Commission also requires Sedona customers to foot the $6M bill for SR 179 underground water tank

The Arizona Corporation Commission approved Arizona Water Company’s rate hike during its Contingency Open Meeting on Thursday, July 24, and required Sedona customers to pick up the tab for the $6 million cost to underground and construct a mock house over AWC’s Sedona Water Storage Facility at the intersection of State Route 179 and West Mallard Drive.

Sedona AWC customers will now see their monthly water bill increased by about 45% a month bringing the average monthly bill to about $60 and the other customers of AWC’s Northern Group will have a price increase of about 34% bringing their monthly bill to about $52.

“Hopefully this is a strong signal to all water companies, local governments and residents moving forward that if you require special conditions or place limitations on infrastructure based upon aesthetic preferences, you may be responsible for those extra costs,” ACC Chairman Kevin Thompson [R] said. “I’m sympathetic to the majority of the Sedona customers who will be solely responsible for these added costs, but it is not an equitable requirement for the 15,000 customers in other communities to be responsible for millions in extra costs because a vocal minority didn’t like the way a water tank looked.”

The tank was designed to blend into its surroundings and completed this spring after years of planning to increase the water capacity for first responders and for residents with a 1.5-million-gallon underground water storage tank and a booster pump station that can put out 3,000 gallon per minute. Additionally the water tank is one of only three of its kind that have been undergrounded in Arizona by ACC regulated companies.

“The residents of the city of Sedona, through their Land Development Code and Conditional Use Permit, required Arizona Water Company to incur over $4.6 million in additional costs to construct a water storage tank that would be not only located entirely underground, but also blended into the surrounding community by including a 1,533-foot structure on the top of the tank to resemble a residential homemaking the project ‘one of the most expensive’ the company ‘has ever constructed,’” Arizona Rep. David Marshall, [R-District 7] wrote in a letter to the ACC on July 23.

Because the aesthetic improvements made to the project only serve Sedona, only Sedona residents should foot the bill, Marshall wrote, and not other members of AWC’s Northern Group that includes about 21,700 customers across eight other water systems. AWC originally argued that undergrounding costs should be borne by all its Northern Group customers, which includes Marshall’s constituents in Lakeside, Overgaard and Pinetop Lakes.

“The incremental costs of the city’s additional requirements totaled more than $6 million in costs that otherwise would not have been required, which the [ACC] decided should only be borne by the Sedona system customers, and not the entire Northern Group,” the ACC announced.

Among the reasons cited for the price increase is the “unprecedented” growing need for AWC to make capital investments. For example, in 2010 the company spent $5.7 million on capital expenditures, a figure that has steadily increased over the years,reaching $46 million in 2024 according to a joint posthearing reply brief filed May 22 by AWC’s attorneys. Additionally “a material share of [AWC’s] capital investments will be in [the] Northern Group.” AWC’s attorneys also stated that

“Arizona needs to move from groundwater to sustainable water resources,” and noted that “every drop of water that the [AWC’s] Northern Group customers receive is groundwater.” Also “not a single active management area in Arizona has achieved ‘safe yield’” of groundwater. The situation outside of active management areas, including areas in the Northern Group, is generally worse.”

Sedona City Manager Anette Spickard previously sent a letter to the ACC on March 17 opposing the ACC’s staff recommendation for Sedona customers to be charged a greater rate by AWC to recover the cost of undergrounding the water tank.

“Because AWC operates no less than nine other water storage tanks in Sedona, many Sedona customers will not be specifically served by the new under ground tank, with some customers located more than eight miles from the new tank,” Spickard wrote. “These customers would receive no more benefit from the new tank than would AWC customers in other communities within the Northern Group, resulting in a concern that the additional surcharge may be arbitrary and unfair if not equally shared by all Northern Group customers.”

“Additionally, most full-time Sedona residents are not wealthy,” Spickard wrote. “Many Sedona residents are on a fixed income, with a number of residents residing in manufactured homes. An additional Sedona-specific surcharge for the tank on top of the rate increase would pose a significant financial hardship for many of them.”