20080529Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 6618
D
iUUa t11\ Y 28 P~f 1,: It 7
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
MAYFIELD SPRINGS WATER COMPANY, )
INC. FOR A CERTIFICATE OF PUBLIC )
CONVENIENCE AND NECESSITY )
)
)
)
CASE NO. MSW-W-08-1
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilties Commission, by and through its Attorney of
Record, Kristine A. Sasser, Deputy Attorney General, submits the following comments in
response to Order No. 30524 issued on April 9, 2008.
BACKGROUND
On Februar 5, 2008, Mayfield Springs Water Company, Inc. i, an Idaho corporation,
fied an Application requesting a Certificate of Public Convenience and Necessity to provide
water service as a public utility. Idaho Code § 61-526; IDAPA 31.01.01.111. The Application
states that the Company provides water service within the Arrowrock Subdivision in Kuna to 38
residential customers, 17 connections taing service during the construction of residential
dwellngs, and 1 customer taking service to water common areas. The Company maintains that
i Fonnerly Idaho Springs Water Company, ISW-W-08-L. See Notice of Name Change issued on May 12,2008.
STAFF COMMENTS 1 MAY 28, 2008
additional development of the Arrowrock Subdivision and surounding territory could increase
the number of customers to more than 200.
The Company asserts that the proposed service area is not within, and therefore wil not
interfere with, the authorized territory of any other public utilty water corporation. The
Application contains exhibits regarding the proposed service area, technical drawings and maps
submitted to the Idaho Deparment of Environmenta Quality, consumptive use figures, and other
financial data.
The Company initially proposed a rate for residential customers that would include a set
monthly charge and an additional, variable, amount determined by monthly consumption. It
anticipated a residential monthly charge between $50 - $100 per customer. An amended
Application filed by the Company on April 25, 2008, proposed a monthly base rate of $81.60 for
the first 10,000 gallons, and $0.000651 for each gallon in excess of 10,000 gallons.
The Commission approved the following interim water rates (subject to refund): $25 flat
fee per month for connections to lots upon which constrction of a residential dwellng is
occurring, $50 flat fee per month for residential customers, and $800 flat fee per month for water
service to common areas. Order No. 30512.
Several informal consumer complaints and one formal consumer complaint have been
fied with the Commission against the Company alleging that it has been operating without the
proper authorization of the Commission.
STAFF ANALYSIS
Staff Revenue Requirement Analysis
Staff examined the books and records of the Company for the fiscal year ending
December 31, 2007. The expenses incured by the Company durng 2007 were used as the basis
for establishing the operating and maintenance expenses included in rates.
Expenses and Rate Base
Expenses
The Company submitted financial records detailng its anual operating costs as
$82,697.81. From this amount, the Company reduced the amounts as follows:
STAFF COMMENTS 2 MAY 28, 2008
Annual Costs $82,698
Less: Unrelated Legal Fees $20,541
Meters (Capitalized) $13,367
Meter Fittings (Capitalized) $ 1,070
Add: Capital Sinking Fund $13,080
Total Anual 0 & M Expenses $60,800
A more detailed breakdown of the Anual Costs is set fort in Attachment C under the colum
titled "Company's 2007 Costs." Staff is recommending that the total anual expenses for
operations and maintenance to be included in rates should be $37,376.
Staffs Adjustments to Annual Expenses
Staff made the following adjustments to the Company's 2007 anual expenses to obtain
the recommended anual expenses for the revenue requirement. The effect of each adjustment is
shown on Attchment C.
1. Power Costs: The Company claimed anual power costs for the operation of the well
pumps as $12,981. Staff audited all of the power bils and found that the actual cost for the
power used during the year was $13,495. This power was used to serve an average of 46
customers on the water system throughout 2007. There are now 52 customers served by the
water system. Staff adjusted the power costs on a linear basis to reflect the 13% increase from
46 customers to 52 customers. Therefore, the test year power cost was increased by 13% from
$13,495 to $15,249. Staff is also aware that the cost of electricity is expected to increase. Staff
recognizes that the percentage of increase in electric rates is dependent upon the outcome of
Idaho Power cases (Power Cost Adjustment, Danskin CT1, DSM Rider) curently before the
Commission. The actual increases to power rates should be determined by the Commission by
June 1,2008. Staff recommends that the power costs be increased to reflect the actual
percentage increase as determined by the Commission. For these comments Staffhas
incorporated Staffs position in the above cases to calculate an escalation factor of 14.5% for
inclusion until the Orders are issued. Therefore, Staff has included $17,461 of anual power
costs in rates.
2. Certified Operator: The Company paid $30,412 to Valley Hydro as the contracted
certified water system operator. The total paid to the certified operator included amounts paid
for the basic water system operation, water testing, extra labor charges, and meter reading.
