20200930Response.pdf

Preston N. Carter, ISB No. 8462
Blake W. Ringer, ISB No. 11223
Givens Pursley LLP
601 W. Bannock St.
Boise, D 83702
Telephone: [phone]
Facsimile: [phone]
prestoncarter@ givenspursley. com
blakeringer@ givenspursl ey. com
i'ia !'\it":'r,LtYf,lL*
:*:i:if 3ff FS l+r 29
'-1l.t' j. r _r: iq,- r:-.'.,iT"-:ii;.. , .iiSL+r:_ibi.GH
. i. "'F'JrJrirlrlE
Attorneys for the Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE COMMISSION'S
INVESTIGATION INTO CDS STONERIDGE,
LLC'S HOOK-UP FEE FORNEW
CUSTOMERS TO CONNECT TO ITS WATER
SYSTEM
CaseNo. SWS-W-20-02
RrspoNsr ro ORDER No.34770
CDS Stoneridge Utilities, LLC, owned by J.D. Resort, Inc. (collectively the "Company")
through its attorneys of record Givens Pursley LLP submits this Response to the Idaho Public
Utilities Commission's (the "Commission") Order No. 34770, dated September 9, 2020.
INTRoDUCTIoN
J.D. Resort acquired CDS Stoneridge in November 2018, as part of a larger acquisition
that involved purchase of a golf course, other property, and a sewer company. See Idaho PUC
Order No.34297 (April 2ll9).Unfortunately, CDS Stoneridge had been operated for years or
decades in an unsustainable manner. The Company's rates have not been substantively updated
since 2007, Idaho PUC Order No. 30342 (June 2007);r the prior owner did not keep adequate
records; and the Company's policies and procedures were not readily available. Exacerbating
I Note that CDS Stoneridge did have a rate case in 2015 but it involved only the approval of a minor adjustment to
rates related to a loan (an adjustment that had actually been approved in advance in the 2007 rate case) and a request
to change the utility's n,rme on its Tariff. Idaho PUC OrderNo. 33249 (March 2015). The Company's core existing
rates, including the $1,200 Hook-up Fee, were set in the 2007 rate case and have not been adjusted since then.
RsspoNsr ro Onoen No. 34770
t 533267 4 _).docx[ I 5376. I ]
Page I of8
issues, the employees of CDS Stoneridge were located in Utah and did not stay with J.D. Resorts
after the acquisition.
Upon the acquisition, J.D. Resorts hired a water system operator and began the process of
attempting to run the Company in a sustainable manner. At the outset, J.D. Resorts recognized
that the $1,200 Hook-up Fee did not cover the costs of connecting new customers to the system.
Due to the unique geography of the remaining lots, connecting new houses was not a matter of
simply installing a meter; it often involved extending the water system, boring under roads, and
other services in excess of $1,200. As discussed in more detail below, it was not clear to J.D.
Resorts when a customer was merely hooking up to the system, and thus would be subject to
only the Hook-up Fee, and when other parts of the Company's approved Tarifq such as the
provisions for line extensions or for out-of-the-ordinary expenses, applied.
In addition, J.D. Resorts did not fully appreciate the depth and intricacy of the
Commission's regulations. The new water system operator, while highly competent in the details
of running a water system, had experience only with non-utility water providers.
J.D. Resorts now recognizes that the Company's operations, tariffs, and rates must be
overhauled, with Commission oversight and approval, to bring it into compliance with the
Commission's rules. The Company's Response to the Order No. 34770 is set forth below.
ln addition, the Company will take immediate action in response to OrderNo. 34770.
The Company also proposes to work with its afforneys and Commission Staff to create a
compliance plan to be frled with the Commission within 90 days after the Commission's order
regarding this Response. The Company respectfully requests that the Commission defer any
decision regarding monetary fines until after the compliance plan is filed.
