28810.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE INVESTIGATION OF REQUESTED METERING FOR THE BARBERTON/GOLDEN DAWN SERVICE AREA. )
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CASE NO. UWI-W-01-01

ORDER NO. 28810

On December 27, 2000, a Petition for Installation of Individual Water Meters was filed with the Idaho Public Utilities Commission (Commission) by nearly one-half of United Water Idaho’s (UWI; United Water; Company) customers in the Barberton/Golden Dawn (Barber) service area (previously served by Barber Water Company). As reflected in their Petition
Per UWI, we are the only individual home sites within UWI’s customer base that don’t have our own water meters. The current master meter average billing method, which replaced Barber Water’s billing, is unjustifiably high when compared to other UWI customer bills. It doesn’t give residents ability to manage/reduce their water usage to minimize financial impact. We believe these meters should have been installed prior to any change in billing calculations. Unjustifiably high master meter billing has placed unreasonable economic burdens on many senior citizens residing within our community. We wish to be responsible for managing water usage at our home sites like all other individual UWI customers. Finally, we believe master meters prevent us from giving support to PUC’s position regarding water conservation.

We request the PUC to correct the above concerns by directing UWI to install individual water meters at each of our home sites for the least possible expense to us.

On January 25, 2001, the Commission initiated a formal docket for investigating the metering request of Barberton/Golden Dawn service area customers. United Water Idaho was directed to file comments and a written reply to its customers’ concerns regarding water usage and master metering in the Barberton/Golden Dawn area, the Company’s billing of said customers since date of acquisition and the ramifications of their request for metering. The Commission directed the Company in its comments to specifically address the projected cost of providing individual meters to Barberton/Golden Dawn service area customers and proposals for cost recovery. Recognizing that only half of the Barberton/Golden Dawn customers have requested metering, the Commission also directed the Company to address the issue of selective metering and its ramifications. The Company was also to detail what efforts the Company has made to identify and curtail abusive watering practices of area customers.
On February 14, 2001, the Company responded to the Barber area customers’ Petition for Metering. Subsequent filings by both Barber area customers and the Company served to clarify the respective positions. The customers contend that their support of the acquisition was based on a Company estimate of future bills ($38/bi-monthly). That estimate was much lower than the actual consumption and rates experienced to date. The Company’s present bill/revenue analysis projects an annual bill to Barber customers of $410.61 ($68.43 bi-monthly). That compares to a system average of $338.69 ($56.44 bi-monthly) and the current flat rate Tariff 1E of $325.74 ($54.29 bi-monthly).
On May 14, 2001, the Commission issued a Notice of Public Workshop (May 31, 2001) and established a June 8 comment deadline. In its Notice the Commission made the following findings:
The Commission has reviewed and considered the filings of record in Case No. UWIW-01-1 including the Petition, the Company’s Response and related comments. United Water has offered several alternatives regarding the metering of Barberton/Golden Dawn customers. The Commission Staff has reviewed those options. The following is a description of each of the possible outcomes to this case together with the related pros and cons.

1. Do not install meters and leave the current billing practice in place. Currently all customers share equally the cost of water for everyone.
Pro: Billing system already in place
Some conservation incentive present
Con: Low-use customers subsidize high-use customers

2. Switch customers to United Water’s current non-contiguous Flat Rate of $54.29 bi-monthly (Tariff Schedule 1E)
Pro: Rate schedule already in place
Customers know in advance what their water bill will be
Con: No conservation incentive
Inability for customers to reduce their bill through reduced consumption

3. Install meters on all customer connections
Pro: Customers have control of their water consumption and therefore their bill.
Conservation incentive is present.
Con: Expensive. Total estimated cost is $152,508.

If meters are installed the Commission must determine a reasonable and equitable method of paying for the installation. The Commission is considering three methods:

A. Each customer pays for the cost at the time of the installation. The installation cost per customer is $652 plus a tax gross-up (1.68 times) for a total cost per customer of $1,095. The tax-gross up is applicable only in the instance of customer contributions (i.e., customer contribution advance; company investment—customer surcharge).

Pro: No impact on the other customers of the Company.
Con: The required up-front payment may create a financial hardship.

B. Each customer pays for the cost of installation through a bi-monthly surcharge on their water bill over a period of three (3) years.

Pro: No impact on the other customers of the Company.
Con: Bi-monthly cost to customers is estimated to be between $70 and $90 in addition to each customers bi-monthly water bill.

C. United Water incurs the full cost.

Pro: No up-front cost to customers
Con: Future basic water rates will be higher than they would otherwise be.