Meter reading, water testing, excess labor costs, and materials should not be included in the basic
STAFF COMMENTS 3 MAY 28, 2008
contract amount. Staff removed these costs from the certified operator's anual costs and
included them as separate line items in the total cost analysis. These costs will be discussed
below. The contract for basic water system operation with Valley Hydro provides for the basic
operating service at $3,000/year, well maintenance at $720/year, service connection maintenance
at $1 ,440/year, and backflow testing at $1 ,080/year. This totals $6,240. The basic cost of
$6,240 ($520 per month) is a reasonable cost for the certified operator. The law requires that the
Company have the services of a certified operator for the operation of the water system.
3. Labor Charges for Certified Operator: Last year the Company used the certified
operator for extra services for a total of 36.5 hours. The Company was charged $35/hour for this
extra labor. Staff is satisfied that the amount of extra labor charges incured by the Company is
reasonable. Even though the system is new, and extra repairs should not be excessive, 36.5
hours of extra service on the system anually can easily occur. Additionally, Staff believes the
hourly rate of$35 is reasonable. The total cost of$I,275 for the extra labor by the certified
operator is reasonable and should be include in rates.
4. Meter Reading: The certified operator also received additional compensation for
reading the meters. The operator spent 43.5 hours during 2007 for reading the meters monthly.
The operator charged $35/hour for this service. Staff believes this is a reasonable time and
charge for meter reading on a monthly basis. The total cost for this service included in rates is
$1,525.
5. Accounting and Biling: The Company included in 2007 the cost of$3,603 for
Accounting and Biling. An affiiate of the Company is currently providing the accounting and
biling services. This service includes the preparation of the monthly statements, the collection
of the payments, depositing those payments into the Company's ban account, and providing
monthly accountings to the Company. Since an affiiate is providing this service, Staff closely
scrutinized the charges to ensure that the affiiate was not transferring any unrelated costs to the
Company. Staffis satisfied that a monthly charge for accounting and billng of$300 is
reasonable. This is a very competitive price if compared to the same service provided by an
unaffiliated party.
6. Water Testing: The Company included as part of the payments made to the certified
operator the sum of $8,075 for water testing. Staff determined the normalized anual costs of
water testing (See Attchment D) for the Company's two wells, and the total anual cost is
STAFF COMMENTS 4 MAY 28, 2008
$3,450 for both wells. Therefore, Staff excluded $4,625 from the Company's claimed $8,075 for
water testing.
7. Legal Fees: The Company recorded legal fees in the amount of$16,278.
Additionally, the Company recorded $l4,263 as Professional Fees. Upon examination, all the
costs incurred and recorded in Professional Fees were also legal fees. Therefore the total legal
fees paid by the Company in 2007 were $30,541. The Company reduced its request for legal
fees in its Application by $20,541. Even with this reduction, the Company is requesting that it
recover $10,000 anually in rates. After reviewing the legal biling invoices, Staff does not
believe recovery in rates is reasonable. It appears that most if not all of the recorded legal fees
are related to the civil action between the developer and the homeowners. The Company should
not be allowed to include any of the legal fees relating to the legal action between these two
private paries. None of these costs are related to the operation of the water company, nor are
they reoccurng expenses. It is reasonable to expect that the Company would incur between
four and five hours of legal service on an anual basis. Based on biling rates paid by the
Company, Staff has included a normalized amount of $750 for anual legal fees.
8. Professional Fees: Since none of the professional fees incured by the Company
should be allowed (see Legal Fees above), Staffhas included other professional fees that are
reasonable and reoccurring. Staff includes a normalized amount of $500 to cover the cost of an
accountant to prepare the anual ta retu and the Annual Report for the Commission.
9. Engineering Fees: The Company included $3,480 for payment made to professional
engineers. Staff found that all of these costs were related to the initial installation of the water
system and obtaining the required permits from DEQ. Since these are non-reoccurrng expenses,
they are not appropriate for inclusion in a rate calculation. Staffhas, however, included a
normalized amount of $250 to cover the cost for two hours of engineering expenses that may be
incured on an anual basis.
10. Well Inspection Fees: The Company included $526 for well inspection fees. Staff
determined that the wells need to be inspected semi-anually and that a reasonable cost for this
inspection is $170 per inspection. Therefore, Staff included $340 in expenses for this service.
11. Telephone: The Company did not include any expense in its Application for
telephone costs. Staff has included $300 anually for a single telephone line that the Company
should use as the contact method for its customers.
STAFF COMMENTS 5 MAY 28, 2008
12. Maintenance and Repairs: The Company included $1,080 for maintenance and
repairs. Upon audit, these expenses were for cutting holes in the meter lids. This does not
appear to be a reoccurring expense and should not, therefore, be used as the basis for determining
a reasonable amount for anual maintenance and repairs. Staff determined that $350 is a
reasonable amount for maintenance and repairs to include in anual expenses.
13. Offce Supplies: The Company included $74.00 as its anual expense for office
supplies. Staff included this in expenses at $75.00.
