20100115Comments.pdf

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 1895
Rt:r:r-i.'\L....V :"-"
2010 JAr! \ 5 M'lIO: Ll6
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE PURCHASE AND
SALE OF TROY HOFFMAN WATER
CORPORATION (CERTIFICATE OF
CONVENIENCE AND NECESSITY NO. 280)
)
) CASE NO. TRH-W-09-01
)
)
) COMMENTS OF THE
) COMMISSION STAFF
)
)
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its
Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of
Application, Notice of Modified Procedure and Notice ofComment/rotest Deadline issued on
December 17,2009, submits the following comments.
BACKGROUND
On November 12,2009, an Application was filed with the Idaho Public Utilities
Commission (Commission) requesting approval of the sale of Troy Hoffman Water Corporation
(Troy Hoffman Water; THWC) by Bentwood Park LLC to Dalton Square LLC. Dalton Square
wil operate the THWC as a corporation and continue to operate under the Troy Hoffman Water
Corporation name. The Application is solely for approval of the change of ownership.
STAFF COMMENTS 1 JANUARY 15,2010
Dalton Square is familar with the Commission's regulatory authority and rules and is
prepared to abide by existing directives. The Company is aware of the Commission's website
and have become familiar with the Utilty Customer Relations Rules (IDAP A 31.21.01) and
Utilty Customer Information Rules (IDAPA 31.21.02.). Dalton Square is familiar with the
water system testing requirements of the Idaho Department of Environmental Quality and is
prepared to fulfill those ongoing requirements.
Dalton Square represents that it has the business experience, financial ability and water
system expertise to operate and maintain the system. Dalton Square is owned by Ron Stadley
and Ken Murren and was formed in 2006. Dalton Square owns light industrial buildings for rent
in Coeur d Alene as well as aparments for rent in Plummer. Mr. Stadley has been the water
master for THWC since 1995 and is qualified to operate a pressurized potable water system, both
through his hands-on experience of handling the day-to-day operations, maintenance and
emergencies as well as through being licensed as a drinking water operator which requires
ongoing continuing education classes. Mr. Stadley holds a curent Drinking Water Operator
License. Mr. Stadley has also been an electrician since 1988 and owns his own electrical
company. He holds a master electrician license in four states. Mr. Muren has 25 years of
experience in commercial and residential construction. He owns a general contracting and
landscaping business and specializes in custom homes. He is currently in the process of
preparing to take his tests to receive both his Drinking Water Operator License and Backflow
Assembly Tester License.
There is no deed transferring title to the water system because THWC is the corporation
that owns the real estate and Dalton Square is purchasing the corporation. Included with the
Application are copies of the Purchase and Sale Agreement between Bentwood Park and Dalton
Square. The transfer of ownership took place April 1, 2009. Also included is a copy of the
Drinking Water Operator License held by Ron Stadley, a copy of Dalton Square's Certificate of
Existence from the Idaho Secretar of State, and a copy of the Idaho Tax Commission's 2009
Valuation ofTHWC for $16,081. The Purchase and Sale Agreement, Attchment A to the
Application, shows the purchase price of $65,000 as the value the seller and buyer agreed upon
for sale/purchase of THWC.
STAFF COMMENTS 2 JANUARY 15,2010
Included with the filing also is a brief business plan which explains how Dalton Square
intends to incorporate the THWC into its other business interests and a copy of notice sent to
customers on November 10,2009, informing them of the sale.
STAFF ANALYSIS
Finance and Accounting
Staff has reviewed the Troy Hoffman Water Corporation Application requesting approval
to sell and transfer all its outstanding common stock from the current owner Bentwood Park
LLC. (Bentwood Park) to Dalton Square, LLC (Dalton Square). Bentwood Park curently is
owned by two managers: H. James Magnuson and Rick Gunther. Dalton Square is an Idaho
limited liability corporation owned and managed by two managers: Ron Stadley and Ken
Murren. Staff has determined that both Bentwood Park and Dalton Square are corporations in
good standing with the Idaho Secretary of State's office.
Troy Hoffman Water serves 144 residential customers in the city limits of Coeur d'Alene,
Idaho. THWC has provided water service since 1977 under Certificate No. 280 as issued by this
Commission on Januar 18, 1977.
