20181012final_order_no_34153.pdf

Office of the Secretary
Service Date
October 12,2018
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT )APPLICATION OF UNITED WATER IDAHO )CASE NO.SUZ-W-18-01
INC.,AND BRIAN SUBDIVISION WATER )USERS ASSOCIATION FOR APPROVAL OF )AN AMENDMENT TO CERTIFICATE OF )ORDER NO.34153
PUBLIC CONVENIENCE AND NECESSITY )NO.143;APPROVAL OF AN AGREEMENT )FOR CONNECTION AND TRANSFER OF )WATER SYSTEMS;APPROVAL OF RATES )AND CHARGES )
On September 29,2014,Suez Water Inc.fka United Water Idaho,Inc.("Suez")and
Brian Subdivision Water Users'Association ("Brian Water Users")jointly applied to the
Commission seeking an Order authorizing Suez to connect to,and take over operation of,Brian
Subdivision's water system.This request came about because of insurmountable costs related to
contaminants in Brian Water's ground water wells.At that time,Suez estimated it would cost
$1.3 million to connect the systems.The Commission ultimately authorized Suez to connect and
provide service to Brian Subdivision's customers.The Commission also approved certain
ratemaking treatment,including a process for Suez to true-up estimates to actual costs once the
connection was complete.Order No.33195.
On May 1,2018,Suez filed an application (the "Application")requesting that the
Commission approve a trued-up rate,and conforming tariffs for Suez's costs of connecting to,
and taking over operation of the Brian Water system.Suez supported its Application with
testimony and documentary evidence.Suez also asked that its Application be processed by
modified procedure.No effective date was requested.
The Commission set a June 27,2018,intervention deadline.No one intervened.
However,Richard Juengling,President of the Brian Subdivision Water Users Association
("Brian Water Users"),was an active participant in the case,and provided comments to the
Commission.
On August 9,2018,the Commission ordered the case be processed by modified
procedure.The Commission set an August 23,2018,comment deadline and a September 6,2018
deadline for the Company to reply.In addition to the public comments of Mr.Juengling,Staff
provided timely comments and the Company filed a timely reply.
ORDER NO.34153 1
THE APPLICATION
In its Application,Suez noted that in the 2014 case,the Commission authorized Suez
to extend its pipeline under the New York Canal and the Boise River to connect with the eastern
end of Suez's mainline near the Brian Subdivision.Application at 2.Suez estimated it would
cost $1,340,209 to connect to Brian Water's system,including approximately $1,215,184 in
pipeline costs and $125,026 in service and meter costs.Id.The Commission authorized Suez to
recover these costs as follows:
1.Former Brian Water customers would pay,as a lump sum or over 10 years,all
service and meter costs within the subdivision and 10%of the trued-up
pipeline costs.The remaining 90%of trued-up pipeline costs would be rate
based among all Suez customers;
2.Regarding the 90%of trued-up pipeline costs allocated to all Suez customers,
the Company would defer recovery of costs (and accrue allowance for funds
used during construction ("AFUDC"))until those costs are included in base
rates throughSuez's next general rate case;and
3.Once complete,Suez would file a conforming tariff specifying the terms of
service for customers in Brian Subdivision.
See id.The Commission further authorized Suez to return to the Commission for approval of
trued-up costs.See Id.
With this Application,Suez has asked to recover its trued-up costs.Suez represented
that it took two more years than expected to connect the systems,and cost $1,692,177,nearly
half a million dollars over its initial estimates.Suez stated its trued-up costs included $1,541,504
in pipeline costs,of which former Brian Water customers would pay 10%(or $154,150),and all
Suez customers would pay 90%(or $1,387,353).The trued-up costs also included $150,673 in
service and meter costs to be entirelypaid by former Brian Water customers.See Wyatt Direct at
3-5.The Brian Water Users'share of the trued-up costs was $304,823,which consisted of
$154,150 in pipeline costs and $150,673 in service and meter costs.Suez proposed to recover
these costs from the former Brian Water customers througha one-time lump sum surcharge of
$6,350.99 per Brian Water customer,or a $154.55 surcharge per Brian Water customer every
two months for 10 years.Id.at 7-8.Suez attributed the delays and cost overruns to geotechnical
issues with boring under the New York Canal and Boise River.Id.at 5-7.
