20240228Reply Comments.pdf

Stoneridge Utilities P.O. Box 298 Blanchard, ID 83804
Ph [phone] Extn. 4

Sent by: Email

February 28, 2024

Commission Secretary
Idaho Public Utility Commission
11331 W. Chinden Boulevard
P.O. Box 83720
Boise, ID. 83720-0079

RE: CDS StoneRidge Utilities, LLC Response to Staff Comments SWS-W-23-02

Dear Staff/Commission Members:

Please find enclosed our response to “Staff Comments” regarding our Connection Fee Increase Case SWS-W-23-02 for
StoneRidge Utilities, LLC Water Company in Blanchard Idaho.

Please let us know if you have any questions.

Sincerely

Teresa Zamora
Utilities Administrator

~✓~
$TONE RIDGE --~--
RECEIVED
Wednesday, February 28, 2024 6:02PM
IDAHO PUBLIC
UTILITIES COMMISSION
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CASE NO. SWS-W-23-02

CDS STONERIDGE UTILITIES, LLC’S

RESPONSE TO STAFF COMMENTS

Background

Company feels it is important to refer to GEM State Water which
owns/manages the Spirit La Company feels it is important to
make reference to GEM State Water which owns/manages the
Spirit Lake East Water System in Spirit Lake Idaho.
ke East Water System and several other water systems in North
Idaho. In reviewing Gem State Water Company’s Tariff approved
May 24, 2023, we note the new “Hook up Fee+ (New Service) is
$5,500 per each new customer connection.
Many of their new hookups are similar in nature to our more
complex connections—i.e. s, yet they are 20 mins closer to
population centers-subcontractors who can perform these
services—we are at a cost disadvantage to them!
Yet, Staff only recommended $4,700 for a “Hook Up Fee” for CDS
StoneRidge Utilities for a new water customer. Given the greater
mobilization charges and travel times, contractors face working in
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StoneRidge we feel it is reasonable that Staff recommend that
our Hook Up Fee be increased to $5,500 as well.
The Company will continue to request written bids from 2-3
providers on new connection requests and we will retain those
records as well. However, we have found that in a competitive
market there is difficulty in asking a provider for more details in
their written proposals than they typically provide.

3.

The Company is appreciative of this option being added to our
Tariff and we have added language to implement this option into
the attached “Marked Up” Tariff #4.
The Company has updated and revised Tariff #4 for Staff Review
and approval by the Commission.

Draft Tariff #4 is attached reflecting the changes in the tariff non-
recurring charges recommended by Staff.

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which consists of approximately 251 meters and The Happy Valley
Rancho’s Subdivision of approximately 115 meters.
The StoneRidge Golf Community homes consist of homes on lots
smaller than ¼ acre along with Timeshare Units, Condo Units,
Motor Coach Pads and commercial Golf Course meters. The “water
system” was designed and developed to service the golf
community and infrastructure development, for the most part,
consisted of installing service in the ROW to each lot with at least
a “Curb Stop”—thus leaving many of the most recent connections
within the golf community to be at most a box/pit setter/meter.
The Happy Valley Ranchos (HVR) subdivision was developed
independently of the StoneRidge Golf Community and had its own
well and distribution system to provide water to the individual lots.
SRU was approached by DEQ to “Roll Up” the HVR system in
approximately 2005 after the HVR well(s) “went bad”. DEQ
provided financing for the acquisition and the additions of
infrastructure required to service the Subdivision—new well,
storage and mainline extension.
The lots in this community are much larger, ranging from several
acres up to 5+ acres and the initial infrastructure development was
primarily the installation of wells and storage along with water
mains in the road system ROW—thus leaving a wide range of
existing conditions for remaining parcels to be connected. When
we receive a request for new water connection in Happy Valley
Ranchos there is typically a much greater need for exploratory
locating of the existing services that can supply the new connection
and each new connection’s required “connection costs” can vary
extensively, especially when the most recent parcels served (likely
why they had not previously been built upon) tend to have longer
distances to extend a service line from the main line to the Lot
ROW etc.
In retrospect, during the last 4 years SRU has experienced a
potpourri of existing conditions on the new connections completed.
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After a 10-year period of relatively few new connections annually,
we had the following activity:

2018 8
2019 23
2020 29
2021 17
2022 18
2023 3
Total 98

The high “new connection” activity during this five year period
reflected a significant increase over the prior 10 years. It also
saw a wide range of new connection types as many infill and
Happy Valley Rancho Lots were connected to the system and
only a small number of lots were not owned by individuals.
Many of these were bought and sold in recent years by
individuals building their retirement homes along with some
outside builders building speculative projects. Outside of
approximately 17 lots in the “Ironwood” final phase. These
lots all have existing curb stops, meter boxes/pit setters and
will only need individual meters set to complete a new
connection. No new plats were developed since 2018.
With the economy appearing to have entered a “correction”
in late 2022 we anticipate a minimum number of new
connections in the coming years until the general real estate
cycle picks back up. Consequently, SRU anticipates a small
number of new connections requests in 2024-2028.
In retrospect, the last 6 years of new connections represented
a “virtual cleanup” of 30 years of lots that the majority of
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were held by individuals acquired over the last 30 years and
few were “developer owned” lots. Going forward SRU expects
the majority of new connections to consist of meter setting
only, especially within the StoneRidge Golf Community.
Common practice for new water connections in SRU since
Esprit’s acquisition in 2018 has consisted of retaining an
independent contractor to provide an estimate for the cost of
the connection and upon SRU acceptance of the estimate, the
contractor completes the work and invoices SRU and typically
any additional/unexpected costs were added to the original
contractor estimate. SRU on the other hand has always been
bound by the approved IPUC Tariff and unable to “bill” to the
new customer for any extraordinary costs incurred if they
were not covered by the existing tariff.
The StoneRidge Golf Community is located in a rural setting
that does not lend itself to a large supply of contractors willing
to travel extended distances to complete new water
connection work.
For the most part since 2019 we have relied on one primary
contractor—Swank Excavating—to complete the majority of
the jobs.
Recently, we have requested additional bids from alternative
contractors, and we have not typically required a specific
format for their estimate nor focused on their prices vs their
costs—i.e. their “markup margins” is part of their business
strategy and not germane to our focus—Total Price to the
customer and what our current Tariff allows us to charge.

Please see Narrative above. StoneRidge Utilities,
LLC does not use nor require a “standard bid/estimate” from our
new water connection contractors. Their pricing/cost/markup
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strategies are not of our concern, rather we only are concerned
about their total bid estimates.

—Per NO. 1 above response, we do not engage in
discussions nor review of our contractors cost/markup/pricing
strategies. They present us with an estimate initially and an invoice
at the completion of the work. We do not “markup” their invoices
as our charges to our customer are fixed by our current tariff.

—This report from 7B engineering was completed in
May of 2020. It was prepared to support our request to IPUC to
increase our “New Water Connection” fees from $1,200 approved
in the 2007 Tariff closer to the $5,000 plus invoices we were
experiencing. It was also our first analysis of what costs of labor
and materials we incurred in new water connections from both an
administrative and operating standpoint. In that we outsource all
of the connection work to outside contractors and have decided not
to track any internal costs since they do not appear to be directly
recoverable.

—We have provided a copy of the Customer Notice
as part of our submission. This was sent to all of our current
customers as a label on the backside of their December water bill
postcard. We had discussed this approach with Staff after we
reviewed our 2021 Connection Fee application—in that case staff
had determined that a “Notice to existing Customers” was not
necessary given that only new customers would be impacted by
the changes. Nonetheless, we proposed to Staff to provide the
notice on the next water billing and were encouraged to proceed.
We are preparing a new customer notice for review after discussion
with Compliance Staff before the holidays. This notice will be part
of a separate mailer to our existing water customers.
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—The chart title on Page 7A should be Water Service
Connections.

— Service area map and unconnected lots. We have
an updated map under development and expect to have it
completed by January 12, 2024 and will submit it at that time.