Dalton Square wil purchase all of the outstanding common stock ofTHWC for $65,000
and wil continue to operate THWC as the licensed entity and water provider. Dalton Square
understands that the current financial records for THWC wil be used on a going forward basis
for the establishment of any rates and that the purchase price for the common stock wil not be
recorded on the books of THWC. Staff has informed Dalton Square that the stock purchase is an
investment by Dalton Square and as such is not recoverable from customers. Dalton Square
acknowledges that it is aware that the valuation of the rate base by the Commission in any future
rate cases wil be the same as is currently on the books of THWC plus new plant additions and
wil not be revalued because of the purchase price of the common stock. Dalton Square
understands that in any future rate cases, it has the responsibilty to justify any additions to the
rate base.
Dalton Square acknowledges that it understands that accounting for the water system
must be in accordance with the Commission's Uniform System of Accounts and must be
maintained on a stand-alone basis separate and apar from any other business activities of the
buyer. It is the intent of the buyer to continue to use the services of All Service Electric to do the
STAFF COMMENTS 3 JANUARY 15,2010
biling for the water system and to complete and meet the Commission's accounting
requirements. All Service Electric has been doing the biling for THWC for the last three years.
Ron Stadley, one of the managers of Dalton Square, has been the certified operator and
water master of the water system since 1995. He has proven himself during that time to be well
qualified to operate the system, and wil continue to serve as the water master after the approval
to transfer the common stock.
Troy Hoffman Water's biling services have been provided by All-Service Electric, a
company owned by Ron Stadley. This company will continue to provide the biling services
after the common stock transfer. Staff has advised all paries involved that any service provided
by an affliated company must be provided to THWC at a reasonable rate. Any affiliate
transaction must meet higher standards to show the costs are reasonable.
From the customer's perspective, all services previously provided by THWC will remain
the same. Troy Hoffman Water has not requested a rate increase with this Application and
therefore any approval of the transfer would not have any effect on rates.
Staff has reviewed the current financial information for Dalton Square, Ron Stadley and
Ken Muren. Based upon that financial information provided, Dalton Square and its managers
have the financial strength to support and operate THWC as an on-going concern and wil not be
an additional burden on the water company's operation. Additionally, Dalton Square, Mr.
Stadley and Mr. Murren have the financial strength to provide for future financial needs should
THWC have that need.
Engineering
As par of its review, Staff contacted the Idaho Department of Environmental Quality,
Coeur d Alene Region (IDEQ) to ensure that Troy Hoffman Water Corporation is currently in
compliance with IDEQ's rules and regulations. Staff was informed by IDEQ that the last
Sanitar Survey conducted on Troy Hoffman Water was December 10, 2004. Sanitar Surey is
an onsite review of the water source, facilties, equipment, operation and maintenance to assure a
public water system provides an adequate source of supply, and is distributing safe drinking
water. Generally, for community systems, IDEQ conducts a Sanitay Surey every five (5)
years, with some exceptions. According to IDEQ, effective 2013, Sanitar Surveys wil be
conducted every three (3) years. During the 2004 Sanitar Survey, IDEQ identified several
STAFF COMMENTS 4 JANUARY 15,2010
deficiencies requiring correction. IDEQ letter to Company, December 16,2004. IDEQ
informed Staff that it does not have a Plan of Corrections submitted by the Company to IDEQ
regarding the regulatory deficiencies noted during the December 10, 2004 Sanita Survey. One
major deficiency that needs to be corrected was the installation of a water production flow meter
at the well.
Staff contacted Ron Stadley, new owner of the Troy Hoffman Water, to find the status of
the installation of flow meter. Mr. Stadley explained that this specific system deficiency has
already been corrected. When the Company retrofitted the pumping system in March 2009, the
Company also installed a 4-inch flow meter that measures instantaneous flow rates and volume
of water pumped. With the newly installed meter, the Company can now record its total water
production on a regular basis. The Company informed Staff that IDEQ has not yet been notified
that this corrective action was already completed by the Company. The other deficiencies are
minor and the Company has either corrected them or the deficiencies are in the process of being
completed. IDEQ informed Staff that Troy Hoffman Water is due for another Sanitary Survey in
2010. This survey wil identify any current deficiencies and confirm that the deficiencies
identified durng the December 10, 2004 survey have been appropriately corrected.
