991223_sw.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
MYRNA WALTERS
DON HOWELL
STEPHANIE MILLER
TONYA CLARK
RON LAW
RANDY LOBB
WORKING FILE

FROM:

DATE: December 23, 1999

RE: CASE NO. UWI-W-99-05 (United Water)
AMENDED SOUTHEAST BOISE WATER SUPPLY PROJECT
AGREEMENT (United Water/Micron)

On December 14, 1999, United Water Idaho Inc. filed an Application with the Idaho Public Utilities Commission (Commission) requesting approval of an “Amended Southeast Boise Water Supply Project Agreement” (Amended Agreement) with Micron Technology, Inc. and related accounting treatment.
The proposed Amended Agreement dated April 14, 1999, supersedes a prior approved Agreement dated March 7, 1995, which provided for the development of additional facilities to meet growing demand in the southeast Boise area by bringing water to the Columbia Basin and Gowen service areas from the Pleasant Valley Road area. Reference Order No. 29577. The initial underlying Agreement provided for zero interest project financing by Micron and reimbursement (approximately 46.2% of entire project cost exclusive of reservoir, and 50% of reservoir storage costs) with connection fees from new hook-ups in United Water’s southeast service area until paid in full, but not to exceed a repayment period of 20 years. As reflected in the Commission’s Order No. 25977 approving the earlier Agreement:
Staff reminds the Commission, Company and Micron that the future of hook-up fees is presently at issue in the pending Supreme Court appeal filed by the Building Contractors’ Association of Southwest Idaho (reference Order No. 25640, Case No. BOI-W-93-3). Should hook-up fees be modified or eliminated as a result of that case, the reimbursement from United Water to Micron may be difference than contemplated by the Agreement.

At p. 4.

The scope of the Southeast Boise Water Supply Project included the transfer of water rights for two existing wells (Gowen and Oregon Trail Wells) to Micron, the development of two replacement wells in the Yankee/Nicholson area, a tie-in to the existing Birds of Prey (Raptor) well, the construction of related transmission lines and the construction of a water storage reservoir to be built on the ridge south of Micron. The estimated cost of the proposed project was $5 million.
In 1996, the Idaho Supreme Court issued its opinion in Building Contractors’ Association of Southwest Idaho Inc. v. Idaho Public Utilities Commission, 128 Idaho 534 (1996). The Supreme Court determined that the then existing connection fees of Boise Water Corporation unlawfully discriminated against new customers and the Court remanded the matter to the Commission. Subsequently in Case No. UWI-W-96-4, the Commission eliminated the connection fees that were the source of reimbursement to Micron. Reference Order No. 26898, April 24, 1997. In that case the Commission approved a Stipulation and Settlement Agreement of the parties which in part stated:
4. Micron Agreement: United and Micron Technology, Inc. previously entered into an agreement whereby Micron advanced the cost of some source of supply, major transmission lines and storage. Pursuant to the agreement, United agreed to refund to Micron a percentage of new connection fees for new customers within a specific geographic region where these facilities serve (the geographic region). If, pursuant to the recommendations contained herein, connection fees are eliminated, United would continue to refund the amount of money anticipated by the Agreement to Micron for new customers in the geographic region as if the connection fees had not been eliminated, but were still in effect. Payments to Micron hereunder shall be added to United’s rate base.

In order to accomplish the goal of refunding the percentage of connection fees anticipated by the agreement, United agrees to negotiate amendment(s) to the agreement in accordance with its original spirits and in good faith with Micron, and said negotiations will address increases in the connection fee level as well as other issues implicated by this settlement. Any such amendment(s) to the agreement will be subject to the Commission’s approval.

The instant filing tenders an Amended Agreement for Commission approval whereby due to elimination of connection fees it is proposed that Micron will receive reimbursement directly from United Water. The total project costs paid by Micron are estimated to be $6,528,927. Refund will occur “as if the connection fees had not been eliminated but still were in effect.”
The Amended Agreement establishes the terms for the sale of the Gowen and Oregon Trail wells, related facilities and equipment and associated water rights to Micron. The negotiated purchase price is $183,394, the depreciated value of the wells and their associated equipment, together with the current market value of the related building lots. United Water in the Amended Agreement relinquishes all rights to use the Gowen/Oregon Trail wells for emergency back-up supplies that it had retained in the earlier agreement. The Amended Agreement also provides Micron with rights to use Company facilities to transport Micron-owned water to the Micron plant (on Federal Way).
Upon request from Micron and pursuant to identified terms and conditions and necessary approvals, United Water in the event of an emergency, such as fire or pressure failure which interrupts a sufficient supply of water to Micron, agrees to operate, maintain, repair and/or replace the Gowen/Oregon Trail wells and related delivery facilities as necessary to deliver water from the Gowen/Oregon Trail wells to the Micron plant through United Water existing distribution system.
The Amended Agreement requires United Water to operate the 3 million gallon project reservoir in such manner as to make available and reserve for Micron 1 million gallons of storage for Micron plant operation and ½ million gallons for Micron fire protection.
The Amended Agreement sets the terms and conditions under which Micron may occupy a portion of United Water’s pipeline right-of-way from the Raptor Well to the Micron plant for the purpose of installing a separate water pipeline.
The Amended Agreement also sets conditions under which United Water agrees to carry water (up to 2 million gallons per day at an instantaneous rate of 1400 gallons per minute) produced from a Micron water right in the 24-inch diameter pipeline from Pleasant Valley Road to the Micron plant.
The Amended Agreement further provides terms and conditions under which Micron may be allowed to use United Water’s three project wells (Ten Mile, Pleasant Valley and Raptor) as alternate points of diversion for Micron’s water rights serving the Micron plant.
United Water contends that a hearing is unnecessary and recommends that the matter be processed pursuant to Modified Procedure, i.e., by written submission rather than by hearing. Reference Commission Rules of Procedure, IDAPA 31.01.01.201-204. Staff has no objection to the use of Modified Procedure but suggests that the standard period for comments be extended to 45 days to permit sufficient time to obtain responses to production requests (formal and/or informal), and to provide other interested parties with the opportunity to participate.

Commission Decision
Does the Commission find Modified Procedure in the manner proposed by Staff to be reasonable? If not, what is the Commission’s preference?

vld/M:UWI-W-99-5_sw

DECISION MEMORANDUM 4