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HomeMy WebLinkAbout20030319Decision Memo.PDFDECISION MEMORANDUM TO:COMMISSIONER KJELLANDER COMMISSIONER SMITH COMMISSIONER HANSEN COMMISSION SECRETARY COMMISSION STAFF LEGAL FROM:LISA NORDSTROM DATE:MARCH 6, 2003 RE:NON-COMPLIANCE SYSTEM. P%~L(J~tJJ;(/ I OF PONDEROSA TERRACE ESTATES WATER On August 8, 2002, the Commission authorized Ponderosa Terrace Estates Water System (ponderosa) to collect monthly rates in the amount of $48 for Full-Time and Part-Time customers and $25 for Active Service customers! for service rendered on or after August 1 , 2002. Order No. 29086. In its Order on Reconsideration the Commission directed Ponderosa and Commission Staff to submit a report detailing customer class inventory (membership) changes once the grace period expired on October 15, 2002, and the impact these changes may have on Ponderosa s revenues. Order No. 29123. Staffs Report indicated that even though Ponderosa was under-collecting its revenue requirement, neither Staff nor Ponderosa recommended a change in rates at that time. Report at 2. Based on a number of inquiries received by the Commission, it was apparent that some confusion existed regarding the implementation of the Commission s Orders and the Company treatment of seasonal disconnections. Because Staff and the Company did not agree on the treatment of seasonally disconnected customers, Staff requested clarification of Order No. 29086 in that regard so that it could properly advise customers and the Company. ld. In response to these concerns about seasonal disconnection, the Commission in December 2002 clarified Order No. 29086 and authorized Ponderosa to involuntarily move a customer to the Inactive Service customer class if the customer remained disconnected from the system for longer than eight full months. Order No. 29172. If the customer later sought to 1 "Active Service" customers have service extended to the lot and have aboveground access to water. DECISION MEMORANDUM resume service after the eight months had passed, the Commission directed Ponderosa to retain the following infonnation to justify imposition of a $2 500 hook-up fee: 1) its customer payment and disconnection records and 2) proof that notice of Ponder os a s intent to move the customer to Inactive Service and require a $2 500 hook-up fee upon reconnection was sent via certified mail. ld. NON-COMPLIANCE WITH ORDER NO. 29172 Ponderosa Letter to Customers:Several customers sent Staff a copy of a Company letter dated January 2, 2003. The letter (Attachment A) advised customers that the "Ponderosa Terrace Estates Water System Inc. is no longer going to be involved with the Idaho Public Utilities Commission." Mr. Robaer Cobott, Ponderosa s owner and author of the letter, noted that "since P.C. has been involved in my water system I have lost many customers" who have drilled wells or withdrawn from the system. He further infonned customers that this had reduced Ponderosa s annual revenues by $9,200 from the $26 600 Commission-authorized revenue requirement. As a result of Order No. 29172 issued in December 2002, Ponderosa asserted that the Commission s decision to allow Part-Time and Active Service customers to pay for just a four-month minimum of water reduced the Company s revenue by $6,400. Consequently, the Company s annual revenues are now less than $10 000. Mr. Cobott wrote , " this water system cannot operate under the current condition that C. is trying to impose" and that he is going to try to save the water company for those customers needing service. Effective January 1, 2002, Mr. Cobott infonned customers that only two customer classes - Resident and Non-Resident - would exist, as he had "before the P. got involved." Under his plan, Residents (a customer "who lives on his property all year ) pay $48 per month and Non-Residents ("part-time use or no use at all") pay $25 per month. Although this rate structure is similar to the one approved by Commission Order No. 29086 August 2002, Mr. Cobott deviated from the Commission s seasonal disconnection directives in Order No. 29172. The letter threatened customers that "if you do not pay a monthly charge to help maintain this system then you will not be able to hookup to the system in the future." Thus, Non-Residents must pay a monthly charge of $25 per lot to keep water service. Ponderosa allowed customers that are not currently making monthly