20240206Comment_6.pdf

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
Opposition and Comments against CDS Stoneridge Utilities:
(A) Application for Increase to Water Meter New Installation fees, Case #
SWS-W-23-02;
and,
(B) Application for Additional Capital Contributions, Case # SWS-W-23-03.
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The undersigned (residents of Stoneridge) file these comments in opposition to
both the above matters pending before the IPUC:
(1)157% Increase: Stoneridge Utilities requests an increase in water meter
installation fees from $3,500.00 to $9,000.00, per meter. This is a 157%
increase. As explained below, Stoneridge Utilities’s application provides
insufficient evidence meeting its burden of proof for such increase. “Most
often, it is the party which requested the hearing who will bear this ‘burden of
proof.’” Idaho Office of Administrative Hearings,
https://oah.idaho.gov/representing-yourself/
(2)Outside Contractors vs In House Installations: Stoneridge Utilities claims
in its water meter increase application [exhibit “D”],
“The majority of [water meter] installs were done by Swank
Excavating in 2021 - 2023. Our prior system operator (left
SRU summer 2023) was able to do some of the
installations which did not include "boring under road" or
"cutting open the road." When we did this complex
"in-house" installations they were typically installing a meter
only and our costs were minimal for parts/materials, etc.
. . . .
“In total we had the following new connections in each time
period [as follows]:
2020 - 29
2021 - 18 [connections] less 15 either prior to
Tariff # 3, or "Not Arm's-Length"
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RECEIVED
Tuesday, February 6, 2024 10:57:20 AM
IDAHO PUBLIC
UTILITIES COMMISSION
2022 - 18 [connections] less 11 in-house
transactions.
2023 - 04 [connections] less 2 in-house
transactions and two not connected yet."
[emphasis added]
Stoneridge Utilities’ application itself disproves its own request. For
example:
(a) The “majority” of installs were NOT done by an outside contractor
(“Swank Excavating”], as claimed by applicant.
(b) From the information provided by Stoneridge Utilities, for the “test period”
between 2021 - 23, there were a total of 10 outside contractor installations [3 for
2021; 7 for 2022; and a net 0 for 2023]. For the same period, there were a total of
30 connections (75% of total connections) NOT done by outside contractors.
© Stoneridge Utilities has had no increase costs from 75% of the total
connections (30), but yet requests a 157% increase in fees. D
(d) Stoneridge Utilities submits sample billings from “Swank Excavating”
[exhibits “E” & “F”]. None of these billings are as much as applicant’s requested
increase ($9,000.00).
(3)The Request results in a Windfall: The applicant’s Exhibit “D” also claims:
“In 2022 our new construction revenue was 48,895 and the
associated installation costs were $70,148 for a net loss in
2022 on New Connections”.
If the 18 connections in 2022 were charged $9,000.00 per connection [total
revenue: $162,000], and costs were $70,148, the applicant would receive a
$91,852 windfall for utility connections in 2022.
(4)$980,000.00 Capital Contribution: Stoneridge Utilities is applying “to the
Commission for authorization to borrow $980,000.00 from related entities and
or receive additional capital contributions for $980,000.00, from the same
related entities”.
(a)Stoneridge Utilities’ is clearly not requesting preauthorization for the
borrowing, because the borrowing has already been completed.
Instead, Stoneridge Utilities is requesting retroactive approval of its
actions, having already completed the transfer. Stoneridge Utilities’
application for retroactive approval is completely disingenuous.
Permission should be sought prospectively, not retroactively.
(b) In order to justify its request, Stoneridge Utilities argues:
“Esprit Enterprises, LLC had no prior experience managing
a publicly regulated water company. The first four years of
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learning the reporting requirements along with updating
operations and administrative procedures and evaluating
the condition of the approximately 30+ year old water
system(s) has been a steep learning curve for an
organization with a complete staff turnover in 2019."
(i)However, this was not the tone or tenor of the applicant when a
request was made of the Commission to approve Stoneridge
Utilities’ purchase of the water utility.
(ii)For example, the staff report [Case # SWS-W-18-01] recites:
“Staff believes Mr. Karupiah has the ability to
financially operate the water company. From
discovery, staff is learned that Mr. Karupiah is
an experienced investor, familiar with the
commercial real estate markets and investment
opportunities in northern Idaho. In addition,
staff has reviewed the last 3 years of financial
statements from Mr. Karupiah and believes that
Mr. Karupiah has the ability to finance the
capital needs of the utility." And,
(iii)Also, from the staff report [Case # SWS-W-18-01]: “ . . JD
Resort [applicant] indicated that there are no plans to change the
current rates and charges in the current CDS tariffs. Although
rates will not increase because of the transaction, the engineering
analysis will identify only necessary capital improvements in the
system that may be a driver for a future rate case."
Applicant’s approval for purchase of the water utility was based upon
an express statement that rates would not be increased, except based
upon an engineering analysis for necessary capital improvements.
Applicant has presented no engineering analysis and no basis for
capital improvements.
