20041020Notice of Oral Argument.pdf

Office of the Secretary
Service Date
October 20, 2004
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
UNITED WATER IDAHO, INC. FOR AN
AMENDMENT TO ITS CERTIFICATE OF
PUBLIC CONVENIENCE AND NECESSITY NO. )
142 AND FOR AN ACCOUNTING ORDER.
CASE NO. UWI-O4-
NOTICE OF ORAL ARGUMENT
On August 9, 2004, United Water Idaho, Inc. (United Water; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) requesting authority to
remove the Carriage Hill Subdivision from the Company s certificated service area and for an
accounting order regarding distribution of proceeds from the sale of the Carriage Hill domestic
water system from United Water to the City of Nampa. On August 25 2004, the Company filed
supporting testimony for its Application.
Background
On March 29, 1999, the Commission in Order No. 27976 approved an expansion of
United Water s certificated service area to include the Carriage Hill Subdivision in Canyon
County, Idaho near the City ofNampa. The expansion was pursuant to a Non-contiguous Water
System Agreement between the Company and Carriage Hill dated November 20 1998. At the
same approximate time, the Company s corporate parent, United Waterworks, entered into a
separate understanding with the Carriage Hill developers that United Waterworks would loan the
developers up to $350 000 to finance the construction of the Carriage Hill source of supply
system only. Reference 1) Design-Build Promissory Note dated December 7, 1998 and 2) Joint
and Several Individuals Guaranty signed by Carriage Hill developers.
As initially constructed, the Carriage Hill development had only one well to serve as
the source of supply. In the spring of 2002, the developer had embarked on Phase 2 of the
distribution system that would add 20 lots to the original 27 in Phase 1. Eventually, 25 lots
would be connected, the maximum permitted by the Idaho Department of Environmental Quality
(DEQ) for a system with only one source well. Under DEQ requirements, a second source of
supply is required for a water system serving more than 25 connections.
NOTICE OF ORAL ARGUMENT
In early 2003, the Carriage Hill developers informed United Water that they did not
have funds to construct a second source of supply or to continue payments to United
Waterworks. Without a second source of supply Carriage Hill would not be able to expand.
Without expansion, Carriage Hill developers would be unable to generate funds to finance a new
well or to pay United Waterworks.
On August 15, 2003, the City of Nampa indicated its desire to enter into negotiations
with United Water and Carriage Hill in connection with the ownership, operation and
maintenance of the Carriage Hill domestic water system and the connection of the system to
Nampa s Municipal Water System.
On August 25 , 2003, Carriage Hill requested a waiver from the Idaho Department of
Environmental Quality to allow an additional ten lots in the subdivision to be connected to the
water system prior to the installation of a second source of supply, which second source of
supply, it was stated, would take the form of connection to Nampa s Municipal Water System.
As of the date of this Application approximately 30 lots in the Carriage Hill Subdivision have
been connected to the domestic water system.
Purchase Agreement-United Water/City of N ampa
United Water (Seller) has entered into a Purchase Agreement (Agreement) with the
City ofNampa (Buyer) dated 12 March, 2004. As reflected in the Agreement, the purchase price
is $375 000. A small portion of the purchase price, approximately $36 000, is to be paid to
United Water Idaho. The remainder of the purchase, approximately $338 000, is to be paid to
United Waterworks, Inc., owner of a Design-Build Promissory Note in the original principal
amount of $350 000 dated December 7, 1998, said note being the joint and several obligation of
Carriage Hill LLC.
United Water contends that acquisition of the Carriage Hill domestic water system by
the City ofNampa is consistent with the Public Convenience and Necessity because:
0 N amp a has adequate source of supply and operational capability to provide
safe and reliable water service to the subdivision;
The connection of Nampa distribution system to the Carriage Hill
domestic water system will provide a second source of supply as required
by DEQ rules thus insuring reliable water supply to the subdivision and
permitting further expansion of the subdivision; and
NOTICE OF ORAL ARGUMENT
The rates charged by N amp a for domestic water service are lower than the
rates charged by United Water, and customers within the subdivision will
therefore experience a decrease in the cost of domestic water service.
