20080905Comments.pdf

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 1895
RECEIVED
280SEP -5 PM 12: 0..
lDAHO PUSLlC .,.
UTIUTtES COMMISSION
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
TETON SPRINGS WATER AND SEWER ) CASE NO. TTS-W-08-1
COMPANY, LLC FOR THE ISSUANCE OF A )
CERTIFICATE OF CONVENIENCE AND )
NECESSITY, FOR APPROVAL OF RATES AND) COMMENTS OF THE
CHARGES FOR WATER SERVICE, AND FOR) COMMISSION STAFF
APPROVAL OF RULES AND REGULATIONS )
GOVERNING THE RENDERING OF WATER )SERVICE )
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
Modified Procedure and Notice of Scheduling issued on August 6, 2008, submits the following
comments.
BACKGROUND
On May 20, 2008, Teton Springs Water & Sewer Company, LLC (Teton Springs;
Company) fied an Application with the Idaho Public Utilties Commission (Commission)
requesting a Certificate of Public Convenience and Necessity to provide domestic, culinary water
service in Teton County, Idaho to customers within the Teton Springs Golf and Casting Club
planned unit development. The Company also requested that the Commission approve a change
STAFF COMMENTS 1 SEPTEMBER 5, 2008
in existing rates and charges for water service and approve the Company's proposed Rules and
Regulations Governing the Rendering of Water Service. The Company proposed an anual
revenue requirement of $298,000, residential rates of $150/quarer, commercial rates of
$450/quarer and inactive lot charges for both residential and commercial lot owners.
On June 12, 2008, the Commission in Order No. 30571 issued Certificate of Convenience
and Necessity No. 471 to Teton Springs, authorized continued water service under the existing
flat rate, and suspended the remainder of the Company's Application. Accompanying the
Commission's Order was a Notice of Application. Also established was a June 27, 2008
intervention deadline. No petitions were filed.
STAFF ANALYSIS
REVENUE REQUIREMENT ANALYSIS
Audit
Staff examined the books and records of the Company for the fiscal year ending
December 31, 2007, and for the months through July of2008. The expenses incured by the
Company during 2007 were used as the basis for determining the operating expenses used in
determining rates. Staff examined the 2007 expenses and is recommending adjustments to both
rate base and the 2007 level of expenditures.
Rate Base
The Company's records reflect plant in service in the amount of$3,188,772. This
amount is offset by developer contributions in the amount of$3,176,409; leaving a balance of
$12,363 as the rate base for the Company as of the end of2007.
Staff, during the course of the audit found additional capital expenditues incurred in
2007 that were originally included by the Company in its anual operating and maintenance
expenses. Staff has subtracted these capital expenditures from the anual operating and
maintenance expenses and has capitalized them and included their cost in the Company's rate
base amount. The detail of these adjustments is as follows:
STAFF COMMENTS 2 SEPTEMBER 5, 2008
Total
Amount
$16,019
$ 4,750
$23,631
$44,400
Attachment A
Column 6
Adjustment No.
Adjustment NO.2
Description
Sensus software and hardware
Caselle Utilty Software
Water Meters Adjustment NO.8
The Company is also entitled to include in rate base an amount for its working capitaL.
The Company proposed using one-eighth of its anual operating and maintenance expenses as
the working capital amount. Staff agrees that for a small water company this is an acceptable
method of determining working capital and has allowed one-eighth of the Staffs adjusted annual
operating and maintenance expense as an addition to rate base. Attachment A is the schedule
showing the detail of Staffs adjusted annual operating and maintenance expenses.
Attchment B presents Staffs calculation of the Company's rate base as the sum of the
Company's rate base, the working capital, and the three capital expenditures identified above.
The total rate base is $71,571.
This rate base level must be reduced by accumulated depreciation to determine net rate
base at year end. Annual depreciation for the rate base determined above is $12,377. See
Attachment B. The Company has no accumulated depreciation, therefore, the anual
depreciation expense for one year is the accumulated depreciation that must be applied. The net
rate base is therefore $59,194 ($71,571 - $12,377).
The Company has not asked that the initial investment in the water system by the
developer be included in rate base at year end. Thus, it has not asked for a rate of return on that
investment as part of its requested revenue requirement. The Company has, however, requested
that it receive depreciation/amortization expense in the amount of$89,140 annually for the
amortization of those water system costs. This amount represents the anual depreciation the
water system investment would accrue if the investment were included in rate base. See
Crowley Testimony, page 8, lines 15-16.
Staff is opposed to the Company being allowed to recover any depreciation/amortization
for the initial investment costs of the water system. The Commission has consistently held that
STAFF COMMENTS 3 SEPTEMBER 5, 2008
the developer's capital investment in the water system are considered contributed capital and not
included in rate base. The Commission's Small Water Company Policies Rule 103 states:
103. PRESUMPTION OF CONTRIBUTED CAPITAL (Rule 103).
In issuing certificates for a small water company or in setting rates for a
small water company, it will be presumed that the capital investment in
plant associated with the system is contributed. capital,- i.e., that this
capital investment wil be excluded from rate base.
IDAPA 31.36.01.103, Policies and Presumptions for Small Water Companies
If the initial capital investment is considered contributed capital, and not included in rate
base, it should not ear any rate of return, nor should the cost be recaptured by the collection of a
depreciation/amortization expense included in rates. To allow the Company to capture the cost
of the initial investment though the depreciation/amortization expense would violate the
"contributed" principle of Rule 103.
The Company has not stated any specific water system need that would necessitate the
collection of this additional $89,140 in customer rates. If there is a need in the future that would
require the additional fuding, the Company should petition the Commission at that time with a
specific request associated with those expenditures.
The Company states this depreciation/amortization expense would "produce cash flow
for the Company to maintain and upgrade its system" and "improve the financial stability of the
Company." See Crowley Testimony, page 8, lines 8-9. Staffs recommended revenue
requirement should provide the Company with adequate fuding to satisfy the Company's need
for cash flow and financial stabilty. Any amount beyond the revenue requirement would be in
excess of the Company's curent needs.
