Linam 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 WILLIAM C. LINAM

ON BEHALF OF UNITED WATER IDAHO INC.

JULY 2000

Q. Are you the same William C. Linam who submitted direct testimony in this case?
Yes.
Regarding what areas will you be submitting rebuttal testimony?
I am submitting rebuttal testimony regarding Mr. Lobb’s testimony on Redwood Creek and Raintree Mutual Water Company.
Beginning on page 11, line 23 of his testimony, Mr. Lobb’s states, “The Redwood Creek facilities, however, are not needed to serve the needs of customers within the Company’s integrated system and should continue to be viewed on a stand-alone basis.” What does Mr. Lobb recommend?
Mr. Lobb recommends disallowance of a portion of the investment the Company has made based on a stand alone analysis of revenue support.
Q. Do you agree with this approach?
A. No. The Redwood Creek area is part of the Company’s integrated system, is totally interconnected with United Water Idaho’s (UWID) overall system, and all the facilities are utilized in providing service to UWID’s customers, including providing fire flows to two schools. The Redwood Creek well can and has provided service back into the Hidden Hollow area when there was a problem with the Floating Feather well. The Redwood Creek well and system become the primary means of maintaining service to the customers in the West Main service area of United Water Idaho if there is a problem with the Floating Feather Well. The Floating Feather well can and has provided service to the west when there was a problem with the Redwood Creek well. This service includes fire flow back to the schools in the area. Therefore, it is my testimony that the Redwood Creek facilities are needed and are utilized to serve the needs of the customers within the Company’s integrated system. Supporting this position, the pump installed at the Redwood Creek well, under C98A105, was designed specifically to deliver water to the Floating Feather booster pump, which supplies the Northwest Pipeline. This is supported by production data from 1999. During the month of July, the Floating Feather booster pump delivered 57.2 million gallons to the West Main Service Level. During the same month the Floating Feather well produced 53.6 million gallons. The balance of 3.6 million gallons was produced from the Redwood Creek well.
Q. With the Redwood Creek area being part of UWID’s integrated system, you do not agree that a portion of the investment should be disallowed due to the fact that the revenue in the immediate area does not fully support the overall investment?
No, I do not.
Assuming that the Commission agrees that the investment in Redwood Creek must be supported by the customers in the immediate area, I want to review Mr. Lobb’s testimony on this stand-alone theory. First, I note that on your Exhibit No. 5 (corrected) that you included a calculation of supported investment for the customers in place as of September 30, 1999 (Column 3) and a calculation of supported investment for the customers projected to be in place as of June 30, 2000 (Column 5). Do you still propose that in calculating the supported investment that the projected number of customers as of June 30, 2000 should be used?
No. It would be more appropriate and consistent with ratemaking practices to match revenue from customers, expense and rate base as of the end of the test year.
Referring to the Total Revenue Received in Column 3 of Exhibit No. 5 (corrected), is the $57,741 actual revenue received in the test year the actual revenue or is it the pro forma revenue based on the customers in place as of September 30, 1999.
A. This is the annualized revenue for the customers on line as of September 30, 1999.
Q. Your Exhibit No. 5 (corrected) shows an investment of $844,819. Please tell us what this $844,819 represents.
A. The $844,819 is the undepreciated investment in both the Floating Feather and Redwood Creek wells plus the distribution system in the immediate area.
Q. Since Mr. Lobb has accepted as used and useful the Floating Feather well, have you prepared a new Exhibit showing only the original undepreciated investment in the Redwood Creek well and the distribution system in the immediate area?
A. Yes, I have. Exhibit No. 20 updates this investment for only the original undepreciated cost of the Redwood Creek well and the distribution system for the immediate area.
Q. Why have you included Column 3 (Actual Consumption at Staff Proposed Rates) and Column 4 (Actual Consumption at UWID Proposed Rates)?
A. If we are going to be consistent with the practice of matching rate base, revenues and expenses, then we have to use the revenues that will be in effect at the time rate base is established. For example, the overall revenues that will be approved in this case are set to support the rate base that is found to be appropriate in this case. By the same theory, the revenues from the customer in the immediate Redwood Creek area will support a set rate base. We should not use the previous case’s revenue levels.
