20131114Comments.pdf

KARL T. KLEIN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5156
Street Address for Express Mail:
472W, WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
TROY HOFFMAN WATER CORPORATION ) CASE NO. TRrr-W-13-01
FOR AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR WATER SERVICE IN ) COMMENTS OF THE
THE STATE OF IDAHO.) coMMrssroN STAFF
)
The Staff of the Idaho Public Utilities Commission comments as follows on Troy
Hoffman Water Corporation's Application to increase rates and charges for water service.
BACKGROUND
On June 5,2013, Troy Hoffman Water Corporation (Troy Hoffman, Company) filed an
Application with the Idaho Public Utilities Commission (Commission) requesting authority to
increase its rates and charges for water service. Troy Hoffman provides water service to 146
residential customers and one commercial customer in the City of Coeur d'Alene, Idaho.
Troy Hoffman proposes a revenue increase of $12,714 (33.56%) for residential and
commercial water customers. The current and Company's proposed rates are shown below:
STAFF COMMENTS NOVEMBER 14, 2OI3
Current Rates Pronosed Rates
Residential $11.80 per month plus $1.10 per
1,000 gallons for all
consumption in excess of 5,000
gallons per month
$15.76 per month plus $1 .47 per
1,000 gallons for all
consumption in excess of 5,000
gallons per month
Commercial $15.50 per month plus $1.10 per
1,000 gallons for all
consumption in excess of 5,000
gallons per month
$20.70 per month plus $l .47 per
1,000 gallons for all
consumption in excess of 5,000
gallons per month
The Company asks that the new rates take effect on January 1,2014.
STAFF ANALYSIS
Staff Audit
Troy Hoffman reports to the Commission using cash accounting procedures for revenue
and operating expenses, and accrual for rate base calculations. The Company has no formal
budgeting process but it does have an informal plan to replace plant in service as it fails.
This is Staffls second audit of Troy Hoffman since Mr. Murren and Mr. Stadley acquired
it. Documentation for most expenses was available. Labor hours and call-outs for the backhoe
were only available from memory with no auditable record.
Staff s recommended adjustments are summarized on Attachment A. They are as
follows:
Adjustment I - Plant in Service
The only new capital placed in service since the last rate case is a new roof on the pump
house. Invoices verify the new roof cost of $2,700. Staff recommends a 35-five year useful life
with a half year convention for depreciation expense and accumulated depreciation.
The Company requested two pro forma adjustments to plant in service. The first consists
of $2,254 for new valves. The Company said it would place the first two valves in service in the
spring of 2014. These valves will not be used and useful before new rates will be effective.
Staff thus recommends that this adjustment be removed. This is a$2,254 decrease to plant in
service, or about a $191 revenue requirement decrease.
STAFF COMMENTS NOVEMBER 14, 2OI3
The Company also requested a549,327 pro forma adjustment to buy a new vehicle. The
Company incorrectly asked to include only the first year of payments in plant in service. The
investments revenue requirement impact due to depreciation expenses and return on investment
would be about $11,200 per year. The pro forma test year expense is $563. There is no evidence
supporting the Company's request to change from the current practice of reimbursing the
Company for miles driven. The proposed vehicle expense is also not known and measurable,
because the Company would not buy the vehicle until after the proposed time frame that the rates
are to be effective. Staff thus recommends that the proposed pro forma vehicle adjustment also
be removed.
Staff s two recommended pro forma adjustments result in a total reduction of $10,482 to
plant in service and a revenue requirement reduction of $964 from the Company's Application.
See Attachment A, Adjustment 1.
Adjustment 2 - Depreciation Expense and Accumulated Depreciation
For this rate case, the Company determined accumulated depreciation and annual
depreciation expense based on tax useful lives and annual depreciation expense from tax returns.
Staff recommends using the straight line depreciation methods accepted in the prior rate case.
See Case No. TRH-W-10-01, Order No. 32152. Staff s adjustment reduces depreciation expense
by $2,996 and accumulated depreciationby $24,939. See Attachments B and C.
Adjustment 3 - Contributions in Aid of Construction (CIAC)
The Company asked Staff to help it determine how to treat $12,859 shown onthe2012
Annual Report, page 8, line 28, Accumulated Amortization of Contributions in Aid of
Construction. This amount was included in the books when the Company was purchased.
In Case No. TRH-W-95-01, Staff recommended and the Commission accepted the
$12,859 as customer contributions from prior hookup fees. See Order No. 26545 and Staff Audit
Report, Attachment E. It appears that the Company mistakenly moved the $12,859 to the
Accumulated Amortization of Contributions in Aid of Construction line in the 1998 annual
report.
Staff recommends that these contributions be placed in the proper account (272).
Because no amortization schedule was previously recommended for the contributions, and the
contributions were paid as hookup fees, Staff recommends that the CIAC be amortized at the 35
STAFF COMMENTS NOVEMBER 14,2013
year meter depreciation rate, starting in20l2. The net CIAC would be $12,492 (i.e., $12,859
minus $367 for the first year of amortization). This results in a net decrease of $12,492 to rate
base. The amortization of contributions will also lower depreciation expense by $367.
