20181115Deshazo Direct.pdf

r)U
f 'l lfl. anr.rt l-'uL)
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT
APPLICATION OF EAGLE WATER
COMPANY, INC. AND SUEZ WATER
IDAHO INC. FOR APPROVAL OF SALE
AND ACQUISITION OF EAGLE WATER
COMPANY, INC. ASSETS BY SUEZ
WATER IDAHO INC. AND AMENDMENT
OF CERTIFICATE OF PUBLIC
CONVENIENCE AND NECESSITY NO.
143, AND APPROVAL OF RATES AND
CHARGES
Case Nos. SUZ.W-I8-02
EAG-W-18-01
DIRECT TESTIMONY OF ROBERT DESHAZO
ON BEHALF OF EAGLE WATER COMPANY INC.
November 2018
1
2
3
4
5
6
7
8
I
a. Please state your name and business address?
A. My name is Robert DeShazo and my office address is 188 West State Street,
Eagle Idaho 83616.
a. What is the name of the company you represent and your capacity?
A. Eagle Water Company, Inc.. I am the President and General Manager.
a. How long have you been the President and General Manager?
A. I have been the President and General Manager for 47 years.
a. What is the purpose of your testimony?
A. Eagle Water Company is a joint applicant with SUEZ Water ldaho Inc.
requesting approval by the Idaho Public Utilities Commission of the
contemplated sale of Eagle Water Company's assets and transfer of its
certificate of public convenience and necessity to SUEZ. My testimony
describes the history of my involvement with Eagle Water Company, why
I have decided to sell the company assets now, and why the purchase of
those assets by SUEZ will be in the best interest of Eagle Water customers.
a. Please describe how you became involved with Eagle Water Company,
Inc.
A. I started Eagle Water Company in 1972 when the city of Eagle, Idaho had
a population of about 180. I was building houses on land I was developing
in the area and there was no water company in Eagle. So I drilled the initial
wells and have spent the last 47 years building water infrastructure to
support the growth in the Eagle area.
R. Deshazo, Dir. 1
Eagle Water Co., Inc.
10
11
12
13
14
15
16
17
18
19
21
20
22
1
2
3
4
5
6
7
8
I
10
11
12
13
14
15
16
17
18
19
20
21
22
23
a
A.
Please describe why you are seeking to sell Eagle Water Company's
assets.
First and foremost, I am now 78 years old, and I realize that a solid
succession plan for ownership and continued operation of the water system
is important to meet the needs of current and future customers.
Secondly, Eagle Water Company currently has over 4,000 customers. I
recogrrize that the company requires significant upgrades in billing, office
administration, water meters, well houses, standby generators, vehicles,
employee education and training along with engineering services for long-
term planning. Also, the company's water infrastructure should be
upgraded with a SCADA system to enable water production monitoring,
early leak detection and conservation management. Being 78, it is even
more difficult for me as an owner and manager to continue to keep up with
the ever-increasing stringent water quality regulations, increasingly
complex utility regulation, and increasingly complex operational and
technical requirements.
Eagle Water Company water rates have not really increased since 7972-
The regulatory process has been difficult for me to understand. Our existing
plant needs to be upgraded and rates need to be updated accordingly to
reflect these infrastrucfure upgrades, system improvements and shifting
focus on water conservation measures. In the absence of this sale to a
qualified purchaser who can efficiently address these needs, Eagle Water
Company would experience difficulties maintaining its system and
R. DeShazo. Dir. 2
Eagle Water Co., Inc.
a.
A
obtaining much-needed financing for its operations, maintenance and
infrastructure upgrades.
And finally, since I have no heirs who are capable or even willing to operate
the company, it is important that I convey the Eagle Water Company system
to a company that possesses the technical, managerial and financial
capabilities to provide reliable and adequate service going forward (e.g.,
engineering; hydrology; utility management; utility accounting; customer
service; computer systems; water production, treatment & testing;
distribution system operation, and the resources to provide 2417 emergency
response services).
Can you please describe the nature of your agreement with H2O Eagle
Acquisition?
In May of this year Eagle Water Company entered into an asset purchase
agreement with H2O Eagle Acquisition, LLC. It was contemplated by the
parties and provided for in the agreement that by this agreement H2O Eagle
would acquire Eagle Water Company and transition the company into a
wholesale water company or at H2O Eagle's sole option, H2O Eagle's
rights under the agreement could be assigned to a very qualified purchaser.
H2O Eagle subsequently expended a great deal of time and effort-time
and effort that I have not been able to dedicate-to develop an appropriate
plan of action. After months of due diligence, outside plant modeling,
financial modeling, potential partnermeetings and internal discussions H2O
Eagle ultimately made the decision to approach SUEZ as a potential
R. DeShazo. Dir. 3
Eagle Water Co., Inc.
1
2
3
4
5
6
7
8
I
'10
11
12
13
14
15
16
17
18
19
20
21
22
23
1
2
3
4
5
6
7
8
I
purchaser and negotiate an agreement committing SUEZ to purchase the
Eagle Water assets subject completion of its due diligence investigations
and Commission approval. The closing of the purchase and sale of the
Eagle Water assets under this agreement would occur at the same time as
the closing of the sale under an asset purchase agreement that SUEZ and
H2O Eagle have entered into (the "H2O Eagle - SUEZ APA"), and which
is being submitted as an attachment to the Joint Application. The intent is
that the Eagle Water Company assets will immediately transfer at closing
to SUEZ, at which point SUEZ would acquire all ownership and
responsibilities for operation of the water system.
Would you please summarize your testimony?
For personal reasons and for what I believe to be in the best interest of Eagle
Water Company customers, I have decided that now is the appropriate time
to transfer ownership and operation of the company's water system to
another company that is qualified to serve its customers and has the
experience and financial wherewithal to upgrade and operate the system.
Asset purchase agreements are place that would allow transfer of ownership
and operation of the company's assets to SUEZ, which would become be
the water utility serving customers in Eagle Water Company's existing
service area. I firmly believe that the succession plan before the
Commission in the Joint Application, including the sale of the company's
assets and transfer of its CPCN to SUEZ as requested by the Joint
R. DeShazo. Dir. 4
Eagle Water Co., Inc.
10
11
12
13
14
15
16
17
18
19
21
a.
A.
20
22
1
2
3
4
5
6
Application will be in the best interests of the Eagle Water Company
a.
customers.
Does this conclude your testimony?
Yes, it does.A.
R. DeShazo. Dir. 5
Eagle Water Co., Inc.