Q. Why did you use the revenue levels at the Staff Proposed Rates and UWID Proposed Rates?
A. To show the difference in unsupported investment at the two proposed rates. You will note that the perceived unsupported investment ranges from approximately $139,300 to $145,700 (rounded). If we then refer to Exhibit 1 of my direct testimony, we note that at existing rates, the Island Woods revenues support an investment of $19,400 more than the actual investment. At the Staff’s proposed rates, the Island Woods revenues will support an additional $67,800, and at the company’s proposed rates the additional supported investment is $85,500. (Exhibit No. 21)
Q. Mr. Lobb maintains that it is inappropriate for the revenues in Island Woods to support investment at another location. Would you comment on that please?
A. Yes. If the revenues in Island Woods support an investment in excess of actual, then automatically or by definition this is going to subsidize investment at some other location within the UWID system. I maintain that it is just as appropriate that revenues from two acquisitions that were added to the system in a similar time frame subsidize each other as it is for one of the acquisitions to subsidize other investment within the overall system.
Q. In your Exhibit 20, the Investment Requested is $472,684. Mr. Lobb maintains the investment is $573,906. Can you reconcile the difference in your $472,684 and Mr. Lobb’s $573,906?
A. Yes, I can. I am submitting Exhibit 22, which shows a Net Rate Base amount of $997,184 for the combined Floating Feather/Redwood Creek investment. This is the same number as shown on Mr. Lobb’s Exhibit 107. However on Mr. Lobb’s Exhibit 107, he attributes $327,000 as the Net Rate Base investment in Floating Feather. According to the books and records of UWID, the appropriate amount for Floating Feather is $372,135. In addition, I have removed the $56,127 that Mr. Lobb lists as item 4 on his Exhibit 107, for the replacement pump.
Q. Why did you remove the $56,127 for the replacement pump?
A. This replacement pump was a necessary expenditure to continue to serve the needs of customers of UWID. Without this replacement, it would have been impossible to deliver water from Redwood Creek to the Hidden Hollow Reservoir. To deny recovery of an investment to serve the needs or the customers would result in confiscatory action against UWID property. This pump replacement was not to serve only the customers in the vicinity of Redwood Creek but to serve the customers in the entire West Main service area.
Q. Can you summarize your position on the Redwood Creek investment?
A. Yes. I contend that the Redwood Creek area is part of the integrated UWID system, standing ready and providing service to the overall customer base of UWID. As such, recovery of the full investment should be permitted. If the Commission finds that the Redwood Creek area should be supported on a more stand-alone basis, it would certainly seem appropriate that two acquisitions added at similar times could be considered together. In this respect, the maximum investment that could be considered for exclusion from rate base should be no more than $53,800 to $77,900.
Q. How did you arrive at the range of $53,800 to $77,900?
A. From Exhibit 20 we see the range of unsupported investment is $139,300 to $145,700. From Exhibit 21 we see investment supported over the actual investment ranges from $67,800 to $85,500. Combining these figures gives us the $53,800 to $77,900.
Q. Let’s turn our attention to the Raintree Water System acquisition. In Mr. Lobb’s direct testimony, he recommends a total disallowance of the investment by UWID in acquiring this system. Mr. Lobb states that the Staff was concerned as to whether it was appropriate for the Company to promote service by a nonprofit company within an existing regulated Company’s service area by allowing master metering, wholesale rates and resale. Did UWID promote this nonprofit company?
A. No, we did not. A group of developers organized and started this company. UWID became involved in an attempt to prevent the addition of separate, independent companies within our designated service area that could hinder good planning and efficient flow patterns for water delivery throughout the area.
Q. Why didn’t UWID simply oppose the organization of this nonprofit company by asking the IPUC to not allow this nonprofit company to operate within UWID’s service area and/or requesting that the Idaho Department of Water Resources deny it a water right permit?
A. First, it is my understanding that a nonprofit company does not require IPUC approval, so there would be no format for the IPUC to deny approval. We also know that UWID’s desire to serve an area does not take precedent over another’s desire when dealing with an Idaho Department of Water Resources water right permit.
Q. What did the Company do at this point?
A. The Company entered into discussions with this group of developers in an attempt to resolve the issues that made the developers feel compelled to organize this company.
