981023.docx

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO  83720-0074
[phone]
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. TO AMEND ITS RULES AND REGULATIONS GOVERNING WATER MAIN EXTENSIONS.
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CASE NO. UWI-W-98-4
COMMENTS OF THE
COMMISSION STAFF
COMES NOW  the Staff of the Idaho Public Utilities Commission, by and through its attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of Application, Notice of Modified Procedure and Notice of Comment/Protest Deadline dated October 2, 1998, submits the following comments.
On September 4, 1998, United Water Idaho Inc. (UWI; Company) filed an Application with the Idaho Public Utilities Commission proposing an amendment to its Rules and Regulations Governing Water Main Extensions.  The Company’s Application proposes to amend Rules 67, 73 and 75.
The amendment to Rules 67 and 73 are intended to allow individuals and developers of subdivisions to provide materials necessary for the installation of water facilities.  While customers are currently allowed to provide labor in lieu of a cash contribution toward facility construction, the Company has historically provided all of the materials and the customer has contributed the cash.
The amendment to Rule 75 is intended to allow the potential for refunds to developers who advance the cost of special facilities specifically defined as source of supply, storage or pumping.  The Company’s rule currently requires that the cost of such special facilities be fully contributed by the developer without refund.  According to the current rules, special facilities are only required when adequate service cannot be rendered to an area where services have been requested.  In most cases, adequate service can be provided to new subdivisions without the need for additional contributed special facilities.  This creates an inconsistency, where some developers must contribute the cost of special facilities while most others do not.
STAFF EVALUATION
The timing of the Company’s application to amend these rules coincides with the Company’s request for approval of the Stipulation and Settlement Agreement in Case Nos. UWI-W-97-3 and GNR-W-97-3 (the Hidden Springs case).  In fact, Staff Objections and Comments filed June 16, 1998 regarding the Settlement Agreement recommended that the line extension rules be amended as a condition for approval of the agreement.  In its comments, Staff stated:
Staff believes that allowing developers to obtain water supply materials from suppliers other than United Water could drive down costs for developers and home buyers without negatively impacting the Company’s existing customers.  We therefore support the Company’s decision to allow Materials-in Lieu of a cash contribution in this case.  However, we also believe that if this opportunity is made available to one developer it should be made available to all developers requesting an extension.  Staff recommends that the line extension tariffs be modified to allow materials as well as labor-in-lieu of cash for all developers requesting water service.
The amendments to Rules 67 and 73 proposed by the Company in this case were reviewed and deemed acceptable by Staff as part of the Hidden Springs cases listed above.
Staff Objections and Comments in the Hidden Springs case also recommended modification of Rule 75 (Special Facilities) of the Company’s line extension tariff.  Staff’s recommendation was made in recognition that the Stipulation and Settlement Agreement provision allowing refund of special facilities costs was equitable.  It was also made to provide consistency between provisions of the Agreement that allowed refund of contributed special facilities costs and the existing Rule 75 that did not.  In its comments, Staff stated:
Although the special facilities section of the existing rules require an unrefundable contribution of storage and booster pump costs, it is only applied in rare cases when projects are large or the facilities are needed immediately to provide adequate service.  Smaller developments generally utilize existing storage and booster facilities and are not required to directly contribute their costs.  Staff believes that it is inequitable to charge some developers directly for storage and boosters while allowing others to utilize the existing facilities paid for by all ratepayers.
Furthermore, it is Staff’s belief that the settlement in Case No.
UWI-W-96-4 establishing existing line extension rules, intended that extension of on-site and offsite mainlines/distribution facilities be contributed without refund and special facilities such as supply, storage and boosters be ultimately paid for by all customers.  Therefore, given the somewhat speculative nature of the special facilities in these cases, Staff supports a developer advance and subsequent refund of supply, storage and booster facility costs.
Accordingly, Staff recommends that the special facilities portion of the Company’s line extension rules be modified to require a developer advance and refund based on the formula proposed for Hidden Springs.
Staff has worked with the Company both before and after the filing of the Rule 75 amendments and has agreed on additional language that allows individual case by case assessment and review of projects that fall under the amended special facilities portion of the tariff.  The proposed tariff Rule 75 is attached with agreed to changes underlined.
STAFF RECOMMENDATION
The line extension amendments proposed by the Company in this case are the direct result of Staff’s comments and recommendations filed in prior Case Nos. UWI-W-97-3 and GNR-W-97-3.  The Commission has issued its final Order No. 27762 in those cases approving the Settlement and Stipulation agreement between UWI and Hidden Springs Water Co., LLC and citing the reasonableness of Materials-in-Lieu of cash and refund of special facilities costs.  Staff worked with the Company to develop reasonable amendments to line extension Rules 67, 73 and 75 so that all individuals and developers are treated equitably and consistently when line extensions are requested.  Therefore, Staff recommends that the proposed amendments be approved as modified.
DATED at Boise, Idaho, this             day of October 1998.
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Scott D. Woodbury
Deputy Attorney General
Technical Staff:  Randy Lobb
SW:RL:jo\umisc\comments\uwiw984.sw
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 facility or 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 Company an amount equal to the estimated cost of applicable overheads for the entire project plus the estimated direct labor cost for such items as engineering design, estimating, and inspection.
The cost of the special facilities advanced, or a portion thereof, shall be refunded based upon the following equation:  X=[0.631 (R-E-D)]/Y.  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 of that facility not advanced.  The advance and refund agreeement for each development shall be evaluated on a case-by-case basis and submitted to the IPUC for review.
An amount equal to the estimated cost of the necessary 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 the 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 the submission.
X  =Refund/Customer
R  =Annual Revenue/Customer (actual received from each customer served from the special facility.)
E  =Annual Operating and Maintenance Expense/Customer
D  =Annual Depreciation Expense/Customer (Depreciation rate(s) for types of facilities installed x investment in that type of facility installed.)
Y  =Authorized Rate of Return