20070316Comments.pdf

WELDON B. STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3283
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
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-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Weldon B. Stutzman, Deputy Attorney General, in response to Order No.
30242 , the Notice of Application and Notice of Modified Procedure in Case No. UWI-07-
issued on February 14, 2007, and submits the following comments.
BACKGROUND
On January 10, 2007, United Water Idaho Inc. filed an Application requesting approval of
an amendment to its Certificate of Public Convenience and Necessity and of a special facilities
agreement with A vimor LLc. A vimor intends to develop a planned community north of Boise
called Avimor (the Project) on lands known as the Spring Valley Ranch. The Project consists
initially of approximately 700 residential and commercial building lots. A vim or has requested that
STAFF COMMENTS MARCH 16 , 2007
United Water provide public water service to the Project and to future development located within
the Spring Valley Ranch property.
The area of development currently is not within the certificated area of any water company.
In order for United Water to provide service to the area, it must extend its facilities, including
approximately 30 500 feet of main water line, a booster station, and a 600 000-gallon water storage
reservoir. A vimor has agreed to provide the initial funding for the needed facilities at an
approximate cost of $6.3 million. United Water will provide refunds to A vimor, on a portion of its
investment, as new customers are connected to the facilities. A portion of Avimor s investment
would be contributed without opportunity for refund.
STAFF REVIEW
For the purpose of perspective Staff offers the following estimates taken from United
Water s filing. Phase 1 of the Avimor project will be built on approximately 860 acres (1.3 square
miles). Phase 1 is approximately one-fifth of United Water s requested service area expansion that
includes approximately 4 500 acres (7.0 square miles). The area identified as available for refund
of Avimor s investment is more than 10 000 acres (15.6 square miles) and Avimor s total holdings
in the area are approximately 23 000 acres (35.9 square miles).
Phase 1 of Avimor includes approximately 700 residential and small commercial water
connections that are estimated to require 500 gpm (gallons per minute) of capacity. The 16-inch
transmission main that will deliver water to A vimor has an operating capacity of at least 10 times
that amount which is 5 000 gpm. The Application states that United Water can provide the initial
500 gpm required to serve Phase 1 without additional investment in source of supply. The Company
does not indicate where additional water supply will come from to serve the remaining development
or how much it will cost.
In order to determine whether the Company s application should be approved, the
Commission must determine if the requested expansion is in the Public Interest. In this case, the
Public Interest of particular concern to Staff is the potential impact of the proposed expansion on
the general body of United Water ratepayers.
In its filing, United Water requests that the Commission approve the expansion of its service
territory as shown on the map that is Exhibit E to the Application. United Water also requests that
STAFF COMMENTS MARCH 16, 2007
the Commission authorize the preparation and filing of an Amended Certificate No. 143 to include
that area.
As already discussed, the expanded service area requested by United Water is much larger
than A vimor Phase 1. United Water apparently has an adequate water supply for Phase 1 but not
for buildout of the additional service area. Once a certificate is granted, United Water will have the
obligation to supply service in the expanded area, and that undoubtedly will require a new source of
water supply.
While the Company has indicated that sufficient water supplies exist to serve the initial
phase of 700 customers, it does not provide any information regarding where additional water will
come from to serve the larger area requested or what it might cost. Given the desert location ofthe
development and the limited ground water supply in the area, it is unlikely that water supply can be
obtained at the embedded cost currently supported by rates paid by United Water customers. In fact
it is likely that water supply costs to serve this area could equal or exceed the investment made for
United Water s Columbia Water Treatment Plant, which are six times that currently included in
rates.
When revenue generated from new customers fails to cover the cost of new supply sources
required to serve them, the general body of ratepayers pays the additional costs. Staff believes that
the impact on United Water customer rates must be evaluated to determine if an expanded
certificated area is in the Public Interest. This is not necessarily unique to the Avimor development
but is the circumstance of all system growth that requires expensive source of supply investment.
Source of Supply Contributions
While the Company can collect contributions from developers for various facilities, and has
proposed to do so for some distribution and transmission facilities in this case, it may be prohibited
from collecting contributions for source of supply from new customers located within its
certificated area. Currently, United Water tariffs require that 100% of the distribution costs to serve
a new development be contributed by the developer without refund. The rules also specify that the
cost of special facilities such as boosters and storage reservoirs can be advanced by the developer
and refunded over time as new customers are connected. Staff will discuss the proposed special
facilities agreement between United Water and A vimor later in these comments.
STAFF COMMENTS MARCH 16, 2007
However, under United Water s existing tariffs, it i~ unclear if the capital costs associated
with source of supply such as wells, pumps, water rights and water treatment plants are subject to
developer contribution or advance. The Company has not historically collected such an advance
nor is it certain that it could. In addition, restrictions were placed on new customer fees to pay
capital costs in Building Contractors Association of Southwestern Idaho, Inc.v. Idaho Public
Utilities Commission 128 Idaho 535, 916 P.2d 1259 (1996), where the Supreme Court overturned
new customer water supply contribution fees that had been established by the Commission. The
Court's decision was based on Idaho Code ~ 61-315, which prohibits "unreasonable differences" in
rates and customer charges. Staff believes the circumstances in this case dealing with service area
expansion differ from the Building Contractors case, allowing the Commission to consider
contributions toward source of supply from the developer or from new customers as a condition of
certification.