One of the original reasons for the presumption of contributed capital in Rule 103 was to
recognize that the developer generally recovered the initial capital investment for the water
system in the sale of the individual lots served by the water system. In this case, the Company's
record is void of any evidence that the developer has not recovered its initial capital investment
when it sold the lots in the development. Therefore, the presumption of Rule 103 should be
followed by the Commission and the Company's request for $89,140 in
depreciation/amortization expense should not be allowed.
STAFF COMMENTS 4 SEPTEMBER 5, 2008
Utilties are entitled to earn a retu on rate base investments. The Commission has
allowed small water utilties to ear a rate of return of 12%. Case No. DIA-W-07-1, Order No.
30455; Case No. MNV-W-06-1, Order No. 30420. A 12% retur on net rate base provides the
Company the opportunity to ear a retur amount of $7,103. See Attachment B. This amount
must be grossed up for the payment of taxes resulting in the $9,044 as shown on Attachment C.
Therefore, Staff recommends the grossed-up retur on rate base of $9,044 be included in the
revenue requirement.
Expenses
The Company in its Application proposed anual operating and maintenance expenses of
$192,210. Staff reviewed all of the Company's expenditures and determined that these expenses
were related to the operation of the water company with the exceptions noted in Attachment A as
Staff s Adjustments.
Attachment A sets forth a detailed comparison of the Company's proposed expenses of
$192,210 in Column (5) and Staff s recommendations for the level of expenditures to be
included in the anual revenue requirement in Column (8). For expenditure lines on Attachment
A with no adjustments to the Company's proposed amount, Staff accepts the amount for this
case. Staff recommends annual operating and maintenance expense of $118,461.
Staff is recommending adjustments to the Company's proposed amount as follows:
1. Labor - Operation & Maintenance: The Company included in its amount
expenditures for sewer monitoring equipment. This expenditure should have been
allocated to the sewer company and not included in the water company's expenses.
Staff removed $3,543 from the expense amount.
2. Materials & Supplies - Operation & Maintenance: The Company has included in this
account the cost of Sensus software and hardware. This is a computerized monitoring
program of the water system. The system notifies the system operator when
something malfuctions. Staff has removed this expenditue of $16,019 from anual
expenses and recommends that it be capitalized and included in rate base. See
Attachment B.
3. Materials & Supplies - Operation and Maintenance: The anual cost for the
operation of the Sensus program is $1,320. This yearly cost was not included in the
STAFF COMMENTS 5 SEPTEMBER 5, 2008
Company's expenses, but is an anual expense that needs to be included. Staffhas
included the $1,320 in operations and maintenance.
4. Contract Services - Professional: The Company included its expenses for legal
services in 2007 in this account. Staff reviewed all the legal statements for these
services and determined that most of the legal fees were incured for matters that
were either not related to the on-going operation of the water company or non-
reoccurring. The Company incured substatial fees for the creation of a water
district which was ultimately abandoned. The Company also had legal fees for a
legal action against the City of Driggs, Idaho. Staff does not believe these
expenditures represent a level of legal services required on a continuing nature for the
operation ofthe water company. Therefore, Staff has removed $24,640 in
professional services.
5. Contract Services - Professional: The Company included its expenses for
engineering services that related to the preparation and fiing of the rate case and not
the anual operation of the water company. The Engineering statement states that the
purose of the work was as follows: "Represents work completed over the last year,
including updates to the rate model to accommodate 'availabilty fee', define biling
units by customer class, and project revised operating requirements of the Teton
Springs system." The engineering activities described above do not appear to be of a
recurring nature so that it would be expected anually. Therefore, Staff has excluded
$8,672 from the anual expenses. Some or all of these costs may be included in the
costs of the rate case discussed below.
6. Contract Services - Professional: The Company included in this account its anual
costs for system repairs and maintenance. The Company expended $8,380 on repairs
and maintenance in 2007, and Staff accepts this as a reasonable amount. Staff
reclassified this amount from the Contract Services - Professional account and added
the same amount under a separate line title of Repairs and Maintenance.
7. Rate Case Fees: The Company has included in its expenses the sum of$II,667 for
its rate case costs. It explains this amount in its Adjustment No 7. It has incured a
total of $35,000 and proposes amortizing that sum over a three (3) year period or
$11,667 anually. Staff has not included any amount for the Company's cost of the
STAFF COMMENTS 6 SEPTEMBER 5, 2008
rate case in its anual expenses analysis. The Company has included as par of its
case a request that it recover a depreciation/amortization expense for the portion of
the water system that was contributed by the developer. Staff is opposed to any
recovery for those costs, and believes it is inappropriate to allow recovery of rate case
costs incurred by the Company to address this issue.
8. Miscellaneous Expenses - Cost of Meters: The Company has included the cost of
meters it purchased as an anual expense, and Staff has removed $23,631 from the
anual expenses and included this amount in rate base.
Revenue Requirement
Staffs calculation of the proposed revenue requirement for the Company is shown on
Attachment C. Attachment B shows the Company's net rate base of$59,194 and a return of
$7,103 at the recommended rate of retur of 12%. This retur must be grossed-up to account for
federal and state income taxes. The net to gross multiplier is 127.32%. When the gross-up
factor is applied to the retur of$7,103, the revenue requirement for the return is $9,044. When
this amount is added to the anual expenses of $118,461 (Attachment A), Staff calculates the
Company's total revenue requirement at $127,505. See Attachment C.
WATER SUPPLY AND RATES
Certifcated Area
Teton Springs Water and Sewer Company currently serves the Teton Springs Golf and
Casting Club Resort. The resort is located approximately 2 miles south of the town of Victor,
Teton County, Idaho. When fully built out, the resort development could serve up to 581 single-
family residential lots, 14 commercial lots and 143 residential multi-family units. Teton Springs'
Application with the Commission requested that the Commission issue the Company a
Certificate of Public Convenience and Necessity to provide domestic, culinar water service in
Teton, County, Idaho to customers within the Teton Springs Casting Club planed unit of
development. Teton Springs is located in the S 1/2 of Section 14, the N 1/2 of Section 23, the
western 572 feet of S 1/2 of Section 13, the western 572 feet ofN 1/2 of Section 24 and par of
HES946, T3N R45E Boise Meridian, Teton County, Idaho. On June 12, 2008, the Commission
issued a Certificate of Convenience and Necessity No. 475 which authorizes Teton Springs
STAFF COMMENTS 7 SEPTEMBER 5, 2008
Water to own, hold, construct or otherwise acquire, to maintain and to operate a water system
and water supply within the said territory.