Application Exhibit E (revised) sets forth United Water s proposed journal entries to
account for the $36 000 to be received by United Water at closing. Revised Exhibit E reflects
Advanced Plant in Service of $354 906 and Contributed Plant in Service of $177 439. The
advanced plant reflects the source of supply portion of the system and was provided by the
developer. The contributed plant reflects the distribution portion of the system and was fully
funded by the developer. Because advanced plant and contributed-plant are not included in the
Company s rate base, United Water states that customers have not, through their rates, paid any
return on those investments. It is the Company s contention that its customers have not acquired
any financial or equitable interest for which they should be compensated upon sale of the
Carriage Hill assets. United Water contends that the Company s accounting proposal is
consistent with established regulatory accounting principles and requests that the Commission
approve it.
On September 1 , 2004, the Commission issued a Notice of Application and Modified
Procedure in Case No. UWI-04-3. The deadline for filing written comments was
September 27, 2004. The Commission Staff was the only party to file comments. On
October 12 the Company filed Reply Comments.
Staff does not object to the sale of the Carriage Hill Water System to the City of
Nampa. Staff contends, however, that United Waterworks has no legal claim to any portion of
the proceeds from the sale of the Carriage Hill Water System. Staff contends that the interests of
ratepayers in advanced or contributed property is equivalent to that of the Company and should
be treated as such in an equitable distribution of sale proceeds. Staff proposes that the proceeds
from the sale be accounted for in a different manner than recommended by the Company. The
Company in Reply Comments (and Affidavit) notes that in attempting to structure a solution to
the dilemmas presented by the Carriage Hill situation, the Company did not proceed based on a
rigid analysis of the legal rights and obligations of the various parties. Rather the Company
looked for a practical solution that did not harm any ratepayers and that unwound the financial
obligations in a way that all parties were made whole. What the Company did may not be
NOTICE OF ORAL ARGUMENT
required from a strict legal point of view, but neither, it contends, is it prohibited. United Water
contends that Staff s proposed distributions and recommended accounting proposals are contrary
to law and sound public policy. United Water requests the opportunity to present oral argument.
YOU ARE HEREBY NOTIFIED that ORAL ARGUMENT IN CASE
NO. UWI-04-3 IS SCHEDULED FOR 9:30 A.M. NOVEMBER L 2004" AT THE
COMMISSION'S HEARING ROOM" 472 WEST WASHINGTON" BOISE" IDAHO. The
subject matter of the oral argument is 1) the interest of ratepayers in advanced or contributed
property; 2) the Company s proposed distribution of proceeds from the sale of the Carriage Hill
domestic water system; and 3) related Staff distribution and accounting proposals.
YOU ARE FURTHER NOTIFIED that the Application in Case No. UWI-04-
together with the Comments of Staff and Reply Comments of United Water can be reviewed
during regular business hours at the Commission s office in Boise, Idaho. The Application and
Comments are also available on the Commission s website at www.puc.state.id.under the
File Room" icon and "Water Cases.
YOU ARE FURTHER NOTIFIED that all proceedings in this case will be held
pursuant to the Commission s jurisdiction under Title 61 of the Idaho Code and that the
Commission may enter any final Order consistent with its authority under Title 61.
YOU ARE FURTHER NOTIFIED that all proceedings in this matter will be
conducted pursuant to the Commission s Rules of Procedure, IDAP A 31.01.01.000 et seq.
YOU ARE FURTHER NOTIFIED that all hearings and prehearing conferences in
this matter will be held in facilities meeting the accessibility requirements of the Americans with
Disabilities Act (ADA). Persons needing the help of a sign language interpreter or other
assistance in order to participate in or to understand testimony and argument at a public hearing
may ask the Commission to provide a sign language interpreter or other assistance at the hearing.
The request for assistance must be received at least five (5) working days before the hearing by
contacting the Commission Secretary at:
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone] (Telephone)
[phone] (FAX)
E- Mail: secretary(fYpuc. state.id. us
NOTICE OF ORAL ARGUMENT
DATED at Boise, Idaho this ;;.0 day of October 2004.
J a. D. Jewell
ission Secretary
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NOTICE OF ORAL ARGUMENT