20080721Petition for Clarification Order No 26898.pdf

Peter J. Richardson ISB # 3195
RICHARDSON & O'LEARY PLLC
515N. 2ih Street
Boise, Idaho 83702
Telephone: [phone]
Fax: [phone]
peter(~,richardsonandolear .com
9:23
Attorneys for the McKay Construction Co., Inc. and Schmidt Construction Co. Inc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
MCKAY CONSTRUCTION CO., INC.,
COMPLAINANT
and
SCHMIDT CONSTRUCTION CO., INC.,
COMPLAINANT
vs.
UNITED WATER IDAHO INC.,
RESPONDENT
) CASE NO. UWI-W-08-01
)
) PETITION FOR CLARIFICATION OF
) ORDER NO. 26898, CASE NO. UWi-iJ-
) 96-4.
)
)
)
)
)
)
)
Pursuant to Rule 53 ofthe Rules of Procedure ofthe Idaho Public Utilities Commission
(the "Commission"), McKay Construction Co. Inc. ("McKay") and Schmidt Constrction Co.
Inc., ("Schmidt") by and through their attorney of record, Peter J. Richardson, hereby petitions
the Commission for a clarification of Order No. 26898, Case No. UWI-W-96-4 In the Matter or"
the Connection Fees of United Water Inc. and Other Related Issues Including Rate Design (the
"Order").
Order and Tariff at Issue in this Petition
On April 23, 1997, the Commission issued Order No 26898 (Case No. UWI-W-96-4)
approving a settlement agreement allowing United Water ("United") to implement a Labor in
1 - PETITION FOR CLARlFICA TION BY COMPLAINANTS - UWI- W -08-01
Lieu of Cash Program for installation of water facilities within residential subdivisions.
Paragraph 6(B) ofthe stipulation provides that:
United Water shall implement such systems and procedures as are necessar to monitor
the implementation of a labor in lieu of cash program to insure that implementation of
this program does not result in increased administrative and inspection costs for United
and its customers generally
Rule 67 of United's Rate Schedules and Rules and Regulations Governing the Rendering
of Water Service and Water Main Extensions (the "Tariff') provides that, "applicant contractors
shall comply with Section 1 and Section 2 of the Company's Requirements for Labor in Lieu of
Cash Contractors (the "Rules"). In general, areas covered are requirements for inspection,
monitoring of construction, acceptance and handling of materials, documentation of costs,
correction of faulty installation, insurance, bonding, license requirements, experience, and
equipment availability. Nothing in the United's Tariffs or Rules address the question of a capped
list of approved contractors. When the Commission first approved the concept of a labor in lieu
of cash program the question of a cap on the number of approved contractors was apparently not
at issue, so this is a question of first impression for the Commission. In addition, Order No.
26898 is silent on the question of whether United is authorized to cap the number of approved
contractors.
Facts
Beginning in 1997, pursuant to the above Order, United Water implemented an approved
contractor list for residential developers to choose from for their water facilties construction.
This list began with six approved contractors and has grown to include ten contractors. In
Januar of2008 United Water decided to cap the number of approved contractors at ten. In
doing so United Water declined to review the submitted applications of six contractors for
2 - PETITION FOR CLARlFICA TION BY COMPLAINANTS - UWI-W-08~01
addition to the list. Petitioners McKay and Schmidt were two of the excluded applicant
contractors. (United Water Statement of Position, Case No UWI-W-08-0l).
Although Petitioner McKay was an approved contractor from 1997 through 2005, it was
arbitrarly denied reinstatement to the list after having secured the required insurance coverage.
Despite McKay's having an AA Public Works License from the State of Idaho and its having
30 years of experience working on United Water projects it was informed it would need to
reapply as a new applicant. In August 2005 McKay was informed that all it needed to do to be
reinstated on the approved contractor list was to meet the minimum insurance requirements. See
attached Exhibit A. Breaking that promise, in Januar 2008 United Water informed McKay their
application would not be reviewed citing the general administrative burden of approving,
training, and monitoring a new, inexperienced contractor. (Staff Decision Memorandum, April
11 2008). In addition, McKay Construction is well respected and its services are in demand for
this type of work as is evidenced by letters from the Haris Family Limited Parership, Park
Pointe Development Inc., and the G.L. Voigt Development Company all attached as Exhibit B
hereto.
