20060113Comments.pdf

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DONOY 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, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE INVESTIGATION
OF TERRA GRANDE WATER AND THE
ISSUANCE OF RELATED CERTIFICATE OF
PUBLIC CONVENIENCE AND NECESSITY NO. )429. CASE NO. TGW-O4-
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission, by and through its Attorney of record
Donovan E. Walker, Deputy Attorney General, in response to the Notice of Stipulation and Notice of
Comment Deadline in Order No. 29933 issued on December 21 , 2005 , submits the following
comments.
On December 16, 2005, Staff of the Idaho Public Utilities Commission (Staff) filed a
Stipulation (attached) by which United Water will take over the operation of Terra Grande s water
distribution system. The Stipulation is entered into by and among Terra Grande Water Inc. (Terra
Grande), United Water Idaho (United Water) and Staff (collectively referred to as the "Parties ). The
Parties agree that the Stipulation represents a fair, just, and reasonable resolution and disposition of the
investigation of Terra Grande and is in the public interest. The parties request that the Idaho Public
Utilities Commission (Commission) approve and adopt this Stipulation by subsequent Commission
Order.
STAFF COMMENTS JANUARY 13 , 2006
HISTORY
The Terra Grande water system has been operating for over 50 years and provides water
service to approximately 117 residential customers in the Terra Grande Subdivision in Ada County,
Idaho.
On February 19, 2004, in Case No. UWI-04-, United Water and Terra Grande filed a joint
Application with the Commission for an Order approving the purchase by United Water of Terra
Grande s water system. Originally the agreed upon purchase price for the system was $47 000.
However, on April 2, 2004, Staff filed comments recommending that the purchase price be reduced to
$0.00 because after United Water s acquisition of the system, more capital than initially anticipated
would have to be invested. Staff Comments at 6-7 (Case No. TGW - W -04-1). Staff also stated that if
Terra Grande would not agree to transfer the system to United Water for no value then it should be
brought within the jurisdiction of the Commission. Id. United Water, in turn, offered an Amendment
to the Purchase and Sale Agreement reflecting a $0.00 price. Reply Comments at 2-3. At that time
Terra Grande determined it was not in its best interest to proceed with the purchase and sale
transaction, therefore the Application was withdrawn.
On June 8, 2004, the Commission issued Order No. 29512 in Case No. TGW-04-, issuing
Terra Grande a Certificate of Public Convenience and Necessity and opening an investigation to
establish: (1) whether the existing rates for water service charged by Terra Grande are just and
reasonable Idaho Code 9 61-301; and (2) whether Terra Grande furnishes, provides, and maintains
service, instrumentalities, equipment and facilities that promote the safety and health of its patrons
employees and the public and is in all respects adequate, efficient, just and reasonable. Idaho Code
61-302.
On January 21 and January 24 2005 , the Commission was notified by Terra Grande and by the
Idaho Department of Environmental Quality (DEQ) that the three water supply wells of Terra Grande
were contaminated with Trichloroethylene (TCE), a hazardous chemical, and thus were unusable. As a
result, an emergency interconnection between Terra Grande s distribution system and United Water
supply system was completed. The Commission issued Order No. 29735 in Case No. TGW-05-
that approved interim rates for Terra Grande based upon the interconnection with United Water. Terra
Grande was also ordered to develop a permanent service arrangement plan and submit it to the
Commission for approval prior to the establishment of permanent rates.
On August 12, 2005, a petition signed by approximately 61 Terra Grande customers was filed
with the Commission requesting that it require Terra Grande to install individual water meters.
STAFF COMMENTS JANUARY 13 2006
Commission Staff, Terra Grande and United Water subsequently entered into discussions
whereby United Water would take over operation of the water system, install meters, make other
necessary and prudent improvements , and incorporate Terra Grande s customers into its service
territory.
STAFF ANALYSIS
As part of Order No. 29735 issued in this case, the Commission directed Terra Grande to make
an emergency interconnect of its distribution system with that of United Water s due to chemical
contamination of the entire Terra Grande Water supply. The Commission also directed Terra Grande
to develop a permanent service arrangement plan and submit it to the Commission for approval.
The Stipulation submitted by the parties in this case, if approved by the Commission, will bring
to a close the retail water service responsibility of Terra Grande Water Company. Staff believes that
approval by the Commission of a Stipulation to transfer the distribution system and water service
responsibilities to United Water Idaho (UWI) resolves all outstanding water service issues associated
with Case No. TGW-04-1 and is in the public interest.
Current Conditions
In agreeing to the terms of the Stipulation, the Staff evaluated the situation that exists today in
the Terra Grande Water system. The water supply owned by Terra Grande, consisting of three ground
water wells, is contaminated by Trichloroethylene (TCE) and unusable for potable purposes. The
source of the contamination is unknown as is the cost of cleanup if it is possible at all. Given the
limited financial capabilities of Terra Grande, it is unlikely that the Company could develop an
alternative source of supply in the foreseeable future. Thus, the existing interconnection with UWI
will continue to be the only viable supply option.
