20190703final_order_no_34372.pdf

Office of the Secretary
Service Date
July 3,2019
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )CASE NO.SPL-W-19-01
OF SPIRIT LAKE EAST WATER COMPANY )AND LYNNWOOD FOR AMENDMENT AND )TRANSFER OF CPCN )ORDER NO.34372
On February 15,2019,Gem State Water Company,LLC ("Gem State Water")filed an
Application with the Commission requesting approval of Gem State Water's acquisition of the
assets of Spirit Lake East Water Company ("Spirit Lake")and LynnwoodWater,and approval to
amend Spirit Lake's certificate of public convenience and necessity ("CPCN")to incorporate the
customers currentlyserved by Lynnwoodand transfer the amended CPCN to Gem State Water
(collectively,the "Application").
On March 13,2019,the Commission issued a Notice of Application and Notice of
Modified Procedure.Order No.34271.
Now,after reviewing the record,the Commission approves the Application,subject to
conditions identified herein.
THE APPLICATION
Gem State Water,throughits parent companies,is held by Northwest Natural Holding
Company,which was created during a recent corporate reorganization of Northwest Natural Gas
Company and its affiliates.Applicationat 2.Northwest Natural Gas Company is a 160-year-old
natural gas utility that serves customers in the Pacific Northwest.Id.Spirit Lake and Lynnwood
Water are in Kootenai and Bonner counties and have been owned and operated by the same person
since 2015.See Id.at 3-4.Spirit Lake is a regulated water utility that serves approximately 315
customers in north Idaho.Id.at 3.LynnwoodWater serves approximately 18 customers.Id.at
4.Gem State Water seeks to acquire the assets of Spirit Lake and LynnwoodWater,to amend
CPCN No.293 to include the service territory of the customers currentlyserved by Lynnwood
Water,and to transfer CPCN No.293 from Spirit Lake to Gem State Water.Id.at 1.Gem State
Water does not ask for a change to current rates or rate structure for either water company with
this Application.Id at 4.Gem State Water states it intends to retain the existing management and
other employees of the water companies.Id at 3.
ORDER NO.34372 1
THE COMMENTS
a.Comments of Commission Staff
Staff recommends the Commission approve the Application.Staff conducted its
analysis under Idaho Code §61-328 and determined that the transaction is consistent with the
public interest,that rates will not increase due to the transaction,and that Gem State Water has the
bona fide intent and financial ability to operate and maintain the system in the public service.
Staff believes the transaction is in the public interest because Gem State Water has
greater access to capital than Spirit Lake or Lynnwood Water on their own,and because of
potential operational efficiencies and economies of scale that can be achieved as Gem State Water
continues to pursue its strategy of acquiring small water companies in the region.Staff believes
rates will not increase as a result of the transaction because the systems will function post-
acquisition much the same as they have functioned pre-acquisition.Any future improvements to
the system,Staff believes,would not be a result of the transaction.Staff believes Gem State Water
has the bona fide intent and financial ability to operate and maintain the system in the public
service because Gem State Water has made the continued employment of the current owner and
operator of the system a condition to the closing of the transaction,and has stated that it plans to
retain existing management and other employees.Staff notes that Gem State Water,through its
parent companies,has extensiverevolving credit facilities and very strong credit ratings.
Staff notes that Lynnwood Water has not previously been regulated by the
Commission,and therefore its rates and charges have not been approved by the Commission.Staff
performed an abbreviated audit of LynnwoodWater's rates and determined that the company is
not overearning.Staff believes Gem State Water's strategy of waiting until a future rate case to
potentiallyconsolidate rates is a reasonable and prudent approach.
Staff reviewed Lynnwood Water's non-recurring charges and has numerous
recommendations regarding these charges.Staff recommends the Commission 1)Deny
LynnwoodWater's Account Change (Account Transfer Fee)of $35 because Spirit Lake does not
have a similar charge and the charge has not been justified;2)Deny LynnwoodWater's proposed
Meter Set Fee of $4,500 and approve Spirit Lake's Hook-up Fee of $2,500 for Lynnwood Water;
3)Deny Lynnwood Water's proposed Turn On Fee of $95.00 and approve Spirit Lake's
Reconnection Fees of $16.00 if reconnected during normal business hours and the account has
been closed for thirty days or less,$32.00 if reconnected after business hours and the account has
ORDER NO.34372 2
been closed for thirty days or less,$52.00 if reconnected during normal business hours and the
account has been closed for over thirty days,and $65.00 if reconnected after normal business hours
and the account has been closed for over thirty days;4)Deny LynnwoodWater's Bounce Check
Fee and approve the Insufficient Funds Charge at the statutory limit of $20.00 for Lynnwood
Water;5)Deny LynnwoodWater's Finance Charge of 1%,which is applied to the unpaid balance
owed after the due date,and approve a Late Payment Fee of 1%of the unpaid balance owed at the
time of the next billing statement.
