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Water Company Costs Pass-Through Defeated
Scottsdale Sues Makers of Polyethylene Pipe
Water Company Costs Pass-Through Defeated
Legislation that would have forced the Arizona Corporation Commission to
allow private water companies to raise rates up to 10 percent to recover
increased operating costs has died in the Senate. (See Nov.-Dec.
AWR, p. 6). This is the fourth year the Water Utilities Association
of Arizona has sought authority for water companies to pass through
to customers increases in costs over which they have no control, such
as wholesale water, energy, and regulatory compliance costs.
- Current law requires water companies to request a formal rate hearing.
New rates take effect on an interim basis if the ACC fails to act on
the formal rate request within six months for small water companies,
or within nine months for larger ones.
- Originally introduced as HB 2137, the bill stalled in the House Rules
Committee on the issue of whether it constituted an unconstitutional
limitation on the ACC's rate-setting authority. The measure reappeared
in the Senate as a strike-all amendment to HB 2189. It passed out of
the Senate government committee after assurances it would be amended
on the Senate floor to allow operating savings as well as costs to be
passed through to customers. The bill ultimately was defeated on the
Senate floor, in part due to opposition from retirement communities.
- Pass-through legislation was opposed by ACC commissioner Renz Jennings,
but supported by newly elected commissioner Carl Kunasek. Proponents
also claimed support from the Central Arizona Project, Arizona Department
of Water Resources, and Arizona Department of Environmental Quality.
The ACC currently regulates 350 water companies serving 400,000 persons,
mostly in rural Arizona.
Scottsdale Sues Makers of Polyethylene Pipe
The Scottsdale City Council recently approved a $100,000 annual contract
to support litigation over faulty polyethylene pipes. The city hopes
to recover an estimated $8 million, the cost of replacing failed water
distribution pipes throughout the city.
- Polyethylene pipes once were widely used for water service lines,
but their reliability was questioned beginning in the early 1980s when
leaks developed. City officials' concern deepened as the number of leaks
increased, until 1986 when the city banned the use of polyethylene pipes
in future installations.
- Roger Klinger, general manager of Scottsdale water operations, reported
that the number of known failures greatly increased in 1989 when his
department began tracking the failures. Since 1989 over 6,800 failures
have been reported, with an estimated 13,000 additional services needing
replacement due to the problem pipe.
- City efforts to have the manufacturers reimburse damage costs have
been unsuccessful thus far. Costs include replacing failed lines, repairing
damaged streets and replacing landscaping on private property, with
work taking up to 12 years to complete. These costs could be passed
on to city water customers.
- Polyethylene pipes are not to be confused with polybutylene pipes,
another type of water pipe at the center of a controversy. Failed
polybutylene pipes have plagued many Arizona homeowners, causing
extensive property damage and resulting in high repair costs (see
Nov.-Dec. AWR, p. 1).
While polyethylene pipes are used as water mains, polybutylene
pipes carry water within the house. The Scottsdale City Council
considered banning polybutylene pipes but put off action when
the courts overturned a similar ban enacted in Chandler due to
a technicality.
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