—During our phone call with IPUC staff last month
we discussed this issue to provide better clarification of the ¾” vs
1” water meter choice during the last few years. From 2019 -2023
we have experienced “supply chain” issues in obtaining water
meters on a timely basis. Our previous operator made the decision
to use 1" meters vs 3/4" meters as the lead time to obtain the 1"
meters was shorter than the 3/4" meters. While there is typically
a price differential with the 1” meters being 20-40% greater than
the 3/4" meters, the lack of availability of the ¾” meter led SRU
to switch to the larger meter—it was not a customer option.

—As per NO. 7 above, meter size was not a customer
option.

—Due to the volatility of “New Connections” on an
annual basis, there is no economic positive value of establishing
and maintaining labor and equipment capacity within SRU to
perform new connection work vs outsourcing it. We have no intent
nor expectation that SRU will maintain this specific capacity going
forward.
Rather as covered in Exhibit A attached, it is our intent to ask for
IPUC approval to outsource not only all new connection work, but
the oversight, pricing, management, and approval of all new
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connections to the customer directly and to remove SRU from these
functions.

—We have made requests to three contractors for
this in the last 2-3 weeks, but have yet to receive their
responses.
—The majority of these “in-house installations”
involved lots that already had a curb stop, meter box, and pit setter
in place in the lot ROW. The only items required were to purchase
a meter and connect it.
—As discussed in the Narrative, we do not
require/request our independent contractors to provide us with
cost breakdowns, markup margins etc. on their final bills to us.
We receive an initial estimate (often times verbal) and only when
exceptional conditions occur during the installation work do we
even discuss the final bill with the contractor. We have a very
limited number of contractors available for this work and even
fewer who also are willing to be available for emergency repair
work that requires immediate attention.

—This, again, is something that we do not
require/nor request of our contractors in either their estimates or
invoices. This specific request for details is not something we can
now request from Swank Excavating.

—As discussed above, our installation contractors
are not required to submit detailed estimates of their proposed
work—primarily because our remote location significantly restricts
the number of contractors interested in our work. Consequently,
we do not typically have any subsequent discussions/conversation
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regarding the bid/estimate with the contractor prior to the
installation. Usually the initial phone conversation scheduling the
work is the only contact with the contractor prior to the day of the
installation.

—As above for Swank Excavating, JADE Enterprises
(a new vendor who has not previously worked for SRU) provided
us a written bid for the 2-3 installations as we requested. We have
provided all of the documentation that they have provided us with
and we do not request any further itemization/details that what
they volunteered. There are no other phone/written/email
exchanges between JADE and SRU. Again, given the lack of
qualified/interested contractors we are not in a position to
require/request additional documentation.

—We have provided all related documentation we
have received from Swank Excavating on this project. Swank has
completed the majority of our installations in the last 4 years and
as a consequence our primary focus has been to get installations
scheduled and completed on a timely basis, given the lack of
leverage with contractors we have experienced in the market from
2019-2023.

—Same answer as above, we have submitted all
related documents from JADE There are no other
phone/written/email exchanges between JADE and SRU.

—SRU does not own any excavation equipment, we
do lease a backhoe from Esprit Enterprises and do not have any
specific details of the model number nor purchase information
readily available.
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—We have attempted to obtain an additional bid
from a 3rd party other than Swank and JADE for the additional two
new connections but given the recent holiday periods we have been
unsuccessful in obtaining any responses. We will submit this new
bid when we receive it.

—Other than an extension of the main water supply
line on the 3rd phase of the Ironwood Plat (in which all costs were
paid by Esprit Enterprises, LLC and not SRU) there have been no
mainline extensions since 2021.

—Our “new connection charges” were updated
effective March 25, 2021. See attached Exhibits 1-3 showing the
breakdown of connection charges by classification.

—SRU did not send customers “Bills” prior to/or
after new connections are completed from 2019-2023. When a
customer made application for a New Connection, the customer
completed an application form that specified the type of
connection anticipated out of the five options outlined in our
current tariff and the specific “connection fee” under the option
their connection is classified. Each customer file contains a
completed application which includes the specific connection
charge each customer paid along with other specific information
related to the installation.

