20200317Final_Order_No_34601.pdf

Office of the Secretary
Service Date
March 17,2020
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF TETON WATER &)CASE NO.TTS-W-19-01
SEWER COMPANY'S APPLICATION FOR )
APPROVAL OF USE OF EMERGENCY )ORDER NO.34601
RESERVE FUND MONIES )
On November 22,2019,Teton Water &Sewer Company ("Teton Water"or
"Company")applied to the Commission for approval of $18,044.80 in expenses to be reimbursed
from Teton Water's emergency reserve fund ("Fund").
On December 26,2019,the Commission issued a Notice of Application and a Notice
of Modified Procedure,setting a February 26,2020 comment deadline and a March 4,2020 reply
comment deadline.Commission Staff filed the only comments.The Company did not file reply
comments.
Having reviewed the record,we deny the Application as described below.
BACKGROUND
The Commission authorized Teton Water to establish the Fund in Order No.30718.
The Fund is only to be used "for emergencies and major unplanned capital expenditures,"such as
plant maintenance,repair,or replacement.Order No.30718 at 12.While Teton Water may
immediately access the Fund,it must "establish an auditable paper trail and provide the
Commission with contemporaneous written notice of the Company's use of the [Fund]for an
allegedly permitted purpose with emergency details and related invoices."Id.at 13.After the
emergency use of Fund monies,the Company must file an application requesting the Commission
determine whether the Fund withdrawal(s)meet the Commission's eligibilityrequirements.
THE APPLICATION
In its Application,Teton Water stated it spent $18,044.80 to purchase a backup well
pump,transformer,and associated materials during summer 2019.The Company stated Well No.
1 and Well No.2 were runningalmost continuously in mid-June but failing to maintain minimum
reservoir levels during peak demand periods.The Company estimated that if Well No.1 failed the
Company would have only 8 to 12 hours to repair the well before its reservoir would be emptied.
The Company determined it would be wise to have a replacement pump,motor,and transformer
on hand in case of failure.
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The Company began consulting with Buchanan Well Drilling,Inc.("Buchanan")and
Rendezvous Engineering on June 18,2019 about pump replacement parts.On June 27,2019,the
Company requested Buchanan order a Goulds pump,a Franklin motor,310 feet of pump cable,
two check valves,and 42 feet of galvanized steel pipe.The total cost of this purchase was
$16,864.80.The Company also ordered around this time a replacement transformer for $1,180.00.
The Company stated that even though the water system did not fail during summer
2019,the time required to get replacement parts shows the Company could not have fixed a well
before its reservoir was depleted.The Company requested the Commission authorize the Company
to use the Fund to cover these expenses.
STAFF COMMENTS
In its comments,Staff recommended the Commission deny the Company's Application
because the $18,045 incurred to purchase backup parts were planned costs and not for
"emergencies and major unplannedcapital expenditures."See Order No.30718.Also,Staff noted
the Fund would have a negativebalance if it was used to pay for the backup parts.However,Staff
commended the Company's prudent management and recommended that the costs incurred to
purchase the backup parts be recognized by the Commission as prudent.
Staff noted that Order No.30718 set out clear parameters for the Company to access
the Fund:1)the Fund must be used onlyfor emergencies and major unplannedcapital expenditures
(plant repair,maintenance,and replacement),2)the Company must establish an auditable paper
trail for all expenditures paid from the Fund,and 3)the Company must apply to the Commission
for permission to use the Fund.See Order No.30718 at 12-13.While the Company filed an
application with the Commission to use the Fund and provided the audit trail,Staff believes the
expenditures were not for an emergency or a major unplanned expense.Staff noted that
"[p]urchasingspare parts is inherentlya planned activity,"and that planned expendituresfor parts
can be placed into inventory for recovery in rates during a utility's general rate case.Staff
Comments at 3.Therefore,Staff does not believe the Fund should be used to reimburse the
Company for its expendituresfor the backup parts.
