20070413Reply comments.pdf

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William 1. Batt, ISB No. 2938
John R. Hammond, Jr., ISB No. 5470
BAIT & FISHER, LLP
U S Bank Plaza, 5th Floor
101 South Capitol Boulevard
O. Box 1308
Boise, Idaho 83701
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Attorneys for A vimor, LLC
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
UNITED WATER IDAHO, INC. FOR
AUTHORITY TO AMEND AND REVISE
CERTIFICATE OF PUBLIC CONVENIENCE AND
NECESSITY NO. 143 AND FOR APPROVAL OF
A SPECIAL FACILITIES AGREEMENT WITH
A VIM OR, LLc.
Case No. UWI-O7-
REPL Y COMMENTS OF
A VIMOR, LLC
COMES NOW Avimor, LLC, an Idaho limited liability company, by and through
its attorneys of record, Batt & Fisher, LLP , pursuant to Commission Order No. 30242
and submits its Reply Comments in response to the written comments of the Idaho Public
Utilities Commission Staff ("Staff'), filed on March 16, 2007.
Introduction
On January 4 2007, United Water Idaho Inc.
, ("
UWI" or the "Utility ) and
A vimor, LLC ("A vimor" or the "Company ) entered into a Special Facilities Agreement
SF A") consistent with the Utility s Rules and Regulations 74-77. Under the terms and
conditions of the SF A transmission mains, an intermediate booster station and a reservoir
I The City of Eagle filed comments in this case. However, Avimor is currently working with Eagle to
address their concerns.
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(the "Facilities ) will be built so that UWI can provide water service to Avimor s multi-
use planned community development (the "Project"). Avimor s Project is largely
outside, but contiguous to UWI's certificated territory, thus in order to provide service to
this area, the Utility must receive authorization from the Commission to expand its
certificated service territory
Pursuant to the SF A, A vimor will advance the entire cost of Facilities to serve the
Project, estimated to be $6 308 805. Of this total cost, $1 749 962 will be considered as a
non-refundable contribution and $4 558 843 will be considered an Avimor advance
which the Company will be eligible to receive refunds for when customers are connected
to the system and are producing revenue for UWI. In addition, A vimor will contribute
the entire cost of constructing the distribution system in the Project without the
possibility of refund.
In its Comments, Staff did not object to granting UWI a smaller expansion of its
current certificated territory based on the projected size of Avimor s first phase of
development. Staff also did not object to the refund mechanism that will be employed for
A vimor to recoup the advances it will make. As Staff and A vimor appear to be in
agreement at least to these issues, they will not be discussed herein. However, Staffs
Comments asserted that the Commission should deny UWI's Application to expand its
certificated service territory beyond the first phase of A vimor' s development and also
require amendments to the Agreement in order to alleviate its concerns over the potential
rate impacts these filings could have upon UWI's general body of ratepayers. Staff has
also recommended that the Commission open a generic docket to examine various issues
2 It appears that 80 acres of the Northwest Quarter of Section 28 as shown on Exhibit E to the Application
is already within UWI's certificated territory.
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including whether the Commission should impose the condition that developers and new
customers be required to contribute the cost of providing additional water supply prior to
the serving utility being granted an expansion of its certificate.
A vimor believes that a review of applicable law, and the facts and circumstances
in this case, demonstrate that the Agreement and UWI's Application are just and
reasonable in their current form and should be approved for the following reasons: 1) the
public interest is served by granting UWI's Application and approving the Agreement as
submitted; 2) Idaho law does not provide the Commission with authority to impose
conditions on a grant of an expanded certificated area in this case; and 3) the
Commission s treatment of previous SFAs that include main extensions warrants that
similar treatment be given to the SF A in this case.
LEGAL FRAMEWORK
The Commission exercises limited jurisdiction and has no authority other than
that expressly granted to it by the legislature. Washington Water Power Co.v. Kootenai
Environmental Alliance 99 Idaho 875, 591 P.2d 122 (1979). As a result, nothing is
presumed in favor of its jurisdiction. United States v. Utah Power Light Co.98 Idaho
665 570 P.2d 1353 (1977). Ifthe provisions of the statutes pertaining to the Commission
are not met and compliance is not had with them, no jurisdiction exists. Washington
Water Power 99 Idaho at 879 591 P.2d at 126.
