20060821_1645.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:TERRI CARLOCK
DATE:AUGUST 24, 2006
RE:APPLICATION OF FALLS WATER COMPANY FOR
AUTHORITY TO BORROW $1 200 000 FROM THE STATE
DRINKING WATER FUND; CASE NO. FLS-06-
Falls Water Company (Falls Water) requests authority to borrow not more than
200 000 from the State Drinking Water Revolving Fund administered through the Idaho
Department of Environmental Quality (DEQ). The terms for the loan amount of$1 200 000 are
expected to include an annual interest rate of3.25% for twenty years with semiannual payments
of principal and interest of$41 033.67. The terms are also expected to include a reserve
provision where by the end of the fifth year of the loan, an amount equal to one annual payment
will be established in the reserve. The loan will be closed in about one year when construction is
completed.
Staff has reviewed Falls Water s Application and believes the loan will be used primarily
to meet new growth requirements while assuring adequate fire flows and pressures. The funds
will be used to purchase land and water rights; drill the well (20"diameter, approximately 350
feet deep); purchase and install a 300 Hp pump and controls; emergency generator, transfer
switch and diesel tank; build a building sufficient to house the well and generator plus be
expandable for a booster pump station and chlorination; fencing and engineering costs.
The plant-in-service investment and loan will impact the revenue requirement for Falls
Water and its customers. These plant investments will increase the total plant in service by
130%. After the loan is finalized and absent additional equity contributions, Falls Water
Company will have less than 1 % equity. The capital investment for rate base and the revenue
DECISION MEMORANDUM - 1 -AUGUST 24 , 2006
requirement will be reviewed in the next rate case for inclusion in rates. If revenues were
increased to cover the loan it could result in approximately a 9% increase.
STAFF RECOMMENDATION
Staff recommends that the Commission approve the DEQ loan request of$1 200 000.
Staff also recommends that Falls Water provide copies of the final DEQ loan documents, any
compliance reports and calculations that may be required, and the actual final costs in summary
format similar to the engineering estimate. The final investment cost records will be reviewed
during audit with the rate impact to be established in the next rate case.
COMMISSION DECISION
Does the Commission approve the requested DEQ loan authority of$1 200 000?
Does the Commission adopted Staff s recommended reporting requirement?
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Terri Carlock
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DECISION MEMORANDUM - 2 -AUGUST 24, 2006