Q. What were some of the reasons the developer felt compelled to start their own company?
A. The developers had a strong conviction that they could construct the water system facilities at a much lower cost than the cost of connecting to UWID’s system. This was based primarily on the fact that at the time Internal Revenue Service rules and IPUC rules treated contributions of property as taxable income. Consequently UWID was required to collect from developers an amount sufficient to pay income tax on the value of the contributions received. This “gross-up” of contributions significantly added to a developer’s costs by an additional 34% of the required gross-up amount. In addition, the developers had a strong desire to manage their own construction by providing their own labor and materials. They felt this would provide them an overall lower cost through contractor synergies and scheduling of their projects.
Q. Were you able to resolve their issues?
A. No, we could not change an IRS ruling, and the Commission approved rules and regulations at that time did not allow for developers to provide their own labor and materials for new construction.
Q. What was the Company’s approach since you could not resolve the developers’ concerns at this time?
A. Since the Company was convinced that the developers fully intended to proceed with forming their own company, we entered into negotiations to develop an agreement where United Water Idaho could eventually become the owner of this new company at an investment no greater than what UWID would have made had we entered into a standard main extension agreement for the entire area in question, considering the rules and regulations in effect at that time.
Q. So agreements along these lines were negotiated with the developers?
A. Yes.
Q. Why was the Company convinced that these developers would proceed with starting this Raintree Mutual Water Company?
A. These developers are among the most sophisticated and financially capable developers in the Boise Valley. They had gone so far as to begin the application process at the Idaho Division of Environmental Quality to obtain ground water drilling and well permits.
Q. Mr. Lobb states that the Staff was surprised that UWID did not make a formal application to the Commission for approval of the Water Service Agreement. Why didn’t UWID make an application for approval of the Water Service Agreement after discussing the issue with the Staff?
A. The Water Service Agreement provides that UWID sell water to Raintree at the tariff rates in effect at the time the water is delivered and all water sold was metered. Therefore, the sale of water from UWID to Raintree was no different than the sale of water to any other customer. Our attorney advised that there was no reason to seek approval for such a sale.
Are you aware of the basis of your attorney’s opinion that formal Application to the Commission and approval was not required?
Yes. In Case No. UWI-W-97-4 UWID filed an Application for approval of a contract with the City of Eagle under which UWID proposed to sell water to the City at UWID’s then existing tariff rates. That case was entitled In the Matter of the Joint Application of United Water Idaho Inc. and the City of Eagle for Approval of a Special Contract for Supply of Water to the City of Eagle.
On September 8, 1997 the Commission issued its Final Order No. 27121. A copy is attached as Exhibit No. 23. In its Order the Commission acknowledged Staff Comments in which Staff suggested the need for UWID to establish a tariff for wholesale service. While the Commission said it might explore the issue of a wholesale tariff in a future case, it declined to require it. Instead, the Commission held:
“Whereas United Water simply intends to provide water supply under its present tariffs, although the tariff rate and schedule may later change, we find that approval of the Agreement is unnecessary and not required. Accordingly we simply acknowledge the supply Agreement, note the concerns addressed above and find it reasonable to close this case.” Order No. 27121, page 4.

Our attorney, discussed this order with Raintree, and the attorney for Raintree, Mr. Barton Kline; and the two attorneys advised their respective clients that in their opinion the sale of water by United Water Idaho to Raintree did not require prior Commission approval so long as the rate charged by UWID was the full tariff rate previously approved by the Commission.
Q. At page 18, line 5 Mr. Lobb observes that service was first provided to Raintree in 1996 but that the Water Service Agreement was not signed until 1998. Can you explain this gap in time?
A. There were several reasons. During part of this time an appeal regarding the company’s hook-up fees was pending in the Idaho Supreme Court which created uncertainty about whether such fees should be collected. Negotiations with Raintree Mutual Water Company were protracted on this and other issues. The organizers of Raintree Mutual Water Company wanted provisions in the agreement that United Water Idaho could not accept. There was not a great urgency on UWID’s part since we were selling the water at tariff rates. Basically, the two parties had difficulty in reaching a final agreement, which did not occur until 1998.
On page 18 of his Testimony, Mr. Lobb argues that Order No. 27121 is not applicable to the Raintree situation stating that the City of Eagle circumstance involved “supplemental fire service only and did not provide for delivery of potable supplies”. Can you respond?