water payments 30 days from the date of the letter to decide whether to be part of the system or "be withdrawn from any future use from this system. DECISION MEMORANDUM Under these conditions, Mr. Cobott believes that the Company will still be operating $10 000 under the Commission-authorized revenue requirement if every customer pays their bill. In closing, Mr. Cobott stated: Last year P.u.c. caused me to lose $20 000 and they don t care. P.u.c. lied to me, they told me that when their decision was made it was final. P.u.e. are the ones that said the operating cost per year had to be $26 600. What gives them the right to destroy this company and put the landowner into a situation that might eliminate their water service. Staff Letter to Ponderosa After receiving calls from customers and a copy of the letter described above, Staff engineer Michael Fuss sent a letter (Attachment B) to Mr. Cobott on January 23, 2003. Although noting that some of the statements in the Company s January letter were contrary to the Commission s Order, Staff indicated that Ponderosa s rate alternative may have some merit given the Company s current financial situation. Staff requested Mr. Cobott' assistance in gathering specific infonnation that Staff could use to file an updated report with the Commission. This report would examine the Company s financial status and determine if it had deteriorated since October. The report would also evaluate whether Ponderosa s rate proposal might improve the Company s financial status. Staff requested that Mr. Cobott provide the requested infonnation no later than February 18 , 2003. Although Staff emphasized that continued communication with the Commission was the best approach for Mr. Cobott and his customers, as of this date Mr. Cobott has not responded to Staffs letter and infonnation request. Customer Bill:In early February, Staff received a copy of a customer bill (Attachment C) in which Ponderosa charged a customer that had seasonally disconnected two Non-Resident lots last fall for water service rendered the month of January 2003. The customer paid Company employee Larry Fairfax $50 "upfront" to shut off the valves to these lots several months ago. Because the customer was seasonally disconnected and did not request water service during the month of January, Staff alleges the amount charged was contrary to Order No. 29172. The customer told Staff that he intended to pay the bill but that if the billing was improper the Commission could return the payment to him. STAFF RECOMMENDATION Staffhas attempted to work with Ponderosa to address the Company s concerns about the rates imposed in Order No. 29172 to no avail. The Company is non-responsive to Staff inquiries and customers are uncertain whether they should pay the amounts billed by Ponderosa DECISION MEMORANDUM or the amounts authorized by Commission Order. Consequently, Staff alleges there is sufficient cause and recommends the Commission initiate an Order to Show Cause docket for Ponderosa Terrace Estates Water System under a new case number. Prior to holding an evidentiary hearing in Sandpoint, Staff recommends the Commission direct Staff to prefile testimony outlining Ponderosa s failure to comply with Commission Orders, to which the Company would be required to respond by a date certain prior to hearing. The Company s testimony should address: 1) why the Commission should not seek imposition of civil and/or criminal penalties for non- compliance with Commission Orders; 2) explain how the Commission s current rates are inadequate to recover Ponderosa s expenses; and 3) explain what rates Ponderosa believes should be implemented. Because Mr. Cobott has refused to sign for and accept notice by certified mail in the past, Staff recommends that Mr. Cobott be served with the Order to Show Cause by personal service. If Ponderosa fails to appear at the hearing, Staff recommends that the Commission consider exercising the civil and criminal remedies available through the judicial system. This may include: I) petitioning the 1st Judicial District for an injunction prohibiting Ponderosa from charging rates different than those ordered by the Commission; 2) requesting the Court place the Company in receivership; or 3) filing criminal misdemeanor charges under Idaho Code 9 61-709 for failure to comply with a Commission Order. COMMISSION DECISION Does the Commission wish to adopt Staff s recommendation as described above to initiate an Order to Show Cause against Ponderosa? If not, how does the Commission wish to proceed? 