20180507Wyatt Supplemental Direct.pdf

Michael C. Creamer,lSB #4030
GTVENS PURSLEY LLP
601 W. Bannock St.
P.O.Box2720
Boise, Idaho 83701-2720
Telephone: [phone]
Facsimile: 208-388-1 300
mcc@ eivenspursl ey. com
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF TIIE JOINT
APPLICATION OF SUEZ WATER
IDAHO INC. AND BRIAN SUBDIVISION
WATER USERS ASSOCIATION FOR
APPROVAL OF AN AMENDMENT TO
CERTIFICATE OF PUBLIC
CONVENIENCE AND NECESSITY NO.
l43;APPROVAL OF AN AGREEMENT;
FOR CONNECTION AND TRANSFER OF
WATER SYSTEM; APPROVAL OF
RATES AND CHARGES
Case No. SUZ-W-18-01
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
SUPPLEMENTAL TESTIMONY OF GREGORY P. WYATT
MAY 1,2018
Attorneysfor SUEZ Water ldaho Inc.
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Please state your name and business address?
Gregory P. Wyatt, 8248 West Victory Road, Boise, Idaho 83709.
By whom are you employed and in what capacity?
I am the Vice President and General Manager of SUEZ Water Idaho Inc.,
("SUEZ" or "the Company"), formerly United Water Idaho Inc.
What is the scope of your testimony?
This testimony provides information on the completion of the Brian
Subdivision Water Users Association's (BWSUA) water system connection
to SUEZ. Idaho Public Utilities Commission (IPUC) Order No. 33195
dated December 17,2014 authorized connection to SUEZ's water system
to resolve BSWUA's drinking water nitrate contamination problems and
provided for a lO-year surcharge recovery mechanism applicable to
BSWUA customers for a portion of the project cost. The Company is
requesting IPUC approval of the capital investment and the associated
surcharge along with approval of tariff Schedule 1C (Exhibit No. 8).
Are you sponsoring any Exhibits with your testimony?
Yes.
Exhibit No. 5 shows the final project costs compared to original estimates.
Exhibit No. 6 shows the calculation of the revenue requirement resulting
from the Company's capital investment.
Exhibit No. 7 shows the calculation of the customer surcharge and one-time
payment option.
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Exhibit No. 8 is the updated tariff Schedule 1C reflecting the proposed bi-
monthly surcharge amount to be paid by BSWUA customers.
Exhibit No. 9 is a letter to be sent to BSWUA customers notifying them of
this filing and the proposed surcharge amount based on actual project costs.
Exhibit No. 10 is a letter to be sent to BSWUA customers after the
Commission issues a Final Order in this proceeding advising them of the
approved surcharge amount and the need for them to contact SUEZ and
make their payment election.
Were these exhibits prepared by you or under your supervision?
Yes they were.
Is the necessary water system installation work complete to connect the
Brian Subdivision water users to the SUEZ system?
Yes. All46 BSWUA customers are connected to SUEZ's water system as
of November 2017. Additional paving, sidewalk, and cleanup work
continued through January 2018 when the project work was completed.
Project costs became final in March 2018.
Please outline the major project milestones.
Major project milestones:
o September 2014 - Joint application filed by BWSUA and SUEZ.
o December 2014 - IPUC approval Order No. 33195.
o January 2015 - Task order to Earth Energy to commence bore work
under the New York Canal and Boise River/Penitentiary Canal.
o November 2016 - Change order to include casing through loose
material on south side of New York Canal.
. May 2017 - Bores completed.
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. July 2017 - Task order to Dahle Construction for offsite pipe and
onsite pipe and services work.
o October 2017 - First BWSUA customer connected to the SUEZ
water system.
o November 2017 - Final BWSUA customer connected to the SUEZ
water system.
o December 2017 I January 2018 - Final paving, clean-up, and project
punch-list work completed.
Please, briefly describe the project.
IPUC Order No. 33195 approved the BSWUA connection path along the
southeast portion of Surprise Valley, near Highway 21, under New York
Canal and the Boise River, then along Warm Springs Avenue to the north
end of the Brian Subdivision. This involved boring under the New York
Canal, Penitentiary Canal and the Boise River. The canal authorities only
allowed work to be completed during months when the canal was not in
operation. This limited the bore timing between mid-October to mid-March
timeframe when the irrigation canals were not flowing. The pipeline
portion of the project included installing main from the end of the bore along
Warm Springs Avenue up to and within the Brian Subdivision, along with
new fire hydrants, service connections and meter installations within the
Subdivision.
Please describe the reasons for delay in the project.
The canal bore was originally anticipated to conclude in early 2015, after
which the rest of the project would proceed. In addition to the canal
authorities' restrictions, the bore under the New York Canal encountered
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difficulties and caused a substantial delay in the project timeline.