The Commission has jurisdiction over utility rate-making matters. Idaho Code
61-502 et seq. However, in exercising authority over rates, the Commission is forbidden
to allow preferential treatment, advantage, prejudice or disadvantage between ratepayers.
Idaho Code ~ 61-315; Idaho State Homebuilders v. Washington Water Power Co.107
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Idaho 415, 690 P.2d 350 (1984); Building Contractors Assn. of Southwestern Idaho, Inc.
V. Idaho Public Utilities Commission 128 Idaho 534, 916 P.2d 1259 (1996).
AVIMOR, LLC
Initially, Avimor s Project will be an 830 acre, 685 residential unit community
(+/- 10% based on actual development applications) with 75 000 square feet of
commercial and retail space.3 In approving the Project, the Ada County Board of
Commissioners ("Commissioners ) found that:
(TJhe tax base anticipated at build-out is expected to cover the costs of
essential public services and government functions needed to support the
project.
Board of Ada County Commissioners, Findings of Fact, Conclusions of Law and Order
05-00l-PC Report 5 , at p. 10. The Commissioner s also found:
(TJhe proposal sets forth sufficient and adequate mitigation for the
identified economic impacts beyond normally expected incremental
impacts on municipalities and other agencies and districts. . . . Therefore,
in the overall scheme of things, any potential impacts the A vimor
development may have would be miniscule when compared to the publicly
funded impacts and sprawl development currently taking place in the City
of Eagle and Boise City areas of City Impact.
Id. at p. 23 & 25 (emphasis added).
Avimor s Project has also been designed to conserve water and energy for the
benefit of its residents , the Utility and the general body of ratepayers. Central to this is
that the Project will have a state of the art wastewater treatment plant that will be capable
of converting 300 000 gallons of wastewater daily into water clean enough for reuse
meeting both the strict permitting requirements of the National Pollutant Discharge
Elimination System, an EP A permitting program that controls pollutant discharges into
waters of the United States , and the Idaho Department of Environmental Quality s strict
498 acres of the Project will be devoted to open space.
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Reuse Rules that regulate water reclamation. The treated wastewater will be used to
irrigate play fields, parks and other common areas in the Project, a practice that will both
conserve valuable drinking water and reduce water costs for A vimor homeowners and
businesses. Avimor s parent, SunCor Land Development, Inc. ("SunCor ), has employed
this water conservation feature in other markets; for example, its master-planned
community in New Mexico, Rancho Viejo , was the first community development in that
state to reuse effluent for irrigating common areas. SunCor also is working on a pilot
program with the state of New Mexico on aquifer recharging, from which the state will
develop new regulations.s In Utah, SunCor s Coral Canyon development was awarded
Envision Utah's Governor s Merit Award in 2002 , in part because of its water
conservation program.6 In addition, Avimor will employ other water conservation
measures into the Project by installing low water use plumbing fixtures and hot water
recirculating pumps in all 585 residential units that it will build as part of the Project and
will limit the use of turf on all lots and require drip irrigation for all shrubs and trees.
Although not directly related to water conservation, but consistent with
conservation principles, at least 585 residential units within the Project to be built by
Avimor will meet or exceed Northwest Energy Star Standards, that is, they will be 30%
more energy efficient than residential construction built to state code standards. A vim or
will also strongly encourage other builders working in the Project to build residential
units that meet Northwest Energy Star Standards.
4 This facility can be expanded to convert 1 000 000 gallons of wastewater daily into usable effluent.
See www.governor.state.nm.us/press/2004/nov/l13004 pdf.
See www.envisionutah.org/qgawards2002
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REPL Y COMMENTS
It is in the Public Interest for the Commission to Approve the Application
and the Agreement.
In determining whether the public convenience and necessity would be served by
granting UWI's request to expand its certificated territory requires the Commission to
review and decide the public interest issues which are at the core of such an analysis. See
Order No. 26200, Case Nos. USW -94-4 & MID- T -94-citing Idaho Code ~ 61-526;
Application of Kootenai Natural Gas Company, 78 Idaho 621 , 627, 308 P.2d 593 596
(1957). The "public interest" is not susceptible of precise definition. Application of
Bermensolo 82 Idaho 254 352 P.2d 240 (1960). In general, where the Commission is
required to consider the public interest it must look to "the interest of the public, their
needs and necessities and location and, in fact, all the surrounding facts and
circumstances. . . to the end that the people be adequately served.Browning Freight
lines v. Wood 99 Idaho 174 579 P.2d 120 (1978) quoting Malone v. Van Etten 67 Idaho
294 301 , 178 P.2d 382, 385 (1947).
