20121005Comments.pdf

KARL T. KLEIN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
P0 BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5156
E C : v
2,12OCT-5 AM 9:59
Tfl iiJ
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF TETON WATER AND )
SEWER COMPANY'S APPLICATION ) CASE NO. TTS-W-12-01
REGARDING THE SALE OF TETON SPRINGS )
WATER AND SEWER COMPANY AND ) COMMENTS OF THE
TRANSFER OF CERTIFICATE OF PUBLIC ) COMMISSION STAFF
CONVENIENCE AND NECESSITY NO. 475 )
The Staff of the Idaho Public Utilities Commission submits the following Comments on
Teton Water and Sewer Company LLC's Application.
BACKGROUND
On June 19, 2012, Teton Water and Sewer Company, LLC (Applicant) filed an
Application apprising the Commission that it purchased Teton Springs Water and Sewer
Company (Teton Springs) effective May 23, 2012. On July 18, 2012, the Applicant filed
additional information about the sale and requested that Certificate of Public Convenience and
Necessity (CPCN) No. 475 be transferred to the Applicant. These two documents and
attachments are collectively referred to as the "Application."
The Application attaches the following items: (1) executed Sale Agreement; (2) the Idaho
Drinking Water Distribution Operator license for the Applicant's managing member, Jon
Pinardi; (3) Mr. Pinardi's financial statement; (4) a warranty deed from Teton Springs to
STAFF COMMENTS 1 OCTOBER 5, 2012
Applicant; (5) Applicant's initial and amended certificates of organization; (6) Applicant's
business plan; (7) Notice of Sale sent to customers; and (8) Idaho Department of Water
Resources letter to Applicant acknowledging change in ownership of water right.
STAFF ANALYSIS
Sale Agreement
Staff reviewed the documents submitted by the Applicant. Staff confirms that the
Applicant is an Idaho limited liability company that filed a certificate of organization with the
Idaho Secretary of State on April 12, 2012. Staff also confirms that Applicant has submitted a
May 14, 2012 warranty deed from Teton Springs that grants, bargains, sells and conveys Teton
Springs' real estate and personal properties, easements, permits, licenses and certificates to the
Applicant.
Company Management
Applicant's managing member, Mr. Jon Pinardi, has managed the Teton Springs water
system since 2006. Mr. Pinardi will continue managing the public water system for the
Applicant. The Applicant submitted a business plan describing the water system's daily
operations, Mr. Pinardi' s responsibilities, and contact information for the Applicant's key
personnel. The Applicant also noted that it has retained Teton Water, Inc. to be the primary
operator of the Applicant's public water system. Teton Water, Inc. also was the primary water
operator for the system when it was owned by Teton Springs. Staff verified with the Idaho
Bureau of Occupational Licenses (IBOL) that Teton Water, Inc.'s owner and President, Rick
Nansen, has a valid Drinking Water Distribution Operator - Class II license that is current to
July 28, 2013. Staff also verified with IBOL that Mr. Pinardi's Drinking Water Distribution
Operator- Class 1 license is current to August 25, 2013. Staff believes the Applicant has the
capability to operate and maintain the public water system in a manner that will provide safe and
adequate service to its customers.
IDEQ Compliance
Staff contacted the Idaho Department of Environmental Quality (IDEQ) - Idaho Falls
Regional Office to insure that Teton Springs and the Applicant have complied with IDEQ
regulations. IDEQ informed Staff that IDEQ personnel conducted a Sanitary Survey of the
STAFF COMMENTS 2 OCTOBER 5, 2012
Teton Springs water facility on September 21, 2011. The Sanitary Survey is an onsite review of
the water source, facilities, equipment, operation and maintenance; it assures that a public water
system provides an adequate water supply source and is distributing safe water. The IDEQ's
2011 Sanitary Survey of the Teton Springs water system identified no significant deficiencies,
and found the water system to be in good condition overall and the system to be in compliance
with the Idaho Rules for Public Drinking Water Systems. The Applicant is working with IDEQ
to correct the few minor deficiencies that were noted during the Sanitary Survey.