System Description
The Company submitted maps and drawings showing location of residential, commercial
and multi-family lots, wells, pumping plants, storage reservoir and water distribution system.
Staff reviewed the as-built drawings of the water system and physically inspected the water
system on August 13, 2008. Staff found the system to be constructed in general agreement with
the design. The public water system is designed to serve 581 single family homes, 19
commercial establishments and 143 multi-family units, but currently serves only 196 residential
lots.
The public water system is supplied by two wells. Well NO.1 is located in the northeast
corner of the Teton Springs resort and was driled to a depth of 806 feet cased with a non-
perforated 16-, 10-, and 8-inch steel casing to a depth of 509 feet. The well is considered a low-
temperature geothermal well since the water produced has a temperature of approximately 97-
degree Fahenheit. During the Staff field visit, the pump was operating at 275 gpm at 110 psi.
The pump is operating against a relatively constat head supplying water to the system and the
storage tan located at a higher elevation. Well NO.2 is located in the southeast par of the resort
and was driled to depth of 1,140 feet. This well is not very productive and was only pumping
97 gpm at 78 psi discharge pressure durng Staffs visit. According to Company personnel, the
two pumps were only needed to operate two times a day for 4 hours to meet the water
requirements during peak months. Both wells are equipped with production flow meters to
measure instataneous flow rates and the total volume of water pumped. Both pumps are
submersible types.
The system is equipped with pressure relief valves, air/vacuum relief valves, isolation
valves, double check valves, pressure gages, and other appurenances for better system
management and safety of operation. The electrical controls, discharge piping, and major
appurenances are housed in a locked shed. The walls are adequately insulated to prevent
freezing of pipes.
The system is equipped with a 500,000-gal welded storage tan that is gravity-fed into
the system. This appears to provide adequate storage capacity to support future growth. The
STAFF COMMENTS 8 SEPTEMBER 5, 2008
tan is securely located from an unauthorized access and can only be accessed through two
locked gates that ru through private property. The external surface of the tan is sprayed with a
material to provide insulation and tank surface protection.
The distribution system is supplied from the storage reservoir and from the two well
pump facilties. Main and distribution lines consist of 16-inch, 12-inch, 8-inch, 6-inch and 4-
inch diameter pipes using Class 150 C900 PVC piping materials. Fire hydrants are also installed
in strategic locations in the distribution system. These hydrants are also used for flushing the
system. Service lines provided to residential lots are all one-inch lines. Service lines provided to
commercial establishments have different sizes depending upon the type of operation.
According to the Company personnel, the size of service lines for existing commercial buildings
currently in operation (i.e. sales office, golfbar, golfbar, sports club) range from 2 inches to 3
inches. A review of the distribution system and customer service line layouts indicates the that
Golf Bar has a 4-inch service line and the Club House currently under construction shows a 6-
inch PVC water service line. Staff also found that there are several rest rooms/snack shacks
receiving water service with I-inch lines. In addition, there is also one special 3-inch service line
with a 2-inch meter serving the Quickwater Ranch property which is not a par of the resort.
According to the Company, they have an agreement with Quickwater Ranch to receive free
water in lieu of using its property for the installation of the storage reservoir and in constructing
par of the mainline from the reservoir to the Company's main and distribution system. Staff
believes the allowance for water provided to Quickwater Ranch is generally equivalent to a lease
payment. Staff recommends that the Company record on its books all metered water provided
to Quickwater Ranch.
The overall water system appears to be well designed and constructed and is expected to
be adequate for the number of customer served. The inclusion of the 500,000-gal water reservoir
provides additional flexibilty in operating the water system. A review of tyical main and
distribution system, and water service layout indicates that minimum cover for trenches is seven
feet or to provide 2-inch insulation pad over the service lines when the 7-foot minimum cover is
not met. This wil prevent freezing of lines during winter time.
The Company operates a separate pressurized irrigation system providing water for
residential lawn, golf courses and other common area landscaping using surface water. Irrigation
customers are biled separately from the domestic water service.
STAFF COMMENTS 9 SEPTEMBER 5, 2008
Water Production and Consumption Data
As mentioned earlier, the two wells are equipped with flow measuring devices to measure
instantaeous flow rates and volume of water pump. Meter readings were staed for Well NO.1
and NO.2 on April 2007 and January 2007, respectively. Staff extracted a 12-month period of
continuous flow data covering August 2007 to July 2008 for both wells and are presented in a
char (Attachment D). As shown in the char, approximately 69 % of the total volume pumped is
contributed by Well NO.1 and 31 % from Well NO.2. Water consumption varies throughout the
year with the maximum usage occurring in August and the minimum usage in November. Since
customer consumption is not metered, it was difficult to calculate the total amount of water
consumed by residential and commercial customers. Staff recommends that the Company
continue to regularly read and record these well production meters.
Number of Customers
The Company indicated when filing its Application the following number of lots and
customers:
Residential:
. Total number of single family lots -
. Total number of active customers-
. Total number of inactive lots-
. % of active customers-
581
194 (196 as of 8/13/08)
387
33.4%
Commercial:
. Total number of commercial lots-
. Total number of active customers-
. Total number of inactive lots-
. % of active customers-
19
5 (8 including 3 sep. restrooms)
14
26.3%
Multi-family (2-buidings):
. Total number of multifamily units- 143
. Total number of active customers- 73 (74 as of 8/13/08)
. Total number of inactive customers- Not applicable
The Company apprised Staff during the field visit on August 13, 2008 that the total
number of residential customers increased from 194 to 196, and the multi-family units from 73 to
STAFF COMMENTS 10 SEPTEMBER 5, 2008
74. There are also three additional rest rooms/snack shacks located in the golf course making the
total number of commercial connections to eight accounts. Therefore, the total number of
residential, multi-family and commercial accounts used by Staff in estimating future revenues in
rate analysis is 278 (196+74+8).
