20070917Wyatt Direct.pdf

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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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JDi\HO PUBLiC
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Attorneys for Applicant
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF UNITED WATER IDAHO INC., TO
IMPLEMENT A PROGRAM OF MONTHLY
BILLING AND FOR RECOVERY OF
COSTS ASSOCIATED THEREWITH and
REQUEST FOR MODIFIED PROCEDURE
Case No. UWI-07-
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
DIRECT TESTIMONY OF GREGORY P. WYATT
September 17, 2007
Please state your name and business address.
Gregory P. Wyatt. United Water Idaho 8248 West Victory Road, Boise Idaho.
What is your occupation?
I am the Vice President and General Manager of United Water Idaho ("United
Water" or "Company
When did you assume your duties as Vice President and General Manager of
United WaterIdaho?
January of2000.
What is the purpose of your testimony?
I will testify regarding the reasons for the Company s request to convert from bi-
monthly to monthly meter reading and billing process. I will also identify the
anticipated cost increases associated with the proposed change to monthly billing,
and the Company s proposal for recovery of those costs.
Why is the Company proposing to make this change?
The Company believes this is primarily a customer service issue in that the
amount of a monthly bill would be smaller, and thus easier for customers to pay
than the current bi-monthly bill. For example, over the 12 months ended August
2007 the average bi-monthly residential bill was approximately $62, and in the
summer, for a customer using United Water for lawn and landscaping irrigation, it
can be well over $125. With monthly billing, the customer s average monthly bill
would be reduced to approximately $31 , and summer monthly bills would
likewise be more manageable. A smaller monthly bill will enable lower income
customers to more readily pay for the water service they use. In addition, a
WYATT, DI
UNITED WATER IDAHO INC.
smaller monthly bill should enable customers to more adequately budget for their
water service needs. Monthly billing also gives more current price signals in
regard to conservation issues.
Please explain how monthly billing enhances customer conservation.
Since 1993 United Water s commodity rates have contained a seasonal
adjustment by which water consumed in "summer" months (May through
September) is priced at 25% above water consumed in "winter" months. The
Commission adopted this seasonal differential to create a price signal that summer
time consumption is more expensive than winter time consumption. (Case No.
BOI-93-, Order No, 25062; Case No. UWI-98-, Order No. 28043). A
monthly bill would provide a more timely consumption/price signal which would
allow customers to adjust their water use patterns as they desire. In this way, a
monthly bill serves as a proactive conservation tool for customers to manage their
higher summer irrigation bills. In contrast, for example, under the current system
a customer might receive a bi-monthly bill in September for their domestic and
irrigation consumption in July and August. By the time the customer receives the
bill the opportunity to adjust consumption in response to the price signal has
passed.
What other ways will customers benefit by the change to monthly meter reading
and billing?
Monthly meter reading and billing creates a more useful water usage history since
there are twelve reading periods instead of six. This improved history can enable
a more accurate estimated monthly bill whenever an actual meter reading cannot
WYATT, DI
UNITED WATER IDAHO INC.
be obtained. In addition, meter readers are more likely to find customer leaks
unusual water usage, stopped meters, etc. more quickly because they will visit
customer sites twice as often. This should reduce the number and severity of
these kinds of customer billing problems and should save customers money as
well as preserving water supply if leaks are found. Also, monthly billing will
double the number of customer contact opportunities via informational bill
messages and/or bill inserts.
Additionally, a monthly billing cycle is the frequency customers are
accustomed to from other utilities and services such as: electricity, natural gas
telephone, wireless telephone, cable and satellite television, internet service, etc.
Also, monthly billing makes the Company s electronic debit payment option
easier for customers. This method of payment is a less expensive way to process
payments both for the customer and the Company.
As customers find a monthly bill more manageable to pay there could be a
reduction in uncollectible accounts resulting in a lower annual bad debt expense.
Monthly billing will also reduce the company s working capital requirement thus
reducing the overall revenue requirement.
Does the Company have any information on the financial impacts related to the
change to monthly meter reading and billing?
Yes. Information related to the financial impacts of monthly meter reading and
billing are identified on Exhibit No.1 to my testimony. As indicated therein, net
annual operating expenses will increase by approximately $1 125 905.
WYATT, DI
UNITED WATER IDAHO INC.
Would you please provide a general summary of the increased operating expenses
you referred to above?
Conversion from bi-monthly to monthly meter reading, billing and collection will
require the addition of eight (8) new employees comprised of four meter readers
and four office customer service representatives at an annual personnel related
operating cost of $436 674 including benefits.Vehicles, insurance, fuel
uniforms, and meter reading equipment for the additional personnel are estimated
to cost $29,452 annually. The additional billing, postage, collections/payment
processing, and communications are estimated to cost an additional $732 412
annually. Reducing these costs somewhat, the Company has estimated a $5 000
reduction in annual bad debt expense, and a rate base offset related to reduced
working capital requirements totaling approximately $605 100 with a calculated
revenue requirement of approximately $67 633 , using the rate of return authorized
in the Company s last rate proceeding (See UWI-06-02 and Order No. 30104).
What is the Company s proposal for recovery of these increases in annual
operating costs?
In this filing the Company is proposing that the increased operating costs be
allocated entirely to the customer charge portion of the tariff, (Schedule No.
General Metered Service and Schedule No. 1B Flat Rate Service). The Company
believes that recovery via only the customer charge is appropriate because the
increased costs are directly related to customer related costs of meter reading,
billing, payment and collections processes. These cost categories were found to
be allocable to the customer charge portion of the tariff in the Company s last
WYATT, DI
UNITED WATER IDAHO INC.
fully litigated rate proceeding (UWI-04-, and Order No. 29838). These