Approximately 160 feet of material on at the top of the south side of the
New York Canal was loose and contained large rocks. When the bore
contractor, Earth Energy, encountered a large rock that could not be bored
through or extracted through the borehole, a new bore alignment had to be
started. In addition, the loose material was prone to caving into the borehole
causing additional delays. These difficulties were experienced both during
the2014-2015 and 2015-2016 wintertime bore attempts.
In the 2016-2017 winter timeframe, the successful solution was to
hammer 160 feet of 30-inch diameter steel casing through the loose material
providing a sleeve for the bore pipe in the unstable soils area. A larger
machine than was originally anticipated had to be brought in to complete
the bore and pull the pipe through the borehole.
Are any contractor costs of the unsuccessful bore attempts included in
the cost of the project or this filing?
No. Only the contractor cost for the successful bore, with the additional
casing and pipe materials, and related additional installation cost, is
included in total cost of the project and surcharge calculation.
How do the actual costs differ from the original estimate?
The estimated total cost of the project, per the original Application, was
$1,340,210. The actual costs for the project totaled $1,692,177 as detailed
in Exhibit 5. The overall cost of the project is $351 ,967 higher than the
estimate. The increase in cost is predominantly due to the higher cost of the
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pipeline portion of the project and additional costs incurred in installing the
bore casing.
Please explain the difference in cost in more detail.
There are five major contributors that resulted in the increase in cost. l)
The more than two-year delay in the project timeline necessitated the
pipeline work be re-bid. Dahle Construction was the successful low cost
bidder and completed the pipeline work. Their bid was approximately
$183,000 higher than the original contractor's bid. 2) The bore casing
installed on the south side of the New York Canal to enable boring through
the loose material was at an additional cost of $77,500 - which included
$57,500 for contractor installation labor and $20,000 for materials. 3) There
was almost $19,000 of additional piping required within Brian Subdivision
because the existing piping was in poor condition and required replacement.
4) Abandoning and replacing the existing BSWUA services resulted in
about $24,000 higher cost. 5) Finally, due to the extended project timeline
and scope, more engineering, surveying and inspection costs were required
to complete the project.
Please explain the pipeline bid process.
Initially, the company sought and received four pipeline bids in 2015 at the
commencement of the project. The bids ranged in price from $356,612 to
$534,034. Owyhee Construction Inc. was the initial low cost bidder.
After the completion of the successful bore of the New York Canal
in 2017, which allowed the pipeline project to proceed, the Company
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submitted requests for bids to three of the four qualified contractors that had
initially bid, along with one additional qualified contractor. Owyhee
Construction Inc. was no longer qualified to bid or work on SUEZ projects
in 2017. No contractors responded to this request for bids. The response
from the contractors was that they were then too busy to perform the work.
So then the Company requested bids from four additional qualified
contractors and in May 2017, received two bids ranging in price from
$539,660 to $630,217. Dahle Construction LLC was selected as the
successful low bidder. Dahle Construction LLC's May 2017 bid was
$ 183,048 higher than the original bid from Owyhee Construction two years
prior.
Please explain why the Company did not proceed with the pipeline
project ahead of a bore completion?
In the Company's view, proceeding with the pipeline work ahead of a
successful bore, would not have been a prudent decision. Had the Canal
and Boise River bore route failed due to the unsuccessful bore attempts, the
alternative would have been to pursue the Warm Springs connection from
the west side of the BSWUA system, which would have left the pipeline
work stranded and unusable by the BSWUA customers if it had been
installed ahead of the bores being successful.
Please describe the surcharge and any changes from the Application.
The original estimated ten-year bi-monthly surcharge, as submitted in the
Application, included a Capital Structure of 47.49o/o Debt and 5251%
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Equity, Cost of Debt of 6.15% and a 10.40% Retum on Equity, for an
overall Rate of Return of 8.382%.
SUEZ's December 2017 refinancing changed the Company's
Capital and Cost structure to 45.82o/o Debt, 54.18% Equity, with a Cost of
Debt of 4.650/0.
Because SUEZ's last two general rate case proceedings resulted in
settlements without exact rate of return determinants, the 2009 Order No.
31016 pre-settlement stipulated 10.4oh return on equity rate was used in the
original surcharge calculation model in the Application. Recent IPUC
authorized return on equity rates have varied from 9.5o/o to 10.0%. SUEZ
has therefore revised the Retum on Equity in the surcharge from l0.4Yo to
10J% in an attempt to be equitable between the needs of the customers to
keep costs low and the Company's need to earn a fair retum on the
investment to allow for continued operations and investment in
infrastructure. The revised Rate of Retum on rate base is now 7.549%
The Tax Cuts and Job Act of 2017 reduced the federal corporate tax
rate from 35Yoto 2lo/o. The company's state income tax rate changed from
7.60%to 6.925oh
With the exception of the above-mentioned rate of return
adjustments, the surcharge calculation methodology shown in Exhibit 6 is
identical to the methodology approved in Order No. 33195.