Rate Design
As par of the Company's Application for a Certificate of Public Convenience and
Necessity, the Company is requesting that the Commission approve a new taiff rate. The
interim rates as approved by the Commission Order No. 30571 issued in June 12,2008 are $240
per quarer for residential single-family, $80 per quarer for multi-family unit customers and
$240 per quarter for commercial customers.
The Company's proposed rates distinguish between active and those who can be
connected to the system. The Company defines active customers as those who have built
permanent structures on their lots, who are physically connected to the system and are actively
taking water service from the Company. The Company is also proposing another class of
customers who would be subject to an "Availability Charge." The Company proposed the
Availabilty Charge would be applied to each customer's premises located within the Teton
Springs Community that can be connected to the Company's water system but which has not yet
connected to the system. This charge would be applicable to the unimproved residential and
commercial lots but would not be applicable to the multi-family unit buildings.
The new tariffs proposed by the Company are as follows:
Active Customers, Flat Rate Service:
. Active Unmetered Residential
. Active Unmetered Commercial
. Active Unmetered Multi-family
$150.00 per quarer
$450.00 per quarer
$150.00 per quarer
Availability Charge, Flat Rate Service:
. Residential Lots
. Commercial Lots
$75.00 per quarer
$225.00 per quarer
The Company is proposing a flat rate because the system has been in operation for only a
short time and the Company does not have consumption data from metered sales that would
permit calculation of a metered rate. The Company indicated that after they have monitored
STAFF COMMENTS 11 SEPTEMBER 5, 2008
consumption for a period of time, they intend to apply to the Commission for authority to
convert rates based on metered consumption. Staff agrees with the Company that a uniform flat
rate design may be appropriate and reasonable since not all customers are curently metered and
metered consumption is not available at this time.
Staff notes that the Company has stared installng meters for all new connections.
However, the Company told Staff that the first 50 homes that the Company connected to its
system and all commercial customers did not have meters. Staff recommends that the Company
install meters in all customer service lines previously connected for better system management
and future rate redesign.
The Company proposes a uniform flat charge for both the single-family residential
customers and the multi-family unit customers. None of the units use the water from the
domestic water system for lawn irrigation since the Company operates a separate pressurized
irrigation system. Therefore, Staff believes that the water usage in single-family homes and
multi-family units is similar; Staff agrees with the Company proposal for a uniform flat rate for
single family and multi-family units.
The Company also proposes to apply a flat uniform rate for all types of commercial
customers regardless of the size of customer supply lines. There are 19 commercial lots and the
Company indicated in its application that there are 5 active commercial customers. As discussed
previously, during a meeting with Company personnel and site visit on August 13,2008, Staff
found that there are only 4 active customers currently connected to the system, namely the Golf
Barn, Golf House, Sports Club and the Sales Office. The Club House is curently under
construction and is not currently taking water service. Staff also found that there are 3
restrooms/snack shacks located in various pars of the golf course that have water service. As
indicated earlier, the commercial customers are not currently metered and the size of their
service lines range from I-inch (restrooms) to 6 inches (Club House). Because of the variation
in size of commercial customer's service lines, Staff believes that it is not reasonable to use a
uniform rate for all commercial customers. The various sizes of supply lines would correspond
to different system requirements. Staff reviewed two previous cases (RES-W-04-1 and MSW-
W -08-1) where the issue of equity for customers with different sized service lines was addressed.
Commission Order No. 29732 (RES-W-04-1) addressed the variation of usage by commercial
customers in Resort Water Co. and approved a tariff based on Equivalent Residential Unit (ERU)
STAFF COMMENTS 12 SEPTEMBER 5, 2008
basis. The use of ERU is a way to express water use by non-residential water customers as an
equivalent number of residential customers. A commercial customer with a large service would
have a greater ERU and thus would be charged more. In a more recent case (MSW-W-08-l),
Commission Order 30628 addressed the variation of commercial (non-residential) users using
the Commission approved commercial tariff that is based on meter size.
Staff believes that rates based on meter size or customer supply line size is more
appropriate method to use in Teton Springs Water. As mentioned earlier, the commercial
customers are currently not metered. However, the pipe size of customer service lines is known.
Staff assumes than when a specific size of supply line is provided to a customer, the meter size,
assuming it is metered, would be the same size as the customer service line. For example, if the
service line size is I-inch, the meter size is generally I-inch. Using this assumption, the meter
size/pipe size ratios published by the American Water Works Association's Manual of Water
Supply Practices as presented in Attachment E were used in designing the rates.
The Company is also proposing an Availability Charge. The Company states that they
have to operate and maintain the entire distribution system, but with only a fraction of the
potential users providing revenue to cover costs. The Company claims that there is no
proportionality between the size and operating cost of its system and the number of "active
users." In the Company's system, only 35% of the users have built homes and, if those 35%
were required to bear the full cost of system operation, the Company contends those customers
would be required to pay an amount that would not be fair for them. The Company, therefore,
proposes that an "availability fee" be paid by those property owners who have not yet built
homes, so the full operating cost burden does not fall on those active customers.
The concept of "Water Availabilty Charge" was addressed for the Mountain View
Terrace Water System in Commission Order No. 17536 (Case No. U-1121-20) issued on April
12, 1994. In that case the Company proposed to assess this charge on all buildable lots that have
water available to them, commencing when a subdivision received final approval and when the
water lines were turned over to the water company. In Order No. 17536, the Commission
rejected Mountain View Terrace Water's proposal. The Commission agreed with the Intervenor
in the case who testified that the water availability charge is inequitable because service is not
provided and may never be rendered. The Commission said:
STAFF COMMENTS 13 SEPTEMBER 5, 2008
"The Commission agrees with the Intervenor that where hookup fees are
cost based, no additional charge is waranted for water availability. A
public utility is not an entity given the constitutional right to levy a tax.