Adjustment 4 - Materials and Supplies Inventory
Staff noted an inventory of pipes, meters, and couplings stored at the pump house for
repairs on the system. Mr. Stadley says that the supplies are needed to make repairs in an
emergency. Considering the age of the systems, Staff agrees that this inventory level is
reasonable. Staff thus recommends that rate base include $697 for Materials and Supplies. See
Attachment D.
Adjustment 5 - Removing Cost of Living Adjustments
The Company's Application includes pro forma inflation adjustments for Materials &
Supplies-Operations and Maintenance, Materials & Supplies-Admin & General, and Rentals-
Property & Equipment. Increases in expenses since the last rate case are reflected in the test year
expense. Pro forma adjustments for forecasted future expense increases are not known and
measurable. Staff thus recommends disallowing these pro forma adjustments decreasing
operating expenses by $712.
Adjustment 6 - Removing Office Rental Expense
In the last rate case (Case No. TRH-W-10-01, Order No. 32152) the Commission did not
allow the Company to recover its office rental expense in rates. Nevertheless, the Company
included office rental expense for rate recovery in this case. Staff viewed the office space in
question and found that the Company only uses a small portion of the office space; the rest is
being used by related parties. The burden of proof that these expenses are both prudent and
necessary falls on the Company and because this is a related party transaction extra scrutiny is
necessary. It is common practice for contracts with extemal bookkeepers to include the use of
their office space in their contract rate. Staff believes the combination of the office rental
expense in addition to the cost of the bookkeeping services is excessive. Staff thus recommends
that the office rental expense be disallowed, resulting in a $2,400 decrease in operating expenses.
STAFF COMMENTS NOVEMBER 14,2013
Adjustment 7 - Wage Adjustment
The Company included a llYo inflationary increase in Labor-Operations & Maintenance,
Salaries-Officers & Directors, and Contract Services-Professional. Authorized test year amounts
were previously established in Case No. TRH-W-10-01. These expenses were incurred by
parties affiliated with the water company. Actual hours worked by the affiliated entities was not
available for review; Staff thus used the Idaho Department of Labor Wage data to determine if
these wage-related increases could be justified by an increase in costs of labor in the Coeur
d'Alene area. See Attachment E.
Overall wages from 2010 to 2012 in the Coeur d'Alene area were effectively flat, but
certain wages did increase. Bookkeeping wages increased by 4% and Water Operator wages
increased by 30%. On the other hand, management wages decreased by l2%. Staff thus
recommends accepting the proposed l0% increase to Labor-Operations & Maintenance. But the
Commission should disallow half of the Contract Services-Professional increase and all of the
Salaries-Officers & Directors increase. These adjustments decrease operating expenses by $873.
Adjustment No. 8 - Purchased Power Expense
The Company claims an annual purchased power cost of $5,980 during its test year. The
Company proposes an adjustment of l}Yo to reflect annual inflation or 3.3oh for the three years
since the Company's last general rate case. The Company proposes a pro forma purchased
power cost of $6,578.
Instead of using the Company's methodology, Staff believes it is more appropriate to
normalize the test year purchased power expense based on average volume of water pumped.
The cost of purchased power is affected by the volume of water pumped and the power rates
during the time of use. Using the six-year annual average volume of water sold and applying the
power cost per 1,000 gallons for 2012, Staff calculates the normalized cost of purchased power
to be $6,558 per year. Staff recommends that the test year purchased power cost be reduced by
$20 ($6,578-$6,558). See Attachment F.
Adjustment No. 9 - Water Testing Expense
The Company proposes annual water testing expenses of $480. Staff does not agree with
this amount because the actual test year expense should have been annualized. The Idaho
Department of Environmental Quality (DEQ requires different testing cycles for various
STAFF COMMENTS NOVEMBER 14,2013
regulated water contaminants. It is thus necessary to normalize water testing costs over several
years. In consultation with DEQ, Staff developed a complete list of required tests using a9-year
water testing cycle. Staff calculated the annualized water testing cost to be $571. Staff
recommends increasing the test year water testing cost by $91 ($571-$480). See Attachment G.
Annual Revenue
Staffinvestigated accounts receivable and revenues. There are very few delinquent
accounts and proper collection procedures appear to be in use. Staffaccepts the revenue total of
$37,900 and the near zero uncollectable accounts.
Calculation of Revenue Requirement
Staff recommends a total rate base of $42,547. This is an increase of $2,367 from the
ratebase proposed in the Company's Application. See Attachment H,lines l-7. The Working
Capital calculation is shown on Attachment H,lines l2-18.
Staff recommends annual operating expenses of $36,295, and other expenses of $3,332.
See Attachment A, lines 15 and2l. This is a decrease of $3,913 and $3,363 from the Company's
Application, respectively. Based upon the adjustments discussed above and shown on
Attachment A, line 22, Staff calculates that the Company has a net loss of $ 1,727.
The rate of return is shown on Attachment I. The l2Yo retum on equity (ROE) is
consistent with the Commission authorized ROE for many small water companies. The cost of
debt is the actual rate paid by the Company.
