20081113Supplemental Comments.pdf

KRISTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 6618
R£iCElVED
2008MOV '3 PH 3: 02
\DAHO PUBUÇ.. . ,
UT1UilES CO!\¡~MbS10N
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 )
ROCKY MOUNTAIN UTILITY COMPANY, )
INC. FOR A CERTIFICATE OF PUBLIC )
CONVENIENCE AND NECESSITY )
)
)
)
CASE NO. ROC-W-08-1
SUPPLEMENTAL COMMENTS
OF THE COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its
Attorney of record, Kristine A. Sasser, Deputy Attorney General, and submits the following
comments to supplement its comments previously fied on September 12, 2008, in this case.
BACKGROUND
On May 13, 2008, Rocky Mountain Utilty Company filed an Application for a Certificate
of Public Convenience and Necessity (CPCN). The case proceeded under Modified Procedure
pursuant to Order No. 30601. During the Commission's public hearing held on September 23,2008
in Rigby, several questions were raised concerning the Company's Application. In order to clarify
these issues, Staff sent a Second Production Request to the Company on September 25, 2008. The
Company responded to Staff s request on October 8, 2008. Additional clarifications to the
Company's responses were obtained by Staff through phone discussions with Company personneL.
As a result of the new detail provided by the Company, Staff now submits revised comments
SUPPLEMENTAL STAFF COMMENTS 1 NOVEMBER 13, 2008
regarding three matters: 1) number and type of customers, 2) rate design, and 3) hook-up
(connection) fees.
NUMBER OF CUSTOMERS
Staff initially used a total of 46 customers in establishing future rates -- 44 residential
connections, and 2 commercial connections. This information was provided by the Company on
August 12,2008. New data and information provided by the Company in response to Staffs
Second Production Request includes the following:
. Number of residential and commercial customers curently connected and biled - 46 (44
residential and 2 commercial)
· Number of residential and commercial customers currently connected with shut-off valves
closed and not currently being biled - 21 (21 residential and no commercial)
· Number of water service connections serving common area - 1 (well lot)
Of the 21 residential customers connected to the system and not being biled, the Company
reported that 16 are homes being built under the Eastern Idaho Community Action Parnership
(EICAP) program. This number was updated to 18 homes after Staff contacted Ron Holt of EICAP
in Idaho Falls to gain additional information about the EICAP homes being built in Pepperwood
Crossing Subdivision.
Eight EICAP houses have been completed, are occupied and are actively being biled (these
homes were included in Staffs previous analysis). The homes not contemplated in Staffs previous
comments include the following: nine houses in advanced stages of construction and expected to be
finished and occupied by Januar 2009; five houses with a completed foundation and some
flooring/framing stared; and another four with concrete foundation work stared. The latter nine
houses (5+4) will take approximately 1 year to complete. All 18 houses are already sold to
homeowners. Mr. Holt explained that it takes longer to finish a house under this program since the
applicants (owners) are expected to provide 65% of the labor in constructing the house (with the
exception of plumbing, heating and electrical systems, and concrete work) instead of using sub-
contractors. There are also seven speculative homes currently being built and for sale. These
speculative homes built by independent builders/realty development companies are either
completed or nearing completion. One out of the seven spec homes has been sold and will be
SUPPLEMENTAL STAFF COMMENTS 2 NOVEMBER 13, 2008
occupied soon, and another spec home that was recently completed has tenants renting pending loan
approval for its purchase.
In addition to the two commercial customers previously considered, another tenant will
soon occupy a commercial building. This commercial building, designed to accommodate three
tenants, is located in a single commercial lot. The Company intends to bil commercial tenants
separately even though there is a single customer service line connected to the commercial building.
Staff does not oppose biling the individual commercial customers.
The well lot is utilzing a pressurized sprinkler system tapping the mainline at the pump
control house. Staff did not include this in its commercial customer count. Water used for lawn
irrigation on the well lot is par of the cost of operating and maintaining the public water system.
In view of the new information provided by the Company, Staff proposes that the following
data be used in estimating the Company's future revenue requirements:
· Total number of residential customers - 64 (44 + 18 + 2)
· Total number of commercial customers - -.
Total number of customers - 67
The residential customer total includes 44 customers already connected to the system and
currently being biled, 18 EICAP homes, one residential speculative home recently sold, and
another home pending sale. Staff believes that it is reasonable to include the 18 EICAP homes
since they are already sold to homeowners and are expected to be occupied between January 2009
and September 2009. The three commercial customers include two that are already connected and
being biled and a new tenant with an approved lease who is expected to occupy the building soon.
RATE DESIGN
Staff recalculated the monthly flat rates for residential and commercial customers based on
67 customers (64 residential + 3 commercial) and using the previous Staff-adjusted annual revenue
requirement of $26,679. The revised flat monthly rate for residential and commercial customers
amounts to $33.25. Staff recommends that this revised rate be implemented for Rocky Mountain
Utilty. A comparison of the curent rate, the Company's proposed rates and Staffs rate proposal is
shown in Attachment A.