Therefore, any charge assessed must relate to a service or product
rendered. The mere existence of a water main runing along a vacant lot
is not a service from which a public utilty can base a fee. Although we
recognize the worthy goal of the Applicant and the Staff to hold down the
rates of the existing ratepayers, we reject their requested availabilty
charge".
In a similar and more recent rate case involving Mayfield Springs Water (MSW-W-08-
01), one Intervenor proposed a rate design that divided all customers into two classes: "active"
and "inactive" customers. "Active" customers would include lots that are connected to the
system with water available - regardless of the status of home construction on the lot. "Inactive"
customers would include owners of lots within the subdivision not currently connected to the
system and not currently receiving water from the Company. The Intervenor offered the rate
design with the justification that inactive customers stil benefit from the water system's use in
common areas, adding value to the inactive property. In addition, the Intervenor recommended
that the Commission direct Staff to construct a rate based on the active and inactive customer
classes. In the Commission Order No. 30628, the Commission ruled that a monthly base charge
plus a usage charge is an appropriate and reasonable rate structure. This Commission decision
essentially rejected the proposal to charge inactive customers.
The Commission in previous cases has consistently ruled that the concept of an
Availabilty Charge is not appropriate in designing rates. Staff can see no significant difference
between those cases and this one. Given the Commission's clear position in this matter in prior
cases, Staff rejects the use of a Company-proposed "Water Availability Charge" in designing the
tariff for Teton Springs Water.
Based on the Staff -adjusted revenue requirement for the test year 2007 of$127,505,
Staff calculated the rates for various sizes of customer supply lines using the A WW A meter
ratios, and the projected revenue for each line size or customer class. The flat rate for I-inch
customers is $103 per quarer. The I-inch customer class currently includes 196 single family
residential connections, 74 multi-family units and 3 commercial (restrooms in golf courses), a
total of 273 connections. The flat rates per quarer for the remaining five commercial
establishments range from $213 (2-inch) to $1,545 (6-inch). The percent total revenue
STAFF COMMENTS 14 SEPTEMBER 5, 2008
requirement contributed by residential and multi-family customers (I-inch meters) is 7.1% and
12.9% by commercial customers (I-inch to 6-inch meters). Staff recommends this tariff for the
Teton Springs Water Company.
A comparison of the curent rate, the Company's proposed rates, and the Staff rate
proposal is shown in Attachment F. Staff recommends that this rate design be in place for two
years. Ths will give the Company time to meter its customers and collect 12 months of metered
usage. At that time, Staff recommends that the Company file a metered tarff.
OTHER OPERATIONAL AND MAINTENANCE ISSUES
As noted earlier, the Company's two wells have flow meters and started recording flow
data in January 2007. Staff recommends that the Company continuously read and record this
well production data. The Company has now installed approximately 150 customer meters in
single-family homes but has not started reading and recording usage data. Staff recommends
that the company star recording water flow information from individual single-family residential
customers with meters. It is Staffs understanding that the two multi-family buildings also have
a single meter installed for each building but it is not being read. Likewise, Staff recommends
that the Company star reading these meters. As previously discussed, the Quickwater Ranch
also has a usage meter but the Company does not bil the owner as par of an agreement. Staff
recommends that the Company begin reading this meter as well.
It was determined during the course of Staff investigation that Teton Springs Water has
an expired water permit for both wells. Staff also determined that a Proof of Beneficial Use has
been submitted by the Company after the deadline lapsed. The Idaho Deparment of Water
Resources IDWR is currently reviewing the case and plans issue an order denying or reinstating
the permit. Staff recommends that the Company maintain a valid water permit to the wells for
public water supply in its service territory.
Staff contacted the Idaho Department of Environmental Quality's Idaho Falls Region to
verify water quality issues with Teton Springs Water. Staff was informed by IDEQ that the
water system operated by Teton Springs Water is currently meeting Idaho's water quality
standards for public drinking water systems.
STAFF COMMENTS 15 SEPTEMBER 5, 2008
NON-RECURRNG CHARGES
The Company has submitted a copy of its proposed Rate Schedules and Rules and
Regulations Governing the Rendering of Service (Tariff). Schedule NO.2 - Miscellaneous Fees
and Charges includes non-recurring charges for retured checks, reconnection following a
disconnection for non-payment, and payment collection during a field visit. Not included in
Schedule NO.2 but mentioned in the rules and regulations section of the Tariff are charges for
customer-requested disconnections for repair work and after-hours connections. Staff
recommends that these changes be moved from the rules and regulations section to Schedule No.
2. A single schedule wil ensure that the customers, the Company and the Commission are aware
of all possible charges and simplify future revisions. Schedule NO.3 - Bulk Water Sold to
Contractors includes provisions for charging contractors for the bulk delivery of water and for a
back-flow prevention device. Schedule NO.4 - Hook-up Fees includes a base hook-up fee and
an uncollected availability charge.
Return Check Charge
Schedule NO.2 includes a retured check charge of $20.00 for each occurence. A
charge in this amount has been approved by the Commission for use by other utilities. Staff
recommends approval of this charge.
Reconnection Charge For Nonpayment Termination
Schedule NO.2 includes a charge for reconnection following a disconnection for non-
payment. The Company is asking for $50.00 for reconnection during normal business hours and
$100.00 for reconnection for other than normal business hours. Business hours are from 8:00 am
to 4:30 pm, Monday through Friday, not including holidays. The Company provided no cost
justification for these amounts, and the charge requested is significantly higher than what the
Commission previously has allowed for other utilties. Customer connections are equipped with
underground shut-off valves near the property line. The service lines and valves are buried at a
depth of 7 feet to prevent water lines from freezing in the winter. Valves are accessible through
risers by utilzing a long-handled valve wrench. There are no unusual conditions that would
make it more difficult for the Company to reconnect service as compared with other water
utilties. Staff recommends a $20.00 charge for reconnection durng normal business hours and a
STAFF COMMENTS 16 SEPTEMBER 5, 2008
$40.00 charge for reconnection for other than normal business hours. These amounts are
consistent with charges approved by the Commission for other utilties.
Field Collection Trip Charge
Schedule NO.2 includes a $50.00 charge to be assessed when in order to avoid
termination of service, a customer pays a Company representative during a visit to the
customer's premise to terminate service. No cost justification was provided by the Company.
