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"I , ' UTiLrflEs COiAiJi ~ l Allen Bivins 3980 E 200 N Rigby, ill 83442 O. No.Terms Project Due on the 1st Quantity Description Rate Amount Detail Of Operating Expense - 1 Acre 35.35. Customer Surcharge For Contingencies Total $40. 208- 745-0021 MORNING VIEW WATER CO. INC. 3996 E. 200 North POBox 598 Rigby. Idaho 83442 !llll!11 i lJg-.:i\:\,:I~HlI~,'ij!..(L\\':~I,n\:! 0 rJ If j,:J: '" 7 /Ji P, : . , - X 7i15.~OO4.I!; 'I' ' ,.., ,~~.' ;ild:dUjILlii'- ~("'';' I"!-"""""'""';""'00\,), LEGAL NOTICE --, MQrning View Water Company, Inc. has filed an application with the Idaho Public Utilities-Commission-r-equesting-a ratecine..~ase-o-Bhiny...fivepercentA tbirty-five~ - percent increase would add the following amounts to your bill; ~ Acre $7.70 per month, Yz Acre $10.10 per month, and 1 Acre $12.50 per month. A rate increase is necessary to pay the increased cost of power, taxes, salaries, repairs, maintenance, general operation costs, and to recover the depletedcontingency fund. Ail increase in revenue is necessary for Morning View Water Co.. Inc. to continue service without interruption. Morning View Water Company last filed a rate case in September 2002. The Commission granted a much smaller increase than was requested. Any questions or comments may be directed to our office or to the Idaho Public Utilities. Morning View Water Co.,lnc. 3996 E. 200 N. P~O:Box:598. Rigby, Idahu'83442 , 208- 745-0029 Idaho Public Utilities 472 W. Washington O. Box 83720 , Boise~ Idaho 83720-0074 208-800-432~369 -~ - --c fV 1 r. No / 1 M . 6 1 1 ' ,1 ; :Y p r o pv - f pi A ~U 1 C l S ~~ ct l ~ a d u . / d d f m ur v H . TI M E : 1 4 : 4 4 : 0 7 PA R C E L N U M B E R : R P 00 1 6 0 0 0 5 0 2 9 A A i PR O P E R T Y A D D R E S S : 39 7 5 DA V I D C I R PA G E DA T E : 3 / 0 2 / 2 0 0 7 83 4 2 9 VA L U A T I SU M M A R Y SH E EF F E C T I V E D A T E : EX P I R A T I O N D A T E : 02 / 1 5 / 1 9 9 8 00 / 0 0 / 0 0 0 0 TA X C O D E A R E A : 03 5 0 0 0 0 NA M E : MO R N . IN G V I m H. O - M - E ' S ' " ~ LE G A L : SH O T G U N V I L L A G E E S T A T E S # 1 0 1S T A M E N D E D P L A T LO T 2 9 A B L K 5 SE C S 1 2 - 13 T W P 1 3 R G E 4 2 AD D R E S S : PO B O X 59 8 RI G B Y ID 8 3 4 4 2 - 9 5 9 8 OL D P A R C E L # : -- - _ ~A ~ _ aR ~ - - - R X - - - -- - UA N ~ I ~ X - _ UH _ HA R K g ~ _ ~A L US _ - - - - R Q _ ~A L U g _ - - - RQ - gX g H ~ ~ - - - _ ~a - ~ A L U g - - _ Q~ R g R - gX E M ~ - 15 20 0 5 1 . 72 3 AC . 15 . 83 0 T 0 TA L S - ; - - - - - - 1- : 7 2 3 - - - -: - ~ o - - - - - - - - - - - -- - - - - - CA M A A R E A # : 11 DE E D R E F E R E N C E S : RE L A T E D P A R C E L S : I S U B i S Y S : I HO M E O W N E R S : N O N E DA T E : 0 8 / 1 0 / 1 9 9 8 ZO N I N G : 45 2 9 1 7 PH O T O N U M B E R : 33 2 5 4 7 IM A P N U M B E R : IN S P Y E A R : SL PA R C E L T Y P E : I L O C A T I O N C O D E : 0 0 0 3 I S W U N I T S : I S W T Y P E S : 20 0 5 I C O M M E N T S : I C O M B I N A T I O N TA X S P E C I A L S : TI M E : 1 4 : 4 4 : 0 4 PA R C E L N U M B E R : R P 00 1 6 0 0 0 5 0 2 7 A A PR O P E R T Y A D D R E S S : 39 8 1 DA V I D C I R PA G E DA T E : 3 / 0 2 / 2 0 0 7 83 4 2 9 VA L U A T SU M M A R Y SH E E T EF F E C T I V E D A T E : EX P I R A T I O N D A T E : 02 / 1 5 / 1 9 9 8 OO / D O / O O O O TA X C O D E A R E A : 03 5 0 0 0 0 NA M E : MO R N I N G V I E W H O M E S I N C LE G A L : SH O T G U N V I L L A G E E S T A T E S # 1 0 1S T A M E N D E D P L A T LO T 2 7 A B L K 5 SE C S 1 2 - 1 3 T W P 1 3 R G E 4 2 AD D R E S S : PO B O X 59 8 RI G B Y ID 8 3 4 4 2 - 05 9 8 OL D P A R C E L # : -- - - ~~ ~ _ ~R ~ - _ _ R X - - -- - _ QU A N ~ I ~ X - - US _ HA R K g ~ - ~~ L U g - - - _ _ RQ _ ~6 L U g - - _ _ RQ _ gX g H ~ ~ - _ _ _ ca _ ~~ L U R - _ _ Q~ H B R _ RX BH f - 15 20 0 5 1 . 26 8 AC 1 2 , 18 0 -- - - - TO T A L S : 1. 