20210908Comments.pdf

irI i, l* '.J i;<H)
ERICK SHANER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5214
, : I :i.P -S PH 2:59
, t...,-;il-;'iit ;iou
Street Address for Express Mail:
I I331 W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, TD 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF NORTH STAR
WATER, LLC'S APPLICATION FOR A
CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY
CASE NO. NSW-W-21-01
COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its attorney of record,
Erick Shaner, Deputy Attomey General, submits the following comments.
BACKGROUND
On May 26,202l,North Star Water,LLC ("Company") applied for a Certificate of Public
Convenience and Necessity ("CPCN") to provide water related services as a public utility in
Idaho. The Company is an Idaho limited liability company headquartered in Kuna, Idaho.
Application, Exhibit 1. The Company plans to provide in-home potable water, irrigation water,
and water for fire protection to the North Star Subdivision ("Subdivision") in Canyon County,
Idaho. 1d Construction has begun on the facilities; however, no customers have been connected.
Application at 12 and 15. Once the Company begins to provide water service to customers it
proposes to charge rates of $70 per month for domestic service and $30 per month for irrigation
service. Id. at 19.
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1STAFF COMMENTS SEPTEMBER 8,202I
STAFF ANALYSIS
Staff believes the Company's request for a CPCN should be approved by the Commission
This conclusion is based on Staff s review of the Company's Application, appendices, Idaho
Department of Environmental Quality ("IDEQ") documentation, and plans for the Subdivision's
water system as developed by SPF Water Engineering LLC. Through its review, Staff has come
to the following conclusions:
l. The Company's requested service area does not overlap with an existing water utility
and the system has a reasonable opportunity to provide reliable service to future
customers based on the provided documentation.
2. The system design and construction has been approved by IDEQ and are adequate to
provide service to the Subdivision. As designed, the system doesn't allow for separate
measurement of domestic and irrigation usage or metered usage. Additional
improvements should be made to allow the Commission to set rates that are just, fair,
and reasonable. Additional data will need to be collected over time as customers
connect to the system, and rates adjusted at some future time within the context of a
general rate case.
Each of the conclusions will be discussed in more detail in the sections below along with
Staff s recommendations.
North Star Water System
The system is designed to serve the 24-lot North Star Subdivision in Canyon County,
Idaho near the City of Caldwell. The system is located on the east side of Wagner Road
approximately I mile west of the City of Caldwell's current municipal boundary in Canyon
County, Idaho. The legal description of the Subdivision is the W Yz of the NW % of Section 8
within Township 3 North, Range 3 West.
Staff believes the service area does not overlap with an existing water utility and has a
reasonable opportunity to provide reliable service to future customers based on the Company
provided documentation. Staff reviewed the legal description of the requested service area and
believes the description is accurate and is not in conflict other water utility service areas. To
2STAFF COMMENTS SEPTEMBER 8,202I
evaluate the ability for North Star Water to provide reliable service to future customers, Staff
reviewed the water system design, available water rights, and operation and maintenance plan.
These topics are discussed in more detail in the sections below.
Water System Design
Based on the documents provided in the Application and in response to production
requests, IDEQ documentation, and the SPF Water Engineering Plan, Staff believes the water
system design is sufficient to provide reliable service to future customers. The Subdivision water
system was originally constructed in 2008 but not put into service or approved by the IDEQ.
Original development costs are unknown. The IDEQ initially approved the system in January
2014; however, the project was never completed. Ln2020, additional water quality tests were
required and IDEQ subsequently confirmed that the well meets applicable drinking water
standards. Final approval as a public water system was again given on May 12,2021.
The system is a single well configuration, designed to serve domestic, pressurized
irrigation, and fire protection needs. From this single well, domestic and fire protection water are
distributed through a separate system from the irrigation water, which is supplied through a
pressurized irrigation system. A single flow meter tracks consumption for both distribution
systems so the consumption for each system cannot be tracked separately. The domestic and fire
protection system and irrigation system are separated with a pressure sustaining valve and
backflow prevention device to ensure irrigation water is shut off before domestic or fire protection
supplies are affected.
The fire protection system includes five fire hydrants within the North Star Subdivision.
In order to provide fire protection for individual residences, the City of Caldwell Fire Department
signed an agreement allowing the well to be used for fire protection under three criteria:
1. All homes within the Subdivision are required to have fire sprinklers;
2. A separate pressure irrigation system must be provided with a pressure sustaining valve to
prevent irrigation demands from drawing flow during a fire event; and;
3. The Company must connect to City of Caldwell municipal water service when it becomes
available. SPF Engineering at 4.
