20070601Reply comments.pdf

DONOV AN E. WALKER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5921
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, ID 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
STONERIDGE WATER COMPANY FOR AN
INCREASE IN RATES AND CHARGES AND TO )
MODIFY RULES AND REGULATIONS
CASE NO. SWS-O6-
REPL Y COMMENTS OF
THE COMMISSION STAFF
On November 20, 2006, Stoneridge Water Company filed an Application for an
increase in rates and charges and changes to its rules and regulations. On December 18 , 2006
the Commission issued a Notice of the Company s Application and authorized the use of
Modified Procedure to process that Application. Order No. 30204. On February 16, 2007, the
Commission established a comment deadline under Modified Procedure of April 27, 2007.
On April 27, 2007, the Commission Staff as well as Stoneridge Recreational Club
Condominium Owners Association, Inc. (Stoneridge Resort), the only intervenor in this case
filed comments. On May 14, 2007, both the Company and the Intervenor filed Replies to the
Comments of Staff.
Based upon the Replies to its Comments, Staff is compelled to make certain
corrections to its Comments filed on April 27 , 2007. Because these corrections have a rather
large impact upon the Company s Revenue Requirement, a change in Staffs recommended rate
design is also warranted.
REPL Y COMMENTS OF
THE COMMISSION STAFF
JUNE 1 , 2007
CORRECTIONS TO RA TE BASE
In the Company s Reply to Staffs Comments in this Case, the Company raises the
issue that Staff failed to accurately consider investments made by the Company as part of the
Company s rate base. After reviewing the information provided by the Company, Staff agrees
that it failed to accurately consider some investments made by the Company, and failed to
include an additional $52 373 of capital expenditures in rate base. The additional expenditures
made by the Company were for items associated with capital improvements made as part of the
previously described Phase I and Phase II improvements. Staff examined these expenditures and
determined that the Company incurred these costs above and beyond the costs incurred and paid
for with the Phase I and Phase II loan proceeds. Also, Staff recommends that these expenditures
were reasonable and prudent expenditures for capital improvements that are currently used and
useful in providing service. Staff is requesting that the Commission determine that the rate base
amount Staff set forth in its Comments of $51 254 be increased by the $52 373. This will make
the Company s total rate base $103 627.
Staff also wishes to correct a typographical error from page 14 and page 20 of its
original comments. The total monthly surcharge per customer for the Happy Valley Ranchos
Phase I, interconnection loan repayment should be $16.83 as stated in the chart on page 14. The
$16.64 amount stated in the text of page 14 and 20 is an error.
When the corrected amount of rate base is used, the Company s revenue requirement
should be increased by $8 002. Staffs original Comments stated that the total revenue
requirement should be $132 350; now with the additional rate base, the new revenue requirement
is $140 352. See Attachment A, which is meant to amend Staffs Exhibit 106.
CORRECTIONS TO METER SIZES
Staff s recommended rate design utilized a varying customer charge based upon
meter size. This calculation uses a standard residential % inch meter as a base charge, and all
other customer s minimum charges are set as a multiple of this base, using the flow area ratio as
the multiplier. Staff continues to support and recommend this methodology. However, the
Company has identified a number of changes and corrections to the actual meter sizes that
are/will be installed on the system. The changes include reductions in both the number of meters
and the size of several meters. Additionally, there was an error in Staffs spreadsheet calculation
REPL Y COMMENTS OF
THE COMMISSION STAFF
JUNE 1 2007
utilized in Staff s original Comments. The net effect of these changes combined with the
additional rate base revenue requirement is to create a revenue shortfall of $37 670, using the
rates as proposed in Staff s original Comments.
CLARIFICA TION OF THE RECONNECTION FEE (SEASONAL DISCONNECTS)
Staff, in its filed Comments, proposed a reconnection fee of $65 for customers that
are disconnected for periods greater than 30 days ($83.50 after hours). Staff believes that this fee
is necessary to discourage seasonal disconnections, which undermine the company s revenue and
therefore their ability to maintain facilities capable of delivering the peak water demand.
Because commercial customers had not historically disconnected, Staff was focused on the
residential customers but is now aware that larger customers, specifically referring to the golf
course, might disconnect for the winter season. For the same reasons that staff proposed a
varying customer charge based on meter size, Staff believes that the reconnection charge should
also be proportional to the flow area of the meter, or proportional to the customer charge. The
after hours differential should be $25 higher than the charge for normal working hours.
Staffs original proposal: $65 reconnection fee for disconnects longer than 30 days
Staff revised proposal:$65 for a standard %" meter and proportionately increase
the fee based on the flow area of the meter. For example:
14"$65
$462
$4160
These rates are summarized in Attachment B.
CORRECTED RA TE DESIGN
Because of the accounting adjustment that increased the revenue requirement and the
reduction in revenue that would result from the changes in meter size, the Staffs originally
proposed rate design will no longer produce the necessary revenue requirement. The new
revenue requirement is $140 352.