Attachment J reflects the Staff recommended revenue requirement. Staff calculated the
revenues associated with the return on rate base in the amount of $3,604 ($42,547 x 8.47%). Of
this revenue, $2,503 (line 11) reflects interest on the debt that is a deduction for tax purposes.
The remaining $1,101 (line 9) is subject to Federal and state taxes. The process of increasing the
revenue requirement for tax effects is called "grossing-up." The net-to-gross multiplier
calculation of 128.17% is the percentage that must be applied to the $ 1 , I 01 to determine how
much tax must be recovered in rates to allow the Company an opportunity to earn the overall
8.47% rate of return.
The grossed-up ROE is added to the $1,727 net loss and the $2,503 debt related portion
of the capital calculation. This results in the Staff-recommended income deficiency of $5,641
(line 12), and a total revenue requirement of $43,541 (line 15) for an increase of 14.88%.
STAFF COMMENTS NOVEMBER 14, 2013
Proposed Capital System Improvements
Gate Valves - The Company proposes to replace six gate valves in the water system at the
rate of two gate valves ayear. The Company would replace the first two valves during the first
quarter of 2014 for a total cost of $2,254. See Exhibit 1 , Schedule A of Application. The
Company, as discussed earlier, included the $2,254 as an adjustment to its rate base.
Although Staff supports the Company's plan to replace the six aging and inoperative gate
valves at a rate of two per year, none of the valves have yet been purchased or installed. Because
the valves are not used and useful, Staff recommends that no valve-related adjustment be made
to rate base.
Flow Meter for Pump No. 2 - While reviewing this case, Staff found that the DEQ
conducted a Sanitary Survey on the Company's water system in January 2012 md identified
several deficiencies and recommendations. A Sanitary Survey is an onsite review of a public
water system's water source, facilities, equipment, operation and maintenance to assure that the
system provides adequate and safe drinking water. During the DEQ Sanitary Survey, DEQ
found that Pump No. 2, which is the back-up pump, is not equipped with a flow meter. The
DEQ determined that the Company must correct this deficiency by installing an instantaneous
and totalizing meter on Pump No. 2's discharge line when the next material modification is made
to the system. In response to a follow-up question raised by Stafl the Company indicated that it
has no definite time frame in which to install the flow-meter because DEQ stated it need only be
done when the next time material modifications are made. The Company says it will cost $3,140
to install the meter ($2,100 for meter, $300 for miscellaneous parts/supplies and $740 for labor).
Staff believes installation of this meter is necessary and required by DEQ, and recommends the
Company install it when capital is available.
Relocation of Flow Meterfor Pump No. I - During the Company's last general rate case,
the Commission directed the Company to make an accurate assessment of water pumped and
water sold. Specifically, the Company was to investigate the placement and test the accuracy of
the newly installed production flow meter. See Order No. 32152. In the current rate case and in
response to Staff Production Request No. 3, the Company explains that after a thorough
investigation and discussion with the flow meter manufacturer, it was convinced that the meter is
not faulty but was improperly installed by the pump contractor. The Company acknowledges
that the meter does not meet the recommended installation requirements, and it informs Staff that
STAFF COMMENTS NOVEMBER 14,2013
it will relocate the flow meter during the first quarter of 2014 according the manufacturer's
placement recommendation. The Company did not provide Staff with the approximate cost of
relocating the meter, but Staff believes that it will primarily involve labor cost. Staff believes
relocating the meter is necessary to obtain the accurate volume of water pumped.
RATE DESIGN
The Company proposes increasing its water rates as follows:
Residential Customers - increase residential rates from $11.80 per month plus
$1.10 per 1,000 gallons for all consumption in excess of 5,000 gallons per month
to $ 15.76 per month plus $l .47 per 1,000 gallons for all consumption in excess of
5,000 gallons per month.
Commercial Customers - increase commercial rates from $15.50 per month plus
$1.47 per 1,000 gallons for all consumption in excess of 5,000 gallons per month
to $ 20.70 per month plus $1 .47 per 1,000 gallons for all consumption in excess of
5,000 gallons per month.
As noted above, the Company proposes to maintain the same rate structure by imposing a
minimum customer charge with a volume allowance of 5,000 gallons and a commodity charge
for both the residential and commercial customers.
Staff supports the Company's proposal to maintain arate structure consisting of a
minimum customer charge with volume allowance, and a commodity charge. Staff believes this
rate design remains appropriate for the following reasons. First, the total number and type of
customers have not changed significantly since the rate was set by the Commissionin 1996 (144
customers in 1996 and 147 in 2013). Second, there is not much variability in the sizes of service
meters for various customers. The Company indicates that out of 146 residential customers, 143
have 3/4-inch service meters and three have l-inch meters. Staff Production Request No. 2, Case
No. TRH-W-10-01. Third, this rate design is simple, easy to implement and understand.
Finally, the current rate structure is a common rate design for small metered water utilities.
