Developer Owned Utilities Struggle to Manage the Cost of Water in Northern Arizona

Emery Cowan reports on the quickly escalating cost of water in an Arizona subdivision known as Flagstaff Meadows, which is served by a utility called Utility Source. The utility is requesting a rate increase from state regulators that would, if allowed, quadruple the price of water for residents in the last nine years.

In Flagstaff Meadows, Cowan reports, such high water rates would be too much for some homeowners to bear. Unfortunately, the Arizona Corporation Commission, the publicly elected body that regulates private utilities, predicted many of the development's current problems back in 2004 when the subdivision was first built.

According to Cowan: "While Utility Source's case is unique in many ways, several key issues are the product of larger development challenges that are pervasive across the state: small developer or landowner-owned utilities with costs that overwhelm a small ratepayer base, subdivisions left half-built after developers went bankrupt during the housing bust and a reliance on groundwater that, at least in northern Arizona, is difficult and expensive to access and pump."

Arizona has more than 400 small utilities, according to the article, which is an unusually high number. So many small utilities leads to problems with economies of scale, expertise on the part of the utilities, and trouble dealing with impacts arising from the persistence of zombie subdivisions.