Staff also requests the Commission order Gem State Water to:1)directly notify
customers of the sale,either through a separate mailing or as a billinginsert;2)file updated Tariff
rate schedules consistent with the Commission's decision before the effective date;3)work with
Staff to revise the Company's Tariff,including its Rules and Regulations;4)work with Staff to
revise the billingand collection documents and the Explanation of Rates and Rules Summary.
b.Public Comment.
One member of the public filed a comment on this matter and expressed concern
whether Gem State Water's parent company has plans to sell the water outside of the subdivision
and also wondered how long Gem State Water's assertion that rates will not raise as part of the
transaction will hold.
c.Reply Comments of Gem State Water.
Gem State Water filed reply comments stating that it appreciates Staff's review and
willingness to work with Gem State Water to update its tariffs and revise billing and collection
documents,and that it agrees with Staff's recommendations.Gem State Water also stated that it
will provide customers notice of the sale througha separate mailing or billing insert.
FINDINGS AND DISCUSSION
Gem State Water is a water corporation under Idaho Code §61-125.The Commission
has jurisdiction over it and the issues in this case under Title 61 of the Idaho Code.Having
reviewed the record,includingthe Application,Staff's comments,and Gem State Water's reply
comments,the Commission finds it reasonable to approve Gem State Water's Application subject
to the conditions described hereafter.
The Commission finds that Gem State Water has the financial and operational abilities
to manage the water systems in the public service and has the bona fide intent to do so.It is
persuasive that Gem State Water contracted to keep the services of the previous owner and operator
ORDER NO.34372 3
of the systems.The Commission also fmds that rates will not rise as a result of the transaction.
Any future rate increases for customers of Spirit Lake and LynnwoodWater will be to recover
costs for prudent investments made to the water systems,and will not be a result of this transaction.
The Commission finds that the public interest is furthered by having a respected organization with
experience in the regulated public utility industry purchase and operate the systems.The
Commission is confident that Gem State Water is fully aware of the administrative requirements
of runninga public utility,and knows the infrastructure investments necessary to maintain a water
system in the public service.Further,Gem State Water has access to capital to make these
investments.As Gem State Water and its parent companies continue to pursue their strategy of
purchasing small water companies in the Northwest,some operational and administrative
efficiencies of scale are likelyto be achieved,which can be passed on to customers.
Lynnwood Water has been an unregulated water company,so the Commission has not
had the opportunity to review Lynnwood's rates,rate structure,and charges.At this time,the
Commission is satisfied with Staff's abbreviated audit,which showed to reasonable certainty that
Lynwood Water is not overearning.A comprehensive review of Lynnwood's rates and rate
structure is more properly deferred to a general rate case.However,we have reviewed
Lynnwood'snon-recurring charges and find that it is justand reasonable to make changes to these
charges to bring them in line with the Commission-approved non-recurring charges of Spirt Lake,
as more specifically described below.
ORDER
IT IS HEREBY ORDERED that Gem State Water's Application is approved.
IT IS FURTHER ORDERED that CPCN No.293 is amended to include the service
territory of LynnwoodWater,and is transferred to Gem State Water.
IT IS FURTHER ORDERED that the following changes be made to Lynnwood
Water's non-recurring charges:Lynnwood Water's Account Change (Account Transfer Fee)of
$35 is denied until the charge is justified;LynnwoodWater's proposed Meter Set Fee of $4,500
is denied and Spirit Lake's Hook-up Fee of $2,500 is approved for LynnwoodWater;Lynnwood
Water's proposed Turn On Fee of $95.00 is denied and Spirit Lake's ReconnectionFees of $16.00
if reconnected during normal business hours and the account has been closed for thirty days or
less,$32.00 if reconnected after business hours and the account has been closed for thirty days or
less,$52.00 if reconnected during normal business hours and the account has been closed for over
ORDER NO.34372 4
thirty days,and $65.00 if reconnected after normal business hours and the account has been closed
for over thirty days are approved for LynnwoodWater;LynnwoodWater's Bounce Check Fee
is denied and the Insufficient Funds Charge is set at the statutory limit of $20.00 for Lynnwood
Water;LynnwoodWater's Finance Charge of 1%applied to the unpaid balance owed after the
due date is denied and a Late Payment Fee of 1%of the unpaid balance owed at the time of the
next billingstatement will be charged.
IT IS FURTHER ORDERED that Gem State Water:directly notify Spirit Lake and
LynnwoodWater customers of the sale,either through a separate mailing or as a billinginsert;file
updated Tariff rate schedules consistent with the Commission's decision within fourteen (14)days
of the service date of this Order;work with Staff to revise Gem State Water's Tariff,includingits
Rules and Regulations;work with Staff to revise Gem State Water's billing and collection
documents and the Explanation of Rates and Rules Summary.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order.Within seven (7)
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §61-626.
ORDER NO.34372 5
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 5
day of July,2019.
PAUL KJELLANbER,PRESIDENT
KlÍI NE RAPEPs,C MISSIONER
ERIC ANDERSON,COMMISSIONER
Diane M.Hanian'
Commission Secretary
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