Staff confirmed that the agreement with the City of Caldwell is still in force. The
agreement states that in lieu of the typical 1,500 gpm fire flow requirement, the Caldwell Fire
JSTAFF COMMENTS SEPTEMBER 8,2021
Department signed an agreement stating that the system well would only need to supply 450 gpm
as long as every home within the Subdivision is equipped with fire sprinklers.
Water Rights and Production
The system water rights should be adequate to meet the expected demand of the fully
built-out Subdivision. Water right 63-32262 allows the diversion of up to 0.22 CFS (-100 gpm)
of groundwater for domestic uses within the Subdivision and water right 63-33225 allows the
diversion of up to 0.62 CFS (-280 gpm) of groundwater for irrigation within the Subdivision.
Both domestic and irrigation system demands were calculated using IDEQ design flow
tools. Based on the Subdivision of twenty-four lots, maximum daily domestic demand is
estimated at approximately 32 gpm with an estimated peak hour demand of approximately 62
gpm. Domestic average daily is estimated at approximately 20 gpm. These demand values are
lower than the 0.22 CFS (99 gpm) diversion limit set by water right63-32262 so the system is
adequately permitted to meet peak domestic demands. SPF Engineering at 4.
Operation and Maintenance
Staff believes the Company Operation and Maintenance ("O&M") Plan is reasonable
because the Company has a contract with a certified water operator and included reasonable
O&M items in the expense budget. Staff does have concern with the estimated cost of electric
power provided by the Company in the O&M budget.
Black Water LLC, Michael J Williams-Black will provide O&M for the North Star Water
System. Michael J Williams-Black is a certified Drinking Water Distribution Operator - Class l.r
Michael Williams-Black is also listed with the Idaho Secretary of State as the Registered Agent
for North Star Water LLC.
Since North Star Water is a new company with no history of the system providing service
to customers, no financial operating records are available. However, the Company provided a
range of estimated annual O&M expenses of $25,130 for year I to $28,284 for year 5.
Application Appendix 8. Staff examined the Company's estimates and believes that some O&M
expenses could be underestimated. Of particular concern is the estimated cost of electric power.
t DWDI - 18682 Original Date of Issue 711612012
STAFF COMMENTS 4 SEPTEMBER 8,202I
Staff encourages the Company to keep complete and accurate records of power costs, paying
particular attention to costs as the system adds customers.
Power Costs
Staff believes the Company should be permitted to recover annual power costs of $5,339
based on Staff calculations. In the Application, the Company provided an annual power cost
estimate of $3,000. In response to Production Request No. 13, the Company stated the power
cost provided in the Application was a random estimate of what they thought the power bill
would be. Additionally, in Response No. 13, the Company stated that after doing more research
and comparing to another water system, the power expense should be $5,400 to $6,000 per year.
Staff estimated domestic and irrigation system demand calculations that were created
using IDEQ design flow tools. These demand numbers were used to estimate the total gallons
used per month by the system. Using these estimates for demand, Staff calculated the amount of
electricity that would be consumed using pump curves and the depth of the well as installed. By
applying the amount of electricity needed to pump the estimated water demand using Idaho
Power's Schedule 9 rates, Staff was able to determine annual power costs for the system.
The Company takes power under Idaho Power's Schedule 9 (Large General Service).
Schedule t has a $16 per month service charge and uses a declining block rate structure whereby
the Company pays approximately $0.098 per kilowatt hour ("kwh") for the first 2,000 kWh of
energy, and $0.046 per kWh for each additional kWh. The Company also pays a monthly
demand charge and Basic Load Capacity charge for all power in excess of 20 kilowatts.
Hookup Fee
In response to Production Request No. 3, the Company provided the "Water System
Agreement for North Star Water,LLC" and the Water System Agreement mentions a one-time
hookup fee of $3,125. Staff asked a production request to determine the purpose for this hookup
fee paid by Elevation Partners, LLC. See Production Request No. 8. The Company stated that
the purpose of the hookup fee paid by the developer is to provide the Company with reserves to
have sufficient revenue to operate and is not related to a hookup fee for end-use customers.
Response to Production Request No. 8.
5STAFF COMMENTS SEPTEMBER 8,202I
Staff believes a hookup fee is not required for new customers. This conclusion is based on
the Company not incurring additional cost when a new customer installs their service line to the
Company's distribution system. The Company did not propose a hookup fee in the Application,
but Staff reviewed the information provided in this case and responses to production requests to
ensure a hookup fee is not required. Both the domestic and irrigation water distribution systems
were paid for by developers and the Company does not have to incur additional cost when a new
customer hooks up to either distribution system.