(5)It’s really all about a General Rate Increase: Stoneridge Utilities makes
clear that it is using both these proceedings as a springboard for a general
rate increase application. For example,
(a)“In addition, we [Stoneridge Utilities] are in the process of filing a
general Taif rate increase application.” And,
(b)"In recent years, Stoneridge Utilities has "Capitalized" all that losses on
"New Connections" on to the balance sheet into balance sheet account
# 333 . . . This strategy allows those "new connection losses" to be
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amortized . . . annually and therefore increase our "Rate Base" for Rate
Design purposes to recover in future years."
Stoneridge Utilities’ applications must not be used as a springboard for a
general rate increase. The undersigned strongly urge the Commission to reject
both applications, as neither are the proper basis for a future general rate increase.
Any general rate increase should stand on its own.
(6)Audit Requested: The undersigned request the Commission conduct an
audit of Stoneridge Utilities, as a next step in these proceedings. The
authority for an audit is contained in paragraph (9)(d), infra, Conditions of
Sale. The applicant self-serving income statements and balance sheets and
calculations simply have no reliability or credibility without audit. The size
[157% increase] and nature of applicant’s requests [$980,000.00 in already
made loan “capitalization”] alone justify an audit. Applicants are not in
compliance with the financial requirements described in paragraph (9), infra,
Conditions of Sale.
(7)Bank Line of Credit Required: As recited infra [paragraph (9)(b)], the IPUC
final order requires a bank line of credit. There is no evidence that a bank
line of credit has ever been established. The only evidence given by the
applicant of a line of credit is one from Esprit (not a bank) to the JD Resort
(both wholly owned by Chan Karupiah). And this information has been filed
just recently, 17 January 2024. A bank line of credit was due shortly after the
final order approving the sale of the utility (2019). Without compliance with
the Commission’s existing orders, the Commission should deny applicant’s
present requests.
(8)No Timely Reporting: Further, there is no evidence that applicant has
timely filed the periodic monthly and yearly statements required by the
Commission’s Final Order [see paragraph (9)(b). Without compliance with
the Commission’s existing orders, the Commission should deny applicant’s
present requests.
(9)Conditions of Sale: As argued above, the IPUC Final Order allowing sale of
the water utility to applicant contained several conditions [Case #
SWS-W-18-01]. For example:
(a)"JD Resort [applicant] must demonstrate his financial ability to operate
on its own accord. The notarized personal guarantee of Chan
Karupiah to use his personal finances to support the financial needs of
the company is of uncertain value. If Mr. Karupiah were to file
bankruptcy or otherwise being unable to meet all of his financial
obligations, a signed personal guarantee to financially support a legally
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separate company is dubious value compared to more standard cash
capital or debt instruments likely held by other creditors. Therefore, we
require assurances that JD Resort has the financial ability to operate
the system in the public service, not JD resort by and through Chan
Karupiah."
(b)"JD Resort [applicant] must be able to make and pay for ongoing
repairs and have access to capital for major repairs, including pump or
well failures. . . JD resort must file balance sheets and income
statements with the commission quarterly . . . JD resort must file its
balance sheet and income statement for the quarter ended 30 June,
2019, within 60 days of this Order. Subsequent quarterly financial
statements must be filed within 45 days of the quarter end. JD resort
must file monthly bank statements showing at least a $50,000 balance
until JD resort establishes a bank line a credit of at least $250,000. If
JD Resort does establish a satisfactory bank line of credit, JD Resort
must continue to file monthly statements showing a line of credit
remains in place under JD Resorts name, along with the dollar balance
utilized in remaining, until the commission orders otherwise . . ."
©" . . . JD Resort must also demonstrate compliance with the generally
acceptable reporting requirements under Idaho code."
(d)“We remind JD Resort [applicant] that the Commission has the
authority to audit JD Resort at any and all reasonable times. Idaho
Code § 61-610.”
(10)Staff Memo on Capitalization Request: Staff has filed a “Decision Memo"
with the Commission on 23 January, 2024. The undersigned concurs with
the reasoning of the Decision Memo and recommendation to deny applicant’s
capitalization request [Case # SWS-W-23-03].
(11)Conclusion: Both applications must be denied because applicant has not
met its burden of proof and the applications lack merit. If the applications are
not denied, prior to the Commission proceeding further, the Commission
should order an audit.
Scott and Cheryl Baumann
113 Forest Ridge Road
Blanchard Id 83804
[e-mail]
[phone]
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Donovan and Mary Ellen Kessler
431 Hanford
Blanchard Id 83804
[e-mail]
[phone]
John d. Dupree
181 Stewart Drive
Blanchard Id 83804
[e-mail]
Steve and Nancy Rezac
28 Sans Souci Drive
Blanchard Id 83804
[phone]
Leon Marshall
200 Hanford Rd
Blanchard Id 83804
[e-mail]
Randy and Mickey Garrison
76 Bellflower Ct
Blanchard ID 83804
[e-mail]
[phone]
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