20100127Wyatt Supplemental Direct.pdf

Dean J.Miler(ISB 1968)
McDEVITT & MILLER LLP
420 West Banock Street
P.O. Box 2564-83701
Boise, ID 83702
Tel: [phone]
Fax: [phone]
joecæmcdevitt -miller. com
Attorneys for Applicant
rE"1R.Fv. ì\~..-
20\0 JM~ 21 Mi \\: 24
BEFÒRE TH IDAHO PUBLIC UTILITIES COMMSSION
IN THE MATTER OF THE APPLICATION Case No. UWI-W-09-01
OF UNTED WATER IDAHO INC. FOR
AUTHORITY TO INCREASE ITS RATES
AND CHAGES FOR WATER SERVICE IN
THE STATE OF IDAHO
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
SUPPLEMENTAL DIRECT TESTIMONY OF GREGORY P. WYATT
1 Q. Please state your name and business address.
2 A. Gregory P. Wyatt, 8248 W. Victory Rd, Boise Idaho.
3 Q. What is your occupation?
4 A. I am the General Manager of United Water Idaho Inc., ("United Water" or the
5 "Company").
6 Q. Are you the same Gregory P. Wyatt who previously fied Direct Written
7 Testimony on September 3, 2009, in ths matter?
8 A. Yes I am.
9 Q. What is the purose of your Supplementa Testimony?
lOA. I want to express United Water's support for the Settlement Stipulation signed by
11 Commission Staff, Communty Action Parership Association of Idao
12 (CAPAI), and United Water, dated and filed Janua 26,2010, and urge the
13 Commission to approve the Settlement Stipulation without material change or
14 condition.
15 Q. Could you briefly describe the key featues of the Settlement Stipulation?
16 A. Yes. In the Settlement Stipulation the paries have agreed that:
17 . The Company's allowed revenues should be increased by $4,300,000 in
18 two phaes as follows: $3,660,000 effective March 1,2010, whichis an
19 approximate 9.9% increase over curent rates, and an additional $640,000
20 effective Febru 1,2011, which is an approximate 1.7% over curent
21 rates;
22 . Both phases of the $4,300,000 increase should be implemented by taffs
23 tht increase the rates and chages (except incidenta service charges ) to
Wyatt SuppDi 1
United Water Idaho Inc.
1 all customers by a unform percentage increase and that the increase apply
2 equally to the Company's customer charge and volume charge;
3 . United Water accepts a rate case moratorium and will not file a general
4 revenue requirement rate case Application prior to June 1, 2011;
5 . The Commssion's final Order should approve varous accounting
6 methods for the Idaho Power Company PCA and certn deferral items as
7 set out in the Settlement Stipulation;
8 . The Commission's final Order should approve an amendment to United
9 Water's Rules and Regulations by adding thereto Sheet 17a, "Budget Bil
1 0 Plan" in the form attched as Exhibit B to the Settement Stipulation;
11 . The Commission's fial Order should approve an amendment to United
12 Water's Rules and Regulations, Sheet No. 18, Paragraph 44, as set fort in
13 Exhibit C of the Settlement Stipulation, to clarify its rules on Private Fire
14 Service Line Connection;
15 . United Water, CAPAI, and Commission Staff agree to convene an
16 informal workshop, withn a reasonable time afer the entr of the Final
17 Order in ths matter, to discuss potential modifications to the UW Cares
18 Program which is targeted to assist low-income customers, and other
19 issues afecting the low-income communty.
20 Q. To put the Settlement Stipulation in appropriate context, could you please
21 describe the Company's initial Application in ths case?
22 A. Yes. On September 3, 2009, the Company filed its initial Application requesting
23 a revenue increase of approximately $5.626 millon, or an overall increase of
Wyatt, SuppDi 2
United Water Idaho Inc.
1 15.21 %. The increase was requested in order to enable the Company to ear a
2 retur on more than $13 milion of additional capita investment it had made in its
3 water system since rates were last set in August 2006, and to recover certn
4 increases in operating costs including depreciation, electrc power and chemicals.
5 Q. Were there other featues of the Company's initial application designed to
6 streamline processing of the case and eliminate contentious issues?