2 6 8 12 , 18 0 CA M A A R E A # : 11 DE E D R E F E R E N C E S : 1 R E L A T E D PA R C E L S : SU B - S Y S : I HO M E O W N E R S : N O N E DA T E : 0 8 / 1 0 / 1 9 9 8 1 IZ O N I N G : 45 2 9 1 7 IP H O T O N U M B E R : 33 2 5 4 7 I /M A P N U M B E R : IN S P Y E A R : SL PA R C E L T Y P E : IL O C A T I O N C O D E : 0 0 0 3 I S W U N I T S : 1 S W TY P E S : 2 a 0 5 I C O M M E N T S : I C O M B I N A T I O N TA X S P E C I A L S : 99 5 TI M E : 1 4 : 4 3 : 5 7 PA R C E L N U M B E R : R P 0O 1 6 0 0 0 5 0 0 4 A A PR O P E R T Y A D D R E S S : 39 8 0 JO S E P H D R PA G E DA T E : 3/ 0 2 / 2 0 0 7 83 4 2 9 VA L U A T SU M M A R Y SH E E T EF F E C T I V E D A T E : EX P I R A T I O N D A T E : 02 / 1 5 / 1 9 9 8 00 / 0 0 / 0 0 0 0 TA X C O D E A R E A : 03 5 0 0 0 0 NA M E : MO R N I N G V I E W H O M E S I N C LE G A L : SH O T G U N V I L L A G E E S T A T E S #1 0 1S T A M E N D E D P L A T LO T 4 A B L K 5 SE C S 1 2 - 1 3 T W P 13 R G E 4 2 AD D R E S S : pO B O X 59 8 RI G B Y ID 83 4 4 2 - 05 9 8 OL D P A R C E L # : - - - _ CA ~ - a H ~ - - _ R X _ - - -- - Q UA H ~ ~ ~X - _ UH _ HA R i g ~ _ ~A w U g - - - - _ HQ _ ~A L U ~ - - _ _ HQ - R X ~ H ~ ~ - - - - CR - ~ A L U S - - _ Q~ H g R _ gX g H ~ - 15 20 0 5 1 . 72 0 AC 15 , 80 0 -- - - - - - - - - - - - - - - - - - - - - - TO T A L S : 1. 7 2 0 15 , 80 0 CA M A A R E A # : 11 DE E D R E F E R E N C E S : 1 R E L A T E D PA R C E L S : 1 S U B - S Y S : HO M E O W N E R S : N O N E DA T E : 0 8 / 1 0 / 1 9 9 8 1 ZO N I N G : 45 2 9 1 7 IP H O T O N U M B E R : 33 2 5 4 7 !M A P N U M B E R : IN S P Y E A R : SL PA R C E L T Y P E : I L O C A T I O N C O D E : 00 0 3 I S W U N I T S : I S W T Y P E S : 20 0 5 I C O M M E N T S : I C O M B I N A T I O N TA X S P E C I A L S : TI M E : 1 4 : 4 3 : 5 1 PA R C E L N U M B E R : R P 00 1 6 0 0 0 5 0 0 1 A A PR O P E R T Y A D D R E S S : 39 7 6 JO S E P H D R PA G E DA T E : 3 / 0 2 / 2 0 0 7 83 4 2 9 VA L U A T SU M M A R Y SH E E T EF F E C T I V E D A T E : EX P I R A T I O N D A T E : 02 / 1 5 / 1 9 9 8 00 / 0 0 / 0 0 0 0 TA X C O D E A R E A : 03 5 0 0 0 0 NA M E : MO R N I N G V I E W H O M E S I N C LE G A L : SH O T G U N V I L L A G E E S T A T E S # 1 0 1S T A M E N D E D P L A T LO T 1 A B L K 5 SE C S 1 2 - 13 T W P 1 3 R G E 4 2 AD D R E S S : PO B O X 59 8 RI G B Y ID 8 3 4 4 2 - 0 5 9 8 OL D P A R C E L # : -- - _ C~ ~ _ ~R ~ _ _ _ RX _ _ _ _ _ _ QU A N ~ ~ ~ X _ _ YH _ H~ R K ~ ~ _ ~~ ~ y g _ _ _ _ _ aQ _ ~A ~ U R _ _ _ _ RQ _ gX g H ~ ~ _ _ _ _ Qa _ YA M y g _ _ _ Q~ H g R _ gX g H f - 15 20 0 5 2 . 04 0 AC 1 8 , 23 0 TO T A L s , - - - - - 2" - : D " 4 0 l8 , 2 3 0 - - - - - - - - - - - - - - - - -- - - CA M A A R E A # : 11 DE E D R E F E R E N C E S : I RE L A T E D P A R C E L S : I S U B - S Y S : I HO M E O W N E R S : N O N E DA T E : 0 8 1 1 0 / 1 9 9 8 IZ O N I N G : 45 2 9 1 7 IP H O T O N U M B E R : 33 2 5 4 7 IM A P N U M B E R : I I N S P Y E A R : IP A R C E L T Y P E : IL O C A T I O N C O D E : 0 0 0 3 I S W U N I T S : I S W T Y P E S : 2 a a 5 CO M M E N T S : CO M B I N A T I O N TA X S P E C I A L S : SCOTT WOODBURY DEPUTY ATTORNEY GENERAL IDAHO PUBLIC UTU..ITIES COMMISSION PO BOX 83720 BOISE. IDAHO 83720-0074 (208) 334-0320 BAR NO. 1895 Street Address for Express Mail: 472 W. W ASlllNGTON BOISE, IDAHO 83702-5983 Attorney for the Commission Staff BEFORE THE IDAHO PUBLIC UTILITIES COMl\flSSION IN THE MATTRROF THE APPl.ICATIONOF ) MORNING VIEW WATER CO., 1Ne. TO REVISE AND INCREASE RATES CHARGEDFOR WATER SERVICE. CASE NO. MNV-W-O2- COMMENTS OF COMMISSION STAFF COMES NOW the Staff of the Idaho Public Utilities Commissloll, by and through its attomey of record., Scott Woodbwy, Deputy Attorney General. and submits the following commc:nl.. in rQ.ponsc to Lhe Notice of AppliC"dtion, Notice of Modified Pro(.