No Iniury or Impact on Another Utility s Operations
In this case, UWI's request for an expansion of its certificated territory does not
interfere or injure any other utility. Rather, the Utility is only seeking to extend its
facilities to an unserved area based on Avimor s request. See Application at p. 3.
These Reply Comments were prepared with assistance from Tim Farrell, an Idaho licensed engineer and a
principal of SPF Water Engineering, LLc. Mr. Farrell has experience with public water system design
and permitting, water rate development and analysis, capital improvement planning, water system
operations, source water treatment, water system master planning, hydraulic modeling, water resource and
groundwater evaluations and water quality investigations. Previous to SPF, Mr. Farrell was an engineer
with UWI.
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Further, UWI represented that it knew of no public entities, persons or corporations with
whom the proposed expansion was likely to compete. Id. Based on the foregoing, this
factor to be considered in the public interest analysis she be deemed satisfied.
Granting the Application is Consistent with Commission Policy
Through the Application, Avimor is committing to have UWI serve the Project
within its proposed service area. In the past, the Commission has encouraged new
connections to connect to existing systems rather than creating a patchwork of multiple
systems. If the Commission denies UWI's Application , it is possible that a variety of
small water systems will be formed to fill the void and need. Long ago the Idaho
Supreme Court recognized the validity of the Commission s policy to encourage
connections to existing systems when it stated:
The commission is strongly convinced that it would be wise if the General
Assembly should enact legislation prohibiting the grant by municipal
authorities of franchises to local utilities, where there is an established
utility rendering safe, adequate and proper service at reasonable rates
already occupying the field, prior to application to and issuance by this
commission of a certificate of public convenience and necessity.
In our opinion the government which properly assumes to prescribe
reasonable rates and compel adequate service by public utilities, should
also protect such utilities and the public from unwise and useless
competition, and the wasteful investment of capital in the unnecessary
duplication of plants.
Idaho Power Light Co. v. Blomquist 26 Idaho 222, 242, 141 P. 1083 , 1089 (1914)
(emphasis added). In addition, the Commission has also time and again recognized that
with small water companies there are economic and operational challenges that they face
which require a great deal of resourcefulness in order to provide safe and adequate
service at just and reasonable rates. See Order 26524 at p. 14, EUW - W -94-1. UWI is the
largest, most sophisticated and financially able utility to serve the A vimor Project.
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Further, other than speculation, there are no facts in the record which demonstrate that
UWI will not be able to provide adequate, safe and reliable service at just and reasonable
rates to all of its customers if this Application were granted. Based on the foregoing, the
public interest weighs in favor of granting UWI's request for an expanded service
territory.
In addition, by granting the current Application, the Commission will avoid
having to process multiple requests for expansion of UWI' s certificated territory as the
Project builds out and the associated issues that may arise with them. Avimor
respectfully requests that the Commission consider the inefficiency of Staffs suggestion
that is to grant a minimal expansion when it is clear that UWI is qualified to provide
service. As such, Avimor respectfully requests that the Commission grant UWI's
Application for the expansion of its certificated territory as requested.
Refund Formula Based on Existing Rules
The proposed refund methodology is the same methodology that is required by
the Utility s Commission-Approved tariff. Sheet No. 24 sets out the specific way that
refunds will be calculated. The developer is required to advance all the costs for the
special facilities it needs to serve its customers. Then, as new customers hook into the
system, the developer is paid back refunds in a very specific way. The refund
methodology takes into consideration a customer s annual revenue, the operating costs
per customer, depreciation expense, the authorized rate of return of the utility, and the
value of the plant allocable to support consumption per customer. The tariff is used so
that new customers pay a fair share of the costs to serve them.
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This proposed agreement is exactly what A vimor and UWI are required to do by
the Commission and as such should be accepted on its face.
Negligible Rate Impacts
In its Comments, Staff states that it is concerned with the impact this Application
and Agreement, if approved, would have on UWI's general body of ratepayers. Staff
speculated that given the desert location of A vimor and the limited ground water in the
area, the costs for obtaining additional water supply would likely be significantly more
expensive than the costs for water supply currently embedded in rates and higher than the
investment made for United Water s Columbia Water Treatment Plant. Staff also
presumably recommended that the on-site main portion of Avimor s advance, as called
for in the SF A, be recategorized as a contribution due to concerns about rate impacts.
