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Here's how AV Water's proposed rate increases could impact customers

Hannah Grover
Farmington Daily Times
AV Water has proposed increasing rates for Morningstar Water System customers.

AZTEC — The receiver who oversees AV Water's Morningstar Water System says a proposed rate increase includes a renewal and replacement charge that mirrors what neighboring Farmington residents pay. 

C. Randel Lewis answered questions during a hearing on Sept. 21 that can be viewed on YouTube. The company filed an application earlier this year requesting a 27% rate increase.

Lewis was appointed by the court to oversee operations of AV Water’s Morningstar Water System in 2017. At the time it was one of two water systems that AV Water’s owners had essentially walked away from. The other system, Harvest Gold, broke off to form a community-owned utility, which allowed it to access state funds to repair infrastructure and connect to Bloomfield water.

Following a mediation hearing this summer, a stipulated agreement was reached and this was presented to PRC Hearing Examiner Elizabeth Hurst.

Hurst said her goal is to have the case completed by the end of the year, however the PRC has an option to extend the process into February if needed.

How will the proposed stipulated rate increase impact customers?

However, following mediation, the proposed rate increase is no longer 27% flat across all customer classes. Instead, the utility has proposed a tiered system that will make up 23% of the increase. The remaining 77% of the increase comes in the form of the repair and replacement charge.

Some customers will actually see a decrease in bills. The average multi-family customer that uses 12,571 gallons of water a month will see a $2.18 decrease, from $149.22 now to $147.04 if the new rates are implemented. Lewis said this will impact 17 or 18 customers. Lewis said these customers had been subsidizing low-end users in the past.

The majority of customers, he said, are residential customers. The average residential customer uses 4,976 gallons a month and will see their bills increase from $47.68 to $65.13.

The remainder of the customers are in the commercial class. There are 45 commercial customers that use an average of 70,000 gallons monthly. Lewis said these customers will see an increase of $66.38 per month.

AV Water Co. offices are pictured on Crouch Mesa.

Hurst is no stranger to AV Water. She worked on the PRC investigation when the company faced boil water advisories.

She outlined the next steps in the case, which include making a recommendation for the PRC to rule on at a future date. This document will include her recommendation. She did not indicate which direction she will recommend that the PRC take, however Hurst could suggest the commission accept, reject or modify the stipulated rate increase.

This rate increase includes a $14.10 repair and replacement charge.

Lewis said customers who intervened in the case did not like that the rates were substantially different than what Farmington residents pay. He said this can make it difficult to sell properties and the customers requested tiers and structures similar to Farmington's.

"People in the system feel like they are an extension of the city," Lewis said.

These discussions led to the tier system and the separate renewal and replacement charge.

"We like the R and R charge because it approximates the $300,000 a year that we spend trying to keep the system together," Lewis said. "It ensures the customers that the money they're paying is going to that purpose and not subject to diversion."

Once the parties had agreed on a repair and replacement charge, Lewis said the remainder if the rate increase was readily addressed by following commission policies that the high users should pay more and the burden should be shared across all customer classes.

Timothy Martinez, one of the PRC staff members who testified during the hearing, also expressed support of the repair and replacement charge.

"The system has a number of issues that have been well documented," he said. "It's in need of repair. It's in need of rehabilitation."

He said the line-item charge will allow customers to know that money is being allocated for that purpose.

Russ Caskey, with contractor JCH, works July 22, 2016 on a pump station for the Morningstar water system.

Possible sale pending for water system

Lewis is appointed by the court and entrusted with the assets, but does not have the authority to sell the assets. Instead, the court kept the authority to authorize sale of the system.

There is a pending contract to sell the assets, including substantially all of the Morningstar assets, for $4.5 million to a company called New Mexico Water Service Company.

The increased rates could help facilitate the sale, according to Milo Chavez, the PRC acting division director for the utility economics division.

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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