-edure and Notice of CommentIProtest Deadline issued on May 15, 2002. On April 26 2002. Nolan Gneiting. president ofMoming View Water Co., Inc. (Morning View; Company) filed an Application with the Idaho Public Utilities Commission (Commission) requesting authority to increase rates for water service by $30 a month. an increase of 136%. Current authorized tariff rates for Morning View are a $22 per month flat fee plus a public drinking water fee of $6.67 per year. Base.rates have not been changed since June 21, 1990. GENERAL The Application was based upon the water company s average operating results tor the last three years (1999-2001). Staff visited the Company s offices on May 16 2002 to audit the STAFF COMMENTS JUNE 5, 2002 financial records of the Company for the three years upon which the Company s request was based. Morfurig VieW WateiC Orfipanyhas ridf filed' 'A:m1ua lRepOrt'Withthetdaho 'PubJi ~iIities(J()111miSS~()r1.sifice199LStafrhashadnUlIleroUscoIitacts with the 'owner, Mr. Nolan Gneiting,regarding his failuretO:filetherequirec:irep()r~.S fiiffhasseve.ta.ltime&m the ,past attempted to petforma. 1ihari.ciala1.1dit of the C().t1:Ip8riy s()p~rations~. Each audit was discontinued due to a lack of adequate records. The Company has made considerable improvement in its ability to provide adequate documentation regarding its expenditures. During its ream audit.. Staff was able to track most expenditures to determine whether or not they were just and reasonable. Staffhas made numerous adjustments to the financial data submitted in the Company s Application. These adju.c;tmentc; are detailed iTl AttachmeTlt~ A-4 and A-5 to these commeTlt~. Mr. Gneiting owns three separate business entities, Morning View Water Co. (utility) Morningview Homes (real estate company) and Landco Building and Development Co. (land development and home construction). Mr. Gneiting doe8 not adequately segregate his various business,oac tiviti es . '€~~ t1mv'2in.t:ifu!'tb.e van(')i!s blJ.Siness en tj'ti&'isciommitt 0\ed . atid"num.eroUs ' :,' ""' . '' "" " t.) , ' xp~ d.l t.Ui es 'froJjj ., ' ' the ~pcobmi accPu.n Fbaye ':beei:viriapp i"tjp~ IX. iD. cl t1Qed 85M: 0 mitt g View .~~ Co~"experises~ Staff believes that it has adequately separated costs not associated with operation of the water utility from the financial data included in the Company s Application. Based upon its analysis of the Company, Staff has determined that an increase in pro forma gross revenues of 49.0% or $7,244 is justified. During the course of its investigation, Staff discovered that the Certificate of Convenience and Necessity No. 314 issued by this Commission bas a rjpographieal error identifying the service area to be ",ithin Section 30, Township 4 North, Range 38 East. The Range is incorrect and should be 39 East. In addition, Staff learned that the water system has expanded beyond the service area approved by the Commission.. The Company has extended its service approximately Yz mile west of the certificated area. The legal description of the area .now be.ing served is lhe Norlh Yz of lhe Northeast ~ of Section 30, Township 4 North, Range 39 East (lhe original service are"d) and lhe North Y:z of Ihe Northwest YJ of Section 30, Township 4 North, Range 39 East (the expansion area). The Commission received a letter :trom the Company on May 31, 2002, requesting a revision to its Certificate to .include the expansion area. ST AFro COMMENTS JlJNE 5, 2002 RESUL TS OF OPERATIONS Attachments A-I through A-3 present a side-by-side comparison of the fInancial data submitted. in the Company s Application with 8ta1I"s post audit adjusted. results tor the years 1999, 2000 and 2001. Attachment A-I compares the Company s 1999 reported net loss of ($10,312.74) with Staffs adjusted net loss for the year of ($2 629.73). The difference is the result of numerous adjustments identified by adjustment number in the last column of the attachment. The details of the adjustments for 1999 are shown on the top of Attachment A-4. The . ma j 0 Ii tj"U f!ilie a djtiSOOen1#ai eLf #~p 'en dJ:taJ;eg!t1UJ;t ~t 0 pri a telYs h out d' h ave'.beenc: barged tothe Ti3tidco'bfu.9ness.