14. Licenses and Permits: The Company did not include any costs in its anual expenses
for licenses and permits. Staff is aware of anual licenses the Company wil be obligated to pay
to DEQ and to the Commission. Therefore, Staff has included $300 in the annual expenses to
pay for these anual costs.
15. Depreciation Expense: Staff has included the purchase of the meters and some
flexible fittings that go with the meters in rate base. The Company should be able to depreciate
these items and receive the anual depreciation in rates. Staf used a useful life of 15 years for
these capital assets. The anual depreciation amount is $960.
Rate Base
The Company purchased meters for the system in the amount of$13,367 and flexible
fittings for the meters in the amount of $1 ,070 during 2007. The Company excluded the cost of
the meters from its calculation of anual expenses but did not exclude the cost of the flexible
fittings. It is Staffs belief that the cost of the fittings should also be capitalized with the cost of
the meters, and that both costs should be added to rate base. The Company has agreed with Staff
that the total cost of the water system (not including the meters and the fittings) should be
considered as contributed capital by the developer, and not included in rate base. Therefore, the
total rate base for the Company should be $13,367 (meters) plus $1,070 (fittings) less $960 (one
year's depreciation) or $13,477. (See Attchment B).
Revenue Requirement
Staff s calculation of the proposed revenue requirement for the Company is shown on
Attchment A. The Company's net rate base of$13,477 wil produce a retur of$I,617 at the
recommended rate of retur of 12%. (See Attachment B). This return must be grossed-up to
account for federal and state taes that would need to be paid on this revenue. The net to gross
STAFF COMMENTS 6 MAY 28, 2008
multiplier is 127.3% (see Attchment A). When the gross-up factor is applied to the retur of
$1,617, the Company must ear revenue of$2,059. This amount added to the anual expenses
of$37,376, equates to a total revenue requirement of$39,435. (See Attchment A).
The Company requested that it be allowed to collect as par of the revenue requirement
the sum of$13,080 as a sinking fund account for future repairs on the water system. Staffis
opposed to the Company collecting any amount for a sinking fud. The Company does not
specify how the amount was calculated or for what purose the sinking fud would be used
except for the general assertion that it would be used to pay for future repairs to the system.
Since the system is new, future repairs are not likely for some time. If the curent system has a
specific need, then the Company can present that need to the Commission for consideration. The
Commission should not approve the collection of a fee for a sinking fud whose purose is only
general, nonspecific and for future needs.
WATER SUPPLY AND RATES
Certifcated Area
Mayfield Springs Water curently serves the Arrowrock Ranch Subdivisions No. 1 and
NO.2. (See Attachment E). The subdivision is located in Ada County about two miles east of
the town of Kuna. Attched is the legal description of the property included on the offcial plat
map of Arowrock Subdivisions No. 1 and NO.2. The entire plat includes an area of
approximately 106.3 acres. The Arrowrock Ranch Subdivision consists of 100 lots ranging in
size from 0.5 to 1.0 acre. In the event the Arrowrock Subdivision is fully built out the Company
could have an estimated 100 residential customer connections (50 for Subdivision NO.1 and 50
for Subdivision No.2). An additional 100 residential customer connections are expected if the
larger proposed service territory is fully built out. Furermore, the Company has plans to
develop other surrounding areas in the future consisting of approximately 5,584 acres and
requested that the Commission grant a Certificate of Public Convenience and Necessity for these
areas, including Subdivisions No. 1 and NO.2.
Staff proposes that the Commission only issue a CPCN for the existing improved
residential areas included in Arowrock Subdivisions NO.1 and NO.2. When the other areas are
fully developed in the future, Staff recommends that the Company apply for modification of the
Certificate with a corresponding Staff review of the adequacy of the water supply system serving
the new areas at that time.
STAFF COMMENTS 7 MAY 28, 2008
System Description
The Company submitted drawings showing lot sizes, locations, wells, pumping plants
and the water distribution system. Staff has reviewed the as-built drawing of the water system
and physically inspected the water system on April 3, 2008. Staff found the system to be
constrcted in general agreement with the design. The public water system is designed to serve
approximately 10lcustomers; 100 residential customers in Arowrock Subdivisions NO.1 and
NO.2 and the common area. When the Application was fied, the Company indicated that the
water system was serving 38 residential customers, providing water to 17 lots for the
construction of residential dwellngs, and serving the common areas. However, when Staff
reviewed the meter usage readings submitted by the Company, there was a total of 60
connections (customer meters) by the end of December 2007.
The public water system is supplied by two wells. Well NO.1 has two pumps; Pump
NO.1 is a 25-hp pump unit with a design capacity of250 gallons per minute (GPM) used for
domestic water supply and another 125-hp pump for fire protection with a design capacity of
1,000 gpm. Well No.2 has one 50-hp pump unit with a design capacity of 500 gpm used for
domestic water supply. All three pumps are submersible tyes. Since the 1,000-gpm pump is
dedicated to fire protection, the total peak pump capacity for the domestic water supply is 750
gpm including landscape irrgation. Assuming a peak household demand of 4.75 gpm, it appears
that the system is more than adequate to serve the anticipated 100 households for Arowrock
Subdivisions NO.1 and NO.2. Staff notes that the developer plans for an additional 100
residential lots in the futue in adjacent properties. Again, Staff recommends that a Certificate
amendment as well as a determination of system adequacy be a condition to serve additional
customers.
