20081202Comments on Reconsideration.pdf

DONALD L. HOWELL, II
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
POBOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3366
RECE\VED
to8B DEC -2 PM~: 28
IDAHO PUBLIC ,I
UTILITIES COMMISSIOf'l
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
STAFF COMMENTS ON
RECONSIDERATION
The Staff of the Idaho Public Utilities Commission, by and through its Attorney of
Record, Donald L. Howell, II, Deputy Attorney General, submits the following comments on
reconsideration.
BACKGROUND
A. The Underlying Proceeding
On March 3, 2008, the Commission issued a Notice of Application and set a deadline for
intervention in this proceeding. Order No. 30512. One customer (Gerald Corvino) petitioned
and was granted intervention status. A Notice of Paries was issued on March 26,2008. The
Commission also approved interim flat-monthly rates (subject to refud) pending a final order.
The interim flat rate was $25 per month for service on lots where a residential dwellng is under
STAFF COMMENTS ON
RECONSIDERATION 1 DECEMBER 2, 2008
constrction; $50 per month for residential customers; and $800 per month for water service to
common areas within the subdivision. Order No. 30512.
On April 25, 2008, the Company filed an Amended Application and proposed a
permanent monthly customer charge of $81.60 for the first 10,000 gallons, and $0.000651 for
each gallon in excess of 10,000 gallons. The Company also requested an effective date for its
newly proposed rates of August 1, 2008. i
On April 9, 2008, the Commission issued a Notice of Public Hearing and adopted the
parties' proposed schedule for processing this case. Accordingly, Staff conducted a public
workshop in Kuna on May 19,2008, and filed written comments on May 28,2008. Mr. Corvino
also fied written comments on May 28. Mayfield's scheduled date for reply to comments was
extended until June 24, 2008, to allow the paries to meet for an attempt at settlement. Full
settlement of the disputed issues was not achieved. Mayfield's reply comments were eventually
filed on June 26, 2008.
The Commission held its public hearing in Kuna on July 1, 2008. Numerous customers
testified at the public hearing and many submitted wrtten comments. At the public hearing, the
Commission requested that Mayfield Springs submit the Covenants, Conditions and Restrictions
(CC&Rs) for the Arowrock Subdivision. The CC&Rs were fied on July 22, 2008. On July 29,
2008, the Staff filed Supplemental Comments to reflect partial settlement of three disputed
expense issues between Staff and the Company. On August 26, 2008, the Commission issued
final Order No. 30628 approving a hook-up fee of$725.
B. The Petition for Reconsideration
On September 15,2008, Mr. Corvino filed for reconsideration based on four allegations.
The Commission granted reconsideration on one limited issue of residential hookup fees. More
specifically, reconsideration was limited to the issue of refunding the difference between the
Company-collected hook-up fee of $2,500 and the approved hook-up fee of $725 collected prior
to August 30, 2008. Order No. 30656 at 6.
Mr. Corvino asserted in his motion for reconsideration that Mayfield received a windfall
profit when the Commission declined to order Mayfield Springs to refud the hookup fees. Mr.
1 On July 30, 2008, the Commission suspended the effective date for the proposed rates until August 29, 2008.
Order No. 30609.
STAFF COMMENTS ON
RECONSIDERATION 2 DECEMBER 2, 2008
Corvino insists that the Commission order a refud of the difference between the $2,500 paid
and the $725 (i.e., $1,775) for those customers not paries to the lawsuit. He contends that this is
the only choice consistent with the Fourh District Cour's findings. Reconsideration Comments
at 2-3.
STAFF COMMENTS
In its Application, the Company requested authorization to charge a hookup fee of $2,500
per customer to recover the "costs associated with building the water system, meter installation
and connection." Amended Application, Exhibit 9. Following an audit of the Company's
records, Staff determined that the hook-up fee was excessive and the Company failed to provide
detailed documentation of how its hook-up fee was derived. Staff Comments at 13. Staff
recommended a hookup fee of $725 based on the cost of labor and equipment required to install
a meter. ¡d. The Commission found Staffs analysis persuasive and approved the charge of$725
for a non-recurring hookup fee. Order No. 30628.