~tiOD..;Landco is the developer of four of the five subdivisions served by the water company. The initial installation of a water system in a subdivision is the responsibility of the subdivision developer. The Commission s Rule 103 for Small Wafer IMufJi1nio; I"'-emJt11 ~ 1hat1he developer1"eCover!; tbe mitial CO!;t of the water ~y!;tem through the '5ale-Df!ots. It fiuther presumes that the water system is contributed by the developer to the water company resulting in no initial investment by the wate.r company in the development. Other adjustments include items that should be capitalized as investment rather than expensed persona! expenses of the owner. expenses that should be shared with other business entities and property ta.."Ces. Property taxes have been removed because of the special treatment used for dete.m:riiring appraised value of utilities in Idaho. The Idaho State Tax Commission conducts appraisals of utilities. Those appmisals depend heavily upon the Idaho Public Utilities Commission determination of valuation for rate making pwposes. As discussed above, this Commission assumes the initial water system is co.ntributed to the water company by the developelS. Therefore, the valuation determined by the Co.mmission is zero until major compo.nents fail and havc to be replaced with new investment. The Idaho State Tax Commission would therefore consider the valuation to be zero.. resulting in no. property taxes. -staff~~'fI:re,;ifd ijfioiSf#'t9lfliJt(~i()Jl wlI (rind! cared. tliaf~ If.. Ghei titt g has. . 18.i l~ .b!; tetUrJitJIa C -(jriiiri i ~siOO'-s.A RiJ.uat Rep 6~Fo rms d.~i ttfn l1ID. e co cefu 1 n de.rs . The Idaho. State Tax Co.m.mission therefo.re assigned an arbitra.tyvaluatio.n of$60.000 to the system. Had Mr. Gneiting filed /.he annual reports to this Commission and to /.he Slate Tax Commis:.ion /he appraised valuation for (be W"dter system would have bcc::n properly established at zero. The Staff also discovered that at least one of the well lots (included in the water company valuation) has been separately appraised by IeffeI50n County and therefore has been counted twice STAFF COMMENTS JUNE 5. 2002 resulting in double taxation on the property. Mr. Gneiting should immediately be in contact with both the State Tax Commission and Jefferson County to correct the appraised valuation. StatI has removed these taxes. The taxes were assessed due to water company managerial error and should not be passed onto customers. Correcting the assessed valuation will eliminate these taxes in the future. Attachment A-2 compares the Company s 2000 reported net loss of($12,439.90) with Staff's adjusted net loss for the year of ($1 020.92). The difference is the result of numerous adjustments identified by adjustment number in the last column of the attachment. The details of the adjustments for 2000 are shown on the bottom of Attachment A-4. Adjustments are similar to those discussed above for 1999. AttachmentA-3 compares the Company s 2001 reported net loss of ($6 685.50) with StafFs adju.o;;led Tlel loss for the year of ($134.26). The difference is the remllt of numerou.o;; adjustments identified by adjustment number in the last colunm of the attachment. The details of the adjustments for 200 1 are shown on Attachment A- 5. Adjustments are simil8I' to those discussed above for 1999. In addition. the Company s requested office space rent allowance of $3.000 has also been removed on Attachment A- 3 but is addressed later on Attachment A- 7. Attachment A-6 is a side-by-side comparison of the Company s Staff Adjusted Income Statements for the three-year period. similar in format to the schedule attached to the Company Application. It is apparent from looking at this schedule that the Company is moving toward profitability as customers are added to the system. Attachment A- 7 is a Pro forma schedule of operating results. This schedule builds rl.pbti. the adjusted 2001 Income Statement from Attachment A-6. The intent is to annualize and normalize certain items and provide for expenses not actually incurred but reasonable. First, Staffhas normalized the revenues that the Company would collect from its existing 56 customers on an annualized basis. This adjustment adds $2 411 to the Company s reported revenues for 2001. Second, Staffhas normalized the Company s water testing expenses. The frequencies of specific water tests vary. Some tests ace required monthly. Othet's have a frequency quarterly, mmwilly. semi mmwilly. every 3 years IIIld every 