2001312_sw.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
JEAN JEWELL
RON LAW
LOU ANN WESTERFIELD
TONYA CLARK
DON HOWELL
DAVE SCHUNKE
RANDY LOBB
JUDY STOKES
BOB SMITH
BEVERLY BARKER
WORKING FILE
FROM:
DATE:
MARCH 12, 2001 RE: CASE NO. UWI-W-99-4 (United Water)
FINAL ORDER NO. 28205
PETITION FOR CLARIFICATION

Petition for Clarification
On November 16, 1999, the Idaho Public Utilities Commission issued final Order No. 28205 in Case No. UWI-W-99-4 approving the sale and transfer of the Barber Water Corporation domestic water system to United Water Idaho Inc. On January 12, 2001, the Commission Staff filed a Petition for Clarification of Order No. 28205, Case No. UWI-W-99-4. Reference IDAPA 31.01.01.325. Staff requests clarification of the following Commission Order language:
IT IS FURTHER ORDERED and the Commission does hereby approve a transitional six-month phase in of rates for Barber Water residential customers.

Order No. 28205, p. 10.

It is United Water’s contention that the Commission intended that the six-month phase in begin immediately as of the date of the Commission’s Order (11/16/99). It is Staff’s contention that the trigger event for initiating the six-month phase in of rates was completion of master metering (4/18/2000).
Staff contends that the Commission’s Order language is qualified by the ordering preface language, i.e., “In consideration of the foregoing and as more particularly described and qualified above.” Order No. 28205, p. 9. The relevant preceding language in the Commission’s Order is as follows:
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 master meters, telemetering,
automated control systems $15,000
Repair storage reservoir $35,000
Rehabilitate wells $5,000

Order No. 28205, p. 2.

…

As reflected in the Application, as soon after closing as is feasible, United Water proposes to install master meters at the wells serving Golden Dawn and Barberton Subdivisions. Thereafter, bills for individual residential customers will be calculated by dividing the number of service connections into the total monthly consumption as measured by the well master meters. Each customer would pay a customer charge based on a ¾ inch service connection (presently a bi-monthly charge of $13.51) and pay for their proportionate share of water consumed at United Water’s rates as they currently exist or may hereafter be changed. Notwithstanding the foregoing, the Application states that for a period of six months following installation of the master meters, United Water will continue to render bills to residential customers at the rates contained in Barber Water’s Residential Tariff Schedule No. 1. (emphasis added.)

Order No. 28205, p. 3

Commission Staff supported United Water’s Application. The Commission in its Order summarized Staff’s position and recommendations as follows:
( Staff recommends that current Barber Water residential customer rates, $8.90 per winter month and $10.90 per summer month, be continued for no more than six months after master meter installation and operation. After this period, the applicable UWI ¾ inch residential metered rates should be applied, based on total system consumption averaged equally on a per customer basis.

Order No. 28205, p. 4

United Water in reply comments filed October 1, 1999, perceives Staff’s recommendations to be generally consistent with the Company’s proposals and supports and accepts same. O.N. 28205, p. 2. [As more particularly reflected in Staff comments, “the six-month interim period would begin upon completion of the master meter installation.” Staff Comments, p. 2.]

The Commission in its Order No. 28205 made, in part, the following findings:
Capital Improvements
We expect United Water to perform the identified capital improvements (install master meters, telemetering and automated control systems; repair storage reservoirs; rehabilitate wells) prior to any switch of Barber residential customers from present rates to United Water tariffs. Order No. 28205, p. 7

Rate Design & Transition Period
United Water proposes a rate design whereby residential customers will be assessed an amount equal to the metered well production divided by number of customer connections.… We find the proposed rate design for residential customers to be reasonable. We find a required transition to full United Water rates to be reasonable and necessary.…

United Water proposes a six-month transition period for Barber Water residential customers from Barber Water rates to United Water’s ¾ inch residential metered rate during which time residential rates for Barber Water customers will remain unchanged. We find the transition period to be a reasonable and responsible method of addressing customer concerns in mitigating the rate shock that would otherwise result. During this period customers are to be provided within 30 days with billing information that will be useful in assessing the change that will occur when they are switched to United Water rates. Order No. 28205, p. 8.

Staff also notes the following language set out in transcript of public hearing held on October 14, 1999. At that hearing United Water was represented by Bill Linam and Kathy Shiflett. The Company’s attorney was Joe Miller. Mr. Miller at Tr. 21 states:
From the Company, from the United, perspective, the starting of the transition period is very important, and from the customer perspective, the sooner the transaction can close, the sooner the repairs can be made to the system, which is kind of the quid pro quo for the starting of the transition period…the customers get the upgraded system, Barber gets the proceeds, we can start our transition period.

Staff notes that the rates for former Barber Water customers on file with the Commission are the rates reflected in United Water’s Schedule No. 1F (attached). The rates set out in that schedule are the Barber Water flat rates. The rates also contain the following language
“these rates [bi-monthly flat charge] will remain in effect for six months or until the system improvements stipulated in Order No. 28205 have been completed, whichever is longer.”

