20180109Comments.pdf

BRANDON KARPEN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-007 4
(208) 334-03s1
IDAHO BAR NO. 7956
RECEIVED
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702.5918
Attorney for the Commission Staff
BEFORE THE TDAHO PUBLIC UTILITIBS COMMISSION
IN THE MATTER OF THE APPLICATION OF
TETON WATER & SEWER COMPANY FOR
AUTHORITY TO ACCESS THE COMPANY'S
EMERGENCY RESERVE ACCOUNT.
CASE NO. TTS-W-17-02
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attomey of record, Brandon Karpen, Deputy Attorney General, and in response to the Notice of
Application and Notice of Modified Procedure in Order No. 33942 on Decemb er 6, 2077 , in
Case No. TTS-W-17-02 to submit the following comments.
BACKGROUND
On October 73,2077, Teton Water & Sewer Company submitted a one-page Application
requesting the Commission approve access to a reserve fund to pay for two emergency valve
repairs-Cluff Lane, at $3,328. 12, and Teton Springs Lodge, at $5,35 1.22. The Company
included detailed invoices with its Application, and requested that this matter be processed by
Modified Procedure.
In January 2009, the Commission found that the Company was under-capitalized because
the Company developed its water system using lot sales to recover infrastructure costs. Because
the system was funded with contributed capital, the Company did not have plant-in-service that
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ISTAFF COMMENTS JANUARY 9,2018
qualified for rate base treatment. As a consequence, the Company did not have earnings should
it experience a financial emergency. Order No. 30718. Accordingly, the Commission
established an emergency reserve fund, and parameters for access to it, should such an
emergency arise. Id. The Commission stated, "[t]he reserve fund is to be used only for
emergencies and major unplanned capital expenditures (plant repair, maintenance and
replacement). It is not intended to . . . fund capital expenditures that should have been planned."
Id. at 12.
With this Application, the Company requested permission to use its emergency reserye
fund to pay for two emergency valve repairs that the Company completed in September 2016
and June 2017. The Company claims that the total cost for the repairs was $8,679.34. The
Company provided invoices and pictures to support its claims.
STAFF ANALYSIS
Staff recommends that the Commission approve the use of funds from the surcharge
account. In Order No. 30718, the Commission authorized the Company to establish an
Emergency Reserve fund with a separate account. The Commission directed the Company to
file notice when money from the emergency fund is used. The Commission has allowed the
Company immediate access to these funds, but the determination of specific withdrawals would
be determined in after-the-fact applications. Id. In addition, the Commission directed the
Company to provide an audit trail for the use of the funds. Further, the Commission directed that
the use of funds from this account only be used for unplanned repair costs exceeding 10% of the
Company's annual revenue requirement.
The Company has satisfied three of the four requirements. The requirement that the
repair cost must be over l0% of the revenue requirement was not followed. However, Staff
recommends that this requirement be eliminated for this and future filings because it is
excessive, as explained below.
The Company's Application meets the first requirement. The Company has met the
second requirement by providing an auditable paper trail. In this case, the Company provided
copies of the invoices for these repairs in the initial filing. Staff reviewed these invoices and
found them to be adequate and that they added up to the requested amount.
Staff agrees that project expenses were unplanned and therefore satisfy the third
requirement. The first project was the repair of a leaky connector beneath the paved surface of
2STAFF COMMENTS JANUARY 9,2018
Cluff Lane, which required excavation, plumbing repairs, and repairs to the asphalt road surface.
Total project cost was $3,328.12. Staff believes this repair to be both necessary and unplanned.
The second project required repair and relocation of a leaky curb stop valve at the Teton
Springs Hotel. The Company explained that the leak was due to settlement of the hotel's
foundation. The Company also explained that access to the valve was difficult, and that it
relocated the valve in order to facilitate future repair work. Total project cost was $5,351.22,
which includes the costs of excavation, repairing and relocating the valve, and replacement of
landscaping over the valve. Staff believes this repair was also both necessary and unplanned.
The decision to relocate the valve was prudent, and the incremental costs of relocation were
small relative to the total costs of repairing this valve.
Staff recommends that the Commission approve these expenditures despite not satisfying
the fourth requirement, that costs exceed l0% of annual revenue requirement. When the
surcharge account was authorized, the approved revenue requirement was $146,309. Order No
30718 at22. This would set the minimum allowed project amount at $14,631. This requirement
is not met by the projects either individually or combined. As a small water company, Teton
does not have ready access to capital markets. Staff believes that funding smaller projects from a
relatively small emergency accountl will allow the Company to address crucial system needs
while maintaining the Company's cash flow and financial health. Furthermore, Staff
recommends that this l0% requirement be eliminated as long as the other three requirements
continue to be met.
STAFF RECOMMENDATIONS
Staff recommends that:
o The Commission approve the expenses for the Cluff Lane Valve Repair and Teton
Springs Lodge Valve Repair for use of funds from the emergency reserye account.
. The Commission eliminate the requirement that repair costs exceed l0% of the revenue
requirement for use of this account.
I Staffnotes that the account balance was only $15,543 at the end of2016.
STAFF COMMENTS JANUARY 9,2018J
Respectfully submitted this
Technical Staff: Joe Terry
John Nobbs
Mike Morrison
Chris Hecht
Kevin Keyt
i : umisc/comments/ttsw I T.2bkjtjnmmchkk comments
,lV day ofJanu ary 2018.
4STAFF COMMENTS JANUARY 9,2018
CERTIFICATE OF SERVTCE
I HEREBY CERTIFY THAT I HAVE THIS 9th DAY OF JANUARY 2018,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. TTS-W-17-02, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
JON PINARDI
TETON WATER & SEWER CO
PO BOX 786
DRIGGS ID 83422
E-MAIL : I'etouws(j)silverstar.com
ARY
CERTIFICATE OF SERVICE