6 years. This adjuslmcnt ~-prCHds the cost of each test over its required frequency. OVcl' lime, the averdgc annual testing expense is $750 for each water source. Mr. Gneiting has informed Staff that the Idaho Department of STAFF COMMENTS JUNE 5, 2002 Environmental Quality has declared the aquifer from which Morning View draws water a well field requiring only one set of tests regardless of the number of wells. The Company in its Application requested (and actually paid to an affiliated company, Landeo) office rent expense in the amount of $3 000 annually. During discussions with Mr. Gneiting, Staff determined that the office space requirement for the water company was 100 square feel A phone call placed to a local commercial landlord by Mr. Gneiting produced quote of $0.79 per square foot per month for office space. Staff independently searched the Internet and found a realty company in Idaho Falls with commercial rental space available. Those properties had monthly costs of $0.37 to $ 1.25 per square foot per month. Staff believes that the $0.79 per square foot quote is reasonable. The building within which the Company conducts its business is not owned. by the water company but rather by its affiliate Landco. Were this space not availahle, the water company would have to seek space elsewhere fTom a non- affiliated company. This allowance replaces the Company s requested $3,000 per year allowance with an allowance of $948. The last two pro forma adjustments are to provide compensation to Mr. Gneiting for the time he spends managing and ma1tlUlining the water system. Ifhe were to hire a third party for these activities, the water company would incur labor costs. Mr. Gneiting has not drawn a salary from the Company. It is reasonable for him to expect to be compensated for his effort. Mr. Gneiting requested an allowance of $10 000 per year in the application. The Company employs a part-time employee to help with the office tasks and who often checks the pressure tanks as welL At this time with only 56 customers connected to the system and a total of 149 lots on the system (approximately 400/0 fill), Staff does not believe a $10,000 annual salary is justified for the part-time operation of the water system. Staff has substituted a managerial allowance of $4,160 (4 hours/week at $20/hour) and a maintenance allowance of $2.496 (4 hours/week at $12/ hour). Staff's adjusbnents represent an allowance of approximately 20% of a 40-hour week for Mr. Gneiting s time. 'St1iJI~li~v~t1liit'"Glleitingasth~deveI()~ra.;aiid\fu)ofthe subijivisi onsri1ustffii'prppt!rc:dtotib:;t;tbstf.tIIc;ofthcop crating (Jas ts until. such .time .ss .the suWl'Vj~i&tls.reachareas9.riaJ)le:fi1lIeV~tofJ()%tQ80%. As customers connect to the system more of IY1r. Gnciting's time will be required bul!here will also be additional revenues to support. reasonable int.Teases in his co.mpcnsation. SlaLTs pro fonna resulls produce a ne1loss for !he test year 2001 of($5,414.32). ST AFro COMMENTS ruNE 5, 2002 RATE BASE, DEPRECIATION AND REVENTm REQUIREMENT Attachment A-8 is a calculation of the Company s rate base, depreciation expense and the total revenue requirement StatiO believes is justitied in this case. The top part of this schedule develops a rate base and depreciation expense tor the Company that Stair believes is reasonable. The rate base is the investment the Company bas in physical assets that were not contributed by developers. The items identified here arc investments the Company recorded as operating expenses that Staff removed in its previous expense adjustments. The Company is allowed to record and recover depreciation expense on these assets and earn a reasonable return on the net undepreciated investment (rate base). The rate base determined by Staff is $6,373.66. Depreciation expense on these assets is $596.79 annually. The lower portion of Attachment A-8 is the calculation of total revenue requirement for Morning View Water Company. A 12% return on the rate hase determined ahove produce!; a return requirement of $764.84. This return must be grossed