20130731Comments.pdf

NEIL PRICE ; -
irTHS;ffi?Hr1I3,'#?*$,:MrssroN :j .'. :r i i' r i,: j I
PO BOX 83720
BOISE, IDAHO 83720-0074 , ,'.
[phone]
IDAHO BAR NO. 6864
Street Address for Express Mail:
472W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
SPIRIT LAKE EAST WATER COMPANY FOR ) CASN NO. SPL.W.13.O1
AUTHORITY TO INCREASE ITS RATES AND )
CHARGES FOR WATER SERVICE. ) COMMENTS OF THE) covrMrssroN srAFF
)
The Staff of the Idaho Public Utilities Commission, by and through its Attomey of Record,
Neil Price, Deputy Attorney General, in response to the Notice of Application and Notice of
Modified Procedure, issued on April 10, 2013, Order No. 32783, submits the following comments.
BACKGROUND
On March 5,2013, Spirit Lake East Water Company ("Spirit Lake" or "Company") filed an
Application for authority to increase its total revenue by $77,544, or l06Yo. The Company is
proposing to increase its base rate for water service from $12.50 to approximately $24.75 per month
for usage up to 9,000 gallons per month. The Company does not propose any change of the
commodity charge presently set at $0.12 per 100 gallons consumed for all usage above 9,000
gallons for each month.
Spirit Lake also requests authority to change its meter reading and billing procedure from a
quarterly to monthly schedule. The Company asserts that more frequent meter reading and billing
STAFF COMMENTS JULY 3I,2OI3
has been requested by many of the Company's customers and the Company believes that it would
be in the best interest of the public to convert to a monthly billing program.
STAFF ANALYSIS
Change of Company Ownership and Management
Since the Company filed its last general rate case in2006 (Case No. SPL-W-06-01),
ownership and management of the Company has changed. In 2009, Leslie Abrams became the new
registered agent and President of Spirit Lake with an office in Coeur d'Alene, Idaho. Prior to
purchasing the assets of the Company, Leslie Abrams' other company, Water Works, Inc., provided
contract services to Spirit Lake. Water Works continues to provide contract services to the
Company. These services include but not limited to the following:
o Act as primary and secondary water system operator
o Make monthly site visits which include recording pump and flow readings, monitoring
performance of well and reservoir, etc.
o Perform end of line flushing two times annually
Test the pressure tanks, quarterly testing
Prepare the Consumer Confidence Report
Administer the Cross Connection Control Program
Provide 24-hour on-call service
System Description
Spirit Lake serves two communities in rural Kootenai and Bonner Counties. The larger
community, Spirit Lake is located in Kootenai County. This is a private community with wooded,
variable terrain lots, from l0 acres to 15 acres in size. The second community, Treeport, is a private
aviation community located in Bonner County. Treeport consists of generally open lots,
approximately five acres in size.
Spirit Lake water system currently has one production well equipped with a submersible
pump with a design capacity of 500 gpm and a 100-hp electric motor. Groundwater is pumped to
an above-ground 200,000-gallon concrete reservoir. Water is delivered from the reservoir to the
mains and distribution systems using three booster pumps with a combined capacity of
approximately 1,000 gpm (total of 45-hp). The facility is equipped with 10 hydro-pneumatic tanks
to supply water during low demand and to reduce frequent pump cycling. The system is also
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STAFF COMMENTS JULY 3I,2OI3
equipped with a back-up 175-kilowatt diesel generator on site to provide power to the well and the
booster pumps in the event of power outage.
The distribution network is comprised of various pipe sizes ranging from 2-inch to 10-inch
of mostly PVC pipes. Water is delivered to various residential customers using mostly manual-read
meters. A few old model remote-read meters were also installed at sites where obstructions
obscured the meters. All customer meters are 1-inch in size. Approximately 90Yo of the meters
register water usage in cubic feet and 10% register in gallons. As the Company replaces defective
meters, it installs meters that register in cubic feet.
The Company currently serves 288 full-time residential customers. Only two additional
customers were added since the Company's general rate case filed in 2006. The Company states
that there are 55 lots remaining at the Spirit Lake and Treeport subdivisions which are not
connected to the water system. The Company anticipates one customer hook-up per year.
Previous System Problems and Improvements
A2004 engineering report identified several system deficiencies and recommended major
investments to improve the water system and bring it to compliance with Idaho Department of
Environmental Quality (DEQ) regulations. A sanitary survey conducted by DEQ in November
2005 also identified numerous system deficiencies. On June 5, 2007, a Consent Order was signed
between DEQ and the Spirit Lake directing the Company to comply with water system deficiencies.
The Consent Order required the Company to develop and submit to DEQ a detailed Public Water
System Corrective Action Plan which includes, but not limited to:
. The installation of backup generator capable of running the submersible well pump and the
three water pumps used to pressurize the water distribution system.
o The development and implementation of a maintenance program to ensure that the generator
and all associated equipment is taken care of appropriately.
o A detailed plan and schedule to evaluate and address any and all deficiencies associated with
the electrical and pumping systems.
o I detailed plan and schedule for conducting a leak detection survey providing written
survey results to the DEQ which, at a minimum, identify the location and estimated intensity
of all leaks detected.
o A plan and schedule to repair the reservoir roof to ensure that the roof is water tight, that
ponding of water is eliminated, and that the roof is sloped so that water drains off the
surface.
STAFF COMMENTS JULY 3I,2OI3
In addition to the DEQ Consent Order, the Commission also directed Spirit Lake to provide
a written plan to the Commission to install a new generator and to address the system leaks. Order
No. 30279. The Company was further ordered by the Commissionl to file a detailed written plan
and schedule showing start and completion dates, demonstrating commitment to install a new
generator and address system leaks as previously directed by the Commission in Order No. 30279.
The Company completed the various tasks contained in the June 5,2007 Consent Order and
subsequently received a notice from DEQ on November 7,2008 indicating that the requirements of
the Consent Order have been met by the Company, and finally terminating the Consent Order.2
Similarly, the Company also submitted a Status Report to the Commission on December 12,2008 in
compliance with the Commission Order Nos. 30279 and 30315.
Based on the information submitted by the Company as part of the Application, the
following investments were reported since the last general rate case filed by the Company in 2006:
Maior Catesories Cost ($)
Electrical and oump controls $ 84,091
Back-uo senerator $ 78,231
Reservoir $ 469s2
Main/distribution system leaks s 34.823
Maintenance equipment $ 24,981
Other miscellaneous investments $ 28.384
Total Cost $297.462
The major investments made by Spirit Lake in order to meet the requirements of the Consent
Order and additional capital expenditures are discussed further in detail in the Staff Comments
section on Addition to Plant in Service.
Staff Audit
Spirit Lake reports to the Idaho Public Utilities Commission using accrual accounting and a
Fiscal Year End (FYE) of October 3l. Routine financial controls such as budgets are not currently
used and normal reconciliations were not available. Ms. Abrams stated she is not an accountant or
familiar with regulatory accounting standards. She also stated the current accounting software has
problems. She is contemplating hiring bookkeeping services.
I Commission Order No. 30315, Case No. SPL-W-06-01.
2 On November 18, 2008, DEQ also notified the Company of the re-approval of Spirit Lake East Water Company as a
public water system (PWS ID1280176) under DEQ's authorities.
STAFF COMMENTS JULY 3I,2OI3
Staff notes this was the first audit Ms. Abrams has experienced with the Idaho Public
Utilities Commission. Consequently, Ms. Abrams is not familiar with the documentation
requirements to demonstrate actual cost. Anticipated costs, standard costs, and similar projections
have specific uses but are not actual costs. Staff encourages Ms. Abrams to contact the
Commission Staff for guidance in assembling documentation and reporting actual costs for future
audits. Staff recommends the Company begin preparing budgets and performing monthly
reconciliations for future audits. Generally, Staff found documentation and recording of Plant in
Service transactions to be adequate.