The Company does not propose to change how it classifies customers (i.e. as residential
or commercial). Staff reviewed the water usage of residential and commercial customers using
six years' of water sales data. Staff found that the average total annual usage for commercial
customers was about 0.473 million gallons, and the average total annual usage for residential
customers was about 24.444 million gallons. This usage respectively equates to l.9o/o and98.lYo
of the total volume of water sold (24.917 million gallons). In addition, there is only one
STAFF COMMENTS NOVEMBER 14,2013
commercial customer out of the 147 total customers. As noted above, there are three residential
customers and one commercial customer with the same size, l-inch service meter. Staff believes
that a single commercial customer with low water usage does not warrant its own customer class.
It would be easier to understand and implement the tariff if a single rate design applied to all
customers. Staff thus recommends eliminating the customer classes and instead implement a
single rate design for all customers.
Staff analyzed the appropriate level of volume allowance for all customers. Using the
total amount of water sold during the winter period (6 months usage from November to April)
for six years of records (2007-2012), Staff calculates the average monthly winter usage to be
5,405 gallons per month for all the 147 customers. Staff believes that a minimum charge volume
allowance of 5,000 gallons for all customers is reasonable and appropriate. Staff thus supports
the Company's request to maintain a 5,000 gallon minimum charge volume allowance.
Attachment K shows the average monthly water usage of all customers using six years' of billing
data.
As indicated previously, Staff s adjusted test year annual revenue requirement for the
Company is $43,541. Using this adjusted revenue requirement and the recommended rate design
discussed above, Staff recommends a minimum customer charge of $13.75 with a volume
allowance of 5,000 gallons. This represents about a16.5Yo increase in base rates. Staff
recommends a commodity charge of $ I . 12 per 1 ,000 gallons for water usage above 5,000
gallons, which is about a l.\Yo increase in the commodity rate.
The Company proposes to apply a uniform rate of the overall increase (34%) to both the
minimum customer charge and the commodity charge for all customer classes. Staff did not
uniformly increase the base charge and commodity charge, as noted above. Staff believes that a
165% increase in the base charge and a lower 1.8% increase in the commodity charge is
warranted to bring more balanced revenue collections throughout the billing period.
A comparison of the existing, Company-proposed, and Staff-proposed rates are shown in
the summary table below.
STAFF COMMENTS NOVEMBER 14, 2OI3
TYPE OF
CUSTOMERS
EXISTING
RATES
COMPANY
PROPOSAL
STAFF
PROPOSAL*
Residential
Min. Customer Charse s I 1.80 sr7.76 $ 13.75
Volume Allowance 5.000 eallons 5.000 sallons 5.000 eallons
Commodity Charee $1.10 per 1,000 eals $1.47 per 1.000 eals $1.12 per 1.000 sals
Commercial
Min. Customer Charse s l s.s0 $20.70 N/A
Volume Allowance 5.000 sallons 5.000 sallons N/A
Commoditv Charse Sl.l0 oer 1.000 sals $ I .47 per I .000 eals N/A
*Staff proposes a single rate designfor all customers.
To assure that the Staff s rate design will enable the Company to recover Staff s
recommended revenue requirement, Staff developed a rate-proof sheet. See Attachment L. Staff
calculated the total revenue for the commodity charge using a normalized six-year average
(2007-2012) annual excess volume usage of 17,239,500 gallons for all customers. Staff
calculated the normalized excess volume by analyzing individual water usage for each customer
per billing period using six years of billing data. Customer water usage is affected by various
factors including economic conditions, weather, customers' use of water efficient devices and
conservation practices, etc. Using the billing data from2007 to 2012, Staff found that average
annual water usage per customer is declining. See Attachment M. Staff believes that analyzing
average excess water usage for the last six years is a reasonable method to determine the
normalized revenue needed for Staff s recommended rate design to enable the Company to
recover StafPs recommended revenue requirement.
Staff calculates that its rate design will yield the total revenue of $43,563, or about $22
more than what the Company needs to recover Staff s recommended revenue requirement. Staff
believes that this rate design is reasonable and appropriate. The total revenue contributed by the
minimum customer charge is 56oh, and the revenue contributed by the commodity charge is
44%. With the current rates, about 52Yo is contributed by the minimum customer charge and
48%by the commodity charge. As discussed above the change in percent contribution of the
minimum customer charge from 52Yoto 56%o is warranted to bring more balanced revenue
collections throughout the billing period. In addition, Staff generally predicates revenue derived
from the base rate on a 50/50 split of fixed and variable expenses. In the case of Troy Hoffman,
current operation expenses consist of about 78.8% fixed costs and20.2Yo variable costs. The
Commission has allowed a small water utility to recover up to 72Yo of its revenue from the
minimum customer charge. See Order No. 30027, Case No. FLS-W-05-01.
STAFF COMMENTS 10 NOVEMBER 14,2013
Typical Monthly Bill and Rate Impacts
Staff s proposed rate structure would produce on average monthly customer bill of about
$32,23, an increase of $2.28 or 7.6Yo above current rates. Staff calculated the average monthly
bill by averaging water usage in the winter and summer seasons as shown below:
A Monthlv Bill - all customers
Season
Average
Usage
(sallons)
Current
Monthly
Bill
Proposed
Monthly
Biil
Amount of
increase in
(s)
Percent
Increase
(ohl
Winter 5.000 s1 1.80 $ 13.75 $ 1.9s t6.s%
Summer 38.000 $48.1 0 $s0.71 $2.61 5.4%
.lverase increase ($&o/o) $29J5 $32.23 s2.28 1rt%.
