20070110Wyatt direct.pdf

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2007 JM~ I 0 PH 12: 57
Dean J. Miller (ISB 1968)
McDEVITT & MILLER LLP
420 West Bannock Street
O. Box 2564-83701
Boise, ID 83702
Tel: [phone]
Fax: [phone]
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Attorneys for United Water Idaho Inc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF)
UNITED WATER IDAHO INC., FOR
AUTHORITY TO AMEND AND REVISE
CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY NO. 143 AND FOR
APPROVAL OF A SPECIAL FACILITIES
AGREEMENT WITH A VIMOR LLc.
CASE NO. UWI-O7-
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
DIRECT TESTIMONY OF GREGORY P. WYATT
JANUARY 10, 2007
Q. Please state your name and business address.
A. Gregory P. Wyatt, 8248 West Victory Road, Boise, Idaho.
Q. What is your occupation?
A. I am the General Manager of United Water Idaho Inc.
, ("
United Water" the
Company
Q. What is the purpose of your testimony in this proceeding?
A. I will describe United Water s Application to expand its service territory to
provide service to the Avimor Planned Community (the "Project") and the Special
Facilities Agreement (SFA) between the Company and the developer, Avimor
LLC ("A vimor ). I will demonstrate that the service territory expansion is
consistent with the public interest, that the SF A is not harmful to the public
interest, and that both should be approved.
Q. Please describe the proposed A vimor Planned Community development.
A. The initial Avimor Planned Community is a planned community of approximately
700 residential and commercial building lots located on the east side of State
Highway 55 in north Ada County on land known as the Spring Valley Ranch.
A vimor LLC owns or has interest in approximately 23 000 acres, which includes
the A vimor Planned Community, for which A vimor has requested the Company
to expand its certificate of public convenience and necessity. The location of the
A vimor Planned Community is depicted on Exhibit A of the SF A, filed with the
Company s Application.
Q. When did Avimor first approach United Water about the possibility of water
service to the Project?
Wyatt, Di
United Water Idaho Inc.
A. Representatives of Avimor (then SunCor Idaho Inc.) first met with United Water
twice in May 2003 to inquire about water availability for the Project. In January
2004, United Water learned that A vimor was investigating possible sources of
water supply in the vicinity ofthe Project and that Avimor was considering the
creation of a stand alone water company for the Project.
Q. Please describe activities undertaken after the initial contacts.
A. The Company and A vimor met again a couple of times during 2004, yet nothing
definitive developed. Beginning in the first quarter of 2005, several meetings
occurred between the Company and A vimor during which various options and
proposals were discussed seeking to establish a Memorandum of Understanding
(MOU) between the parties for United Water to provide water service to Avimor.
In April 2005, the Company submitted a proposal to Avimor which outlined the
basic components of an MOU which could lead to a Special Facilities Agreement.
During the rest of2005, the parties worked to establish the MOU which was
ultimately signed on December 2, 2005.
Q. You mentioned that during this time Avimor was also considering the creation of
its own independent water utility to provide service to the Project. Please explain.
A. In January 2004 United Water learned that Avimor had drilled test wells in the
area known as the Sandy Hill Aquifer near the Project and was investigating
forming a stand alone water company for the Project. The Company later learned
that Avimor had obtained a water right permit for 5 cubic feet per second (cfs) of
groundwater source of supply in the area of their Project. In addition, A vimor had
retained consultants to prepare filings with the Idaho Department of
Wyatt, Di
United Water Idaho Inc.
Environmental Quality regarding a stand alone water utility, and A vimor met
directly with Idaho Public Utilities Commission (IPUC) staff to discuss the extent
of the project and to discuss alternatives for water service to the project. I believe
A vimor had the financial resources and management sophistication to create and
operate a water utility. Avimor s parent company, SunCor, has experience in
creating and operating both water and wastewater facilities in Arizona on other
projects they have developed.
Q. Please describe activities undertaken after signing of the MOU up to signing of
the Special Facilities Agreement.
A. During the intervening period A vimor was filing and obtaining approval of its
Planned Community through Ada County. The parties were also negotiating the
specific issues and language of the SF
Q. Directing your attention to Exhibit A ofthe SF A, please explain the design of
water system facilities that will provide service to A vimor.
A. As can be seen on Exhibit A ofthe SFA, approximately 30 500 feet of 16 inch
transmission main line will connect to United Water s existing mainline facilities
at the north end of the Hidden Springs Community. Along this transmission
mainline there will be a booster station and a 600 000 gallon reservoir. The
mainline then runs into and through the A vimor subdivision terminating at State
Highway 55. The distribution system within the subdivision (mains, services, and
fire hydrants) will be constructed in accordance with United Water s standard
Residential, Multiple Family Housing, Commercial, Industrial, or Municipal
Wyatt, Di
United Water Idaho Inc.