up to provide for an income tax allowance. Staff used the minimum Idaho State tax rate- of 8% and the minimum federal tax rate of 15% (after state tax deduction) to develop a pretax requirement of $978.99. The pro forma 2001 operating expenses of $20.452.24 from Attachment A- 7 and the depreciation expense of $596.79 are added to the return to produce a total revenue requirement of$22,O28.02. Tills revenue requirement is $7,244.02 greater or 49% more than the annualized revenue the Company would collect from its current 56 customers at existing rates. RATES AND SYSTEM DESIGN As calculated by Staff, the annual revenue requirement determined by Staff is $22 028. If this revenue is recovered. from all eustomclS with a unifonn customer charge, such as the $22.00 per customer per month rate currently in place, thc rate would go to $32.78 per month. This is an increase of $10.78 per month or 49%. Although the system is not metered there is another rate design alternative that Staff believes is more equitable. The five subdivisions served by Morning View Water are predomin.a.ntly composed of lots in. three different sJus. The lots are quarter-acre, half-acre or one-a('Te in size. The meter at the well indicates (hat f.he averdge cuswmer uses approximately 000 gallons per month in f.he lowest winter month and more than 10 times that amount in the highest summer month, approximately 124 000 gallons. The extremely large amount of water per customer pumped in the summer months indicates very substantial amounts of outside water STAFF COMMENTS JUNE 5, 2002 use, presumably lawn and garden watering. Since larger lols have more potential for this kind of use, a different monthly rate can be determined for each lot size. One such rate design that recovers the Company s revenue requirement would charge customers on quarter-acre lols the existing rate of$22.00 per month, balt:'acre lot customers would pay $29.75 per month and customers on one-acre lots would pay $37.50 per month. There are two quarter-acre lot customers, 30 half-acre lot customers and 24 one-acre lot customers. This rate design assumes no increase for customers on quarter-acre lois, a 35% increase for customers on half-acre lots and a 70% increase for customers on one-acre lots. Complete equity in water bills is only achieved when every customer is metered and every customer pays only for the water that he or she uses. Nearly all lots in the five subdivisions were developed with meter boxes such that all that is required to meter the system is the meter and some as.e;;ociated plumhmg, Mr. ('meiting estimates these coste;; to he approximately $300.00 per service. The cost of metering, reading meters and calculating bills amounts to a few dollars per month per customer. Along with equity as previously discussed, me.tering brings some other advantages. It de.creases water consum.ptio~ which increases system water pressure and delays the need tor additional pumping capacity and/or water storage facilities. Staff does not recommend metering at this time but instead. proposes rates by lot size. However, as additional water supply is needed or water pressure falls to unacceptable levels even with such practices as alternate day lawn watering, all customers should be metered to capture the benefits previously discussed. Morning View should plan on this transition in the next two or three years. The Idaho Department of Environmental Quality reviews water S".fstem plans to determine ifwatcr volumes and pressures arc adequate. DEQ has approved Morning View sys tc m. How CN e r~D ftiQ rpqriirqsaU systCtrjS"W;i tl1i116 IY- th ~11h~ Sciis t() JJ1(: is. 16 ha V'c tW ~or11l6rc wells~y.lo~e customers. Mof1lingYi~\VWaterJ:J.asthree we11s. Qneofthey.rellsisnot eCfI.JiPPe(f\'YithapuiriparidmQMJl'iI'11r1 n9tl;O:nn.