1f:k~Lisa ordstrom M:Ponderosa OSC In DECISION MEMORANDUM . I E. WATER SYSTEM INC. 2626 !'I Loop Road ~n~p~ ' - ho 83864 Telephone 208-263-2720 *ear Laodown This Ie is to serve notice to landowners that the Ponderosa Terrace Estates Water ystem Ine. is longer going to be involved with the Idaho Public Utilities C~mm~ssion. he P.C. has ade me conform to all their demands including taking aU my InVOICes on e operation 0 e water system to Boise so they could come up wiih a yearly operatiAg ~:" . ..~ '" '.',""""'" st to operate water system. I disagreeded with their finding so there was a formal aring in Jun 00% in Sandpoint Idaho to try an resolve the problems. Befo~e the heanng e P.c. said at tbe operating expense was $14,000 plus and after the hearmg the xpenses were ermined to be S26 000 plus. The P.C. put all landowners in different , asses deterrni by their water bookup on their lot. This gave the P.C. the ability to arge the diU Dt landowner based 00 how they bad classed them. Tbe P.C did this nd 1 was told at to charge the different classes so tbat the revenue received would ke care of th xpenses. Since P.C. bas been involved in my water system I have lost any costome : Some have put in their own well and others have just withdrawn fro~ t~e stems. Did y ' know that if a landowner puts in a well Bnd your lot is next to pis that y~ur twill probab be conSidered worthless. This information'I received from the Panhandle : ' ealth Dept. ch states that a septic system can not be put in any closer than 100 feet , all direction On October 30, 2002 Michael Fuss came up to the water system and took . customer cia "nventory and came up with over a 56000.00 loss in revenue which reduced .he annual rev ue to less than 520,000.00. Since October I have loss more customers which iotal5 53200.' loss revenue. Tben the P.c. changes their mind and states that all ~art time dwel ' g~ and active service customers only have to pay for water payment 4-months tf the year. T ' reduces the revenue another 56400.00 a year. At tbis time the revenue to tperate tbe sy has been reduced ,to less than 510,000.00 per year. Because of the above . .1 have decided , handle this problem myselve. Tbere will be 2 classes of customers like I ~ad before P.. got involved. Resident aDd Non-Resident. Resident customers will be charged ~48.00 per mo , and Non-Resident customers will be charged, 525.00 per month. ReSident . customer tha , ives on his property all year. Non-Resident is part time use or no use at aiL ~on-ResideDt , not be used for resident use. If you as Iandownen, resident or non-resident, .0 Dot pay am , thly charge to help maintain this system then you will not be able to hookup to the 4ystem in the. fi . re.It's not fair for a few to pay for all the upkeep and tbe rest can come and go , .5 ~hey please. ,his water system can not operate under the current condition that P.C. is trying ~ . tmpos~. I'm . iog to try to save tbis water company for all or you my customers that need .hlS service. If . u want to put in 'your own well please check first on all the different cos~ and .,..bat your mo Iy electric charge will be to operate the well. You will be surprised. Lattdowners i!bat a~e not m ng monthly water paymen.ts at present have 30 days from tbe date of this letter ~ dectd~ to be rt on the system or not. In don t here from you by letter or phone during this .me period th ou will be withdrawn from any future water use from this system. January 2, 2003 ATTACHMENT A PAGE 1 of 2 that everybody forgetJ about and that is I Robaer Cobott own tbis water ke this system survive for you my customers and for myselve. If everbody operating 510,000.00 a year under what the P.C. said I needed. I doo't e this work but I'm going to try. Last year P .c. caused the water system 520,000.00 and they doo t care. P.C lied to me, they told me that when s make it was floai. P.C. are the ones that said that the operating cost e 526,600.00. What gives them the right to destroy this company and put 0 a situation that might eliminate their 'Water service. In order to keep water t or lots you are going to have to pay a monthly charge of $25.00 per lot ent owners. If payments are not mad~ you wiU be eUminated permanently stem. These new conditions described in this letter will go into ,effect on THANK YOU ATTACHMENT