Well NO.1 is 12-inches in diameter and serves as the primar source of water supply. It
utilzes a variable frequency drive (VFD) to maintain a constat operating pressure during
variable demands. The VFD is set to maintain a 60-psi operating pressure. Well NO.2 is 18
inches in diameter and provides additional domestic water supply and fire protection. The two
wells are approximately 40 feet apar and are constructed to a depth of approximately 400 feet.
The facility is equipped with five 119-gallon hydro pneumatic tans to supply water during low
demand and to reduce pump cycling, but there is no other storage. The facility is also equipped
with a propeller type electronic flow meter, which measures instantaneous flow rates and the
total volume of water pumped.
STAFF COMMENTS 8 MAY 28, 2008
The distribution system is supplied from the well facility through a 12-inch transmission
main. An eight-inch looped system was designed to provide adequate hydraulic capacity of
1,000 gpm to all fire hydrants at a minimum pressure of20 psi. Residential service lines are
single one-inch polyethylene pipe with single meter boxes. Residential meters are installed to
measure water consumption when new houses are built. The water supplied to each residential
customer is used both for domestic and irrgation puroses. Seven two-inch irrigation service
lines equipped with meters and backflow devices serve the common areas. Another one-inch
service line with meter serves a waste water treatment facilty.
The system is also equipped with pressure relief valves, isolation valves, check valves,
electronic solenoid controlled flush valves and other appurenances for better system
management and safety of operation. A 30 kW generator was installed to provide standby power
for the 30-HP Well NO.1 pump and controls. It is equipped with an automatic transfer switch to
automatically start up the generator in the event of a power failure. The system is designed to
have a chemical feed system for directly injecting sodium hypochlorite solution into the
discharge piping through a quil type injector. However, this chlorination system is not yet
installed.
The overall water system appears to be well designed and constrcted and is expected to
be more than adequate for the number of customers to be served. The installation of a 30 kW
generator is a good insurance for electrical interrptions in the area. The variable speed drive
increases the effciency of electrical usage, avoids frequent repeated cycling of pumping units,
reduces wear and extends life of the equipment. Individual water meters for all customers allow
rates to be charged based on amount of water used.
Water Production and Consumption Data
Through production requests, Staff obtained information on monthly water usage for each
customer during the 2007 test year. The data provided was incomplete so Staff extrapolated
from the existing data to create a full year of record, which was used in designing water rates and
charges. Monthly water consumption information was available for 46 residential customers
and eight non-residential connections from June 1,2007 to December 19,2007, and for
52 residential customers for approximately three-month of lump-sum data for the period of
December 19,2007 to March 20, 2008, and additional data from March 20, 2008 to April 29,
2008. The test period water usage was anualized for 52 end-of-year customers and for the
STAFF COMMENTS 9 MAY 28, 2008
missing month of the test year covering December to May. (May was calculated as the average
of the April and June water usage.)
The Company provided monthly well water production data durng the period from
June 1,2007 to December 17,2007, a lump-sum three-month data from December 19,2007 to
March 20, 2008, and from March 20, 2008 to April 27, 2008.
Staff attempted to compare the monthly well water production and customer consumption
data to verify the accuracy of the data and determine the amount of lost and unaccounted for
water in the system. For all but one month, the well production amount is very close to the total
customer consumption amount. This indicates very low losses which is what would be expected
for a new system. (See Attachment F).
According to the Company, using its proposed rates, the average customer wil pay
$101.45 per month and see an increase in the cost of water service of $51.45 per month or 103 %
over the $50 flat rate currently being charged. The Company also proposes to eliminate the
separate rate for builders with unsold homes.
Rate Design
In addition to the 52 residential customers in the subdivision, Staff notes that there are
seven two-inch meters that supply irrigation water to a common area. In addition, there is
another one-inch meter supplying water to the wastewater treatment facilty making a total of
eight meters for non-residential consumption.
The Company proposes rates for common area customers similar to the residential rates.
Under the Company's proposal, the seven meters serving the common area would receive a
single bil with one customer charge equivalent to a single residential customer. Water
consumption for the non-residential customers is about 63% of the total anual consumption of
the whole systems through these eight meters, and about 78% during the peak period of August.