Development Water Main Extension Agreement, as contained in United Water
approved Rules and Regulations.
Q. How much water is required to serve Avimor s proposed 700 building lots and
how does United Water anticipate providing the source of supply for the proj ect?
A. United Water s and Avimor s engineers have estimated the source of supply
requirement for the approximately 700 lots to be no more than 500 gallons per
minute (gpm), or .7 gpm per lot, based on the low water use design of the
residential home lots and the planned reuse of wastewater for common area
landscape irrigation. This contrasts with the average water use per lot of about 1.
gpm per customer on United Water s existing system. United Water has the
ability to provide the 500 gpm source of supply from its existing source of supply
facilities.
Q. You mentioned previously that A vimor had drilled wells in what is called the
Sandy Hill Aquifer. Please explain this feature of the project.
A. A vimor has drilled several test wells and has obtained a 5 cfs water right permit
in the project area. One of the wells (the Sandy Hill Well) is 16-inches in size and
was drilled to municipal supply standards in the area identified as the Sandy Hill
Aquifer. The Sandy Hill Aquifer has been identified as having Aquifer Storage
and Recovery (ASR) potential. The Parties have interest in continuing the
evaluation of the Sandy Hill Aquifer ASR site for future source of supply to
additional developments on lands owned or controlled by A vimor in the Spring
Valley Ranch area, and to existing United Water customers in the Hidden Springs
area. If the ASR site proves to be an economically viable project to provide
Wyatt, Di
United Water Idaho Inc.
source of supply to additional A vimor developments and to existing United Water
Customers, then ASR pumping equipment, treatment if required, and
interconnecting facilities would need to be constructed between the Project and
the ASR site.
Q. Are A vimor investments in the Sandy Hill Aquifer ASR site included in the
current SF A?
A. No. If further investigation shows the site to be viable, United Water and Avimor
would seek to negotiate a subsequent Special Facilities Agreement that would
spell out cost responsibility and recovery.
Q. Turning to the financial aspects ofthe SFA, please describe the Company
general approach to the financial terms.
A. In light of Avimor s ability to create its own water utility, the Company sought to
arrive at a SF A that would be an attractive alternative to the creation of a water
utility, and, consistent with Commission policy, insulating existing customers
from speculative risk.
Q. Please describe the financial terms for construction of the transmission mains
booster and reservoir.
A. Ofthe approximately 30 500 feet of transmission water main line extension
approximately 18 000 feet will be classified as "on-site main" and approximately
500 feet will be classified as "off-site main." The delineation between on-site
and off-site main is depicted on Exhibit A of the SF
All costs, for the "on-site" water mains, booster station (less oversizing),
and storage reservoir, including United Water s direct engineering, inspection
Wyatt, Di
United Water Idaho Inc.
accounting, legal and administrative costs shall be paid for by A vimor and shall
be recorded on the Company s books as an advance in aid of construction.
All costs of the "off-site" water mains and associated facilities including
United Water s direct engineering, inspection, accounting, legal and
administrative costs shall be paid for by A vimor and shall be recorded on the
Company s books as a contribution in aid of construction.
Q. Please discuss the rational for including the on-site transmission mainline in
advanced plant available for refunds on the Company s books.
A. The A vimor on-site mainline is included in advanced plant available for refunds
because the line is first and foremost a transmission mainline. The line will
operate as a high pressure transmission main with maximum operating pressures
in excess of 200 psi (pounds per square inch). This high pressure is not typical in
distribution mains, and this particular mainline will serve primarily as a source of
supply line to Avimor. The transmission main is not designed for distribution
purposes, but as part of an integrated facility plan to deliver water to and from the
Project. In addition, it is typical for feed lines to water storage reservoirs to be
classified as part of the "backbone plant" and classified as advanced plant in
previous Special Facility Agreements approved by the Commission. This was the
case with Hidden Springs, Harris Ranch, Jayo Construction (Claremont
Reservoir) and the Claremont Development (Arrowhead Reservoir) SF A'
Q. Please explain the rational for over sizing of the booster station.
A. First of all, the phrase "over sizing" does not fully reflect what United Water is
funding at the booster station. In order for water from the new 600 000 storage
Wyatt, Di
United Water Idaho Inc.