The facts of this case demonstrate that the rate impacts on UWI customers if the
Agreement and Application are approved will be negligible.
Under the Agreement, Avimor s advances and contributions to UWI essentially
amount to an interest free loan which the Utility will only repay part of incrementally as
the Company connects customers to the Facilities and they begin to produce revenue for
the Utility. Those amounts contributed and those advances not refunded will be kept by
UWI and not impact customer rates. Refunds will be determined by a refund formula
which has been used in previous SF As and has been found to protect UWI and ratepayers
from risk. See Order No. 27762, Case Nos. GNR-97-2 & UWI-97-3 (Commission
finding that the refund formula, tied as it is to customer connections and revenues
protects the Company s general body of existing ratepayers from harm.); Order No.
28588, Case No. UWI-00-04 (Staff and Commission find that refund arrangement is
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advantageous to DWI because the Utility only makes investment in the Harris Ranch
backbone plant when new customers are connected and only in proportion to the number
of customers taking service.
Any rate impacts will also be mitigated by the amount oftime which it takes for
connections to occur and begin producing revenue for UWI. Accordingly, it is likely that
rate base additions will occur over a long period of time. This is further mitigated by the
amount of the refund for each connection as determined by the Commission approved
UWI refund formula.
Another mitigating factor is that any rate base additions resulting from refunds
will not be included in customer rates until UWI receives authorization from the
Commission to do so. While Avimor has no control over the timing ofUWI's rate cases
the Utility generally does not file them annually. As such, it is likely that any rate impact
would be spread out over general rate case filings, thus mitigating impact on customers.
Finally, the Project's overall impact on UWI's entire customer base ifthe
payments are refunded to A vimor is very small. Because the refunds are based on the
model required by sheet 24 of the approved rates, the new customers will pay for all the
costs of the refunds, assuming the new additions are the same costs as the costs
embedded in rates. If the Commission were to accept the original Agreement, A vimor
were to receive a full refund of the advances and UWI were to file a general rate case
every year where the Commission authorized inclusion of the cost of the refund payments
to the Utility into rates, there would be no impact on customer rates except for the portion
of new supply (if it were even needed) that is higher than the amount for supply that is
already embedded in rates. Due to the fact that refunds will be spread over so many
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customers and over such a long period of time, it is doubtful that there would be any short
or medium-term impact from the refunds, if any. Any incremental costs over the costs
embedded in rates would be spread to all customers, just as if the new customers came
onto UWI's system in West Boise or some other area in the Utility s territory.
Despite the negligible rate impact, Staff states that it does not believe that it is
appropriate to place the cost burden of providing water supply to projects such as Avimor
on the general body ofUWI ratepayers. There are several problems with this position.
First, the Idaho Supreme Court has unequivocally stated that imposing the cost of growth
only on new customers is prohibited discrimination. In Building Contractors of Southern
Idaho v. Idaho Public Utilities Commission 128 Idaho 534, 916 P .2d 1259 (1996) the
Court said:
While it is true that the cost of service has increased, the cost has increased
proportionately for each Boise Water customer. There is no difference in the cost
of service between customers who connected to Boise Water s system before July
, 1994, and those who have connected or will connect to the system from that
date forward. Each new customer that has come into the system at any time has
contributed to the need for new facilities. No particular group of customers
should bear the burden of additional expense occasioned by changes in federal
law that impose new water quality standards.
In Idaho State Homebuilders v. Washington Water Power 107 Idaho 413 690 2d 350
(1984), the Court, quoting from an expert witness went on to state that:
(TJrying to track 'casual' responsibility for costs can quickly degenerate into a
metaphysical debate similar in character to the famous medieval debate over how
many angels can fit in the head of a pin. From the economist's perspective, a new
customer is no more responsible for the level of demand than an old customer.
The need for additional capacity can be avoided either by the old customer
reducing demand or by the new customer abandoning plans to purchase
electricity. An old electric heat customer in an uninsulated house or an existing
industrial customer with an old, energy inefficient production process or an
industrial customer who could produce thermal electric energy more cheaply then
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Washington Water Power, et cetera, are all as responsible for the rising demand
for electric energy and power as the new home heating customer is.