Additionally,Staff pointed out that the Fund's balance was $15,273 as of December
30,2019.If the Company were allowed by the Commission to withdraw $18,045 from the Fund,
the Fund would be left with a negative balance.Staff noted the Company has recently needed to
utilize the Fund for emergency leak repairs.See Case Nos.TTS-W-17-02 and TTS-W-18-01.If
ORDER NO.34601 2
the Commission allows the Fund to be depleted,Staff noted the Company would have no
immediate emergency funds available.By denying the Application,Staff believes the Commission
would be ensuring the Fund remains adequatelyfunded.
However,Staff agreed with the Company that the expenditures were prudentlymade
and in the best interest of the Company's ratepayers.Well No.I has failed at least four times since
2002.Given the summer peak demand,Staff noted the Company could only meet customer needs
for 16 hours if Well No.1 failed.By having spare parts to repair the pump on hand,Staff noted
the Company could likelyrepair the system without service interruptionto customers.
Staff praised the Company's owner,Mr.Pinardi,for his commendable management of
the Company."The recommendation for denial of this Application is not intended to punish good
behavior,but rather to follow the parameters necessary to access the Fund set forth in Commission
Order No.30718."Staff Comments at 4.
COMMISSION FINDINGS AND DECISION
The Company is a water corporation under Idaho Code §61-125.The Commission has
jurisdiction over it and the issues in this case under Title 61 of the Idaho Code,including Idaho
Code §§61-129,-501 through -503,and -524.Having reviewed the record,including the
Application and Staff's comments,the Commission finds the $18,044.80 spent for backup parts
cannot be reimbursed from the Fund.Nevertheless,the Commission finds these expenses to be
prudent and appreciates Mr.Pinardi's proactive management of Teton's water system.
When we authorized the creation of the Fund,we stated it "is to be used only for
emergencies and major unplanned capital expenditures (plant repair,maintenance and repair)."
Order No.30718.In 2018,we followed this standard when we disapproved a $3,430 expenditure
from the Fund for a backflow device because the Company installed the device to comply with
long-standing Idaho Department of Environmental Qualityrules.See Order No.34278 at 3.While
recognizing the need for the backflow device,we noted "the cost of the backflow device should
be capitalized and recovered throughdepreciation expense in the Company's next rate case."Id.
at 4.
Similarly,the $18,044.80 in expendituresfor the backup parts for Well No.1 are planned
capital expenditures.The Company was preparing for a possible emergency,but none had yet
occurred when the Company purchased the backup parts.Given the facts presented by the
Company,we find the Company prudentlyexpended$18,044.80 for backup well parts that should
ORDER NO.34601 3
be capitalized for recovery in the Company's next rate case.With such a short window to make
repairs before a service interruption,having backup parts makes sense.But this expenditure is not
the kind for which the Fund may be used.Therefore,we deny Teton Water's request that it be
reimbursed from the Fund for the backup parts expenditure.Our denial today ensures the Fund
will be available to the Company if it has an emergency or major unplannedcapital expenditure.
We commend Teton Water for proactively managing its water system and for its
responsiveness to Staff's requests in this and prior cases.We deny the Company's Application
only because it is more appropriate for the Company to capitalize these expenditures for recovery
in the Company's next rate case.
ORDER
IT IS HEREBY ORDERED that the Company's Application-thatthe Commission
approve reimbursement from the Fund of $18,044.80 for backup well parts-is denied.
IT IS FURTHER ORDERED that the Company may capitalize the $18,044.80 it spent
for backup well parts as prudentlyincurred expenses to be recovered in the Company's next rate
case.
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.
ORDER NO.34601 4
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this I
day of March 2020.
PÁÛLI JE Al R,¾ESÎDEN -
KR R ÔM IÈSIONER
ERÌÒ ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
I:\Legal\WATER\TTS-W-19-01\orders\TTSW1901final_mh.docx
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