Sun City Home Owners Association v. Acc, CV-20-0047-PR

Background

EPCOR Water Arizona acquired five separate wastewater districts with materially different monthly rates and centralized corporate operations.
The Arizona Corporation Commission ordered cost-of-service studies and rate scenarios (full consolidation, stand-alone, deconsolidation); EPCOR proposed full consolidation with a five-year phase-in to a uniform monthly rate of $38.59.
The Commission (4–1) approved full consolidation; higher-rate districts would pay less while Sun City and Sun City West residents faced substantial increases.
Sun City Home Owners Association appealed, arguing the consolidated rate unlawfully discriminated by ignoring cost causation; the court of appeals affirmed, applying what it called "extreme deference."
The Arizona Supreme Court granted review to decide whether the Commission is entitled to extreme deference and whether consolidation produced unconstitutional discrimination under Ariz. Const. art. 15, § 12.
The Court held that courts do not owe "extreme deference" on constitutional questions, reviewed discrimination de novo, and upheld the consolidation as not violative of § 12 because customers receive "like and contemporaneous service" at equal rates after the transition.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether courts must give the Commission "extreme deference" on ratemaking and constitutional questions	Sun City sought reversal of consolidation; argued Commission exceeded constitutional bounds (implicitly urging close review)	Commission and some parties relied on historical deference to its ratemaking expertise	Court: No automatic "extreme deference" on constitutional issues; factual findings get ordinary deference but constitutional questions reviewed de novo
Whether consolidation into one district produced unconstitutional rate discrimination under Art. 15 § 12	Consolidation is discriminatory because Sun City residents will pay rates that do not reflect their lower cost of service	Commission considered cost studies, sought parity to reduce disparity and fund capital needs; after transition all receive like and contemporaneous service at equal rates	Court: Not discriminatory — § 12 prohibits different charges for a like and contemporaneous service; uniform rates for identical service do not violate § 12
Whether cost-causation is required to satisfy the nondiscrimination clause	Sun City: cost causation must control so that customers aren't charged higher than their cost of service	Commission: cost causation relevant to just-and-reasonable rates but not dispositive of § 12 discrimination analysis	Court: Cost causation is relevant to determining just and reasonable rates (Art. 15 § 3) but not to the § 12 prohibition once service is "like and contemporaneous"
Whether classifications (consolidating districts) are limited by the nondiscrimination clause	Sun City: consolidation effectively reclassifies customers unfairly and produces impermissible discrimination	Commission: Has plenary authority to prescribe classifications; classifications are distinct from rates under § 12	Court: Classifications fall under the Commission's plenary § 3 power and are not themselves subject to § 12; courts will overturn classifications only if arbitrary, unlawful, or unsupported by substantial evidence

Key Cases Cited

Sun City Home Owners Ass'n v. Ariz. Corp. Comm'n, 248 Ariz. 291 (App. 2020) (court of appeals decision upheld consolidation)
Johnson Utils., LLC v. Ariz. Corp. Comm'n, 249 Ariz. 215 (2020) (Commission has plenary ratemaking authority; scope subject to judicial review)
Residential Util. Consumer Off. v. Ariz. Corp. Comm'n, 240 Ariz. 108 (2016) (constitutional questions reviewed de novo; no presumptive deference on constitutional compliance)
Freeport Mins. Corp. v. Ariz. Corp. Comm'n, 244 Ariz. 409 (App. 2018) (constitutional requirements limit Commission discretion)
State v. Tucson Gas, Elec. Light & Power Co., 15 Ariz. 294 (1914) (early expansive characterization of Commission power)
Town of Wickenburg v. Sabin, 68 Ariz. 75 (1948) (charges must be equal for same service under like circumstances)
Trico Elec. Coop., Inc. v. Senner, 92 Ariz. 373 (1962) (statutory nondiscrimination principle reflects constitutional provision)
Simms v. Round Valley Light & Power Co., 80 Ariz. 145 (1956) (deference to Commission factual findings absent abuse of discretion)
Jung v. City of Phoenix, 160 Ariz. 38 (1989) (cost-based rate differentiation can be defensible)
Alabama Elec. Coop. v. FERC, 684 F.2d 20 (D.C. Cir. 1982) (single rate for groups can be discriminatory when costs to serve differ)
Portland Ry., Light & Power Co. v. R.R. Comm'n of Or., 229 U.S. 397 (1913) (different charges for like service may be discriminatory)
Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803) (judiciary's duty to interpret the law)