Reserve Fund
In its response to Production Request No. 8, the Company explained that the purpose of
the $3,125 hookup fee per lot paid by the developer is for reserves and will not be used to hook up
new customers. The Company does not yet have a revenue stream to cover expenses and these
reserve funds will be used to cover operational expenses.
Staff recommends that these funds should be placed in a separate account, and their usage
be restricted to emergencies and major unplanned capital expenditures such as leak repairs and
other unplanned replacements. Staff recommends the Company establish and maintain an
auditable paper trail for all expenditures paid from this reserve Fund. The Company should be
required to file notice to the Commission when money from this reserve fund is used. In order to
have the funds available for emergencies, Staff recommends that the Commission allow the
Company immediate access to the reserve funds, and the Company should seek Commission
approval of the withdrawals by filing an application after-the-fact.
Revenue Requirement and Rate Base
Pursuant to Idaho Administrative Code Rule 31.36.01.102. Section 31.36.01 .102 -
PRESUMPTION OF CONTRIBUTED CAPITAL "In issuing certificates for a small water
company or in setting rates for a small water company, it will be presumed that the capital
investment in plant associated with the system is contributed capital, i.e., that this capital
investment will be excluded from rate base. (7-l-93)" The Company is under-capitalized
because the water system infrastructure costs were recovered through the sale of lots. Because the
system is funded with contributed capital, the Company does not have plant-in-service that
qualifies for rate base treatment. Without rate base, the Company's revenue requirement is the
6STAFF COMMENTS SEPTEMBER 8,202I
amount necessary to cover its operating expenses. Staff adjusted the Company proposed
expenses and recommends a revenue requirement of $19,869 for the Company, as shown on
Attachment A.
Repairs
The Company estimated Repairs and Maintenance Expenses totaling $500 annually.
Because Staff is recommending the Company establish a reserve account for emergency repairs,
Staff has removed the estimated Repair and Maintenance Expense from the Company's proposed
revenue requirement. As discussed previously in these comments, emergency repairs and
unplanned capital expenses should be recovered from the reserve account.
Lab Testing Fees
In setting rates for small water companies, Staff typically adjusts Water Testing Expenses
to recover a multi-year average of annual testing expenses. Because water tests are required at
different times on different schedules, some tests only being required once every nine years, the
multi-year averaging methodology spreads the recovery of all testing expenses equally over time.
Staff recommends an annual level of Water Testing Expense of $600, which is the annual average
of all required tests, required by the IDEQ. As shown on Attachment B.
Equipment and Spares Parts
The Company included in its estimated expenses $1,000 for inventory and spare parts.
Staff removed this amount from the Company's revenue requirement because inventory should be
included in rate base after it is incurred. As the Company builds inventory, it may include the
balances and seek recovery in a future proceeding.
Rate Design
In its initial Application with the Commission, the Company proposed to charge the flat
rates for residential customers of $70 per month with additional $30 per month for irrigation
water. Staff recognizes the Company's desire to keep all the rates simple and because the system
is not individually metered, Staff believes that maintainingaflatrate design is appropriate.
However, Staff recommends that all customers be charged a single flat rate for both domestic
7STAFF COMMENTS SEPTEMBER 8,2021
residential water and inigation water until the Company can sufficiently separate usage and
associated costs of the two systems.
As indicated previously, the Staff-adjusted annual revenue requirement for the Company
is $19,869. Using this adjusted revenue requirement, Staff calculated the new single monthly flat
rate of $66.25 for residential and irrigation water combined. A comparison of the Company's
proposed rates and Staff proposed rates are shown in the summary table below.
Table 1: Rates Comparison
Reporting and Records
Utilities regulated by the Idaho Public Utilities Commission are required to file annual
reports. Annual reports contain company information, revenue and expense detail, an income
statement, plant in service detail, accumulated depreciation, a balance sheet, a statement of
retained earnings, capital stock detail, long-term debt detail, system engineering data, and
customer statistics. If the Company's Application is approved, Staff will supply the Company an
Annual Report for Water Utilities template in Excel format. Staff encourages the Company to
utilize the template and implement records management according to GAAP (Generally Accepted
Accounting Principles).