The existing Terra Grande distribution system is antiquated and in need of mainline
replacement. Several mainline ruptures occurred during the irrigation season causing a reduction of
service pressure and extensive water loss for extended periods. Because all water delivered by UWI to
Terra Grande is metered and individual customers are not metered, all Terra Grande customers paid for
water lost due to mainline rupture. The financial limitations that make alternative supply unlikely also
make mainline replacement by Terra Grande difficult.
Individual customers of Terra Grande are not currently metered and therefore, split equally the
system metered supply provided by UWI. Besides paying for the distribution system losses occurring
STAFF COMMENTS JANUARY 13 2006
due to mainline rupture, customers are unable to directly control their own water bill by reducing
consumption. This results in inequitable treatment whereby a small consumer of water subsidizes a
large consumer of water. This inequity is the primary complaint behind the 61-customer petition filed
with the Commission requesting individual metering. Again, the financial limitations of Terra Grande
make timely installation of individual meters unlikely.
Proposed Conditions
The transfer of the distribution system from Terra Grande to UWI will be made without any
payment to Terra Grande. Once the transfer is completed as specified by the Stipulation, UWI will
make the following improvements to the distribution system:
Multiple, enlarged inter-ties between UWI and the Terra Grande distribution system will be
installed to improve pressure, reliability and flows for fire protection.
Individual meters with meter boxes and relocation of service lines to mainlines fronting
customer property will be installed to allow identification of individual consumption and
improved billing.
Aging mainlines will be replaced, blow offs will be installed and fire hydrants will be added to
improve reliability, improve the Company s ability to maintain the system and enhance fire
protection.
Because UWI is already interconnected to Terra Grande and indirectly billing customers for
metered consumption, rates charged customers directly by UWI will be essentially the same. Instead
of monthly billing at UWI commodity rates for 1/117 of the metered consumption and a Terra Grande
customer charge of $13., UWI will bill each customer bi-monthly for individual metered
consumption at current UWI commodity rates and charge the current UWI residential customer charge
of$15.10 bi-monthly. Small users will see a bill reduction, average users will pay about the same and
large users will pay more to reflect their actual unsubsidized consumption.
STAFF COMMENTS JANUARY 13 2006
Transfer Costs
Staff has reviewed the system improvements proposed by UWI and believe the Company
proposal and estimated costs are reasonable. Staff also recognizes that some uncertainty remains with
regard to the condition of existing facilities and additional costs could be incurred for system
improvements. However, no fees are paid to Terra Grande and the contaminated ground water wells
remain the property and responsibility of Terra Grande.
The cost of known UWI system improvements after the transfer (attached to the Stipulation as
Exhibit A) is estimated to be about $243 800. This results in an increased annual revenue requirement
of approximately $27 680. The estimated annual revenue from Terra Grande customers is estimated to
be approximately $32 600. While the annual revenue from customers will cover the installation of
meters and improvements in the distribution system, it will contribute little to incremental cost
increases for water supply, operation and maintenance, storage and customer meter reading and billing.
Consequently, it is likely that some incremental costs of serving Terra Grande customers will
be borne by the general body of UWI customers. Given the relatively small number of Terra Grande
customers, Staff believes any subsidy will be minimal and is in the public interest by improving the
substandard service arrangement that currently exists under Terra Grande.
Staff has agreed, for the purposes of this case, to recommend as part of the Stipulation that
UWI be allowed to recover prudently incurred investments in the Terra Grande system as if the capital
investment were in service for an entire test year rather than subject to the 13-month rate base average.
Staff has further agreed to recommend continued accrual of AFUDC after the plant is placed in service
but before it is included in rates. Staff notes that this AFUDC accrual should be limited due to the
intention of the Company to file a rate case in the early part of 2006.
Staff believes that deviation from the 13-month rate base average and special AFUDC accrual
are warranted in this case to facilitate transfer of the system and meet what UWI has determined is
required to be made whole on the transaction.
CONCLUSION AND RECOMMENDATION
Staff believes that the water service situation that currently exists in the Terra Grande water
system should not be allowed to continue. The combination of contaminated water supply, antiquated
distribution network and lack of meters makes immediate system improvements imperative. Terra
Grande s lack of financial ability to resolve the problems in a timely manner makes transfer of the
system to UWI the only viable long-term solution.
STAFF COMMENTS JANUARY 13, 2006
UWI has the ability to make immediate system improvements at a cost Staff deems reasonable.
Staff further believes the terms of the Stipulation regarding special accounting treatment are reasonable
to facilitate the transaction and that any potential subsidy on the part of UWI's other customers is
justified to remedy the situation and satisfy the public interest.
UWI, Terra Grande and Staff agree that time is important for conversion of the customers to
individually metered rates prior to the 2006 summer irrigation season. Therefore, the goal as stated in
the Stipulation is to have all initial construction completed by May 31 , 2006. Completing construction
by the 2006 irrigation season will allow individual customers to control their consumption and billing
amounts without significant change in rates charged.
