20030325Order No 29212 Order to Show Cause Notice of Hearing.pdf

Office of the Secretary
Service Date
March 25 2003
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF PONDEROSA
TERRACE ESTATES WATER SYSTEM,
INC.S FAILURE TO COMPLY WITH
COMMISSION ORDERS.ORDER TO SHOW CAUSE
CASE NO. PTE-O3-
NOTICE OF HEARING
ORDER NO. 29212
Idaho Code ~ 61-501 vests the Idaho Public Utilities Commission with the power and
jurisdiction to supervise and regulate every public utility within the State of Idaho. The
Commission is also empowered by law to investigate and fix rates and regulations of any public
utility, including water corporations.Idaho Code ~~ 61-502; -503; and -129.Idaho law
generally defines a "water corporation" as a person or corporation that owns or operates property
or infrastructure that facilitates the supply, distribution, or sale of water for compensation. Idaho
Code ~~ 61-124 and -125. In September 2001 , we determined that Ponderosa was operating as a
public utility and water corporation such that it fell within this Commission s regulatory
jurisdiction. Order No. 28845.
Mr. Robaer Cobott owns Ponderosa Terrace Estates Water System, Inc. (Ponderosa or
Company) and operates it as a for-profit water system. Located south of Sandpoint and east of
the community of Sagle in Bonner County, Idaho, the Company serves approximately 20 full-
time residences connected to the system and a total of approximately 90 lots within the area.
This system has been in place since approximately 1969. In this Order, the Commission directs
Ponderosa to appear at a hearing and show cause why it has failed to comply with prior
Commission Orders. The Show Cause Hearing is set for April 28, 2003 at 9:30 a.m. at the
Bonner County Courthouse in Sandpoint, Idaho.
BACKGROUND
On August 8, 2002, the Commission authorized Ponderosa Terrace Estates Water
System to collect monthly rates in the amount of $48 for Full-Time and Part-Time customers and
ORDER TO SHOW CAUSE
NOTICE OF HEARING
ORDER NO. 29212
$25 for Active Service customers with above-ground access to water 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.
The subsequent report filed by Staff 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 s 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. Id.
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
resume service after the eight months had passed, the Commission directed Ponderosa to retain
the following information to justify imposition of a $2 500 hook-up fee: 1) its customer payment
and disconnection records and 2) proofthat 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.
Id.
STAFF CHARGES
On March 6, 2003, the Commission Staff advised the Commission that several
customers had received a letter from the Company 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. 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 informed 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
ORDER TO SHOW CAUSE
NOTICE OF HEARING
ORDER NO. 29212
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
D.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 , 2003 , Mr. Cobott informed customers that only
two customer classes - Resident and Non-Resident - would exist, as he had "before the P.
got involved." Under his plan, Resident (a customer "who lives on his property all year ) pay
$48 per month and Non-Resident ("part-time use or no use at all") pay $25 per month.
Although this rate structure is similar to the one approved by Order No. 29086 issued
in August 2002, Staff alleges that these rates or the application of these rates deviate from the
Commission s seasonal disconnection directives in Order No. 29172. The letter also threatened
customers that "if you do not pay a monthly charge to help maintain this system theh 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." 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.
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's assistance in
gathering specific information 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 information no later than February 18, 2003. Although Staff emphasized that
ORDER TO SHOW CAUSE
NOTICE OF HEARING
ORDER NO. 29212
continued communication with the Commission was the best approach for Mr. Cobott and his
customers, as ofthis date Mr. Cobott had not responded to Staff s letter and information request.
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
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.
ORDER TO SHOW CAUSE
Based upon the Staffs representations, the Commission finds that there is probable
cause to believe that Ponderosa has failed, omitted or neglected to obey, observe or comply with
Commission Orders, rules, direction, or requirements as required by Chapter 7 Title 61 of the
Idaho Code. More specifically, Ponderosa:
1. Made material misrepresentations to customers
Commission s involvement in regulating the Company;
regarding the
2. Made material misrepresentations to customers regarding rates to be
charged for seasonal disconnections;
3. Threatened to disconnect customers in a manner inconsistent with prior
Commission Orders and administrative Rules; and
4. Billed customers for usage (or lack thereof) in a manner inconsistent with
prior Commission Orders.
IT IS HEREBY ORDERED that the Company show cause why the Commission
should not formally find that the utility has failed to comply with Commission Orders, rules
direction, and/or requirements. The Company shall appear before the Commission s Hearing
Examiner at the Bonner County Courthouse, located at 215 SOUTH FIRST AVENUE.