Spirit Lake received its CPCN in 1983. Ms. Abrams identified the near term need to begin
replacing all remaining customer meters. Staff notes Ms. Abrams statement is consistent with the
average expected useful life of meters. Staff believes the advancing age of the existing
infrastructure will necessitate future replacement of Plant in Service. Ms. Abrams also expressed a
preference for establishing an Operating Reserve for future additions or replacements, using a self
funded sinking fund arrangement. Ms. Abrams cited the previous cost of pump replacement
including the need for a special crane, as one potential need. Staff strongly encourages Ms. Abrams
to begin this sinking fund as soon as possible. Preparing Capital Expenditure budgets are the first
step. They identify the purpose, timing and amount of capital needed. Water rates include amounts
for cash operating expenses, depreciation expense and a return on investment. Depreciation is a not
a cash expense. It is a return of investment. Saving an amount equal to Depreciation Expense does
not use the portion of cash included for operating expenses. Therefore, the amount for depreciation
is the natural portion to set aside for the sinking fund. Also, Ms. Abrams can add a selected portion
of the return on investment. The reported pump and motor replacement in July 2013 demonstrates
the prudence of establishing this sinking fund. Ms. Abrams is encouraged to contact Staff for
further assistance.
Summary Schedule of Adjustments
Staff has prepared Attachment A as the Summary Schedule of Adjustments that includes the
Company's request and Staff s recommended adjustments. This schedule includes additional
Company expenses that are not included in the operating expenses. These additional expenses to be
discussed later are depreciation expense, Idaho Public Utilities' fee, property taxes, DEQ fee, and
state and federal income taxes.
STAFF COMMENTS JULY 3I,2OI3
Additions to Plant in Service
Most of the additions considered in this audit are those required by the Idaho Department of
Environmental Quality. Others, such as replacement of meters, are symptomatic of the advanced
age of this system. Asset Detail Reports showed additions to Plant in Service totaling $289,747.
Staff s analysis of these Asset Detail Reports also shows Spirit Lake reported asset values and
classifications, depreciation methods and capitalization conventions, used for Income Tax reporting
purposes. Staff s adjustments reflect the differences between Income Tax reporting and regulatory
accounting methods.
Staff s audit of the supporting documentation shows the yearly reported totals did not
include all costs due to timing differences. This is not unusual for construction projects. These
timing differences arise primarily when services were provided on one date and were invoiced later.
When this time difference bridged more than one Fiscal Year, the Company reported known
additions at the end of the Fiscal Year. Invoices arriving after the end of the Fiscal Year were
reported in subsequent fiscal years. These are part of Staff s discussion and adjustments below.
20062 The Asset Detail Reports for the FYE 2006 reported six categories of additions to
Plant in Service totaling $23,964. Three of these totaling $5,892 were included in Order No. 30279
for the previous rate case, Case No. SPL-W-06-01 . These include $ 1,048 for Purification Systems,
$2,400 for accounting software reported as Office Fumiture and Equipment, plus $2,444 reported as
Other Tangible Property. Staff removed $456 for a metal detector no longer in service. Staff
excludes reported additions for improvements to the Reservoir tank, pressure bladders and Mains
totaling $15,789, for Plant in Service due to lack of documentation.
Miscellaneous Equipment: A sign invoiced for $1,827 was observed by Staff at the well lot
and capitalized for the amount of $ 1,827.
Staff additions to Plant in Service for the FYE 2006 totaled $1,827.
20072 The Asset Detail Reports for the FYE 2007 reported additions to Plant in Service
totaling $81,663.
Reservoir: Additions were reported totaling $39,818. Documentation provided supports an
increase of $930, totaling $40,748. This includes project management fees, County permits, and
payments to the contractor. The documentation shows the down payment was made on October 18,
2007,13 days before the end of the Fiscal Year. Building permits were issued in November 2007,
with engineering services provided during October through December 2007. This timing indicates
STAFF COMMENTS JULY 31,2013
the addition was not placed in service during Fiscal Year 2007, but in the FYE 2008. Staff
capitalized this addition in Fiscal Year 2008.
Pump Motor: Staff s examination shows the reported amount $7,022, did not include the
invoiced purchase price with shipping charges totaling $8,653, a difference of $1,631. The original
motor was fully depreciated when it was retired. No adjustment for the retirement is required. Staff
capitalized pumping equipment equaling $8,653.
Leak Detection: This category was reported as $34,823. Staff s examination shows
documentation supports a total of $36,582, a difference of $1,759. These charges include valve
location and valve exercising, labor, mileage, leak notices, and a valve survey. Staff believes the
long term useful life of the water delivery system will be benefited by the resulting improvements.
Staff capitalized Leak Detection Services totaling $36,582.
Other Tangible Equipment: Among the timing differences are General Engineering
services. Staff analysis of the documentation shows charges for engineering analysis and
supervision. Normally such charges are part of the total project costs which are capitalized. Staff
identified certain charges which appeared to be wholly or primarily associated with specific
projects. These were reclassified to those projects so that depreciation expense would more closely
match the expected benefit period of the specific improvement. The remaining items were
capitalized as Other Tangible Equipment totaling $10,563.
Additions to Plant in Service for the FYE 2007 totaled $55,798.
2008; Asset Detail Reports for the FYE 2008 reported additions totaling $ 1 5 1,469. The
documentation provided, supported a different total due to timing differences.
Reservoir: Additions to Plant in Service began in2007 but completed in FYE 2008 for the
Reservoir tank, discussed above, were capitalized totaling $40,748.
Structures and Improvements: Spirit Lake reported capitalized Electrical Plant in Service
totaling $86,914. Documentation supports engineering services, labor, mileage and materials
totaling $86,914.
Power Generator: The generator sits on a concrete pad within the security fence of the well
lot. The generator has a metal enclosure with locking doors. The identification plate shows the
generator to be a Caterpillar, Model Dl50-8, rated at 480 Volts, 226 Amps. Staff analyzed the
Generator Log for the calendar year 2011, showing the generator was tested weekly and run beyond
the weekly test period requirements. The analysis shows the generator provided backup electrical
Additions to Plant in Service for the FYE 2007 totaled $55,798.
STAFF COMMENTS JULY 3I,2OI3
power to the pump house nearly every month. Staff s analysis of the documentation shows the
purchase and installation of the Generator totaled $59,421.
Staff s additions to Plant in Service for the FYE 2008 totaled $187,083.
2009: The Asset Detail Reports for the FYE 2009 show three additions totaling 527,597.
Office Furniture and Equipment: Staff s examination of the documentation showed a
printer-scanner was purchased for $665. The purchase price was not added to Plant in Service
because it was replaced in less than one year.
Communications Equipment: A replacement auto-dialer was purchased for $ 1 ,951 . The
original was not fully depreciated. Adjustments to the plant account and to Accumulated
Depreciation are required for this retirement. Staff capitalized $ 1,951.
Power Operated Equipment: Documentation shows a backhoe was purchased from a related
party for $24,981. The backhoe is used for repairs and light construction and appears to meet the
needs of the water system. Staff tested the prudency of this purchase by comparing the total annual
cost to current rental rates for an equivalent model. Considering the distance to rental companies,
availability and transportation costs, Staff believes the cost is prudent and the $24,981is properly
capitalized. Staff encourages the Company to keep a log identifying the project it was used on and
hour meter readings to facilitate maintenance and document the machines use for future audits.