All other United Water customers subsidize the cost of installation.

The public workshop in Boise was well attended. The meeting was informational and customers had the opportunity to ask questions and express their concerns and preferences. Written comments were filed by Commission Staff and a great many of the Company’s Barberton/Golden Dawn customers. Reply comments were filed by the Company on June 22, 2001. The comments can be summarized as follows:
Staff Comments
Staff believes that master metering has failed to achieve most of the objectives hoped for at the time of United Water’s acquisition of the Barber system. Although the method has proven relatively simple and easy to implement, it has not been viewed as equitable for customers or promoted conservation. High volume users continue to be undeterred in their consumption; low volume users are facing high bills they cannot control. Low use customers will continue to subsidize high use customers, Staff states, as long as consumption is evenly allocated to all 234 customers. Staff is convinced that individual metering is the only alternative to achieve fairness and to promote conservation.
Staff opposes selective metering. Staff does not believe that selective metering will alleviate allegations of unfairness, it will not eliminate subsidization and will not promote conservation. Staff agrees with the Company that selective metering could ultimately prove more costly because of the added cost of installing meters piecemeal and the added cost in complexity of billing and meter reading.
Staff believes that the most equitable solution is to retrofit the entire system with meters on all customer service lines. Staff in its comments discusses the alternatives identified by the Commission in its Notice.
Staff notes that under normal circumstances, when new customers are served by United Water, developers of subdivisions are required to contribute to costs of all new distribution facilities including meter boxes and meter settings. Because developers recover their investments through the sale of lots, new customers indirectly pay the full cost of meter boxes and settings. Barberton/Golden Dawn customers are asking that they not be required to pay these costs. Splitting the cost of installing meters, Staff states, would recognize that Barberton/Golden Dawn customers have some responsibility to pay the costs just as other United Water customers have done, while also recognizing that most Barberton/Golden Dawn customers are not capable of paying the full cost either up-front or through a multi-year surcharge.
Staff contends that if Barberton/Golden Dawn customers do not pay the metering costs themselves the resultant subsidy is a hidden cost of purchase that was not previously considered when the system was acquired by United Water. Staff expresses some concern that similar situations could occur in the future, should for example the Company acquire Capitol Water Corporation which serves approximately 2,750 customers, of which only 200 commercial customers are metered. Because of experience gained with the acquisition of the Barber Water system, Staff believes that individual metering should be considered as a prerequisite to future acquisition by United Water of any unmetered water system. The experience with Barber Water, Staff notes, has shown that even with a relatively homogeneous group of customers, master metering can be an unacceptable alternative to providing meters for individual customers.
Staff notes that approximately 80 to 90 customers attended the public workshop held on May 31, 2001. Based on written comments received to date from 124 households, Staff’s assessment is that virtually all customers offering an opinion favor installation of meters. As expected, customers overwhelmingly desire that United Water pay for the full cost of installation and include the investment in rate base. Customers appear somewhat split on the question of whether to install meters as soon as possible or whether to pay a flat rate until meters are installed in two to three years.
Staff recommends that the Commission order United Water to install meters as soon as possible. Staff recommends that the full cost of installing meters be capitalized, accrue interest and be included in rate base in the Company’s next general rate case.
United Water Reply
United Water accepts Staff’s ultimate recommendation (that meters be installed as soon as possible and that the full cost of installing meters be capitalized, accrue interest and be included in rate base), upon the condition that interest on the investment be permitted to accrue until the time of the next general rate case.
United Water, the Company notes, continually adds customers through various means and routinely makes investments to improve or repair portions of the system. These investments are routinely allowed in rates. The Commission in such instances makes no effort to distinguish between new and old customers. There is no sound reason, the Company contends, to treat customers who come onto the system through acquisition differently. Barber customers, the Company notes, have been on the system for almost a year and a half. They are no longer “new.” It makes sense, therefore, the Company states, to view the investment in meters as a system improvement.
United Water cautions against adoption of a blanket policy requiring metering as a part of acquisitions. Each case, the Company contends, will need to be examined on a case by case basis, leaving open the possibility that it may be in the best interest of all to permit some level of subsidy by all customers on the system.
The Company notes that of the written ballots submitted by Barber customers at the workshop, of 127 responses received, 64 customers (50%) support a flat rate first, then meters, while only 46 customers (36%) support meters now.
United Water notes that its acquisition of Barber Water was approved by the Commission only after full public notice and opportunity for comment. While customers may not have noticed much difference in service, United Water contends that customers are receiving better service than before. The water served is now safe and clean and is provided at constant pressures. Customers have access to a customer service department on a 40 hour per week basis and United Water provides emergency repair service 24 hours per day, 7 days per week. Customers also have access to free conservation programs, kits and information. The system is now integrated into United Water’s telemetering and monitoring apparatus.
United Water contends that it did not intentionally, or otherwise, mislead customers about expected future costs. Because the system was previously unmetered United Water did not have any ability to predict likely bills at the time of acquisition.
Regarding Staff’s recommendation for metering, the Company states that if the Commission believes interest accrual is not appropriate, then the Company recommends the option of a flat rate until such time as the Company receives approval in its next general rate filing. United Water would commit to install meters before the conclusion of that case with the understanding that the investment would be included in rates. If United Water were required to state a preference between the two options, this would be United Water’s choice. Under the “meters now” option, the Company would be forced to defer already budgeted capital projects to free up funds for this project. Flat rates now with meters later would be the least cost option as it would not involve accruing interest. The Company recognizes that this option does not provide an immediate metering solution.

