20101206Reply Comments.pdf

. ~
.'
Troy Hoffman Water Corp.pc
~ ..L710 W Dalton Ave, Suite J '
Coeur d' Alene, ID 83815 inin nEC-6
208-664-9858
PM 2:20
\DAr'iCl
UTiUilES
December 2, 201 0
Scott Woodbury
Deputy Attorney General
Idaho Public Utilities Commission
PO Box 83720
Boise, ID 83720-0074
RE: Case No. TRH-W-IO-Ot - Response to Comments ofthe Commission Staff
Dear Mr. Woodbury:
We first would like to respond to the Staff comments regarding the Annual Operating Expenses:
Annual Operating Expenses
Labor - Operations & Maintenance:
We accept the Staf s recommendation to continue to pay RonStadley $825 per month as the
licenses water master ($9,900 annually). Ken Murren is our licensed backup òperatónvhich is
something we are required to have. We do request anallowanceof$83.33 per month ($1,000
annually) for his services. This would increase the total for this category to $10,900 anually.
Contract Services - Office & Accounting:
In our rate increase application, we included bookkeeping services under the Contract Services -
Professional category. (The categories the Staff used in their comments are slightly different
than the ones we used in our application). Staff increased the Contract Services - Office &
Accounting category by $3,600 for the bookkeeping service ($300 per month). Staff stated that
in reviewing the company history, this is the amount that was paid to an independent service
provider in 2004 and 2005 which is correct. The cost of bookkeeping has increased since 2004.
Therefore, we request that a 5% increase per year be figured in to this total, bringing the amount
up to $400 per month or $4,800 anually.
In addition, now that we as the new owners are running all of the company operations out of the
All Service Electric offces, we request that $200 per month or $2,400 anually be added to this
category for offce space rental. This is a new expense as we are now using their offices in
addition to them providing the ongoing bookkeeping services.
In our application we put this uffice space rental amount under the Rentals - Property &
Equipment category (the $2,400thàt Staff recommended for this category for equipment rental
expenses was under the Materials & Supplies - Operation & Maintenance category in our
application).
.
We accept the Staffs recommendation to include $400 anually for the meter reading expenses.
In addition, we request an annual amount of $400 be included for lawn maintenance for the
pump house. We had originally included this under the Contract Services - Professionals
category. This $400 anual amount would equate to $20 per week for 20 weeks (5 months-
May through September).
In summary, we are requesting that the total amount for this category be raised to a total of
$8,000 to include $4,800 for bookkeeping services, $2,400 for office space rent, $400 for meter
reading costs and $400 for landscaping costs.
Transportation Expenses:
Staff stated they were unable to find any ongoing reoccurrng expense that would justify the
$500 annual amount we requested and therefore excluded this entire amount. Staff is correct in
their findings. Until this rate increase application, we were unaware that we should be
reimbursed for mileage for using personal vehicles for company business. The company does
not own any vehicles. ThereÎore, it seems fair and reasonable that the owners would be
reimbursed monthly by the company for miles used in their personal vehicles for company
business. $500 annually equates to approximately 83 miles per month at $0.50 per mile which is
the 2010 IRS standard rate. This includes monthly mileage for driving within the
system/customer locations, water testing, banking and mailing.
Under the RECOMMENDATIONS section on Page 21, the recommendation for a $20 returned
check charge was not listed though it was addressed and recommended on Page 18. We simply
want to make sure that it is not overlooked because it was not mentioned in the summar of
recommendations at the end.
Secondly, we would like to respond to some ofthe customer comments sent to the IPUC
regarding this rate increase case:
Some customers said we did not notify them regarding our application. On June 30, 2010 we
mailed a letter to every customer along with the annual CCR report and the Anual Rules
Summar. We also place a Press Release in the Coeur d Alene Press that ran on June 11,2010.
We understand the concerns regarding those people living on fixed income and impact of the
curent economy. These are legitimate concerns. We were aware that because there has not
been a rate increase for over 14 years that the amount being requested would appear extreme to
some people. We thought it was best to submit all costs needed to ru the company in the rate
increase, being very mindful that the IPUC would take the customer "sticker shock" factor into
serious consideration. We were confident that the IPUC would do their best to come up with a
fair compromise for both the Company and the customer.
Some customers wonder why we asked for such a large increase because they assumed the
previous owners were making a profit or else they would have applied for a rate increase within
these last 14 years. While we cannot speak to the "why" of the previous owner's decision not to
apply for a rate increase in the last 14 years, we do know that they were running the company at
an anual loss as costs went up over these last 14 years. We knowingly inherited this annual loss
when we purchased the water system, knowing that a rate increase was needed. If rate increases
had been done on a regular basis, this would have allowed the company to make a reasonable
.,
,
profit rather than ruing at a deficit and the customers would have seen a gradual increase along
the way rather than such a large amount at one time.
Dalton Square purchased the water system for $65,000 which included both the land valuation
and the value of the business entity itself. The 2009 Idaho State Tax Commission's valuation of
the system is $l6,081. This does not take into consideration the value of the business entity. As
stated in the IPUC paperwork for the approval ofthe purchase, Dalton Square is aware that the
State's valuation is the accepted amount by the IPUC and not the $65,000 as far as the rate
structure is concerned. In addition, the purchase of the water system was paid for by Dalton
Square and is not on the Troy Hoffman Water financial books. Some customers are concerned
that we are trying to recoup the difference in the purchase price and the State's valuation. This is
simply not the case and the evidence of that is clear in the financial data submitted in our
application, along with the fact that the Staffhas reviewed all of our financial information and
would not allow us to do that had we tried.
Some customers are upset that shortly after purchasing the water system we replaced the 'main
pump. They question the timing of this necessity so shortly after we purchased the system. The
pump that was replaced was the original pump installed in 1956. That means the original pump
had been used for 53 years. We were fully aware when we purchased the water system ofthe
age of the water pump and that upgrades and replacements were going to be needed in the near
future. The previous owners did very few improvements. Therefore, we knew it was only a
matter of time that the main pump would need to be replaced. We just did not intend to replace
it so soon after purchasing the water system, but the circumstances of the motor on the pump
burning up forced us to do it sooner than expected. The Staffhave reviewed the costs of
replacing the pump and have determined that the costs involved to replace the pump were
reasonable.
Some customers question why we are "forcing" them to install backflow prevention assemblies
and have them tested each year at their expense. This is mandated by the United States
Environmental Protection Agency (EPA). It is therefore also mandated by the State of Idaho,
Idaho Department of Environmental Quality and the City of Coeur d' Alene. We are therefore
mandated to bring our water system into compliance with these federally mandated rules. It is
for the personal protection of every person on the water system. More information can be found
under the Idaho Rules for Public Drinking Water Systems, Section 558.06 on pages 116 and 117
at the following website: http://adm.idaho.gov/adminrles/ru1es/idapa58/0108.pdf.
Finally, we want the IPUC and our customers to know that we are highly committed as the new
owners of Troy Hoffman Water Corp. to provide the highest quality of water and service to our
customers as possible and to take excellent care of the water system structure to ensure an
ongoing quality water system for years to come.
Sincerely,
Ron Stadley
President