The rate impacts for metered residential customers using various monthly water volumes
are presented in Attachment N. For example, as shown in the table, a customer who uses about
25,000 gallons per month during summer would be billed a total of $36.15, an increase of about
$2.35 per month or 7.}Yo above the current rates. Staff also prepared a bill frequency analysis
for all customers at various usage levels using a six-year average for the month of August. As
shown in Attachment O, 75 out of 147 customers, or 5I%o, used 25,000 to 49,000 gallons of
water during the August billing period.
Other Water System Operational Issues
During the Company's last general rate case, Staff determined that in 2006 and 2010, the
total volume of water reportedly pumped was less than the total volume of water reportedly sold.
This anomaly could have occurred due to a faulty production flow meter, faulty customer service
meters, different dates of reading the production meter and the service meters, or meter-reading
errors. Staff asked the Company for flow meter data as part of the current case. Partial data
were available for 2011,2012 and20l3. Again, the flow meter appears to show erratic readings
because 50% of the available monthly flow records for these years indicate that the volume of
water pumped was less than the volume of water sold. See Attachment P. Staff recommends
that the Company complete its plan to relocate the flow meter on Pump No. I to potentially
correct the inaccuracy of reading, as discussed earlier. Staff also recommends that the
Commission re-evaluate its directive in Order No. 32152 to temporarily delay the random testing
of 10% of its customer service meters until the flow meter is relocated and measuring accurately.
llSTAFF COMMENTS NOVEMBER 14, 2013
RECURRING CHARGES
The Commission's billing requirements are contained in Rule 201 of the Utility Customer
Relations Rules (UCRR). Rule 201 states that "[b]ills shall be issued on a regular basis." It also
describes what the bills must contain. The Company bills its customers six times ayear, at the
end of February, April, June, August, October and December. The Company's customer usage
records indicate that the Company only reads meters four times ayear. It does not read meters in
December or February because snow limits meter access.
The Company bills its customers for the product of the monthly charge times the number
of months in the billing period, (e.g., $l1.80/month x 2 months = $23.60 at current rates). In
preparing the April billing statement, the Company aggregates the 5,000 gallon monthly
allowance for the six months from November through April (5,000 gallons x 6 = 30,000 gallons),
and the customer is billed for usage exceeding 30,000 gallons based on the April meter reading.
The bi-monthly billing periods and the aggregation of usage over the winter months result in
billing statements that do not comply with Rule 201. Specifically, the billing statements do not
itemize each monthly charge or identify the number of months for which the usage is aggregated
or the water usage allowance is included in the base monthly rate. See Rule 201.03 and .06.
Rather than requiring the Company to itemize monthly base charges on bills, Staff
recommends that the Company prepare a bi-monthly rate schedule (based on 2 times the monthly
rate and allowance) to provide the necessary consistency between the Company's rates and its
established billing practices. In addition, Staff recommends that the Company revise its bills to
indicate the usage allowance included in the base charge, the amount of water actually used
during billing periods where actual meter readings are taken, and the net amount of usage to
which the water usage charge is applied.
NON.RECURRING CHARGES
Account Initiation Fee and Reconnection Charges
Rule 121 of the Commission's Rules of Procedure (IDAPA 31.01.01) requires that
application exhibits include a clean copy of the proposed tariff and a marked-up copy of the tariff
to show in full any proposed changes. The Company did not include a marked up copy of its rate
schedule for non-recurring charges (Rate Schedule No. 2) to show any proposed changes. It did
include a clean copy of a revised schedule that doubled the Account Initiation Fee from $10 to
STAFF COMMENTS t2 NOVEMBER 14,2013
$20, and increased Reconnection Charges from $20 to $40 for reconnections requested business
hours and from $40 to $80 for reconnections outside normal business hours.
The Company does not discuss these changes in its Application or otherwise try to justify
the increased fees and charges. The amount of the revised fees and charges are also higher than
the amounts the Commission allows for similar charges at other water companies. Staff thus
recommends that the Commission deny the proposed increase in non-recurring fees and charges.
Late Payment Charges
The Company's tariff describes the Late Payment Fee as lYo per month of the unpaid
balance at the time of the billing statement. Because the Company only bills bi-monthly, the
wording of the tariff might be misinterpreted to allow monthly compounding of the late payment
charges. Staff recommends that for clarification, the tariff wording on Rate Schedule No. 2 -
Non-Recurring Charges be changed as shown in Attachment Q.
Summary of Rules and Explanation of Rates
The UCRR requires that the Company provide customers a copy of its Summary of Rules
(Rule 701) and an Explanation of Rates (Rule 702) upon initiation of service and annually
thereafter. The Company combines its summary and explanation in one document. The
Company has been mailing the Summary of Rules and Explanation of Rates to existing
customers annually. But because most new customers initiate service through a phone call rather
than stopping by the office, the Company discusses the rates with the customer if asked, but it
does not send new customers the required information. Staff recommends that the Company
provide each new customer a copy of the Summary of Rules and Explanation of Rates upon
initiation of service and annually thereafter.
