Brown Rebuttal Testimony.doc

Dean J. Miller
Chas. F. McDevitt
McDEVITT & MILLER LLP
537 W. Bannock, Suite 215
P.O. Box 2564-83701
Boise, ID 83702
208.343.7500
208.336.6912 (Fax)

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION )
OF UNITED WATER IDAHO INC. ) CASE NO. UWI-W-00-1
FOR APPROVAL OF INCREASED RATES )
FOR WATER SERVICE )

REBUTTAL TESTIMONY OF DANIEL BROWN

ON BEHALF OF UNITED WATER IDAHO INC.

JULY 2000

State your name and business address.
Daniel Brown, 8248 W. Victory Road, Boise, Idaho, 83709.
Are you the same Daniel Brown who sponsored direct testimony in this case?
Yes, I am.
What is the scope of your rebuttal testimony?
My rebuttal testimony will address the Staff’s proposal to exclude several capital projects from rate base, namely C98C109 – Spurwing Telemetry/Chemical Feed Equipment, C99A106 – Spurwing Pump, and C00A001 – Collector #3 Rehabilitation.
Do you concur with Staff witness Lobb’s exclusion of the above “Spurwing” projects from this case?
A. No, I do not. Staff witness Lobb contends, beginning on page 13 at line 25 through page 14 at line 4, that, “Both of these investments [C99A106 and C98C109] were subsequently made as part of the Spurwing water system acquisition and should be nonrefundable developer contributed distribution plant, or water supply plant advanced by the developer, and subject to refund.”
Please explain the history of the Spurwing projects.
The Spurwing and Foxtail subdivisions were located approximately two miles west of the company’s existing service territory along Chinden Boulevard. In 1998 the developers of the subdivisions applied to the company for service. At the time, the Spurwing subdivisions had 20 existing customers with un-metered water service. The water facilities consisted of a distribution system and a single well. The Foxtail Subdivision, located approximately one and one half miles east of Spurwing, had five customers served by private wells.
The Spurwing developer faced a problem with completing his project. He had one well serving less than 25 lots, as allowed by the Idaho Division of Environmental Quality (DEQ). Adding the next phase of the subdivision would result in more than 25 total lots served, and therefore require a second well, as per DEQ rules and regulations. His first well cost $150,000 to drill and equip and he believed he could add a second well for the same cost. There was, however, an existing well at the Foxtail subdivision and the Company was able to negotiate an agreement, whereby 7,100 feet of 12-inch water main would be installed between Spurwing and Foxtail in lieu of drilling the second Spurwing well. The total cost of the main was $276,900. This solved the second source of supply problem by tying the two water systems together, with the Foxtail well being the backup supply to the existing Spurwing well. Thus, the Spurwing developer agreed to apply the $150,000 against the cost of the water main, with the Company funding the balance of $126,900.
Did the company subsequently acquire this system and apply to the Commission for approval?
Yes, the company filed application pursuant to its non-contiguous tariff. See Case No. UWI-W-98-5. The Commission approved the acquisition, although it concluded that the agreement with the developer should be considered a special contract. See Order No. 27899.
Were the expenditures for projects C98C109 and/or C99A106 included in the above quoted $276,900 amount?
No. The $276,900 amount was for the water main installation only. Projects C99A106 and C98C109 were not associated.
What were the purposes for these two projects?
Project C98C109 was for the installation of telemetry and chemical feed equipment. The telemetry equipment is necessary to communicate the status and operating conditions of the facility to our SCADA system. The chemical feed equipment is needed to inject chlorine for distribution system disinfectant and a sequestering chemical to control the iron and manganese in the water system. This project was created contemporaneously with the acquisition of the Spurwing system, but as noted above, it was not a part of the acquisition agreement with the developer. The company routinely installs such facilities on wells that are part of its interconnected system.
Project C99A106 was for the purchase and installation of a new pump for the Spurwing well. The existing pump, at the time of the acquisition, was not designed to operate against the Company’s system pressure. The upgrade was necessary to take advantage of the well’s production capacity to supplement the Company’s West Bench Service Level source of supply. This project was created in December 1999, nearly a year after the acquisition of the Spurwing system. This investment was for the benefit of the system generally, not for the benefit of the Spurwing subdivision.
Do you concur with Staff witness Smith’s exclusion of project C00A001 – Collector #3 Rehabilitation?
A. No, I do not. On April 20, 2000, Staff witnesses Smith and Lobb met with me to discuss the status of the proforma capital expenditures included in the company’s case. I relayed to them that the Collector #3 Rehabilitation project was not yet in service and that the revised project cost was $360,100, up from the original estimate of $300,000 as included in the Company’s Application. Apparently, I incorrectly gave the impression that the project was not underway. I assume this is the basis of Witness Smith’s direct testimony on page 12 at line 23 through page 13 at line 1, where he states: “The projects reflected in Columns (S) and (T) [Collector #3 Rehabilitation] have not yet been initiated and as such remain budget items rather than known and measurable work in progress.”
In reality, the project was well under way at that time. The contract, see Exhibit 31, was executed with the contractor on February 8, 2000. The contractor completed the work and vacated the site on May 10. The collector was put into service on May 24. It is now fully operational and is providing service. In previous cases the Commission has permitted plant that was in service by the time of hearing to be included in rate base. Including the Collector # 3 Rehabilitation project would be consistent with prior rulings.
Q. Does the $360,100 amount for the Collector #3 Rehabilitation agree with the proforma estimate submitted in your direct testimony for this project.
A. No, it does not. The proforma estimate for the project, as indicated in Exhibit 9, Page 1, was $300,000. Therefore, Staff Witness Smith’s recommended disallowance incorrectly reduces more capital than the Company had included in its case. More importantly, we would request the Commission approve inclusion of the now known actual amount of $360,100 in rate base as it accurately reflects the known and measurable cost of the project which is now used and useful.
Q. Does this conclude your rebuttal testimony?
A. Yes, it does.

Brown, Reb 1
United Water Idaho Inc.