Staff attempts to distinguish these cases, though based upon the fact that the area
where A vimor is located is currently uncertificated, unlike those areas involved in the
cases above. Based on the discussion below A vim or respectfully suggests that Staff s
position is on shaky ground as discussed below.
Staffs argument first does not recognize the system-wide impacts of growth on
the utility. Stated another way, Staff in its comments, seems to suggest that a new source
of supply is needed as a direct result of the Avimor Project. To Avimor s knowledge
UWI plans source of supply additions based on system wide growth and adds new water
supplies to meet the water demands created by this growth on a relatively short time
period.8 Further, to Avimor s knowledge, UWI has never planned for new water supply
based on ultimate build out of currently held certificated area. In the event that UWI
planned new source of supply additions based on ultimate build out of currently held
certificated areas, the required source of supply to meet this demand would be many
multiples of existing supply requirements and would not be used and useful for decades.
The reason for this sort of planning is that the Utility is adding thousands of customers
each year to its system. It is this system-wide growth that is or will cause the need for
additional supply and not just the addition of A vimor. Thus, to require A vim or, who will
be a UWI customer as it will own various facilities in the Project that will take service
from the Utility and its residents to pay for additional source of supply when that need
was created by growth of the entire system, is inequitable and discriminatory.
8 This discussion ofUWI planning was provided by Tim Farrell of SPF Water Engineering who previously
was employed by UWI.
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Staff s argument also requires the Commission to take a leap of faith that its
argument will withstand judicial scrutiny in the face of black letter law that utilities may
not discriminate based on old and new customers. Idaho State Homebuilders
Washington Water Power 107 Idaho 413 690 P.2d 350 (1984); Building Contractors of
Southern Idaho v. Idaho Public Utilities Commission 128 Idaho 534, 916 P.2d 1259
(1996). Although this case involves an uncertificated area, there is no indication in the
Homebuilders or Building Contractors cases that this fact would change the Court'
central finding that old and new growth are both responsible for increasing demand.
addition, as discussed below, Avimor asserts that Idaho Code ~ 61-526 does not provide
the Commission with authority to impose the sort of conditions on a grant of an
expansion of a certificated territory. Based on the foregoing, A vimor respectfully
suggests that the Commission consider this legal landscape when it considers Staff s
position in this case.
Development Incorporating Significant Water Conservation
Features is Beneficial to UWI and its Ratepayers in General
Staff has not discussed the fact that Avimor s Project is designed and will be built
with water conservation as a central feature. The Commission should consider the
positive impacts of the Company s water conservation measures when it makes its
findings in this matter.
In general, the Idaho Legislature has articulated its policy on water conservation
in Idaho Code ~ 42-250(1), which provides that:
The legislature finds that voluntary water conservation practices and
projects can advance the policy of the state of Idaho to promote and
encourage the conservation, development, augmentation and utilization of
the water resources of this state. The legislature deems it appropriate
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therefore, to encourage and support voluntary water conservation practices
and projects.
Consistent with this general policy, as early as 1991 the Commission encouraged UWI to
develop a system wide plan aimed at reducing its water capacity requirements through
water conservation. Order No. 23420 at p. 28, Case No. BOI-90-1. In this case, Staff
also stated that water conservation programs could be a legitimate and cost effective
means for UWI to meet its growing water demand and that the Utility should target areas
where customers typically use the most water, such as watering lawns or in bathrooms.
Id. at pp. 26-27. The Commission and Staff continue to pursue cost-effective water
conservation measures in order to reduce other, costlier supply-side options. See
generally Case Nos. UWI-04-04 & UWI-06-05.
Consistent with Idaho and the Commission s water conservation policies, the
Avimor Project will have a state of the art wastewater treatment plant that will convert
300 000 gallons of wastewater daily into water clean enough for reuse. As stated
previously, the treated wastewater will be used to irrigate play fields, parks and other
common areas in the Project, a practice that will both conserve valuable drinking water
and reduce water costs for A vimor homeowners and businesses. In addition, A vim or will
employ other water conservation measures into the Project by installing low water use
plumbing fixtures and hot water recirculating pumps in all 585 residential units that it
will build as part of the Project and will limit the use of turf on all lots and require drip
irrigation for all shrubs and trees. A vimor believes its Project contains many of the
water conservation measures which the Commission is seeking to promote. As such, if
Commission adopted Staffs position in this case, such an action would contradict the
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conservation policy it has been seeking to promote and will punish A vimor and other
developers for engaging in development that incorporates valuable conservation features.
