20040303Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:FEBRUARY 27, 2004
SUBJECT:CASE NO. UWI-04-2 (United Water)
AGREEMENT FOR PURCHASE AND SALE - TERRA GRANDE
CERTIFICATE AMENDMENT
On February 19 2004, United Water Idaho Inc. (United Water; Company) and Barbara
V. Child dba Terra Grande filed a joint Application with the Idaho Public Utilities Commission
(Commission) for an Order approving the purchase by United Water of water service properties
owned by Barbara V. Child. United Water requests authority to expand its Certificate of Public
Convenience and Necessity No. 143 to include the Terra Grande water system and requests
approval of related rates and charges for Terra Grande customers. Reference Idaho Code ~ 61-526;
IDAPA 31.01.01.112.
The Terra Grande water system has been operating for over 50 years and provides water
service under a flat rate to approximately 117 residential customers in the Terra Grande Subdivision
in Ada County, Idaho. Terra Grande is generally located South of Overland Road, East of
Milwaukee Street and North of Targee Street as more particularly depicted in the map attached to
the Application as Exhibit 1.
The total purchase price set forth in the Agreement for Purchase and Sale (Application
Exhibit 2) is $47 000. United Water states that upon approval of the purchase, the Company will
invest up to $122 000 in capital improvements for system upgrades and metering of customers. The
proposed system upgrades which include capping Terra Grande s four wells and switching
customers to United Water supply are described in Application Exhibit 4. United Water requests an
Order confirming the right of the Company to include in rate base in future rate proceedings the full
Terra Grande purchase price and up to $122 000 in capital investment along with reasonable costs
of acquisition which are estimated to be approximately $5 000.
DECISION MEMORANDUM
United Water requests a Commission Order confirming the right of the Company to
provide service to the Terra Grande customers according to United Water s current approved rules
and regulations, including its tariff rates for service. Revenue from Terra Grande customers, at
present United Water rates, the Company estimates will be equal to or greater than the revenue
requirement associated with the assets being acquired. The revenue requirement calculation is set
forth in Application Exhibit 5. The Company projects that Terra Grande customers will generate
average residential revenue for United Water, or $327/year. Terra Grande customers are presently
served under a two-season flat rate. The summer rate for four months is $26 and the non-summer
rate for eight months is $14, producing total annual per customer revenue of$216.
As reflected in the Application, Barbara V. Child desires to convey the Terra Grande
domestic water system to United Water because she wishes to retire from the water business and is
unwilling to undertake the perceived risks of continued operation arising from increasingly stringent
water quality regulations, and increasingly complex operation and technical requirements. Because
of its small size Ms. Child states that Terra Grande has experienced, and in the absence of the sale
would continue to experience, difficulties in maintaining its system and obtaining adequate
financing for operations, maintenance, and expansion.
United Water contends that it possesses the technical, managerial and financial abilities
to provide reliable and adequate service and accordingly it represents that the proposed transfer is in
the public interest.
Commission Decision
As reflected in a letter to customers (Application Exhibit 6) United Water and Ms. Child
intend to hold an informational meeting in order that customers can be informed of the details
reasons and ramifications of the sale. Commission Staff intends to participate and/or hold a
separate public workshop. Staff recommends that following the meeting with customers, that the
Company s Application be processed pursuant to Modified Procedure, i., by written submission
rather than by hearing. Reference Commission Rules of Procedure, IDAPA 31.01.01.201-204.
Does the Commission agree with Staff s recommended procedure?
Scott D. Woodbury
bls/M:UWIWO402 sw
DECISION MEMORANDUM