If the Commission accepts Staffs recommendation to establish bi-monthly rates, Staff
recommends that the Company revise the Summary of Rules and Explanation of Rates to show
the metered rate charges as bi-monthly charges to be consistent with the tariff.
The Company's billing statements and its Rate Schedule No. I - Metered Water Rates
both describe the due date as 20 days from the bill date, which is consistent with the Company's
actual billing practice. The Summary of Rules says that a bill may be considered past due 15
days after the bill date, which is the minimum requirement of the UCRR (Rule 202)but does not
reflect the Company's actual practice. Staff recommends that the Company revise its Summary
l3STAFF COMMENTS NOVEMBER 14, 2013
of Rules and Explanation of Rates to consistently reference that a bill is due and payable within
20 days. See Affachment Q.
General Rules and Regulations Section of Company's Tariff
Sections 6.1 of the General Rules and Regulations discusses the billing period for the
Company. Staff recommends that the Company revise Section 6.1 as shown in Attachment Q to
reflect billing frequency.
Section 6.2 of the General rules and Regulations discusses meter reading and estimated
usage. The Company bills bi-monthly but only reads meters four times a year. Staff
recommends that the Company revise Section 6.2 to more accurately reflect the circumstances
when the Company reads meters, aggregates usage and may estimate usage. See Attachment Q.
Section 6.3 discusses payment due date and mentions a l5-day time period. Staff
recommends that the Company revise its Section 6.3 to reflect its actual business practice of
having bills due within 20 days. See Attachment Q.
CUSTOMER RELATIONS
Customer Notification
The Company submitted copies of its customer notice and the press release as required
under Rule 125 of the Commission's Rules of Procedure. The Company mailed customers a
copy of the customer notice on July 1,2013. The press release was published in the Coeur
d'Alene Press on July 4, 2013. The original Application, customer notice and press release
misstated the amount and percentage of the proposed increase. On July 26,2013, the Company
filed a modified Application that lowered the amounts and percentage of the proposed increase.
It did not send out a corrected customer notice. Considering that the errors overstated the
proposed increase and the additional cost of mailing a second notice to customers, Staff agrees
with the Company's decision.
The Commission issued a Press Release regarding the public workshop on Thursday,
September 12,2013. The workshop was held in Coeur d'Alene, on Tuesday, October 1,2013.
There were no attendees.
STAFF COMMENTS t4 NOVEMBER 14,2OI3
Customer Comments
The Commission has received three written comments from customers regarding this
case as of November 12,2013. The majority of the customers asked for a more modest increase
than the 72o/o requested by the Company in its original Application.
Customer Complaints
There were no informal complaints to the Commission for the years 2011,2012 and 2013
year-to-date.
RECOMMENDATIONS
I . Staff recommends that the use of a 2012 test year be approved.
2. Staff recommends that a l2Yoretum on equity and an overall rate of return on rate base of
8.47% be approved.
3. Staff recommends that arate base of $42,547 be approved.
4. Staff recommends that an annual revenue requirement of $43,541 or an increase of 14.88%
be approved.
5. Staff recommends that the customer classes be eliminated and a single rate design for all
customers be implemented.
6. Staff recommends that the volume allowance of 5,000 gallons for minimum customer
charge be maintained for all customers.
7. Staff recommends that the rate design proposed by the Staff be approved.
8. Staff recommends that the Company complete the relocation of the flow meter at Pump No.
1 as planned during the first quarter of 2014.
9. Staff recommends that the Commission delay its previous directive to the Company to
randomly check l0% of its customer meters until the Company assures Staff that the flow
meter in Pump No. I is already measuring flow accurately.
10. Staff recommends that the Company prepare a bi-monthly rate schedule (Rate Schedule
No. 1 at twice the monthly customer charge and allowance) to be consistent with the
Company' s existing bi-monthly billing schedule.
I L Staff recommends that the Commission deny the Company's proposed increases of the
account initiation fee and reconnection charges.
STAFF COMMENTS 15 NOVEMBER 14,2013
12.
13.
Staff recommends that the Company revise its Rate Schedule No. 2, General Rules and
Regulations - Section 6.1 and 6.2, billing statements and combined Summary of Rules and
Explanation of Rates to be consistent with the Company bi-monthly billing schedule.
Staff recommends that the Company revise its billing statements to indicate the usage
allowance included in the base charge, the amount of water actually used during the billing
period(s), and the net amount of usage to which the water usage charge is applied.
Respectfully submitted this lqrL day of November 2013.