Transportation Equipment: Equipment listing in the Plant in Service at $5,001 was not
found. Staff removed this from Plant in Service. No depreciation adjustment is required.
Total additions to Plant in Service for the FYE 2009 total $26,932.
2010: Asset Detail Reports, for the FYE 2010, showed additions totaling $3,1 1 1.
Meters: The Company reported additions totaling $1,524. These were not added to Plant in
Service due to lack of documentation.
Office Fumiture and Equipment: Documentation supported the reported additions to office
equipment consisting of a laptop computer for $1,163 and a replacement printer-scanner for $424,
totaling $1,587. Staff capitalized Office Equipment totaling $1,587.
Stafls additions to Plant in Service for the FYE 2010 total $1,587.
20ll: The Asset Detail Reports listed additions totaling $1,943.
Office Furniture and Equipment: Ms. Abrams stated the Laptop computer purchased for
$1,163 was declared unfixable. Staff removed it from Plant in Service and Depreciation.
Meters: Documentation supports Meters totaling $1,943. These were used to replace older
meters. The older meters were fully depreciated; no retirement adjustment is needed.
STAFF COMMENTS JULY 3I,2OI3
All additions to Plant in Service for the FYE 2011 total $1,943.
Attachment B shows the details of additions to Plant in Service totaling $1,216,107.
Depreciation Expense: The Company reported Depreciation expense using Income Tax
depreciation methods. These methods include accelerated depreciation and shorter lives than used
in rate setting. Staff recommended annual depreciation expense for the FYE 2011 of $20,395
shown in Attachment C.
Accumulated Depreciation: Staff adjusted the Accumulated Depreciation for additions
and retirements as shown in Attachment D. Staff recommends Accumulated Depreciation of
$840,577 as the proper rate base deduction.
Materials & Supplies Inventory: This inventory includes a pump and motor for the well.
The pump and motor is required by the Idaho Department of Environmental Quality, because this
pump is not stocked locally. The previous failure of this pump and motor required a wait for
shipping before it could be replaced. This wait resulted in a multi-day period without water. In
addition, the depth of the well and the weight of the pump and motor combination requires a truck
mounted crane to remove and replace the pump and motor. Staff notes the existing operating pump
reportedly failed on the weekend of July 27,2013. The pump and motor in inventory was used to
replace the previous pump and motor.
Total Rate Base
Total Rate Base consists of Plant in Service equaling $1,216,107 less Accumulated
Depreciation of $840,577 less Contributions in Aid of Construction of $70,050, equals a Net Plant
in Service of $305,480. Net Plant in Service of $305,480 plus a Material and Supplies Inventory of
Sl2,29l plus Working Capital of $9,263, results in a Total Rate Base equaling $327,034.
Revenues
Staff investigated accounts receivables and revenues. There is evidence the Company is
using proper collection procedures up to and including discontinuing water service. The only write
offs in the test year were attributed to the Company's policy of forgiving half of the consumption
charge on leaks that were repaired in a timely manner. Staff accepts the Company's bad debt
calculation of 0.5Yo.
STAFF COMMENTS JULY 3I,2OI3
The Company's Application included $2,500 in connection fees. This reflects past history
and the Company expects to add one new customer per year. Therefore, Staff accepts the reported
revenues.
Operating Expenses
The Company claimed annual operating expenses in the amount of $87,275. Based upon the
Staff Audit of the Company's financial records and its operation, Staff recommends including
$72,289 for annual expenses. Attachment A reflects the Staff adjustments to operating expenses.
Each expense adjustment is individually discussed below.
Adjustment No. 4 - Rental Expense
In the test year, the Company was renting a shop that also included an office. ln20l2,the
Company ended the lease, and moved the larger equipment to the pump house and rented an office
in Coeur d'Alene. Staff recommends removing the costs relating to the shop and including the
current expenses relating to the office. The shop rent of $ 1,200 per month totaling $ 14,400 per year
was removed. Power expenses of $797 plus $697 in Miscellaneous Expenses that reimbursed
Water Works Inc. for power expenses for the operation of the shop were also removed. The current
office has a monthly lease of $235 per month with a fee of $30 for internet and $30 for utility and
maintenance. The net of these adjustments decreases Purchased Power Expense by $797, decreases
Rental Expense by $10,860, and decreases Miscellaneous Expense by $697. (See Attachment E)
Adjustment No. 5 - Telephone Expense
When the Company moved its office from the shop to the rented office, it also eliminated its
dedicated telephone line and instead went to an online service called Ring Central. The Company
was able to maintain the same phone number and uses an email service to record messages left for a
return call by the Company. Staff recommends decreasing Phone Expense by $ I ,241 . (See
Attachment F)
Adjustment No. 4 - Related Parfy Labor Expense
Nearly all customer-related labor was performed by contract with Water Works Inc. Leslie
Abrams is an officer for Water Works Inc. as well as owner of Spirit Lake. These services are with
an affiliated party and, therefore the expenses invoiced by Water Works received a higher level of
STAFF COMMENTS t0 JULY 3I,2OI3
scrutiny by Staff. Staff used invoices from Water Works Inc. to the Company to recreate the
number of hours worked in a variety of categories. These categories of labor were then compared
to wages reported by the Idaho Department of Labor's Idaho Occupational Employment and Wage
Release 2012. Because the cost of labor includes more than just wages paid to the employee
(employment taxes, insurance, etc.), Staff used the high end of the middle category to calculate the
cost of labor for each category. In addition, travel was included in the cost of labor by calculating
the number of trips required for each category then using the time required for travel as well as the
IRS mileage reimbursement for distance travelled. This resulted in the Staff recommended cost of
labor for each category. The Company reported $1,364 worth of labor that was not invoiced by
Water Works Inc. and therefore was not subject to this adjustment. (See Attachment G)
As a result of this analysis Staff recommends a net overall decrease in labor expenses of
$4,81 1. This represents a shift in labor categories by increasing Operations and Management Labor
Expense by 59,777 and decreasing the cost of Administration and Management Labor Expense by
$ 14,587.
Adjustment No. 5 - Fuel for Power Production Expense
In the audit of the Company's books, Staff discovered that the Company had included the
costs of fuel for the onsite generator in the Transportation Fuel Expense. Staff recommends
transferring $1,788 from Transportation Fuel Expense to Fuel for Power Production. This does not
constitute an adjustment to Revenue Requirement.
Adjustment No. 6 - Water Testing Expense
The Company proposed water testing expense of $975. Different testing cycles for various
regulated water contaminants are required by DEQ; hence, it is common practice and necessary to
normalize water testing costs over several years. In consultation with DEQ, a complete list of
required tests was developed by Staff with water testing cycle of nine years. The cost of nitrate test
was not included in the Company's spreadsheet; therefore, Staff included the cost of nitrite testing
every nine years and calculated the annualized water testing cost to be $670. Attachment H shows
the required water quality tests for water contaminants and the annualized water testing costs. Staff
recommends reducing the test year water testing cost by $305 ($975 - $670) to reflect normalized
levels.
l1STAFF COMMENTS JULY 3T,2OI3
Adjustment No. 7 - Purchased Power Expenses
The Company claims an annual purchased power cost of $18,270 during the test year. This
cost comprises about 2l percent of the operating expenses and the second largest annual operating
expense incurred by the Company. Staff believes it would be more appropriate to normalize the test
year purchased power expense based on average volume of water pumped. The cost of purchased
power is affected by the volume of water pumped and the power rates applied during the time of
use. Staff calculated the normalized annual purchase power expense by first deriving the current
power cost of pumping water per unit volume of water pumped (i.e. $ per 1,000 gallons) and
applying this rate to the three-year total annual average volume of water pumped (2010, 2011,
2012). Staff calculated the normalized cost of purchased power to be $ I 7,9 32 per year. Staff
recommends that the test year purchased power cost be reduced by $338. See Attachment I for
detailed calculation of the normalized purchased power cost.