Staff agrees that a charge to cover part of the cost for a field visit that results in payment of a bil
is appropriate. However, Staff recommends that the Company be allowed a $20.00 charge,
which is in line with charges approved by the Commission for other utilties. This charge would
be sufficient to deter customers from waiting until the last minute to pay their bils.
After Hours Connection Charge
Rule NO.4 under the "Application for Service" section requires a $60.00 charge for
service tur-on after regular office hours and on weekends and holidays. No cost justification
was provided by the Company. Staff agrees that a charge for dispatching personnel to connect
service outside of business hours is appropriate. However, Staff recommends that the Company
be allowed a $40.00 charge, which is in line with charges allowed other small water companies
and is consistent with the after-hours reconnection charge recommended by Staff. Staff also
recommends that this charge be moved from the rules and regulations section to Schedule NO.2.
Shut-Off At Customers Request
Rule No. 10 under the "Service Connection" section includes a charge to temporarily
disconnect service at the customer's request for the purose of repairs to the customer's
plumbing. The proposed charges are $50.00 during normal business hours and $100.00 for other
than normal business hours. No cost justification was provided by the Company. Staff agrees
that a charge for dispatching personnel to a customer's premise is appropriate. However, Staff
recommends that the Company be allowed a $20.00 charge for each visit during normal business
hours and $40.00 charge for each visit after normal business hours which is in line with charges
allowed to other small water companies and is consistent with the reconnection charges
STAFF COMMENTS 17 SEPTEMBER 5, 2008
recommended by Staff. Staff also recommends that this charge be moved from the rules and
regulations section to Schedule NO.2.
Late Payment Charge
Late payment charges encourage a timely payment and allow the Company an
opportunity to recoup the costs of collection of unpaid bils. The Company sends their bils out
on a quarterly basis, starting in January of each year, and the bils are due by the end of the
quarter. The Company did not ask for a late payment charge, and given the Company's preferred
billng and collection policy, Staff does not recommend that a late payment charge be
implemented at this time.
Bulk Water Services
The Company anticipates that private contractors wil purchase water in bulk from its
water supply system and has designated a specific hydrant for this purpose. The Company
proposes fees for providing water to contractors and the provision of a backflow prevention
device to the contractors to ensure integrity of the water system. The Company is requesting a
$25.00 daily fee for the device and an additional $25.00 daily fee for unlimited water. The
Company would also have additional costs to dispatch personnel to inspect setup and connect
and disconnect the service. Staff recognizes the need to protect the system while providing water
for construction purposes but considers the daily fees excessive when compared to the
Company's proposed quarterly flat rate of$150.00. Staff is also concerned about the proposal
for unlimited water at $25 per day per contractor. Staff recommends that when bulk water is
requested, the Company would make the necessar installation which include a backflow
prevention device and a meter. This service would be provided for a one time set-up fee of $40
and a metered rate of$1.50 per 1,000 gallons of water used.
Hook-Up Service Fee
The Company proposes a hook fee to be charged and collected at the time the customer
makes an application for connection to the system. The hook-up fee includes the Company's
cost of providing a meter. However, the Company did not include a proposed amount in its
original Application. Staff discussed with the Company what is involved in connecting new
STAFF COMMENTS 18 SEPTEMBER 5, 2008
customers. The Company indicated that to have a uniform water service connection with single
family residential customers, the Company provides the meter yolk/setter, I-inch meter,
backflow device and a touch pad for the meter. The total cost of these materials based on
previous purchases is $450.00. Assuming two hours of time required to locate the curb stop,
work with the customer's contractor and inspect the new water service connection, it would cost
the Company about $150 in labor. Staff recommends a hook-up fee of $600 for new single-
family residential connections. The actual installation is performed by the customer's contractor
and the cost of installation, supply pipe from the Company's curb stop to the house and
miscellaneous fittings are paid by the customer.
Staff believes the cost of hook-up for new commercial customers would be different
since the cost of meter, setter, backflow device and touch pad would be proportionately higher,
although the cost of locating curb stop, working with the customer's contractor, and inspection
would be similar. Staff recommends that the Company charge a base rate hook-up fee of $600
for I-inch customers (single-family and commercial) and adjusted correspondingly for
incremental cost of the meter, setter, backflow device and touch pad for other pipe sizes/meters
over I-inch.
Uncollected Availabilty Charge
Availabilty charges are asked for in Schedule No. 1 and addressed in the Rate Design
section of Staff comments with respect to customer who are not connected to the system.
Schedule NO.4 and Rule No. 29 requires payment of an availabilty charge in situations where
the customer temporarily disconnects service for some period of time. Staff recommends denial
of an availability charge for customers who request temporary disconnection of services.
CUSTOMER RELATIONS
Biling Documentation
The Utilty Customer Relations Rules (UCRR), IDAPA 31.21.01000 et seq. includes the
requirements for biling documentation. The Company bils customers on a quarerly basis
starting in January of each year and the bils are due by the end of the quarer. The bil sample
submitted by the Company indicates the service period and the due date but does not indicate a
date for the invoice. The sample notice of intent to terminate and the final shut-off notice do not
STAFF COMMENTS 19 SEPTEMBER 5, 2008
specify the reconnection charges, but instead leave a blan space to be filled in. Staff
recommends that the Company update all the quarerly bils sent to customers to include invoice
date as required under the UCRR. Staff recommends that the notices sent to customers prior to
termination list the reconnection charges as approved by the Commission. Staff also
recommends that all customer biling and collection documents include current information on
how to contact the Company
Customer Notice And Press Release
The Company sent notice of the proposed application for a certificate of public
convenience and necessity and the proposed rate increase in a mailng to all customers and
landowners within the Teton Springs Resort on May 22, 2008. A certificate of mailing was
received by the Commission on June 23, 2008 along with a copy ofthe notice. The notice meets
the requirements of the Utility Customer Information Rules (UCIR), IDAP A 31.21.02000 et seq.