The Commission recently received an email from a Troy Hoffrran Water customer
complaining that the water pressure in the customer's residence has been half its normal pressure
for the past two months. Staff contacted IDEQ to determine if there have been some low water
pressure complaints from customers of Troy Hoffman. IDEQ indicated that no complaints have
been received recently. Staff alerted the Company concerning this complaint and the Company
indicated the same customer included a note concerning this problem when the last water
payment was sent to the Company. Ken Murren, in-charge of the Company's operations and
maintenance investigated the problem on Januar 7, 2010, and provided the Staff a copy of the
incident report. The report indicates that the customer meter was functioning properly and it was
not spinning to indicate a potential leakage problem. The water pressure at the customer side of
the house was 68 psi. A neighbor's water pressure was also checked and read 68 psi. The
Company suggested to the customer that perhaps the screens on the faucets and shower head
may need to be checked to see if they are clogging. Troy Hoffman Water system appears to be
operating within the IDEQ's rules and regulations pertaining to water pressures in the
distribution system.
STAFF COMMENTS 5 JANUARY 15,2010
As mentioned in the Application, Mr. Stadley is the new co-owner of the Troy Hoffman
Water Corporation and wil continue as the water system operator. He currently holds a license
as Drinking Water Operator, Distribution - Very Small System (DWO-DVSS). Staff notes that
his license expires on February 28,2010. To continue as a certified operator for Troy Hoffman
Water, he must maintain his certification as DWO-DVSS.
Staff also reviewed the Company's water rights. According to the Idaho Department of
Water Resources, Northern Region, Troy Hoffman Water has two valid water right licenses.
While the Company name is not changing with the sale of the Company to Dalton Square, LLC,
it may be necessar to notify IDWR about change of address of the Company for future
communication. IDWR informed Staff that it would soon serve notification to water rights
holders in the area to fie adjudication claims. Staff recommends that the Company
appropriately fie the notice of claims to its water rights when the adjudication notification has
been issued by IDWR. This action wil assure protection of the Company's water rights for the
benefit of its customers.
Customer Relations
The Company notified customers of the sale in a letter dated November 10,2009.
The customer notification filed with the Application complies with the requirements of Utility
Customer Information Rules (IDAPA 31.21.02 et seq.).
The Commission has received no complaints and only one inquiry from a customer in the
past three years. There have been two commen,ts received from customers during the comment
period. One comment expressed support for the sale while the other (as discussed above)
expressed concern about adequate water pressure.
The Company did not submit updated versions of the Company's Tarff and rate schedule
as par of the transfer. A review of the Company rules and regulations on fie, dated 1982, and
the rate schedule, dated 1996, indicate the Company will need to revise its rate schedule and
tarff to comply with the model taiff adopted by the Commission. Staff review of notices and
biling statement submitted in 2007 as par of a periodic review indicate that the Company wil
need to update documentation to conform with the Utilty Customer Relations Rules (IDAPA
31.21.01 et seq.). Biling documentation is adequate but the Company wil need to revise its
annual rules summary and notices used in the termination process. Sample forms are available
STAFF COMMENTS 6 JANUARY 15,2010
online or from Commission Staff, and Staff recommends the Company update its Tariff, rules
summar and biling and collections documents. Staff is wiling to work with the Company in
an ongoing effort to update forms to ensure compliance with the all current rules and regulations.
RECOMMENDATIONS
Staff is supportive of this sale and recommends that the Commission authorize the
transfer of all of Troy Hoffman Water Corporation outstanding common stock from Bentwood
Park, LLC to Dalton Square, LLC. Staff also recommends that Dalton Square make the
appropriate changes with the affected state agencies to reflect the new registered agent and
registered address of Troy Hoffman Water Corporation.
Staff recommends the Company update its tariff, rules summar and biling and
collections documents to meet curent Commission rules and regulations.
Respectfully submitted this /51Á day of Januar 2010.
~~IJ~
Scott Woodbury -- ~
Deputy Attorney General
Technical Staff: Joe Leckie
Gerry Galinato
Chris Hecht
i:umisc:commentsltrhw09.1 swjlggcwh comments
STAFF COMMENTS 7 JANUARY 15,2010
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 15TH DAY OF JANUARY 2010,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. TRH-W-09-01, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
BENTWOOD PARK LLC
C/O H JAMES MAGNUSON
PO BOX 2288
COEUR D' ALENE ID 83816
DALTON SQUARE LLC
ATTN: RON STADLEY
710 W DALTON AVE STE B
COEUR D'ALENE ID 83815
Jo~
SECRETARf
CERTIFICATE OF SERVICE