Petitioner Schmidt applied for addition to the approved contractor list between October
and December 2007. In Februar 2008 United Water informed Schmidt its application would
not be considered, citing the same administrative burden of approving, training, and monitoring a
new, inexperienced contractor. Schmidt carries an AA Public Works License from the State of
Idaho and has over 25 years of experience in the water facilities construction industry in the
Treasure Valley including experience directly with United Water's construction documentation
and oversight procedures. (Schmidt Formal Complaint Letter of February 14,2008 as included in
the Staff Decision Memorandum of April 11,2008). In addition, Schmidt Construction is well
3 - PETITION FOR CLARIFICATION BY COMPLAINANTS - UWI-W-08-01
respected and its services are also in demand for this type of work as is evidenced by letters
from Hubble Homes, Tennant Enterprises, Inc. and the City of Meridian's Public Works
Inspector all attched as Exhibit C hereto.
Relief Requested
Petitioners hereby respectfully request this Commission to issue its order clarfying
whether the administration of the list of approved contractors is an appropriate issue for this
Commission to consider. If the answer is in the affirmative, then your Petitioners respectfully
urge this Commission to declare that a cap on the list of approved contractors is contrary to the
best interests of United's ratepayers and order the company to permit all qualified contractors to
paricipate in the labor in lieu of cash program. If the answer is in the negative then your
Petitioners respectfully request this Commission issue its order declaring that the administration
of the list of approved contractors is beyond the jurisdictional reach of the Commission.
United's implementation of the contractor list unduly increases costs to all
ratepayers - triggering this Commission's regulatory authority
The primary argument United uses to enforce a cap on the list of approved contractors is
to "contain the cost of administering the labor in lieu program."i It also argues that the question
of the size of the approved contractor pool is a business judgment decision which is beyond the
reach of this Commission's jursdiction? However, as shown below, the Company's
implementation of the cap has direct and widespread rate impacts on existing customers. In
addition, the remedy for removing those impacts completely undermines the Company's
arguent that elimination of the cap wil increase costs.
i United Statement of Position at p. 2.
2 Id. at p. 5.
4 - PETITION FOR CLARlFICA nON BY COMPLAINANTS - UWI-W-08-01
United allocates the costs associated with managing its approved list of contractors to all
of its ratepayers. According to United's Statement of Position:
None of this added administrative time and cost is passed on to any specific developer
simply because there is no paricular associated developer project against which the
charges could apply. These costs therefore become par ofthe overall constrction
overhead charged to all capital improvement projects resulting in increased rate base and
eventually increased rates for all customers.
3
Leaving aside the question of whether administrative time and training costs, that are not
associated with any paricular "developer project", may properly be included in ratebase4 - the
immediate issue is the prudence of allocating the costs that are directly caused by new
subdivision construction to all ratepayers. The prudence of United's allocation of the costs of
administrating the contractor list to all ratepayers is relevant in this case because it is the primary
justification United relies on for capping the contractor list in the first place. Were the costs of
training and monitoring contractors directly assigned to each contractor or each project on which
the various contractors work, then United's other ratepayers would be held harmless - regardless
of how many contractors were on the list and regardless of the costs of training and monitoring.
United's claim that the costs of the labor in lieu program cannot be attributed to any
specific development is simply untenable. United's claim that the costs of oversight and review
of approved contractors can only be recovered through rate base is uneasonable and directly
results in unecessarily increased costs to rate payers generally. United Water offers no
explanation or evidence as to why the costs associated with reviewing, approving, and training
an applicant contractor canot be recovered from the applicant through an application fee.
Likewise, United Water offers no explanation or evidence why the training, monitoring,
3 Id. at 7, emphasis provided.
4 Because line extension rules are designed to prevent water utilities from inflating their ratebase with plant used to
serve individual subdivisions, the Commission may find that an investigation into United's practices is waranted by
the Company's admission that it adds these administrative costs to its overall ratebase.