Adjustment No. 10 - Change to Monthly Billing
Staff concurs with the Company's proposal to change the billing cycle from a quarterly
cycle to a monthly cycle. This will increase O and M Labor Expense by $3,034 and Administrative
and Management Labor Expense by $2,002. (See Attachment J) This will be partially offset by a
decrease in power expense of $974 due to the better leak prevention that monthly meter reading will
provide. Billing changes are discussed in more detail later in Staff comments under the section
titled "Frequency of Meter Reading and Billing."
Insurance Expense
The Company recorded $2,510 in lnsurance Expense. In20l2, the Company discontinued
its insurance policy. Staff does not propose an adjustment to this expense and instead urges the
Company to retain a new insurance policy.
Adjustment No. 11 - Property Tax Expense
The Company did not include the Bonner County Property in the test year expenses. This is
a recurring cost. Staff recommends adding $101 in Property Tax Expense.
STAFF COMMENTS t2 JULY 31,2013
Adjustment No. 12 - Interest Expense and Capital Structure
Staff removed Interest Expense from the income statement net income calculation because
interest expense is recovered in the revenue requirement through the return on capital as reflected in
the capital structure calculation. Interest Expense is incurred on the loan for the back hoe and a line
of credit that is used for the operating expenses. Staff has concerns related to the line of credit and
does not believe a2l.9o/o interest rate even on unsecured short term debt would be prudently
reflected in the capital structure and revenue requirement. The line of credit is not included in the
capital structure by the Company. Staff believes this is appropriate because a 12Yo return on equity
better reflects a prudent cost.
The Company's Application contained $163,195 in equity and $15,375 in long-term debt.
In past small water cases the Commission has allowed a l2Yo return on equity. (See Case TRH-W-
10-01, Order No. 32152 and BCS-W-09-02, Order No. 30970) The only long term debt is a loan
for the back hoe at a stated 5.3o/o interest rate. The weighted average of these sources of capital is
11.42% return on rate base. (See Attachment K)
Income Statement
Staff recommends annual operating expenses of $72,289 and other expenses of $22,211.
(See Attachment A, lines 16 and23, respectively.) This is a decrease of $14,986 and $5,344 from
the Company's Application, respectively. Based upon the financial information discussed above
and shown on Attachment A, line24, Staff calculated that the Company has an annual net loss of
$21,630.
Revenue Requirement
Attachment L, page l, reflects the Staff recommended revenue requirement. Staff calculated
the revenues associated with the return on rate base in the amount of $37,358 (9327,034 x 11.42%).
Of this revenue, $1,492 (line 7) reflects interest on the debt that is a deduction for tax purposes.
The remaining $35,865 (line 9) is subject to taxes on both a federal and state level. The process of
increasing the revenue requirement for tax effects is called "grossing-up." The net to gross
multiplier calculation of l28.8lo/o is the percentage that must be applied to the $35,865 to determine
amount that must be collected in rates to allow the Company an opportunity to eam the overall
11.42% rate of return. The grossed up return on equity is added to the net loss of $21,630 and the
13STAFF COMMENTS JULY 3I,2OI3
$1,492 related to debt portion of the capital calculation, resulting in the Staff recommended income
deficiency of $69,321 (line 12).
The Company also requested recovery of rate case expenses. Staff believes the $4,000
amount amortized over three years for an annual amount of $1,333 is reasonable.
This results in a total revenue requirement of $ I 43,525 (Attachment L, page I , line 1 7) and a
revenue deficiency of $70,655. (See Attachment L, page 1, line 15)
The detailed calculations for the Staff recommended Rate Base of $327,034 on Attachment
L, page 1, line 1, are shown on Attachment L, page2,lines l-7. The Working Capital calculation is
shown on page 2, lines I 1-18.
RATE DESIGN
The Company's current rate structure consists of a base rate or minimum customer charge of
$12.50 per month with volume allowance of 9,000 gallons and a commodity charge of $0.12 for
each additional I 00 gallons (or $ 1 .20 per 1,000 gallons). Spirit Lake is proposing to raise the base
rate from $ 12.50 per month to $24,7 5 per month for the first 9,000 gallons, an increase of 98
percent.3 The Company is not proposing to increase the commodity charge of $0.12 per 100
gallons. The Company proposes to maintain the minimum charge volume allowance of 9,000
gallons per month. The current and Company proposed rate design is summarized below:
RBSIDENTIAL
CUSTOMERS
EXISTING
RATES
COMPAI\Y
PROPOSAL
PERCENT
INCREASE
Min. Customer Charge $ 12.5 $24.75 98.0%
Volume Allowance 9,000 gallons 9,000 gallons No change
Commodity Charge $0.12 per 100 gals.$0.12 per 100 gals.No change
Staff believes it is appropriate to maintain the single block rate design with a minimum
charge volume allowance. Most of the small water utilities regulated by the Commission have been
operating for decades with this rate structure because it is simple, easy to implement and
understand.a This type of rate design also encourages conservation because the more water a
customer uses the more he has to pay as compared to a flat rate design.
There are no set policies in establishing the base charge or minimum customer charge in
designing rates for small water utilities regulated by the Commission. The primary objective is to
' Spirit Lake erroneously stated in its Application (page l) a 106 percent increase in base rate from S12.50 to $24.75.o Out of the 27 small water utilities regulated by the Commission, I 5 small utilities (56%) have single block rate design.
STAFF COMMENTS 14 JULY 3I,2OI3
design rates and charges that generate the recommended revenue requirement. A rate design with a
high fixed charge may provide more stable revenues for a small water utility company. However, it
may also reduce the conservation incentive provided by the commodity charge. Therefore, Staff
strives to balance the conservation incentive of a commodity charge with a minimum customer
charge that reasonably meets monthly cash flow requirements of the Company.
Staff does not support the Company's rate design proposal because it would apply the entire
increase to the minimum customer charge without increasing the commodity charge or changing the
volume allowance. The Company's proposed rate design does not promote conservation, nor does
it allow customers who consistently practice conservation to reduce their monthly bill.
Volume Allowance for Base Charge
The Company does not propose a change in the minimum charge volume allowance of 9,000
gallons per month. Staff acknowledges that the 9,000 gallon minimum charge volume allowance
has been in place since the Commission set the Company's first tariff in 1983.
The Commission does not have a written policy on setting the minimum customer charge
volume allowance in rate design for small water companies. It deals with this issue on a case-by-
case basis. For example in Case No. DIA-W-07-01, the Commission addressed the monthly volume
allowance issue and stated:
...Some customers recommended increasing the monthly allowance of water to as
much as 10,000 gallons per month, others recommended reducing it to as little as
0. Staff reasoning in lowering the base monthly amount of water allowance is
appealing; however, we believe the reduction from 7,500 to 4,000 per month goes
too far. Instead, we find that the monthly allowance should be 5,500 gallons
which coincides with the average winter usage which can be considered
"minimum." (Emphasis added.)
Commission Order No. 30455.
Similarly, in a recent case (Case No. TRH-W-I0-01) the Commission accepted Staff s
recommendation of using the average winter usage in establishing the monthly volume allowance
for the minimum customer charge.
To promote water conservation, Staff has also been advocating the concept of bringing the
minimum charge volume allowance to a level that approaches the Company's average winter
monthly usage if the current allowance significantly exceeds average winter usage per customer.