reservoir to flow back toward the Hidden Springs area, the booster station is being
equipped with additional piping, valves, controls and metering that can regulate
water flows from the new 600 000 gallon reservoir. Additional costs are also
included for expanding the booster building sufficiently to house the additional
equipment. The new reservoir is located northwest from Hidden Springs and
ground elevation of 3 534 feet. The Hidden Springs Reservoir is located on the
south side of the community at a ground level elevation of 3 270 feet. As a result
the new reservoir could , by gravity, provide redundant, emergency supply to
Hidden Springs in the event of an emergency such as a main brake, a fire, or if the
Hidden Springs Reservoir were out of service. The additional piping, valves
controls, and metering will allow water to flow from the new reservoir back
toward Hidden Springs when needed.
Q. Please describe the approach and methodology used to estimate the over sizing
amounts on the booster station and how the actual over sizing cost will be
determined when the construction is completed.
A. Over sizing of the booster station was determined by identifying and pricing the
particular components and building space that would need to be added and/or up-
sized in order to enable the booster station to accommodate the flows back toward
Hidden Springs from the new reservoir (see Exhibit D of the SFA). This analysis
resulted in an estimated over sizing of the booster station of $63 000 out of a total
estimated cost of $759 000 or 8.3%. When actual construction ofthe booster
station is completed a similar analysis will be applied to determine the actual over
SIZIng.
Wyatt, Di
United Water Idaho Inc.
Q. Please describe the refund method for the on-site transmission mains, booster and
storage facilities advanced by A vimor.
A. United Water will make one-time refunds to A vimor on advanced plant, less over
sizing on the booster station, pursuant to its Rules and Regulations and United
Water s existing SFA refund methodology. The geographic area eligible for
refunds is depicted on Exhibit H of the SF A. The effect of this refund
methodology is to insulate United Water s customers from speculative risk and to
insure there is not a cross-subsidy from existing customers to new customers.
Q. Please describe Avimor s opportunity for reimbursement of the off-site
transmission main investment.
A. The cost of the "off-site" portion of the water main line funded by A vimor will be
subject to refund to Avimor in accordance with United Water s standard method
of off-site reimbursements by late comers which method is identical to that found
in the Company s current Rules and Regulations Governing Main Extensions as
approved by the Commission.
Q. Please describe how overhead costs which normally would be charged by United
Water are treated in the SF A and why they are being proposed in this way.
A. Pursuant to the SFA, the Project will be constructed by Avimor on a labor and
materials in lieu of cash basis and A vimor will pay directly all planning, design,
engineering, management, materials, construction and inspection costs, including
United Water s direct engineering, inspection, accounting, legal and
administrative costs. A vimor will not pay overheads calculated on a percentage
basis, as is the case when United Water provides design, engineering, construction
Wyatt, Di
United Water Idaho Inc.
management and inspection. Application of the Company s standard overhead
percentage on a project ofthis magnitude would produce overhead liability in
excess of $600 000 and would result in Avimor paying a significantly higher
overhead amount than would be actually required to support the Company
actual costs for engineering, inspection, accounting, legal, and administrative
work. Thus, due to the project size and scope, charging overheads as a percentage
of construction cost would result in a disproportionate total overhead charge to
A vimor. I believe it to be fairer for A vimor to deposit an estimated amount of
overheads to cover the Company s estimated expenses for these costs and then
true up to actual costs at the end of the project as has been provided for in the
SFA.
Q. Has the Commission previously approved discounted overheads in the case of
large planned developments?
A. Yes. In 1997 the developers of the Hidden Springs development, like the A vimor
developers, proposed to provide labor and materials in lieu of cash and to directly
pay planning, design, engineering, management and construction costs. The
Commission agreed that the application of United Water s usual overheads, based
on a percentage of total project cost, would be inappropriate. See Order No.
27762, Case No. UWI-97-
Q. Turning your attention to SF A Exhibit E, the area depicted as the addition to the
Company s service territory is larger than the initial Avimor Project itself. Please
explain the Company s request for inclusion of an area larger than the initial
phase.
Wyatt, Di
United WaterIdaho Inc.
A. The service territory expansion designated on Exhibit E of the SF A is comprised
exclusively ofland owned by Avimor. No lands owned by others have been
included in the request. A vimor has, by virtue of the SF A, committed to having
United Water as its water service provider for not only the initial Avimor
development, but for all their development on lands they own in the area. It is
these lands that are herein requested to be added to the Company s service
territory.
Q. Does that conclude your testimony?
A. Yes it does.
Wyatt, Di
United Water Idaho Inc.