The BSWUA share ofthe total project costs went from the estimated
$246,544 to the actual 5304,824, a change of $58,280. The impact of these
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changes increased the estimated bi-monthly surcharge from 5124.86 to
$ 1s4.s5.
What are Brian Subdivision customers' options in regards to the
surcharge amount due?
Brian Subdivision customers connected to the SUEZ water system will
share in the cost of the project. According to the Commission Order No.
33915, they are responsible for llYo of the pipeline cost and 100% of the
service line cost. After the surcharge is approved by the Commission, these
customers will have the option to elect either to pay the Net Present Value
of the full surcharge as a single lump sum payment in the amount of
$6,350.99, (as shown by the calculation in Exhibit No. 7) or elect to pay the
bi-monthly surcharge of $ 154.55 for ten years, which will be included on
their regular bi-monthly SUEZ water bill.
Does this conclude your supplemental testimony?
Yes.
Wyatt, Supp. Dir. 8
SUEZ Water Idaho Inc.
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CASE NO SUZ.W.18.O1
SUPPLEMENTAL DIRECT TESTIMONY
GREGORY P. WYATT
EXHIBITS NOS. 5, 6 and 7
(Provided on disk)
Sheet No. 1
Replacing all Previous Sheets
SUEZ WATER IDAHO !NC.
SCHEDULE NO. 1C
BRIAN SUBDIVISION SURCHARGE
Availability
To all metered customers, who were previously customers of Brian
Subdivision Water Users Association lnc., located in the Brian
Subdivision, Ada County, ldaho.
Surcharqe Amount
An every other month charge in the amount of $154.55 in addition to
charges specified in Schedule No. 1, General tt/etered Service, and other
applicable charges.
Conditions of Contract:
The surcharge set forth above shall take effect in the first billing period
following the customer's connection to the Company's distribution system,
computation of final project costs, and approval by the ldaho Public
Utilities Commission. The surcharge shall continue for a period of ten (10)
years until [date].
The surcharge shall attach to the customer service address and payment
thereof shall be the responsibility of subsequent customers taking service
at that address.
The surcharge shall not be subject to change in subsequent general rate
proceedings absent a showing of adversity to the public interest.
In lieu of the surcharge a customer may elect to pay a single lump sum
payment equal to the NPV of the surcharge amount owed at the time of
election. The lump sum amount must be paid within thirty (30) days of the
customer's election and sha!! be irrevocable.
SUEZ
INC.
lssued Per IPUC Order No
Effective -
ldaho
lssued by SUEZ WATER IDAHO
Gregory P. Wyatt, Vice President
8248 West Victory Road, Boise,
Case No. SUZ-W-1,8-01
Exhibit No.8
G. Wyatt
SUEE
Linda Puryear
Customer Service Manager
8248 W. Victory Road
Boise, lD 83709
Aprilxx,2018
Telephone: (2OB) 362-7 304
Name
Address
Dear:
This letter provides information regarding the actual cost of the water line work and connection of Brian Subdivision
Water Users Association (BSWUA) customers to the SUEZ water system, as well as the proposed revised
surcharge amount.
Back in September 2014, SUEZ filed an Application (UW|-W-14-01) with the ldaho Public Utilities Commission
(IPUC) requesting approval of the proposed project costs and a billing surcharge for the BSWUA customers. The
application estimated the total cost of the project at approximately $1.3 Million. As you are aware, the project
encountered delays for over two years caused by difficulties in completing the bore under the New York Canal. As
outlined in the IPUC Order No. 33195, BSWUA customers are responsible for the on-site work related to installation
of service lines and meters within Brian Subdivision, and 10o/o of the remaining project cost. That estimated
amount was $246,544. This would have resulted in a surcharge of $124.86 bi-monthly over 10 years or an
estimated onetime lump sum amount of $4,941.
Actual costs for the entire project totaled nearly $1.7 Million. The increase from the original estimate is
predominantly due to higher cost of the pipeline portion of the project, but there were increases in the services and
meters portion as well. Because of the higher costs, the portion to be supported by the BSWUA customers is
$304,824 and the proposed surcharge is now $154.55 bi-monthly or a one-time lump sum amount of $6,350.99.