The Building Contractors case began as a rate case filed by Boise Water Corporation. The
Commission in that case imposed a hook-up fee on new water customers to pay for a new treatment
plant required by federal law, as well as other capital costs associated with increases in numbers of
customers. The Court stated that "no particular group of customers should bear the burden of
additional expense occasioned by changes in federal law " and held: "To the extent that the new
hook-up fees are based on an allocation of the incremental cost of new plant construction required
by growth and by the Safe Drinking Water Act solely to new customers, the fees unlawfully
discriminate between old and new customers in violation of section.61-315 of the Idaho Code." 128
Idaho at 539.
The Supreme Court also overturned a new customer fee in Idaho State Homebuilders
Washington Water Power 107 Idaho 14 690 P.2d 350 (1984), but noted that rate distinctions may
be appropriate in some circumstances. The Homebuilders case began as a rate case filed by
Washington Water Power. The Commission required Washington Water to impose a nonrecurring
charge on all customers who installed electric space heating, or converted to electric space heating,
after March 1 , 1980. The Court held that the one-time charge
, "
which differentiates between
customers using electricity for space heating prior to March 1 , 1980, and customers who install or
convert to electric space heating after that date, is an invalid classification and violates the
legislative prohibition against discriminatory or preferential rates." 1 07 Idaho at 421. The Court
noted, however, that "not all differences in a utility's rates and charges as between different classes
STAFF COMMENTS MARCH 16, 2007
of customers constitute unlawful discrimination or preference under the strictures ofLC. ~ 61-315.
107 Idaho at 420. Permissible differences in rates may occur, and must be justified by, "
corresponding classification of customers that is based upon factors such as cost of service, quantity
of electricity used, differences in conditions of service, or the time, nature and pattern of the use.
Id. Significantly, the Court also noted that the case before it "presents no factors such as when a
non-recurring charge is imposed upon new customers because the service they require demands an
extension of existing distribution or communication lines and a charge is imposed to offset the cost
ofthe utility s capital investment." 107 Idaho at 421 (italics added).
A key distinction between the Homebuilders and the Building Contractors cases and this
case is that United Water here seeks an extension to its certificated area, to include an area currently
unserved by any water utility. In the court cases, new fees were imposed solely on new customers
within the affected utilities ' already certificated area , and in areas already served by the utility.
Idaho Code ~ 61-526, which authorizes the Commission to place terms and conditions on a service
area certificate, was not considered in those cases.
Staff believes the Commission in this case can and should consider placing conditions on
United Water s certificate if its certificate is amended to include an area larger than A vimor' s Phase
1 development.
Certificate of Public Convenience and Necessity
Idaho Code ~ 61-526 authorizes the Commission to place terms and conditions on a
certificate of public convenience and necessity, particularly when considering the extension of a
utility s facilities. The conditions the Commission may place on a certificate, when proper evidence
demonstrates the appropriate public need, may be stringent. The Idaho Supreme Court even
affirmed the Commission s authority under Section 61-526 to remove an unserved area from a
utility s certificated area upon evidence the public convenience and necessity warrants it.
Cambridge Telephone Co., Inc.v. Pine Telephone System, Inc.109 Idaho 875 , 712 P.2d 576
(1985).
United Water in this case is seeking not only extension of services to an unserved area, but
must have the area added to its certificate in order to build facilities to serve the area. The area
currently is unserved, and is outside United Water s certified area. The Commission s authority to
STAFF COMMENTS MARCH 16, 2007
place terms and conditions on United Water s extension of services to the area, pursuant to Idaho
Code ~ 62-526, is clearer than in the Cambridge Telephone case.
Consequently, given the size, location and uncertainty in costs associated with source of
supply to serve the entire Avimor development, Staff recommends that the Commission deny
expansion in the area beyond A vimor s Phase 1 at this time. Staff further recommends that the
Commission open a docket so that interested parties can discuss the water supply cost concerns and
develop alternative solutions to mitigate the potentially unconstrained investment in source of
supply that would otherwise be borne by United Water customers. Areas of discussion might
include developer contributions, hook-up fees as a condition of certificate, a source of supply
investment cap, contributed water rights, a water rate differential, etc.
H appears that the Company anticipated the possibility of such an approach based on
language in the special facilities agreement, which states:
The Company shall supply source water for future A vimor development outside
the Project but within the Company s Service Area Expansion as shown on
Exhibit E, all subject to approval by the Idaho Public Utilities Commission. If
because of the absence of economically feasible source of supply or because of
regulatory constraints imposed by the Idaho Public Utilities Commission, the
Company is unable to supply source water sufficient to meet the domestic
commercial, public authority, and associated irrigation water supply needs for
future Avimor developments within the Company s service Area expansion as
shown on Exhibit E, then the Company shall not object to Avimor s reliance on
alternative sources of water.
Contrary to what the quoted part suggests, Staff believes that once the development area is
within the Company s certificated service area, United Water may be obligated to provide water to
the development regardless of cost, and the Commission may be legally constrained from collecting
contributions from the developer or new customers in the area. Thus it is Staff s recommendation
to substantially deny the certificate request at this time in order to establish reasonable conditions
for water supply cost contribution to enable full development of the Amimor project.
To the extent the company has existing water supply available to serve the Avimor Phase 1
Staff does not oppose expanding the certificate to serve this area. There is little risk to ratepayers as
a result of such expansion and Staff believes that it is not contrary to the public interest. However
Staff does have additional concerns with respect to extension of facilities to serve Phase 1 and the
terms of the proposed special facilities agreement.
STAFF COMMENTS MARCH 16, 2007
The Special Facilities Agreement
In its Application United Water requests that the Commission approve the special facilities
agreement (SFA) it has entered into with Avimor and determine that United Water s investments
made pursuant to the agreement are prudently incurred and recoverable in a future rate proceeding.
