20050321Order No 29735.pdf

Office of the Secretary
Service Date
March 21 , 2005
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF TERRA GRANDE WATER FOR
INTERIM RATE RELIEF AND FURTHER
PROCEEDINGS TO ESTABLISH JUST AND
REASONABLE RATES ORDER NO. 29735
CASE NO. TGW-O5-
On February 9, 2005 , Terra Grande Water filed an Application with the Commission
requesting immediate interim rate relief, further proceedings to establish just and reasonable
rates, and deferred accounting treatment for excess water supply costs above interim rates if
appropriate. This Application is based upon the emergency interconnection of Terra Grande
Water with United Water Idaho Inc.
In Order No. 29716 the Commission found that, because of the emergency situation
there was good cause to process the Company s Application for interim rate relief on expedited
proceedings with comments due on March 4, 2005. The Commission received comments from
seven of Terra Grande s customers, as well as comments filed by the Commission Staff. In this
Order the Commission establishes Terra Grande s interim rate as a $13 per month, flat rate, year
round customer charge in addition to charges collected for United Water s metered service.
BACKGROUND
On June 8, 2004, the Commission issued Terra Grande Water a Certificate of Public
Convenience and Necessity and authorized the Company s current two-season flat rate fee
schedule of $26 per month in the summer and $16 per month in non-summer months. Order No.
29512. Case No. TGW-04-1. Additionally, that Order initiated an investigation of the
Company. Idaho Code ~~ 61-501 , 61-503. The investigation is to establish: (1) whether the
existing rates for water service are just and reasonable; and (2) whether Terra Grande Water
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 ~~ 61-301 , 61-302.
Staff was in the process of its investigation when, on January 21 and January 24
2005 , the Commission was informed by the Company and by Department of Environmental
Quality (DEQ) officials that the three water supply wells of Terra Grande Water were
ORDER NO. 29735
contaminated with Trichloroethylene (TCE), a hazardous chemical. Customers were notified on
January 21 , 2005 not to consume the water and to minimize all other uses of the water. DEQ
recommended an emergency interconnection of Terra Grande s water system to United Water
supply system, and offered to make funds available from the Idaho Hazardous Waste Emergency
Response Fund to pay for the costs of making the connection. On January 28, 2005 , the
Commission was notified that the interconnection with United Water was completed.
THE APPLI CA TI 0 N
According to its Application, Terra Grande has provided water service to the Terra
Grande Subdivision for over 50 years, and currently has approximately 117 residential
customers. The Company states that it notified customers of the contamination on January 21
2005, and advised them to cease the use of water for drinking and to minimize all other uses
such as bathing and showering. The Company also started supplying bottled water to its
customers and arranged for them to purchase water at wholesale price from a Wal-Mart across
from the subdivision. Terra Grande notified customers that it would provide them with a billing
credit against future bills for their purchase of water. According to the Application this amount
has not yet been calculated. Terra Grande and DEQ are working together to determine the cause
of the contamination, but have not yet been able to identify the party responsible for the
contamination of the Company s water source.
The Application states that the connection with United Water s supply system was
completed on January 28 2005 and United Water began providing water service to the Company
around 5:00 p.m. on that same day under United Water s current Schedule 1 , General Metered
Service. This connection consists of: (1) a 3" meter installed in a concrete vault; (2) 4" pipe
connecting the United Water System with Terra Grande s system; and (3) a backflow device to
prevent any residual contamination from the Terra Grande system from entering into United
Water s system. DEQ provided funds from the Idaho Hazardous Waste Emergency Response
Fund to pay for the costs of this connection.
According to the Company s Application, United Water s charges under Schedule
for General Metered Service consist of a volume charge for all water use of $0.9825 per 100
cubic feet (CCF) in the winter, and $1.2281 per CCF for the summer as well as a customer
charge for a 3" meter of $82.42 bi-monthly. Summer rates apply for all water consumed
between May 1 and September 30 each year~ United Water also assesses a 50~ bi-monthly
ORDER NO. 29735
charge as required by DEQ to fund the State Drinking Water Program and a 3% municipal
franchise fee as required by the City of Boise.