Staff believes that the conservation element should be emphasized in the rate design for this case
STAFF COMMENTS l5 JULY 3I,2OI3
because of the increasing trend in water use per customer. Water-use data provided by the
Company for the last three years (2010,2011 and20l2) and 2005 data from the last rate cases
indicate an increasing trend from 1 14,525 gallons to 153,183 gallons per customer per year. See
Attachment M.
Staff conducted an analysis to determine whether the current level of volume allowance is
appropriate. The Company provided Staff with three years of water use data from calendar year
2010 to 2012. Monthly readings were not available, but meter readings were completed (quarterly)
when the weather allowed the Company to read meters.6 Only a single 6-month meter reading of
water use data from October 2009 to March 2010 was available so the average winter water usage
per month was calculated by dividing the total six months of usage by six months and the total
number of customers during that period. The average winter usage per residential customer was
approximately 5,314 gallons per month per customer. Rounding the average winter usage to the
next thousand-gallon unit, Staff recommends that the monthly volume allowance be reduced from
9,000 gallons to 6,000 gallons.
Rate Design Options
Staff investigated two rate design options before selecting the 6,000 gallon allowance.
Option I maintains the current minimum charge volume allowance of 9,000 gallons, and Option 2
reduces the volume allowance to 6,000 gallons per month, an amount close to the average minimum
winter usage as discussed above.
As indicated previously, Staff s recommended test year revenue requirement for the
Company is $143,525. The expected revenues for water utilities can be affected by many things
and one of the primary factors is the weather. It is a traditional practice in rate design to use
normalized water usage rather than a single year or test year usage to estimate expected revenues to
meet the Staff s recommended revenue requirement. To assure that the Staff s rate design options
meet the recommended revenue requirement, it was necessary to determine the normalized excess
usage. The excess usage is the actual volume of water delivered to the customer in excess of the
minimum charge volume allowance. This is the net volume where the commodity rate is applied
during a billing cycle to obtain the commodity revenue. Staff calculated the normalized excess
volume by analyzing individual water usage for each customer per billing period using three years
s Case No. SPL-W-06-01.
u The Company currently reads meter at the end of a quarterly billing cycle, beginning January l, except when
conditions make the meter inaccessible.
STAFF COMMENTS 16 JULY 2013
of data (2010, 2011 and 2012). A minimum charge volume allowance of 9,000 gallons per month
or 27,000 gallons per 3-month (quarterly) billing period was used for Staff proposed Optionl rate
design, and 6,000 gallons per month volume allowance or 18,000 gallons per 3-month billing period
was used for Staff proposed Option 2. The normalized annual excess usage for Option I is
21,138,000 gallons. This is also the normalized excess volume used for the current rate and the
Company proposal. The calculated normalized annual excess volume for Option 2 is25,140,000
gallons.
Using Staff s proposed revenue requirement of $143,525, Staff calculated the appropriate
base charge, customer charge and estimated revenues for the existing, Company proposed and Staff
Options 1 and2 rate designs. They are presented in the table below.
Rate Design
Parameters
Existing
Rate
Desien
Company
Rate Design
Prooosal
Staff
Proposal
Ootion 1
Staff
Proposal
Ootion 2
Volume Allowance {sallons)9,000 9,000 9,000 6,000
Minimum Customer Charge (S/mo)s 12.50 5 zqts s 25.75 s 25.25
Commoditv Charse (5/100 eallonsl s o.t2 s 0.12 5 o. zsa s o.224
Excess Usase (eallonsl 21,138.000 21,138,000 21,138,000 25.140.000
Base Revenue (S/vearl s 43,200 $ 85,536 s 88,992 $ 87,264
Commoditv Revenue (S/vearl S 25,366 s 25,366 $ 54,536 $ s6,314
Total Annual Revenue (S/vear)$ G8,566 s 110,902 $ 143,528 $ 143,578
Over/under Staff Rec. Rev. Reqt.s (74,9s91 s (32,623)s 3 s 53
It should be noted from the table that the Company's rate design proposal would still
produce a revenue deficiency of $32,623 using the Staff s revenue requirement of $143,525. If the
Company's proposed revenue requirement is used ($150,414), the Company proposed rate design
produces an even larger revenue deficiency of about $39,512. Consequently, rates must be higher
than those proposed by the Company just to generate the lower revenue proposed by Staff.
Staff-Recommended Rate Design
Comparing the two rate design options analyzed by Staff, it is recommended that Option 2
(reduced volume allowance from 9,000 to 6,000 gallons) be implemented by the Company for
several reasons. First, it would further promote conservation during the summer season when most
customers are irrigating lawns and landscaping. Second, it would be more in line with the rate
design guidelines recommended by the American Water Works Association of using winter time
STAFF COMMENTS t7 JULY 3t,2013
usage of very small households as allowance for minimum customer charge.T Third, this
methodology for estimating reasonable minimum customer charge volume allowance is consistent
with the method used by Staff and approved by the Commission in recent general rate cases for
small water utilities. TRH-W-I0-01, OrderNo. 32151; BCS-W-09-02, OrderNo. 31002; and
FLS-W-09-0 1, Order No. 32022.
The recommended minimum customer charge for the Option 2 rate design is $25.25 per
month compared to $12.50 per month for the current rate, an increase of $12.75 or l02Yo. The
recommended commodity charge is $0.224 per 100 gallons with the 6,000 gallons volume
allowance compared to $0.12 per 100 gallons of usage with the volume allowance of 9,000 gallons
for the current rate, an increase of $0.104 per 100 gallons or 87oh.
With the Staff recommended rate design (Option 2),the total revenue contributed by
minimum customer charge is 6lYo and the revenue contributed by the commodity charge is 39Yr.
See Attachment N for rate proof calculations. Staff believes that this rate design is reasonable and
appropriate for Spirit Lake. With the current rates, approximately 63'/o of the total revenue is
contributed by the minimum customer charge and37%o by the commodity charge. Staff believes
that the minor decrease in percent contribution of the minimum customer charge from 63 to 6l% is
warranted to enhance the water conservation element in the rate design.
Typical Monthly Billand Rate Impacts
Based on Staff s recommended rate structure, the typical monthly bill for a metered
residential customer would be approximately $52.13, or an increase of 107 .7% above current rates.
The average monthly bill was calculated by taking the average water usage during winter season
and the average usage during the summer season as shown in the following tabulation:
Season
Average
Usage
(sallons)
Current
Monthly
Bill
Proposed
Monthly
BiI
Amount of
increase in
(s)
Percent
Increase("1
Winter 6,000 $12.s0 $25.25 $r2.75 102.0%
Summer 30,000 $37.70 s79.01 s41.31 109.6%
Aversgeitrscasc-$2A10 $seut $27,03 frIJ%
TAmerican Water Works Association, Manual of Water Supply Practices, Water Rates, AWWA Ml, Fourth Edition,
1991, p.34.
STAFF COMMENTS 18 JULY 31,2013
The rate impacts for metered residential customers using various monthly water volumes are
presented in Attachment O. For example as shown in the table, a customer who uses about 60,000
gallons per month during the summer would be billed a total of $146.21, an increase of
approximately $72.51 per month or 98.4%o above the current rates.
Frequency of Meter Reading and Billing
The Company currently reads meters and bills customers on a quarterly basis. Its present
tariff states that meter reading is done at the end of a quarterly billing cycle, beginning January 1,
except when conditions make the meters inaccessible. In the event the Company cannot read a
customer's meter for a billing period, the customer will only be billed the minimum monthly
charges as set forth by the tariff. Company meter reading and billing records examined by Staff
indicate that for the last three years, the Company read meters three times in 2010 (October to
March, April to June and July to October quarterly usage). However, in 2011 and2012, only two
meter readings during those years were made (October to June -nine month usage and July to
October quarterly usage).
