20190215Application.pdf

GtvENS PunsLEY,,"
Attorneys and Counselors at Law
601 W. Bonnock Street
PO Box2720
Boise, lD 83/01
Telephone: [phone]
Focsimile: 208-388-l 300
M.givenspursley.com
Preston N. Corler
pres'[e-mail]
208-38a.1222
VIA HAND DELIVERY
Diane Hanian
Idaho Public Utilities Commission
472W. Washington
Boise, ID 83702
Gory G. Allen
Chrislopher J. Beeson
Joson J. Blokley
Clint R. Bolinder
Jeff W. Bower
Preston N. Corter
Jeremy C. Chou
Michoel C. Creomer
Amber N. Dino
Brqdley J. Dixon
Thomos E. Dvorok
Deboro Kristensen Groshom
Mortin C. Hendrickson
Brion J. Holleron
Ke6ti H, Kennedy
Neol A. Koskello
Michoel P. Lowrence
Fronklin G. Lee
Dovid R. Lombordi
Kimberly D. Moloney
Kenneth R. McClure
Kelly Greene McConnell
Alex P. McLoughlin
Melodie A. McOuode
Christopher H. Meyer
L. Edword Miller
Potrick J. Miller
Judson B. Monlgomery
Deboroh E. Nelson
W. Hugh O'Riordon, LL.M
Rondoll A. Petermon
Jock W. Relf
Michoel O. Roe
Jomie Coplon Smilh
Jeffrey A. Wor
Roberl B. While
Williom C. Cole (Of Counsel)
Kenneth L. Puuley (1940-2015)
Jomes A. McClure (1924-201 l)
Roymond D. Givens ( I 9l 7-2008)
February 15,2019
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Re: Confidential Exhibits
Dear Ms. Hanian:
This firm represents NW Natural Water Company, LLC and Gem State Water Company,
LLC (collectively, "Company"), which is filing an Application today. Certain documents in the
Application, specifically Exhibits I and 3 to Justin Palfreyman's direct testimony, are exempt
from public disclosure as confidential business information, trade secrets under Idaho Code $ 74-
107(1), and sale or purchase records (or similar business records) required to be submitted to a
public agency under Idaho Code $ 74-107(2).
Per Commission Rule 67, the exhibits containing confidential information are enclosed
for filing separate from the main documents. The confidential exhibits are printed on yellow
paper and marked "Confidential." Nine copies, and an original, of each confidential exhibit are
enclosed. The confidential pages have been replaced in the main filing with pages indicating
confidentiality per Rule 67.
Thank you for maintaining the confidentiality of this information. If you have questions,
please do not hesitate to contact me.
Sincerely,
Preston N. Carter
PNC/KIh
Enclosures: Exhibits I and 3 to Direct Testimony of Justin Palfreyman
14544798_l.DOC [3988.4]
/rAL"*'t:^
Preston N. Carter (ISB No. 8462)
Givens Pursley LLP
601 W. Bannock St.
Boise,lD 83702
Telephone: [phone]
Facsimile: (208) 388-1 300
prestoncarter@ givenspursley. com
14485378_9.docx [3988-4]
Attorneysfor Gem State Water Company, LLC
IN THE MATTER OF THE APPROVAL
OF ACQUISITION OF THE ASSETS OF
SPIRIT LAKE EAST WATER
COMPANY AND LYNNWOOD
WATER; FOR AMENDMENT AND
TRANSFER OF SPIRIT LAKE EAST
WATER COMPANY' S CERTIFICATE
OF PUBLIC CONVENIENCE AND
NECESSITY (NO. 293); AND
REQUEST FOR MODIFIED
PROCEDURE
frECE'VED
iuilr[S IS pHt}t 3t
,iLlC
{Mtsstof{
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
Case No. 'L- U' )g-o
APPLICATION FOR APPROVAL OF
ACQUISITION OF THE ASSETS OF
SPIRIT LAKE EAST WATER
COMPANY AND LYNNWOOD
WATER; FOR AMENDMENT AND
TRANSFER OF SPIRIT LAKE EAST
WATER COMPANY'S CERTIFICATE
OF PUBLIC CONVENIENCE AND
NECESSITY (NO. 293); AND
REQUEST FOR MODIFIED
PROCEDURE
Gem State Water Company, LLC ("Gem State Water") seeks the Idaho Public Utilities
Commission's (o'Commission") approval of Gem State Water's acquisition of the assets of Spirit
Lake East Water Company ("Spirit Lake") and Lynnwood Water. Gem State Water also seeks
approval to amend Spirit Lake's Certificate of Public Convenience and Necessity ("CPCN") No.
293 to incorporate the customers currently served by Lynnwood Water, and to transfer the
amended CPCN to Gem State Water. Gem State Water requests that this Application be
processed by modified procedure.