Terra Grande s Application requests immediate interim rate relief, effective as of the
date it filed the Application, February 9, 2005. The Company subsequently filed an Amendment
and Supplement to its Application. In this Amendment the Company requests that any interim
reliefbe made effective as of January 28, 2005, the date on which United Water began supplYing
water to the Company s system.The Amendment also advised the Commission that the
Company had received the first billing from United Water. That bill was $723.49 for a 17-day
period starting from the initial hookup. Finally, the Company advised that it was recently
annexed into the City of Boise, and requests that the Commission, to the extent possible, take
into consideration the effect of the potential impact on rates of a possible municipal franchise fee
that the Company may have to pay in the future.
CUSTOMER COMMENTS
The Commission received comments from seven of Terra Grande s customers.
Three of the comments were not opposed to paying United Water s charges for water use, but
were opposed to paying Terra Grande s fee in addition to United Water s charges. Two of the
comments opposed paying anything for the United Water bill, stating that it was not the
customers ' fault that the water was contaminated and they should not be punished for it. One
comment stated that the customers should not pay for the hookup to United Water s system.
Several of the comments took issue with Terra Grande crediting customers for only two liters of
water per day for their purchase of bottled water.
FINDINGS OF FACT
I. INTERIM RATES
Terra Grande requests that the Commission allow it to continue charging its
customers $16 per month for water service based on the Company s current, filed tariff.
Additionally, the Company requests that it be authorized to add the costs of purchasing water
from United Water to the Company s existing flat rate. The Company proposes to divide the
United Water bill by the total number of Terra Grande customers, and pass this expense on to
each customer equally by adding it to their existing flat rate. United Water bills on a bi-monthly
basis, and Terra Grande bills its customers in advance for two months of service.
ORDER NO. 29735
Commission Staff also recommended that the Commission allow Terra Grande to
continue charging its customers $16 per month for water service and that it be authorized to add
the costs of purchasing water from United Water to the Company s existing flat rate by dividing
the United Water bill by the total number of Terra Grande customers. Staff recommended that
the $16 monthly charge continue year round, with no increase for the summer months. Staff
contends that approval of the $16 monthly charge continues an existing rate, provides the
Company with reasonable recovery of anticipated costs, allows the Company to pursue
permanent service arrangement alternatives, defers consideration of specific rate base treatment
of plant and associated expenses until more information is known, and recognizes that the
Company will be required to collect United Water s metered charges from its customers up to
two months in arrears.
We find that some combination of the existing flat rate charge and the new United
Water metered charges should be collected from Terra Grande customers. Clearly the charges
assessed Terra Grande for metered service under United Water s Schedule 1 were not anticipated
by any party when the Commission approved the Company s existing flat rate charges. It is
equally true that other costs previously incurred by the Company, such as pumping power costs
will not be incurred during the period of interconnection with UWI. Consequently, we cannot
authorize Terra Grande s full, previously charged rate of $16 per month in addition to the water
charges from United Water because Terra Grande will have reduced expenses.
We find it just and reasonable to authorize Terra Grande to charge its customers a
monthly charge of $13 year round, in addition to United Water s metered charges. If Terra
Grande s customers were direct customers of United Water they would be assessed a customer
charge of $14.57 bi-monthly in addition to the Schedule rates for water consumption.