The Company proposes to change its billing and meter reading procedure from a quarterly to
monthly meter reading and billing schedule. The Company asserts that more frequent meter reading
has been requested by many Company customers. The Company also believes that it would be in
the best interest of the public to convert to a monthly meter reading and billing program for the
following reasons:
l. It will allow the Company to provide accurate and timely water usage numbers to the
customers enabling them to track personal usage, achieve water conservation, and to realize,
find and correct water losses.
It will relieve the customers' f,rnancial burden that can occur with the longer usage and
billing periods that are currently associated with quarterly schedule. A monthly billing
would ultimately allow for customers to budget more effectively, especially for high usage
months that produce an increase in per gallon charges.
It will also allow the Company to track more accurately the water balance between
production and delivery to pinpoint any water loss that may be occurring on the Company
side of the meter.
2.
J.
STAFF COMMENTS l9 JULY 3I,2OI3
Spirit Lake submitted billing worksheets as part of its Application which show the total annual costs
for quarterly meter reading and billing for the test year tobe $7,425. Changing to monthly meter
reading and billing is estimated to cost $8,550 annually, an increase of $1,225 per year.
The Company's analysis of the billing determinants for monthly meter reading/billing is
based on the contract with Water Works Inc. Due to these being related party transactions, Staff
recreated the billing determinants using the invoices submitted by Water Works Inc. to the
Company to create the number of hours used for services related to meter readingibilling and
payment processing. Then using Idaho Department of Labor Statistics for the duties provided
calculated the total cost for meter reading/billing on a quarterly basis. This adjusted the test year
costs from $7,424 to $4,740. See Attachment J.
The Company has installed a new billing system that will affect the costs for meter
readingibilling. The Company asserts that the time spent creating bills can be reduced by about one
third.
Staff further analyzedthe financial benefits of converting from quarterly meter
reading/billing to a monthly schedule and found that excessive usage due to leaks is an ongoing
problem. The total volume of customers' excess usage was 5,207,822 gallons during a specific
billing period for those customers experiencing "leaks." The total cost of these'oleaks" was
estimated to be $3,125 (one half of 5,207,822 gallons of excess usage @$1.20 per 1,000 gallons).
This is equivalent to approximately 2,603,91I gallons of water lost due to o'leaks" for 2012. Staff
believes that monthly meter reading and billing could provide early leak detection and significantly
reduce the cost of leakage for the Company and the customer.
Staff also believes that additional cost savings could be achieved by reducing electric power
costs for water pumping. Using purchased power cost of $0.374 per 1,000 gallons pumped during
the test year ($19,079 power cost/51,018,500 gallons pumped x 1,000 gallons), the total power cost
saved by the Company would have been $974 (2,603,911 gallons x $0.374 per 1,000 gallons).
In addition to the reasons for monthly billing cited by the Company in its Application, Staff
believes that monthly billing is further justified by providing more regular consumption information
to customers so they may better monitor consumption and control their bills. Staff has also
identified costs savings that result from better leak identification that further reduce the cost
increase associated with monthly billing. An estimated incremental increase of approximately
$ 1.50 per month can be decreased to approximately $0.33 per month with associated savings. For
STAFF COMMENTS 20 JULY 3I,2OI3
all these reasons, Staff recommends that the Commission approve the Company's request to
implement a monthly meter reading and billing procedure.
Other System Operation and Management Issues
Water Production. Consumption and Losses
One of the major issues during the last Company rate case (Case No. SPL-W-06-01) was the
very high percentage of lost or unaccounted for water. Staff analysis in that rate case indicates from
59% (2005) to 6l%o (2006) of unaccounted water system losses annually. In the current case,
Company records for calendar years 2010 ,2011 and 2012 show total annual water production data,
annual volume of water delivered and estimated loss as follows:
Year 20r0 20tt 2012
Total volume pumped (gals.)42,997,400 49,8472720 51,01 8,500
Total volume delivered (gals.)36,639,288 42,043,258 44,116,600
Total volume lost (gals.) 4i 6,352,112 7,804,462 6,901,900
Percent system lost t4.8%15.6%13.5%
a,/ Includes distribution systemflushing and leakage.
Staff is encouraged that there has been a considerable reduction of water system losses
compared to the losses being experienced by the Company in previous years.
CUSTOMER NOTICES AND PRESS RELEASES
The Company submitted copies of its customer notice and the press release as required
under Rule 125 of the Utility Customer Relations Rules (UCRR). The Company mailed all
customers a copy of the customer notice on April 10,2013. The press release was published in the
Coeur d'Alene Press on April 10, 2013.
The Commission issued a Press Release regarding the public workshop on Tuesday, June
18,2013. The workshop was held in Spirit Lake, Idaho on Tuesday, June 25,2013. There were
twenty four (24) attendees. All attendees were in favor of a public hearing.
BILLING & COLLECTION
The Commission's requirements for billing documentation are contained in Rule 201 of the
Utilities Customer Relations Rules (UCRR), which states that bills shall be issued on a regular
STAFF COMMENTS 2t JULY 3I,2OI3
basis, and describes the content requirements for the bills. The Company has already switched its
billing to the new billing system discussed earlier in Staff comments, and the new system meets the
requirements of the UCRR.
Currently, the Company utilizes three separate notices in its attempt to collect a past due
balance, plus a door hanger to be left if the customer is not at home the first time it attempts to
collect the bill at the door. These notices are similar in design to the notices utilized by the previous
owners of the Company. The contents and formatting of the notices do not meet the requirements
of the UCRR. Staff recommends that the Company revise its termination notices and is willing to
provide assistance, including examples, to ensure that the Company's notification process is in
accordance with the UCRR.
COMPANY TARIFF
The three sections of a small water utility tariff - the Commission-approved rate schedules,
the General Rules and Regulations for Small Water Utilities and the Uniform Main Extension Rules
- describe the relationship between the customers and the Company and establish the basic rules for
providing service.
The Company's tariff predates the Model Tariff for Small Water Utilities implemented in
2008 and it does not include a copy of the Uniform Main Extension Rules. The Company needs to
update its tariff to conform to the current version and to that end, Staff is willing to provide a copy
of the General Rules and Regulations and the Uniform Main Extension Rules in electronic format to
the Company. Staff recommends that the Company revise its Tariff to include its Rate Schedules,
the General Rules and Regulations for Small Water Utilities, and the Uniform Main Extension Rule
in a format consistent with the Model Tariff.
The Company tariff also includes a special provision under Attachment I that allowed
customers to pay a hook up fee of $650. Order No. 295 13 (Case No. SPL-W-04-01) authorized the
Company to increase its hook up fee to $2,500 on June 9,2004, and required customers who had
paid the lower fee of $650 to install connections prior to December 3 1, 2004. This paragraph has
become outdated by the passage of time and needs to be removed from the Company tariff.
The Company Tariff expresses the commodity rates in $ per gallon unit and this format has
been in place since the Tariff was set by the Commission in 1983. The meter readings on a
customer's bill are expressed in cubic feet or gallons, depending on the unit of measure on the
STAFF COMMENTS JULY 31,2013
customer's meter. However the excessive usage above the 9,000 gallons/month allowed in the
monthly charge is expressed in gallons.
A note on the bottom of the customer billing reminds customers that there are 7 .48 gallons
per cubic foot, so that customers can have the means to better understand their usage if their meter
uses cubic feet as a unit of measure. While Staff commends the Company for adding the note to the
bottom of the billing, Staff believes that hundred cubic feet (ccf) and 1,000 gallons increments are
better unit of measures for excessive usage, and recommends that the Company use those units of
measure in the note.
