20210126Comments.pdf

JOHN R. HAMMOND, JR.
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITM,S COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-007 4
[phone]
IDAHO BAR NO. 5470
Street Address for Express Mail:
11331 W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, D 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
APPLICATION OF CDS STONERIDGE
UTILITIES, LLC TO CHANGE RATES FOR
NON.REFUNDABLE HOOK.UP FEE FOR NEW
WATER CONNECTIONS
cAsE NO. SWS-W-20-01
COMMENTS OF THE
COMNISSION STAFF
The Staff of the Idaho Public Utilities Commission ("Staff') submits the following reply
comments.
BACKGROUND
On June 4,2020, CDS Stoneridge Utilities, LLC ("Company") applied to increase the fee
for a new customer to physically connect to the Company's water system from $1,200 to $9,735.
See Application at 1. The Company requested an effective date of July 27,2020. On June 25,
2020, the Commission ordered the Application to be processed by Modified Procedure and
suspended the Company's proposed effective date to January 26,202I. See Order No. 34702.
On November 30, 2020, Staff filed a Motion to Extend Suspension Period ("Motion") for
an additional 60 days for good cause pursuant to ldaho Code * 6l-622(4). The Company did not
file a written response.
The Commission granted Staff's Motion and extended the suspension period (the
proposed effective date) in this case until March29,2OZI.
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ISTAITF COMMENTS JANUARY 26,2021
STAFF ANALYSIS
Staff reviewed the Application, the Company's responses to Productions Requests, and
other available documents and generally supports the Company's Application to increase the fee
for a new customer to physically connect to the Company's water system ("Hook-up Fee") but
not to the requested level. Staff recommends that the Non-Recurring Charges section of the
Company's Tariff be modified to allow for the itemized Hook-up Fees based on the work
required to connect a customer to the Company's water system. CDS Stoneridge Utilities, LLC
Tariff No. 2 (effective November 1,2014). Staff will also provide direction on the accounting
for Hook-up Fees and connection costs, and how the Company can potentially recover any costs
it incurs beyond the amount received from the customer Hook-up Fee.
RECOMMENDED TARIFF CHANGES
Staf?s Proposed Hook-up Fees
The current $1,200 Hook-up Fee included in the Non-Recurring Charges section of the
Company's Tariff does not cover the costs incurred by the Company when it connects a new
customer to its system. The Company experiences a wide variety of circumstances that affect the
cost to hook-up new customers in different parts of the Company's service territory. In some
cases, the service line and other components have already been installed, and the Company need
only install a meter and perform an inspection. [n other cases, the Company must excavate, tap
the main, run a service line across the road, and install a meter and pit setter. To better reflect
the variety of circumstances that the Company encounters across its service territory, Staff
proposes that the following schedule be adopted in lieu of the current $1,200 Hook-up Fee:
For applicants requesting a 314" or 1" connection:
Complete Installationl
Tap Main and Install service line to curb stop only
Adder for excavation or horizontal boring across a road
Pit Setter and meter only
Install meter and turn-on water only
I A "Complete Installation" is defined on page 4 of Staff's Comments.
$3,500
$1,512
$1,900
$2,296
$ 533
2STAFF COMMENTS JANUARY 26,2021
For applicants requesting a connection larger than L": Customer pays actual
construction costs.
Staff s proposed Hook-up Fees are based on costs provided by the Company in its
responses to Staff s Production Request Nos. 4, 5, and 6. In its estimates, Staff included only
external costs and did not include internal administrative,labor, or overhead costs. When the
Company provided two or more different costs for the same materials or labor, Staff used the
lower cost in its estimate.
Staff requested detail for the internal costs the Company incurs connecting a customer.
The Company stated that it pays all employees on a salary and therefore could not break out the
cost for their work to connect new customers. Staff recommends that internal costs continue to
be included in base rates and not included in the Hook-up Fee.
Staff compared material and labor costs with actual invoices provided by the Company in
Case No. SWS-W-20-02 and found that some of the work and materials described by the
Company were not routinely performed when installing a new service. For example, Staff found
no invoices from contractors for traffic control services, even though bids provided by the
Company included traffic control costs. Staff excluded such costs from its estimates and
recommendations.
Using information obtained from Company supplied bids, Staff estimates the cost of
a complete installation to be $3,808; however, invoices provided by the Company in
Case No. SWS-W-20-02 indicate that the Company is only paying $3,500 for this same work.
Staff recommends the Commission approve this latter amount for a complete installation
Hook-up Fee.
Staff believes that most residential lots in the Company's service area only require a3l4-
inch meter. In conversations between the Company and Staff, the Company stated that its
materials costs for a l-inch meter installation are less than the cost of obtaining materials for a
314-inch installation. Staff notes that this is not generally true across Idaho, but that the
difference in costs of installing either a l-inch or a3/a-inch meter are relatively small. Staff used
the l-inch meter materials costs provided by the Company in its estimates. Provided that the
cost of installing a l-inch meter is less than the cost of installing a3/q-inchmeter, Staff believes
that it is prudent for the Company to install the larger meter. The Company's current Tariff
STAFF COMMENTS JANUARY 26,20213
allows the Company to charge a customer with a "0.75" inch meter a Minimum Monthly
Customer Charge of $24.00 and$42.67 for a customer with a "1.00" inch meter. Company
Tariff No. 2, page 1. Staff believes that a customer requesting a3/q-inch meter should only be
charged the minimum monthly customer charge for a3/q-inch meter regardless of whether a 1-
inch meter was installed or not. The Company should look at the need to have both the 0.75 inch
and 1.00 inch meter rates in it's next general rate case.