However, this is based upon all of the considerations specific to setting rates for United Water
including their economies of scale, cost of service, etc., which is quite different than a much
smaller company like Terra Grande. Additionally, Staff s preliminary estimate of a post-
interconnection revenue requirement (excluding UWI charges) produces a flat rate of
approximately $11 per month. This amount assumes a rate base of approximately $52 000, a
return on equity of 8% and annual expenses of $7 300. No expenses are included for pumping or
management. However, rather than trying to anticipate the permanent flat rate based upon
limited, preliminary information, and given the fact that Terra Grande s expenses will be less
ORDER NO. 29735
than they were before interconnection, we find it reasonable to set the interim monthly charge at
$13 per customer per month. In establishing this interim rate we reject the Company s request to
take into consideration the effect of a possible future municipal franchise fee that mayor may not
be imposed.
We find that the $13 monthly charge should be year round, with no increase during
the summer months. The existing flat rate differential between summer and winter assumes that
the Company will incur additional costs in summer due to increased water consumption. Absent
a metered rate, a higher summer rate was needed to recover those costs. That is not the case after
interconnection with United Water. UWI meter charges will increase in the summer but Terra
Grande s costs recovered through the flat rate will not. Customers will pay higher charges in
summer because they will be charged for the water provided by United Water.
We find that the United Water retail rate is appropriate at this time. Although this is
technically a resale arrangement between United Water and Terra Grande, we find that, under the
circumstances of this case, the service arrangement at existing retail rates is appropriate on an
interim basis. United Water does not have a separately tariffed wholesale rate. Given the lack of
individual meters in the Terra Grande system, we also find it reasonable for Terra Grande to
divide United Water s charges by the total number of Terra Grande customers and to collect the
amount on a monthly basis along with its monthly flat rate charge.
Although United Water s tariffed rates are billed on a bi-monthly basis we find it
reasonable and prudent for United Water to make a special exception in this particular set of
circumstances and bill Terra Grande on a monthly basis. This is based upon the circumstances
surrounding the contamination of Terra Grande s wells, the resulting emergency interconnection
with United Water, the bulk nature of Terra Grande s service, (all of Terra Grande s 117
customers are on one meter from United Water), and United Water s cooperation. This is also
based upon the fact that bills for Terra Grande s customers are going to change rather
dramatically, and a monthly monitoring and price signal is vital, especially because this change
comes at the beginning of the summer season. We also note that United Water has a pending
rate increase request at the Commission.
The Commission wishes to complement United Water on its prompt and professional
response and cooperation in this emergency situation. We additionally find that United Water is
specifically authorized to deviate from its tariff for this one customer, Terra Grande, and bill on a
ORDER NO. 29735
monthly basis. We find that this unique situation does not establish precedent for requiring
monthly billing of any other United Water customer or group of customers.
Commission Findin2s We find, based upon the contamination of Terra Grande
water source and the resulting emergency interconnection of the water system to United Water
system as an alternative source, and pursuant to the finding of good cause to process the
Company s Application for interim rate relief on expedited proceedings in Order No. 29716, that
Terra Grande s current rates are insufficient to cover the costs of providing water to its
customers.
We find that Terra Grande should collect a $13 monthly flat rate customer charge
year round, in addition to charges collected for metered service from United Water.
We find that Terra Grande should divide the United Water bill equally among its
customers and collect that amount, with its $13 customer charge, on a monthly basis
commencing with United Water s first billing period that started on January 28, 2005.
II. FURTHER PROCEEDINGS
Terra Grande requested that the Commission allow further proceedings in
conjunction with the investigation in Case No. TGW W -04-1 to establish just and reasonable
rates for its customers on a going-forward basis once more detail is developed regarding the
Company operations.In the event that actual cost recovery is not authorized by the
Commission, the Company also requested authorization to defer any excess water supply costs
until new rates are implemented that provide for recovery of excess water supply costs, over and
above any interim rate that is put in place.
We have already opened an investigation to determine whether Terra Grande
existing rates are just and reasonable. Staff was in the process of this investigation when the
water quality problems developed. We find that until the Company completes its evaluation of
service arrangement options and affects a permanent solution, it is premature to establish
permanent rates. Deferral of additional service costs is not authorized at this time, but may be
considered after a specific source of supply remedial plan or permanent service arrangement is
submitted and approved by the Commission. This is consistent with Commission Order No.