AppLrcATroN FoR AppRovAL oF ASSET AcqursnroN - I
ORlGINAL
Please serve all notices and communications with regard to this Application upon:
Preston N. Carter (ISB No. 8462)
Givens Pursley LLP
601 W. Bannock St.
Boise,ID 83702
Telephone: [phone]
Facsimile: [phone]
prestoncarter@ qivenspursley. com
kendrah@ eivenspursley. com
Eric W. Nelsen
Senior Regulatory Attorney
NW Natural
220 NW 2'd Ave.
Portland, Oregon 97209
Telephone: [phone]
Eric.Nelsen@nwnatural. com
BacxcRouxo
Gem State *Vater
l. Gem State Water is an Idaho limited liability company created to own and operate
water utilities in Idaho. Gem State Water is a wholly owned subsidiary of NW Natural Water of
Idaho, LLC, which is in tum wholly owned by NW Natural Water Company, LLC ("NW Natural
Water"). An organizational chart is attached to the testimony of Justin Palfreyman, the President
of Gem State Water and NW Natural Water.
2. Gem State Water and NW Natural Water are members of a family of companies
held by Northwest Natural Holding Company ("NW Natural Holdings"), which was created
during a recent corporate reorgarization of Northwest Natural Gas Company and its affiliates.
Northwest Natural Gas Company is a 160-year-old natural gas utility serving customers in the
Pacific Northwest. NW Nahrral Water notified the Commission of the planned corporate
reorganization during NW Natural Water's acquisition of Falls Water Company, Case No. FLS-
AppLrcATroN pon AppRovaL oF ASSET AcqulsrtoN - 2
W-18-01 ("Falls Water Case"). The Commission approved the acquisition but did not address the
corporate reorganization. I
3. NW Natural Holdings and NW Natural Water have financial resources and access
to capital markets to sufficiently capitalize Gem State Water so that it can provide safe and
reliable water utility service and proactively address the infrastructure needs of the utility. See
Palfreyman Testimony at 2. Additionally, Gem State Water will benefit from its parent
companies' and affiliates' core competencies in constructing and maintaining infrastructure,
providing exemplary customer service, and effectively managing regulated utilities.ld at 2. NW
Natural Water recently acquired water utilities in Oregon, Washington, and Idaho. Id. at 3. These
acquisitions, and the continued operation of these water utilities, were seamless, with no
disruptions to customer service. Id. This experience will carry over to Gem State Water. Id.
4. Gem State Water intends to retain the existing management and other employees
of Spirit Lake and Lynnwood Water to maintain the existing level of services, to leverage their
expertise with operating these water systems, and to prevent any disruption to customers. Id. at 5.
Importantly, as described below, the transfer of ownership to Gem State Water will not result in
a change to Sprit Lake or Lynnwood Water's rates.
Spirit Lake and Lynnwood lVater
5. Spirit Lake is a regulated water utility that serves approximately 315 customers in
Kootenai and Bonner Counties, Idaho. Spirit Lake was issued CPCN No. 293 in 1983 and has
provided water service ever since. Leslie Rayner is the sole shareholder of Spirit Lake. Id. at 4.
1 In the Falls Water Case, NW Natural Water Company sought the Commission's approval of the corporate
reorganization "to the extent the Commission deems such approval necessary." Case No. FLS-W-I8-01, Application
for Approval of Acquisition of Falls Water Company by NW Natural Water Company, LLC and Request for
Modified Procedure at 5. The Commission approved the acquisition but did not address the corporate reorganization.
See Order No. 34103.
APPLICATION FoR APPROVAL OF ASSET ACQUISITION - 3
6. Leslie Rayner owns the assets of Lynnwood Water. She acquired these assets
from the prior owner in 2015. The rates and charges charged by the prior owner were carried
forward and have not changed since that time.Id. at Exhibit 2 (Affidavit of Leslie Rayner).
7. The accounts of Lynnwood Water and Spirit Lake have been kept separate. Id.
8. Lynnwood Water serves approximately eighteen customers at this time.Id.
9. Through the Transaction described below, Gem State Water intends to acquire the
assets of Spirit Lake and of Llmnwood Water; to serve existing and future customers of these
water systems; and to maintain the current rates and rate structure.
THE TRANSACTIoN
10. Gem State Water and the selling parties (Spirit Lake, Lynnwood Water, Water
Works Management,LLc, and Leslie Abrams-Rayner) entered into an Asset Purchase
Agreement ("Agreement") on December 18, 2018.2 The Agreement, attached to Mr.
Palfreyman's testimony, and the actions it contemplates (the "Transaction") are contingent upon
the Commission' s approval. Agreement fl5. I (0. 3
11. If approved, under the Agreement Gem State Water will acquire substantially all
the assets of Spirit Lake and Lynnwood Water.
