20080201final_order_no_30494.pdf

Office of the Secretary
Service Date
February 1 2008
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 ORDER NO. 30494
CASE NO. UWI-07-
On September 17, 2007, United Water Idaho Inc. filed an Application requesting
authority to convert from bimonthly to monthly billing and to increase its rates to recover the
higher expenses associated with monthly billing. The Company requested that its Application be
processed by Modified Procedure. The Commission issued Order No. 30446 on September 27
2007, authorizing Modified Procedure and establishing deadlines for petitions to intervene and
for submitting comments. The Commission Staff filed written comments, and approximately
340 comments were filed by United Water customers. By this Order the Commission denies the
Company s Application to convert to monthly billing and increase its rates.
THE APPLICATION
United Water asserted that converting from bimonthly to monthly billing would serve
the public interest in several ways: (1) a monthly bill should be easier for customers to budget
and pay than a bimonthly bill, especially during the summer when consumption is highest; (2)
monthly billing can enhance water conservation and ultimately lower bills by sending a more
timely price signal to customers; (3) monthly billing would reduce the incidence of high-bill
complaints from customers resulting from bills for two months of usage; and (4) monthly billing
would double the number of visits to customer premises by meter readers, enabling quicker
detection and troubleshooting of leaks or meter problems.
The Company estimated the additional annual cost of monthly billing to be
125 905, including the cost of new personnel for meter reading, preparation and mailing of
bills on a more frequent basis, increased processing, and administrative expenses. Recovery
the cost would require an overall increase in rates of 3.75%. The Company proposed to apply
the increase to the fixed Customer Charge portion of customers' bills , resulting in an increase for
all customers of approximately $1.15 per month. The Company estimated it would need
approximately five months to hire and train additional personnel and to make the operational
ORDER NO. 30494
adjustments to implement monthly billing. The Company filed revised tariff sheets with its
Application showing the proposed charges to convert from bimonthly to monthly billing.
STAFF COMMENTS
Staff agreed with United Water that monthly billing would provide customers with
timely feedback on water consumption, and thus could lead to a reduction in water use. The
current bimonthly billing cycle provides customers with only two bills during the summer
irrigation season. By providing twice as many bills to customers during the summer season
Staff stated that customers would receive consumption information in a timeframe that will
allow them to make adjustments during the peak water season.
Staff also stated that monthly billing is a prerequisite to an effective water
conservation program. Staff was not able to find any study that quantifies the water saved by
converting from a bimonthly to monthly billing cycle, but Staff noted that monthly billing is
recommended by most resource planning guides. For example, a study prepared for Utah water
utilities by Western Resource Advocates in the following section titled "Billing Frequency and
Communication to Customer" concludes:
Customers' response to water rates is also influenced by the billing cycle and
the ability to track their use. For example, bi-monthly billing cycles can be
counter-productive to water conservation efforts. Customers interested inconservation or saving money adjust their home water use on an incremental
basis, in response to consumption reported in each billing statement. Thispractice is particularly common during the summer irrigation months, when
urban water use peaks. With a bi-monthly billing cycle, the summer can be
half over by the time customers are notified of their recent consumptionquantities. This may preclude many customers from making more efficient
water use decisions earlier in the summer during the high water use months.
Water Rate Structures in Utah: How Utah Cities Compare Using This Important Water Use
Efficiency Tool, Western Resource Advocates and the Utah Rivers Council, Jan. 2005.
Staff also mentioned a study completed by Western Resource Advocates where a
strong correlation between monthly billing and effective conservation programs is implied.
Western Resource Advocates prepared a study of conservation programs and rates for 13 water
utilities on Colorado s Front Range. Of the companies evaluated in the study, the Denver water
utility scored high for the range of water conservation programs and the amount of funding
directed towards conservation. Nonetheless, the Denver utility's per customer consumption
remained among the highest in the study, and the company s conservation efforts did not achieve
ORDER NO. 30494
the same level of overall water savings as the other utilities. Staff noted that the Denver utility
was the only utility in the study that used bimonthly billing rather than monthly billing.
Staff noted other benefits for customers, including that many customers, especially
low-income customers, will find it easier to make smaller monthly payments than to pay for two
months of usage. Staff expects that United Water would have fewer customers who fail to pay
their bills and that a lower number of delinquencies per billing, requiring fewer notices to
customers, would mitigate some of the increased costs.