29512 , which states:
The Commission further finds it reasonable to require Terra Grande Water to
file a written plan for any additional capital investment in the water system
ORDER NO. 29735
with estimated costs and proposed timing. No further capital investment is to
be made in the water system without Commission approval.
We find this requirement is all the more critical given the severe water quality
problems encountered by the Company.
Commission Findin2s We find that Terra Grande should develop a permanent
service arrangement plan and submit it to the Commission for approval prior to the establishment
of permanent rates or consideration of deferral of any additional costs.
III. CUSTOMER NOTICE
The Company states that notice to its customers concerning this interim and more
general rate request has been accomplished by news media releases simultaneously with the
filing of the Application and by individual notice mailed to each customer.
attached to the Company s Application as Attachment C.
Based on information provided to customers by the Company and the media
The notice is
coverage of Terra Grande s water quality problem, customers are likely well aware of the current
situation.However, the interim interconnection with UWI and the rates approved by the
Commission will subject customers to unaccustomed consumption charges. Moreover, because
none of the customers are individually metered, system consumption will be divided equally.
Consequently, we find it is important for the Company to routinely notify its customers of the
need to control water consumption, particularly in summer months to assure that water service
remains affordable.
Commission Findin2s We find that Terra Grande should notify its customers that
the costs of water system consumption will be shared by all customers and inform them of the
need to control their water consumption. We find that Terra Grande should also notify its
customers that conservation materials and kits are available upon their request, describe what
those materials are, and facilitate the distribution of those materials to those that request them.
Terra Grande shall work in conjunction with Commission Staff and United Water to compile and
provide a list and description of the pamphlets and the indoor and outdoor water conservation
kits in order to provide that information to its customers. Terra Grande shall distribute the
materials upon request by customers.
ORDER NO. 29735
UL TIMA TE FIND IN GS OF FACT
AND CONCLUSIONS OF LAW
Terra Grande Water is a water corporation providing water service to the public
within the State of Idaho Idaho Code ~~ 61-124, 61-125, and is operating as a public utility.
Idaho Code ~ 61-129.
The Commission has jurisdiction over this matter as authorized by Title 61 of the
Idaho Code, and more particularly Idaho Code ~~ 61-501 , 61-502, 61-503 , 61-520, 61-523.
As set out in the body of this Order, the Commission finds that the existing rates are
unreasonable. The approved rates set forth in this Order are just and reasonable. Idaho Code
61-622.
ORDER
IT IS HEREBY ORDERED that Terra Grande is authorized to collect a $13 monthly
flat rate customer charge, year round, in addition to charges collected for metered service from
United Water.Terra Grande shall divide United Water s monthly bill equally among its
customers and collect that amount, with the above mentioned $13 customer charge, on a monthly
basis commencing with United Water s first billing period that started on January 28, 2005.
IT IS FURTHER ORDERED that the Company submit tariffs conforming to the
rates set out above no later than March 31 , 2005.
IT IS FURTHER ORDERED that Terra Grande shall develop a permanent service
arrangement plan and submit it to the Commission for approval prior to the establishment of
permanent rates or consideration of deferral of any additional costs. No cost deferral is
authorized at this time.
IT IS FURTHER ORDERED that Terra Grande shall notify its customers that the
costs of water system consumption will be shared by all customers and inform them of the need
to control their water consumption.Terra Grande shall also notify its customers that
conservation materials and kits are available upon their request, describe what those materials
are, and distribute those materials upon request.
ORDER NO. 29735
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this .;z I sf-
day of March 2005.
ATTEST:
~l(\
D. JewellC. mission Secretary
O:TGWWO50 1 dw2
ORDER NO. 29735
, PRESIDENT
MARSHA H. SMITH, COMMISSIONER