12. If approved, NW Natural Water of Idaho, LLC will offer employment to existing
employees. Agreement fl4.7.
13. If approved, NW Natural Water of Idaho, LLC will offer employment to Leslie
Rayner and Cole Rayner for a period of thirty-six months after closing. Their acceptance is a
2 Water Works Management, LLC is a management company owned by Leslie Rayner. It is not a regulated utility
and, therefore, approval ofacquisition ofits assets is not part ofthis Application.
3 The Agreement has been filed as "Confidential" per Commission rules.
APPLICATIoN FoR APPROVAL OF ASSET ACquISnION - 4
condition to closing. Agreement fl5.l(h).x. Ms. Rayner is expected to become the manager of
Gem State Water upon closing. Palfreyman Testimony at 4.
14. Leslie Rayner is a licensed water system operator. She will continue to operate the
water systems of Spirit Lake and Lynwood Water if the Transaction is approved. Id. at 5.
15. Gem State Water is not requesting any change to rates, rate structure, or other
charges in this Application. Any future changes will be based on prudently incurred capital
expenditures and other accepted ratemaking principles. Palfreyman Testimony at 5-6.
16. Spirit Lake's Commission-approved tariffs are available on the Commission's
website.4 If the Transaction is approved, Gem State Water will submit revised tariffs that reflect
the ownership change but retain the existing rates, rate structure, and other charges for current
Spirit Lake customers.
17. Lynnwood Water does not currently have Commission-approved tariffs. Ms.
Ralmer's declaration describes Lynnwood Water's current rates, rate structure, and other
charges. Palfreyman Testimony, Exhibit 2 (Affidavit of Leslie Rayner). [f the Transaction is
approved, Gem State Water will submit a schedule to the revised Spirit Lake tariffs that will
apply to current Lynnwood Water customers. The schedule will reflect Lynnwood Water
customers' current rates, rate structure, and other charges.
18. Gem State Water intends to work with Commission Staffbefore and during future
rate proceedings to consolidate the rates, rate structure, and other charges for current Spirit Lake
customers and current Lynnwood Water customers.
19. Gem State Water submits that the Transaction is in the public interest. The
Transaction will provide access to capital that is not currently available to Spirit Lake or
a https://www.puc.idaho.gov/fileroom/tarifVwater/SPIRIT%o20LAKEo/o20EAST%20WATER.pdf
AppLrcarroN pon AppRovaL oF ASSEr AcqulsnloN - 5
Lynnwood Water. Gem State Water, through its parent companies, will offer expertise in
operating regulated utilities. The Transaction also creates the potential for economies of scale as
more companies are acquired. Finally, Gem State Water will maintain the existing rates and
charges and maintain or improve the level of services currently provided.
Rrqunsr ro AMEND AND TRANsnrn CPCN
20. Spirit Lake currently holds CPCN No. 293. This CPCN encompasses Spirit
Lake's service area. It does not include Llmnwood Water's customers.
21. As described above, Gem State Water intends to provide service to Spirit Lake
and Lynnwood Water customers. Accordingly, Gem State Water requests that the CPCN be
amended to incorporate Lynnwood Water customers within its service area.
22. To enable service to Spirit Lake and Lynnwood Water customers, Gem State
Water respectfully requests that the amended CPCN No. 293 be transferred to Gem State Water.
23. The amendment and transfer of the CPCN are necessary to effectuate the
Transaction, and to realize the public benefits discussed above. Amendment and transfer of the
CPCN is in the public interest for the same reasons as the Transaction more generally.
Moornro Pnocnouno
24. Gem State Water believes a hearing is not necessary to consider the issues
presented in this Application and respectfully requests that it be processed by modified
procedure, using written submissions rather than a hearing, under the Commission's Rules of
Procedure 201 through 210.
Gem State Water respectfully requests that the Commission enter an order:
l. Authorizing this matter to be processed by modified procedure.
2. Approving the Transaction, finding that it is consistent with the public interest,
that the cost and rates for supplying service will not be increased by reason of the Transaction,
AppIIceTIoN FoR APPROVAL OF ASSET ACQUISITION. 6
and that Gem State Water has the bona fide intent and financial ability to operate and maintain
Spirit Lake and Lynnwood Water's property in the public service.
3. Finding that the amendment and transfer of CPCN No. 293 is in the public
interest, amending CPCN No. 293 to incorporate Lynnwood Water customers, and transferring
CPCN No. 293 to Gem State Water.
4. Granting such other relief as the Commission deems just and reasonable.
DATED: February 15,2019.
GIVENS PURSLEY LLP
/
Preston N. Carter
Givens Pursley LLP
Attorneys for Gem State Water Company, LLC
APPLICATIoN FoR APPROVAL OF ASSET ACQUISITION - 7
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