Staff s Reliance on Idaho Code & 61-526 is Misplaced
Staff, in its Comments, states that "given the size, location and uncertainty in
costs associated with source of supply to serve the entire A vimor development, Staff
recommends that the Commission deny expansion in the area beyond A vimor' s Phase 1
at this time.Comments at p. 6. Further, Staff states that through Idaho Code ~ 61-526
the Commission should consider imposing conditions on the granting of an amendment to
a utility s certificated territory, which could include a requirement that new growth make
a non-refundable contribution to future source of supply costs. As discussed below
Idaho Code ~ 61-526 does not provide the Commission with authority to impose
conditions on the grant of an expansion of UWI' s as Staff suggests.
Idaho Code ~ 61-526 provides in pertinent part:
No . . . water corporation, shall henceforth begin the construction of a . . .line
plant, or system or of any extension of such. . . line, plant, or system, without
having first obtained from the commission a certificate that the present or future
public convenience and necessity require or will require such construction:
provided, that this section shall not be construed to require such corporation to
secure such certificate for an extension within any city or county, within which
it shall have theretofore lawfully commenced operation, or for an extension into
territory whether within or without a city or county, contiguous to its. . . line
plant or system, and not theretofore served by a public utility of like character
or for an extension within or to territory already served by it necessary in the
ordinary course of its business: and provided further, that if any public utility in
constructing or extending its lines, plant or system, shall interfere or be about to
interfere with the operation of the line, plant or system of any other public
utility already constructed, or if public convenience and necessity does not
require or will require such construction or extension, the commission on
complaint of the public utility claiming to be injuriously affected, or on the
commission s own motion, may, after hearing, make such order and prescribe
such terms and conditions for the locating or type of the line, plant or system
affected as to it may seem just and reasonablef .
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Idaho Code ~ 61-526 (emphasis added). This provision generally requires that utilities
obtain a certificate prior to commencing construction of facilities. See generally Eagle
Water Company v. Idaho Public Utilities Commission 130 Idaho 314, 317, 940 P.
1133, 1137 (1997). This general requirement is qualified though in three instances.
Relevant to this case, the statute provides that in the event of a conflict between existing
utilities the Commission may impose reasonable conditions on the grant of an expansion
of a certificate. See e., Utah Power Light Co.v. Idaho Public Utilities Commission
112 Idaho 10, 13 , 730 P.2d 930 (1986). Other than this authority above, no other
language in the statute provides the Commission with explicit authority to impose the
type of conditions that Staff recommends. The Idaho Supreme Court's analysis in
McFayden v. Public Utilities Consolidated Corporation 50 Idaho 651 , 299 P. 671 (1931)
suggests that the central purpose of the certification statute and the ability to impose
conditions on the grant of a certificate is based upon:
(tJhe theory of the regulation of municipal public utilities by the state
through such a commission (Public Utilities) is to avoid competition
which is now generally recognized as a needless economic waste and an
entirely insufficient method of securing the necessary regulation and
control. Under this method the state through its commission takes the
place of competition and furnishes the regulation which competition
cannot give, and at the same time avoids the expense of duplication in the
investment and operation of competing municipal public utilities." (Pond
Public Utilities, 3d ed., sec. 901.) This doctrine is approved by this court
in Idaho Power Co. v. Blomquist 26 Idaho 222, Ann. Cas. 1916E, 282
141 Pac. 1083.
McFayden 50 Idaho at p. 658 , 299 P. at p. -' That is not the case here , as there is no
conflict between utilities, and as such, the Commission does not have the reason or legal
authority to impose conditions on granting an expanded certificate. A review of case law
in Idaho reveals that the vast majority of cases concerning Idaho Code ~ 61-526 reviewed
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by the Idaho Supreme Court involve disputes between utilities. See Cambridge
Telephone Co., Inc. v. Pine Telephone System, Inc.109 Idaho 875 712 P.2d 576 (1985);
Petrolane Gas Service, Inc. v. Idaho Public Utilities Commission 85 Idaho 593 , 382 P.2d
777 (1963); (In answer to a affected utility asserting that granting an expanded
certificated service territory to another utility would lead to an existing ratepayer subsidy
Commission found it appropriate to refer to the rule in Minneapolis Gas Co. v. Federal
Power Commission (D.c.Cir.), 108 u.S.App.C. 36 278 F.2d 870 to the effect that, in
determining an application for authority to extend utility service to new areas, it is
recognized that the various parts of a utility company s system need not and cannot be
equally profitable.Application of the Kootenai Natural Gas Company, 78 Idaho 621
308 P.2d 593 (1957). There are no other cases beyond this scenario which discuss the
Commission s ability to impose conditions on the grant of a certificate.