Based on anualized usage for 52 residential customers and eight non-residential
customers, Staff proposes the following rate design:
Residential
Minimum Monthly Base Charge:
Variable Monthly Charge:
$20 (provides for the use of up to 10,000 gallons of
water)
$0.29 per 1,000 over 10,000 gallons consumed
monthly
STAFF COMMENTS 10 MAY 28, 2008
N on-Residential
Minimum Monthly Base Charge:
Variable Monthly Charge:
$50 (provides for the use of up to 10,000 gallons of
water)
$0.29 per 1,000 over 10,000 gallons consumed
monthly
Several rate design options were investigated by Staff using a low monthly base charge
for residential customers for the first 10,000 of usage. Staff reviewed various water utilty taiffs
in Idaho, particularly those that appear to be comparable to Mayfield Springs Water and with
lower monthly base charges. Brian Water, Falls Water, Spirit Lake and Sunbeam charge $10.50
(1st 4,000 gal), $11.53 (1st 12,000 gal), $12.00 (1st 9,000 gal) and $12.00 (1st 12,000 gal),
respectively, for monthly base charges. An initial base charge of$12.00 for the first 10,000
gallons was used but it was not enough to cover potential cash requirements during lean months.
Therefore, the base charge for residential customers was set at $20.00.
The monthly base charge for non-residential customers was set at $50.00 per month for
the first 10,000 gallons of usage. This amount is two and a half times the amount charged for
residential customers. Staff believes that because of the large volume of usage by the non-
residential account, especially during the peak month, the design of various components of the
water facility was correspondingly adjusted to accommodate the requirements of the non-
residential customers. As mentioned previously, water usage of the non-residential customers
was approximately 63% of the total water used for the year and 78% of the total water used
during the peak month.
A commodity charge for both the residential and non-residential customers was set at
$0.29 per 1,000 over 10,000 gallons of water consumed monthly to provide the remaining
balance of the revenue requirement for the Company. The commodity charge would also
encourage conservation of water use. With the above rates recommended by Staff,
approximately 62% of the total revenue requirement for residential customers is contributed by
the base charge and 38% is contributed by the variable charge. Similarly, 44% of the total
revenue requirement is contributed by the base charge and 56% is contrbuted by the varable
charge. Staff believes that this is reasonable because a large percentage of the volume of water
during the year is used by the non-residential users (63%).
Staff notes that the Company proposed a variable rate on a dollar per gallon basis. It is
customary in rate design to express it in dollars per 1,000 gallon basis. Staff recommends that
STAFF COMMENTS 11 MAY 28, 2008
the Company also uses the $ per 1 ,OOO-gallon unit for commodity charges. A comparison of
the curent rate, the Company's proposed rates and Staffs proposed rates are shown in
Attchment H.
Staff recommends that this rate design be evaluated after one year to assess how usage
patterns may have changed, what effect the new rates have had on customer bils and how
effectively the rate design generates the revenue requirements authorized by the Commission.
As noted by Staff, heavy use of water during the summer season also coincided with the
establishment of new lawns for most customers, and the subdivision is actively being developed.
Staff agrees with the concept of designing the rates with both a fixed and variable charge for
metered consumption of water and Staff is not opposed to the Company's proposal to eliminate
the special customer class for builders and unsold homes.
Operation of the System and Related Issues
Mayfield Springs Water has made arangements with Valley Hydro, Inc., as the certified
operator to provide routine operation and maintenance services for the public water system.
Tom Mehiel, owner of Valley Hydro, has a Distribution Operator Class III License in the State
of Idaho. As a certified operator for the system, he wil periodically prepare technical and
managerial reports in connection with the Mayfield water system. Contact between Mayfield
and the certified operator is made regularly through face-to-face meetings, telephone, email and
facsimile. Such contacts help ensure that issues such an equipment problems, performance
shortfalls, and pending needs for repair and replacement are addressed in a timely maner.
As part of its review of the water system, Staff looked at both water quality and water
right issues to assure that the Company can adequately provide service. The Company has had
past occurences of coliform bacteria in 2006 and 2007 that violated DEQ stadards. According
to DEQ, these issues were resolved and the Company is currently in compliance with Idaho
drinking water quality standards.
The Company currently maintains a water permit sufficient to provide domestic use for
100 homes. This permit requires that the Company submit proof that the water is put to
beneficial use to assure that the water right is properly licensed. Failure to record curent
ownership or properly license the right could complicate future water right validation. The
Company's water right permit also contains limitations on the use of irrigation for individual lots
and for irrigation of common areas. Given the size of some subdivision lots and the amount of
STAFF COMMENTS 12 MAY 28, 2008
water applied to common areas, the Company should be aware of such limitations and work to
maintain permit compliance.
HOOKUP FEES
The Company has requested a one-time charge for each customer to recover the cost
associated with building the system, meter installation and connection in the amount of
$2,500.00. It appears that the hook-up fee was charged with the first lot sale. In fact, a copy of a
previous Buyer'sIBorrowers Escrow Closing Statement provided by the Company for Lot 45
Blk 1 Arrowranch 1 with a settlement date of August 17, 2006 indicated that a $2,500 water
hook-up fee was another charge included in the transaction. If the Company has already charged
the lot buyer, there is no reason for the Company to charge another $2,500.00. Otherwise, the
customer wil be charged twice for the same item. It also appears that the hook-up fee charge
appears is excessive. The Company fails to provide detailed documentation on how this fee was
derived. Based on the review made by Staff on the existing water distribution system from
engineering specifications and standard drawings, individual meter boxes are already in place at
each lot. The meter box encloses a one-inch polyethylene supply pipe from the mainline and exit
pipes fitted to a water setter assembly for futue fitting of a one-inch residential type water meter.