The Company electronically converts the volume usage from cubic feet to gallons when it
creates its billing spreadsheets, if necessary, prior to importing the information into the billing
system to generate the customer billing. Staff recognizes that the Company has more customer
meters registering in cubic feet(90%) than in gallons (10%) as noted earlier, and that as meters are
replaced all meters will measure usage in cubic feet.
In the meantime, Staff recommends that for customer convenience the Company indicate
usage on the customer's bill in either cubic feet or gallon increments, depending upon the unit of
measure of the customers'meters. Staff also recommends that the Company revise its rate schedule
to include both cubic feet and gallon rates, preferably in terms of hundred cubic feet (ccf and or
one thousand gallons (1 K gallon) increments, and revise the notes on billing to reflect those
increments of measure.
RULES SUMMARY & EXPLANATION OF RATES
The Company provides its Summary of Rules and Explanations of Rate Schedules to new
customers and upon customer request, but states that it does not send out an annual rules summary
as required under the UCRR Rule 701 or the Explanation of Rate Schedules as required under Rule
702. Examples are available and Staff is willing to work with the Company to create a summary of
rules and an explanation of rates. Staff recommends that the Company provide the required
documents upon initiation of service and annually thereafter.
CUSTOMER RELATIONS
There were no informal complaints to the Commission for the years 2010 and20l2. In
2071, there were two complaints in which the customer stated they had not received a bill, but did
STAFF COMMENTS 23 JULY 31,2013
receive termination notices. The Company worked with the customers and termination was avoided
in both instances.
As a result of customer comments received in this case, Staff initiated five informal
complaints regarding meter malfunction (1), water pressure (3) and water quality (1). The
malfunctioning meter was confirmed to be inoperative and scheduled for replacement. When the
Company checked water pressure at the complainants' service addresses, pressure was found to be
above the IDEQ minimum operating limits of 30 psi at all three locations. The water quality issue
was a complaint about a bleach odor of the water. The Company's response to the Commission
complaint indicates that it treats all water prior to the water being pumped into the main storage
reservoir, even though the quality of the water produced does not require treatment.
The Commission has received twenty (20) written comments from customers regarding this
case as of July 15,2013. Many of the customer comments recognized the need for an increase in
rates, even if they didn't agree with the percentage of the increase requested by the Company.
STAFF RECOMMENDATIONS
Staff makes the following recommendations:
1 . Staff recommends use of a 201 I test year.
2. Staff recommends a l2Yo return on equity and an overall return on rate base of 11.42%.
3. Staff recommends arate base of $327,034.
4. Staff recommends Working Capital of $9,263.
5. Staff recommends that a revenue requirement of $143,525. This represents additional
revenue of$70,655.
6. Staff recommends that the Commission approve the new rates proposed by Staff (Rate
Design Option 2) maintaining the single block rate design with a base charge volume
allowance of 6,000 gallons for metered residential and commercial customers.
7. Staff recommends that the Commission approve the monthly meter reading and billing
procedure proposed by the Company.
8. Staff recommends that the Company express the commodity charge in both $ per 1,000
gallons and $ per hundred cubic feet (ccf) when the Company makes its compliance
filing.
9. Staff recommends the Company revise its termination notices to conform with
Commission Rules.
STAFF COMMENTS 24 JULY 3I,2OI3
10. Staff recommends the Company create an explanation of rate schedules and a rules
summary and provide the required documents upon initiation of service and annually
thereafter.
I I . Staff recommends the Company remove the obsolete reference to Order No. 29513 in
the tariff.
12. Staff recommends the Company revise its tariff to include its Rate Schedules, the
General Rules and Regulations for Small Water Utilities, and the Uniform Main
Extension Rules in a format consistent with the Model Tariff.
Respecttully submitte atnis) kO*of July 20t3.
Technical Staff:Gerry Galinato
John Nobbs
Joseph Terry
Chris Hecht
i :umisc:comments/splw I 3. I npgdgjncwh comments
Deputy Attorney General
STAFF COMMENTS 25 JULY 3T,2OI3
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Spirit Lake East Water Company, lnc
Schedule of Accumulated Depreciaton
FYE 2011
Accu mulated Depreciation, Order 3027 9
Depreciation Attachment C
Depreciation Expense - 2006
Depreciation Expense - 2007
Depreciation Expense - 2008
Depreciation Expense - 2009
Depreciation Expense - 2010
Depreciation Expense - 2017
Depreciation Expense - 20t2
Subtotal
Adjustments for Retirements
Communciation Equipment 2009
Office Equipment - 2011.
Subtotal
Total Accumulated Depreciation
Reported Total Accumulated Depreciation
Adjustment Required
7,293
12,589
78,L44
2L,924
2L,626
20,395
20,395
(1,952)
(1,163)
72L,337
122,355
(3,115)
840,577
(840,489)
88
Attachment D
Case No. SPL-W-13-01
Staff Comments
07131113
Spirit Lake East Water Company
Rental Adjustment
sPL-W-13-01
Shop Rental
Annual Power Bill
Misc Costs
Cost Months
s 1,200 t2s 7s7S ogz
Annual Cost of Shop
Annual Cost
s 14,400
5 797
5 ogzS rs,gg+
Office
Rent
lnternet
Utility and Maintenance
Months Annual Cost
235 12 s 2,820
30 72 5 360
30 12 s 360
Annual Cost of Office 5 3,540
Differe s (12,354
Cost
s
s
S
Attachment E
Case No. SPL-W-13-01
Staff Comments
07/3v13
Spirit Lake East Water Company
Telephone Expense Adjustment
sPL-W-13-01
Ring Central Monthly Cost
Annual Ring Cental Cost
Annual Telephone Cost Test Year S L,745
Difference 5 (1,241)
542S so+
Attachment F
Case No. SPL-W-13-01
StaffComments
07/31/13
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Case No. SPL-W-13-01
StaffComments
07/3U13
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Case No. SPL-W-13-01
Staff Comments
07131113
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Spirit Lake East Water Company, Case No. SPL-W-13-01
Normalized Power Cost
Year
Total Power
Cost
TotalVolume
Pumped (Gals)
2012 s 19,078.61 51,018,500
2017 s 17,348.55 49,847,720
2010 s 15,154.92 42,991,4O0
Tota!S 5t,s8z.o8 143,857,620
Average S tz,tg+.03 47,952,540
Power Cost for Test Case
Normalized Total Power Cost
50.374 per 7,000 gals .of woter pumped
517,932 per yeor
Attachment I
Case No. SPL-W-13-01
StaffComments
o7l3ll13
Spirit Lake East Water Company
Billing Frequency Analysis
sPL-W-13-01
1 Meter Reading
2 Banking
3 Bill Creation Admin
4 Postage
5 Forms
5 Customer lnquiry
7
8
9
10 Meter Reading
11 Banking
12 Bill Creation Admin
13 Postage
14 Forms
15 Customer lnquiry
16
L7
18
19 Meter Reading
20 Banking
21 Bill Creation Admin
22 Postage
23 Forms
24 Customer lnquiry
25
26
27
28 Meter Reading
29 Banking
30 Bill Creation Admin
31 Postage
32 Forms
33 Customer lnquiry
34
Test Year Data Quarterly Billing
Amount
Per Reading 1
Per Hour 9.77
Per Hour 10.95
Perstamp 288
Per Sheet 288
Per Hour 20.33
Total Year lncr Cost
t,213.75
698.86
783.57
381.48
589.55
L,073,25
Per ltem
506.88
17.88
17.88
0.33
0.51
13.20
TOTAL
Per ltem
505.88
17.88
17.88
0.33
0.09
13.20
TOTAL
Per ltem
505.88
17.88
17.88
0.33
0.09
13.20
TOTAI.