In this case, UWI's request for an expansion of its certificated territory does not
interfere or injure any other utility. Rather, the Utility is only seeking to extend its
facilities to an unserved area based on A vimor' s request. As such, the language in ~ 61-
526 which allows the Commission to impose conditions on the grant of an expansion of a
certificated area is inapplicable. See United States v. Utah Power Light Co.98 Idaho
665, 570 P.2d 1353 (1977)(" (tJhe Idaho Public Utilities Commission has no authority
other than that given to it by the legislature. It exercises a limited jurisdiction and nothing
is presumed in favor of its jurisdiction.). Accordingly, the Commission should reject
Staffs recommendation and analysis of the authority which it contends Idaho Code ~ 61-
526 provides.
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The SFA's Treatment of Transmission Line Investment is Reasonable
and Consistent with Past Commission Decisions.
In the SF A, approximately 18 000 feet of transmission line is characterized as
on-site" with an estimated cost of $2 519 944, and approximately 12 500 feet is
characterized as "off-site" with an estimated cost of $1 749 962. The cost ofthe "off-
site" main is being contributed by A vimor without refund by the Company, while the cost
of the "on-site" transmission would be advanced subject to later refund. In its
Comments, Staff states that UWI's Rules and Regulations only allow for non-refundable
contributions to be made by developers for transmission mains. Presumably Staff is
advocating this position in order to mitigate against the rate impacts which the advances
including those for on-site mains, might cause.
For the following reasons, Avimor continues to believe the treatment of on-site
mains proposed in the SF A is reasonable in this case.
First, pursuant to the SFA and Rule 75 of the Company s Rules and Regulations
as approved by the Commission, refunds are payable to A vimor only when customers are
connected to the system and providing revenue to the system. The refund formula is
constructed such that revenue generated from new customers off-sets the revenue
requirement needed to serve those customers, thus insulating existing ratepayers from
speculative risk and upward rate pressure. As a result, the refund payments UWI will
make will come into rates incrementally and will have little impact on customer rates.
Second, A vimor asserts that there are technical reasons why amounts for "on-site
transmission should be treated as an advance as the design and features of this main will
be beneficial to other UWI ratepayers. The A vimor backbone plant facilities included in
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SF A were sized to provide 500 gpm to the Project. The ultimate capacity of the water
facilities, including the booster station, transmission main and reservoir, is 2 000 gpm to
Avimor and 3 500 gpm flowing water from the Broken Horn storage reservoir back to
United Water s main system.9 The water facilities were designed with the capability to
allow water to flow from A vimor to United Water if and when a new source of supply is
developed on the A vimor property.IO Furthermore, this design will enable the Hidden
Springs planned community to have access to water from the reservoir for emergency
uses like fireflow or outages caused by the failure of the Hidden Springs reservoir for any
reason. As such, due to the design and features of this transmission line, there is great
potential for it to provide benefits to UWI customers. As required by the Agreement
A vimor will fund this over-sizing.
Another difference in this case is that the transmission main being constructed
pursuant to the Agreement, unlike distribution mains, will not have service lines directly
connected to it and as such is not considered "distribution facilities" by the National
Association of Regulatory Commissioners ("NARUC"). Rather, NARUC considers
transmission mains of this sort to be a supply main by definition. Please refer to Uniform
System of Accounts (1996).
In addition, special facilities historically have included "backbone plant facilities
including, but not limited to, source of supply, storage and booster facilities. An integral
part of backbone plant facilities are the transmission or supply mains that connect these
facilities. NARUC recognizes supply mains under source of supply plant not distribution
9 Staff estimated the capacity at 5 000 gpm.10 This would include any new UWI water rights or the use of a natural aquifer on the Avimor property for
Utility water storage. See Direct Prefiled Testimony of Greg Wyatt at p. 4, 11. 15-23 & p. 5 , 11. 1-
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plant. As such, UWI is generally allowed to rate base transmission and supply mains
when they are installed as a company project.