Based on a quote from a vendor the average cost of a "touch-read" type meter is $268 and the
adapter to allow reading electronically costs $215. Assuming approximately 3 hours to install
the meter and electronic adapter at $75, the total cost of installng the meter should be
approximately $708. Staff therefore recommends a hookup fee of $725.00 for new homes.
CUSTOMER RELATIONS
The Company provided copies of the customer notice and the press release regarding the
request for certification and a proposed interim rate schedule as par of its original filing on
Februar 5, 2008. The customer notice meets the requirements of the Utility Customer
Information Rules (UCIR), IDAPA 31.21.02.000 et seq. The Commission mailed Mayfield
Springs' customers a copy of the Notice of Application and Notice ofIntervention on March 3,
2008 as formal notification of the Company's request for certification. On April 25, 2008, the
Company filed an amended Application along with a copy of a customer notice and a press
release notifying the customers of its new proposal. The notice and press release fulfilled the
requirements of the UCIR. The customer notice was sent to customers along with their monthly
STAFF COMMENTS 13 MAY 28, 2008
biling on April 30 and 31, 2008, and the press release was sent to local television and print
media on April 29, 2008.
The General Rules and Regulations for Small Water Utilties section of the Company's
proposed tariff submitted with the original Application was based on an older version of the
Commission's model Rules and Regulations for Small Water Utilties. An updated version of
the Rules and Regulations wil be provided to the Company by Staff for incorporation into its
tariff.
A Rules Summar is to be given to new customers and sent to customers on an anual
basis by the Company. The Rules Sumar that was provided by the Company fulfills the
requirements of the Utilty Customer Relations Rules (UCRR), IDAPA 31.21.01.000 et seq.
The bils and past due notices submitted with the original Application meet the
requirements of the UCRR. The Company had initially requested an interim flat rate for its
customers. However in its amended Application fied April 29, 2008, the Company proposed a
minimum monthly charge which includes 10,000 gallon of water and a variable charge of
$.000651 for each gallon used in excess of the initial 10,0000 gallon. Staff recommends that the
Company be required to revise its bils and notices to include meter readings and usage data as
required by the UCRR. Staffwill assist the Company in drafting these documents to ensure
compliance.
Non-recurring charges mentioned in its proposed rate schedules include an initial hook-
up fee, which is charged to the builder/developer for the initial installation of the meter and the
meter box, and a reconnection fee which is charged to restore service after a disconnection for
non-payment. Neither the original interim rate schedule nor the revised rate schedule includes a
non-recurring charge for late payment fees, although the Company's response to Staff
Production Requests indicates that the Company has been assessing a late payment charge. A
customer invoice, submitted as par of Exhibit No. 25, indicates a $15.00 late payment charge
assessed on the previous balance due. Other utilties, including several small water companies,
have adopted a late payment charge as a means to encourage customers to pay on a timely basis.
While the Company has not requested a late payment charge in its Application, Staff
recommends the Commission authorize a late payment charge of one percent per month on any
balance owing at the time of the next monthly biling as a means of encouraging prompt
payment. The $15.00 late payment that is assessed regardless of the amount owed is excessive
and does not conform to charges approved by the Commission for other utilties.
STAFF COMMENTS 14 MAY 28, 2008
The revised rate schedule submitted with the amended Application would charge all
customers the same minimum monthly charge including residential sites, both developed and
under construction, and the common areas in the subdivision. Residential sites are serviced
through a meter and a one-inch pipe and all residential sites would pay the same minimum rate
once the meter and meter box are installed, whether the site is bare land or under construction or
is a finished residence with a landscaped yard. According to Company provided information the
residential sites average three/fourths of an acre and a completed lot would use considerably
more water than an empty lot or a lot under development. According to the original Application
the common areas in the subdivision are serviced through three separate meters supplied by two-
inch pipes. Other responses to Staff Production Requests indicate that the Company is utilzing
seven meters to water the common areas. The proposed taiff is unclear as to whether the
common areas would be charged a minimum charge for each meter or a single minimum charge
for all meters. This discrepancy in size of service and possible amount of usage should be
considered to ensure residential customers are paying an appropriate rate.
In addition to the eight informal complaints fied with the Commission by seven different
customers since October 12,2006, there has also been a request to fie a formal complaint, all
filed prior to the Company's Application for certification. The informal complaints address
(1) the rates charged by the Company providing service to the subdivision (initially $100 a
month) and (2) the delay in filing an Application for certification with the Commission. Since
notification was sent to the customers, the Commission has received six comments from
customers including some of the previous complainants and all comments speak against the
proposed rates. On May 19, 2008 the Commission held a public workshop for customers of
Mayfield Springs with about twenty people in attendance out of thirty-eight residential
customers. Since the public workshop, four additional comments have been received that also
spoke against the proposed rates.