Commission approve the Stipulation as filed.
Consequently, Staff recommends that the
Respectfully submitted this j'tt""day of January 2006.
62x. Donovan E. Walker
Deputy Attorney General
Technical Staff: Randy Lobb
i:umisc:comrnents/tgwwO4.! dwrlZ
STAFF COMMENTS JANUARY 13 , 2006
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION'" J'
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IN THE MATTER OF THE INVESTIGATION
OFTERRA GRANDE WATER AND THE
ISSUANCE OF RELATED CERTIFICATE
OF PUBLIC CONVENIENCE AND NECESSITY NO. 429.
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CASE NO. TGW-o4Joii )~~S C'JiU1iSSrON
STIPULATION
This Stipulation is entered into by and among Terra Grande Water Inc. (Terra Grande),
United Water Idaho Inc. (United Water), and the Staff of the Idaho Public Utilities Commission
(Staff) (collectively referred to as the "Parties
The terms and conditions of this Stipulation are set forth herein. The Parties agree that
this Stipulation represents a fair, just, and reasonable resolution and disposition of the
investigation of Terra Grande, and that this Stipulation is in the public interest. The Parties
therefore recommend that the Idaho Public Utilities Commission (Commission) approve and
adopt this Stipulation by subsequen~ Commission Order. See, IDAP A 31.01.01.248.
Nothing in this Stipulation, including the recommended accounting and rate-making
treatment, may be used as a precedent in future cases whether involving United Water or any
other utility. Execution of this Stipulation shall not be deemed to constitute an acknowledgmer;It
by any Party of the validity or invalidity of any particular method, theory, OJ; principle of
regulation or cost recovery, and no Party shall be deemed to have agreed that any method
theory, 9r principle of regulation or cost recovery employed in arriving at this Stipulation is
appropriate for resolving any issues in any other proceeding in the future.
BACKGROUND
On February 19, 2004, in Case No. UWI-04-, United Water and Terra Grande filed
a joint Application with the Commission for an Order approving the purchase by United Water
of water service properties owned by Terra Grande. Originally the agreed upon purchase price
for the system was $47 000.00. However, on April 2, 2004 Staff filed comments which
concluded that after United Water s acquisition of the system it would have to invest more
capital than initially anticipated and thus the purchase price should be reduced to $0.00. Staff
Comments at 6-7 (Case No. TGW-04-1). Staff also stated that if Terra Grande would not
STIPULATION Attachment A
Case No. TGW-04-
Staff Comments
01/13/06 Page 1 of
agree to transfer the system to United Water for no value then it should be brought within the
jurisdiction of the Commission. Id. United Water, in turn, offered an Amendment to the
Purchase and Sale Agreement reflecting a $0.00 price. Reply Comments at 2-3. At that time
Terra Grande determined it was not in its best interest to proceed with the purchase and sale
transaction, therefore the Application was withdrawn.
On June 8 , 2004, the Commission issued Order No. 29512 in Case No. TGW-04-
issuing Terra Grande a Certificate of Public Convenience and Necessity and opening an
investigation to establish: 1) whether the existing rates for water service charged by Terra
Grande are just and reasonable Idaho Code ~ 61-301 , and 2) whether Terra Grande furnishes
provides, and maintains service, instrumentalities, equipment and facilities that promote the
safety and health of its patrons, employees and the public and is in all respects adequate
efficient, just and reasonable. Idaho Code ~ 61-302.
On January 21 and January 24 2005 , the Commission was notified by Terra Grande and
by the Idaho Department of Environmental Quality (DEQ) that the three water supply wells of
Terra Grande were contaminated with Trichloroethylene (TCE), a hazardous chemical, and thus
were unusable. As a result, an emergency interconnection between Terra Grande s distribution
system and United Water s supply system was completed. The Commission issued Order No.
29735 in Case No. TGW-05-01 that approved interim rates for Terra Grande based upon the
interconnection with United Water. Terra Grande was also ordered to develop a permanent
service arrangement plan and submit it to the Commission for approval prior the establishment of
permanent rates.
On August 12, 2005, a Petition signed by approximately 61 Terra Grande customers was
filed with the Commission requesting that it require Terra Grande to install individual water
meters.
Commission Staff, Terra Grande, and United Water subsequently entered into discussions
whereby the Parties have agreed that it is in the public interest to enter into this Stipulation to
effectuate the transfer of Terra Grande s water distribution system to United Water, who would
upon closing of the transactions contemplated herein (the "Closing ), take over the operation of
the water system, install meters and other necessary and prudent improvements, and incorporate
Terra Grande s customers into its service area.