Staff is proposing a customer charge of $24 for a standard % inch meter. Larger
meters would be charged an increased rate in proportion to the area of the meter. This is the
same methodology originally proposed by Staff. The commodity charge would be $0.79/1 000
REPL Y COMMENTS OF
THE COMMISSION STAFF
JUNE 1 , 2007
gallons for all customers and all usage except the golf course, which would receive a 10%
discount in the commodity rate to $0.71/1 000 gallons because it has interruptible service and the
ability to take service during off-peak hours. This is consistent with Staffs original comments
where the commodity rate for the golf course was also set at a 10% discount.
Staffs original proposal: $18.10/month for a %" meter and $0.53/1 000 gal. (10% discount to
golf course)
Staff revised proposal: $24/month for a %" meter and $0.79/1 000 gal. (10% discount to golf
course)
These rates and rate design are summarized in Attachment C.
GOLF COURSE RA
The Company has raised concern that if the annual cost to the Golf course exceeds
about $45 000 they would opt for drilling their own well at an estimated cost of $100 000. Staff
acknowledges that this is a valid concern and also notes that the Golf course is an interruptible
customer.
The annual cost to the golf course under Staffs proposed rates is $46 071. After
communicating this to the Company s representative, the Company responded that Staffs rate
design of $24.00 base charge on a %" meter, with a customer charge varying based upon meter
size as set forth in Staff Comments, and a commodity charge of $0.79/1 000 gallons with an
irrigation (golf course) discount of 1 0% is agreeable.
CONCLUSION
Based on the corrections set forth by Staff in these Reply Comments, Staff s
Recommendations set forth in its original Comments should be modified as follows:
1 )Rate base is $103 627, not $51 254.19;
Revenue Requirement is $140 352, not $132 350;
The total monthly surcharge per customer for the Happy Valley Ranchos Phase I
interconnection loan repayment should be $16., not $16.64;
The base %" meter charge is $24., not $18.10; and the commodity charge is
$0.79/1 000 gallons, not $0.53/1 000 gallons;
The Reconnection Fee scales proportionately just like the monthly customer charge, as
shown in Attachment B.
REPL Y COMMENTS OF
THE COMMISSION STAFF
JUNE 1 , 2007
All of the remaining recommendations and rationale contained in Staffs original Comments
which were not addressed in these Reply Comments, remain as stated in the original Comments.
Respectfully submitted this 1 st day of June, 2007.
Donovan E. Walker
Deputy Attorney General
Technical Staff:Joe Leckie
Dave Schunke
REPL Y COMMENTS OF
THE COMMISSION STAFF
JUNE 1 , 2007
Stoneridge Water Company
ICase No. SWS-O6-
Rate Case
Amended Revenue Requirement Calculation - Post Comments
Rate Base 618,Attachment 105 903
Annual Expenses $116 072,Attachment 104 116 073
Depreciation 181,Attachment 101 181
Grossed-up Taxes 1,478,See Below 195
(See Calculation Below)
Revenue Requirement $132 349,140 352
Calculation of Taxes
Income from Return on RB 618 903
Less Interest Expense 210)210)
Taxable Income 5,408 693
State Taxes ~ 7,411 889
Federal Taxes ~ 15%750 621
Net income after tax 247 184
Gross Up Multiplier:
Beginning 100,0000%
State Tax ~ 7,6000%f---Federal Taxable 92.4000%
Federal Tax ~ 15%13,8600%
Net After Tax 78,5400%
Net to Gross Multiplier 127,3237%
Tax Liability x Gross-up Factor
(($411 + $750) x 1,273237)1,478
--=
(($889 + $1621) X 1.273237)195
Amended
Exhibi t 106
ATTACHMENT A
CASE NO. SWS-06-
STAFF REPLY COMMENTS6/01/07
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CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 1ST DAY OF JUNE 2007
SERVED THE FOREGOING REPLY COMMENTS OF THE COMMISSION STAFF,
IN CASE NO. SWS-06-, BY MAILING A COpy THEREOF, POSTAGE PREPAID
TO THE FOLLOWING:
WAYNE BENNER
STONERIDGE WATER COMPANY
PO BOX 280
BLANCHARD ID 83804
JOE M OLMSTEAD
11203 E ANTLER RD
CHA TT AROY W A 99003
MAIL: jolmstead~windwireless.net
JANET ROBNETT
PAINE HAMBLEN COFFIN BROOKE AND
MILLER LLP
701 FRONT AVE. SUITE 101
PO BOX E
COEUR D' ALENE ID 83816-0328
CINDY THOMAS
RESORT MANAGER AND SRCCOA
ASSIST ANT SECRETARY
STONERIDGE RESORT
250 CHATWOLD
BLANCHARD ID 83804
~~~\(~
CERTIFICATE OF SERVICE