SAND POINT. IDAHO. AT 9:30 A.M. ON MONDAY. APRIL 28. 2003
IT IS FURTHER ORDERED that the Company appear at the time and place above to
show cause why the Commission should not: 1) seek a civil penalty of $2 000 per day for each
ORDER TO SHOW CAUSE
NOTICE OF HEARING
ORDER NO. 29212
day the utility has failed to comply with Commission Orders pursuant to Idaho Code ~ 61-706;
2) petition the First Judicial District for an injunction prohibiting Ponderosa from charging rates
different than those ordered by the Commission; 3) request the court place the Company in
receivership; and/or 4) file criminal misdemeanor charges under Idaho Code ~ 61-709 for failure
to comply with a Commission Order.
IT IS FURTHER ORDERED that all hearings and prehearing conferences in this
matter will be held in facilities meeting the accessibility requirements of the Americans with
Disabilities Act. Persons needing the help of a sign language interpreter or other assistance of
the kind that the Commission is obligated to provide under the Americans with Disabilities Act
in order to participate in or to understand the testimony and argument at a public hearing may
ask the Commission to provide a sign language interpreter or other assistance at the hearing. The
request for assistance must be received at least five (5) working days before the hearing by
contacting the Commission Secretary at:
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone] (Telephone)
[phone] (FAX)
Mail: secretary~puc.state.id. us
IT IS FURTHER ORDERED that all proceedings in this matter will be conducted
pursuant to Idaho Code ~ 62-619 and the Commission s Rules of Procedure, IDAPA
31.01.01.000 et seq.
IT IS FURTHER ORDERED that prior to holding an evidentiary hearing in
Sandpoint, Staff shall prefile testimony outlining Ponderosa failure to comply with
Commission Orders by April 1 , 2003. No later than April 21. 2003, the Company shall file
testimony that explains
1. Why the Commission should not seek imposition of civil and/or criminal
penalties for non-compliance with Commission Orders;
2. Why the Commission current rates are inadequate to recover
Ponderosa s expenses; and
3. What rates Ponderosa believes should be implemented. Staff may offer
live" rebuttal testimony at the hearing, if necessary.
ORDER TO SHOW CAUSE
NOTICE OF HEARING
ORDER NO. 29212
To facilitate the filing of exhibits, the Commission assIgns the Commission Staff exhibit
numbers 1-100 and Ponderosa exhibit numbers 101-200.
IT IS FURTHER ORDERED that the Commission Secretary will have this Order to
Show Cause served upon the person designated to receive Notices of Summonses and
Complaints (IDAP A 31.01.01.016) and upon the person designated by the utility to receive legal
service in Idaho~U.S. mail and certified mail.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this 'Ii"
day of March 2003.
J I
MARSHA H. SMITH, COMMISSIONER
ATTEST:
J e Jewell
Commission Secretary
O:PTEW0301 In
ORDER TO SHOW CAUSE
NOTICE OF HEARING
ORDER NO. 29212
. f E. WATER SYSTEM INC.
2626 "Loop Road
!?~~p'o , _!!!o 83864
Telephone [phone]
4ear Landown
This Ie is to serve notice to landowners that the Ponderosa Terrace Estates Wa~er
' ystem Ine. is . longer going to be involved with the Idaho ~ublic ~ti1ities C~mm~ssion.
he P. D.C. has ade me conform to all their demands including taking aU my mVOlces on
e operation 0 e water system to Boise so they could come up witb a yearly operati.o.g f~
.....- '" '."
_n"
st to operate water system. I disagreeded with their finding so there was a formal
aring in Jun 002 in Sandpoint Idaho to try an resolve the problems. Befo~e the heanDg
e P.C. said at the operating expense was $24 000 plus and after the hearmg the
xpenses were ermined to be $26,000 plus. The P.C. put all landowners in different
, asses determi by their water hookup on their lot. This gave the P.C. the ability to
arge the diffi ot landowner based on bow they bad classed them. The P.C did this
nd I was told at to charge the different classes so that 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~ the
stems. Did y know that if a landowner puts in a well and your lot is next to pis that y~ur
twill probab ,be considered worthless. This information'J received from the Panhandle
: ' ealth Dept.ch states that a septic: system can not be put in any c:Ioser 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 $6000.00 loss in revenue which reduced
.be anDual rev ,De to less than S20 000.00. Since October I have loss more customers which
.otal5 53200.' loss revenue. Then the P.C. changes their mind and states that all
part time dwel ' g, and active service customers only have to pay for water payment 4-months
~f the year. T ' reduces the revenue another 56400.00 a year. At this time the revenue to
tperate the sy bas been reduced to less than $10,000.00 per year. Because of the above
.1 have decided handle this problem myselve. There will be 2 classes of customers like I
~ad befo~e p. '. got involved. Resident and Non-Resident. Resident customers will be charged
$48.00 per mo , and Non-Resident customers will be charged $25.00 per month. Resident is
. customer tha ,ives on his property all year. Non-Resident is part time use or no use at all.
