NARUC

Multiplier

l

1.5

2.5

5

8

15

25

50

x

x

x

x

x

x

x

X

x

x

x

x

x

x

x

x

Col D

Number of

Months in

Year

12

12

12

12

12

12

12

12

Number of

Customers

0

21 454

82

30

25

2

3

0

21 .596 394,092

Col C Excludes Effluent

Step 2 - Find the Monthly Refund Amount

$457,557 Total Annual Income Tax Refund Amount (From Staff Calculation)

394,092 Divided by: Total Number of Equivalent Bills (From Step l)

$1.16 Monthly Surcharge for 5/8"x 3/4" Customers

I 3 - Find the Monthl Refund for the Remaining

Col B

Ste

Col A

Meter Size Customers

Col D

Surcharge by

NARUC Meter Size

Multiplier

l

1.5

2.5

5

8

15

25

50

Meter Size

5/8"x 3/4" Meter

3/4" Meter

I" Meter

no' Meter

2" Meter

3" Meter

4" Meter

6" Meter

x

x

x

x

x

x

x

x

Col C

5/8"x 3/4"

Customers'

Surcharge

$1.16 =

$1.16 =

$1.16 =

Sl.l6 =

Sl.l6 =

$1.16 =

$1.16 =

Sl.l6 =

Col B x C

s l . 16

$1.74

$2.90

$5.8 l

$9.29

$17.42

$29.03

$58.05

Decision No. 76889

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 48 of 51
WS-02987A-17-0392 

Amended Schedule BAB-I (Wastewater) 

Page 2 of 2 

MONTHLY INCOME TAX REFUND CALCULATION - CONTINUED 

Step 4 - Recalculation of Annual Income Tax Refund 

I Col A I Col B I I Col C I I Col D 

Number of 

Meter Size Customers 

Number of 

Months in 

Year 

Surcharge 

by 

Meter Size 

Col E 

Annual 

Surcharge Rev 

Col BxCXD 

518"x 3/4" Meter 0 x 12 x $1.16 $0 

3/4" Meter 21,454 x 12 x $1.74 448,361 

1" Meter 82 x 12 x $2.90 2,856 

l'A" Meter 30 x 12 x $5.81 2,090 

2" Meter 25 x 12 x S9.29 2,786 

3" Meter 2 x 12 x $17.42 418 

4" Meter 3 x 12 x $29.03 1,045 

6" Meter 0 x 12 x $58.05 0 

21,596 $125.39 $457,557 (From Step 2) 

Revenue requirement from Company's latest rate case $12,049,418 

Staffs revenue requirement using 80 percent Qualifying Business Income reduction 12,323,052 

Difference ($273,634) 

ONE TIME BILL CREDIT 

3/4" Meter 

April $1.74 

May $1.74 

June $1.74 

July $1.74 

August $1.74 

Total $8.71 

Decision No. 76889 

I WS02987A-17-0392

Amended Schedule BAB-I (Wastewater)

Page 2 of 2

MONTHLY INCOME TAX REFUND CALCULATION - CONTINUED

I

3

Ste 4 - Recalculation of Annual Income Tax Refund

Col A Col B Col C

Number of

Months in

Year

12

12

12

12

12

12

12

12

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

Meter Size

5/8"x 3/4" Meter

3/4" Meter

1" Meter

IW' Meter

2" Meter

3" Meter

4" Meter

6" Meter

Col D

Surcharge

by

Meter Size

s1 . 16

Sl .74

$2.90

$5.8 l

S9.29

$17.42

$29.03

$58.05

s 125.39

Number of

Customers

0

2 l ,454

82

30

25

2

3

0

2 l ,596

Col E

Annual

Surcharge Rev

Col B x C X D

$0

448,361

2,856

2,090

2,786

418

1,045

0

$457,557 (From Step 2)

Revenue requirement from Company's latest rate case

Staff's revenue requirement using 80 percent Qualifying Business Income reduction

Difference

$12,049,418

12,323,052

($273,634)

ONE TIME BILL CREDIT

3/4" Meter

April

May

June

July

August

Total

$1.74

$1.74

$1.74

$1.74

$1.74

$8.71

Decision No. 76889

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 49 of 51
WS-02987A-17-0392 

Johnson Utilities (Water) 

Docket No. WS-02987A-17-0392 

INCOME TAX REFUND CALCULATION 

Amended Schedule BAB-1 (Water) 

Page 1 of 2 

Revenue requirement from Company's latest rate case $9,899,013 

Staffs revenue requirement using 0 percent tax rate 9,773,941 

Difference $125,072 

MONTHLY INCOME TAX REFUND CALCULATION 

Step 1 - Find the Equivalent Bills 

Col A Col 13 

NARUC 

Meter Size Multiplier 

I col c I Col D 

Number of 

Number of Months in 

Customers Year 

Col E I 

Equivalent 

Bills 

ColBxCXD 

5/8"x 3/4" Meter 1 x 0 x 12 0 

3/4" Meter 1.5 x 16,899 x 12 304,182 

1" Meter 2.5 x 346 x 12 10,380 

112/ " Meter 5 x 126 x 12 7,560 

2" Meter 8 x 136 x 12 13,056 

3" Meter 15 x 2 x 12 360 

4" Meter 25 x 5 x 12 1,500 

6" Meter 50 x 1 x 12 600 

17,515 337,638 

Col C - Excludes Stand pipe. 