ORDER NO.34153 2
COMMENTS AND TESTIMONY OF PARTIES
A.Staff
Staff provided the Commission with a comprehensive review of Suez's Application,
exhibits,and information received throughdiscovery,and reported that the actual project costs
claimed by the Company are accurately and properly recorded in the Company's books.Staff
Comments at 2.Staff generally supported Suez's Application and trued-up calculation of costs as
"prudently incurred,and in compliance with Commission Order No.33195."Id.But,Staff
recommended the Commission allocate costs differently than how they were to be allocated
under that order.Id.at 2-3.
According to Staff,because of the significant delays and cost overruns,certain costs
that exceeded Suez's estimates should be rate based and borne by all customers.Specifically,
delays and engineering changes in the Highway 21 River Crossing increased costs by $260,500.
Id.at 4.Staff stated that while these costs were prudently incurred,Suez could have better
anticipated the overruns when it applied to connect the systems.Id.at 5.Staff argued it would be
unfair to allocate 10%of these excess costs to customers in Brian Subdivision because current
and future customers outside Brian Subdivision,including those in Barber Valley,will benefit
from Suez having extended its pipeline under the Boise River.See id.at 3-5.
Staff also noted that Suez claimed it had inadvertentlystopped accruing AFUDC in
November 2017,when the project was completed.Id.at 3.Staff disagreed with Suez that
AFUDC should continue to accumulate on the Brian Water surcharge portion of the project until
the surcharge is approved and implemented.Staff noted that the Commission did not specify the
AFUDC treatment for the portion covered by the surcharge.Staff stated that traditional
ratemaking would be appropriate-thatAFUDC should cease to accumulate on the Brian Water
allocated costs once the project is completed and placed in service regardless of when the project
is included in rates.Id.at 4.Staff thus recommended that AFUDC not continue to accumulate on
the surcharge portion of the project.
Besides the cost allocations discussed above,with regard to Suez's proposed tariff
Schedule 1C for the Brian Subdivision,Staff recommended several other revisions.Id.at 6.
Specifically,Staff recommended that language be added to account for Budget Billing and
clarifications in language regarding Commission authority.Id.at 6-7.Staff further
recommended that the Company issue direct notice to Brian Subdivision customers about these
ORDER NO.34153 3
revisions after a final order issues in this case.The notice should include the overall surcharge
amount,payment options and terms,including the availabilityof Budget Billing.Id.at 7-8.
Finally,Staff recommended the Commission order Suez to file semi-annual reports on the status
of the Brian Subdivision arrearages and payment plans,with the initial report due six months
after the Commission issues its final order.Id.
B.Brian Subdivision Water Users Association
Brian Water Users provided comments that echoed Staff's appraisal of the process
and result of connecting the Brian Water system with Suez.Specifically,Brian Water Users take
umbrage with paying for additional costs when Suez caused the delays and cost overruns and
many more customers will benefit from the new pipeline than when the original application was
made to connect the systems.Brian Water Users Comments at 2-3.Brian Water Users go further
than Staff,however,to argue that Brian Subdivision customers should pay for costs arising
within the Subdivision only,and that "[n]o portion of the cost to bring the pipeline under the
Boise River should be separately [allocated to Brian Subdivision customers]."Brian Water Users
also commented that its water rights are worth approximately $50,000 and should offset costs to
customers in Brian Subdivision.Brian Water Users Additional Comments at 1.
C.Suez
Suez agreed with Staff's recommendation to rate base the additional project costs.
Company Response at 1-2.The Company stated this approach "will help to mitigate the
financial impact of the unforeseen additional costs on the small number of Brian Subdivision
customers...."Id.at 2.Suez also agreed with Staff's recommendation that Suez change
Schedule 1C to include Budget Billing,and notify Brian Subdivision customers of their payment
options.Id.at 2-3.
With regard to the Brian Water Users'comments,the Company was sympathetic to
the financial burden on Brian Subdivision customers,but points out that,when Brian Water and
Suez jointly applied to connect the two water systems,Brian Water claimed the proposed
pipeline was "the only feasible option for Brian Subdivision."Id.at 3 (internal quotes omitted).