The special facilities agreement identifies facilities costs that are to be contributed by
A vimor and facilities costs that are to be advanced by A vimor with the opportunity for refund from
United Water. Contributed costs place no upward pressure on rates because they are not, nor do
they become, part of the Company s Rate Base. Advanced costs, on the other hand, become
Company investment that is subject to inclusion in Rate Base as United Water refunds the advance
to A vimor over time.
In this filing the facilities costs identified by United Water that are subject to advance with
the opportunity for refund include a storage tank ($788 418), a booster pumping station
($1 250,481) and the "on-site" portion of a 16-inch water transmission main approximately 18 000
feet in length ($2 519 944). United Water identifies developer-contributed facilities to be the "off-
site" 16-inch transmission main approximately 12 500 feet in length ($1 749 962). Total project
costs are estimated to be $6 308 805.
United Water portrays the contributed versus advanced portions of the special facilities to be
standard practice and points to four other projects to substantiate its position. Staff has reviewed the
Commission s special facilities agreement policy as established for United Water and the four
proj ects that United Water points to and arrives at the following conclusions. Staff agrees that the
costs of the Storage Tank and the Booster Pumping Station should be advanced and that "off-site
transmission main should be contributed. Staff does not agree, however, that "on-site" transmission
main should be advanced. Instead, Staff believes that "on-site" transmission main should be
contributed along with "off-site" transmission main.
In support of this position Staffpoints to United Water s current tariff rules 74 through 77
that are listed under the heading "SPECIAL FACILITIES". (Attachment A to these comments)
Rule 74 defines Special Facilities as "source of supply, storage and booster pumping facilities
Rule 75 requires that "the Applicant shall advance the cost of such facility or facilities.
Transmission main is not included as a special facility that qualifies for advance and refund whether
it be on-site or off-site. Further review reveals that the genesis of United Water s current Special
STAFF COMMENTS MARCH 16, 2007
Facilities rules occurred in Case No. UWI-96-, which was a settled case. The Settlement
Agreement is attached to the final order in that case, Order No. 26898. (Attachment B to these
comments) On page 2 of that order "The general terms of settlement regarding the Company
customer contribution rules. . ." are summarized. The third bullet states one of the settlement
results:
Implementation of new main extension agreements whereby the developer
or applicant requesting service contributes the actual transmission and
distribution cost of connecting to the company s water system including
off-site mains, on-site mains and terminal facilities (service and meter).
No allowance or line extension refunds (except vested interest).
The Stipulation and Settlement Agreement page 4 starting at line 10 addresses tariff changes
necessary to implement the Commission s order. Those changes are contained in United Water
Exhibit No.8 (Attachment B), which again make it clear what facilities are eligible for advance and
refund by United Water. Neither on-site nor off-site transmission main is included.
As previously mentioned United Water cites four other facilities agreements in support of
the treatment of special facilities in this agreement. Two of the special facilities agreements--the
Claremont Development project and the Jayo Construction project--were never filed with the
Commission for approval, and there is no record indicating Staffhad an opportunity to review them.
A special facilities agreement was filed with the Commission with a request for approval for
the Hidden Springs project. United Water requested that the developer advance on-site water main
costs with the opportunity to receive refunds from United Water as new customers hooked up and
used water. Staff adamantly opposed the Company s position on this issue. In its final order the
Commission stated:
Although we believe that it is inappropriate to refund distribution and
transmission facilities costs, we find the potential for refund of such costs in
this case to be relatively small.
(Order No. 27762 , Pg. 6)
With this caveat, the Commission approved the Hidden Springs special facilities agreement.
The fourth special facilities agreement identified by United Water is for Harris Ranch. After
the developer contributed $615 700 to bring a 16-inch mainline extension to the development
United Water filed for approval of a special facilities agreement that, among other things, included a
relatively small amount of 12 inch mainline estimated to cost $86 950. Staff did not challenge the
STAFF COMMENTS MARCH 16, 2007
amount, which was identified as an amount to be advanced by the developer. The Commission
approved the agreement.
After reviewing United Water s Rules and the case in which those rules were established
and the previous cases that involved Commission approval of special facilities agreements for
United Water, Staff continues to oppose advances for water mains whether they be on-site or off-
site. The developer should contribute the cost of water mains associated with a specific project
without the opportunity for refund (except vested interest refunds which are not at issue here). Staff
therefore recommends that Avimor contribute without refund the "on-site" portion ofthe 16-inch
water transmission main, approximately 18 000 feet in length, at an estimated cost of $2 519 944.
The remaining advance subject to refund would be $2 038 899. Such a requirement is consistent
with the policy established by the Commission in Case No. UWI- W -96-, Order No. 26898 and
United Water tariffs currently on file with the Commission.
Refunds
As previously discussed, the special facilities agreement proposes that United Water refund
to A vimor portions of the amount advanced by A vimor as new customers connect to the system in
the refund area identified on Exhibit H of United Water s Application. Refunds would continue
until either the total amount of the advance is refunded or the 15-year refund period expires.
The refund amount is based on a formula contained in Rule 75 of the Company s Rules and
Regulations. The refund amount is the investment amount supported by current rates that is
available to pay for storage reservoirs and booster pumping stations. The refund calculation
removes amounts from the revenue stream associated with operation and maintenance, and the
revenue requirement associated with meter investment and embedded source of supply. Any
revenue requirement currently embedded in rates for facilities such as transmission and distribution
that are contributed by the developer in this case, remain in the calculation and increase the refund
amount.
