20100422final_order_no_31061.pdf

Office of the Secretary
Service Date
April 22 2010
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF MORNING VIEW WATER COMPANY
FOR AUTHORITY TO BORROW FUNDS TO
MAKE UPGRADES TO ITS WATER
SYSTEM
CASE NO. MNV-10-
ORDER NO. 31061
On March 24 2010, Morning View Water Company ("Morning View ) submitted an
Application requesting authority to borrow funds in order to perform upgrades on its water
system and ensure compliance with certain Idaho Department of Environmental Quality
IDEQ") standards. The Application contained several attachments including, but not limited
to, correspondence between Morning View and IDEQ regarding Morning View s compliance
with IDEQ standards and the Company s interest in enrolling in IDEQ's Drinking Water
Revolving Loan Program.
APPLICATION
Morning View requests authority to borrow $275 000 under the IDEQ's Drinking
Water Revolving Loan Program to correct the problems identified in the 2009 facility plan and
engineering report. On January 13, 2010, the Company submitted to IDEQ a letter of interest in
obtaining a Drinking Water Planning Grant or a Drinking Water Loan. The loan proceeds will
be used to fund various projects as follows:
Installation of variable speed drive
Installation of 25 meters on I-acre lots
Pump testing of two pumps
Installation of backup generator
Drilling of new well
Grant match
Grand Total
$10 000
000
000
000
150,000
15,000
$ 275 000
IDEQ has accepted letters of interest in its drinking water and wastewater planning
grants and State Revolving Fund loans. Each letter was rated using several criteria and a draft
Intended Use Plan (IUP) for State fiscal year 2011 has been published, with projects listed in
order of ranking. This IUP list of fundable loan projects shows that Morning View Water
System is currently ranked second on the draft project priority list. The IUP report was issued
ORDER NO. 31061
for public reVIew and comment and will be presented by IDEQ Staff to the Board of
Environmental Quality for final approval during its regular meeting on April 22, 2010.
Staff contacted the IDEQ Staff on April 7 , 2010, and IDEQ indicated that Morning
View s Drinking Water Loan would also be eligible as a disadvantaged loan under its Drinking
Water State Revolving Fund (DWSRF) program. Preliminary analysis conducted by IDEQ
indicates that Morning View would qualify for a zero interest rate loan, a loan repayment term of
30 years and a loan principal forgiveness of approximately $60 000 making a net principal loan
amount of $215 000.
Morning View also expressed a letter of interest for a $15 000 planning grant. The
grant requires a 50% match from the Company. If the Company is also offered a drinking water
loan, the $15 000 match is a loan eligible expense. The planning grant can be used to complete
the facility planning study including completion of an Environmental information Document
which is required before a loan can be offered.
STAFF ANALYSIS
Staff believes that the installation of variable speed drive, installation of customer
meters, pump testing of the two pumps, installation of back-up generator, and drilling of new
well if necessary depending upon the result of pump testing the two wells are all necessary to
bring the Morning View water systems to compliance with IDEQ rules as recommended by the
2009 facility plan and engineering study. The estimated costs of these projects appear
reasonable, with the exception of the installation of 25 meters. Staff questions the Company
rationale in proposing to install only 25 customer meters on one-acre lots and the cost of
installing the customer meters.
Metering Requirement Issues Outline:
1. In Commission Order No. 29104 (Case No. MNV-02-01), the
Company was directed by the Commission to "prepare and plan for
transitioning to metering (including time and estimated costs) and present
it to the Commission for approval." The Company never submitted such a
plan.
2. In Case No. MNV-06-, Staff reported to the Commission that the
Company did not prepare a plan and the system is still unmetered. In
Commission Order No. 30420 of this case , it directed the Company as
follows "The Commission requires the Company to submit an
implementation plan for meter installation (including time and estimated
ORDER NO. 31061
costs) within 30 days." In this Order, the Commission also established a
moratorium on new connections pending the Company s metering of
customers and acquisition of adequate water rights for its water system.