Suez also commented that the new pipeline is Brian Subdivision's primary water supply,while
"Homes separate from the Brian Subdivision,off Warm Springs Avenue between Highland
Valley Road and Signal Rock Drive,continue to be provided their water supply from the
Company's existing Harris Ranch Reservoir in the Harris Ranch development."Id.4.
ORDER NO.34153 4
DISCUSSION AND FINDINGS
The Commission has reviewed the arguments advanced by the Company and Staff as
well as the statements filed by Mr.Juengling,on behalf of the Brian Subdivision Water Users
Association.After due consideration,we find Suez has met its burden of showing that it
reasonably and prudentlyincurred the costs to connect Suez and Brian Water.Likewise,Suez's
request to true-up actual costs by $351,968,from its estimate of $1,340,209 to $1,692,177
(including $1,541,504 in pipeline costs and $150,673 in service and meter costs)is approved as
prudent.Nevertheless,Staff's and Brian Water Users'concerns about the spread of these costs
are well-founded.
There is no dispute that construction was delayed for two years,and delays and
engineering changes in the Highway 21 River Crossing increased Suez's original estimate of
pipeline costs by $260,500.It also is undisputed that the river crossing benefits both the Brian
neighborhood and the surrounding area,which has grown substantially over the last three years.
Once the Highway 21 River Crossing is looped with the Warm Springs line,it will have
abundant capacity to benefit current and future customers along Warm Springs Avenue,and in
the east side of Boise.Accordingly,we find that,of Suez's $1,541,504 in actual pipeline costs,
Suez should collect the entire $260,500 in river crossing cost overrun from the general
population of customers through base rates and should not allocate those costs between those
customers and Brian Water customers at the 90%/10%allocation approved in Commission Order
No.33195.This means that the Schedule 1C surcharge to former Brian Water customers shall be
calculated to recover $278,773,i.e.,10%of ($1,541,504 -$260,500)+$150,673.We find it fair,
just,and reasonable for Suez to file a revised Schedule 1C reflecting the adjusted surcharge
amounts prior to implementing any surcharge,with a November 12,2018,effective date.See
Idaho Code §61-307.
Further,we find that AFUDC is appropriately accrued on all construction costs for
the Brian Water connection until these costs are included in rates.This is consistent with our
prior order.To be clear,AFUDC will no longer accrue on the $278,773 Brian Water surcharge
amount because Suez will begin to collect the surcharge amount from Brian Water customers
under revised Schedule 1C.The remaining connection costs will accrue AFUDC until included
in rates at the conclusion of the next general rate case.
ORDER NO.34153 5
Additionally,we find the customer notice provisions recommended by Staff to be
appropriate.Suez shall mail each of its Brian Subdivision customers a letter defining the
surcharge amount,payment terms,and available payment options including Budget Billing.
Finally,the Company shall file semi-annual reports regarding arrearage and payment plan status
with the Commission,with the initial report due in six months.
ORDER
IT IS HEREBY ORDERED that the actual project costs of $1,692,177,for the
construction project originally approved in Order No.33195,are approved.$278,773 shall be
borne by Brian Subdivision customers and immediately placed into rates through the changes
approved in Schedule 1C,with all other costs placed into rates after Suez's next general rate
case.
IT IS FURTHER ORDERED that AFUDC shall no longer accrue on the $278,773
Brian Water surcharge amount.
IT IS FURTHER ORDERED that Suez file with the Commission a conforming
Schedule 1C by October 15,2018,with changes to take effect November 12,2018.
IT IS FURTHER ORDERED that Suez shall mail each of its Brian Subdivision
customers a letter defining the surcharge amount,payment terms,and available payment options
includingBudget Billing.
IT IS FURTHER ORDERED that Suez shall file semi-annual reports as outlined
above.
ORDER NO.34153 6
DONE by Order of the Idaho Public Utilities Conunission at Boise,Idaho this
day of October 2018.
PAUL KJELL R,P SIDENT
TINE RAPE COMMISSIONER
ERIC ANDERSON,COMMISSIONER
Diane M.Hanian
Conunission Secretary
I \LegaltWATER\SUZ-W-18-01\orders\SUZW1801final bk3 doc
ORDER NO.34153 7