The refund formula is designed to theoretically match revenue generated from new
customers with the revenue requirement needed to serve those customers. The assumption is that
once appropriate service costs are subtracted, the remaining revenue from a new customer will
support the revenue requirement on the investment made by the company in the form of a developer
refund. The primary determinates of the available refund are the amount of water a new customer
STAFF COMMENTS MARCH 16, 2007
uses and the assumption that the water source needed to serve new customers will be provided at
embedded cost.
While the refund will be adjusted to reflect actual new customer consumption, the actual
cost of water to serve the new development will not be included. To the extent actual water supply
costs turn out to be higher than embedded costs, rates for all customers will increase. The Staff
recommendation to reduce the developer advance subject to refund does not affect the amount of
refund per customer.
United Water estimates that annual water use per customer on the Avimor project will be
154 ccf (15,400 cubic feet), which translates to a refund amount of approximately $600 per hook-up
(Exhibit G). At that rate the Company proposed advance of $4 558 843 would be completely
refunded with the connection of approximately 7 600 customers. H would require approximately
400 customers to completely refund Staffs proposed advance of$2 038 899.
Staff believes the refund amounts calculated in Exhibit G to the Company s Application are
as required by United Water s tariff Rule 75.
CONCLUSIONS AND RECOMMENDATIONS
Avimor is one of the first of what could be many large Planned Community developments in
the Boise area expected to request water service from United Water. In many areas it is
considerably less expensive for developers to take service from United Water under existing policy
than it is to develop a stand-alone water system. In the last decade source of new water supply costs
have risen dramatically as United Water s source of supply has moved from ground water to treated
surface water in many areas. In other areas, ground water is still available at a fraction of treated
surface water costs, but still well above the cost incurred for ground water in the past. Surface
water in the Boise River drainage is fully appropriated.
Staff does not believe it is appropriate to place the cost burden of providing water supply to
projects such as Avimor on the general body of United Water ratepayers. The cost burden is more
appropriately placed on the developers that profit when water is provided to these lands. Absent the
possibility for United Water and its customers to pay the cost of water supply, Avimor and other
similarly situated projects would be required to develop their own water supplies and more
appropriately carry the cost burden of land development.
STAFF COMMENTS MARCH 16, 2007
Staff does not oppose United Water s service area expansion to serve A vimor Phase 1. Staff
accepts the Company s position that source of supply is available to serve Phase 1 and believes the
risk is low that customer rates could be significantly impacted as a result of this limited expansion.
Staff recommends that the Commission deny the expansion of United Water s service
territory beyond Phase 1 until a more appropriate method is established to require water supply cost
participation by developers or customers requesting service. Staff further recommends that the
Commission immediately open a docket to address the issue of increased developer/new customer
participation in water supply cost recovery.
Staff also recommends that the Commission deny the special facilities agreement as filed.
Staff proposes that the Commission require United Water and A vimor to modify or renegotiate the
SF A such that all transmission investment associated with the project is contributed without the
potential for refund before Commission approval is provided. The increased contribution is
consistent with Company tariffs and Commission policy.
Finally, Staff recommends that the Commission order United Water to file all future special
facility agreements requiring contributions or advances with the Commission for approval except
on-site distribution contracts which require developers to contribute 100% of those costs without
refund.
Respectfully submitted this day of March 2007.
, ....-,?---..... ~-""".._...,.~ ~,--
Weldon B. Stutzman
Deputy Attorney General
Technical Staff: Keith Hessing
Randy Lobb
Kathy Stockton
i:umisc/comments/uwiwtO7 ,1 wsrhklsrl
STAFF COMMENTS MARCH 16, 2007
........~_........................
Sheet No. 23
Replacing all Previous Sheets
IDAHO PUBLIC UTILITIES COMMISSIONApproved EffectiveMarch 6, 2006 March 6, 2006
Per O.N. 29983
Jean D. Jewell Secretary
UNITED WATER IDAHO INC.
RULES AND REGULATIONS GOVERNING WATER MAIN EXTENSIONS (continued)
specifications, and estimates, the Applicant shall reimburse the Company an amount equal to
the Company s expenses.
73. The deposit referred to in paragraph 71 above, shall normally be a cash deposit.
In this instance, the Company shall provide the material and labor for installation of the
project.
However, the Applicant may provide the material and/or contract labor for the installation of
the necessary facilities. In this instance, the Applicant shall deposit with the Company an
amount equal to the estimated cost of applicable overheads for the entire project and the
estimated direct labor costs incurred by the Company for such items as engineering design
estimating, and inspection. Also, the Applicant shall furnish the Company a certified invoice
of sufficient detail to show the separate costs of material and labor for water mains and
appurtenances by size, service laterals by size, meter boxes, meter settings and fire
hydrants. The Company shall specify the material to be supplied by the Applicant with
respect to size and type. In general , the material shall conform to the Company s standard
material specifications and applicable AWWA specifications. The Company shall, at the
Applicant's expense, make all connections to the Company s existing system if in the
Company s opinion the contractor does not have the experience or equipment to make such
a connection. Applicant's contractor shall comply with Section 1 and Section 2 of Company
Requirements for Labor in Lieu of Cash Contractors. In general, areas covered are
requirements for inspection, monitoring of construction , acceptance and handling of
materials, documentation of costs, correction of faulty installation, insurance , bonding, license
requirements, experience, and equipment availability. The Company may deny the right of
Applicant to provide a contractor who has not complied with its requirements in the past.
SPECIALFACILITIES
74. Special facilities shall include source of supply, storage and booster pumping
facilities which may be required to render adequate water service to an area for which such
service has been requested.