7 A. Yes. On July 2,2009, the Company fied a Motion for Order Waiving
8 Requirement for Cost of Service Study maintaining that there was no compellng
9 need for a study to be included with its curent rate case Application. The
10 Company also stated in its Motion that it was not proposing a change to the
11 curent tariff design but rather would propose a uniform percentage increase to all
12 rate elements, and that it intended to mainta the 25% differential between witer
13 and sumer volumetrc rates. The Commission granted the Company's request in
14 Order No. 30865.
15 Additionally, shorty before the case was filed, the Company and Staff
16 agreed to a 10.4% retu on equity in ths proceeding as being a reasonable retu
17 based on the Company's previously approved retu level and present economic
18 conditions.
19 Both the cost of service waiver and the retu on equity stipulations served
20 to streamine the case and hold down rate case costs.
21 Q. Please describe activities in ths case afer the initial fiing.
22 A. Staf conducted a thorough audit of the Application, assigning a team of auditors,
23 engineers and consumer specialists to the investigation. They reviewed internal
Wyatt, SuppDi 3
United Water Idaho Inc.
1 processes and procedures regarding inter-company transactions, Company P-
2 Cards and several other areas. The Company cooperated fully in the Staff
3 investigation, responding to 247 formal discovery requests. The Company also
4 responded to 15 formal discovery requests from CAP AI.
5 Q. After the activity you have described did the Company, CAP AI and Staff meet to
6 discuss possible settlement?
7 A. Yes, representatives of the Company, Staff, and CAPAI met for most of the day
8 on Janua 11,2010, and par of the following mornng Janua 12,2010. There
9 are no other paries in the case. At that meeting an agreement on the basic
10 settlement terms was reached. Afterwards the wrtten Settlement Stipulation was
11 finalized and ultimately filed on Januar 26,2010.
12 Q. Turng to the specific elements of the Settlement Stipulation, please discuss the
13 recommended revenue increase of $4.3 milion.
14 A. Ths figure represents an amount all paries believe reasonable after each pary
15 had an adequate.opportty to evaluate the merits of issues that were in dispute.
16 Whle the paries did not attempt to resolve each issue on an item by item basis,
17 the overall increase reflects each pary's informed judgment regarding the likely
18 outcome if the case were fuly litigated. The agreed increase of $4.3 milion also
19 represents a significant concession from the Company's original request of$5.626
20 milion.
21 Q. Please discuss the proposal for a unform percentage increase.
22 A. As stated previously, The Company stated in its Motion for Order Waiving
23 Requirement for Cost of Service Study fied July 2,2009, that it was not
Wyatt, SuppDi 4
United Water Idaho Inc.
1 proposing a change to the curent taff design but rather would propose a unform
2 percentage increase to all rate elements, and that it intended to maintan the 25%
3 differential between witer and sumer volumetrc rates. Since the time of the
4 Company's last rate case in 2006 (UWI-W-06-02), United Water had not
5 underten and completed any new large capita projects. Rather, its investment
6 has been more in the natue of replacement of existing facilties and routine
7 infastrcture improvement. A complete cost of service study was submitted in
8 the 2004 rate case and the Commission waived the requirement in the 2006 rate
9 case. United Water's decision not to propose a change in rate design in its filing
10 stems from the fact tht the curent taff strctue has been in place for many
11 years, and has been reviewed and affed on numerous occasions. A uniform
12 percentage increase also preserves the rate relationships the Commission found to
13 be reasonable in the Company's prior cases.
14 Q. Is the rate design proposal a material term of the Settlement Stipulation from the
15 Company's point of view?
16 A. Yes. Whle the Company recognzes that each term of the Settlement Stipulation
i 7 is not precedential and approval of it does not commit the Commission to a course
18 of action in the future, an equal distribution to both the volume and customer
19 charge in ths case was a material consideration in the Company's wilingness to
20 enter into the Settlement Stipulation.
21 Q. You mentioned that the Settlement Stipulation also contas agreements between
22 the paries on certn accounting items. Please explain.
Wyatt SuppDi 5
United Water Idaho Inc.
1 A. In paragraph 12 of the Settlement Stipulation, agreements regarding accounting
2 methods for the Idaho Power PCA are set forth. They propose that the Company
3 may amortize its curent PCA deferral at March 1, 20 10. over thee years, and
4 continue to defer for later amortization all amounts biled by Idaho Power under
5 its PCA. The Settlement Stipulation also proposes that the Company may use the
6 Commission approved interest rate on customer deposits to calculate a caring
7 cost on the un-amortized balances.
