Surprise homeowners associations and city officials are scrambling to fight a proposed Arizona American Water rate increase that would hike bills by more than 82 percent.

The sticker shock for individual homeowners, who would see $25 added to the average monthly bill of about $30, would reverberate through the homeowners associations that make up much of the city.

"The biggest expense we have in the community is landscaping," said Mike Smith, president of the board for Sierra Montana, a 2,700-home subdivision just west of Loop 303. "We've got $5.2 million worth of trees. It would be devastating."

Water bills for landscaping in Sierra Montana total about $450,000 a year, paid through homeowners' assessments that can be tough for association boards to increase.

The Surprise City Council, homeowners associations and the state's Residential Utility Consumer Office are pushing the Arizona Corporation Commission to conduct more public hearings before ruling on the rate increase.

The next commission hearing to consider the increase is Aug. 17.

Most of Surprise lies within Arizona American's Agua Fria Water District, the service area that is facing the increase.

The only part of Surprise that lies within the city's water district is the southeastern quadrant, an area bounded by Bell Road on the north and North Reems Road on the west, between Bell and Greenway roads. The western edge of the city's district is Sarival Road.

New treatment plant

The basis for the rate increase dates to 2002, when Arizona American started planning for the White Tanks Regional Water Treatment Plant. It was designed to wean Surprise off of groundwater, which is not easily replenished, and onto the more renewable canal water from the Central Arizona Project, said Arizona American spokeswoman Joni McGlothlin.

The $74 million plant opened last year.

"It actually saves billions of gallons of groundwater per year," McGlothlin said. "It specifically serves the Agua Fria Water District."

She added that the company has not had a rate increase for the district since 2007 despite incurring operating and infrastructure cost increases.

Opponents said that Arizona American should have shelved plans for the plant or, at a minimum, reduced its size after the state's economy tanked.

Developers and homebuyers who pay water hook-up fees for new houses would have paid for the plant under the original plan, devised when the West Valley was still booming.

Research by the Residential Utility Consumer Office shows that the company anticipated receiving $63 million in hook-up fees. To date, it has taken in $2.9 million.

Jodi Jerich, director of RUCO, said the plant was designed to be larger than necessary to process its allotment of canal water.

"Arizona American customers should not have to cover the company's overreach," Jerich said.

RUCO is recommending a rate increase of about 35 percent, an average hike of $10.50 per month, to cover reasonable costs.

"They knew at the time they broke ground they did not have the money for this and exceeded their (canal) allocation," Jerich said. "We believe they are entitled to recover their cost to provide reliable, safe service to customers. Nothing more and nothing less."

McGlothlin denied Jerich's statement that the plant is too large and said it is running at full capacity.

Sun City Grand is fighting

The rate increase affects Sun City Grand, the largest retirement community in Surprise with nearly 10,000 homes and acres of landscaping.

Mitzi Mills, Sun City Grand's executive director, said that most residents have no idea they even reside in the Agua Fria Water District.

Customers said the district's name does not appear on water bills. When some homeowners received notifications about the increase and called Arizona American, they were told that Surprise was not in the district. Apparently, representatives in the call center were unaware of the district's boundaries.

Sun City Grand resident Kenneth Hewitt started his own investigation and determined that he and his neighbors were in the district. He alerted the Sun City Grand board and the community joined the Corte Bella retirement community in filing with the Arizona Corporation Commission to intervene.

The Sun City Grand board also formed an ad hoc committee to determine what happened with the notifications.

"I could not find a citizen in Surprise who thought they were in the Agua Fria Water District," Mills said.

Community and city officials now are notifying residents so they can file comments with the Corporation Commission, which has final say on the matter.

The Surprise City Council sent a letter to the commission asking the board to extend the public-hearing period and is encouraging residents to express their opinions.

Hewitt said he has filed as an individual intervener and asked commissioners to determine if the notification was proper.

"Not just that it met the criteria, but was effective," he said.

Company said it reached out

McGlothlin said the company met all of the notification requirements.

"The company has done many things to reach out to the community to notify them of the proposed rate increase," she said. "All of our notifications include the district name on them and they're targeted to the affected customer. When they get a targeted notice, they should always apply it to themselves."

McGlothlin added that the process at the commission is open and transparent and customers still have time to protest.

"Nothing is final until there is commission approval," she said.