20150410Wyatt Direct.pdf

ORIGINAL
Dean J. Miller (ISB No. 1968)
Chas. F. McDevitt (ISB No. 835)
Celeste K. Miller (ISB No. 2590)
MoDEVITT & MILLER LLP
420 West Bannock Street
P.O. Box 2564-83701
Boise, D 83702
Tel: [phone]
Fax: [phone]
i oe@mcdevitt-miller. com
shas@mcdevitt-miller. com
ck@mcdevitt-miller. com
Attorneyfor United Water Idaho Inc.
Douglas K. Strickling (ISB No. 3230)
BOISE CITY ATTORNEY'S OFFICE
P.O. Box 500-83701
150 North Capitol Boulevard
Boise, Idaho 83702
Tel: [phone]
Fax: [phone]
dstricklin e@cityo fboise. ore
Attorneyfor City of Boise
IN THE MATTER OF THE JOINT
APPLICATION OF UNITED WATER
IDAHO AND THE CITY OF BOISE,
IDAHO, FOR APPROVAL OF AN
AGREEMENT FOR TRANSFER AND
OPERATION OF FIRE HYDRANTS AND
FOR APPROVAL OF RATE MAKING
TREATMENT.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
Case No. UWI-W-15-02
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
DIRECT TESTIMONY OF GREGORY P. WYATT
April 10,2015
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Please state your name and business address.
Gregory P. Wyatt, 8248 W. Victory Road, Boise,Idatro.
What is your occupation?
I am the Vice President and General Manager of United Water Idaho Inc. (United
Water).
Please describe your experience in the water industry.
I have been employed at United Waterworks properties, formerly General
Waterworks, since December 1974. Prior to assuming my current duties as
General Manager of United Water Idaho in late 1999, I worked in various
capacities in several states including General Manager for United Water
Pennsylvania, Area Manager for the United Water Indiana operations, Assistant
Manager of United Water Idatro and various accounting positions in New Jersey
and Pennsylvania.
What are your duties and responsibilities?
My duties and responsibilities are to oversee the daily operation of providing
potable water to the customers of United Water Idatro. I oversee the various
departments of Engineering, Production, Transmission & Distribution, Customer
Service, Billing, lnformation Technology, Finance and Planning, and
Administration in meeting their responsibilities for the delivery of potable water,
maintaining compliance, and providing related services to customers.
My responsibilities also include supervision of the Company's compliance
with all regulations in regard to safety, compliance with the Safe Drinking Water
Act, and other similar requirements.
Wyatt, Di I
[Jnited Water Idaho Ine.
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Are you farniliar with a July 15, 2014 Agreementfor Replacement and Operation
of Fire Hydrants (Agreement) between United Water Idaho and The City of Boise
for the replacement and operation of fue hydrants within United Water's service
area in the City of Boise City, which is attached to the Joint Application of United
Water and the City of Boise?
Yes. I participated in the negotiation and finalization of that Agreement, and
signed it on behalf of United Water.
Can you provide some background on how the fire hydrant agreement arose?
Beginning lr,zOl2,representatives of Boise City, including their Public Works
DirectorNeal Oldemeyer, approached United Water with the concept of
transfening ownership and maintenance responsibility to United Water for the fire
hydrants within the Boise City limits. As discussions proceeded, the approach
described in the Agreement of transitioning fire hydrant ownership and
responsibility over a 4O-year period on a new-only basis took shape.
In August of 2013, representatives from the City of Boise, including
Mayor David Bieter, and United Water met with the ldatro Public Utilities
Commissioners and Staffto review and explain the concepts around the City's
desire to transfer hydrant ownership and responsibility to United Water.
Please describe the key provisions of the Agreement.
The Agreement contemplates United Water funding the replacement of existing
Boise City fire hydrants within United Water's certificated service area over an
approximately 40-year time frame, resulting in United Water assuming ownership
and responsibility for the hydrants on a newly installed basis only. Also, several
Wyatt Di 2
United Water Idaho [nc.
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conditions precedent to United Water's obligations exists within the Agreement
that I will touch upon later in my testimony.
Please explain the replacement program for existing hydrants contemplated by the
Agreement.
Pursuant to the Agreement, in each calendar year commencing with the year the
Agreement becomes effective, Boise City shall identiff those hydrants that are
near the end of their useful life and are scheduled for replacement, which schedule
assumes a 40-year hydrant life. To the degnee it can be accomplished, the
hydrants identified for replacement shall be located in common geographical
areas. Boise City shall provide to United Water all available fire hydrant
locations and maintenance records appropriate to the identified hydrants.
United Water, at its cost and expense, will then install replacement
hydrants, which may include isolation valves and pipe extending from main lines.
The Agreement applies to hydrants within the City of Boise that are
located in United Water's certificated service area.
Who will be responsible to fund new hydrants that had not previously existed on
the system?
In the case of new hydrants associated with new additions and expansions to
United Water's distribution system, those new hydrants would be funded by the
developer or customer requesting the new additions in accordance with United
Water's existing Rules and Regulations for Water Main Extensions. In the case
of new hydrants associated with replacements of existing but undersized water
mains, those new hydrants would be funded by United Water.
Wyatt, Di 3
United Water Idaho Inc.