Karl T. Klein
Deputy Attorney General
Technical Staff: Joe Terry
Gerr'' Galinato
Johanna Bell
Chris Hecht
i:umisc/commentVtrhw I 3. I kkjtgdgibcwh comments
STAFF COMMENTS t6 NOVEMBER 14,2013
40400040004 446646
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Attachment A
Case No. TRH-W-13-01
StaffComments
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Attachment B
Case No. TRH-W-13-01
StaffComments
tUt4/13
Troy Hoffman Water Company
Schedule of Accumulated Depreciation
FYE2012
1 Accumulated Depreciation, Order 32152
2 Depreciation Attachment
3 Depreciation Expense - 2071
4 Depreciation Expense - 2072
5 Subtotal
6 Total Accumulated Depreciation
7 Reported Total Accumulated Depreciation
8 Adjustment Required
s
s
s
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2,069
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(24,9391
Attachment C
Case No. TRH-W-13-01
StaffComments
tt/t4lt3
Troy Hoffman Water Company
Materials and Supplies lnventory
FYE2012
* Type Cost Each Total cost
1 20ft of4" PVC Pipe 5 47 $ 47
1 20ft of6" PVC Pipe S gZ S gZ
2 4" Coupling S 86 5 ttZ
2 6" Coupling $ ttt S zg+4 Meters s ge s 152
Total Materials and Supplies lnventory S 697
Attachment D
Case No. TRH-W'13-01
StaffComments
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Case No. TRII-W-13-01
StaffComments
ll/14/13
Troy Hoffman Water, Case No. TRH-W-13-01
Normalized Power Cost
Power Cost for Test Case
Normalized Total Power Cost
50.2632 per 7,000 gals of water delivered (sold)
$6,558 peryeor
Year
Total Power
Cost
TotalVolume
delivered (Gallons)*
2072 S5,929 22,716,000
20L7 N/A 23,390,000
2010 N/A 23,047,OO0
2009 N/a 25,871,000
2008 N/A 25,772,000
2007 N/A 28,706,O00
Average 24,917,OOO
*includes residential ond commerciol customers.
Attachment F
Case No. TRH-W-13-01
StaffComments
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Case No. TRH-W-13-01
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1 Plant ln Service
2 Accumulated Depreciation
3 C|AC
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6 Working Capital
7 Total Rate Base
8
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Ll Working Capital Calculation
12 TOTAL Operating Expense
13 PropertyTaxes
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15 Regulatory Commission Expense
16 Taxes
L7 Sub Total Operating Expenses
18 Working Capital (1/8 Rule)
Application Staff Difference
s 74,109 s 63,627 s (10,482)
s 38,955 5 L4,Ot6 s (24,939)
S tz,49z S Lz,49zs 35,154 s 37,119 s 1,965
S S ogzS ogzs 5,026 s 4,731 s (29s)
s 40,180 5 42,547 5 2,367
S 36,295S zrsS zssSecSzoS 3z,g+g
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Attachment H
CaseNo. TRH-W-13-01
StaffComments
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Attachment I
Case No. TRH-W-13-01
Staff Comments
1t/14/13
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Troy Hoffman Water Company
Revenue Requirement
FYE 2012
1 Rate Base
2 Required Rate of Return
3 Return on lnvestment
4 Net Operating lncome Realized
5 Net Operating lncome Deficiency
Revenue Requirement to
6 Overcome Loss
Revenue Requirement lncrease
9 Subject to lncome Tax
10 Tax Gross Up Factor
11 Not Subject to lncome Tax
Revenue Requirement lncrease
12 Total Revenue lncrease Required
13 Total Revenue Collected in Test year
14 Revenue lncrease %
15 Total Gross Revenue Requirement
Gross-up Factor Calculation
16 Net Deficiency
17 PUC Fees
18 Bad Debts
19 State Tax @ 8%
20 Federal Taxable
21 Federal fax @ t5%
22 Net After Tax
23 Net to Gross Multiplier
Proposed
S 40,180
8.47%ss/o3-s (9,003)
s 12,406
9,018
Staff Case
s 42,547
8.47%
S 3^504
$ (1,727l,S s,s:r
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LL,382
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5,64L
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0.22s3%
0.0000%
99.77%
7.98%
91.79%
13.77%
78.O2%
128.L7%
Attachment J
Case No. TRH-W-13-01
StaffComments
lt/14/13
SL2,7t7
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Case No. TRH-W-13-01
StaffComments
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Troy Hoffman Water Case No. TRH-W-13-01
Rate Proof of Staff-Recommended Rate Design
Staff Recommended Revenue Requirement
Total Number of Customers:
MINTMUM CUSTOMER CHARGE
S43,541
L47
Tota! Revenue (minimum customer and commodity charges) S 43,563
Revenue over (under) Revenue Requirement
Various Charges as a%o of Gross Revenue
Minimum Customer Charge
Commodity Charge
522
56%
44%
Attachment L
Case No. TRH-W-13-01
Staff Comments
tUt4lt3
Type
of
Customers
Number
of
Customers
Volume
Allowance
(Gallons)
Minimum
Customer
Charee
Total Annual
Rev. from Min.