costs do not vary depending on the amount of consumption, so it would not be
appropriate to recover them in the commodity charge.
What is the current average annual residential water bill as determined from the
twelve months ended August 31 , 20077
The current average annual residential bill is $368., exclusive ofIDEQ fees and
franchise tax.
What would be the average annual residential bill under the proposed rates in this
filing, and what is the overall increase request?
The average annual residential bill under proposed rates would be $382.44, or an
increase of$13.83 or 3.75%.
You state that the average annual residential bill under proposed rates would
increase by $13.83. Do you believe a residential customer who uses United
Water for irrigation purposes can save sufficient water via conservation prompted
by the more frequent price signal in order to offset that increased cost?
Yes. At the current summertime rate of $1.5141 per CCF (748 gallons), a
customer could offset the $13.83 annual increase by saving just 9 CCF during the
entire summer. With a monthly bill providing the customer with more current
information about their water use, the customer could very likely achieve savings
sufficient to more than offset the annual increase proposed in this filing.
Please explain how the new customer charge rates were developed.
WYATT DI
UNITED WATER IDAHO INC.
A customer charge profile by meter size, and including flat rate customers, was
obtained from the Company s customer records database for all active customers
as of August 7, 2007. The increased annual operating expenses identified on
Exhibit No.1 were divided by the total annual number of customers bills derived
from the customer count at month-end August 2007 in order to obtain the
proposed increase per bill. This increase was added across the board to all
customer charges as shown on my Exhibit No.2 to produce the proposed new
monthly customer charge for each meter size and for flat rate customers.
Why was the increase allocated equally to all customer charge rates and classes?
This was done because the increased costs are associated with the meter reading,
billing, and payments/collections processes, which are normally spread equally
across all customer classes and meter sizes in a cost of service study.
Why were private fire service customers excluded from the analysis and from the
proposed rate increase?
They were excluded because the private fire service accounts require no meter
reading and no additional bill needs to be generated and mailed because almost all
are already billed along with the customer s domestic service bill.
Has the Company prepared an exhibit showing the proposed tariff that would
reflect the new rates being sought in this present case?
Yes. My Exhibit No.3 reflects the proposed rates.
Are there other costs that the Company will incur in implementing monthly
billing that are not included in this filing? If so, please identify them.
WYATT DI
UNITED WATER IDAHO INC.
Yes. The Company will incur some additional one-time capital investment and
operating costs that are not included in this filing. We anticipate approximately
$42 000 in capital investments for meter reading, communication, computer, and
office equipment and tools. In addition, we anticipate incurring approximately
000 in one-time operating expenses for customer communications, employee
recruitment, small tools, and supplies. The Company would anticipate including
the capital investments in its rate base in a future rate filing.
Has the Company prepared a notice to customers explaining the affects and
benefits of converting to monthly billing?
Yes. A copy of the customer notice is attached as Exhibit B to this Application.
The Company s Application in this proceeding states that the Company requests a
five (5) month interval between the date of a Commission Order, should the
Commission approve the Company s request to convert to monthly billing, and
the effective date of the tariff changes proposed in the Application.Please
explain the reasons for the requested five-month interval.
The Company has requested the five-month interval in order to enable it to
accomplish the advertising, receipt of applications, interviewing, selection, and
training of the four meter readers required to implement monthly billing. The
hiring process alone can consume two months or more, and the additional period
of time is required in order to train the new meter readers and allow them
sufficient time on the job to become proficient enough to complete the assigned
work that will be required with monthly reading of all customer accounts. In
addition the Company will need time to order and receive meter reading vehicles
WYATT, DI
UNITED WATER IDAHO INC.
and equipment, and to seek, hire, equip, and train the four new Customer Service
Representatives requested in this Application.
Does this conclude your testimony?
Yes.
WYATT, DI
UNITED WATER IDAHO INC.
UNITED WATER IDAHO
Adjustments to
Operations and Maintenance Expense
Monthly Meter Reading and Billing
Line
No.Description
Identify incremental operating expenses of monthly meter reading and billing
Total of annual operating costs that will increase as a result of
the transition from bi-monthly to monthly meter reading and billing.
Expenses are grouped as Personnel, Billing and Payment
Processing and Transportation and Miscellaneous -
Details
Personnel Related Operating Expense
Increase in Workforce: 4 Meter Readers 122 968
Increase in Workforce: 4 Customer Service Representatives 93,600
Increase in Statutory Payroll Taxes 821
Increase in Workers Compensation Insurance 800
Increase in Company Matching of 401(k) Contributions 784
Net Increase in Medical, Dental, Vision & Group Term Life Insurance 969
Increase in Pension Expense 168
Increase in Post Retirement Health Care Expense 587
Increase in Long Term Disability Insurance 005
Increase in Admin Cost of 401(k), VEBA, Open Enrollment & Actuarial Services 822
Increase in ADP Payroll, HRIS and Health & Welfare 518
Increase in IT (Help Desk, Desktop Software & Oracle Support) for four new workstations 217
Increase in Training Fees 3,415
Total Increase in Personnel Related Operating Expense 436,674
Billing & Payment Processing Operating Expense
Additional bill generation costs by vendor UBS 462 694
Postage for additional bills 155,475
Additional customer notices generated 18,000
Postage for customer notices 190
Mellon Bank & US Bank payment processing fee increase 053
Six additional bill inserts 000
Estimated reduction in bad debt expense 000)
Estimated imputed reduction in working capital due to improved cash flow (67 633)
Total Increase in Billing & Payment Processing Operating Expense 659,779
Meter Reader Transportation & Misc. Operating Expenses
Ford Ranger leases 14,400
Fuel 100
Vehicle Insurance & Routine Maintenance, Registration 952
Uniforms 000
Annual supprt & maintenance of Itron meter read units 000
Total Increase in MR Transportation & Misc. Operating Expenses 29,452.
Amount
$ 1,125,905
Exhibit No.
Wyatt, Di
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2
30
.
28
%