75. Should an Applicant propose a Residential, Commercial, Industrial, or Municipal
Development requiring a special facility or special facilities, the Applicant shall advance the
cost of such facility or facilities. Normally, the advance shall be a cash advance. In this
instance, the Company shall provide the material and labor for the installation of the facilities.
However, the Applicant may, with the Company s approval, provide the material and/or
contract labor for the installation of the special facility or facilities. In the instance where an
Applicant provides the material and/or contract labor, the Applicant shall deposit with the
UNITED
Issued Per IPUG Order No. 29983
Effective - March 6, 2006
Issued by UNITED WATER IDAHO INC.
Gregory P. Wyatt, Vice President
8248 West Victory Road, Boise, Idaho
Attachment A
Case No. UWI-07-
Staff Comments
3/16/07 Page 1 of2
Sheet No. 24
Replacing all Previous Sheets
IDAHO PUBLIC UTILITIES COMMISSIONApproved EffectiveMarch 6, 2006 March 6, 2006
Per O.N. 29983
Jean D. Jewell Secretary
UNITED WATER IDAHO INC.
Company an amount equal to the estimated cost of applicable overheads for the entire
project plus the estimated direct labor costs for such items as engineering design, estimating,
and inspection.
An amount equal to the estimated cost ofthenecessary facilities shall be deposited with the
Company prior to construction. The Company shall adjust the deposit based upon the
determination of the actual cost of facilities installed. Any difference between the estimated
and actual cost of the facilities installed shall be shown as a revision of the amount deposited
and shall be payable within thirty (30) days of submission.
The cost of the special facilities advanced, or a portion thereof, shall be refunded based upon
customer connections and in accordance with the following equation: X = ((R-T)/Y)-
(S+M), where:
X = Refund per Customer
R = Annual Revenue per Customer (actual revenue received from each customer
served from the special facility)
E = Annual Operating and Maintenance Expense per customer (including Ad Valorem
Tax)
D =Annual Depreciation Expense per Customer (Depreciation rate(s) for type(s) of
facility installed x investment in that type of facility installed)
Y = Authorized Rate of Return
T = Income Taxes on Net Income per Customer
S = Imbedded investment in Source and Storage plant, less accumulated depreciation
and customer advances and contributions against the plant. (Value of plant
allocable to support consumption per customer level that produces the annual
revenue per customer)
M = Meter cost Installed
Should the Company agree that the cost of any portion of the special facilities (source
storage, or pumping)not be advanced by the Applicant, the per customer refund shall be
reduced by the per customer cost ofthat facility not advanced. The advance and refund
agreement for each development shall be evaluated on a case by case basis and submitted
to the Idaho Public Utilities Commission for review.
76. The Company shall be responsible to construct and/or install special facilities as
may be required from time to time to maintain the rendering of adequate water service to
existing customers.
77. The Company shall be the sole judge as to the design of and the time of
construction and/or installation fo any special facility(ies).
UNITED
Issued Per IPUG Order No. 29983
Effective - March 6, 2006
Issued by UNITED WATER IDAHO INC.
Gregory P. Wyatt, Vice President
8248 West Victory Road, Boise, Idaho
Attachment A
Case No. UWI-07-
Staff Comments
3/16/07 Page 2 of
Office of the Secre%ry
Service Date
April 24, 1997
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE CONNECTION FEES)
OF UNITED WATER IDAHO INC. AND OTHER)
RELATED ISSUES INCLUDING RATE DESIGN.CASE NO. UWI-96-
ORDER NO. 26898 AND
NOTICE OF DEADLINE FOR
INTERVENOR FUNDING
This case was initiated September 17, 1996 pursuant to Idaho Public Utilities
Commission (Commission) Order No. 26611 following a Stipulation\Motion signed by all parties
to United Water s most recent rate case, Case No. UWI- W-96-3. The subject matter, as reflected
in the case caption above, is the connection fee policy and related tariffs of United Water Idaho Inc.
(United Water; Company). This case provides the Commission and parties with the first
comprehensive opportunity to revisit the connection fee issue following the Idaho Supreme Court'
1996 opinion in Building Contractors Association of Southwestern Idaho Inc. vs. IPUC 128 Idaho
534 916 P. 2d. 1259 (1996).
United Water serves approximately 55 000 residential, commercial, and other classes of
customers in the city of Boise and surrounding areas. The Company s sources of water supply
consist of the Marden Water Treatment Plant and 62 deep wells. The combined
1995 capacity of
all wells and the treatment plant is approximately 78 million gallons per day.
Public hearing in Case No UWI-96-4 was held on April 10, 1997. The following
parties appeared either individually or by and through their respective counsel:
United Water Idaho Inc.
Coalition of United Water Idaho Customers
Building Contractors Association
Sharon Ullman
Commission Staff
Dean J. Miller, Esq.
Peter 1. Richardson, Esq.
Forrest Goodrum, Esq.
Scott Woodbury, Esq.
At the hearing on April 10, 1997, the parties presented a proposed Stipulation and
Settlement Agreement (Reference Order No. 26898 - Attachment A) and asked that the Commission
NOTICE OF DEADLINE FOR
INTER VEN 0 R FUND IN G
ORDER NO. 26898
Attachment B
Case No. UWI-07-
Staff Comments
3/16/07 Page 1 of
adopt it as the resolution of the case. The general terms of settlement regarding the Company
customer contribution rules are as follows:
. Elimination of guaranteed revenue escrows for residential subdivisions.
.Elimination of connection fees for new customer~.
. Implementation of new main extension agreements whereby the developer
or applicant requesting service contributes the actual transmission and
distribution cost of connecting to the Company s water system including off-site mains, on-site mains and terminal facilities (service and meter).
