Johnson Utilities ACC hearing

Johnson Utilities officials, from left, attorney Jeffrey Crockett, CEO Gary Drummond and Chief Operating Officer Brad Cole, listen as the Arizona Corporation Commission questions environmental officials about past sewage violations alleged against the company April 17 in Phoenix.

PHOENIX — The Johnson Utilities evidentiary hearing with the Arizona Corporation Commission ended Wednesday, yet after almost four weeks of testimony there are still critical questions that remain unanswered.

Legal briefs will be given May 25, with a June 1 response brief. Administrative Law Judge Sarah Harping will then write a recommended opinion and order, but the commission will ultimately rule on the appointment of an interim manager.

Johnson Utilities CEO Gary Drummond was the last witness to testify. He painted a picture of a utility that has been steadily improving and deserved the chance to keep doing so.

“I feel like we’ve made significant progress and I’d like to have the opportunity to continue to do that,” Drummond said. “We’ve done the heavy lifting over the last 12 months and I’d like the opportunity to cross the finish line.”

Drummond cited an improvement in the utility’s record of hydrogen sulfide emissions at the Section 11 plant but declined to acknowledge the validity of several violations that had been registered by an additional monitor that had been placed by the county.

“If the county wants to put up 100 other monitors, they can do so,” Drummond said, continuing that the only one that was valid for giving violations was the one at the agreed upon location with the county at the golf course maintenance shed.

Activists in the neighborhood surrounding the plant have criticized this methodology, arguing that a single monitor does not accurately represent residents’ exposure to the gas and aggressively lobbying the county to add more monitors.

Drummond was unable to answer hard questions about the subsidiary Ultra Management, which has been the subject of ongoing scrutiny from interveners throughout the hearing.

Johnson Utilities has a contract that diverts about half its revenue to Ultra Management, totaling about $15.5 million annually, which witnesses from the town of Queen Creek argued was related to a lack of investment in infrastructure on the part of the utility. Ultra Management is owned by Chris Johnson and Barbara Johnson, son and daughter of Johnson Utilities owner George Johnson. Drummond could not say what happens to about $9 million in revenue that is diverted out of Johnson Utilities to Ultra Management.

“Those agreements are in place, the ink is dry, and they are what they are,” Drummond said.

Drummond did say that Ultra adds value to ratepayers by protecting the utility from liability in the case of a catastrophe, in which case liabilities to the company would get passed on to ratepayers.

He also said that it provides bookkeeping and administrative services to Johnson Utilities.

Chris Johnson testified that Ultra Management has no employees and that he has no job duties associated with the subsidiary. He could not remember how much money he makes as an owner of the subsidiary.

“These are commonly recognized legal tools,” Drummond said. “It’s not intended to be a sham of any sort. We’ve recognized corporations as fictional entities for centuries.”

Drummond also said that he was concerned that the utility would not be given a fair chance in both the evidentiary hearing and the rate case before the commission. A delay has been requested for the latter until George Johnson’s federal case, where he is being accused of a conspiracy to bribe a member of the Arizona Corporation Commission during a previous rate case, is resolved.

Drummond was concerned that people involved in the hearing have been called as witnesses in George Johnson’s federal case, including Commissioner Bob Burns.

“An indictment of Mr. Johnson, if he did something, is an indictment of the commission too, and we need to preserve the integrity of the commission,” Drummond said.

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