STAFF RECOMMENDATIONS
1. Staff recommends that the Commission issue a Certificate of Public Convenience and
Necessity to Mayfield Springs Water for only the developed property in Arrowrock Subdivisions
No. 1 and NO.2.
2. That the Commission find that the Company has rate base in the amount of $13,477.
STAFF COMMENTS 15 MAY 28, 2008
3. That the Commission find that the Company be entitled to 12% as a reasonable rate of
retur on rate base.
4. That the Commission find that the Company has anual operation and maintenance
expenses of $37,376.
5. That the Commission find that the total revenue requirement for the Company should
be $39,435.
6. That the Commission find that the Company should not be allowed to collect any fees
at this time for a sinking fud.
7. Staff recommends that the Commission approve a minimum monthly base charge of
$20 for up to 10,000 gallons and a variable charge of $0.29 per 1,000 gallons for water
consumed over 10,000 gallons per month for residential customers.
8. Staff recommends that the Commission approve a minimum monthly base charge of
$50 for up to 10,000 gallons and a variable charge of $0.29 per 1,000 gallons for water
consumed over 10,000 gallons per month for customers with two-inch diameter meters.
9. Staff recommends that the Commission approve a hook-up fee of $725.00 for new
homes.
10. Staff recommends that the Commission approve a late payment charge of 1 % per
month on any balance owing at the time of the next monthly biling to encourage its customers to
pay in a timely maner.
11. Staff recommends that the Company revise its General Rules and Regulations to be
consistent with the latest version of the Model Rules and Regulations for Small Water Utilties.
12. Staff recommends that the Commission direct the Company to revise its bils and
notice to comply with UCRR.
Respectfully submitted this ;)-a day of May 2008.
~~d. ~4JAKr' me A. Sasser ~
Deputy Attorney General
Technical Staff: Joe Leckie
Gerry Galinato
Chris Hecht
i:umisc/commentsmswwOS.lksjlggcwh
STAFF COMMENTS 16 MAY 28, 2008
Mayfield Springs Water Company
Case No. MSW-W-08-01
Rate Case
Revenue Requirement Calculation
Rate Base $1,617.00 Attachment B
Annual Expenses $37,376.00 Attachment C
Grossed -up Taxes $442.00 See Below
(See Calculation Below)
Annual Revenue Requirement $ 39,435.00
Gross Up Multiplier:
Beginning 100.0000%
State Tax (§ 7.6%7.6000%
Federal Taxable 92.4000%
Federal Tax (§ 15%13.8600%
Net After Tax 78.5400%
Net to Gross Multiplier 127.3237%100% / 78.54%
Revenue from Return on Rate Base $1,617.00
Revenue Grossed up for Taxes $2,058.82
Difference $441.82
Attachment A
Case No. MSW-W-08-1
J. Leckie, Staff
5/28/08
Mayfield Springs Water Company
Case No. MSW-W-08-01
Rate Case
Rate Base
Meters $13,367
Flexible fittings for Meters $1,070
Accumulated Depreciation $(960)
Total Rate Base $13,477
Rate of Return Allowed 12.000%
Revenue Requirement from Rate Base $1,617
Attachment B -
Case No. MSW-W-08-1 ii-J. Leckie, Staff
5/28/08
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.....