Staff contends that although the tariff language reflects an approval date of January 20, 2000, that the language itself is non-conforming to the Commission’s Order. The Commission’s Order language does not say the transition period was to begin immediately. Staff further notes that United Water failed to submit a replacement tariff when it switched on July 1, 2000, from Barber Water flat rates to the rate calculations set forth in Order No. 28205. Reference Idaho Code § 61-313—Schedule Charges Only Permitted.
Company Response
On February 2, 2001, United Water filed a response to Staff’s Petition for Clarification (attached). United Water contends that the operative ordering paragraph of the Commission is plain and conclusive. United Water admits that the “six-month transition” period recommended by the Company and agreed to by Staff (i.e., “for a period of six months following installation of the master meters”) was different from that “approved” by the Commission (interpreted as authorizing a transition period to begin immediately). Reference Order No. 28205. The Company notes that “persons familiar with the practices of the Commission know it is not uncommon for the Commission, in their exercise of judgment and discretion, to adopt a position in the final Order different than the positions advanced by involved parties.
The Company argues that the submitted tariff reflected its understanding of the Order. [Staff Comment—It is undisputed that the tariff was reviewed by a Staff engineer and that the Commission by its Secretary approved the tariff. Reference IDAPA 31.01.01.133 Tariffs Submitted Pursuant to Order “the review of tariffs filed pursuant to Order is an ex parte, ministerial responsibility of the Commission Staff. Tariffs may be approved by minute entry after Staff review and without further Order.” It is also undisputed that the Company communicated its intentions to the Barber Water Liaison Committee and the Staff’s Consumer Division.] Once approved, the Company contends that it was legally bound to comply with the filed tariff and had no legal authority to do differently. The filed Tariff Schedule No. 1F reads in part as follows:
“These rates [bi-monthly flat charge] will remain in effect for six months or until the system improvements stipulated in Order No. 28205 have been completed, whichever is longer.”

Schedule No. 1F, Tariff approved January 20, 2000, effective January 01, 2000.

United Water disagrees with Staff’s assertion that at the time of the change-over in rates a new tariff should have been filed. The Company contends a new tariff was not necessary because Barber’s unmetered customers began taking service at the Company’s “general tariff rate”—a tariff for metered customers. It is also the Company’s contention that Schedule 1F expired by its terms and formal cancellation would have been merely a clerical act.
The Company in its response also cites Idaho Code 61-313 Schedule Charges Only Permitted to support what it states is an unambiguous statutory requirement to charge no different rates than those “specified in its schedules on file and in effect at the time.” By definition, the Company states that amounts collected from customers pursuant to an approved tariff are not overcharges and there is no authority to retroactively require refunds or reparations of amounts so collected. [Staff Comment—It is Staff’s contention that the Company has no existing tariff for Barber Water customers other than the flat rate Schedule No. 1F tariff which is the flat rates of Barber Water Company. The statutory provision (Idaho Code 61-313) cited by the Company does not support its position regarding refunds. It instead precludes the Company from charging different rates. There are no post-transition rates cited in Tariff Schedule No. 1F. There is no definitive date for tariff expiration. There is no default rate applicable to unmetered Barber Water customers. The Company’s “general tariff rate” is for metered customers only (see attached) and provides no formula or method of calculation of rates for unmetered customers.]
The Company contends that it is “strained” and unreasonable to interpret Commission Order language, in this case “a six-month transition period”, in a manner consistent with and in the same manner proposed by the Company in its Application, in Company representations in a transcripted hearing, and in filed comments of Staff and the reply comments of the Company. The Company contends that the Order language is unambiguous. The Company contends that the Order paragraph preface language “in consideration of the foregoing and as more particularly described and qualified above” relates only to matters contained in the first Ordering paragraph and not to the following paragraphs. The Company is arguing that the Commission’s Order should be read and interpreted not in its entirety, but instead out of context.
Commission Decision
Re: Commission Order language. Was it the Commission’s intention in Order No. 28205 that the “six-month transition period” was to begin immediately rather than in the manner proposed by the Company, represented to customers and agreed to by Staff (i.e., as defined earlier in the Commission’s Order)? Was it the Commission’s intention that the ordering preface language applies only to the initial Order paragraph? Does the Commission expect that its Orders be read and interpreted in their entirety?
Filed tariffs. Was the Company required to file a new tariff for Barber Water customers when it switched from an unmetered flat rate to a calculated formulaic rate? Is the Company’s “general [metered] tariff rate “the applicable rate for Barber Water customers? If not, does the Company have any tariff authority to charge Barber customers rates different than set forth in tariff Schedule No. 1F? Is the filing of a rate tariff a mere technicality? If the Company is charging rates greater than authorized by tariff, should it be required to calculate and rebate the amount of overcharge?

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DECISION MEMORANDUM 5