RESPoNSE ro ORoenNo. 34770
1533267 4_).daxll 5376. U
Page 2 of 8
Rnsponsr ro Onoen No. 34770
The Company responds to OrderNo. 34770 as follows. The Company will immediately:
l. Cease all billing practices that conflict with the Tariff, including charging new customers
within its service territory more thanthe Commission-approved $1,200 Hook-up Fee to
connect to the Company's water system;
2. Reconnect and/or continue serving customers within its service territory who did not pay
amounts that exceed the $1,200 Hook-up Fee;
3. Connect requesting new customers within its service territory to the water system who
pay the $1,200 Hook-up Fee, consistent with the Company's Tariff; and
4. Provide copies of Company records regarding new customer connections from
November 2018 through the present under separate cover to Commission Staff.2
Along with these immediate measures, the Company commits to refund Hook-up Fees
paid by customers in excess of the Commission-approved $1,200.
By way of explanation regarding fees charged to potential customers in excess of $1,200,
the Company interpreted its Tariffas allowing extra charges to customers when connecting those
customers required the Company to incur costs beyond a simple service connection. For
example, section 9.4 of the Tariff provides,
The extra costs of any out-of-the-ordinary circumstances requiring
additional equipment or special construction techniques involved in
the installation of a service connection will be agreed to in advance
by the Customer and Company. The costfor any additional services,
work or parts except those associated with the installation of a stop-
2 The records are provided to Commission Staffunder separate cover to protect customers' addresses and billing
information. Most of the work necessary to connect customers to the system was done intemally, thus the Company
is unable to provide the Commission with simple invoices or receipts for this work. However, the Company is
working diligently to quantifu the costs of these connections and will provide that information to the Commission as
soon €rs possible.
RpspoNsr ro ORonn No . 34770
1 531267 4 3.docx[l 5376. l]
Page 3 of8
and-waste valve and 3/4 inch water meter shall be the responsibility
of the customer.
(Emphasis added.) In addition, section 9.1 of the Tariffcontemplates "piping, valves, [and]
appliances" that are the "property and responsibility of the Customer," while section 12 of the
Tariff provides, "[t]he extension of system water mains for the purpose of providing new service
shall be done on a time and material basis." The Company interpreted these provisions as
authorizing it to recuperate costs associated with extending the water system to serve particular
customers.
The Company also notes that it refused service to several customers that were located
outside its service territory, based on the excessive cost to connect these customers to the system.
The Company does not know whether these customers filed complaints with the Commission.
The Company recognizes that its interpretations of the Tariffmay have been erroneous in
some circumstances. The Company proposes to work with Staffto determine which of the
payments from customers above the $1,200 Hook-up Fee, if any, were valid under these
provisions of the Tariff, and to refund the amounts that were not validly charged. The Company
proposes to file with the Commission a report documenting 1) the amount due to customers; and
2) areceipt for the refund amount within 30 days of the Commission's order regarding this
Response.
Order No. 34770 notes two specific customer complaints, one dated March 25,2020 and
the other dated July 22,2020.3 The Company responds to each as follows.
3 The Company has reviewed its records and found one customer complaint dated February 25,2020 and another
dated June 11,2020. The Company does not otherwise have any records ofcustomer complaints dated on or around
March 25, 2020 arrd Jlly 22,2020. However, based on the facts of the customer complaints that the Company has
on record, and how the customer complaints referenced in Order No. 34770 are described in the order, it is the
Company's belief that February 25 andMarch 25 refer to the same customer complaint. The Company believes the
same to be true for June I I and July 22.The Company is willing to work with the Commission Staffto resolve any
confusion regarding customer complaints. The Company will otherwise proceed to respond to the two customer
complaints here by using the dates mentioned in Order No.34770.