Charee
All Customers 147 5,000 S rg.zs 5 24,255
Total 147 5 24,255
COMMODITY CHARGE (AIl Customers)
Commodity charge for all customers (5/1,000 gallons)S r.rz
Net Volume of Excess Usage (gallons)17,239,500
Tota! Commodity Revenue s 19,308
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Attachment N
Case No. TRH-W-13-01
staff comments
1U14113
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Attachment O
Case No. TRH-W-13-01
StaffComments
n/14n3
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Volume of Water Produced, Sold, and Un-Accounted
Billing Period
Volume Pumped
per Billing Period
(gallons)
Volume Sold
by Billing
Period
(ga!lons)
Difference
(gallons)
Percent
Difference
Aug-091 7,555,100 11,609,000 (3,953,900)-52%
Oct-09 1,561,000 4,351,000 (2,790,000)'t79o/"
Apr-102 4,359,400 4,702,OOO (342,600)-8%
Jun-10 2,938,70O 4,t74,OOO (1,235,300)-42%
Aug-10 10,887,300 10,071,000 815,300 7%
Oct-10 3,528,900 4,100,000 (571,100)-16%
Apr-11 4,860,300 4,757,OOO 103,300 2%
Jun-11 3,730,900 4,539,000 (808,100)-22%
Aug-11 9,826,200 9,47t,OOO 355,200 4%
Oct-11 4,gg4,goo 4,623,O0O 351,800 7%
Apr-12 4,925,900 4,636,000 289,900 6%
Jun-12 3,635,600 3,933,000 1297,4OOl -8%
Aug-12 8,965,100 9,815,000 (849,900)-9%
Oct 2012 - Apr 20133 LO,O74,9OO 9,492,000 592,900 LO%
Jun-13 4,943,50O 5,0g1,ooo (147,500)-3%
Troy Hoffman Water Corporation
TRH W.13.01
t A flow meter was installed in early June 2009. First complete billing period with pumped volume data was August
2009 (i.e., July 1- August 31, 2009).
2 Total volume of pumped water for the April billing periods include November 1- April 30 readings.
' Volume pumped data reading for the end of October 2012 missing. Volume pumped and volume sold data
includes from September L,2OL2 to April 30, 2013. Attachment p
Case No. TRH-W-13-01
staff comments
11114113
TROY HOFFMAN WATER CORPORATION, INC.
COMPANY TARIFF
Proposed Revision to RATE SCHEDULE NO. 2 NON-RECURRING CHARGES
Legislative Version
Late Payment Fee: One percent (l%) peFmen+h of the-r*npaid past due balance owing at the time
of the nexl_bi I I ing.-st&hernen*
Clean Version
Late Payment Fee: One percent (1%) of the past due balance owing at the time of the next
billing.
Proposed Revision to GENERAL RULES AND REGULATIONS - SECTION 6. BILLING
AND PAYMENT
Legislative Version
6.1 All Customers shall be billed @ as
identified on the applicable rate schedule.
6.2 ff ttt€ systern is mete
April. June. August and October. The accumulated usage for the
six month period from November through April is shown on the
April billing statement. Usage exceeding the water allowance is
also shown on the bill.
_If the Company*-mete++eader is unable @
pren*ises-to read the a meter from April throuqh Oct
access to the meter is restricted, or in the event the a meter fails to
register, the Company wi$ rnay estimate the egustomer's water
consumption for the current billing period based on known
consumption for a prior similar period or average of several
periods. Subsequent readings will automatically adjust for
differences between estimated and actual consumption. Bills based
on estimated consumption shall be clearly marked as "estimated".
6.3 All bills shall clearly indicate the balance due, and may$e q9 due
and payable n+less+han-15 twenty (20) days after the date
rendered. All bills not paid by the due date may be considered
ATTACHMENT
CASE NO. TRH.W-I3.OI
STAFF COMMENTS
1111712013
Aftachment Q
Case No. TRH-W-13-01
staff comments
11l14ll3 Page I of2
Clean Version
6.2
ATTACHMENT
CASE NO. TRH-W-I3-OI
STAFF COMMENTS
rUt7l20t3
6.1
delinquent and service may be disconnected subject to the
provisions of the UCRR.
All Customers shall be billed bi-monthly as identified on the
applicable rate schedule.
The Company reads meters four times ayear, in April, June,
August and October. The accumulated usage for the six month
period from November through April is shown on the April billing
statement. Usage exceeding the water allowance is also shown on
the bill.
If the Company is unable to read a meter from April through
October because access to the meter is restricted, or in the event a
meter fails to register, the Company may estimate the customer's
water consumption for the current billing period based on known
consumption for a prior similar period or average of several
periods. Subsequent readings will automatically adjust for
differences between estimated and actual consumption. Bills
based on estimated consumption shall be clearly marked as
"estimated".
All bills shall clearly indicate the balance due, and are due and
payable twenty (20) days after the date rendered. All bills not paid
by the due date may be considered delinquent and service may be
disconnected subject to the provisions of the UCRR.
6.3
Attachment Q
Case No. TRH-W-13-01
StaffComments
1l/14/13 Page2 of 2
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 14TH DAY OF NOVEMBER 2013,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. TRH.W-I3-OI, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
RON STADLEY
PRESIDENT
TROY HOFFMAN WATER CORP
710 W DALTON AVE STE J
COEUR D'ALENE ID 83815
EMAIL: [e-mail]
CERTIFICATE OF SERVICE