Other Recommended Changes to the Tariff
New definitions
For clarity, Staff recommends that the following new definitions be included in Section 2
of the Company's Tariff:
Applicant: A person or entity requesting new water service from the Company.
Complete Installation: lncludes the costs of tapping the main and installing a service line to the
curb stop and installing a complete Pit Setter and meter.
Customer: A person or entity who is receiving water service from the Company.
Pit Setter and meter: Includes the materials and costs necessary to install the Pit Setter (with
enclosure) and meter and connect it to the Corp Stop.
Tap Main and Install service line to Curb Stop: Includes connection to the main, installing up
to 50 feet of line between the Corp Stop, and the Curb Stop.
Corp Stop: A valve located on the service line and adjacent to the Company's main.
Curb Stop: A valve, located on the service line near the edge of the customer's property. The
Curb Stop is used to turn-on/shut-off water to the customer. It is often located within the Pit
Setter enclosure.
Extraordinary Circumstances: Conditions not typically encountered when performing a
hook-up. This may include the installation of service lines longer than 50 feet, excavation
through rock outcrops, or excavation in areas with high water tables requiring additional
equipment for water removal.
4STAFF COMMENTS JANUARY 26,2021
M odifications to existing definitions
Staff also proposes that the following definitions be updated, as shown in redline format
in these Comments, to reflect Staffs recommendations:
2.4.1 Connection or Hook-up Fee: One time connection to the utility's distribution
system.
eempanf The Company assumes ownership and responsibility for maintenance of the meter and
all pipes and equipment between the Company's main and the meter at the time of the
customer's connection to the Company's water system.
2.6 Customer:
A person or entity who is receiving
water service from the Company.
Staff also recommends that the term "out-of-the-ordinary" used in Section 9.4 of the Company's
Tariff be replaced with the word "extraordinary".
Accounting Treatment and Recovery of Excess Costs
Staff discovered through its investigation that the Company does not properly record
Hook-up Fees collected and additional costs incurred for connecting customers to its water
system. Prudent costs incurred by the Company should be rate based and are recoverable from
all customers when the Company files its next rate case.
All Hook-up Fees collected by the Company should be posted under Account No. 271
Contributions in Aid of Construction ("CIAC") (See page 8 in the Annual Report). The balance
of this account is used to reduce Plant in Service and decreases the Company's rate base. The
CIAC balance is amortized at the same rate as the assets they were used to purchase. The annual
amortization will be posted as a reduction to Account No. 403 Depreciation Expense (See page 4
in the Annual Report). The accumulated amortization should be recorded under Account No.
272 Accum. Amort. of Contrib. in Aid of Const (See page 8 in the Annual Report).
STAFF COMMENTS JANUARY 26,202I5
All costs incurred to connect a customer to the water system, regardless of who pays for
those costs, should be posted in the proper Plant in Service account. For service pipes leading
from the main to the meter pit, those costs should be recorded in Account 101 Sub Account No.
333 Services, while the meter pit and meter should be recorded in Account 101 Sub Account No.
334 Meters and Meter Installations (See page 5 in the Annual Report). These balances will be
depreciated at depreciation rates appropriate for the corresponding assets. Based on the National
Association of Regulatory Utilities Commissioners Depreciation Practices for Small Water
Utilities a default rate for each account is 2.57o, which provides for a 40-year life. However,
depending on differing situations those rates could be different. Annual depreciation expense
should be recorded in Account No. 403 Depreciation Expense (See page 4 in the Annual Report),
and the accumulated depreciation should be posted to Account No. 108.1 Sub Account 333
Services and Sub Account No. 334 Meters and Meter Installations (See page 6 in the Annual
Report).
When the Company files its next general rate case, it will be able to recover depreciation
expense in its revenue requirement. The Company will also be authorized to earn a reasonable
rate of return on its net rate base. Staff is available to work with the Company to insure proper
recording of rate base and depreciation expense.
CUSTOMER NOTICE AND PRESS RELEASE
Under the Commission Rules of Procedure Rule l34.OI Tariff Advices Authorized -
Public utilities may file tariffs adding new or modifying existing services, providing for new or
modified rules, or otherwise making minor changes to existing schedules by tariff advice. The
Commission accepted Staff s proposal to open a case and treat this filing as an Application,
Order No. 34702.
Staff reviewed the notice and press release requirements and believe the utility is not
required to issue a customer notice or press release. The Commission did not issue a press
release in this case.
As of January 25, 2021, there were no customer comments received on the case, although
there were two customer comments sent as part of the follow-up case, Case No. SWS-W-2O-02,
which is still pending.
STAFF COMMENTS JANUARY 26,20216
STAFF RECOMMENDATION
After review of the Company's Application and additional information provided through
discovery, Staff recommends the Commission:
. Approve the changes to the Tariff as stated above, including the new Hook-up Fees, new
and revised definitions, and changes to sectio ns 2.4.1, 2.6 and 9 .4; and
o Remind the Company that failure to comply with the Tariff could expose the Company to
penalties under ldaho Code * 6l-706.
Respectfully submitted this ){ au1of January 2021
John Jr.
General
Technical Staff: Joseph Terry
Chris Hecht
Michael Morrison
i :umisc/comments/swsw20. ljhjtcwhmm comments
7STAFF COMMENTS JANUARY 26,202I
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 26th DAY OF JANUARY 2021,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. SWS-W-20-01, BY E-MAILING A COPY THEREOF, TO THE
FOLLOWING:
STEVEN DURBIN
CDS STONERIDGE UTILITIES
PO BOX 298
BLANCHARD ID 83804
E-MAIL: [e-mail]
SECRETAR
CERTIFICATE OF SERVICE