Thousands face hefty rate hike from embattled Yuma utility - FOX Carolina 21

Thousands face hefty rate hike from embattled Yuma utility

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YUMA, AZ (CBS5) -

Thousands of Arizonans could see their water and sewer bills skyrocket, after the Arizona Corporation Commission voted 4-1 and approved a hefty increase.

If Far West Water and Sewer in Yuma meets nine specific conditions, they will be entitled to a 162 percent increase in rates, phased in six months apart.

More than 7,000 customers who live in the foothills are affected, and many of them are angry about the rate hike.

"In my opinion, it's ridiculous," Far West customer Carl Christensen said. "Most of the folks out here are on a fixed income."

"Most of them are really up in arms," said another customer, Patti Sutherland. "That's a huge bit of money to take out of their income."

When the new rates take effect, bills will go up from $21.75 a month to $39.05. After six months, the second phase will take rates to $56.92 a month.

Far West originally requested a 188-percent increase a year ago to avoid bankruptcy and remain operable, but the commission ultimately decided on the slightly lower amount.

Their current rates were set in 2007. Customers who spoke with CBS 5 Investigates acknowledged the company should raise its rates, just not to the extent they will ultimately have to pay, especially since Far West Water and Sewer has a history of mismanagement, violations and noncompliance with the Arizona Department of Environmental Quality.

The privately run water and sewer company is owned by Paula Scheckert and her sister, Sandie Braden, who took over after their father, Hank Scheckert, died.

They also own Hank's Market, H & S Developers, Foothills Mini-Mart, Las Barrancas Golf Course and many other buildings along Foothills Boulevard.

One of the major criticisms of the company is how money is moved around through their affiliates, at times loaned at high-interest rates and paid back to themselves first before paying other vendors.

"Money's been swapped around back and forth. Who knows where it went," said Christensen.

"They're using it as a piggy bank," said Barbara Gilkey.

An attorney for Far West told the Arizona Corporation Commission last spring access to affiliate money was the only thing keeping the utility in business.  

Also at those April hearings were three interveners or customers who are officially fighting the rate change. Robert and Barbara Gilkey are two of them.

"You just have to do the right thing. That's what America is all about," Robert Gilkey said.

The Gilkeys spent months digging into Far West's questionable business dealings and said they couldn't sit on the sidelines in this David and Goliath-type fight.

"Their behavior is well beyond acceptable, and I don't know why the commission doesn't discipline their brat," Gilkey said.

Prior commissioners did just that. In 2008, Far West asked the Arizona Corporation Commission to approve a 100-percent rate increase because, the company claimed, it couldn't pay its bills.

The request was denied, and RUCO, an independent state agency, cited mismanagement, misuse of funds and greed, along with a number of violations and noncompliance with ADEQ.

In an Opinion and Order in 2009, the commission's staff wrote: "It would be patently unfair to ratepayers to treat them as guarantors of the company by bailing out shareholders from the financial mess they've created."

Far West customers have seen little improvement and said they believe it is still business as usual.

In order to get the rate increase, the company has to meet nine specific conditions that include paying off developers and long overdue property taxes, writing a formal affiliate transaction policy and being fully compliant with the ADEQ.

If any of those are not met, the Corporation Commission has the authority to appoint an interim manager to run the company.  

Commissioner Brenda Burns was the only dissenting vote.

"I have a list of violations that I could read that are reason enough for the Commission to appoint an interim manager," Brenda Burns said at an open meeting in September.

At that same meeting, Commissioner Bob Burns also acknowledged Far West's sins of the past, yet he still approved the deal.

"I have some real concerns about the risk that is involved if this company does not improve significantly in their management. And that risk is carried by rate payers," said Commissioner Bob Burns.

Paula Capestro, the owner of Far West, assured the commission she has invested millions to upgrade the utility and promised to turn things around with the new money.

"I hope to rebuild the confidence of the community, but I cannot do that with empty pockets," Capestro told the Commission.

In the meantime, Far West customers are skeptical and not convinced things will improve.

"If history's a factor, probably not," Sutherland weighed in.

"I have no faith that anything's going to change from the way it's been in the past," said Christensen.

Through her consultant, Ray Jones, Paula Capestro agreed to an interview with CBS 5 Investigates but backed out a week later.

The interveners in the Far West case have filed for a re-hearing. Until that time, members of the Corporation Commission can't speak about their decision.

The first phase of the rate increase is expected in the next couple of months.

Copyright 2013 CBS 5 (KPHO Broadcasting Corporation). All rights reserved.

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