I would make two points. First, Mr. Lobb mischaracterizes the facts. Order No. 27121 specifically states: “We note that the Agreement is not limited to fire flow and will probably be used by the City to provide waters for other end-uses.” In the Eagle case, should Eagle purchase water from United Water, they would in turn re-sell the water to others. In this way, the two circumstances are exactly the same. The equally important point is that the company acted in good faith based on advice of counsel, which advice, in turn, was based on a reasonable interpretation of the law. Accordingly, the Water Service Agreement, recites that Commission approval is not required. The Agreement is attached as Exhibit No. 24. See paragraph 5.
At page 15 line 5, Mr. Lobb states that an earlier version of the Agreement that was reviewed by staff had a paragraph in which Commission approval was contemplated. Can you explain the difference between the two versions?
The first draft of any agreement that UWID would contemplate would include the phrase that the terms of the agreement would be subject to Commission approval. Early drafts of the agreement contained provisions that would not have complied with an established tariff. Had any of these provisions survived into a final contract, the agreement clearly would have required Commission approval. Over several iterations, the provisions that would clearly have resulted in a requirement for Commission approval were removed. For this reason, and because in the intervening time the Commission issued its decision in the Eagle case, we believed approval was not required, and this is reflected in the final Agreement
Q. At page 17, line 10, Mr. Lobb states that service to Raintree was not “a service option available under tariff”. Please comment.
A. Service to Raintree was provided under Schedule No. 1, General Metered Service, a copy of which is attached as ExhibitNo. 25. As will be noted, applicable rates are based on meter size, not on customer category or end-use. The tariff does not distinguish between customer categories such as residential, commercial, or other customer grouping. Customers, depending on meter size, pay the same volumetric rate regardless of end use or characterization of customer by category.
Throughout his testimony Mr. Lobb seems to suggest that in circumstances where UWID’s customer intends to re-sell water purchased from UWID there should either be a tariff or a Commission approved special contract for wholesale service. Please comment.
This is the same argument that Staff madein the Eagle case. While the Commission indicated it might explore the issue in a subsequent rate case, it has not been pursued by the Commission. As things stand now, there is no such requirement.
Do you agree with the Commission’s decision to not require a wholesale rate or approved special contract?
I think there is wisdom in a policy that simply says as long as the sale is at full tariff rates the Commission can be indifferent to the end use. This policy insures there is no cross subsidy and avoids unnecessary regulation.
In its dealings with the Commission has UWID acted consistently with its understanding that sales at tariff rates do not require formal approval but that sales at non-tariffed rates do require approval?
Yes. Any time the company has proposed an arrangement involving sales at non-tariff rates, the company has sought approval. Our Application for approval of a special contract with Micron Technology, Case No. UWI-W-99-5, is a most recent example.
Q. Did UWID circumvent any tariffed rates or discriminate against any customer or developer?
A. No. Mr. Lobb’s concern that other developers did not receive similar treatment appears based on the premise that UWID entered into some sort of collusive or preferential arrangement with the Raintree Mutual Water Company developers. As we have demonstrated in this testimony, the relationship was completely arms-length and was in response to a credible threat to create a separate water company within UWID’s service area. During the time Raintree Mutual Water Company was in existence, UWID did not receive any complaints from other developers requesting a similar arrangement. It is also my understanding that the Commission did not receive any such complaints.
Q. Did UWID circumvent any line extension rules regarding customer/developer contributions?
A. No, in fact that is the exact point made in my direct testimony starting on page 22, line 16 and Exhibit No. 7. The extension rules in effect in 1995 when this nonprofit company was organized were utilized in determining what investment UWID would have had in the facilities if a standard agreement had been entered at that time. This calculation of the investment UWID would have made was used as a benchmark in negotiating the arms-length transaction for the purchase.
Q. Basically are you saying that if UWID had entered into a standard main extension contract in 1995 for the total development of the developer’s property involved with Raintree Mutual Water Company that UWID’s total investment would have been at least a net of the $828,943 that UWID is requesting be approved in rate base in this case?
A. Yes.
Q. Mr. Lobb appears to take issue with the fact that the test year revenue to UWID was $95,483 and the revenue available to United Water Operations was $154,266. I believe Mr. Lobb characterized it as United Water Operations pocketing the difference.
Q. Do you agree that the difference quoted by Mr. Lobb is all profit?
A. No. Mr. Lobb’s statement doesn’t consider any expenses. UWO and not UWID incurred all costs for meter reading, billling, collections, maintenance and any cost for water lost or unaccounted for within the Raintree Mutual Water Company facilities.