SUPPLEMENTAL STAFF COMMENTS 3 NOVEMBER 13, 2008
HOOK-UP FEES
As par of the Company's Application for CPCN, Rocky Mountain did not initially request
a hook-up fee to be collected. In response to Staff Production Request No. 16, the Company asked
for a $250 hook-up fee. As par of Staff Comments submitted to the Commission on September
12,2008, Staff recommended a hook-up fee of$150 per customer connection. During the
Commission's public hearing on September 23,2008, several Rocky Mountain customers testified
that the builders and/or homeowners were charged $1,500 for a hook-up / connection fee.
According to the Company, the total hook-up fee collected per customer was for combined
sewer and water charges. The Company did not further explain the allocation between the sewer
and water charges. In addition, the Company did not elaborate as to the specific purose of the
hook-up fee. It appears that when a builder or customer bought a lot from the Company's affliate
Landmark Development, a hook-up fee of$1,500 was charged. It was paid separately after the lot
sale was consummated and the house plan was approved by the Landmark Development Building
and Architectural Committee to ensure compliance with the Subdivision's Covenants and
Restrictions. In some cases, the $1,500 hook-up fee was embedded as par of the lot transaction
cost at closing.
For puroses of this case, Staffhas defined the hook-up fee as a non-recuring charge for
new customers which is limited to recovery of the total costs of Company time, labor and
equipment involved in locating and turing on the shut-off valve. It does not include a distribution
line extension, meter box, setter, or meter.
Generally, the cost of building a small domestic public water system is considered by Staff
to be contributed capitaL. In this case, Staff assumes the cost of the water system is recovered
through the sale oflots. Indeed, the "hook-up" fee was paid by homeowners either as par of the
cost of the lot (for those who paid the fees as par oflot sale closing) or as par of the cost of
building a residential home (for those who paid separately). Although termed as a "hook-up" fee
by the developer, it was merely a way to recover some of the capital expenditures of the water and
sewer systems through the sale oflots/purchase of homes. Unfortunately, the developer used a
regulatory term-of-ar which subjected the fee to scrutiny.
As previously stated, for puroses of this case, Staff defines "hook-up" fee as a non-
recuring charge for new customers which is limited to recovery of the total costs of Company time,
labor and equipment involved in locating and turning on the shut-off valve. Therefore, Staff
SUPPLEMENTAL STAFF COMMENTS 4 NOVEMBER 13,2008
recommends that any hook-up fee, as defined by Staff, become effective simultaeously with the
Company's tariffs as a non-recurring charge. Staff fuher recommends that any $150 hook-up fee
associated with customers already receiving service be deemed waived as they are already receiving
water.
Staff also recommends that Landmark Development properties, an affiliate of Rocky
Mountain Utilty, not use the "hook-up" fee terminology for future lot sales. This has proven to
cause confusion with the water customers.
RECOMMENDATIONS
Based on the foregoing, Staff recommends:
1. That the Commission approve a flat rate of$33.25 per month for residential and
commercial customers.
2. That the Commission approve a $150 hook-up fee, as defined by Staff, to become
effective simultaneously with the Company's tariffs as a non-recuring charge.
3. That the Commission direct the Company to waive any $150 hook-up fee associated
with customers already receiving water service.
4. That the Commission direct the Company to work with Landmark Development
Company, an affiliate of Rocky Mountain Utilty, to cease the use of "hook-up" fee
terminology for future lot sales.
Respectfully submitted this 13th day of November 2008.
tf&, ¿i, ~I\.Kristi A. Sasser
Deputy Attorney General
Technical Staff: Gerr D. Galinato
Chrs Hecht
i:/umisc/comments/rocwOS.lksggch supp comments
SUPPLEMENTAL STAFF COMMENTS 5 NOVEMBER 13, 2008
Rate Analysis
Rocky Mountain
ROC-W-08-01
Annual Revenue Requirement =$26,679
Revenue Average
Monthly Total Over or Total Percent
Rate No. of Flat Rate Revenue Under Increase Increase
Design Customers ($/mo)($/yr)($/yr)($/yr)(%)
Current Tariff:
Residential 64 $28.50 $21,888
Commercial 3 $28.50 $1,026
Total 67 $22,914 $(3,765)
Company Proposal
Residential 64 $42.00 $32,256
Commercial 3 $42.00 $1,512
Total 67 $33,768 $7,089 $10,854 47.4%
Staff Proposal
Residential 64 $33.25 $25,536
Commercial 3 $33.25 $1,197
Total 67 $26,733 $54 $3,819 16.7%
% AIoc-Res ::95.5%
% Alloc-Com ::4.5%
%Total Alloc ::100.0%
ATIACHMENTA
Attchment A
Case No. ROC-W-08-1
Staff Comments
ll/13/08
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 13TH DAY OF NOVEMBER 2008,
SERVED THE FOREGOING SUPPLEMENTAL STAFF COMMENTS, IN CASE
NO. ROC-W-08-0l, BY MAILING A COpy THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
SHERI POULSEN
JENSEN POULSEN & COMPANY PLLC
PO BOX 50225
IDAHO FALLS ID 83405
JIM BERNARD
OWNER! MANAGER
ROCKY MOUNTAIN UTILITY CO. INC.
3894 EAST 200 NORTH
RIGBY ID 83442
CERTIFICATE OF SERVICE