After reviewing the documentation provided by the Company pursuant to the
reconsideration schedule, it seems that the $2,500 hook-up fee was embedded as part of the
escrow closing transaction. Staff noted in its initial comments that the hook-up fee was collected
with the sale of the subdivision lots as par of the escrow closing. Staff Comments at 13. In
Mayfield's accounting of hook-up fees for all residential customers fied with the Commission
on November 7, 2008, the charge appears as a line item on the purchasers' closing statements
under "Other Charges / Credits."
Generally, a developer's cost of building a small domestic public water system is
considered by Staff to be contributed capitaL. In this case, it appears that the cost of the water
system was recovered through the sale of lots. Amended Application, Exhibit 9. Indeed, the
"hookup fee" was paid by the constrction companies or homeowners as par of the lot
sale/purchase at closing. Although termed a "hookup fee" in the escrow closing documents, this
fee was contributed capital that allowed the developer to recover the cost of the water system
through the sale oflots/purchase ofhomes.2 Moreover, Mr. Corvino asserted that "36 of the 56
total hook-up fees were paid by constrction companies or others and not directly by the
homeowner." Reconsideration Comments at 3.
2 The closing statements indicate a water hook-up fee of $2,500 and a sewer hook-up fee of $4,000.
STAFF COMMENTS ON
RECONSIDERATION 3 DECEMBER 2, 2008
Unfortately, the paries used a regulatory term-of-ar to refer to two different items. As
used by the water company and the developer in the closing statements, "hook-up fee" refers to
the contributed capital to pay for the cost of building the system and the meter installation and
connection. The Staff (and presumably Mr. Corvino) use the term "hook -up fee" to refer to only
the cost of the meter and its installation. Staff Comments at 13. Thus, the paries have used a
specific regulatory term to mean two different things.
As the Commission is aware, contributed capital means that Mayfield's rate base is
significantly reduced (from the actual cost of the water system to $13,477 per Order No. 30628
at 8). By way of comparison, the Company asserted the cost to build the water system was
approximately $690,000. Application, Exhibit D at 2. Customers benefit by the small amount of
rate base.
Because the $2,500 fee was collected by the developer through the sale of lots, Staff
treated most of this fee as contributed capital - not simply the cost of the meter and installation.
Given the misapplication of the term, the contributed capital and the lack of privity for 36 of the
56 customers, Staff believes that Mr. Corvino's argument is not well-founded. Staff
recommends that the Commission deny his request on reconsideration.3
Respectfully submitted this 2,1) day of December 2008.
Donald L. H ell, II
Deputy Attorney General
DH:umiss/comments/msww0801 Recon Comments
3 Mr. Corvino also asked the Commission to "affirm the Court's decision and order" regarding full refunds to the
plaintiffs in the civil action. Reconsideration Comments at 2. There is no need to "affirm" because the Court
clearly has authority to order full refunds under its equity powers.
STAFF COMMENTS ON
RECONSIDERATION 4 DECEMBER 2, 2008
. '..
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 2ND DAY OF DECEMBER 2008,
SERVED THE FOREGOING STAFF COMMENTS ON RECONSIDERATION 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(ffpa-law.com
TRENT NIEFFENEGGER
IDAHO SPRIGS WATER CO. INC.
PO BOX 344
MERIDIAN, ID 83642
EMAIL: trent(fwestparkco.com
ALDEN J HOLM CPA
WEST VALLEY BUSINESS CENTER
9446 W FAIRVIEW AVE
BOISE ID 83704
EMAIL: alden(ftreasurevalleycpa.com
GERALD 1. CORVINO
11865 W TUSTIN LANE
KUNA ID 83634-5032
EMAIL: gcorvino(fyahoo.com
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CERTIFICATE OF SERVICE