In the Company's Application separate rates for domestic and irrigation service were
proposed. Given available information, Staff is unable to reasonably establish distinct rates for
domestic and irrigation services. In order to establish rates for multiple customer classes,
8
Company Proposed Staff s Proposal
Customer Class
- Flat Rates
Number
of Cust
Months
of
Service
Proposed
Rates
$/lVIonth
Proposed
Rate
Revenue
Proposed
Rates
$/lVIonth
Proposed
Rate
Revenue
Residential
Domestic
24 t2 $70.00 $20,160
Residential
Irrigation
24 l2 $30.00 $ 8,640
Total $28,800
Residential
Domestic &
Irrigation
25 l2 $66.25 $19,869
STAFF COMMENTS SEPTEMBER 8,2021
additional data is required. Of particular concern are cost and production data by use type. Staff
recommends that the Company keep detailed and accurate monthly data for operating costs,
customer count by type, domestic water production, irrigation water production, common area
inigation use, and revenue by use.
Tariffs
In response to Production Request No. 2, the Company submitted a draft tariff based on
the Commission's Model Tariff. The Company included Rate Schedule 1 Category 1 - Portable
Water Monthly Base Charge I: $70 flat fee, and Rate Schedule 2 Category 2 Irrigation Water
Monthly Base Charge: $30 flat fee (year round). The Company's irrigation right is restricted to
March I - November l5; however the Company believes that a twelve-month charge for irrigation
prevents the customer from being "hit with a large bill during inigation season.
Staff agrees with a twelve-month bill; however based on the lack of metering to separate
the costs of domestic usage and inigation usage, Staff recommends a single monthly rate until
such time as the Company can identiff the costs associated with domestic usage and irrigation
usage. The Subdivision also includes a commons area that will be irrigated and the cost carried
by the Homeowners Association. Because this account will have no domestic water usage, Staff
believes a separate rate should be set for that account when additional data is collected.
Staff recommends in the interim that all lots including the commons areapay
Domestic and Irrigation Monthly Flat Rate - 566.25 per lot
When data is available the rates should be adjusted to reflect
Domestic Monthly Flat Rate (TBD)
Inigation Monthly Flat Rate (TBD)
HOA Commons Area Monthly Flat Rate (TBD)
Staff has reviewed the Non-Recurring Charges included in the draft tariff and suggests the
additional charges as described below. Staff will assist the Company in completion of its tariff as
well as other Commission required documentations such as late notices, disconnection notices,
the annual explanation of rate and the annual rules summary.
9STAFF COMMENTS SEPTEMBER 8,2021
Returned Transaction Fee
Idaho Code $ 28-22-105 allows a company to charge no more than $20.00 for dishonored
checks. Although the Company did not ask for such a fee Staff recommends that a $20.00
returned transaction fee when a payment has been returned for insufficient funds.
Late Payment Charge
In response to Staff s Production Requests, the Company provided a proposed tariff that
the Company would file with the Commission if the CPCN is approved. The Company asked for
a late payment charge of loh monthly on unpaid balances at the time of the next billing date.
Staff supports a late payment charge to encourage prompt payment of bills and a loh charge has
previously been allowed to all utilities that have requested it in past cases.
Reconnection Fee
In its Application, the Company has asked for a reconnection fee when the account has
been disconnected for non-payment. The Company has asked a $35.00 fee when reconnected
during normal business hours, and $70.00 when the request for reconnection is after normal
business hours. Staff agrees that a reconnection charge is appropriate following an involuntary
disconnection of service for non-payment. Historically, the Commission has allowed a portion of
actual costs to be recovered through a direct charge to affected customers. However, Staff
believes the amount requested by the Company is unreasonable and inconsistent with charges
authorized by the Commission for other regulated utilities.
Staff instead recommends a $20 reconnection charge for reconnections following an
involuntary disconnection of service for nonpayment during normal business hours. Staff also
proposes a $40 reconnection charge for reconnections following an involuntary disconnection of
service for non-payment to be applied when the reconnection is requested outside of normal
business hours. This $40 charge is within the range of charges previously approved by the
Commission for other regulated utilities under similar circumstances. Staff and the Company
agree that normal business hours are defined as 8:00 am and 5:00 pm, Monday through Friday,
excluding legal holidays.
STAFF COMMENTS 10 SEPTEMBER 8,2021
CUSTOMER NOTIFICATION AND COMMENTS
Rule 125 of the Commission's Rules of Procedure does not require direct customer
notification unless the Company is requesting a rate change. IDAPA 31.01 .01.125. While the
Company is requesting that the Commission set a rate as part of the process of granting a
Certificate of Public Convenience and Necessity the Company currently has no customers.
STAFF RECOMMENDATIONS
Staff recommends that the Commission:
l. Approve a CPCN for North Star Water.