3. On December 31 , 2007, Morning View submitted to the Commission a
copy of bids as follows: (a) acquisition of 105 service meters (5/8 x % -
inch and I-inch meters) and gaskets of $9 957.90 and (b) labor for
installing meters of $5 500. The grand total of the bids for materials and
installation is approximately $15 458. However, the Company never
completed the installation of the meters.
4. In accordance with the Consent Order from the Idaho Department of
Environmental Quality, the Company hired Aspen Engineering to
complete a facility plan. The Final Facility Report was completed by
Aspen Engineering in April 2009. One of the recommendations for capital
improvements noted in the engineering report is the purchase and
installation of meters for each residence. Based on installing 3/4-inch
meters, meter base and meter box for 100 customers, the estimated total
costs is $200 000 (100 customers x $2 000 per installed meter).
5. In this Application, the Company requested authorization from the
Commission to borrow approximately $275 000 to correct the problems
identified in the facility plan and engineering report. Out of this total
amount to be borrowed, approximately $50 000 would be allocated for the
acquisition and installation of meters for 25 homes in subdivisions that are
one acre in size. The Company used the unit price in installing meters
from the 2009 engineering report. The Company asserts that based on its
observations over the years, there has been significant usage on these lots
for irrigation purposes and that the Company believes that metering such
uses would encourage these homeowners to implement greater water
conservation measures which will lessen demand on the system and
improve pressure and service to other members of the subdivision.
Company letter to IDEQ, January 13 2010, p. 4.
6. There is a big difference in the costs of installing meters between the bid
obtained by the Company in December 2007 ($15 458 or $147.22 per
meter) for 105 meters and the cost estimate made by Aspen Engineering in
April 2009 ($200 000 for 100 meters based on $2 000 per meter). After
further investigation by Commission Staff and discussions with the
Company, it was determined that out of the 105 current customers, 95
already have existing meter bases and boxes and 10 customer connections
do not have meter boxes. These 10 connections are all serving the Yz acre
lots. According to the Company, the cost to put in the meter base and box
is approximately $500 or a total of $5 000 for the 10 connections.
ORDER NO. 31061
7. Staff discussed the initial cost estimate of meter installation as presented
in the 2009 engineering report with Ryan Loftus of Aspen Engineering
and he indicated that the cost per meter installation should have been $200
per meter instead of $2 000 per meter. Therefore, the total cost for 100
meters would have been $20,000 instead of $200 000 as initially reported.
Adding the amount of $5 000 for the meter base of 10 connections results
in an updated cost to install meters for all customers of approximately
$25 000.
8. As shown above, the amount of IDEQ loan funds allocated for metering is
$50 000. Staff believes that this amount will be sufficient to cover the cost
of installing meters for all customers instead of installing 25 meters as
initially proposed. When all customers are metered, Staff believes that a
more equitable rate design can be developed for all classes of customers of
Morning View Water in future rate cases.
ST AFF REVIEW
Staff conducted a review of the improvements to the Company s public drinking
water system and verified that these improvements were necessary in order to meet the minimum
requirements ofthe Idaho Rules for Public Drinking Water Systems.
Loan approval will provide Morning View with the capital necessary to make the
improvements required by IDEQ and as outlined in the 2009 Engineering Report. The specific
recovery level in customer rates for the underlying costs will be evaluated in a rate filing(s) when
Morning View has completed the projects and makes an Application requesting customer rates
be changed to reflect the investments. If the $275 000 loan is repaid in equal monthly payments
and included in rates, the increase to each customer would be approximately $7.20 per month. If
a grant reduces the loan by $60 000, the cost per customer would be approximately $5.60 per
month. The final investment cost records will be reviewed by Staff during audit with the rate
impact to be established in the next rate case(s).