Supporting A vimor' s position that the treatment of on-site mains in the
Agreement is the testimony ofUWI's General Manager which provides:
Q, Please discuss the rational for including the on-site transmission mainline
in advanced plant available for refunds on the Company s books.
A. The A vimor on-site mainline is included in advanced plant available for
refunds because the line is first and foremost a transmission mainline. The line
will operate as a high pressure transmission main with maximum operating
pressures in excess of 200 psi (pounds per square inch). This high pressure is not
typical in distribution mains, and this particular mainline will serve primarily as a
source of supply line to A vim or. The transmission main is not designed for
distribution purposes, but as part of an integrated facility plan to deliver water to
and from the Proj ect.
Lastly, treating transmission lines connected to storage reservoirs as advanced
plant eligible for refund is consistent with prior Commission decisions concerning the
Hidden Springs planned community, the Harris Ranch Planned Community and the
Claremont Construction projects. In the Hidden Springs case the Commission found:
Although we believe that it is inappropriate to refund distribution and
transmission facilities costs, we find the potential for refund of such costs
in this case to be relatively small. We further find that the refund formula
tied as it is to customer connections and revenue, protects the Company
general body of existing ratepayers from harm.
Order No. 27762 at p. 6 , Case Nos. UWI-97-3 and GNR-97-2. In the Harris Ranch
case the Commission found that "the submitted Agreement mitigates the Company
development risk at Harris Ranch and provides benefit to both the Company and its
customers." Order No. 28588 , Case No. UWI-00-04; See also Danskin Ridge Order
No. 28377, Case No. UWI-00-2. According to the testimony of Greg Wyatt, the SFA
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for the Claremont development project contained similar treatment of a supply line and
reservOIr.
Finally, of the $4 558 843 advanced plant in the SF A, $2 519 944 is attributed to
the on-site transmission main and $2 038 899 is attributed to the storage and booster. At
the estimated $600 refund per new customer, the A vimor development will need to
connect many customers more than will be connected through Phase 1 of the Project
before the advance on the storage and booster would be fully refunded, and before any
advance related to the transmission main would be available for refund. Given that
Avimor s Phase 1 calls for approximately 685 units, there is a strong possibility that any
advance related to the on-site main will only be partially refunded to the Company prior
to the expiration of the SF A in 15 years.
The SF A in this case is similar, if not identical, to each of the above
Commission approved SF As in its technical aspects and refund mechanism. Its impacts
on customers will be no different than that in the above cases where the Staff and the
Commission stated that this SF A arrangement removes risk for the Utility and provides
benefits to its customers. Based on the foregoing, the Commission should allow UWI
and A vimor to treat on-site main costs as an advance which can be refunded to A vimor as
customer connect to UWI's system and begin producing revenue for the Utility.
CONCLUSION
Based on the foregoing, Avimor, LLC respectfully requests:
That the Commission approve the expansion of UWI's service area as
requested by the Application and by these Reply Comments;
That the Commission approve the SF A in its current form; and
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That the Commission grant such other and further relief as the
Commission may determine proper herein.
DATED this 13th day of April, 2007.
BATT & FISHER, LLP
John ~/Hammond Jr.
AttdITI'eys for A vimor, LLC
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY That on this 13th day of April, 2007, I served the
foregoing upon all parties of record in this proceeding as indicated below:
Jean Jewell
IDAHO PUBLIC UTILITIES COMMISSION
472 W. Washington Street
P. O. Box 83720
Boise, Idaho 83720-5983
iiewel~cpuc.state.id.
Gregory P. Wyatt
UNITED WATER IDAHO, INC.
O. Box 190420
Boise, Idaho 83719-0420
greg. wyatt~uni tedwater .com
Dean J. Miller (ISB No. 1968)
McDEVITT & MILLER LLP
420 West Bannock Street
O. Box 2564-83701
Boise, Idaho 83702
i oe~mcdevitt - miller. com
Bruce Smith
MOORE, SMITH, BUXTON & TURCKE
950 W. Bannock, Suite 520
Boise, ID 83702-5716
bms~msbtlaw .com
( )( )
(x)
( )( )
(x)
( )( )( )
(x)
( )( )( )
(x)
( )( )
Weldon Stutzman
IDAHO PUBLIC UTILITIES COMMISSION
472 W. Washington Street
P. O. Box 83720
Boise, Idaho 83702-5983
weldon. stutzman~puc. idaho. gov
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