A PAGE 2 of 2 IDAHO PUBLIC UTILITIEScommiSSion Dirk Kempthome, Governor o. Box 83720, Boise, Idaho 83720-0074 January 23 2003 Paul Kjellander, President Marsha H. Smith, Commissioner Dennis S. Hansen, Commissioner Robaer Cobott Ponderosa Terrace Estates Water System 2626 Wrenco Loop Lane Sandpoint, Idaho 83864 RE: Customer Letter Dated January 2, 2003 Dear Mr. Cobott: The Commission has received inquiries from several customers regarding your January 2, 2003 letter.. I understand your frustrations and can sympathize with your situation As more customers continue to drill wells. and other customers refuse to pay their bills, it appears likely that Ponderosa will be unable to collect its $26 600 revenue requirement. This factual situation is usually referred to as a "death spir81" - as rates go up to meet the revenue needs of the utility, more and more customers leave the system, thereby causing a revenue shortfall. If this occurs, the Ponderosa system may norbe financially viable as a public water system. The expenses are too high, the revenue ITom too few customers is too low, and the infrastructure is too. strained.. Even though some of the statements in your J ani.lary 2 letter are contrary to the.Cornmission s Order, Staff believes your rate alternative may have merit given the current financial situation. Consequently, with your assistance we would like to file an updated report with the Commission describing how much the financial status of the "system has deteriorated since October and how your rate proposal might improve the financial situation. . ill order for us to accurately and persuasively present this infonnation to the Commission we will need detailed infonnation ITom you. We need to know, to the best of your knowledge: Which customers have drilled their own wells and what lots are likely to leave the system as a result of the well drilling. We ve heard different estimates IT6m p.umber of customers, but as the owner of the system you are in the best position to assess how many lots have left the water system. How many customers remain in each rate classification. Please provide a summary of the water payments that were made for each month from August to December of. 2002. We need this information to demonstrate to the Commission in concrete numbers the declining status of your system. Please provide the amount of monthly revenue you expect to receive from your proposed rate alternative. ATTACHMENT B PAGE 1 of 2 Located at 472 West Washington Street, Boise; Idaho 83702 Tplpnhnnp' (?nR\ ~~.:1-nqnn I=~,..,=imil",' (?nR' ~~.:1-~7~? Robaer Cobott January 23 2003 Page 2 Once the infonnationdetailing Ponderosa s current financial situation is provided and described in a Staff report, the Commission will have an opportunity to review the current conditions, consider your rate proposal and perhaps modify its prior Order. Absent a request by you and/or the Staffto modify the Order based on new information, the only alternatives are to comply with the existing Commission Order or consider alternatives to regulation. 'In any case the Commission needs to have a clear understanding ofPonderosa s current financial situation. We believe that continued communication with the Commission is the best approach for you andyour customers. Please provide the above requested information and any other financial information that you think might help your case at your earliest convenience or not later 'than 'February 18 2003. We will then promptly complete the report and submit it to the Commission. If you have any questions regarding these tasks, please do not hesitate to contact me directly at (208) 334-0366. It is my hope that we can work together to improve Ponderosa s fmancial situation. Sincerely, ~-- IEchae1 u:mfuss:PTE water/OllOO3 ATTACHMENT B PAGE 2 of 2 . Feb 06 03 01:08p " . o~: ' . i~~ - :';: ~::~ \i~ J B P Z . T. E. WATER SYSTEM, INC. 2626 Wrenco Loop Sandpoint, ill 83864 208-263~2720 ~~~.. ,~~--'-- , , , .".---------- DATE 1/2/'03 1/3/' 1/13/' 213/' CURRENT 50. Non-Resident Blk.. Lots" '252-3566 ta t,emen t y~~~--" ..:../ 213/'03 ---, ,- -...-- AMOUNT' DUE M. aUNT E.NC" 50. AMOUNT BJ\W\NCE 73.73. 73. 50.50. Balance forward INV PMT #- INV TRANSACTION THIS STATEMENT IS FOR THE PREV1OUS MONTH'S WATEF~ BILL 30 DJI. PAST DUE ""..--,,............--....-.........-. . 3 ~~o ~' o 6 DAYS OVER DAYS 'lMOUNT DUE DUE PAST' DOE 50. .. "__n_ '____. "" -,"... ATTACHMENT C , PAGE 1 of