STIPULATION Attachment A
Case No. TGW-04-
Staff Comments
01/13/06 Page 2 of
STIPULATION
1. CAPIT AL INVESTMENT - Commission Staff recommends and agrees that
United Water be allowed to recover any prudently made investments in the Terra Grande system
both the known capital investments outlined in United Water s October 21'2005 letter (attached
as Exhibit A) and the prudently incurred unknown capital investments necessary to provide
service to Terra Grande customers. Staff agrees that these capital investments be allowed in rate
base at 100% value and not be subject to a 13~month average calculation.
ACCOUNTING RE: CAPITAL INVESTMENT - Commission Staff recommends
and agrees that United Water accrue AFUDC on capital expenditures up to the date the plant is
placed in service. After the plant is placed in service, but before the capital investment is
included in rates, United Water will accrue AFUDC and calculate depreciation against the plant.
When the plant is included in rates, United Water will include the original cost of the plant, plus
AFUDC, in rate base at its full amount net of depreciation.
3. AGREEMENT TO CONVEY ASSETS - On the date of Closing (the "Closing
Date ) Terra Grande agrees to execute a bill of sale and assignments conveying to United Water:
a. Domestic Water Svstem.All tangible personal property and only that tangiblepersonal property used and useful in connection with the operation and maintenance
of Terra Grande s domestic water distribution system including, equipment, valves
pipes, water lines, services, meters, meter boxes, machinery, inventory, surveys
maps, records, and supplies (all hereinafter collectively referred to as the "Domestic
Water System or as the "Tangible Property
).
The Domestic Water
System/Tangible Property includes the items listed on the attached Exhibit B. TheDomestic Water System pipelines are depicted on the illustrative map attached hereto
as Exhibit C. Specifically excluded from the Tangible Property are all wells, pumps
and motor equipment, well structures, associated well facilities, well land, welleasements, and water rights, further described in Exhibit D.
b. Intangible Property.All intangible property used and useful in connection with the
operation and maintenance by Terra Grande of the Domestic Water System including,
permits, easements, rights-of-way, customer lists and records, maintenance recordstariffs and rules and regulations governing the rendering of service, provided
however, Intangible property shall not include any easement for ingress and egress to
Terra Grande s real property described in Exhibit D (the "Real Property
LIABILITIES NOT ASSUMED:United Water shall neither assume nor be
responsible for, nor take any property subject to, any liability or obligation of any kind, known or
unknown, absolute, contingent, or otherwise. Without limiting the foregoing, it is specifically
STIPULATION Attachment A
Case No. TGW-O4-
Staff Comments
01/13/06 Page 3 of
agreed that Terra Grande shall have sole responsibility for all claims, losses, liabilities
obligations, and damages, whenever arising, which arise :trom Terra Grande s act, failure to act
or arising out of Terra Grande s operation of the Domestic Water System prior to the Closing
Date.
Without limiting the foregoing, United Water shall not assume:
a. Any liability or obligation resulting :trom violations of any applicable laws or
regulations by Terra Grande prior to the Closing Date;
b. Any employee liabilities of Terra Grande, if any, relating to present and past
employees of Terra Grande with respect to plans, programs, policies, commitments
and other benefit entitlements established or existing on or prior to the Closing Date
(whether or not such liabilities are accrued or payable on the Closing Date, and
whether or not such liabilities are contingent in nature); and
c. Any liability or obligation, including, without limitation, for any personal injury or
property damage or harm to the environment, resulting :trom the presence or release
of hazardous substances at or :tram the Real Property prior to the Closing Date or any
disposal of hazardous waste within the Terra Grande service territory prior to the
Closing Date.
CONDITIONS PRECEDENT TO CLOSING - Terra Grande and United Water
agree that consummation ofthe transaction contemplated by this Agreement is also subject to the
issuance of an order from the Commission that:
a. Confirms that United Water will be permitted in future rate proceedings to earn upon
the total acquisition costs as herein set forth;
b. Authorizes the issuance of an amendment to United Water certificate of
convenience and necessity by the Commission indicating approval of the transaction
contemplated hereby;
c. Confirms the right of United Water to provide service to the area being serviced by
Terra Grande as of the date hereof; and
d. Confirms the right of United Water to provide service at rates set forth in its tariffs.
If there is any portion of such ruling by the Commission that, in either United Water or
Terra Grande discretion, is substantially inconsistent with this Stipulation the parties, or a party,
may, within five (5) business days after receipt of such Commission ruling, provide the other
party with written notice that this Agreement is null and void, and the parties shall have no
further obligations or liabilities hereunder. If neither party provides such notice in the time
STIPULATION Attachment A
Case No. TGW-04-
Staff Comments
01/13/06 Page 4 of
permitted, the parties agree to amend this Stipulation within thirty (30) days of both parties
receipt of such ruling by the Commission, to the effect that this Agreement shall be made
consistent with the Commission s ruling.
It is understood and agreed by the parties that an appropriate due diligence period
consisting of 30 days immediately following the execution of this Stipulation will be established
to allow United Water and Terra Grande the opportunity to further investigate all issues
regarding the acquisition of the Terra Grande s Domestic Water System. Terra Grande agrees to
make available to United Water its repair contractor to assist in inspection of the distribution
system and consultation with respect thereto. The parties agree to cooperate and make all
appropriate documents available in pursuing the due diligence.
