20050906Reply to staff answer to reconsideration petition.pdf

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Dean 1. Miller
McDEVITT & MILLER LLP
420 West Bannock Street
O. Box 2564-83701
Boise, ill 83702
Tel: [phone]
Fax: [phone]
ioe~mcdevitt -miller.com
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Attorneys for Applicant
ORIGINAL
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF UNITED WATER IDAHO INC. FOR
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR WATER SERVICE IN
THE STATE OF IDAHO
Case No. UWI-O4-
REPL Y TO COMMISSION
STAFF'S ANSWER TO PETITION
FOR RECONSIDERATION
COMES NOW United Water Idaho Inc.
, ("
the Company,
" "
United Water ) and Replies
to the Commission Staffs Answer to Petition for Reconsideration dated August 31 2005 , as
follows:
While Replies to Answers to Petitions for Reconsideration are not specifically
contemplated by the Commission s procedure rules (See IPUCRP 331) United Water believes it
important to correct certain statements in Staffs Answer, which if not corrected, might cause the
Commission to mistakenly deny the Company s Reconsideration Petition. These statements
relate to the critical rate base issue.
The Staff Answer states at page 2
, "
It is erroneous (for the Company) to imply the
Commission excluded all post-test year investment incurred after December 31 , 2004. In
particular the Commission allowed all Columbia Water Treatment Plant (CWTP) costs in rate
REPLY TO COMMISSION STAFF'S ANSWER TO PETITION FOR RECONSIDERATION -
base even though it was not substantially completed until March 2005." Staff repeats the
assertion later: "Again, it is important to point out that the Commission allowed a majority of
United Water s post-test year investment in the test year rate base." (Answer pg 4).
What Staffs characterization of the Order No. 29838 ("Order ) does not make clear, and
what the Company believes is improper, is that post-test year investment (with the exception of
CWTP) is included in rate base at only one thirteenth (1113) of its actual investment value. This
results in $7 541 724 of investment in used and useful plant investment being excluded from rate
base and the denial of a return on that investment, as illustrated by this calculation:
Total Post Test Year Investment (excluding CWTP):
Post Test Year Investment Allowed:
Post Test Year Investment Excluded:
Earnings Shortfall at 8.357%
Incremental Tax Multiplier
Revenue Requirement Deficiency:
170 201
$ 628 477
541 724
$ 630 262
683
060 730
This is the deficiency from the Order s treatment of post-test year investment. A deficiency of
equal magnitude results from the 13 month average treatment of investment during the test year
which reflects only one-thirteenth of used and useful plant in service at July 31 , 2004.
Staff goes on to assert that "Of course, the Commission rejected Staff s rate base
calculation and determined to include in rate base additional post-test year plant made by the
Company." Staff also states that the Commission allowed capital expenditures through March
2005 rather than December 31 , 2004 as recommended by Staff (Answer pg, 2 & 3). Staff
offers these assertions to support its claim that the Company s concern about earnings deficiency
is unfounded. In fact, the difference between non-CWTP related post-test year plant additions as
a component of rate base calculated as of December 31 , 2004 and rate base calculated as of
March 31 , 2005, is only $80,406. This small amount does not materially alter the Company
analysis demonstrating earnings deficiency.
REPLY TO COMMISSION STAFF'S ANSWER TO PETITION FOR RECONSIDERATION - 2
The assertion that the "Commission rejected Staff s rate base calculation" is inaccurate in
another respect. The difference between the Commission determined rate base of $126 824 685
and Staff recommended rate base of $124 524,407 ($2 300 278) is not due to a rejection of
Staffs rate base methodology-the Order, obviously, accepts that methodology. Rather the
difference is mostly attributable to the Order s rejection of certain discrete adjustments to rate
base proposed by Staff. These include, for example, rejection of Staff adjustments for CWTP
land and buildings, Initial Butte water rights, and water rights investments.
Finally, United Water believes that Staffs Answer incorrectly interprets the cited Idaho
Supreme Court cases of Utah Power v. IPUC 105 Idaho 822, 673 P.2d 422 and Citizens
Utilities, 99 Idaho 164, 579 P.2d 110. The Company, again, respectfully requests that
reconsideration be granted so that the meaning of those cases can be more fully explored by
written brief.
United Water appreciates the Commission s indulgence in receiving and considering this
Reply.
WHEREFORE, for the reasons stated in its Petition, the Commission should grant United
Water s Petition for Reconsideration.
Respectfully submitted this U-day of September, 2005.
McDEVITT & MILLER LLP
Dean 1. Miller
Attorneys for United Water Idaho Inc.
REPLY TO COMMISSION STAFF'S ANSWER TO PETITION FOR RECONSIDERATION - 3
CERTIFICATE OF SERVICE
I hereby certify that on the ~1i!1-day of September, 2005 , I caused to be served, via the
methodes) indicated below, true and correct copies of the foregoing document, upon:
Brad M. Purdy
Attorney for the Community Action Partnership
Association of Idaho
2019 North 17th Street
Boise, Idaho 83702
Fax: [phone]
bm urd hotmail.com
William M. Eddie
Advocates for the West
O. Box 1612-83701
1320 West Franklin Street
Boise, Idaho 83702
Fax: [phone]
Bill Sedivy
Idaho Rivers United
O. Box 633
Boise, Idaho 83701
Fax: [phone]
iru~id1!.horivers.org
Sharon Ullman
9627 West Desert Avenue
Boise, Idaho 83709
Fax: [phone]
~haronu~cableone.net
Chuck Mickelson
Boise City Public Works
O. Box 500-83701
150 North Capitol Boulevard
Boise, Idaho 83702
Fax: [phone]
gnkke lson~cityo tPoise. org
Douglas K. Strickling
Boise City Attorney s Office
O. Box 500-83701
150 North Capitol Boulevard
Boise, Idaho 83702
Fax: [phone]
~ing~cityotboise.org
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REPLY TO COMMISSION STAFF'S ANSWER TO PETITION FOR RECONSIDERATION - 4
Scott L. Campbell
Moffatt Thomas
101 South Capitol Blvd., 10th Floor
O. Box 829-83701-0829
Boise, Idaho 83702
Fax: [phone]
~c~moffatt.com
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REPLY TO COMMISSION STAFF'S ANSWER TO PETITION FOR RECONSIDERATION - 5