20131017press release.pdf

Idaho Public Utilities Commission
Case No. SPL-W-13-01, Order No. 32904
October 17, 2013
Contact: Gene Fadness [phone], 890-2712
Website: www.puc.idaho.gov

New rates effective Nov. 1 for Spirit Lake East Water customers

Monthly rates for the approximate 300 households served by Spirit Lake East Water Company
will increase from an average $25.10 to $51.18 effective Nov. 1. The water utility serves Spirit
Lake in Kootenai County and Treeport, a private aviation community in Bonner County.
Most of the increase is attributable to system improvements required to update the aging
water system and comply with a state Department of Environmental Quality Consent Order.
“While the commission acknowledges the many objections by customers to a general rate
increase, we cannot simply deny a utility’s request for an increase in rates without justification
supported by substantial evidence for doing so,” said the Idaho Public Utilities Commission in
its order approving the rate increase.
There has not been a significant increase for Spirit Lake East Water customers in 30 years. The
commission did approve an approximate 50-cent per month increase in 2007. Since then, Spirit
Lake East has completed nearly $300,000 in upgrades and repairs to increase water pressure,
provide back-up power generation and improve leaks to the main line.
The commission and its staff conducted a six-month investigation into the company’s rate
increase application, which included an audit and an on-site inspection of the company’s
facilities and infrastructure. Commission staff also conducted a customer workshop and
commissioners conducted a public hearing. The commission also took written comments from
customers.
The commission noted that Spirit Lake East is legally entitled to rates that cover its operating
costs and provide an opportunity to earn a reasonable return on its investment. The
commission staff verified that, under current rates, the company was operating at an annual
net loss of $21,630. It is in the “best interest of all customers” that Spirit Lake is able to attain a
reasonable return and “remain a financially and operationally sound utility. The overall financial
and operational integrity of a utility increases reliability of service and helps to lower the
company’s borrowing costs,” the commission said.
The company sought an annual revenue requirement of $150,414. The commission approved
$140,105. The commission adopted a 12 percent Return on Equity and an 11.42 percent overall
rate of return, which is consistent for small water companies comparable to Spirit Lake East.
The revenue requirement and return allowed Spirit Lake East does not constitute a guarantee it
will attain that level of earnings, only that it is permitted to do so.
Under the new rate structure, all customers will pay a monthly minimum of $25.55. They will
also pay a commodity charge of $2.33 for every 1,000 gallons used above 8,000 gallons a
month. Currently, customers are paying $12.50 per month and $1.20 for every 1000 gallons
above 9,000 gallons per month. To encourage conservation, commission staff recommended
the commodity charge kick-in when customers reach 6,000 gallons per month. But the
commission said that may cause too dramatic an increase for many customers. “We believe
that water conservation habits can and should be given an opportunity to develop over time,”
the commission said. The average use for customers is about 6,000 gallons per month during
winter months and 30,000 gallons during summer.
“By lowering the monthly volume allowance by 1,000 gallons, (from the current 9,000 gallons)
the commission strikes a reasonable balance between encouraging conservation, not overly
burdening low-volume users, and minimizing the potential for rate shock among high-volume
users,” the commission said.
The commission also granted the company’s request to switch from quarterly billing to monthly
billing. That will allow the company to more quickly detect excessive usage due to leaks, which
has been an ongoing problem for Spirit Lake East’s water system. While a monthly billing
system will increase costs by about $1,225 per year, commission staff determined that leaks
cost the company about $3,125 per year. A monthly billing schedule, the commission said, “will
be more economical over time.”
The commission also directed the company to discontinue its business relationship with Water
Works, Inc. and continue with its plan to hire its own employees by no later than November.
That directive addresses a potential conflict of interest for Spirit Lake East’s owner, who is also
an officer for Water Works, Inc. The company must also obtain a new insurance policy and
provide the commission with a detailed study regarding the addition of fire hydrants within six
months.
The commission’s order and other documents related to the case are found on the
commission’s Web site at www.puc.idaho.gov. Click on “Open Cases,” under the Water heading
and scroll down to Case No. SPL-W-13-01.
Interested parties may petition the commission for reconsideration by no later than Nov. 1.
Petitions for reconsideration must set forth specifically why the petitioner contends that the
order is unreasonable, unlawful or erroneous. Petitions should include a statement of the
nature and quantity of evidence the petitioner will offer if reconsideration is granted.
Petitions can be delivered to the commission at 472 W. Washington St. in Boise, mailed to P.O.
Box 83720, Boise, ID, 83720-0074, or faxed to 208-334-3762.

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