No allowance or line extension refunds (except vested interest).
. Vested interest refunds relating to contributions for off-site main extensions
and service to completely new pressure zones requiring independent booster
pumps and storage.
. Authorization of labor in lieu of cash for installation of facilities within
residential subdivisions.
Prequalification contractor requirements.
Infonnation disclosure procedure, re.: cost of materials and overheads.
. Provision for good faith renegotiation of Micron Agreement re.: refundmechanism related to Micron s prior advance of costs for supply,transmission and storage facilities.
Commission Findings:
The Commission has reviewed and considered the filings of record in Case No. UWI-
96-, the prefiled testimony and the exhibits of the parties, the Idaho Supreme Court's 1996 opinion
in the Build)ng Contractors case and the submitted Stipulation and Settlement Agreement. We
appreciate the parties' efforts in negotiating what we find to be a fair , just and reasonable change in
the Company s customer contribution rules. We find the tenns of settlement to be supported by the
filed testimony and exhibits of Commission Staff and Company witness Ben Hepler. We find the
proposed settlement terms to be in the public interest and equitable, both to the Company s existing
customers and to future customers. We also acknowledge and find reasonable and acceptable, the
parties' agreed stipulation not to address rate design issues in this proceeding.
NOTICE OF DEADLINE FOR
INTERVENOR FUNDING
ORDER NO. 26898
Attachment B
Case No. UWI-07-
Staff Comments
3/16/07 Page 2 of
To remove any possible confusion, we find it reasonable to establish an explicit deadline
for applications for intervenor funding in Case No. UWI- W-96-4. YOU ARE HEREBY NOTIFIED
that ail applications for intervenor funding must be filed in this case with the Commission Secretary
within fourteen (14) days from the date of this Order. Reference Idaho Code ~ 61-617 A and
Commission Rules of Procedure, IDAPA 31.01.01.161-164.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over this matter and United Water
Idaho Inc., a water utility pursuant to the authority and power granted the Commission under Title
61 of the Idaho Code and the Commission s Rules of Procedure, IDAPA 31.01.01.000 et seq.
ORDER
In consideration of the foregoing and as, more particularly described above, IT IS
HEREBY ORDERED that the customer contribution rules of United Water Idaho Inc. be changed
in accordance with and pursuant to the terms contained in the Stipulation and Settlement Agreement
attached to this Order. The Company is directed to file revised tariffs to implement and conform to
the provisions of the Stipulation within thirty (30) days of this Order. The effective date of the
revised tariffs will be the date of filing.
IT IS FURTHER ORDERED and the Commission does hereby adopt the foregoing
schedule deadline for intervenor funding applications.
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.
NOTICE OF DEADLINE FOR
INTERVENOR FUNDING
ORDER NO. 26898
Attachment B
Case No. UWI-07-
Staff Comments
3/16/07 Page 3 of
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ~-:.?3/
~'-
day of April 1997.
~~~
RALPH LSON, COMMISSIONER
04"
/~~
MARSHA H. SMITH, COMMISSIONER
ATTEST:
4~ ,yLL~
Myrna J. Walters
Commission Secretary
cm\0:uwiw964.sw2
NOTICE OF DEADLINE FOR
INTERVENOR FUNDING
ORDER NO. 26898
Attachment B
Case No. UWI-07-
Staff Comments
3/16/07 Page 4 of
.. 24
Dean J. Miller
Dean J. Miller, P .
877 Main, Suite 610
O. Box 2564-83701
Boise, ID 83702
Attorney for United Water Idaho Inc.
Scott D. Woodbury
Deputy Attorney General
, 472 W. Washington
Boise, ID 83720
Attorney for Commission Staff
Sharon Ullman
9627 W. Desert Ave.
Boise, ID 83709
Pro Se
Peter 1. Richardson
Davis Wright Tremaine LLP
999 Main Street, Suite 911
Boise, ID 83702
Attorney for the Coalition
Of United Water Customers
Forrest Goodrum
Penland & Munther
350 N. 9th, Suite 500
Boise, ID 83701
Attorney for Building
Contractors Association
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MA ITER OF THE CONNECTION )
FEES OF UNITED WATER IDAHO INC.
, AND OTHER RELATED ISSUES INCLUDINGRATE DESIGN CASE NO. UWI- W-96-
STIPULATION AND SETTLEMENT AGREEMENT
COME NOW the parties identified herein and stipulate and agree as follows to wit:
RECITALS
I. Parties: The parties to this Stipulation and Settlement Agreement are:
A. United Water Idaho Inc (United),
B. The Coalition of United Water Idaho Customers (Coalition),
C. Sharon Ullman (Ullman),
STIPULATION AND SETTLEMENT AGREEMENT
PAGEl
Attachment B
Case No. UWI-07-
Staff Comments
3/16/07 Page 5 of
i Order No. 26898
Attachment A
D. Building Contractors Association (BCA),
E. The Staff of the Idaho Public Utilities Commission (Staff).
There are no other parties to this proceeding other than those above named.
2. Purpose of Stipulation: The purpose of this stipulation is to resolve and settle
differences of opinion with respect to certain issues in this proceeding and to recommend to the
Commission for approval various modifications to United Water Idaho Inc.'s (United) customer
contribution rules.
3. Background: The genesis of this case is United's 1993 general rate case in which the
Commission established certain connection and/or hook-up fees (connection fees).
Subsequently, these fees were found to be discriminatory by the Idaho Supreme Court. At about
the same time, United applied for another general rate increase. At the urging of the parties to
this proceeding, the Commission split that rate case into two separate proceedings--one
addressing the rate increase issues and the instant case addressing hookup fees, rate design and
related issues.