8 In sub-clauses a-d of paragraph 13 of the Settlement Stipulation,
9 agreements regarding certn other deferrals are set fort. None of these items
10 affect the revenue increase award in this case. Rather, they reflect agreement on
11 how these accounting issues wil be handled on a prospective basis, and specific
12 regulatory approval is necessar to support the accounting entries that will be
13 made. They thus eliminate the potential for disagreements on accounting methods
14 in subsequent cases. The Company requests these methods be approved in the
15 Commission's final order.
16 Q. Another term of the Settlement Stipulation is that the fist phase of the rates
17 would go into effect on March 1,2010. Is this a material term of the Settlement
18 Stipulation from the Company's point of view?
19 A. Yes it is. I understad that under the statutory suspension period the Commission
20 would otherwse have until April 3, 2010 to make the rates effective. Although it
21 is possible the Company would have received an ultiate rate award greater than
22 the agreed settlement amount if the case was fully litigated, receiving an amount
23 certain earlier than legally required was a material factor in the Company's
Wyatt, SuppDi 6
United Water Idaho Inc.
1 agreement to accept an overall increase of $4.3 milion rather than pursue though
2 hearng the ful amount of its revised request.
3 Q. Earlier you mentioned that the Settlement Stipulation provides for a two-phase
4 revenue increase and also includes a rate case moratorium. Please explain why
5 the Company agreed to these provisions.
6 A. The Company was willing to accept the proposed $4.3 milion increase over two
7 phases because it wishes to remai sensitive to the effect the full increase amount
8 may have on customers during these difficult economic times. Although the
9 Company believes the full $4.3 milion in increased revenue is justified now
10 based on the Company's investments, costs and its filing, a phased approach to
11 the increase should mitigate somewhat the impact on customers.
12 For similar reasons the Company also agreed to the rate moratorium which
13 prohibits the Company from filing any general revenue requirement rate case
14 Application prior to June 1, 2011.
15 Q. Please explain the purose behind the proposed informal meeting with CAPAI
16 mentioned in the Settlement Stipulation.
17 A. United Water has shown though its UW Cares low-income assistance program
18 that it is sensitive to the needs of customers with limited economic resources.
19 This program, intiated in 2005 was the first, and remains the only low-income
20 assistace program available to water customers in Idaho. Durng the settlement
21 discussions, CAPAI expressed interest in learg more about the UW Cares
22 program and ways that the program might be expanded. United Water is equaly
23 interested to discuss enhancements to its UW Cares program and how the
Wyatt, SuppDi 7
United Water Idaho Inc.
1 Company might also reach more low-income customers with its water
2 conservation information and programs.
3 Q. Does the Budget Bil plan proposed in the Settlement Stipulation also hold
4 potential to benefit low-income customers of the Company?
5 A. Yes. The single greatest category of calls received from residential customers by
6 United Water's customer service representatives is customers who are having
7 diffculty paying their bil and requesting to make payment arangements. The
8 volume of these requests increases signficantly durng the irrgation season with
9 its consequent higher bils. The Budget Bil plan would address the need
10 expressed by these customers of having available the option to, on an anual
11 basis, level out their payments for water servce.
12 The Budget Bil plan allows customers to plan and budget water usage
13 more effectively than the curent "pay as you go" basis. Instead of being faced
14 with larger sumer bils that may be extremely burdensome, especially for those
15 with limited economic resources, customers will be able to make less stressfu,
16 longer term decisions about water consumption and how it fits into their personal
17 budget.
18 A more detailed rationale for implementing Budget Bil at this time is
19 contaned at pages 14-21 of my Direct Testimony, fied herein on September 3,
20 2009.
21 Q. Do you believe the Settlement Stipulation represents a fair resolution of this case?
22 A. Yes. Settlement discussions were only undertaken after Staff conducted a
23 thorough audit of the Application. The Settlement Stipulation is the result of
Wyatt, SuppDi 8
United Water Idaho Inc.
1 ars-lengt negotiations between the paries, all of whom had access to all
2 relevant facts. The end result is rates that are fair, just and reasonable in my
3 opinion.
4 Q. Do you have any concluding remarks regarding the settement process?
5 A. Yes. During the settlement process the Company experienced a willingness by
6 Sta and CAP AI to address issues in a strghtforward, professional maner. The
7 Company is very appreciative of these efforts by the paries.
8 Q. Does that conclude your testimony?
9 A. Yes it does.
Wyatt, SuppDi 9
United Water Idaho Inc.