—For the most part the “In-house” connections
performed in 2022 were performed on lots that already had a curb
stop, Meter Box and Pit Setter in place. The only work necessary
to complete the install on these connections was to obtain a water
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meter and set it in place. Our current tariff only allowed $533 to
be charged for those installs so beyond the meter cost there was
typically less than $200 for all operating and admin labor involved.

—One of these two was completed in December
by a homebuilder who has built a number of homes in
StoneRidge. The invoice was for $4,000.00 and we provided a
meter ($4,400.00 total) and is very likely a “one time” occurrence
as SRU was facing a tight timeline to complete the connection for
the property owner and a favor was asked of the homebuilder to
do this “onetime favor” for this price. We have been unable to
get this contractor to bid on any other work since this time.
—Copies of all available Swank Excavating
invoices are attached.

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EXHIBIT A

StoneRidge Utilities, LLC Proposal to shift the majority of all new
connection responsibilities to the property owner.

Overview: Since acquiring CDS StoneRidge Utilities, LLC in 2018 the process
of making new connections to the existing Water System has followed the
same pattern/guidelines that have been followed in the last 20-30 years by
prior operators of the system, especially for new connections within the
StoneRidge Golf Community separate from the Happy Valley Ranch
Community. “Finished Lots” within the “Golf Course” side of Lake Sans Souci
typically had a curb stop, water meter box, & pit setter installed at “final plat
approval” of all new lots. Consequently, the only requirement for making a
“new connection” on these finished lots was/is the “setting of the water
meter”. This usually does not require any special equipment, boring/taping
etc. and can be completed with minimal investment of labor and materials.
New Connections on the other side of Lake Sans Souci and within the Happy
Valley Rancho Subdivision tend to be much more varied ranging from
Complete installs and adders of boring and hot tapping etc.
It is anticipated that any and all new “Finished Lots” developed in the future
within the water company service area will only require the setting of a
meter at minimal expense.
Because of significant “losses” (these loses occurred for the most part on the
other side of the lake from the Golf Course and within the Happy Valley
Rancho Subdivision) on the approximately 98 new connections since 2018
and the difficulty in getting the IPUC Tariff for new connections raised, SRU
is requesting to IPUC for the ability to have all future installations that are
not “Meter Only” be the responsibility of the Property Owner subject to
specific detailed requirements from SRU in regards to Contractor
Qualification, System Connection Specifications and Satisfactory Completion
of a “Post Install” Inspection.
Once the remaining unconnected lots have service installed then the
expectation is that going forward the water company will only be connecting
to “Finished Lots” only requiring a “Meter Set”.
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Of the remaining unconnected lots only a small number of them are owned
by entities related to the water company. It is only reasonable that those
independent lot owners who purchased those lots “as is” should “bear the
brunt” of extraordinary water connection costs resulting from their lots not
being “meter only” status—i.e. their investment in the lot should include the
potential future impact of connection costs beyond the “meter only” level.
StoneRidge Utilities, LLC has experienced ongoing negative operating losses
since it was acquired in 2018. Along with the anticipated General Rate Case
Application in 2024, the transfer of the new connection costs to the property
owner will “most likely” reduce the operating losses for SRU in 2024 forward.
IPUC Staff has responded positively to this proposal during previous verbal
conversations with SRU and Staff recommended we make a formal request
for this option to be discussed by Staff and for possible recommendation for
review by the Commissioners.
Lacking a formal outline from IPUC for implementing this process for SRU
the following items would seem to be a start for this option to move forward
in its evaluation by IPUC.

1. Property owner would contract with SRU for a New Connection to the
SRU water system. Unless the parcel is a “Set Meter Only” situation (in
which case SRU would perform the connection) SRU would inform the
new customer that it will be their responsibility to manage, supervise
and pay for the connection costs.

2. A new application would be developed and submitted to IPUC for
review and approval and would spell out the Customers
responsibilities. SRU would provide them with an “Approved
Contractor” list, System Specifications and an “Approved Final
Inspection Inspectors” list.