2. Approve a single rate of $66.25 per month per lot for both domestic and irrigation usage
for all lots until additional data is available.
3. Approve a late payment fee of lYo of the past due balance at the time of the next billing
statement.
4. Approve a reconnection fee of $20.00 for a reconnection during normal business hours
and a $40.00 reconnection fee for a reconnection requested after normal business hours.
5. Approve a $20 insufficient funds charge.
6. Direct the Company to work with Staff to revise its Tariff and Rules and Regulations so
that they are consistent with the Commission's Rules and Regulations, and to create
required documents, e.g., disconnection notices and an annual customer notice.
7. Direct the Company to submit a signed copy of its Tariff within 30 days of the effective
date of the Order.
8. Collect and report additional data in its Annual Report to the Commission.
STAFF COMMENTS 11 SEPTEMBER 8,2021
Respecttully sub,mitted this g4 day of Septemb er 2A2l .
A:
Erick Shaner
Deputy Attorrey General
Technioal Staff: Chris Hecht
Michael Eldred
Johan Kalala-Kasanda
Kwin Keyt
i:umisc:ccimments/nsww2l. lescufrlsk;'kme oommornts
STAFF COMMENTS t2 SEPTEMBER 8, 2021
Staff Calculation of Annual Expenses
NSW-W-z1-01
Company
CY2021 StaffAdiustmentExnenses
-
Cortract Operator
Rottine Mairtenance (Labor + Materiab)
Repairs
Equprnent and Spare parts
Power
Lab testirg ftes
Irsmarpe
.O.ffce and Biling
, Offce Stpplies, P-;sage, Notift ations
Other Utilities
Proft ssional Services ftes
larxlscape / Weed confol
;Property ta:<es
Bank charges
Subtotal
Reserve Debt service
Total O&M Expenses
Staff
Recommendation
s
$
$
$
$
$
$
$
$
$
$
$
5,400
250
500
1,000
3,000
1,200
1,440
2,400
240
600
2?400
1,200
$ 19,630
5,500
25,130
s 5,500.00
s00
1,000
2,339
600
sz?39
600
1,440
2,400
240
600
4:4oo
1,200
$
$
,8699$
$
_!___le,86e l
AttachmentNo. A
Case No.NSW-W-21-01
StaffComments
09t08/21
tab Testing Required by. IDEQ
Types
, lnorganlc Contamlnants: Antimony, Arsenic,
, Barium, Beryllium, Cadmium, Chromium,
Fluoride, Mercury, Nickel, Selenium, Sodium,
Thalium
Antimony: S14 Arsenic: $22, garium: S t4
Beryllium: S22, Cadmium: S22, Chromium:
S22, Fluoride: S, Mercury: S30, Nickel:S14'
Selenium: S24 Sodium: S14 Thalium:S22 S 71m
Price
Total / ,
yearFrequency
Every 3 years
quarterly for at least 1year,
then every 3 years.
Annually
. Every 9 years
lquirterty tor r year, then
lreduced anywhere from 3years
,to 9 years depending on the
Synthetic OrBanlc Contaminants: Carbamates,
Chlorinated Herbicides, Diquat, EDB/DBCP,
Endothal l, Glyphosate, Chlorinated
Pesticides/PCBs
Nitrate
lrtitrite
Carbamates: S17t Chlorinated
Herbicides: s190, Diquat: s190, EDB/DBCP:
s140, Endothall: s171 Glyphosate: 5 150,
Chlori nated Pesticides/PcBs: 5190
Nitrate: S35
Ni!rite:
Gross Alpha: S70, Uranium: $30, Radium
226:ifi, Raqium 228t5730
s 4oo.o0
S 3s.oo
3.89
Radionuclides: Gross Alpha, Uranium, Radium
226,Radium228 v.4s
,5 samples every 6 months. After
,two six-month rounds, reduced
ito annual. After two annual
rounds, reduce to every 3 years.
Lead and Copper
Total coliform and E. ali
s34.m
ualAnn v
s 11.33
s asoo
$600.57 ,
Attachment No. B
Case No.NSW-W-21-01
StaffComments
09108121
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 8TH DAY OF SEPTEMBER 2021,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. NSW.W-2I-01, BY E.MAILING A COPY THEREOF, TO THE
FOLLOWING:
MIKE BLACK
NORTH STAR WATER LLC
PO BOX 3723
NAMPA ID 83653
E-MAIL: [e-mail]
SECRET
Jr,/M,--.^y--
CERTIFICATE OF SERVICE