Step 2 - Find the Monthly Refund Amount 

$125,072 Total Annual Income Tax Refund Amount (From Staff Calculation) 

337,638 Divided by: Total Number of Equivalent Bills (From Step 1) 

$0.37 Monthly Surcharge for 5/8"x 3/4" Customers 

Step 3 - Find the Monthly Refund for the Remaining Meter Size Customers 

Col A Col B I I Col C I I Col D 

5/8"x 3/4" Surcharge by 

NARUC Customers' Meter Size 

Meter Size Multiplier Surcharge Col B x C 

5/8"x 3/4" Meter 1 x $0.37 = $0.37 

3/4" Meter 1.5 x $0.37 = $0.56 

1" Meter 2.5 x $0.37 = $0.93 

1W Meter 5 x $0.37 = $1.85 

2" Meter 8 x $0.37 = $2.96 

3" Meter 15 x $0.37 = $5.56 

4" Meter 25 x $0.37 --, .. $9.26 

6" Meter 50 x $0.37 = $18.52 

Decision No. 76889 

WS-02987A-17-0392

A

Johnson Utilities (Water)

Docket No. WS-02987A-I7-0392

Amended Schedule BAB-l (Water)

Page l of 2

INCOME TAX REFUND CALCULATION

Revenue requirement from Company's latest rate case

StaIlf's revenue requirement using 0 percent tax rate

Difference

$9,899,013

9,773,941

s I25,072

MONTHLY INCOME TAX REFUND CALCULATION

Ste I - Find the E uivalent Bills I I

Col A Col B - Col C - Col E

Equivalent

Bills

Meter Size

5/8"x 3/4" Meter

3/4" Meter

l" Meter

l %" Meter

2" Meter

3" Meter

4" Meter

6" Meter

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

NARUC

Multiplier

1

1.5

2.5

5

8

15

25

50

Col D

Number of

Months in

Year

12

12

12

12

12

12

12

12

Number of

Customers

0

16,899

346

126

136

2

5

1

17,5 15

C01 B x C X D

0

304,182

10,380

7,560

13,056

360

1,500

600

337,638

Col C - Excludes Stand pipe.

Step 2 - Find the Monthly Refund Amount

$125,072 Total Annual Income Tax Refund Amount (From Staff Calculation)

337638 Divided by; Total Number of Equivalent Bills (From Step I)

$0.37 Monthly Surcharge for 5/8"x 3/4" Customers

I

Col B

Ste 3 - Find the Monthl Refund for the Remaining Meter Size Customers

Col A Col D

Surcharge by

Meter Size

Meter Size

5/8"x 3/4" Meter

3/4" Meter

l" Meter

IW Meter

2" Meter

3" Meter

4" Meter

6" Meter

NARUC

Multiplier

l

1.5

2.5

5

8

15

25

50

x

x

x

x

x

x

x

x

Col C

5/8"x 3/4"

Customers'

Surcharge

$0.37

$0.37

$0.37

$0.37

$0.37

$0.37

$0.37

$0.37

Col B x C

$0.37

$0.56

$0.93

$1.85

S2.96

$5.56

$9.26

$18.52

Decision No. 76889

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 50 of 51
WS-02987A-17-0392 

Amended Schedule BAB-1 (Water) 

Page 2 of 2 

MONTHLY INCOME TAX REFUND CALCULATION - CONTINUED 

Step 4 - Recalculation of Annual Income Tax Refund 

Col A I Col B I I Col C

Number of 

Number of Months in 

Meter Size Customers Year 

Col D 

Surcharge 

by 

Meter Size 

I Col E 

Annual 

Surcharge Rev 

ColBxCXD 

5/8"x 3/4" Meter 0 x 12 x $0.37 $0 

3/4" Meter 16,899 x 12 x $0.56 112,679 

1" Meter 346 x 12 x $0.93 3,845 

PA" Meter 126 x 12 x $1.85 2,800 

2" Meter 136 x 12 x $2.96 4,836 

3" Meter 2 x 12 x $5.56 133 

4" Meter 5 x 12 x $9.26 556 

6" Meter 1 x 12 x $18.52 222 

17,515 $40.01 $125,072 (From Step 2) 

Revenue requirement from Company's latest rate case $9,899,013 

Staff's revenue requirement using 80 percent Qualifying Business Income reduction 9,890,719 

Difference $8,294 

ONE TIME BILL CREDIT 

3/4" Meter 

April $0.56 

May $0.56 

June $0.56 

July 50.56 

August $0.56 

Total $2.78 

Decision No. 76889 

WS-02987A-17-0392

Amended Schedule BAB-l (Water)

Page 2 of 2

MONTHLY INCOME TAX REFUND CALCULATION - CONTINUED

I

2 -

Ste 4 - Recalculation of Annual Income Tax Refund

Col A Col B Col C

Number of

Months in

Year

12

12

12

12

12

12

12

12

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

Meter Size

5/8"x 3/4" Meter

3/4" Meter

1" Meter

I W' Meter

2" Meter

3" Meter

4" Meter

6" Meter

Col D

Surcharge

by

Meter Size

$0.37

$0.56

$0.93

$1 .85

$2.96

$5.56

$9.26

Sl 8.52

$40.0 I

Number of

Customers

0

16,899

346

126

136

2

5

1

175 15

Col E

Annual

Surcharge Rev

Col B x C X D

$0

l 12679

3,845

2,800

4836

133

556

222

$125,072 (From Step 2)

Revenue requirement from Company's latest rate case

Staffs revenue requirement using 80 percent Qualifying Business Income reduction

Difference

$9,899,013

9,890,719

$8,294

ONE TIME BILL CREDIT

3/4" Meter

April

May

June

July

August

Total

$0.56

$0.56

3056

S056

$0.56

3278

Decision No. 76889

Case 2:17-cv-04688-DLR Document 96-2 Filed 01/07/19 Page 51 of 51