28264.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF TROY HOFFMAN WATER CORPORATION, INC. FOR AUTHORITY TO INCREASE ITS RATES. )
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) CASE NO. TRHW951

ORDER NO. 28264

On August 31, 1995, Troy Hoffman Water Corporation, Inc. (Troy Hoffman; Company) filed an Application with the Idaho Public Utilities Commission (Commission) requesting authority to increase its rates. The Company serves approximately 144 customers, all residential. By Interim Order No. 26545 issued August 1, 1996, the Commission approved a 1994 rate base with pro forma adjustments for the addition of flow meters and working capital, and authorized a Commission Staff calculated rate base valuation of $17,240 and “subject to refund”, a revenue deficiency of $4,053. This translated to an average increase in rates of 23%, or approximately $2.34/month. Calculation of the revenue requirement incorporated a return on the Company’s rate base of 12%.
As a matter of administrative housekeeping, the Commission notes that the rate Order No. 26545 in this case remains an interim order. Commission Staff, who brought this matter to the Commission’s attention, recommends that our rate order be made final without adjustment.
The reason for the interim nature of the rates was the Company’s proposal in reply comments under Modified Procedure to establish a reserve for unforeseeable expenses. Reference IDAPA 31.01.01.201-204 (Modified Procedure). Rather than the 23% increase recommended by Commission Staff, the Company requested a 30% increase to fund a reserve. In our Order we stated:
The reasonableness or appropriateness of such an account was not addressed by Staff and we find that there is not yet a sufficient record on this issue. We find, however, that it is perhaps an opportune time to initiate a formal generic case where alternatives to traditional ratemaking (including reserve accounts) for small water companies are explored. The challenges which Troy Hoffman faces are not unique but are seemingly common to many small water companies. In some instances the financial viability and ability to provide customers with reliable and adequate water service can be threatened. The time is right to review our manner and method of economic regulation of small water companies and to determine what changes and statute or rules (if any) are required to regulate such entities more effectively. The Commission will therefore initiate a generic case in a separate docket and finds it reasonable to stay further proceedings in this case pending further notice and order or motion.

Order No. 26545.
Although it was the Commission’s stated intention to initiate a generic docket, such a docket was not initiated. Informal inquiry by Commission Staff revealed that most small companies contacted, including Troy Hoffman, had little interest in participating in such a proceeding.
The Commission notes that its Staff participates in other forums that provide benefit to small water companies. At the National Association of Regulatory Utility Commissioners (NARUC) level the Commission Staff actively participates in Subcommittees on Water and Consumer Affairs, committees that have developed a Regulatory Technique Sourcebook for Water Utilities, and by comments and coordination with the drinking water industry assisted in the crafting and development of the federal Safe Drinking Water Act amendments of 1996 (SDWA). Commission Staff has also participated in the regulatory implementation of the SDWA amendments on the state level, including the development of guidelines for Consumer Confidence Reports (which requires water companies to disclose what chemicals and bacteria are in drinking water), and participation in Idaho’s Drinking Water Capacity Development Advisory Committee. The Idaho Committee identified criteria to be used in assessing a utility’s managerial, technical and financial viability in determining eligibility for state revolving loan funds available for improving deteriorating water systems and upgrading water treatment systems.
Regarding reserve accounts, the Commission notes that we have approved reserve accounts for several “non-profit” water companies in an amount equal to the return that the company would otherwise earn on rate base if it were a “for profit” company. We have not approved such accounts for “for profit” companies such as Troy Hoffman. We further note that we have also approved single item rate cases for small water companies wherein a surcharge has been authorized to provide a dedicated revenue stream for repayment of loans for capital expenditures. This Commission has demonstrated a willingness in appropriate cases to handle rate cases for small water companies in an expedited fashion pursuant to Modified Procedure, i.e., by written submission rather than hearing based on a complete Company filing, Staff investigative report and written comments or in appropriate cases a hybrid procedure consisting of written comments in lieu of technical hearing and an evening hearing for the public comment of customers.
The Commission has reviewed and considered the filings of record in Case No. TRHW-95-1 including our prior interim Order No. 26545. We have also reviewed the Company’s most recent filed annual reports. We find it reasonable to close out this case and in so doing approve the rate findings set forth in Order No. 26545. We further find it reasonable to approve the increase granted in said Order without adjustment.

CONCLUSION OF LAW
The Idaho Public Utilities Commission has jurisdiction and authority over Troy Hoffman Water Corporation, a water utility, and the issues raised in this case pursuant to Title 61 of the Idaho Code and the Commission’s Rules of Procedure, IDAPA 31.01.01.000 et seq.

O R D E R
In consideration of the foregoing and as more particularly described above, IT IS HEREBY ORDERED and the Commission in Case No. TRH-W-95-1 does hereby approve as final without adjustment or change the rate increase granted in 1996 in Order No. 26545.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-626.

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this _______ day of January 2000.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Myrna J. Walters
Commission Secretary

vld/O:TRH-W-95-1_sw2

ORDER NO. 28264 1

Office of the Secretary
Service Date
January 20, 2000