CLOSING RELATED MATTERS; POST-CLOSING - Terra Grande and United
Water agree to the following:
a. Closing Date; Time of the Essence.The closing shall take place no later than thirty
(30) days after receipt of the regulatory approvals set forth above provided, howeverthat if the thirtieth (30th) day not be a business day, then the Closing Date shall be the
next Tuesday after the thirtieth (30th) day.
b. Closing.The closing ()f the transaction contemplated herein shall take place at the
office of McDevitt & Miller LLP, 420 West Bannock, Boise, Idaho or such other
place as may be agreed upon by the parties.
Possession.Possession of the Tangible Property and the Intangible Property shall be
delivered to United Water on the Closing Date.
d. Billing.Upon the closing date, or as soon immediately prior thereto as possible
Terra Grande shall render bills to its customers for water service provided from the
time of the last most previous billing date up to but not including the closing date.
Terra Grande shall be entitled to receive the revenue and accounts receivable
resulting therefrom. Thereafter, United Water shall render bills for water service
provided on and after closing date and shall be entitled to receive the revenue
resulting therefrom. In the event United Water receives payment for any bill
rendered by Terra Grande which was for service prior to the Closing Date United
Water shall remit said payment to Terra Grande.
CLOSING DOCUMENTS - On the Closing Date, Terra Grande shall deliver the
following documents:
a. Bill of Sale executed by the Terra Grande with full warranties of title conveying
the Tangible Property to United Water;
STIPULA nON Attachment A
Case No. TGW-04-
Staff Comments
01/13/06 Page 5 of
b. General Assignment executed by Terra Grande transferring the IntangibleProperty to United Water;
c. Originals, if available, of all certificates, licenses, permits, authorizations, andapprovals required by law, and issued by all governmental authorities havingjurisdiction; and
d. Such other documents as the parties determine are reasonably necessary in order
to effectuate any provision in this Stipulation.
PROM TIONS AND ADJUSTMENTS - The following items shall be prorated
and adjusted as of the Closing Date:
a. All accounts payable and other obligations incurred by Terra Grande prior to the
Closing Date shall be caused to be paid or performed by Terra Grande on orbefore the Closing Date or as soon as possible thereafter, and United Water
assumes no obligations or responsibility for the payment or performance thereof.
Bills received after Closing which relate to expenses incurred or service
performed allocable to the period prior to the Closing Date shall be paid by Terra:
Grande; and
b. Such other items as are customarily prorated in transactions of the typecontemplated in this Agreement
All such prorations shall be based on the most recent ascertainable bills, and be made on the
basis of the actual number of days and the year and month which shall be elapsed as of the
Closing, and to the extent reasonably practicable such prorations shall be made at Closing. Such
items of income and expenses for the period prior to the Closing date will be for the account of
Terra Grande and such items of income and expense for the period on and after the Closing Date
will be for the account of United Water, all as determined by the accrual method of accounting.
INDEMNIFICATION AND DEFENSE OF CLAIMS - Terra Grande will
indemnify, defend and hold United Water harmless against and in respect of:
a. All liabilities or obligations of, or claims against Terra Grande not assumed by United
Water pursuant to this Agreement;
b. Any damage or deficiency resulting from any breach of warranty; and
STIPULATION Attachment A
Case No. TGW-04-
Staff Comments
01/13/06 Page 6 of
c. All actions, suits, proceedings, demands, assessments, judgments, reasonable courtcosts and attorney fees and expenses incident or incurred by United Water inconnection with any of the foregoing.
The indemnification obligations in this section shall expire three (3) years after the Closing Date.
10.PROPERTY RETAINED BY TERRA GRANDE - Terra Grande and United
Water understand and agree that Terra Grande is retaining all wells, well lots , associated
pumping and well equipment and any water rights or permits associated therewith. When Terra
Grande s abandons the wells, it shall do so at its sole cost and expense, and shall cause the wells
to be properly sealed and abandoned, or otherwise disposed of, controlled, and/or maintained in
accordance with methods approved by, and at the direction of the Idaho Department of Water
Resources and Idaho Department of Environmental Quality.
11.REPRESENTATIONS.- Terra Grande warrants that its has good and sufficient
title to the Tangible Property and the Intangible Property which are being transferred hereunder
free and clear of all liens, claims and encumbrances. Terra Grande further represents and
warrants that it has secured all necessary consents and authorizations for the conveyance of the
Tangible Property and Intangible property required by that certain Trust Agreement dated
November 4, 1959 by and between Real Estate Sales Corporation and First Security Bank of
Idaho, NA and subsequently assigned to Terra Grande and Wells Fargo Bank NA.