STAFF RECOMMENDATIONS
Staff recommended the Commission approve the loan request up to $275,000. Staff
recommended the Company install meters for all customers not just for the 25 customers with
one-acre lots. Cost evaluations indicate all of the meters could be installed within the $50 000
amount requested in the loan application. Staff also recommended Morning View Water be
required to provide copies of the following: Final loan documents with IDEQ; all compliance
reports and calculations that may be required; all approval letters; all executed agreements for the
ORDER NO. 31061
loan; any amendments to the loan application, and the actual final costs in summary format
similar to the engineering estimate.
COMMISSION FINDINGS
The Commission finds that Morning View s filing satisfies the requirements of Idaho
Code 99 61-901 et seq. and the Commission s Rules of Procedure 141-150, IDAPA
31.01.01.141- 150. The purpose of the requested borrowing authority is appropriate and we find
this Application should be approved pursuant to Idaho Code 9 61-902. After reviewing the
Application and Staff s recommendations, the Commission finds that it is reasonable and prudent
to allow Morning View to borrow up to $275 000 under IDEQ's Drinking Water Revolving
Loan Program in order to make necessary upgrades to its water system. The Commission finds
that the loan principal is more than adequate to allow for the installation of meters for Morning
View s entire customer base. Immediately upon loan approval, the Company shall install
appropriate water meters at all customer locations.
Further, the Commission agrees with Staffs recommendation and orders Morning
View to submit, in an expeditious manner, copies of the following documents to the
Commission: All final loan documents with IDEQ; requisite compliance reports and
calculations; approval letters; executed loan agreements; any amendments to the loan
application; and the actual final costs in summary format similar to the engineering estimate that
was previously prepared by Aspen Engineering and referenced in Staffs comments.
The issuance of this Order granting borrowing authority to Morning View "does not
constitute agency determination/approval of the type of financing or the related costs for
ratemaking purposes.Order No. 30120 at 2. Accordingly, the Commission defers its final
evaluation and determination regarding the prudency of such costs and "the effect of issuance on
rates to be charged by (Morning View) to consumers in the State of Idaho" until the Company
next general rate case. Id.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Morning View Water
Company, a water utility, pursuant to Idaho Code 99 61-124, 61-125. 61-129, 61-301 , 61-303
61-501-502 61-901 , and the Commission s Rules of Procedure, IDAPA 31.01.01.000 et seq.
ORDER NO. 31061
ORDER
IT IS HEREBY ORDERED that the Application of Morning View Water Company
for authority to borrow funds in order to make necessary upgrades to its water system is granted.
Morning View is hereby permitted to borrow up to $275 000 under the IDEQ's Drinking Water
Revolving Loan Program.
IT IS FURTHER ORDERED that proceeds from the aforementioned loan shall be
utilized by Morning View in order to make the improvements required by IDEQ and as outlined
in the 2009 Engineering Report, and shall include the installation of meters for all Morning View
customers.
IT IS FURTHER ORDERED that Morning View shall, immediately upon receipt
submit copies of the following documents to the Commission: All final loan documents with
IDEQ; requisite compliance reports and calculations; approval letters; executed loan agreements;
any amendments to the loan application; and the actual final costs in summary format similar to
the engineering estimate prepared previously by Aspen Engineering and referenced herein.
IT IS FURTHER ORDERED that nothing in this order shall be construed to obligate
the state of Idaho to payor guarantee in any manner whatsoever any security authorized, issued
assumed, repurchased, defeased or guaranteed under the provisions of this Order.
IT IS FURTHER ORDERED that this authorization is without prejudice to the
regulatory authority of this Commission with respect to rates, services, accounts, evaluation
estimates or determination of costs, or any other matter which may come before this Commission
pursuant to its jurisdiction and authority as provided by law.
IT IS FURTHER ORDERED that the issuance of this Order does not constitute
acceptance of Morning View s exhibits or other material accompanying this Application for any
purpose other than the issuance of this Order.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order with regard to any
matter decided in this Order. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code 9 61-
626.
ORDER NO. 31061
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ,;2:;J.
day of April 2010.
/.
. KEMPT , P IDENT
MARSHA H. SMITH, COMMISSIONER
ATTEST:
Commission Secretary
O:MNV-I 0-0 I
ORDER NO. 31061