The Company has recently submitted the revised project costs and revised surcharge to the IPUC for their review
and approval. You can find the Company's submission on the IPUC's website at (Docket
No. SUZ-W-18-01 ) or by visiting the IPUC offices a|472 W. Washington Street in Boise. After the IPUC reviews
this latest submission and issues their final order, we will notify you of the approved surcharge amount.
According to the original Commission Order No. 33195, each BSWUA customer will have thirty (30) days within
which to contact SUEZ with your choice of surcharge payment methods. You can make a one{ime, lump sum
payment, or pay the surcharge over 10 years as part of your bi-monthly water bill. lf you choose the bi-monthly
surcharge option, you can still choose to pay off the net present value balance of the remaining surcharge anytime
during the 10 year period.
SUEZ has been providing safe, reliable water service to customers in the Boise area for over 100 years. We look
fonrard to providing you and your family with the same great service. Please do not hesitate to contact us if you
have questions at [phone] or at [e-mail] with the subject line of "Brian Subdivision".
Best regards,
Linda Puryear
Customer Service Manager
Case No. SUZ-W-18-01
Exhibit No. 9
G. Wyatt
8248 W. Victory Road, Boise, lD 83709 - Tel: [phone] - www.mysuezwater.com
SUEZ
Linda Puryear
Customer Service Manager
8248W. Victory Road
Boise, lD 83709
Date, 2018
Telephone : [phone]
Name
Address
Dear:
The ldaho Public Utilities Commission (IPUC) lssued its Order No. _ approving the costs & surcharge for
the Brian Subdivision Water Users Association water system connection to the SUEZ water system on (date).
You can find the IPUC Order at
The IPUC approved bi-monthly 10 year surcharge amount is $xxx.xx
The IPUC approved onetime lump sum surcharge amount is $x,xxx.xx
You may choose to pay the $xxx.xx bi-monthly surcharge along with your regular water bill for 10 years, or you
can choose to make a onetime, lump sum payment of $x,xxx.xx. lf you choose to have the surcharge added to
your bi-monthly water bill, you still have the option to pay off the remaining surcharge amount anytime during the
10 year period. lf elected, you would then make a one-time lump sum payment equal to the net present value of
the remaining surcharge payments. We can provide you that amount upon request.
Accordingly, you must let us know if you want this surcharge to be included on your water bill over a ten-year
period, or if you prefer to make the one-time payment. Please notify us within 30 days of the date of this letter.
You may either call us at [phone] or email us at [e-mail] with the subject line of
"Brian Subdivision".
Please do not hesitate to call or email if you have questions
Best regards,
Linda Puryear
Customer Service Manager
Case No. SUZ-W-18-01
Exhibit No. 10
G. Wyatt
8248 W. Victory Road, Boise, lD 83709 - Tel: [phone] - www.mysuezwater.com
0
Michael C. Creamer, ISB #4030
GIVENS PURSLEY LLP
601 W. Bannock St.
P.O.Box2720
Boise, Idaho 83701-2720
Telephone: [phone]
Facsimile: 208-388-1300
mcc@ givenspursley. com
Attorneys for SUEZ Water ldaho Inc.
IN THE MATTER OF THE JOINT
APPLICATION OF UNITED WATER
IDAHO INC., AND BRIAN SUBDIVISON
WATER USERS ASSOCIATION FOR
APPROVAL OF AN AMENDMENT TO
CERTIFICATE OF PUBLIC
CONVENIENCE AI{D NECESSITY NO.
143; APPROVAL OF AN AGREEMENT
FOR CONNECTION AND TRANSFER OF
WATER SYSTEMS; APPROVAL OF
RATES AND CHARGES
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISION ...:
Case No. SUZ-W-18-01
CERTIFICATE OF SERVICE
REGARDING REPLACEMENT
SUPPLEMENTAL DIRECT
TESTIMONY OF GREGORY P.
WYATT
I HEREBY CERTIFY that on ,n"Mof May 2018 I caused an original and nine (9)
copies of replacement Supplemental Testimony of Gregory P. Wyatt previously filed on May l,
2018, to be served upon:
Diane Hanian, Secretary
Idaho Public Utilities Commission
47 2 W . Washington Street
Boise, ID 83702
by hand delivering the same to the above-named at the last known address(s) as set forth above.
CERTIFICATE OF SERVICE REGARDING REPLACEMENT
SUPPLEMENTAL TESTIMONY OF GREGORY P. WYATT - 1
I
I also served true and correct copies of same to the address listed below via regular mail:
Richard Juengling
President, Brian Sub Water Users
5855 E Wood Place
Boise, ID 83716
Email: [e-mail]
C. Creamer
CERTIFICATE OF SERVICE REGARDING REPLACEMENT
SUPPLEMENTAL TESTIMONY OF GREGORY P. WYATT - 2