Case No. MSW-W-08-1
J. Leckie, Staff
5/28/08
IIc:
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Well #1 Gross AI ha 6 Years 2008-2013 $50.00 $8.33
Well #1 Radium 226 Quarterl $50.00 $200.00
Well #1 Uranium 6 Years 2008-2013 $10.00 $1.67
Well #1 Arsenic 3 Years 2008-2010 $20.00 $6.67
Well #1 Sodium 3 Years 2008-2010 $20.00 $6.67
Well #1 IOC's*3 Years 2008-2010 $100.00 $33.33
Well #1 Fluoride 3 Years 2008-2010 $20.00 $6.67
Well #1 VOC's*Annual 2008,2009...$200.00 $200.00
Well #1 SOC's*Annual 2008,2009...$950.00 $950.00
Well #1 Nitrate Annual 2008,2009...$20.00 $20.00
Well #1 Nitrite 9 Years (2011-2019)$20.00 $2.22
Well #2 Gross AI ha 6 Years 2008-2013 $50.00 $8.33
Well #2 Radium 226 Quarterl $50.00 $200.00
Well #2 Uranium 6 Years 2008-2013 $10.00 $1.67
Well #2 Arsenic 3 Years 2008-2010 $20.00 $6.67
Well #2 Sodium 3 Years 2008-2010 $20.00 $6.67
Well #2 IOC's*3 Years 2008-2010 $100.00 $33.33
Well #2 Fluoride 3 Years 2008-2010 $20.00 $6.67
Well #2 VOC's*Annual 2008,2009...$200.00 $200.00
Well #2 SOC's*Annual 2008,2009...$950.00 $950.00
Well #2 Nitrate Annual 2008,2009...$20.00 $20.00
Well #2 Nitrite 9 Years (2011-2019)$20.00 $2.22
Distribution $200.00 $400.00
Distribution $15.00 $180.00
Totals $3,451.11
* IOC = Inorganic Contaminants
VOC = Volatie Organic Contaminants
SOC = Synthetic Organic Contaminants
Attachment D
Case No. MSW-W-08-1
J. Leckie, Staff
5/28/08J. Leckie, Staff
5/28/08
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-
ARROWROCK RANCH
Well Readings on Meter Reading Dates
Well Meter Well Customer Reading Period
Well Meter Reading Production Total Usage for
Reading Thousand Millon Millon Customer
Dates Gallons Gallons Gallons Total Usage
06/01/07 49613
07/08/07 64509 14.896 11,738 6/1/07-7/7/07
08/07/07 81942 17.433 17.558 7/8/07-8/7/07
09/15/07 107578 25.636 24.411 8/7/07-9/15/07
10/15/07 116868 9.290 10.989 9/15/07-10/15/07
11/12/07 117681 0,813 0.807 10/15/07-11/12/07
12/17/07 117964 0.283 0.362 11/12/07-12/19/07
03/20/08 118860 0.896 0.974 12/19/07 -3/20/08
04/29/08 123292 4.432 5.052 3/20/08-4/29/08
Total 73.679 71.891
Attachment F
Attachment F
Case No. MSW-W-08-1
G. Galinato, Staff
5/28/08
IDAHO SPRIGS WATER COMPAN
PROPOSED TARF SCHEDULE
Rates for all customer:
Monthly Base Charge for Water Servce:
(Includes the fit 10,000 gallons of usage).
$81.60
Variable charge for monthly usage above 10,000 gallons:$.000651 per each
gallon used over
10,000).
$35.00 Reconnection Fee durg offce hour, 8:00 am to 5:00 pm
Monday th Friday except for the following holidays which fall on a
weekday: New Year Day, Memorial Day, 4th of July, Labor Day,
Thangivig and Day after and,Chrstmas Day.
$70.00 Reconnection Fee after offce hour.
.\ ;"
$2,500.00 "Hook-Up" to System Charge.
. , . $~ ~ ~ .i
-:1".
Attachierit G.
Case No. MSW-W-08-1
G. Galinato, Staff
5/28/08
Mayfield Springs Water Company, INC,
Rate Design Alternatives
Mayfield Water
Revenue Requirement: $39,435
Number of Customers (end of year): Residential = 52
Commercial (common) = 8
Residential Existing Company Proposed Staff Proposed
Base Charge $50,00 $81.60 $20.00
Vol in Base 0 10,000 10,000
Rate per 1000 gal $0,00 $0,65 $0.29
Base charge Revenue $31,200 $50,918 $12,480
Commodity Revenue $0 $17,587 $7,719
Total Residential Rev.$31,200 $68,505 $20,199
Average Bil $50,00 $110 $32.37
% change from existing 0.0%119.7%(35.3%)
Commercial (common) (a)
based on 8 customers
Base Charge $100,00 $81.60 $50,00
Vol in Base 0 10,000 10,000
Rate per 1000 gal $0.00 $0.65 $0.29
Base charge Revenue $800 $7,834 $4,800
Commodity Revenue $0 $32,890 $14,436
Commercial Revenue $800 $40,724 $19,236
Average Bill $100.00 $424,20 $200.37
% change from existing 0,0%324.2%100.4%
Total Revenue $32,000.00 $109,228,56 $39,435.00
Revenue over (under)($7,435.00)$69,793,56 $0.00revenue requirement
Notes:a) Assumes 8 common area accounts for 8 meters
Attachment H
Case No. MSW-W-08-1
G. Galinato, Staff
5/28/08
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 28TH DAY OF MAY 2008,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF IN CASE
NO. MSW-W-08-01, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
JOHN R. HAMMOND JR.
FISHER PUSCH & ALDERMAN
SUITE 500
101 S CAPITOL BLVD
BOISE,ID 83701
EMAIL: jrh(ifpa-law.com
TRENT NIEFFENEGGER
IDAHO SPRINGS WATER CO. INC.
PO BOX 344
MERIDIAN, ID 83642
EMAIL: trent(iwestparkco.com
ALDEN J HOLM CPA
WEST VALLEY BUSINESS CENTER
9446 W F AIRVIEW AVE
BOISE ID 83704
EMAIL: alden(itreasurevalleycpa.com
GERALD J. CORVINO
11865 W TUSTIN LANE
KUNA ID 83634-5032
EMAIL: gcorvino(iyahoo.com
~.~
SECRETARY
CERTIFICATE OF SERVICE