rs-on-Resident , not be used for resident use. If you as landowners, resident or non-resident,
~o not ~ay am , tblycbarge to help maintain this system then you will not be able to hookup to tbe
4ystem In the f -, reo It's not fair for a few to pay for all the upkeep and the rest can come and go
*s !hey plea~e. ,~is water system can not operate under the current condition that P.C. is trying
~ ..mpos~. I m mg to try to save tbis water company for all of 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""hat your mo ,Iy electric charge will be to operate the well. You will be surprised. Lartdowners
~ibat are not m 'ng monthly water payments at present have 30 days from the date of this letter
~ decid~ to be rt on ~he syst~m or not. In don t here from you by letter or phone during this
fme period th au will be withdrawn from any future water use from this system.
January %, 2003
ATTACHMENT A
PAGE 1 of 2
. here is one th
stem. I will
ays I still-will
ow If I can
lose more th
, eir decission
er year bad t
e landowner
rvice to your
r aU Non-
om the wate
nuary 1, 200
that everybody forget5 about and that is I Robaer Cobott own this water
ke this system sunrive for you my customers and for myselve. If everbody
operating $10,000.00 a year under what the P.C. said I needed. I don't
e this work but I'm going to try. Last year P.C. caused the water system
$20,000.00 and they don t care. P.C. lied to me, they told me that when
, s make it was final. P.C. are the ones that said that the operating cost
e $26,600.00. 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 made you wilt 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 UTILITIES
com miSSiOn
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 ITom 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 spiral" - 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 notbe financially viable as a public water
system. The expenses are too high, the revenue from too few customers is too low, and the
infrastructure is too. strained, Even though some of the statements in your January 2 letter are
contrary to the Commission 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.
, In order for us to accurately and persuasively present this information to the Commission
we will need detailed information from 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 from a
number 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 ITom your
proposed rate alternative.
ATTACHMENT B
PAGE 1 of 2
Located at 472 West Washington Street , Boise; Idaho 83702
T~I~nhnn~' (?nR) "~~L1-nqnn I=~f'c:imjl~' (?nR\ ~~L1-~7~?
Robaer Cobott
January 23 2003
Page 2
Once the information detailing Ponderosa s current financial situation is provided and
described in a Staff report, the Commission will have an opportunity to review the CUITent
conditions, consider your rate proposal and perhaps modify its prior Order. Absent a request by
you and/or the Staff to 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 of Ponderosa' s current fInancial situation.
We believe that continued communication with the Commission is the best approach for you and
your 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 tothe Commission. If you have any
questions regarding these tasks, please do not hesitate to contact me directly at [phone].
It is my hope that we can work together to improve Ponderosa s fInancial situation.
Sincerely,
~hael Fuss, PE
u:rnfuss:PTE water/Or LO03
ATTACHMENT B
PAGE 2 of 2
~IL:
.."..
"\i
...::-;:. ,
r:~
.,,"'- ,- : :~;
; liii
. ;.
;,i"
. l~-:
, ",:.~ eb 06 03 a 1: asp D B P Z
. T. E. WATER SYSTEM, INC.
2626 W renco Loop
Sandpoint, ID 83864
208-263-2720
L~l
~~..~~~-~ . . . ""-----------
Non-Resident
Blk.. Lots-
DATE
""."
. .u, --..
TRANSACTION
1/2/'03
1/3/'
1/13/'
213/'
CURRENT
50.
Balance forward
(NY
PMT
#..
INV
425 -252 -3566
ta t,emen t
r-"'~-""--" . I--_u..~~T
.. .....
213/'
""". ..........
AMOUNT DUE N'.OUNT ENe"
50.
'.u
AMOUNT BAU\.NCE
73.73.
- 73.
50.50.
THIS STATEMENT
IS FOR THE PREVIOUS
MONTH'S WATEF~ BILL
1-30 DltY'S
fA.ST DUE
31-60 DAY~
PAST DUE
.. u...... '
.. """"'-""""-""""'".. '..-... ....-...--....
- J
DAY'S OVER DAYS '\.MOUNT DUEDUEPAST- DUE
50.
........_--........ -. '.. ......-- .... ..----
ATTACHMENT C
PAGE 1 of 1