The Company did not fie a copy of it press release with the Commission at the time of the
application as required in Rule 102, UCIR. The Company stated that it issued a press release at
the time of the fiing of the application, and later provided a copy of a press release dated June
12,2008 to Staff. Public notification for the customer workshop was also done by the
Commission through a Press Release. No customers attended the workshop. The Commission
has not received any written comments to date. The lack of attendance at the workshop and lack
of written comments may be due to the fact that Teton Springs is a resort where residences are
not occupied year around.
Rules Summary
The Utility Customer Information Rules (UCIR), IDAPA 31.21.02000 et seq., requires
that the Company sent out a copy of its rules summary on an anual basis to all its customers.
Staff is willng to provide a sample copy to customers of the rules summary in electronic format
and recommends that Company send a copy with its updated biling statements and on an annual
basis thereafter to comply with the rules.
STAFF COMMENTS 20 SEPTEMBER 5, 2008
Tariff Issues
The Rules and Regulations Governing the Rendering of Service submitted by the
Company includes reference to the Commission's Utilty Customer Relations Rules (UCRR) and
Utilty Customer Information Rules (UCIR) and cites paricular rules by rule number. Staff
recommends that the Company refer to the Commission's rules by name of the rule set so that
the Company will not have to revise its tariff in the event that the Commission's rules are
renumbered.
Staff recommends that the Company incorporate certain important provisions taken from
the Model General Rules and Regulation for Small Water Companies that Staff provides small
water companies for guidance in developing a Tariff. Staff recommends that the following
section from the Model rules be added:
GENERAL RULES
1.1 The Customer, in receiving water service, and the Company, in providing water
service, shall both agree to abide by these rules and regulations.
1.2 In the event that there is a conflct between these rules and regulations and the
Utility Customer Relations Rules (UCRR) and the Utilty Customer Information
Rules (UCIR), the Rules and Regulations of the Idaho Public Utilties
Commission (Commission) shall tae precedence unless an exception has been
granted.
1.3 All recuring and non-recurring charges shall be approved in advance by the
Commission.
Staff is willng to assists the Company in their revision of their tariff, including the rate
schedules and the rules and regulations, to ensure that it is compliance with Commission Rules
and Regulations.
Rule No. 34 under Customer Deposits reserves the right to require a deposit under IPUC
guidelines. The rule states that deposits may be collected for customers not covered under the
IPUC Rules and Regulations. Since all customers of a public utilty regulated by the
Commission fall under IPUC jurisdiction, Staff recommends that this rule be revised to state that
it covers all customers of the utility.
Schedule No. 1 includes a rate for "Multifamily" customers. The charge will apply to
each unit in a mixed use building that includes residential and commercial customers. Staff
STAFF COMMENTS 21 SEPTEMBER 5, 2008
recommends that the charge be renamed "Multi-Tenant" to more correctly describe it and that
Schedule NO.1 specify that the charge is for each unit.
Finally, Staff recommends that the Company eliminate Schedule lA, since it does not
intend to bil customers separately for DEQ fees.
RECOMMENDATIONS
Staff recommends:
1. The Company has a rate base in the amount of$59,194
2. The Company be authorized to ear 12% as a reasonable rate of return on rate base.
3. The Company's annual operation and maintenance expense be set at $118,461.
4. The total revenue requirement for the Company be established at $127,505.
5. The Company should not be allowed to collect any depreciation/amortization on the
contributed capitaL.
6. The Commission approve a flat rate of$103 per quarer for I-inch customers, $213
for 2-inch, $809 for 3-inch, $1,030 for 4-inch and $1,545 for 6-inch customers.
7. The Company install customer meter for all new connections and install meters on
previously connected service lines without meters.
8. The Company regularly record all well production flow and customer meters.
9. The Company file a new metered tariff approximately after two years with full 12
months of metered usage.
10. The Commission approve the following non-recurring charges: a) hook-up fee of
$600 for I-inch customer. Larger services would pay the $600 plus the incremental
cost for the larger service; b) bulk water service wil be provided for $1.50 per 1,000
gallons of water sold plus a $40 set-up fee; c) reconnection charges of $20 for normal
business hours and $40 for other than normal business hours; d) a retur check charge
of $20 per occurrence; e) field collection charge of $20; f) a charge for shut-off for
maintenance at the customer's request of$20 per visit during normal business hours
and $40 after hours; and g) an after hours service connection charge of $40.
11. The Company update all biling documentation to include the date of the biling and
all contact information.
STAFF COMMENTS 22 SEPTEMBER 5, 2008
12. The Company update its termination notices to include the Commission's approved
reconnection charge.
13. The Company devise a rules summar based on the model to be provided by Staff
and send a copy with approved rates and charges to all customers now and anually
as required by the UCRR.
14. The Company revise its Rate Schedules and Rules and Regulations Governing the
Rendering of Service as recommended by Staff.
Respectfully submitted this
n.
'5 day of September 2008.
