20001130_sw.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
JEAN JEWELL
RON LAW
LOUANN WESTERFIELD
TONYA CLARK
DON HOWELL
DAVE SCHUNKE
RANDY LOBB
RICK STERLING
BOB SMITH
JUDY STOKES
WORKING FILE
FROM:
DATE:
NOVEMBER 30, 2000 RE: CASE NO. UWI-W-00-04 (United Water)
BACKBONE PLANT AGREEMENT—HARRIS RANCH

On October 24, 2000, United Water Idaho Inc. (United Water; Company) filed an Application with the Commission requesting approval of an October 19, 2000, Backbone Plant Agreement between United Water and Harris Ranch/Brighton, LLC.
Harris/Brighton, LLC is the developer of a residential subdivision in the City of Boise, Ada County, Idaho known as “Harris Ranch.” Harris Ranch is located within United Water’s existing service territory, north of the Boise River in the vicinity of Eckert Road and Warm Springs Avenue.
The Company notes that the Commission has previously determined that the Company should be responsible for the cost of wells, boosters, storage and main lines. These facilities, the Company states, are commonly referred to as backbone plant. In order to provide adequate and safe service to Harris Ranch, United Water states that it will be necessary to construct a 1,000 gpm booster station, a 355,000 gallon storage reservoir and a 12 inch water supply line with associated equipment (the facilities). The total estimated cost of the facilities is $657,894.
As described in the submitted Backbone Plant Agreement, Harris Ranch will advance to United Water the full estimated cost of the facilities in two installments corresponding to the construction schedule of the facilities. The first advance in the amount of $112,681 equals the estimated cost of the required booster station. The second advance in the amount of $425,849 equals the estimated cost of Harris Ranch’s allocated share of supply main and reservoir costs.
As the project proceeds, United Water will make payments to Harris Ranch as reimbursement for its advances as customers are connected to eligible portions of the Harris Ranch development. Eligible customers are those customers that can be served by the reservoir through gravity flow. New customers located at a higher pressure zone above 2880 feet, or those that are not hydraulically connected to the reservoir will not be considered for refund as part of this Agreement. Reference Agreement, Exhibit B. The Company estimates that the reservoir will enable it to provide service to 996 eligible customers within Harris Ranch and to approximately 500 additional customers within the general vicinity of Harris Ranch. Payments will cease after 996 customers have been connected, or the expiration of the Agreement in 15 years, whichever occurs first. Although the Harris Ranch development will eventually include more than 996 building lots, the additional lots, the Company contends, will be served by other facilities. In no event will the total of payments exceed the amount advanced by Harris Ranch.
United Water contends that the Agreement is advantageous to Harris Ranch and that it allows construction of the subdivision to proceed upon a schedule that is preferable to Harris Ranch rather than be constrained by United Water’s capital budget and construction cycle.
United Water contends that the submitted Agreement is in the best interests of the Company and its customers. The Company requests that its Application be processed pursuant to Modified Procedure, i.e., by written submission rather than by hearing. Reference Commission Rules of Procedure, IDAPA 31.01.01.201-204.
On November 1, 2000, the Commission issued Notices of Application and Modified Procedure in Case No. UWI-W-00-04. The deadline for filing written comments was November 15, 2000. The Commission Staff was the only party to file comments (attached). Staff recommends that the Company’s submitted Agreement be approved.
Staff notes that whenever United Water installs new backbone plant facilities, there is always some risk that development will not occur as expected. While the Agreement does not completely eliminate United Water’s risk, Staff believes that it greatly diminishes it. Staff views this minimization of risk as the primary benefit of the agreement to both the Company and its existing ratepayers.
Staff contends that the reimbursement arrangement is advantageous to United Water since the Company effectively makes investment in the Harris Ranch backbone plant only when new customers are connected and only in proportion to the number of customers taking service. It is Staff’s understanding that no interest will accrue on advanced amounts for purposes of refund calculations.
As reflected in Staff’s comments, Harris Ranch’s share in the storage reservoir has been calculated based on the estimated benefit its customers will receive. It is noted that Harris Ranch customers will have alternate sources of irrigation supply. Staff accepts the estimates used by the Company and believes that the method used to allocate the cost between customer groups is fair and reasonable.
Staff notes that in the Company’s prior application for purchase of the Barber Water system, the Company committed to expending $35,000 for repairs to the existing storage reservoir. United Water has now determined to construct a new reservoir to serve both Harris Ranch and Barber and to abandon the existing reservoir. Instead of the $35,000 initially planned for reservoir repairs, the Company states that it minimized its expense and spent only $14,174. Ultimately, United Water’s total investment for the benefit of Barber Water customers will be $33,454—i.e., $14,174 for repairs to the old reservoir plus $19,280 for the Barber Water customers share of the new reservoir. Staff believes this is reasonable.
Staff further notes that some additional Harris Ranch development is anticipated in the future at an elevation higher than can be served by the facilities that can be added under this Agreement. United Water states that it will provide service to higher elevation development under Special Facilities Agreements as development proceeds. These agreements the Company represents, will be in accordance with existing tariffs and will require that all special facilities be fully contributed by the developer.

Commission Decision
Does the Commission continue to find Modified Procedure in Case No. UWIW0004 to be appropriate? Does the Commission find it reasonable to approve the submitted Backbone Plant Agreement between United Water Idaho and Harris Ranch/Brighton, LLC? If not, what is the Commission’s preference?

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