Finally, Staff reviewed the proposed costs to United Water to convert to monthly
billing. The Company identified the additional costs to make the conversion and projected the
costs to total $1 l25 906 per year. Staff proposed to lower the projected costs by reducing the
number of additional customer service representatives, billing costs and customer notices
identified by United Water. According to Staffs comments, United Water subsequently agreed
to implement monthly billing at a lower cost than originally projected. The Company indicated
it could implement the program with an increase of 2.95% in annual revenue, although the
Company believes the actual costs will be greater and it would seek recovery of the full amount
in its next rate case.
PUBLIC COMMENTS
As of January 24, 2008, the Commission has received 339 comments in the case.
The overwhelming majority opposed a rate increase to convert to monthly billing. Only seven
comments support United Water s Application. Notably, Community Action Partnership
Association of Idaho (CAP AI) stated that low-income households must budget month-to-month
and that United Water s bimonthly billing makes monthly budgeting more difficult. CAP AI
asserted that monthly billing "would allow households to potentially alter their habits to lessen
consumption for the following month.
The vast majority of customer comments, however, urge the Commission to deny
United Water s Application. Most customers fail to see any advantage to individual customers
and are opposed to the increased costs. Many customers addressed the benefits United Water
claimed would flow from monthly billing and disputed the assertions. For example, many
customers stated that budgeting for bimonthly billing is no more onerous than budgeting for a
lower monthly bill. Regarding an increased incentive to conserve water, customers indicated
that water costs are high enough now to encourage conservation, and that more frequent billing
ORDER NO. 30494
was not likely to affect their consumption. About a fifth of the comments suggest the true
purpose of a change to monthly billing is to help the Company increase its cash flow by
collecting revenues more frequently and is not really a benefit to customers.In general
customers have no issue with the current system, and contend it is "unreasonable that the utility
would request a monthly billing and rate cycle when the current bi-month cycle works well for
customers and the company." Comment filed October 24 2007.
A number of customers noted that United Water proposed to apply the rate increase
to the fixed customer charge rather than to the usage charge. Some customers argued that
increasing the customer charge acts to discourage conservation because it does not change with
reductions in consumption.
Many customers mentioned a recent change by the City of Boise from quarterly
billing to bimonthly billing, allowing City utility bills for sewer and trash to arrive in months
alternating with United Water s bills. According to Staffs comments, the City does coordinate
its billing with United Water so that customers get City utility bills approximately one month
after United Water bills.
DISCUSSION
On the record in this case, the Commission cannot find that increasing United
Water s rates to pay for higher .costs associated with monthly billing is in the public interest.
Although the research provided by Staff supports a conclusion that monthly billing may enhance
a utility's conservation program, Staff conceded it is not possible to quantify the potential
benefit. Quantifying a conservation benefit is impossible in this case where the conversion to
monthly billing was not proposed as part of a particular conservation program, in which case
reduced water consumption might reasonably be anticipated and quantified as an offset to
increased costs for monthly billing.
More important, it is clear United Water s customers fail to see a benefit to monthly
billing, at least one sufficient to justify the increased cost. The Commission rarely receives as
many customer comments as it did in this case. Many customers specifically denied that the
benefits to customers asserted by United Water and the Staff - that budgeting would be easier
and that conservation would be encouraged - were real.
The Commission appreciates the effort United Water put into its Application. The
Commission encourages and supports water conservation programs, and not long ago
ORDER NO. 30494
specifically directed United Water to update its conservation program. The conservation benefits
identified in this case, however, are unknown and not measurable. Customers overwhelmingly
disputed the other benefits identified on their behalf. The evidence provided by the public
supports a finding that anticipated conservation and other benefits from monthly billing may
only be speculative. Therefore, the Commission cannot find that a rate increase to pay for the
program is in the public interest. On the record in this case, the Commission cannot find that
United Water s proposal for monthly billing is in the public interest, and the Application is thus
denied.
ORDER
IT IS HEREBY ORDERED that United Water Company s Application to implement
a monthly billing program and increase its rates is denied.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this Case No. UWI-07-
04 may petition for reconsideration within twenty-one (2l) days of the service date of this Order
with regard to any matter decided in this Order or in interlocutory Orders previously issued in
this case. Within seven (7) days after any person has petitioned for reconsideration, any other
person may cross-petition for reconsideration. See Idaho Code 9 61-626.
ORDER NO. 30494
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of January 2008.
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'" .
MACK A. REDFO
MARSHA H. SMITH, COMMISSIONER
ATTEST:
15)
J (an D. Jewell
Ch"'mmission Secretary
O:UWI-07-
ORDER NO. 30494