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To the extent that an existing Boise City hydrant is replaced in the course of
United Water's existing main replacement and improvement program, I anticipate
those hydrants would count toward the annual number of hydrants identified for
replacement by Boise City.
Does United Water have the technical ability to operate and maintain fire
hydrants?
Yes. United Water currently owns and maintains over 1,000 hydrants in areas
outside the Boise City limits. United Water personnel currently maintain those
hydrants following American Water Works Association (AWWA) standards for
fire hydrant maintenance. United Water has the necessary tools and equipment
necessary to own and operate a fleet of fire hydrants. United Water tracks and
records hydrant maintenance through its GIS system. Specific maintenance
procedures are outlined in the Agreement.
In your experience in the water industry, is the current arrangement whereby the
city owns the fire hydrants but a public utility provides water service a typical
arrangement?
No it is not. It is far from normal, and the current situation with Boise City
owning the fire hydrants is the only one of its kind I'm aware of. It is much more
common for the entrty that provides water service to own and operate the fire
hydrants within the system. As observed in Mr. Oldemeyeros testimony, the
current arrangement is a historical anomaly.
On average, how many hydrants are anticipated to be replaced each year?
Wyatt, Di 4
United Water Idaho Inc"
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Although the useful life profile of Boise's hydrants isn't a smooth line, we
anticipate an average of approximately 168 hydrant replacements annually.
Have you estimated the dollar amount of the annual investment in replacement
hydrants that would be required of United Water to implement the terms of the
Agreement?
Yes. We estimate United Water's annual investment in replacement hydrants
would be approximately $765,000 in the first year. The annual revenue
requirement associated with this level of investment, when included in rates, will
equate to approximately $1.45 per customer, or about $0.24 a bill, and will not be
a material burden to United Water customers.
Is United Water proposing a new tariffto recover the revenue requirement on the
new fire hydrant investments?
No. I believe the revenue requirement for the new fre hydrant investrnents could
be handled under the existing tariffs for all customers in the same way as for the
Company's existing investments in the approximately 1,000 hydrants it already
owns.
You previously mentioned several conditions precedent to United Water's
obligations within the Agreement. Please identiff those.
The conditions precedent are that United Water obtain an approval and order from
the Idatro Public Utilities Commission on terms that are acceptable to United
Water that:
o Approves the Agreement;
Wyatt, Di 5
United Water Idaho Inc.
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Approves United Water's proposal for recovery of costs associated with
ownership, operation and maintenance of the hydrants;
Approves the accounting treatment of the costs associated with ownership,
operation and maintenance of the hydrants.
Please describe United Water's cost recovery and accounting treatment proposals.
United Water requests a determination by the Commission that the investments
incurred in conformity with the Agreement are prudently incurred and that the
Commission provide an assurance that they will be fully included in rate base (not
l3-month averaged) and in rates in United Water's subsequent general rate
proceedings over the life of the Agreement.
Is United Water proposing any additional rate making treatment?
Yes. United Water proposes the Commission allow the Company to continue the
calculation and accrual ofpost-closing AFUDC on the investments anticipated by
the Agreement until such time as those inveshnents are fully accounted for and
included in rates in subsequent general rate case determinations over the life of
the Agreement.
Please explain the rationale for this request.
United Water believes there are several reasons for this requested regulatory
recovery treatnent. First, Boise City has sought out and asked United Water to
make these investments to help ensure the long-term viability of the fre
protection capabilities within the City.
Wyatt, Di 6
United Water ldaho Inc.
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Second, absent this request, the investments contemplated by the
Agreement would not typically be anticipated or included in United Water's
annual capital expenditrues budget.
[,astly, investnents in new and replacement fire hydrants within the City
of Boise will not, in and of themselves, generate any new or additional revenue.
Recognizing its capabilities, United Water is willing to devote its
resources to help solve public safety concerns including fire protection. However,
United Water believes it would be unfair for these investments to be, in effect,
stranded, without earning any kind of return between general rate cases.
Allowing accrual of post-closing AFUDC would be a step toward relieving that
unfaimess. And, depending on the timing of United Water's general rate case
filings, the application of the now customary l3-month averaging methodology
could result in the full amount of the investment not being recognized in rates.
United Water is therefore requesting that this investnent be exempt from the 13-
month methodology and fully included in rates in future general rate proceedings.
How would United Water anticipate these fire hydrant investments being treated
in the future if it pursued a Distribution System Improvement Charge (DSIC)?
At some time in the future, United Water may apply to the Commission for
authority to implement a Distribution System Improvement Charge. Such a
mechanism, approved in a number of states, allows for a surcharge on customer's
bills to enable the utility to eam on certain non-revenue producing replacement
infrastructure invesfinents (mains, services, meters, and fire hydrants) outside a
general rate case. United Water would anticipate investments in fire hydrant
Wyatt, Di 7
United Water ldaho [nc.
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replacements to be included in a DSIC along with the other infrastructure
replacements mentioned above in &termination of a DSIC stucharge on
customer's water bill. United Water, however, is not rqucsting that the
Commission makc a dotcrmination or commitnent in this r€gard in this
proc€oding.
Docs this conclude your testimon/?
Yes it does.
Wyatt, Di 8
Utrttcd WaGr trdaho Inc.