Mediation hearing scheduled as AV Water seeks 27% rate hike to pay debt, cover expenses

Receiver describes utility's financial conditions in documents filed with the PRC

Farmington Daily Times

The sign for AV Water is pictured on County Road 3900.

A public hearing is scheduled for Sept. 21.
C. Randel Lewis said the current revenue situation puts the system at risk.

AZTEC — A mediation hearing has been scheduled for June 25 as AV Water Co. seeks permission from the New Mexico Public Regulation Commission to raise rates by 27%.

This rate increase comes as customers remain frustrated following a boil water advisory that lasted several months in 2016. During the same time, customers faced rate increases and billing issues.

AV Water serves Crouch Mesa and surrounding areas. The company says the rate increase is needed to cover operating expenses as well as debt service.

More:Complaint: AV Water did not pay legal fees

The 27% rate increase would increase annual revenues by more than $434,000, raising the total revenue to a little more than $2 million.

AV Water customer Gay Deen Graves' five-month water bill is pictured on Wednesday at her home in the Crouch Mesa area east of Farmington.

The utility initially filed for the rate increase in 2019, but 238 people filed protests or motions to intervene.

More:AV Water customers successfully petition for PRC hearing about rate increase

If the PRC grants the 27% rate increase, a single-family residential customer would see the monthly minimum bill increase by $8.31, or from $30.77 to $39.08, according to documents filed with the PRC.

More:AV Water pursues 27% rate increase that it says is needed to cover operations and debt

A multi-family residential customers would see a $19.44 increase to its monthly minimum bill, or from $72 currently to $91.44.

Commercial and industrial customers’ minimum monthly bills would increase by $11.12, or from $41.20 to $52.32.

The last rate increase for AV Water came in 2016 and was approved shortly before the New Mexico Environment Department issued a boil water advisory due to high turbidity readings and alleged falsification of turbidity tests. Turbidity is a measurement of the cloudiness of the water.

Heather Lamprecht, left, and Stella Padilla yell at passing cars during a protest against AV Water Co. at County Road 350 and 390 in Crouch Mesa in this September 2016 file photo.

People wishing to review the rate case filings can do so at the AV Water Office, 31 County Road 3900, or on the New Mexico Public Regulation Commission’s website, nmprc.state.nm.us.

Motions to intervene in the case are due by July 8. Intervenors are allowed to file direct testimony and call witnesses.

A public hearing has been scheduled for 9 a.m. Sept. 21, however the details about procedures and location have not yet been determined. In 2016, the PRC hosted a multiple-day public hearing in Aztec.

More:Complaint: AV Water defaulted on water rights payments

In 2017, the company’s asset management was assigned to C. Randel Lewis, a court-appointed receiver, after AV Water defaulted on a loan owed to Stonetown Animas Lenders.

In a document filed June 8 with the PRC, Lewis said, “The situation I inherited in early 2017 was and continues to be dire, due to the previous owners’ and managers’ mismanagement and the lack of sufficient revenue from out-of-date rates.”

Margo Kaiser, of Crouch Mesa, gets water on June 21, 2016, from a filling station at McGee Park in Farmington. The San Juan County Office of Emergency Management has set up the station for customers of AV Water who have been until a boil advisory for about a month.

He said the system needed numerous repairs and there were ongoing water quality concerns that had to be addressed. On top of that, AV Water owed back taxes and there were past due bills remaining uncollected. He said the staffing was inadequate and AV Water owed back wages. Meanwhile creditors remained unpaid and the utility’s mortgaged water rights were in jeopardy of foreclosure. In addition, Lewis said AV Water had not been paying the City of Farmington for the water the city began supplying in 2016. The boil water advisory was lifted when the utility was able to close its water treatment plant and purchase water from the city. Lewis said that water supply was in peril because of lack of payment.

More:AV Water fires operator after NMED inspection

“In my experience dealing with distressed businesses, I have rarely faced such a horrific situation such as that presented when I was appointed Receiver in 2017,” he continued.

Lewis said there have been inadequate revenues and creditors remain unpaid.

“The current revenue situation puts future capabilities of the system at risk, threatens AVW’s ability to maintain the water rights owned by and dedicated to the utility, and hampers its ability to secure a capable new owner and emerge from Receivership,” he said.

AV Water is supposed to pay $150,000 per year in debt service for water rights, but Lewis said the inadequate revenue meant it was only able to pay $12,500 in 2019. The agreement AV Water has with Farmington requires AV Water to have water rights.

More:Complaint: AV Water defaulted on water rights payments

Lewis said AV Water has not been able to pay its debt owed to Stonetown.

Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652 or via email at hgrover@daily-times.com.

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