2
,
60
7

3
1
,
28
8

$

2
5
3
.
28
.
52
%

2
,
45
5

29
,
4
6
1
18
.
9
6
%

1
63
3

1
9
,
59
5

$
20
.
25
%

1
,
74
4

2
0
92
8

$
1.
4
6
%

12
5

1
50
4

$
0.
4
9
%

42

50
1

$
04
%

37

$
0~
1
%

12

$
30
.
28
%

2
,
60
7

3
1
,
28
8

$

2
5
3
59
1

$
28
.
52
%

2
,
45
5

29
,
4
6
6

$

3
1
3
95
8

$
18
.
9
6
%

1
63
3

1
9
,
59
5

$

3
3
8
,
30
6

$
20
.
25
%

1
,
74
4

2
0
92
8

$

5
2
1
63
4

$
1.
4
6
%

12
5

1
50
4

$

6
8
89
0

$
0.
4
9
%

42

50
1

$

3
6
,
54
9

$
04
%

37

$

5
14
7

$
01
%

12

$

2
58
8

$
00
%

44
8

1
0
0
.
00
%

8
,
61
1

1
0
3
,
33
2

$

1
54
0
,
66
3
.
Ex
h
i
b
i
t

N
o
.
Wy
a
t
t
,

D
I
United Water Idaho
Impact of Monthly Meter Reading and Billing Incremental Opex
On Average Residential Customer Bill
Based on Twelve Months Ended August, 2007
Residential
Line No.Month Winter CCF Summer CCF Total CCF Customers
Aug-(205)197 354 197,149 73,420
Jul-84,548 760,702 845,250 72,617
Jun-553,202 806,711 359,913 629
May-573,778 65,945 639,723 72,546
Apr-560,714 560,717 72,401
Mar-388 366 388,367 218
Feb-538,152 (52)538,100 72,047
Jan-446,016 (249)445,767 923
Dec-653,523 33,586 687,109 840
Nov-597,178 549,410 146,588 71,726
Oct-155,412 565,926 721,338 611
Sep-250 991 251,010 71,478
Aug-71,270
550,703 230,328 13,781,031 937,726
15 13 Month Average Customers 133
16 Average Annual Consumption per Residential Customer in CCF 191.
17 Winter 33.02%
18 Summer 66.98%
19 Average Annual Consumption per Residential Customer in CCF 191,
20 Winter Consumption
21 Summer Gross Consumption
22 Summer 3CCF bi-monthly at winter rate
23 Summer usage at summer rates
63.
128.0
120.
24 Total At Winter Rate:
25 Total At Summer Rate:
2112
5141
70.6 $
120.5 $
191,
85.
182.
26 Average Annual Customer Charge 100.
27 Average Total Bill 368.
28 Residential Increase 13.
Average Residential Bill wI Proposed29 Customer Charge Increase 382,
30 Percentage Increase Average Residential 75%
Exhibit No, 3
Wyatt, Di