5 - PETITION FOR CLARIFICATION BY COMPLAINANTS - UWI-W-08-01
inspecting, and review of newly approved applicants canot be allocated to the specific project
for which the newly approved contractor is hired for. Alternatively, United offers no explanation
why the costs of approving and training contractors cannot be directly assigned to the contractors
being approved and/or trained.
United's argument that the administration of the approved contractor list is a business
judgment beyond the reach of the Commission's jurisdiction is belied by the Company's
admission that it allocates the costs of administrating this program to all of its ratepayers and not
to just the development that is causing the costs. When business judgments har the ratepayers,
it is incumbent upon the Commission to exercise its jurisdiction to prevent that har. Here the
administrative costs of maintaining the approved contractor list are spread to all ratepayers rather
that specifically identified and assessed against the contractor or developer who actually are
responsible for the costs. In effect, the ratepayers are subsidizing contractor caused expenses.
This is, indeed, a matter that calls for Commission supervision.
The Commission has an obligation to actively supervise the monopolistic actions of
the utilties it regulates
Use of the phrase "applicant contractors" in the tariff clearly suggests that the
Commission envisioned multiple applicants. It also clearly does not limit the number of
applicants. In implementing this Commission approved tariff language, United has decided to
restrict the workings of freely competitive markets by arbitrarily deciding that ten contractors are
suffcient to "promote price competition". 5
The concept of business judgment permits utilities to freely select vendors and suppliers.
However when, as here, those judgments create unecessary cost increases, the Commission's
intervention is waranted and appropriate. Your Petitioners concede the Commission is free to
5 Supra at p. 5.
6 - PETITION FOR CLARIFICATION BY COMPLAINANTS - UWI-W-08-01
cure the ratemaking improprieties identified herein while stil allowing United to maintain a cap
on its approved contractor. It may do so by simply disallowing rate recovery ofthe costs of
administrating the list. But in doing so, the Commission will have completely undermined
United's sole argument for maintaining a cap in the first place.
As a regulated monopoly United accepts a special relationship with the public that is
unique in our economic system. It is also given the power to control access to its system by third
par vendors. United has decided to limit that access in this case to a select few contractors -
and it has done so without any direct supervision by this Commission. It has implemented the
cap arbitrarily and without competitive bidding or any other standard mechanism to insure that
the costs are reasonable. This Commission, in its role as the regulator of the monopolist ought to
take a keen interest in United's arbitrar decision to prevent the free market from policing its
anti-competitive actions.
Clarification
NOW THEREFORE; your Petitioners respectfully request this Commission issue its
order requiring United Water to take such steps as are necessary to add McKay Construction Co
and the Schmidt Construction Co. to its list of approved contractors.
RESPECTFULL Y SUBMITTED THIS 21 st day of July 2008.
RICHARDSON & O'LEARY PLLC
By:£~Q~
Peter J. Richardson, ISB #3195
Attorneys for McKay Constrction Co.,
Inc and Schmidt Construction Co., Inc.,
7 - PETITION FOR CLARIFICATION BY COMPLAINANTS - UWI- W -08-01
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 21st day of July, 2008, a true and correct copy of the
foregoing PETITION FOR CLARIFICATION OF MCKAY CONSTRUCTION CO., INC.,
AND SCHMIDT CONSTRUCTION CO., INC., was served by u.s. Mail, postage prepaid to:
United Water ofIdaho
Gregory P. Wyatt, President
PO Box 190420
Boise, Idaho 83719-0420
Dean J. Miler
McDevitt & Miler
420 West Banock
Boise, Idaho 83702
p¡¡~at~
8 - PETITION FOR CLARIFICATION BY COMPLAINANTS - UWI-W-08-01
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
MCKAY CONSTRUCTION CO., INC.,
COMPLAINANT
and
SCHMIDT CONSTRUCTION CO., INC.,
COMPLAINANT
vs.
UNITED WATER IDAHO INC.,
RESPONDENT
Exhibit A
) CASE NO. UWI-W-08-01
)
) PETITION FOR CLARFICATION
) OF ORDER NO. 26898, CASE NO.
) UWI-I-96-4.
)
)
)
)
)
)
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Augut 22, 2005
MçKaY'CJÍ1trcton, Co, Inc.