In accordance with deadlines established by the Commission in this proceeding each of
the parties who desired has filed written pre-filed testimony setting forth their views regarding
appropriate polices for customer contribution rules for United.
STIPULATION
I. Recommended changes to customer contribution rules. The parties hereto recommend
that United's customer contribution rules be modified in accordance with the following
STIPULATION AND SETTLEMENT AGREEMENT
PAGE 2
Attachment B
Case No. UWI-O7-
Staff Comments
3/16/07 Page 6 of
principles:
A. Eliminate the use of the current guaranteed revenue/escrow type agreements;
B. Implement new main extension agreements whereby the developer or
applicant requesting service contributes the entire cost of extending the
distribution system to make service available at the new customer location;
C. Eliminate the collection of connection fees.
2. Reasons for recommended changes
The recommended changes are supported by the pre-file testimony of Staff and concurred
in by United and the Coalition. While BCA does not necessarily concur in the rationale for these
changes, BCA concurs in the adoption of these changes in light of other tenns of this Stipulation.
3. Issues withdrawn: The written pre-filed testimony of some parties to this proceeding
contain recommendations with respect to general rate design and the summer/winter differential
that currently is part of United's rate structure. The stipulating parties agree that issues relating
to general rate design will be withdrawn from this proceeding. Withdrawal of rate design issues
from this proceeding is without prejudice to the right of any party to assert any position with
respect to rate design in an appropriate future proceeding.
4. Micron Agreement: United and Micron Technology Inc. previously entered into an
agreement whereby Micron advanced the cost of some source of supply, major transmission lines
and storage. Pursuant to the agreement, United agreed to refund to Micron a percentage of new
connection fees for new customers within a specific geographic region where these facilities
serve (the geographic region). If, pursuant to the recommendations contained herein, connection
STIPULATION AND SETTLEMENT AGREEMENT
PAGE 3
Attachment B
Case No. UWI-07-
Staff Comments
3/16/07 Page 7 of
fees are eliminated, United would continue to refund the amount of money anticipated by the
agreement to Micron for new customers in the geographic region as if the connection fees had
not been eliminated, but were still in effect. Payments to Micron hereunder shall be added to
United's rate base.
In order to accomplish the goal of refunding the percentage of connection fees anticipated
by the agreement, United agrees to negotiate amendment(s) to the agreement in accordance with
its original spirit and in good faith with Micron, and in said negotiations will address increases in
the connection fee level as well as other issues implicated by this settlement. Any such
amendment(s) to the agreement will be subject to the Commission s approval.
5. Off-site main extensions and refunds: At pages 10--12 of his Second Supplemental
Direct Testimony, (Attached) Mr. Hepler outlines United's proposal regarding contributions for
off-site mains and service to completely new pressure zones. The proposal regarding off-site
mains is also illustrated in Exhibit No.7 (Attached). Tariff sheets to implement these proposals
are contained in Exhibit 8 to the Second Supplemental Direct Testimony of Mr. Hepler.
The stipulating parties agree that these proposals are appropriate and fair to all parties
concerned and may be adopted by the Commission.
6. Labor in lieu of Cash: In order to achieve a settlement of this proceeding, United
agrees to a system that makes it possible for developers to exercise a choice in selecting a
contractor to perfonn facilities installations within residential subdivisions. The stipulating
parties agree that the following procedures should be adopted to implement such a system:
A. In order to be eligible to install water mains and services, a contractor must
STIPULATION AND SETTLEMENT AGREEMENT
PAGE 4
Attachment B
Case No. UWI-07-
Staff Comments
3/16/07 Page 8 of
satisfy the "Pre-Qualification Contractor Requirements " as set forth in Exhibit No.6 of the
Second Supplemental Direct Testimony of Benjamin Hepler. Iffound qualified pursuant thereto
the contractor must thereafter perfonn all work in accordance with the procedures and
requIrements set forth in Exhibit 6.
B. United shall implement such systems and procedures as are necessary to
monitor the implementation of a labor in lieu of cash program to insure that implementation of
the program does not result in increased administrative and inspection costs for United and its
customers generally.
C. Upon request of a developer, United shall disclose infonnation regarding its
cost of materials and overheads, subject to an appropriate confidentiality agreement.
7. Tariffs to be filed. effective date. The stipulating parties agree that the tariff changes
necessary to implement the provisions of this stipulation are contained in Exhibit No.8 to the
Second Supplemental Direct Testimony of Benjamin Hepler and that the same may be approved
by the Commission.
United will file revised tariffs to implement the provisions of this stipulation within thirty
(30) days of the Commission s Final Order to be effective upon filing.
8. Testimony to be Spread on Record. To the extent it is necessary to the Commission
consideration of this Stipulation, the parties agree that the pre-filed testimony of all witnesses
may be spread on the record without the necessity of calling the sponsoring witnesses, and each
party waives the right to cross-examine sponsoring witnesses.
8. Authority to Execute. The persons executing this Stipulation in a representative
STIPULATION AND SETTLEMENT AGREEMENT
PAGE 5
Attachment B
Case No. UWI-07-
Staff Comments
3/16/07 Page 9 of
capacity covenant and warrant that they have full power and authority to execute this Stipulation
on behalf of their respective clients.
9. Waiver of Further Proceedings. Upon entry by the Commission ora Final Order
approving and adopting the tennshereof, each party waives any further proceedings herein
including Petition for Reconsideration or Appeal to the Idaho Supreme Court.