~d'ui&¡
Scott Woodbur
Deputy Attorney General
Technical Staff: Joe Leckie
Gerr D. Galinato
Chris Hecht
i:/umisc/comments/ttsw08. i swjlggcwh
STAFF COMMENTS 23 SEPTEMBER 5, 2008
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1
-_._-
TETON SPRINGS WATER
Case No. TTS-W-08-01
Rate Case
Schedule of Rate Base and Contribution to Revenue Requirement
Amount
Annual
Depreciaiton
Useful
Life
Rate Base
As per the Company's Line 9 Table No 1
Working Capital 1/8 of O&M Expenses
$ 12,363
__________-._ 14,808
$3,091 4 years __
+-
__:~~~~~dSd:~~:~e ~~~ ~a~~:are ---t-~ $16,019 __~__..
__ Caselle Utility SO~~~_m________ -==--i ~ 4,750 I __ $
-t W~ter M_et~r~ _ __ ___ ___ ______+-_ --tj--.E,e~1 ' $Îfotal Rate Base t--- $ 71,571 $
-t~ Accumulated Depreciation -------$-12,377
-i!~L~~_~=_~.~~=~~~=~~~r-.--_-_~~ $ 59,194Rate of Return Allowed 12.000%
..-
5,340
1,583
2,363
12,377
--.f------
3 year~___
3 years
1Ql~~--
i-+-----
----=-- -
Revenue Requirement from Rate Base--$ 7,103
---_._-
._--
--- --
c--- --- -.-...-.----.....-..-------.---------.---- -----f- --- - - - - - - ------ - -- ---- --t-== ----+-- =t~-- - --- - -----1-- - ------- ~--t~_+- . --
---------- - ~-=t~--11=f--- ..----------.----.-.-.---..-.. ---.--.-.---.-.---- ----...--. --------
f- -------- ----------
i
~r:~~----- ~~~-=--=:~------------r-.-------l---- -----f----i _.__.-
----f------
---
Attchment B
Attachment B
Case No. TTS-W-08-1
Staff Comments
09/05/08
I i -~~-TETON SPRINGS WATER L~ 1 --
Case No. TTS-W-08-01 I i I--- - - - - ---- -- T - ~-------- - -~-~--- -- -l------Rate Case i=
Revenue Requirement Calculation - - --------- - ---- -l
-
Return on rate base $7,103 Attachment B
Net to Gross Multiplier 127.3237%See below
Return grossed up for taxes $9,044 --
Annual Expenses $118,461 Attachment A
----Annual Revenue Requirement $127,505
----~--",..__.._----Gross Up Multiplier:..--~.----+-i-----_._----1--_...._--~-4--~---~+ . r-----
Beginning
State Tax ~ 7.6%
--~._-
!
1 o~:~~~~~J_~_______ _¡-_____
1-.--
.. !H:~g~ r---==-f- ~~
Federal Taxable-----~-
Federal Tax ~ 15%i
Net After Tax +----i_._..._--_.'--...-~..-
Net to Gross Multiplier 127.3237%--90% / 78.54%----_._-~-----_..e---t-----~.-
I
--'.._---
f-----
f----------
~.--
------I ------~! i t
- -- =- . -------1 j-= -~-lF-~-. - . =--=
--t----------- ¡- j _. - . - i .- .--
:. -- --= ,-----~T _1_-----4 ----=i -=-:- .----- i t- -- AttachmentC
Attachment C
Case No. TTS~W~08~1
Staff Comments
09/05/08
VOLUME OF WATER PUMPED - TETON SPRINGS WATER
nS-W-08-01
Month
Aug '07
Sep '07
Oct '07
Nov '07
Dec '07
Jan '08
Feb'08
Mar '08
Apr '08
May '08
Jun '08
Jul'08
Total
% Pumping
Well # 1
Gals
10,310,000
1,706,000
1,372,000
608,000
863,000
852,500
217,000
825,000
652,000
798,000
2,060,000
4/823/000
25,086/500
68.8%
Well # 2
gals
327/000
2A70,300
952AOO
340/000
505/900
620/000
787AOO
lA60,000
492,800
466,700
945,700
2/015,100
11,383,300
31.2%
Total
Gals
10/637/000
411761300
2/324AOO
948/000
1/368,900
lA72,500
1/004AOO
2/285/000
1/144/800
1/264/700
3/005JOO
6/838/100
36A69/800
100%
Volume of Water Pumped - Teton Springs Water
12,000,000
II 10,000,000c..7ic:
i 8,000,000"t
GJQ.
E::c.6,000,000 II Well #1 ..
GJ..
~IIWell#2-4,000,0000 II Total
GJ
E::Õ 2,000,000;:
~~~~~~~~~~~
'I,;~ e.r¿~ oC' ~o~ çi' \~J: ~~ ~~ 'lç' ~~~ \,;J:
,Ç)a;~')
ATTACHMENT D
Attachment D
Case No. TTS-W-08-1
Staff Comments
09/05/08
TETON SPRINGS WATER
TTS-W-08-01
TYPICAL CUSTOMER METER-AND-SERVICE EQUIVALENT RATIOS 1/
Meter Size (inches)Equivalent Meter-and-Service Ratio
5/8 1.0
3/4 1.1
1 1.4
1 ~1.8
2 2.9
3 11.0
4 14.0
6 21.0
8 29.0
1/ From American Water Works Association's Manual of Water Supply Practices
Attachment E
Attachment E
Case No. TTS-W-08-1
Staff Comments
09/05/08
Rate Analysis
Teton Springs Water
TTS~W~08~01
Annual Revenue Requirements =$127,505
Revenue Average
Quarterly Total Over or Total Percent
Rate No. of Flat Rate Revenue Under Increase Increase
Design Customers ($/qtr)($/yr)($/yr)($/yr)(%)
Current Tariff:
Residential 196 $240 $188,160
Commercial 8 $240 $7,680
Multi-family 74 $80 $23,680
Total 278 $219,520 $92,015
Company Proposal
Res.-Active 196 $150 $117,600
Res. ~i nactive 385 $75 $115,500
Sub~Total 581 $233,100
Com.-Active 8 $450 $14,400
Com.-Inactive 14 $225 $12,600
Sub~Total 22 $27,000
Multi-F-Active 74 $80 $23,680
Total-(Active)278 $283,780 $156,275 $ 64,260 29.3%
Staff Proposal (Based of Meter or Supply Line Size)
1" Res.-SF/MF 270 $103.00 $111,240
l"Com.3 $103.00 $1,236
2" Com.2 $213.36 $1,707
3"Com.1 $809.29 $3,237
4"Com.1 $ 1,030.00 $4,120
6" Com.1 $ 1,545.00 $6,180
Total 278 $127,720 $215 $ (91,800)~41.8%
% Alloc-Res =87.1%
% Alloc-Res =12.9%
%Total Alloc +100.0%
ATTACHMENT F
Attachment F
Case No. TTS-W-08-1
Staff Comments
09/05/08
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 5TH DAY OF SEPTEMBER 2008,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. TTS-W-08-01, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
DEAN J MILLER
McDEVITT & MILLER LLP
PO BOX 2564
BOISE ID 83701
JON PENARDI DIRECTOR
TETON SPRIGS WATER
AND SEWER COMPANY LLC
75 WEST 950 SOUTH STE 3
VICTOR ID 83455
,y~SECRETARY -
CERTIFICATE OF SERVICE