Mr~McKay. '
Pò"Bôx: 2450
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When Y9U at aqle to meet th reqed insut coverage mium 'you Wi.be
'alowedto pt?dorm cønstron on United Wat Idaho prjec. '
If you have any questions, pleae feel free to cal.
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~äÄ you fer youi response to my reques for updaed inurane inoimation. ~é,; .: , ,~;:'-; ",
"lnomiation which you sent to us, indicâtes that you do not have the.~~ W~c~, ~
neceS'farto be an appved'Uni~ WatèrContretor. " " ' "
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4 . Att. this card to the Dåc.o ,th 'måi.
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Mr.MdKy
McKay Conscto~ Inc
PO Bex2450 '
Eae, ID 83616
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
MCKAY CONSTRUCTION CO., INC.,
COMPLAINANT
and
SCHMIDT CONSTRUCTION CO., INC.,
COMPLAINANT
VS.
UNITED WATER IDAHO INC.,
RESPONDENT
) CASE NO. UWI-W-08-01
)
) PETITION FOR CLARIFICATION
) OF ORDER NO. 26898, CASE NO.
) UWI-I-96-4.
)
)
)
)
)
)
)
Exhibit B
00/:3/2008 18: 12 FAX 20852U493 GLVO i GTEVCO laooz
",T G.l. VOIGT
~DEVElOPMENT CO.
P.O. Box 2044. Idaho Falls, Idaho 83403. (208) 524-600
June 23, 2008
Idaho Public Utilities Commission
Jean Jewell
PO Box 83720
Bois, 10 83720-0074
Dear Jean.
We are sending this letter in rerence to McKay Construction. Our firm has utilized
McKay constrction as a general contrctor for construction of residential developments
in Ada County. Our relationship with McKay Construction over the years has been
nothing but poitve and th construn cosistently met all spectins and qualit
requirements.
We currently are in procss of copleti a comprehensive plan chang and aremoving foard with the preliminary pl pros on our Boxwood project at
Cloverdale and Columbia rods, which is in United Water's coverage area. We have
requeted McKay Construction complete the reuired steps necessary to be able to do
work witin United Water's area so they can continue to provide us, with their services
on this projec, as welt as oths we have coing up in the future,
~~
Eric Guanelt
Vice President
G.L. Voigt Developm Co.
, 'i
.;PARK POINTE'"
DEVElOPMENT
June 20,2008
Idaho Public Utilites Commission
Ms. Jean Jewell
PO Box 83720
Boise,ID 83720-0074
Dear Jean,
We have recently acquire a large parcl of land located in east Boise wihin United
Watets servce area. McKay Construction has ben our sole general contractor for
several years with most work negtiated, and at this time we feel that with our
relationship, we do not foresee changing the way we do business in the future.
Therefore, we are very interested in having McKay Constructn being added to the
United Water's approved contractor list so we can continue our relationship.
;¡U~
Matt Schwehr
Project Manager
Park Pointe Development Inc.
~
Idaho Public Utilit CommisioJean Jell- Sery
PO Box 83720
Bo, 10 83720-74
June 20, 2008
Dear Jea,
As th pro managme copany for Harrs Ranch, we are in th pro of
reueng bid for tw sement of this mastr planne comunit, wih the intent toissue a notce to pro this cocton sen. McKay Constcton has mad our
shor li of qualif coors. We are ve intrete in Mc Kay Constrctn being
place ba on the appro Unit Wat Idaho contctor list so thy can proid this
delopme (whic consis of 2,567 reental unit and 1,039,00 square fe of
comel/reil space) wi thir seic for th tw seme, as wel as furephas.
LeNir Ltd.
Projec Managr
Harr Family Umit Partership
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
MCKAY CONSTRUCTION CO., INC.,
COMPLAINANT
and
SCHMIDT CONSTRUCTION CO., INC.,
COMPLAINANT
VS.
UNITED WATER IDAHO INC.,
RESPONDENT
Exhibit C
) CASE NO. UWI-W-08-01
)
) PETITION FOR CLARIFICATION
) OF ORDER NO. 26898, CASE NO.
) UWI-I-96-4.
