990416_sw.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
MYRNA WALTERS
STEPHANIE MILLER
DON HOWELL
TONYA CLARK
BOB SMITH
GEORGE FINK
DAVID SCOTT
WORKING FILE

FROM: SCOTT WOODBURY

DATE: APRIL 16, 1999

RE: CASE NO. UWI-W-99-2 (UNITED WATER)
PROPOSED PURCHASE OF BARBER WATER

On April 5, 1999, a Joint Application in Case No. UWI-W-99-2 was filed with the Idaho Public Utilities Commission (Commission) by United Water Idaho Inc. (United Water) and Barber Water Corp. (Barber Water) for an Order approving the sale and transfer of the Barber Water domestic water system to United Water. The purchase price is $105,000. United Water further requests approval of certain rate and ratemaking matters including the right of United Water to include in rate base in future rate proceedings the full purchase price of the assets and up to $55,000 in proposed capital improvements for system upgrades and repairs.
United Water provides water service to approximately 60,000 customers within the Idaho Counties of Ada and Canyon and operates under Commission Certificate of Public Convenience and Necessity No.143 (as amended). Barber Water provides service to approximately 240 residential customers within the Golden Dawn and Barberton Mobile Home Park Subdivisions in Ada County, and to the nearby Idaho Shakespeare Festival (ISF) site and operates under Commission Certificate of Public Convenience and Necessity No. 277 (as amended). As represented in the Application and related letter to customers, the current owners of Barber Water desire to sell the water system because:
Barber Water has been supplying service to the users in the Golden Dawn Mobile Home Subdivision and the Barberton Mobile Home Subdivision for 30 years. And we would like to retire.

Due to the many changes in the water business, we can no longer continue to serve the users on a part-time basis. Trying to serve the users, dealing with complaints and the increased time in handling late payments has increased the workload. The extra time and work involved in handling the requirements of additional testing, monitoring, keeping certified and responding to government agencies’ complaints with regards to service and service areas has created a very stressful situation for the management. To remain in the water business, we would have to submit a large rate increase for system management and repairs that are needed at this date. We view this process to be very time consuming, adversarial and stressful.

The water system is not new and we are not in a position to upgrade, handle repairs, respond to emergencies and provide the service that a large corporation such as United Water can offer the users. They are experts with the ability and experience to extend better service for the future of this service area.

United Water represents that it possesses the technical, managerial and financial ability to provide reliable and adequate service to Barber Water customers. United Water contends that the proposed sale and transfer of the Barber Water domestic water system to United Water and the related expansion of United Water’s Certificate is in the public interest.
As represented in the Application, United Water has examined and investigated Barber Water’s property and plant used to provide domestic water service and has determined that the following investments are necessary in order to provide adequate service:
Install telemetering, automated control systems: $15,000
Repair storage reservoir $35,000
Rehabilitate wells $ 5,000

As represented, Barber Water provides service to its customers at a tariffed flat rate through a water distribution system that is not metered. (Residential Schedule No. 1—$10.90/mo. May-Oct.; $8.90/mo. Nov.-Apr.); (Commercial Schedule No. 3 ISF) $174.40/mo. May-Oct; $142.40/mo. Nov.-Apr.). United Water proposes to provide service to the residential customers of Barber Water at a flat-unmetered bimonthly rate of $36.00. The proposed bimonthly rate for the residential customers was derived from calculations that estimate Barber Water customers would incur an annual bill of $216.00 for consumption at United Water’s current tariffed rates based on estimates derived from studies of comparable mobile home subdivisions. United Water proposes to provide metered service to the Idaho Shakespeare Festival site at United Water’s regular metered rate. In all other respects, United Water will provide service in accordance with the rules and regulations applicable to its service territory.
United Water calculates that the revenue collected from Barber Water customers based on the proposed rates will be sufficient to provide to United Water a return on its investment equal to or greater than its current authorized return on investment. Accordingly, United Water contends that its existing customers will not be burdened by the purchase of Barber Water.
United Water in its Application commits to form a customer liaison committee to help ensure that the needs and concerns of Barber Water customers are understood and addressed.
Accompanying the Application is the map of United Water’s certificated service area, a map and legal description of the proposed boundary expansion, the underlying Agreement for Purchase and Sale, and the projected revenue analysis. United Water and Barber Water contend that the public interest in this sale requires expeditious review of the Application and does not require a hearing to consider the issues presented. United Water requests that the Application be processed under Modified Procedure, i.e., by written submission rather than by hearing. Reference Commission Rules of Procedure, IDAPA 31.01.01.201-204.

Customer Petition
On April 15, 1999, approximately 100 customers of Barber Water filed a Petition (attached) with the Commission opposing Modified Procedure and requesting a hearing. The Commission has also received a number of individual letters from Barber Water customers requesting a hearing.

Staff Recommendation Re: Procedure
The Staff Consumer Division believes that the public interest and the issues presented in this case require a hearing and the development of a record. Staff counsel does not believe at this time that a formal technical hearing with prefiled testimony is required. What is clearly needed, however, is an evening hearing for public testimony. Staff recommends that the Commission adopt Modified Procedure and extend the standard period for comment to 60 days. This should provide adequate time for investigation prior to preparation of comments. The Commission should also schedule an evening hearing following the comment deadline for public testimony. The Commission is apprised that the Company has scheduled an informational meeting for 7:00 p.m., Tuesday, May 4 at the Summit Room, 5657 Warm Springs (Idaho Dept. of Parks & Recreation). This will provide an opportunity for customer/Company/Commission Staff dialogue and the development of record.
Commission Decision
What procedure should be adopted in this case? Strict Modified Procedure (comments only)? Some hybrid procedure (comments and hearing)? Formal hearing (prefiled testimony, etc.)?

Scott Woodbury

Vld/M:UWI-W-99-2_sw

DECISION MEMORANDUM 4