Water Right Review
Staff also reviewed the Applicant's water right to ensure that Teton Springs appropriately
transferred it to the Applicant, thereby protecting the system's water right assets and water
supply source. The Applicant provided a June 20, 2012 letter from the Idaho Department of
Water Resources (IDWR) indicating that IDWR has modified its record to reflect the water
right's owner has changed from Teton Springs Golf and Casting Club to the Applicant. It
appears that the water right's prior owner, Teton Springs Golf and Casting Club, may not have
transferred the water right to Teton Springs. Staff believes the Applicant acted timely and
appropriately in filing for a change of ownership of the water right.
Certificate of Convenience and Necessity
The Commission issued CPCN No. 475 on June 12, 2008 to provide a domestic water
supply to the Teton Springs Golf and Casting Club planned unit development in Teton County,
Idaho) The water system's prior owner, Teton Springs, still holds that CPCN. As part of the
Application, the Applicant requests that CPCN No. 475 be transferred to the Applicant. Staff
supports the Applicant's request and recommends that CPCN No. 475 be cancelled and that a
new certificate be issued to the Applicant.
'Case No. TTS-W-08-0 1, Order No. 30736.
STAFF COMMENTS 3 OCTOBER 5, 2012
Accounting Issues
The Applicant is a limited liability company with Jon Pinardi as managing member. Mr.
Pinardi has managed the Teton Springs water system since 2006, and he will continue to manage
the system for the Applicant. Staff believes Mr. Pinardi has the business experience and
wherewithal to own and operate the water utility.
The Applicant acknowledges that the Commission's valuation of the system will be the
basis established by the Commission when the present rates were established, with adjustments
for depreciation and improvements. The Applicant's purchase price will be assigned to the
water, sewer and other assets purchased. Staff recommends that any premium paid on water
utility assets not be recorded on the regulatory books as an item to be recovered from customers.
Such a premium should not be a recoverable acquisition adjustment, an asset to be included in
rate base, or an item that will earn a return. The Applicant understands that it must maintain the
accounting for the water system on a stand-alone basis, separate and apart from any other
business activities.
Customer Relations
The Application includes copies of two customer notices mailed in 2012. A May 23,
2012 notice announced the change in ownership. A July 6, 2012 notice contained the
Applicant's contact information. The Applicant did not notify customers of its June 18, 2012
Application to change ownership and transfer the CPCN.
Commission Order No. 32627, dated August 28, 2012, set an October 5, 2012 deadline
for customer comments. The Commission issued a press release September 21, 2012 regarding
the Application. Three comments have been received to date. None of the commenters
expressed an opinion regarding the change in water system ownership.
Mr. Pinardi is familiar with the Commission's regulatory authority and the Utility
Customer Relations Rules. He has been responsive and helpful in working with Staff to resolve
customer complaints filed with the Commission.
While the Applicant did not request an adjustment in its rates, Staff recommends that new
tariff sheets be filed reflecting the Applicant now owns the system.
STAFF COMMENTS 4 OCTOBER 5, 2012
STAFF RECOMMENDATIONS
Staff believes that this sale will not adversely impact the water system's operation or its
customers. Staff specifically recommends the following:
1.Staff recommends that the Commission approve the sale of Teton Springs to the
Applicant.
2.Staff recommends that CPCN No. 475 be cancelled.
3.Staff recommends that a new CPCN be issued to the Applicant.
4.Staff recommends that the Applicant be directed to file new tariff sheets, signed by an
authorized representative, reflecting that Applicant now owns the system.
Respectfully submitted this day of October 2012.
jq ~, -)~
Karl T. klein
Deputy Attorney General
Technical Staff: Gerry Galinato
Chris Hecht
Terri Carlock
i:umisc/comments/ttsw 12.1 kkgdgcwhtc comments
STAFF COMMENTS 5 OCTOBER 5, 2012
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 5TH DAY OF OCTOBER 2012,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. TTS-W-12-01, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
JON PINARDI MANAGING PAR
TETON SPRINGS WATER &
SEWER COMPANY LLC
P0 BOX 786
DRIGGS ID 83422
SECRETA1
CERTIFICATE OF SERVICE