TERRA GRANDE MAKES NO REPRESENTATION OR WARRANTY WITH
RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY P ARTICULAR PURPOSE
AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY
EXPRESSLY DISCLAIMED. UNITED WATER HEREBY ACKNOWLEDGES AND
AGREES THAT IT IS RECENING THE TANGIBLE PROPERTY AND INTANGIBLE
PROPERTY ON AN "AS-, WHERE-IS" BASIS
STIPULATION Attachment A
Case No. TGW-04-
Staff Comments
01/13/06 Page 7 of
DATED this liL day of December 2005.
~?a~
~1 chi r?--
RANDY LOB
Utility Division Administrator
Idaho Public Utilities Commission
GREGORYP. WYATT
Vice President
United Water Idaho, Inc.
BARBARA V. CHILD
President
Terra Grande Water, Inc.
STIPULATION
dl/ CC
ONO V AN E. WALKER
Deputy Attorney General
Idaho Public Utilities Commission
~,
~l~O~
DEAN J. MILLER
McDevitt & Miller, LLP
Counsel for United Water Idaho, Inc.
JOHN R. HAMMOND
Batt & Fisher, LLP
Counsel for Terra Grande Water, Inc.
Attachment A
Case No. TGW-04-
Staff Comments
01/13/06 Page 8 of
DATED this day of December 2005.
RANDY LOBB
Utility Division Administrator
Idaho Public Utilities Commission
BARBARA V. CHILD
President
Terra Grande Water, Inc.
STIPULA TION
DONOV AN E. WALKER
Deputy Attorney General
Idaho Public Utilities Commission
DEAN J. MILLER
McDevitt & Miller, LLP
Counsel for United Water Idaho, Inc.
JOHN R. HAMMOND
Batt & Fisher, LLP
Counsel for Terra Grande Water, Inc.
Attachment A
Case No. TGW-04-
Staff Comments
01/13/06 Page 9 of
UnitedWaleI
(B)
United Water Idaho
8248 West Victory Road
O, Box 190420
Boise. Idaho 83719-0420telephone [phone]facsimile 208-362-7069
October 21. 2005
Mr. Randy Lobb, Utilities Division Administrator
Idaho Public Utilities Commission
472 West Washington
Boise, Idaho 83720-0074
McDEVITT & MillER. lLP
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Re: Terra Grande RECEIVED
Dear Randy:
At our meeting on October 6 2005, we discussed various issues regarding United Water Idaho
acquiring the Terra Grande water system; and you also asked me to submit United Water
proposal for doing so. The following information responds to your request.
Known Capital Investments Required
United Water Idaho believes the following capital investments are required to provide safe and
adequate service to the Terra Grande system. Additionally, certain main replacement projects
have been included in this proposal based on our knowledge of the system gained during our
previously unsuccessful attempt to acquire the system. A map and a summary of the capital
additions are enclosed with this submission.
System Inter-ties
In order to provide adequate water flow and pressure for fire protection, the existing 4-inch
inter-tie installed early this year will be abandoned and replaced with an 8-inch line
connecting the United Water system on South Entertainment Way with the Terra Grande
system on South Ash Park. An additional 8-inch inter-tie and a fire hydrant will be installed at
the southern end of the system from United Water s main in Targee to Terra Grande s main in
Skillern Drive in order to maintain a two-way feed into the system and to provide some fire
protection in the southern portion of the system.
Metering
The Terra Grande system is currently un-metered and customers are billed according to a flat-
rate tariff. In order to meter the entire system, United Water proposes to install meter risers
and meters in the approximately 59 services that currently have adequate meter boxes (but no
meters), and to install cC'!!'..~~;;!~ m~t~r bcx~:; G..~d meters in the remaining servic,:::; -.-. ith existing meter box. Attachment A
Case No. TGW-04-
Staff Comments
01/13/06 Page 10 of
WW'N.unitedwater.com
Exhibit A
Page 1 of 5
...s '-" e
Abandon Main Lines and Install Customer Services
There are several locations where existing Terra Grande main lines run along the back and
side property lines of lots. These lines should all be abandoned and new customer service
lines installed from the street to the home, including meter boxes and meters.
The lines to be abandon are:
The 4-inch lines in the area north of Dorian, between Penninger and Ash Park.
The 2-inch and 4-inch lines south of Dorian, between Penninger and Ash Park.
The 2-inch line north of Lemhi, between Penninger and South Ash Park
Completely new customer service lines, meter boxes, and meters will need to be installed from
the street to the home, including the customer side service, for the seven (7) lots previously
served by the abandoned main lines.
Main Line Replacements
Based on our previous due diligence on this system and from knowledge gained during sewer
installation work in the area, United Water is aware that the water lines in the north end of the
Terra Grande system are of poor quality and should be replaced now.
The following main line improvements are required:
130 feet of 8-inch and 280 feet of 4-inch water main installed from the Ash Park
inter-tie north on Ash Park and a blow-off to replace the existing 3-inch line.
425 feet of 8-inch water main installed in Dorian from Ash Park to Penninger
replacing the 260 feet of 2-inch main in Dorian.