Per Meter
Reading
Period
605.88
t74.71
195.89
95.70
L47.90
268.31
Per Non Meter
Reading Period
174.71
195.89
95.04
146.88
268.31
1,489.39 880.84 4,740.46
Meter Reading Periods
Non Meter Reading Periods
2
2
3
3
With New System Quarterly Billing
Determinant Amount
Per Reading 1
Per Hour 9.77
Per Hour 5.48
Per Stamp 288
Per Sheet 288
Per Hour 20.33
2
2
With New System Bi Monthly Billin8
Amount
Per ReadinB 1
Per Hour 9.77
Per Hour 5.48
Per Stamp 288
Per Sheet 288
Per Hour 5.78
Per Non Meter
Reading Period Total Year
L,2t3.75
fi4.7r 598.85
97.95 391.78
95.04 380.15
25,92 103.68
268.36 t,073.42
Per Meter
Reading
Period
506.88
174.77
97,95
95.04
25.92
268.36
1,268.85 661.98 3,851.55 (878.81)
Meter Reading Periods
Non Meter Reading Periods
Per Meter
Reading
Period
506.88
t74.7L
97.95
95,04
25.92
89.44
Per Non Meter
Reading Period
L74,7L
97.95
95.04
25,92
89.44
Total Year
1,820.63
L,048.29
587.57
570.24
155.52
536,62
1,089.93 483.05 4,7t8.97 (21.49)
Meter Reading Periods
Non Meter Reading Periods
With New System Monthly Billing
Per Reading
Per Hour
Per Hour
Per Stamp
Per Sheet
Per Hour
Amount Per ltem
1 606.88
9.77 t7.88
5.48 17.88
288 0.33
288 0.09
5.08 13.20
TOTAL
7
5
Per Meter
Reading
Period
606.88
t74.71
97.95
95.04
25,92
57.08
Per Non Meter
Reading Period Total Year
4,248.L3
!74.71 2,096.57
97.95 1,175.35
95.04 1,140.48
25.92 311.04
67.08 804.94
35
35
37
38
39
Meter Reading Periods
Non Meter ReadinB Periods
1.057.57 450.70 9,776.50
Operation And Maintenance Labor Expense lncremental Costs 3,034,38
Adminlstrative and Management Labor lncremental costs 2,001.57
Total lncremental Costs 5,036.04
Attachment J
Case No. SPL-W-13-01
Staff Comments
07l3Ut3
5,035.04
Spirit Lake East
Weighted Cost of Capital
Year Ended October 3l,zOlL
Proposed
Ratio
Percent Weighted
ofTotal Cost Cost
Common Stock lssued
Other Paid in Capital
Retained Earnings
Total Equity Capital
Back Hoe Notes Payable
Total
296,434
326,769
(460,008)
163,195 97% 72.00Yo L097%
15,375 9Yo 5.30% 0.46%
L78,570 t$l%L7.42Yo
Long Term Debt Schedule
Ratio
lnterest Percent of Weighted
Debt Amount Rate Total Cost
Back Hoe Loan 15,375.00 5.30Yo 100.00% 5.30%
15,375.00 5.3OYo
Aftachment K
Case No. SPL-W-13-01
Staff Comments
07l3Ut3
Spirit Lake East Water Co.
Revenue Requirement
l- Rate Base
2 Required Rate of Return
3 Return on lnvestment
4 Net Operating lncome Realized
5 Net Operating lncome Deficiency
6 Net Operating Loss
7 Debt Cost on Rate base
8 Deficiency Not Subject to Gross-up Factor
9 Deficiency Subject to Tax Gross-up Factor
10 Gross-up Factor
11 Grossed-up Deficiency
12 Total Revenue Deficiency
13 Rate Case Expense
14 Three Year Amortization
1.5 Total Revenue Deficiency
16 Test Year Revenues at Current Rates
17 Total Gross Revenue Requirement
Gross-up Factor Calculation
18 Net Deficiency
19 PUC Fees
20 Bad Debts
2L State Tax @ 8%
22 FederalTaxable
23 Federal Tax @ 15%
24 Net AfterTax
25 Net to Gross Multiplier
Proposed
5232,750
71.42%
S26,587
(41,9671
s68,548
Staff Case
5327,034
11.42%
s37,358
(21,630)
s58,988
s21,630
1,492
S35,865
728.8t%
100.00%
0.2253%
0.s000%
99.27%
7.94%
91.33%
73.70%
77.63%
1.28.8Lo/o
100.00%
0.2340%
0,s000%
s41,961
34,257
576,2tt
L,333
577,544
72,870
S150,414
523,123
46,198
s69,321
1,333
s70,655
72,870
S143,s2s
Attachment L
Case No. SPL-W-13-01
Staff Comments
07l3lll3 Page I of 2
99.27%
7s4%
9L.32%
73.70%
77.63%
L28.82%
Spirit Lake East Water Company
Rate Base
FYE 2011
1 Plant ln Service
2 Accumulated Depreciation
3 C|AC
4 Net Plant ln Service
5 M&Slnventory
5 Working Capital
7 Total Rate Base
8
9
10
7L Working Capital Calculation
72 TOTAL Operating Expense
13 Property Taxes
t4 DEQ Fees
15 Regulatory Commission Expense
16 State lncome Tax
77 Sub Total Operating Expenses
18 Working Capital (1/8 Rule)
Application
1,120,089
(840,489)
(70,050)
Staff Difference
t,2t6,LO7 96,018
(840,5771 -88
(70,050) o
209,550
!2,29L
10,909
305,480 95,930
72,29L
9,263 L,646
5232,7so 53zt,o3q Sgz,sz6
72,289
598
1,o27
762
30
74,106
9,263
Attachment L
CaseNo. SPL-W-I3-01
StaffComments
07l3lll3 Page2 of 2
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Attachment M
Case No. SPL-W-13-01
StaffComments
07t3lt3
MINIMUM CUSTOMER CHARGE
Type
of
Customers
Number
of
Customers
Volume
Allowance
(Gallons)
Minimum
Customer
Charse
Total Annual
Rev. from Min.
Customer Charge
Residential 288 5,000 s 2s.2s 5 97,264
Spirit Lake East Water Case No. SPL-W-13-01
Rate Proof/Estimated Revenue (Pro forma) using Staff Proposed Rate Design
Option 2 - Reduce the Volume Allowance to 6,000 Gallons per Month
Staff-Proposed Revenue Requirement:
Total Number of Customers: Residential
s143,525
288
Total Revenue (minimum customer and commodity charges):
Revenue over (under) Revenue Requirement:
Various Charges as aYo of Gross Revenue:
Minimum Customer Charge
Commodity Charge
1/ Bosed on 6,000 gollons volume ollowance per month.
Attachment
t43,578
$sg
6t%
39%
Attachment N
Case No. SPL-W-13-01
Staff Comments
07l3rl13
COMMODITY CHARGE
Commodity charges for all customers (5/1,000 gallons)5 z.zq
Net Volume of Excess Usage lgallonsl !/25,140,000
Total Commodity Revenue s 56,314
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Case No. SPL-W-13-01
Staff Comments
07l3y13
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 31ST DAY oF JULY 2013,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. SPL-W-13-01, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
LESLIE ABRAMS
OWNER/OPERATOR
SPIRIT LAKE EAST WATER
PO BOX 3388
COEUR D'ALENE ID 83816
CERTIFICATE OF SERVICE