~ted.t9ilie~~. The other two weIls are identified as the large well and the small well. The large well is capable of producing 400 GPM and the small well produces 150 GPM. The large well is providing the needs of the customers at the c urren l Lime. AIl'ar!clilion tj.lval vcfi~ji~tO.pX:l1 pet lY.wJID.C(.:tth ~. s.mall wen .iO' lh e." ~YStc:JD. To ~ JJ, void ~(J I ouiag c::siiV1i. en "the largc&WHFcq Uipmcm t 18' m' nee(luf rtp air ~ lli b . srnMI .W eU needstobema~'DpCI'3tio&ttlLast win~ some repairs needed to be made on the large well~hmd customers were-without water for two or three days. STAFF COMMENTS JUNE 5, 2002 Morning View Water's Tariff consists of two Schedule No. l's. One contains the current flat rate charge of$22.00 per month for water consumption and the other a once a year charge trom each customer tor the Department of Environmental Quality's Annual Assessment. The DEQ tee has been incorporated in the over-all revenue requirement recommended by Statl" in this case and need not be recovered through a separate tariff schedule. CONSUl\tfE R COMMENTS To date, three petitions from customers of Morning View Water have been received. One petition was signed by 39 households; each of the other two petitions were signed by individuals. The total number of signatures on the three petitions is 77. The Company initially stated that it has 53 customers, although a more recent customer list shows 56 customers. Some cu.~tomers readily acknowledged signing multiple petitions. Tn addition, eleven written comments were filed. Many customers request that the Idaho Public Utilities Commission (IPUC) hold a hearing in this case. Staff recommends that a workshop and hearing be held in Rigby or another location near Morning View s service territory. In the petitions and comments, customers expressed concern with the magnitude of the requested increase. They also are concerned at the Jack of water pressure, the number of times water is totally off, the slowness of repair when there is a problem, the safety of the water supply, and the validity of the system costs as reported by the system owner. The Commission authority is to set rates which are just and equitable to both the people and to the corporation. (Idaho Code ~9 61-301 through 61-329). Some of the issues mised by customers concern the development itself instead of the water system and are not under the purview of this Commission. Subdivision covenants arc beyond the scope of the Commission s authority. The request by customers to change the covenants so that residents can elect their own board and run the water system, or allow them to drill their own well cannot be addressed by the IPUc. Customers did not indicate that they had approached Mr. Gneiting '\Vith an offer to purchase his water system so they can form a homeowners association and eliminate the need for regulation by the IPUC. Water quality and the associated water safety issues fall Ullder the prima.ty jurisdiction of Idaho Department of Environmental Quality (DEQ). which is rc.-ponsible for monitoring water quality and enforcing environmenf.a.llaws and regulations. The Company understands that it is required to follow the Commission s Utility Customer Relations Rules (UCRR) and Utility Customer Information Rules (UCIR) as well as its ST AFro COMMENTS JUNE 5, 2002 own approved tariffs for rates and charges as authorized by the Commission. Minor changes are needed to bring Morning View s bills and disconnect notices into compliance with those rules. The Company is working with Statrto make the necessary corrections. The Company s "Utility Agreement~ provided to customers says a $25 reconnect tee will be charged in the event service is disconnected. A $25 reconnect fee falls within the reasonable range of charges the IPUC has allowed other utilities for the reconnection of service. The Company also charges a "finance charge" of $. 