Q. Mr. Lobb contends that UWID did not require Raintree developers to provide revenue escrow and/or contribution of distribution plant as required of all other developers. Please explain revenue escrow.
A. Under the rules in effect in 1995, when a developer requested an extension, the Company would calculate the investment that could be supported by the full build out of customers in their development. UWID would then make this up-front investment in the facilities for their development. Since the proposed customer would not be on line taking service at the beginning of the project, the developer would escrow funds from which UWID could withdraw funds to provide the revenue as if the full number of customers were in place and taking service. The developer would deposit enough funds to make up any revenue deficiency the Company would have in the first five years based upon the investment made by the Company at the outset of the project.
Q. What was the investment made by UWID at the outset of the Raintree project?
A. None.
Q. So, if UWID did not make any initial investment, would there be any requirement to escrow funds?
A. No.
Q. In 1995 when Raintree Mutual Water Company was organized and the agreements were made, what contribution of distribution plant was required from the Raintree Mutual Water Company?
A. As stated earlier, when a developer requested service for a specific area and set number of customers, UWID would calculate the investment that could be supported when all customers were on line and taking service. UWID would make that up-front investment. If the total cost of the facilities exceeded that amount, the developer would contribute the amount by which the total investment exceeded the amount of investment supported by full customer build-out. Initially Raintree Mutual Water Company supplied all the funds for the installation of facilities. Therefore, no initial contribution was required. In addition, United Water Idaho could not require a contribution on something UWID did not own. Service connection fee contributions were required to UWID whenever a new customer was connected in Raintree Mutual until connection fees were eliminated in 1997.
Q. Did the total cost exceed the amount that UWID would have invested under the rules in effect at the time the deal was struck?
A. Yes. As can be concluded from Exhibit No. 7, the total investment would have been slightly greater than what the Company would have invested initially.
Q. Did the Raintree Mutual Water Company make any contribution to offset this greater investment?
A. Yes. Again as shown on Exhibit No. 7, the Raintree Mutual Water Company contributed $600,382, which was actually more than would have been required.
Q. Is this how you concluded that, had the developers and UWID entered a standard agreement for the entire project in 1995, the net investment by UWID would have been greater than $828,943?
A. Yes.
Q. Mr. Lobb states on Page 19 starting at Line 19, that you seem to be redefining “arms length negotiations.” Would you describe the negotiation of the acquisition of the Raintree Mutual Water Company?
A. Yes. In 1995 when the original agreements were negotiated with the owner of Raintree, some general assumptions were made concerning the maximum investment that UWID would eventually be able to make based upon the rules and regulations for main extensions in effect at the time. Shortly after my arrival at UWID in 1997, I began trying to negotiate the acquisition of Raintree to resolve the issue of a nonprofit company operating within UWID’s service area. For almost 2-1/2 years, I negotiated with the owners to reach the final agreement. The original request of the owners would have resulted in an investment by UWID of over $1,400,000. UWID did not unilaterally establish anything.
Q. Mr. Lobb further comments on Page 19, starting around Line 20, that UWID was in a position to dictate the service arrangements or terms due to the limited alternatives of the Raintree owners. Do you agree that UWID could have dictated the terms?
A. Absolutely not. This is certainly a nice theory and one in which many individuals involved in a negotiation would love to be true. However, the reality is that the owners of Raintree had formed a nonprofit company, were in the process of applying for permits to install their own supply and were prepared to follow through on all phases of a separate company.
Q. On page 24 beginning at line 2 Mr. Lobb states, “I believe that recovery of the cost to acquire a system that should have already been part of the Company is equally improper and should be disallowed”. Would you comment on this statement?
Yes, this appears to come from Mr. Lobb’s belief that someone, be it the Company, the Staff, or some combination can dictate to the various private business entities how development in an area will proceed. This statement also appears to be a product of the fact that the extension rules for UWID changed in 1997 requiring contribution of the distribution system by developers. The facts are that a group of developers formed an independent water company in 1995. Regardless of any rule change in 1997, this would not change the ownership of any facilities installed within that company’s area for which they organized the independent company in 1995.
So this group of developers organized and incorporated a company to serve a specific area and they incorporated this company 1995.
That is correct.