RsspoNsn ro ORDER No . 3477 0
1533267 4 j.docx[ 5376. ll
Page 4 of 8
The property related to the March 25 complaint required special services in order to make
the connection. Among other things, the Company was required to retain a third party to perform
over 300 feet of excavation on a neighboring property, which cost $2,850, and was required to
install an abnormally extensive service line to reach the customer's property. The customer was
aware of the unique services required for the connection to his property and verbally agreed to
pay $4,600 (the $1,200 Hook-up Fee plus the cost of the wor$ to connect his property to the
system. The customer never disagreed with the additional charges and, in fact, he informed the
Company that he did not file the complaint with the Commission himself, but that some other
resident of the community filed it when he or she learned that the customer had paid more than
$1,200 for the connection. In any case, the Company believed, at the time, that the additional
charges were appropriate under its interpretation of $$ 9.4 and,12 of the Tariff.
Likewise, the July 22 complaint involved a customer whose property required additional
services to make the connection. The Company charged the customer a total of $4,000 for the
connection and the additional work. As with the March 25 customer, the Company believed that
the additional charges to the July 22 customer were appropriate under its interpretation of the
Tariff.
In addition, the Company understands that the Commission received an additional
complaint from a customer on September 16,2020, indicating that the Company had proposed to
charge a customer $4,000 to connect to the water system. The Company has not deposited the
customer's check, and will return the check to the customer. The Company will hook up the
customer to the system and charge only the $1,200 Hook-up Fee. To the extent providing service
to the customer requires extraordinary costs, the Company will work with Staffto determine
whether charging some of these costs to the customer is appropriate under the existing Tariff.
RESPoNSE ro Onorn No . 34770
I 533267 4 3.d@x[ 5376. l]
Page 5 of8
PnOTOSTU COMPLIANCE PLAN
The Company recognizes and acknowledges the need to overhaul its operations to come
into compliance with the Commission's rules, while also revising its tariffs, charges, and rates to
allow sustainable operations. To that end, the Company proposes to work with its afforneys,
Commission Staff, and outside professionals (such as accountants) to establish a compliance plan
with at least the following components:
An understanding of what circumstances are considered a customer connection subject
only to the Hook-up Fee, and what circumstances are considered main extensions or out-
of-the-ordinary expenses allowing recoupment of costs under the Tariff;a
Identification of potential changes to the Tariffthat will enable the Company to
recuperate costs associated with adding new customers, consistent with Commission
rules;
o Considering hiring or consulting with a water operator that is familiar with the
Commission's rules and business practices of regulated water utilities; and
. Any other compliance issues or operational challenges identified in the course of
reviewing the Company' s practices.
The Company proposes to file this compliance plan within 90 days of the Commission's
order acknowledging this Response.
The Company respectfully requests that the Commission defer any decisions regarding
penalties or fines against the Company until it takes the steps identifred in this Response. This
will enable the Company to focus its resources on achieving compliance.
J.D. Resorts acknowledges the.#;::::'olf ..o.n"r"ed in attempting to operate the
Company in compliance with the Commission's rules. The Company is committed to achieving
a The Company has requested an increase in the Hook-up Fee. It recognizes that any increase can be applied only
prospectively.
a
a
RsspoNss ro Onosn No . 3477 0
I 5332674_3.docxfl 5376. ll
Page 6 of 8
compliance, and hopes to demonstrate this intent by completing the actions identified in this
response.
Dated: Septerrber 30, 2020.
Respectfully submitted,
,?
PrestonN. Carter
Blake W. Ringer
Givens Pursley LLP
Attomeys for the Company
RESPoNSE ro Onorn No . 34770
1533267 4:l.dmxfl 5376. l]Page 7 of 8
CERTIFICATE OF SERVICE
I certify that on September 30,2020, a true and correct copy of the foregoing was served
upon all parties of record in this proceeding via electronic mail as indicated below:
COMMISSION STAFF
JanNoriyuki
Idaho Public Utilities Commission
11331 W. ChindenBlvd., Bldg. 8, Ste.201-A
Boise, D 83714
EMAIL: j [e-mail]. gov
John R. Hammond, Deputy Attorney General EMAIL: john.hammond@puc'idaho.gov
Idaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg. 8, Ste. 201-A
Boise, D 83714
.P
Preston N. Carter
RESPoNSE ro Onosn No . 34770
15332674 3.dxxUs376.U
Page 8 of8