20230308Comments.pdf

CLAIRE SHARP CElVED
DEPUTY ATTORNEY GENERAL o y .cc
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720 '
BOISE,IDAHO 83720-0074
[phone]
IDAHO BARNO.8026
Street Address for Express Mail:
11331 W CHINDEN BLVD,BLDG 8,SUITE 201-A
BOISE,ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF TETON WATER &)SEWER COMPANY'S REPORTING ON )CASE NO.TTS-W-23-01RESERVEFUNDDISTRIBUTION)
)COMMENTS OF THE
)COMMISSION STAFF
Staff of the Idaho Public Utilities Commission ("Staff'),by and through its attorney of
record,Claire Sharp,Deputy Attorney General,and in response to the Notice of Application in
Order No.35668 issued on January 20,2023,submits the followingcomments.
BACKGROUND
On January 3,2023,Teton Water &Sewer Company,LLC ("Company")filed its 2022
Reserve Fund Usage Report ("Report")pursuant to Order No.35382 seeking approval that the
reserve funds were used appropriately.Application at 1.The Company requested that its
Application be processed through Modified Procedure.
The Company has submitted its Report on 2022 reserve fund expenditures,reflecting
expendituresof $28,777.25 for the followingprojects:Asphalt Repair at 33 Targhee Trail,Water
Leak Repair at 20 Targhee Trail,Water Leak Repair at 46 Targhee Trail,and Water Leak Repair
at 4 Blackfoot Trail.Id.
STAFF COMMENTS 1 MARCH 8,2023
The reserve funds covered the 33 Targhee Trail asphalt repair in the amount of
$3,927.70.Id.The remaining projects'costs-$24,849.55-werepaid from operating funds.
Id.
The Company anticipates additional repairs and costs for the Water Leak Repair at 4
Blackfoot Trail in 2023.Id.
STAFF ANALYSIS
In Order No.30718,the Commission authorized the Company to establish an Emergency
Reserve Fund with specific parameters for accessing the funds.The requirements for accessing
the funds were as follows:
1.The Company must file a notice of application to use the fund.
2.The fund is only to be used for emergencies and unplanned capital expenditures
(plant repair,maintenance,and replacement).
3.The Company must establish an auditable paper trial for all expenditurespaid from
the fund.
4.The fund can be used only for capital expenditures greater than 10%of the
Company's annual revenue requirement.I
On January 3,2023,the Company filed an Application for use of the fund,fulfilling the
first requirement listed above.In the Application,the Company included expendituresfor four
projects:
1.33 Targhee Trail Asphalt Repair,$3,928
2.20 Targhee Trail Water Leak Repair,$9,786
3.46 Targhee Trail Water Leak Repair,$13,521,and
4.4 Blackfoot Trail Water Leak Repair,$1,542
The Company provided invoices and photo documentation of all projects.Based upon
this evidence,Staff believes that all four projects were unplanned emergency repairs,which
fulfills the second requirement.Documentation provided along with the Application fulfilled the
final requirement.
I ln Order No.34000,the Commission eliminated the 10%of annual revenue requirement condition.
STAFF COMMENTS 2 MARCH 8,2023
Staff has reviewed the Company's Application and recommends the Commission find the
$3,928 cost of the asphalt repair at 33 Targhee Trail,to be prudent.Staff also recommends to
amend the total cost of repairs for 20 Targhee Trail,46 Targhee Trail,and 4 Blackfoot Trail from
$24,849 to $24,365.
Prudencv of Costs
The water leak repairs at 20 Targhee Trail,46 Targhee Trail,and 4 Blackfoot Trail
include transactions from related companies.Each project includes labor charges from Teton
ManagementServices,Inc.,("TMS").The Company and TMS are owned by the same
individual,Jon Pinardi.In response to Staff Audit Request No.1,the Company stated that
historicallyit was able to have work completed by other vendors,but that these other vendors no
longer have laborers on staff to complete this type of repair work.The vendors only provide the
equipment and operator.To address this,the Company has used labor from TMS,and believes
those labor charges are reasonable for the circumstances,and the market value expenses should
be covered regardless of who performs the actual work.
Staff commends the Company for adapting to the challenging circumstances by
supplying necessary labor through a related company.However,because this is an affiliated
transaction,Staff believes the costs passed on to customers should be at the lower of cost or
market.In Boise Water Corp.v.IPUC,97 Idaho 832,555 P.2d 163 (1976),the Idaho Supreme
Court noted that a utility's burden of proof is different depending on whether its claimed
expenses arise from transactions with non-affiliated or affiliated parties.A utility claiming
affiliate transaction expenses must prove that it actually incurred those expenses and that they
were reasonable.Staff believes that it is unreasonable for the owner of a regulated utilityto
achieve additional profit from customers by using the services of a separately-ownedbusiness.
The Company stated in the response to Audit Request No.1,that the all-in cost incurred
by TMS for labor totals $28 per hour.The hourly rate included in the invoices from TMS to the
Company was $50 per hour.Actual hours billed by TMS for labor include:
8 hours for 20 Targhee Trail,
7 hours for 46 Targhee Trail,and
7 hours for 4 Blackfoot Trail.
STAFF COMMENTS 3 MARCH 8,2023
Hours billed to TMS total 22 for the three projects.The difference of $22 per hour
charged by TMS for labor equates to a charge of $484 more than the actual incurred costs by
TMS.Removing this excess labor cost decreases the cost of emergency repairs not covered by
the Emergency Reserve Fund from $24,849 to $24,365.
The Emergency Reserve Fund surcharge has been insufficient to cover these repairs over
the last two years.In 2021,the Company incurred $23,388 in emergency repairs not covered by
the Emergency Reserve Fund.The additional $24,365 incurred in 2022 that is not covered by
the Emergency Reserve Fund brings the total amount of emergency repairs not covered to
$47,763.Staff recommends this amount to be booked to account 101.333 ("Plant-in-Service",
sub-account "Services"),which is on page 5 of the Company's annual report,and then
depreciated over 30 years,which Staff estimates to be the useful life of the repairs.This equates
to a depreciation expense of $1,592 per year,which can be recovered when the Company files its
next general rate case.
STAFF RECOMMENDATION
Staff recommends that the Commission:
Approve the Company's use of the Emergency Reserve Fund for the year 2022 for the
entire amount of $3,928 for the repair at 33 Targhee Trail;
Reduce the remaining amount of the projects to be included in Plant-in-Service by
$484 for a total of $24,365,
Require the remaining amount of 2022 repairs in the amount $24,365,along with the
2021 unrecovered repairs of $23,388,to be recorded in Account 101.333 for recovery
in the Company's next general rate case,and
Approve a depreciation rate of 30 years for these expenses for an annual depreciation
expense of $1,592.
STAFF COMMENTS 4 MARCH 8,2023
Respectfully submitted this day of March 2023.
Claire Sharp
Deputy AttorneyGeneral
Technical Staff:Joe Terry
James Chandler
i:umisc/comments/ttsw23.lcsjtjccomments
STAFF COMMENTS 5 MARCH 8,2023
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 8TH DAY OF MARCH 2023,SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF,IN
CASE NO.TTS-W-23-01,BY E-MAILING A COPY THEREOF,TO THE
FOLLOWING:
JON PINARDI
TETON WATER &SEWER CO
PO BOX 786
DRIGGS ID 83422
E-MAIL:[e-mail]1
Tetonws 1silverstar.com
SECRETARY /
CERTIFICATE OF SERVICE