20200319Final_Order_No_34603.pdf

Office of the Secretary
Service Date
March 19,2020
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF TETON WATER &)SEWER COMPANY'S APPLICATION TO )CASE NO.TTS-W-20-01
AUTHORIZE DEBIT FOR PURPOSE OF )
WELL CONSTRUCTION )
)ORDER NO.34603
On February 20,2020,Teton Water &Sewer Company ("TetonWater"or "Company")
applied for Commission authorization to issue up to $450,000 in debt.See Idaho Code §61-901
et seq.The purpose of this debt is to build a third well for the Company's water system.
Based on our review of the record,we approve the Application as noted below.
THE APPLICATION
Teton is a small water company serving approximately 924 persons in Teton County,
Idaho.The Company requests the Commission authorize it to assume up to $450,000in debt.This
debt would take the form of a loan secured by the assets of Teton.The Company expects to receive
a loan with a 5-year term and a 7-8%interest rate.
The purpose of the loan would be to plan,engineer,permit,drill,and construct a third
well for the Company's water system.The Company provided bids and estimates totaling
$385,519 but is requesting a Commission authorization of $450,000 in case costs vary once
construction begins.The Company asserts it needs the well to meet the Company's current and
future service obligations,and to provide system redundancy should either of the existing wells
fail.The Company points to the records in two of its prior cases,Case Nos.TTS-W-17-01 and
TTS-W-19-01,as evidence that a third well is necessary.Specifically,during summer 2019 water
demand exceeded production capacity multipletimes,and the Company only avoided service
interruptions by running both well pumps almost continually.See Case No.TTS-W-19-01,
Application at 1.Adding a third well to the system would increase the Company's production
capacity and create system redundancy.
Teton Water hopes to secure the loan by April 1,2020.The Company paid the filing
fee required under Idaho Code §61-905 on February 28,2020.The Company issued a press release
ORDER NO.34603 1
to local newspapers.On February 26,2020,Teton Water provided unaudited financial statements
to Commission Staff.
STAFF REVIEW AND RECOMMENDATION
Staff reviewed the Company's Application and financial statements and confirmed that
the Company paid the fees required under Idaho Code §61-901 et seq.Staff found the bids and
estimates provided by Teton Water to be reasonable considering the geology of the area in which
the water system is located.Staff recommended the Commission approve the Company's
Application and borrowing authority up to $450,000,but noted the Company's rates are
insufficient to service the proposed debt.
Staff noted the third well would significantlyimpact the Company's rate base if the
Commission finds the project to be prudent:
In the Company's last general rate case (Case No.TTS-W-08-01),the
Company's rate base was $57,763.The Company's water revenues in its 2019
financial statements were $162,534,and the gross income from the 2018
Annual Report was $35,808.Staff estimates that the annual payment on the
$384,519loan (the estimated cost of the project)at 7%interest with a five-year
term would be approximately $91,000.The Company's current rates are not
sufficient to service the loan.
Staff Decision Memorandum at 2.With well systems typically depreciated over 25 to 35 years,
Staff noted a mismatch between the usual cost recovery for a well and the terms of the loan.Staff
recommended the Company seek more favorable loan conditions.If that is not possible,then
"accelerated recovery of the third well may be the only option to maintain the financial security of
the Company."Id.
In response to questions from the Commission at its March 10,2020 and March 17,
2020 decision meetings,Staff clarified that drillinga new well is probably the most cost-effective
solution for the Company-despite its significant price tag.A water storage tank that could hold
enough water to act as a redundancy for the system would cost considerably more than the
proposed well to build.Staff also noted that even if Teton Water could realistically connect to
another nearby water system,the cost to build a line to the nearest viable system would probably
be more than the cost to drill a well.
ORDER NO.34603 2
DISCUSSION AND FINDINGS
The Commission finds that the Company is an Idaho corporation,a water corporation
within the definition of Idaho Code §61-125,and a public utility within the definition of Idaho
Code §61-129.The Commission has jurisdiction over this Application under Idaho Code §61-
901 et seq.
The Commission finds that the Company's Application should be approved.The
Company's Application reasonably conforms to Rules 141 through 150 of the Commission's Rules
of Procedure (IDAPA 31.01.01.141-150),and the Company has paid all fees required by Idaho
Code §61-905.Further,the proposed issuance of debt is for a lawful purpose,is within the
Company's corporate powers,and is compatible with the public interest.
While we authorize this debt,we recognize that if Teton Water receives a loan in the
amount and with the conditions it expects,its current rates will be insufficient to service the loan
payments.We encourage the Company to do all it can to secure loan conditions that will minimize
the impact on customer rates.
Because issuance of this much debt will be a significant burden on Teton Water,
authorization is subject to several conditions.First,Teton Water shall file with the Commission
the loan documents (showing the amount borrowed and all other terms of the loan)within seven
days of those documents becoming available to the Company.Second,the Company shall file an
annual report on the loan with the Commission,due February 28 of each year.The annual report
shall include the beginning and ending balance of the loan,and number of payments made,and
whether there were any missed or late payments.The annual report shall be filed with the
Commission as long as a balance remains on the loan,or until the Commission eliminates this
requirement by Order.
The issuance of an Order authorizing the proposed financing does not constitute agency
determination/approval of the type of financing or the relatedcosts for ratemaking purposes,which
determination the Commission expressly reserves until the appropriate proceeding.
The Commission's approval of the Company's proposed debt issuance is not an
approval of how the Company ultimately spends any funds obtained from the issuance.The
Commission also does not have before it,and therefore does not determine,the effect of issuance
on rates to be charged by the Company for water service to its consumers.
ORDER NO.34603 3
ORDER
IT IS HEREBY ORDERED that the Company's Application is granted.The Company
may issue up to $450,000 in debt-in the form of a secured loan-under the terms and conditions
and for the purposes set forth in the Company's Application and this Order.
IT IS FURTHER ORDERED that the Company shall file with the Commission the loan
documents (showing the amount borrowed and all other terms of the loan)within seven days of
those documents becoming available to the Company.
IT IS FURTHER ORDERED that the Company shall file an annual report on the loan
with the Commission,due February 28 of each year.The annual report shall include the beginning
and ending balance of the loan,and number of payments made,and whether there were any missed
payments during the report year.
IT IS FURTHER ORDERED that the foregoing authorization is without prejudice to
the regulatory authority of the Commission regarding rates,utility capital structure,service
accounts,valuation,estimates for determination of cost or any other matter which may come before
this Commission under its jurisdiction and authorityas provided by law.
IT IS FURTHER ORDERED that nothing in this Order and no provisions of Chapter
9,Title 61,Idaho Code,or any act or deed done or performed in connection with this Order shall
be construed to obligate the State of Idaho to pay or guarantee,in any manner whatsoever,any
security authorized,issued,assumed,or guaranteed under Chapter 9,Title 61 Idaho Code.
IT IS FURTHER ORDERED that issuance of this Order does not constitute acceptance
of the Company's exhibits or other material accompanying the Application for any purpose besides
issuing this Order.
THIS IS A FINAL ORDER.Any person interested in this Order (or in issues finally
decided by this Order)or in interlocutoryOrders previouslyissued in this case may petition for
reconsideration within twenty-one (21)days of the service date of this Order with regard to any
matter decided in this Order or in interlocutoryOrders previouslyissued in this case.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.34603 4
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of March 2020.
PAUL KJELLÁNbER,PRESIDENT
KRIS INE RAPER,COM ISS NER
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
I:\Legal\WATER\TTS-W-20-01\Orders\TTSW2001_final_mh.doex
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