10. Effect of Failure to Approve.If the Commission for any reason does not enter a
Final Order approving and ad~pting the tenns hereof, this Stipulation shall be held for naught
and shall be of no further force and effect. Each party shall thereafter be free to again assert
positions contained in pre-filed testimony previously submitted.
11. Intervenor Funding. Pursuant to the Idaho Public Utility and the Rules of Practice of
the Commission, Intervening parties herein may have a right to petition the Commission for an
award of Intervenor Funding. If said petitions are filed, United will neither support nor oppose
awards of intervenor funding. United requests that the Commission conduct its independent
review to determine financial need and the degree to which the requesting party made a material
contribution to the proceeding.
12.Approval Requested. The stipulating parties agree, and represent to the
Commission, that each of the individual terms hereof are material and essential to the complete
terms hereof. The stipulating parties further agree, and represent to the Commission, that the
overall terms hereof are fair, just, reasonable and consistent with the public interest.
Accordingly, each of the stipulating parties request that the Commission enter its Final Order
approving and adopting the terms hereof without change and in their entirety.
STIPULA nON AND SETTLEMENT AGREEMENT
PAGE 6
Attachment B
Case No. UWI-07-
Staff Comments
3/16/07 Page 10 of
. 20
f1tDATED thisY -day of April, 1997.
~d'
Scott D. Woodbury
Attorney for Commission Staff
~a~
Attorney for Coalition of United Water Customers
Forrest Goodrum
Attorney for Building Contractors Association
~111JA2~Sharon Ullman
illR
Dean J. Miller
Attorney for United Water Idaho Inc.
STIPULATION AND SETTLEMENT AGREEMENT
PAGE 7
Attachment B
Case No. UWI-07-
Staff Comments
3/16/07 Page 11 of
advanced the money for I would recommend that for new connections in the ar
covered by the contract, the Company continue to refund the same amou
to Micron, which would be added to the Company s rate base, as .
fees were still in effect.
Q. Basically, would you say you have fimdamental a
recomrnendati on ?
A. Yes, with the exception of labor in l'of cash we have previously discussed.
Q. What if the Commission doe gree that labor in lieu of cash be allowed? Should
there be specific requ' ments for this procedure?
s proposed requirements are shown in Exhibit 6 attached. These
. ements are what are essentially in place at the
CUITent time for developers
0 chose the labor in lieu of cash option currently allowed on Commercial
Industrial, or Municipal Projects
Q. You are agreeing with Mr. Lobb that the developer or applicant should contribute the
cost of the mains, services, and meters. Should there be any time when a developer
or an applicant should receive any refunds of the cost of a main line extension?
A. Yes, I believe that if a developer or applicant pays the cost of an offsite main and
another developer or applicant takes service from that line, within a specific time
frame, then the new developer or applicant should pay their proportionate share of
the off site main.
Q. What is an offsite main?
A. This would be a main that is installed between the Company s existing system and
the nearest boundary of the nearest boundary of the property to be served plus one
Hepler, 2nd Supplemental Di
United Water Idaho
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half of the main fronting the property to be served. For example, if an applicant
wants service installed to serve an individual lot or a development but had to install
500 feet of main before it reached his lot, the 500 feet of main plus half of the main
fronting his property would be offsite main. Obviously, the other half of the main
fronting.. the property to be served and all distribution system facilities within a
development (including mains, service lines and meter installations) would be on
site. See Exhibit 7.
Q. What is your suggestion in regard to the offsite main cost?
A. My suggestion is that if an applicant requests service from an off site main, they
would contribute the cost of the proportionate share of their front footage towards
the cost of the offsite main, which would be refunded to the original party(ies) who
paid for the off site main.
Q. Are there other circumstances in which you would recommend that a developer
advance any cost and receive a refund vs. contributing dollars?
A. Yes, in an instance where a developer is requesting service to a completely new
pressure zone requiring independent booster pumps and storage, the developer
should contribute the cost of the main, services, and meters , and advance the cost of
the booster pumps and storage. As the customers are added in the area served by
these boosters, pumps and storage, refunds would be made to the developer for these
costs. This would be similar to the Micron projects.
Q. Why should the developer advance the cost of the booster pumps and storage rather
than the company installing these facilities?Attachment B
Case No. UWI-07-
Staff Comments
3/16/07 Page 13 of
Hepler, 2nd Supplemental Di
United Water Idaho
A. Basically because the developer is speculating that there will be a need for the
facilities. If he is COITect in his speculation, the company will refund at least a
portion of these dollars and will have made an investment in the backbone plant.
he is not COITect in his speculation, the facilities will not be useful, and the company
should not be stuck with a..11 investment that is not used.
Q. How would this refund be calculated?
A. If a developer wanted to develop in an area that required a new storage tank due to
serving a new pressure zone and the tank could ultimately serve only 1000
customers, and if the tank cost $500 000, the average cost would be $500 per
customer. The normal allotted cost for storage per customer is $110 as utilized in
our calculation of the $530 connection fee. Therefore, we would propose to refund
only $110 per cUstomer.
Q. Have you prepared tariff sheets for approval to implement your recommendation for
both the standard main extension agreements and the offsite proposal?
A. Yes, see Exhibit 8.
ve you reviewed Dr. Reading s testimony?
A. Yes.
Dr. Reading s recommendations in regard to "Individual
Customer Hook-up Cost and Cn
A. Yes. I believe his first three recommendatl
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guaranteed revenue method; (2) eliminate the free allo ce; and (3) require the
applicant to contribute the cost of the main line extension, servic ateral, and meter.
As in my testimony concerning Mr. Lobb's recommendations, I believe the
Hepler, 2nd Supplemental Di
United Water Idaho