75 or 1.25%. whichever is larger, when a payment is late. Apparently, this "Imance charge" is a late payment fee assessed on past due bills. To date, the Company has not requested, nor has the Commission granted, approval of either a reconnection or a "finance charge.'" Historically, the Commission has not allowed a late payment fee when a utility has the ability to discontinue service for nonpayment, or when the utjliLy s charge for ba.:;ic service js billed a month in advance. Morning View can and doe..:; disconnect service~ therefore, Staff does not support a late fee or finance charge. Staff does support implementation of a $25 reconnection charge. The utility has required. eusiomers to sign a "Utility Agreement" in order to receive service. The utility certainly can require a written application to identi..f)1 customers. However , the "U tility Agreement" appears to be a written contract that goes beyond the scope of an application for service and it contains inaccurate information. Item 4 of the Agreement contams rates which have not been approved by the Commission: $22 for each month plus a rate of $.45 per thousand over 20 000 gallons up to 100,000 gallons and $.35 cents per 1 000 gallons of water used in excess of 100 000 gallons. The Agreement goes on to say that "'rates shall be subject to adjustment and shall be approved by the Public Utilities Commission ofllie State ofIdaho." The IPUC has not approved a usage-based rate. Indeed, such a rate design would be inappropriate because customers do not have metered service. Item 7 of the Agreement discusses deposits. Statements made regarding deposits are in keeping with Commission Customer Relations Rules. The last sentence in Item 7 stated that "the above captioned occupant is to remain responsible to the water company until a new occupant pe.rsoJlally signs for the accoWlt with Morning View Water Co., Inc." A utility can require a reasonable prior notice for a requesUo disconnect service for a customer moving to give the utility time to s(:hedule the water shut off. An attempt to hold one party rc::.-punsible for water service until another party signs up for service at that location is unreasonable and should not be allowed. FurthemlOre. the utility is allowed to pursue collection of amounts owed by a previous STAFF COMMENTS JUNE 5, 2002 customer, but it can only attempt to collect from that customer, not a new party moving into the same address. The amounts owed remain with the customer of record., not the location of service. Mr. Gneiting has agreed to discontinue use of the "Utility Agreement" which will make changes to the "Utility Agreement" unne-eessary. STAFF RECOMMENDATION Staff recommends that a workshop and hearing (for public testimony) be scheduled in Rigby or another location near Morning View s service territory. Staff recommends that an annual revenue requirement of $22,028 be approved for Morning View Water. Staff recommends that monthly rates for Morning View Water be established by lot size a~ follows: LOT SIZE 0 Acre - 0.4 Acre 4 Acre - 0.8 Acre 8 Acre and Larger MONTHLY RATE $22. 29. 37. Staff recommends that the "Schedule l - Public Drinking Water Fee" tariff be cancelled. Slaffrecommends that a $25.00 reconneclion charge be approved and shown on Schedule 2 - Miscellaneous Charges. S#I ff -C() mrrre1t ci~" tltat thecl "5QGPM'weUbe,cmmected into.the, system '.and ., be opera tio,:naI .""itlriri 3 Ooay:;,.()-rtliis(jrd,~r,CIlldth Ii tMI'.Grieitingno tifytheConmrissi on" bY-Jetter when:"tbat1tas'OCct.ttted. . Staff-recotttllm11ds.tbat Mom1ng View be required to bring its bills and notices into cempliance-with the Commission s Customer Relations RuIes and Customer Information Ruies. Staff recommends that the Company cease its practice of assessing a "finance charge" or late payment fee on past due bills. Stat!" recommends that the Company discontinue use of its presently dratted "Utility Agreement. .. Staff recommends that the Commission coaect the Company s existing Certificate No. 314 to properly identify the Company s existing service area to be within Section 30.iownship N~Ra.ge39tasl STAFF COMMeNTS JUNE 5~ 2002 Staff recommends that the Commission notice its intent to amend the Company Certificate No. 314 to include the North Y2 of the Northwest V4 of Section 30, Township 4 North Range 39 East Respectfully submitted this day of June 2002. Scott Woodbury Deputy Attorney General Technical Staff: Bob Smith Marge Maxwell Kcith Hessing SW:i:umisccommenlvnm"",1)2.15wnume5kh STAFF COMMENTS JUNE 5, 2002