So UWID’s goal at the time was to find a mutually agreeable solution which would allow UWID to eventually become the owner of this independently formed company, at an investment by UWID that would be no greater than the investment UWID would have made under the standard extension agreement for service to the areas in question, considering the extension rules in effect at the time this independent company was formed?
That is correct.
Was this accomplished?
A. Yes.
Q. Would you comment on Mr. Lobb’s contention that your Exhibit 7 does not simulate the guaranteed revenue agreement mechanism?
A. Yes. The guaranteed revenue agreement mechanism was what was in effect in 1995 when the basic agreements were negotiated with Raintree Mutual Water Company. The calculation on Exhibit 7 is exactly the calculation that would have been utilized in 1995 for a development that included all the area of Raintree. UWID contends that the Company should be able to rely upon the rules in effect when an overall agreement was reached.
Q. Starting on Page 20, Line 21 of his testimony, Mr. Lobb lists six reasons why Exhibit 7 incorrectly simulates the extension rules in effect in 1995. Please respond to each of these reasons.
A. 1. “The Raintree area consists of multiple subdivisions with multiple phases developed by multiple developers.”
Raintree did consist of multiple subdivisions and multiple phases. The line extension agreement analyzed in Exhibit 7 as simulated as if this was one project because at the time of acquisition the entire project was complete and, therefore, correctly should be analyzed as one project since this was the point in time when UWID first had any investment. Although several developers and phases were involved, this was organized as one company.
2. “The Guaranteed Revenue Agreement assumed a specific build-out for each project over a five-year period.”
The reason nearly total build-out was assumed in Exhibit 7 was that at the time of acquisition there were 830 existing customers that were added to UWID’s system on day one of the acquisition. Until that point, Raintree Mutual Water Company had supplied all funds for construction, thereby eliminating any need for contributing any additional revenues during the first few years of construction and the addition of customers.
3. “Incorrect customer levels and revenues, such as shown in Mr. Linam’s Exhibit No. 7 would not have been used.”
There were no incorrect customer levels used in Exhibit 7 because of the previously stated fact that there were 830 actual customers on line at the time UWID made the initial investment. Revenues that were used in preparing Exhibit 7 were the average residential revenues for UWID in 1995, and this is exactly how Exhibit 7 would have been prepared in 1995.
“By analyzing the development as a single project, high cost projects are subsidized by low cost projects and there is no possibility of collecting additional contributions.”
It is appropriate to analyze as one project because the project had 830 existing customers before UWID made an initial investment. There is no evidence of high cost vs. low cost projects in the Raintree Mutual Water Company.
“Line extension rules for a portion of the development period required that the Company provide labor and materials for the construction of distribution facilities.”
I am not aware of line extension rules for a nonprofit company and UWID had no way to dictate that this nonprofit company not provide its own labor and materials.
“Since May of 1997, distribution facilities associated with all new residential projects should have been contributed to the Company without refund.”
As previously stated, UWID contends the Company should be able to rely upon the rules in effect when the original agreements were negotiated. Again, Raintree Mutual Water Company was an independent company formed in 1995. UWID’s rule change in 1997 would not change that fact.
Mr. Lobb is recommending basically reducing UWID’s request for rate base treatment in this case by $905,623. What is the amount that UWID proposed to include as rate base in this request?
$828,943.
So Mr. Lobb is recommending that an amount greater than that being requested be eliminated?
Yes.
Mr. Lobb submits that the service agreement that resulted in the Company’s proposal to purchase was specifically designed to avoid rules established by the Commission. Is this an accurate assumption?
No, it is not.
Have there been any collateral benefits arising from the experience with Raintree?
As I noted earlier, Raintree Mutual Water Company provided its own labor and materials to construct the system. Based in part on this experience, UWID concluded that allowing developers to provide both labor and materials in lieu of cash was a workable program. Accordingly, UWID amended its Rules and Regulations to permit this practice. All qualified developers how have the opportunity to mitigate their costs though the operation of competition in this area.
Is disallowance of the Raintree investment a fair result, in your opinion.
A. No. Under staff’s proposal UWID would never be able to earn a return on the $828,943 it has invested to serve the public. This penalty is completely out of proportion when compared to the conduct about which staff complains. Disallowance would have the effect of confiscating property that UWID has devoted to public service.
Q. Does that conclude your testimony?
A. Yes.
.

Linam, Reb 24
United Water Idaho Inc.