COMMISSION FINDINGS
The Commission has reviewed the filings of record in Case No. UWI-W-01-01 including the comments of the Commission Staff and Barberton/Golden Dawn customers and the reply comments of United Water.
The Commission is troubled by the fact that the estimated water consumption of Barberton/Golden Dawn customers is so far off of actual consumption. Master metering under the facts of this case appears to result in unacceptable inequities. Low use customers are essentially subsidizing high use customers. As the cost of water continues to increase, customers must be provided with the ability to control their billed consumption. We find that the customers request in this case for individual metering is a reasonable request.
United Water maintains that Barberton/Golden Dawn customers should no longer be considered “new customers.” They have been Company customers for over one and one-half years. The capital investment for meters for the Barberton/Golden Dawn area, the Company contends, should be regarded as a system improvement. We agree. As a system improvement, the Company can expect rate base treatment of its investment, including an allowance for funds used during construction (AFUDC). We note that the total estimated cost of metering is $152,508. The actual capital investment to be ratebased will be determined when the Company requests ratebasing and rates to recover same.
We authorize the Company to accrue additional carrying charges at the AFUDC rate for a period of two years from the date the work order is closed, or until such earlier date as the Company may file and complete a general rate case. In authorizing the continued AFUDC accrual we note
that the Company’s rates are not being adjusted coincident with the expenditure;
the investment will be used and useful immediately upon completion; and
that this is a non-revenue producing investment.
We find it reasonable to require the Company to complete meter installation for the Barberton/Golden Dawn area customers by May 15, 2002. This will be near the beginning of the next irrigation season (May 1 to September 30).
Until meter installation is completed, the Commission finds it reasonable to require Barberton/Golden Dawn customers to be charged at the Company’s Tariff 1-E flat rate, presently $54.29/bi-monthly. The Company shall file an amended tariff reflecting this change. We find that the authorized effective date for the tariff change shall be August 1, 2001 and that rates for Barberton/Golden Dawn customers should be prorated to reflect this change in rates, if necessary.
We find it unnecessary to address other issues raised by the parties.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over United Idaho Inc., a water utility, and the issues presented in Case No. UWI-W-01-01 pursuant to the authority and power granted it under Title 61 of the Idaho Code and the Commission’s Rules of Procedure, IDAPA 31.01.01.000 et seq.
O R D E R
In consideration of the foregoing, IT IS HEREBY ORDERED and the Commission does hereby approve the Petition of Golden Dawn/Barberton area customers for individual metering. United Water Idaho Inc. is ordered to meter said customers prior to May 15, 2002.
IT IS FURTHER ORDERED and the Company is directed to switch Barberton/ Golden Dawn area customers to the Company’s Tariff 1E flat rate effective August 1, 2001 and rates are to be prorated to reflect this change.
IT IS FURTHER ORDERED and the Commission does hereby authorize future rate base treatment of the Company’s capital investment in Barberton/Golden Dawn area meters as more particularly discussed and qualified above.
IT IS FURTHER ORDERED and the Company is authorized to accrue carrying charges on its required capital investment for Golden Dawn/Barberton area metering at the AFUDC rate for a period of two years from the date the related work order is closed.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this _______ day of August 2001.

PAUL KJELLANDER, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

DENNIS S. HANSEN, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

vld/O:UWI-W-01-01_sw

ORDER NO. 28810 1

Office of the Secretary
Service Date
August 2, 2001