575 feet of 4-inch water main installed in Penninger, north from Dorian, and a
blow-off to replace the existing 3-inch line.
235 feet of 8-inch water main and a blow-off installed in Penninger, south from
Dorian to 1717 Penninger, and reconnect with existing main line, replacing
existing 3-inch main in Penninger.
185 feet of 2-inch water main and blow-offs installed in Penninger Court to replace
existing 2-inch and l-l/2-inch main line.
Installation of one fire hydrant located at 8023 Dorian.
Replace blow-off at south end of Ash Park due to unusable condition of existing
blow-off.
Remove main line T's at wells No. 3 and 4 and replace with main line.
Unknown Capital Investments Required
There are three basic areas where capital investments will likely have to be made as the above-
described work is performed. However, the quantity and cost of such work is currently
unknown. First, as risers and meters are installed in the e~istil1g meter boxes, we may find
that some of the existing boxes are unusable and must be adjusted and/or replaced. Second, as
meter boxes are installed in services where no box previously existed, we may find that the
Attachment A
Case No. TGW-04-
Staff Comments
01/13/06 Page 11 of
Exhibit
Page 2 of 5
service line (either customer side or company side, or both) is in such poor condition that it
must be replaced to maintain service to the customer. Third, as replacement services are
installed, we may find that the existing main to which the service must be connected is in such
poor condition that one or more sections of the main must be replaced.
As of this writing, we cannot speculate on the quantity or cost of these kinds of investments
but we believe that they will occur at some level simply due to the age and condition of other
portions of the system.
Acquisition and Construction Timing
We have not had contact with Mrs. Barbara Child since mid-2004, when the initial acquisition
attempt was foiled and the docket on Case No.UWI-04-02 was closed. During our
acquisition attempt, we performed due diligence with regard to obtaining clear title to the
water system assets and believed that it was possible. We would need to follow up at this time
to ensure that rights and title to the system assets have not changed. I estimate that this
investigation would take about two to three weeks. Assuming cooperation ITom all parties, a
closing on the acquisition is conceivable 30-45 days following Commission approval.
Construction of the above-mentioned investments would be possible only after a closing and
transfer of the assets was finalized. Depending on the timing of the acquisition, and
considering winter weather, we currently estimate a construction time of approximately three
months for the above-mentioned known investments. The quantity, if any, of unknown
investments, as mentioned above, could lengthen the time to complete the entire project.
any event we would like to see all initial construction completed by May 31 , 2006.
Customer Billing and Conversion to Metered Rates
Upon closing the acquisition United Water would read the current ma~ter meter serving the
entire Terra Grande system and render a final bill to Mrs. Child. At the same time, we
propose to initiate service with each individual Terra Grande customers on a flat-rate basis in
accordance with United Water s current Tfu-iff Schedule No 1B, Flat Rate Service. Each
customer would receive service on the flat rate tariff until their meter was installed, at which
time they would be converted to service in accordance with Tariff Schedule 1 , General
Metered Service. This is identical to the approach used when we converted the Barber system
from flat rate to metered service.
United Water s Return on Investment
In order to adequately compensate United Water for the investments it will need to make after
acquiring the Terra Grande system, I propose that United Water be allowed to calculate and
record on its books AFUDC, as detennined in the most recent rate case, on all of the above-
described investment~ that it prudently makes in the Terra Grande system, until such time as
those investments are allowed to be recovered in its next rate case. I also propose that those
Attachment A
Case No. TGW-04-
Staff Comments
01/13/06 Page 12 of
Exhibit A
Pa1?;e 3 of 5
investments be allowed in rate base at 100% value and not be subject to a 13-month average
calculation.
Currently United Water is billing Mrs. Child for all water used in the Terra Grande system via
the metered service interconnection installed January 28 , 2005. Water revenues billed from
1/28/05 through the last meter reading on 9/20/05 amount to $36 973. Based on the existing
history, I estimate a full year s revenue, adjusted for the current rate increase, to be
approximately $47 000. United Water believes that these revenues are included in the revenue
requirement calculated in the most recent rate case since they represent part of the growth
revenue United Water provided as offset for the Columbia Plant.
After acquisition, it is certain that United Water will earn less revenue and less operating
income from the Terra Grande customers via individual meters than from the current master
metering arrangement. This is true because customers will be able to monitor their usage
through bi-monthly billings and adjust their use accordingly, the overall system leakage will
no longer be billed, and United Water will incur additional system operating, billing, and
collections costs. Assuming that the Terra Grande customers provide a revenue stream at 80%
of the average residential rate, due to smaller homes and yards, the annual revenue would be
approximately $32 600 (116 customers ~ $351 per year X 80%). Thus, United Water will
suffer at least a $14 400 revenue deficiency even before any return on investment is
considered.