)
)
)
)
)
)
)
70 ¡,SQt, ¡:ei\ St. P; :¡_Ì)""~!'oii5ull 104 ¡:: '208":niJ:;~9
1I:~,;ri. ii) alñ42
Iìllblehom~(Om,
June IS,,20u8
Jean Jewel1- Secry
Idaho Public tJtilities Commssi,on
PO Box, 83720
Boi's~, lD 8:3720.0074
RE: Case 'No. ù'WI- W -08-01
Dea Ms. Jewell
ThiS leter is -in :regard to \he fomi ooiaplahlt against Uiiìted Water :fQÔ, by Pet 'Wilsn
of Sciiinidt Constrction.
WQ are planning on staring a subdivision lIi July an we have oontrc1ed Sclidt
Constction ,ro.. 0'11 titüìty intallation. The Bùbdìvísìòi is in Unrtl$' Wa1~"s jurad,oüun
and we are aware tht,Schmidt Construction is not i11 approved oon~tor, hOWlWet we
\\,oukllik, to have. 'Schmidt constnt, the waler mai, We ,believe thet since thissubdivision -is Qui: private prjeot' and we arC! payig' for the eoiio~ we- mould be
able to (;,Qmtact any.:qualifi,i! i;ntraçtot we olioo'SIl to 'Coniplete th wor
Schnidt. Constmction ,ha, coplo.ted other subdvisions for UA in differt juridiction
throughout tbe Treaure VaHey with complete satisfaotion 'by the applicable agcies a.nd
Hubb.le:Homcs. lfwe ,are not abJe to have Sclídt Construon conpiete th w&t to
this proje.ct we wil hlCUr- additional costs f-or tbe. prqieet nS,elf'whieb we 'feel are not
watnnted, YOll COsideratiol1 OIl't!S matter is gtèatly apprecia.ted'.
Resettfully:,
?-' ~,""y.,
. , ' .,"" ,A.' .
.cha Hall'lei
Dìrector of L~nd Devetopnteut
Htib:ble Ho.es
7tH Allen Street
Merdilli ID :83642
1I....e¿ /eao
JII 18, 200
JII Jew) - ScIda .Pl' UtUiU CollOl
PO BoIJ12.Bif in 83724
R. Cue No UW.w-o.fi
De Ms. JcwJ
I own.i PJ In Sc Bo t1 i im Of dcft llii.d.twiSci Coriti.. em 1O.1I .. ir dl pu lD t \W . to lJ1i tt
ifI", f., tb iub 1I (li pI.. T' is i afifi ii"'. or oW.._WI Ma 81 wel II 811 ÛK (~._ 'W tD 00
hhm L~ia a qUl MVCl ee)'. 8UL Scmi .. hi pr~P8 Wl wbo i ha m~ a... IUllp wilh fO a Jlbi or)' .e PlOYC ti.. ti WiIU OICK_ al ~ Th l1i..i of ClllmD qii II wM lIotIU to 1'UC )lØ' ~ of ~otkbmfdi Coni to l* th co_niotion of ali of. wa lI I will ~rel1 to l:W fo th .pped Gf' Uli s.'¥Áon in bth Ro IlI cODnr ib lIelllb ~ im ICpm.. to JHíe IfIW8 _. we or bc u aaan" in tU Øe
,. YOt tb )'ur ecra oftl ...
SlMerey, (~.::' ~~~~.., ... ~
ScoT~PrnbC.S.o.teil Er lA.
ßDM. Id 83709C.II~ 20 941-+Faa: 20-.341IOnrli.o
P V1
IDIAN~J
MayorTammy de Weit
CI COncil Mebe:
Kerth 81rd
Joe Born
Charles Rountree
David Zaremba
Jun 24, 2008
Jean Jewell - Secta
Ida Public Utilties Commssion
PO Box 83720
Boise, In 8372-0074
RE: Case No. UWI-W-08-01
De Ms. Jewell
I work for the City of Merdian as a Public Works In. i have peonay inspted
water mai prjecs tht Scbmdt Conston ha intaled. Schmdt Constction
instaled thes systes in a prfessina maer whie coually mata th utmost
consideron for qualty.
I believe Schmdt Conscton is more than quaifed to be includd on the Unite Wate
aproved cotrator list.
Sinerly,
TomJo n
City of Meridiai