Miscellaneous
United Water understands that Mrs. Child wishes to maintain ownership of all Terra Grande
land, wells, pumping equipment, and water rights. United Water anticipates only taking
ownership of the distribution system assets and all (if any) easements and rights-of-way
required to operate and maintain those assets. It is United Water s strong belief that all
existing Terra Grande wells should be properly abandoned and capped in accordance with
Idaho Department of Environmental Quality requirements. United Water desires that the
Commission instructs Mrs. Child to perform such abandonment, and it desires to be held
harmless from any and all claims or liabilities arising as a result of any contamination from the
said wells.
If you have any questions or need additional information, please contact me at 208-362-7327.
Respectfully,
/ Gr . Wyat
er I Manag
' ,--'"
cc:J. Miller, McDevitt & Miller
P. Foss, M. Germari, J. Healy, S. Rhead
Attachment A
Case No. TGW-04-
Staff Comments
01/13/06 Page 13 of
Exhibit A
PaQ'e 4 of ~
Revised 10/20/05
United Water Idaho Estimated Investments in Terra Grande
Interties -
Dorian & Ash Park
Targee & Skillern (plus one fire hydrant)
Abandon 4" Service. Meter and Backflow Vaults
Main Replacements & Abandonments
Replace 410' of 3" PVC pipe (Thin wall) on Ash Park lane
Replace 260' of 2" Galvanized pipe on Dorian W. of Ash Park lane.
Replace 575' of 3" PVC ( Thin wall) on Penninger Dr. N. of Dorian.
Replace 235' of 3" PVC (Thin wall) on Penninger Dr. S. of Dorian. (add:1 fire hydrant)
Replace 185' of 2" and 1 1/2" PE. class 160 (Thin wall)
Abandon lines in back yards along property lines
The 3" PVC is Brittle and the 2" & 1 1/2" PE is thin wall with hose clamp fittings.
Replace Blow off
Replace existing blow off - Ash Park & lemhi (flushing)
Service Lines Due to Main Line Abandonments
Install 7 service lines from the main to the house.
Meter Boxes
Install 50 Meter Boxes & Setters in existing service lines
Meter Relocators
Install 59 Relocators in existing meter boxes
Abandon Well T's
Well #3 & #4
Subtotal
Company Construction Overheads ~ 7.53%
Subtotal
Omissions and Contingencies ~ 5%
Project Total
Materials &Company Total
feet size Contractor labor Cost
160 $9,921 $400 $10.321
$5.684 $3,352 036
$300 $2,793 093
130 $94,491 $3,600 $98 091
280 included above included above
425
575
235
$350 117 $1,467
503 $27 934 $34,437
$10.515 $39 107 $49 622
$2,742 $2,867 609
$858 $3.352 210
$131 364 $84 522 $215 886
$16.256
$232 142
607
$243 749
Attachment A
Case No. TGW-04-
Staff Comments
01/13/06 Page 14 of
Exhibit A
Page 5 of 5
Exhibit B
Tangible Personal Property
The entire Terra Grande Water distribution system, excluding those items on Exhibit D.
The Tangible Personal Property transferred to United Water Idaho, Inc., includes all
water mains, services, meter boxes, meters, valves, valve boxes, and all other water
distribution system appurtenances including:
Approximately 1 750 feet of2-inch GIP water line
Approximately 1 585 feet of3-inch AC water line
Approximately 390 feet of 3-inch PVC water line
Approximately 4 858 feet of 4-inch water line
Approximately 53 single and 26 double service lines
Attachment A
Case No. TGW-04-
Staff Comments
01/13/06 Page 15 of 17
TERIlA GRANDE
TERRA GRANDE
BOUNDAR'(
Exhibit C
------ ... .
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Attachment A
Case No. TGW-04-
Staff Comments
01/13/06 Page 16 of
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Exhibit D
Excluded Property
All real roperty upon which Terra Grande Water, Inc.'s wells are located.
The following personal property and appurtances:
Well, well casing and appurtenances, well building, all pumps, motors, valves
meters, piping, electrical and control equipment and appurtenances and easements for
ingress and egress into the following listed Terra Grande Water wells:
Well No.located at 1719 Ash Park
Well No.located at 1607 Ash Park
Well No.located at 1735 Penninger
Well No.located at 8111 Lemhi
Water Rights
Water Right No. 63-18443
Attachment A
Case No. TGW-04-
Staff Comments
01/13/06 Page 17 of
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 13TH DAY OF JANUARY 2006
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. TGW-04-, BY MAILING A COpy THEREOF, POSTAGE PREPAID
TO THE FOLLOWING:
BARBARA V CHILD
TERRA GRANDE WATER
10012 ESHELMAN
BOISE ID 83704
WILLIAM J BATT
BATT & FISHER
PO BOX 1308
BOISE ID 83701
GREGORYP. WYATT
UNITED WATER IDAHO INC
PO BOX 190420
BOISE ID 83719-0420
DEAN J MILLER ESQ
McDEVITT & MILLER LLP
PO BOX 2564
BOISE ID 83701
Iv) fl~SECRET
CERTIFICATE OF SERVICE