20240612Staff Comments.pdf

RECEIVED
2024 June 12, PM 3:53
MICHAEL DUVAL IDAHO PUBLIC
DEPUTY ATTORNEY GENERAL UTILITIES COMMISSION
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 11714
Street Address for Express Mail:
11331 W CHINDEN BLVD,BLDG 8, SUITE 201-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF FARKO WATER )
SYSTEM'S PROPOSED CANCELLATION OF ) CASE NO. PTE-W-24-01
PONDEROSA TERRACE ESTATES WATER )
SYSTEM'S CERTIFICATE OF PUBLIC )
CONVENIENCE AND NECESSITY NO. 393 ) COMMENTS OF THE
COMMISSION STAFF
COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission, by and
through its Attorney of record, Michael Duval, Deputy Attorney General, submits the following
comments.
BACKGROUND
On January 18, 2024, an application("Application")was submitted to the Commission
which stated that Ponderosa Terrace Estates Water System, Inc. ("PTE") was sold to Farko
Water System Inc. ("Farko")' on October 1, 2016. While the Application's heading requested a
transfer of PTE's Certificate of Public Convenience and Necessity ("CPCN"), the body of the
Application clearly requested that PTE's CPCN be cancelled. Rather than ask that Farko be
While the Application indicates that the word"Company"is used in both PTE's and Farko's company names,
according to the Idaho Secretary of State,both companies actually use the word"System" instead of"Company"in
their respective titles.
STAFF COMMENTS 1 JUNE 12, 2024

issued a new CPCN, the Application requested that the Commission recognize that Farko is
operating the system as a not-for-profit organization; and supplemental information related to
this request was attached to the Application.
On March 26, 2024, Staff attended a water user meeting in Sagle, ID. The meeting had
several objectives: should water users take control of the water system; what assistance is
available; current status of the water system; and to replace the current Farko Water Board
("Board"). The meeting was attended,either in person or by Microsoft Teams, by 36 individuals
that represented 25 water connectionsz. Also in attendance was Commission Staff, Idaho Rural
Water Association ("IRWA"), and Idaho Department of Environmental Quality ("IDEQ").
On May 21, 2024, the Commission issued Order No. 36188 establishing a comment date
of June 12, 2024, and a reply date of June 20, 2024.
STAFF ANALYSIS
Staff has completed its review and recommends that the Commission recognize PTE's
transfer to Farko and cancel CPCN No. 393. In making its determination, Staff reviewed similar
Commission cases and orders dealing with small water company regulation. Staff has compiled
a list of non-exclusive criteria to make its recommendation. Additionally, Staff believes the list
of non-exclusive criteria can be used for a final determination in this case:
a. Is the Company a qualifying not-for-profit organization or a Co-op?
b. Does the Company operate for the service of the customers and as a not-for-profit
organization?
c. Is the Company owned by the water users?
d. Do the customers have control of the rates that the Company charges?
e. Do the customers have control of the operations and capital expenditures of the
Company?
Farko is on record with the Idaho Secretary of State as a not-for-profit organization and is
organized as such in the State of Idaho. Farko is operated by the Board of Directors ("Board")
and its by-laws. The Board members are water users elected at its annual meeting. The Board is
given the authority to control its rates and the operations and maintenance of the water system.
z Each individual property parcel with its associated drinking water connection is given a membership certificate and
has one vote.
STAFF COMMENTS 2 JUNE 12, 2024

On March 26, 2024, the current board was replaced by newly elected Board members.
Accordingly, the water users have control of rates and the operations and maintenance of the
water system. The new board consists of nine individuals in various roles. Each Board member
will be in their respective role for one year with new members being elected at the annual
meeting. Given that Farko has elected water users to the Board, the customers will bear the
responsibility for making decisions for the benefit of the system's users.
In making its recommendation, Staff reviewed prior Commission cases. In Case No.
MUR-W-14-01, Murray Water became a not-for-profit association of water users—where every
customer became a member of the association. In Case No. CCH-W-15-01, Country Club Hills
became a water and sewer district where the directors were voted in by the customers in the
district. In Case No.PKS-W-15-01,Packsaddle Estates was converted to a not-for-profit
organization, and the Commission ruled in Order No. 33603 against further regulation because,
the Company "Has customers who are members of the Company, with each customer having one
vote. . . ." Order No. 33603 at 6. In Case No. GNR-U-22-03, Sunnyside Park Utilities
transitioned into a not-for-profit organization of water users, and the Commission ruled in Order
No. 35737 that the Company is "not subject to the Commission's regulatory authority because, it
is organized and operated for service at cost and not for profit." Order No. 35737 at 7. In each
of these cases, the Commission either cancelled or declined to issue a CPCN.
Financial Review
Farko provided bank statements for 2021, 2022, and 2023 that showed Farko is not
operating for profit. During those years, Farko did not receive revenues greater than they were
authorized by the Commission and Staff found no other evidence that Farko was paying its
Board members. Thus,Farko is currently organized and operated for service at cost and is not
making a profit.
CUSTOMER COMMENTS
As of June 12, 2024, no comments have been received from customers by Staff.
STAFF COMMENTS 3 JUNE 12, 2024

CUSTOMER RELATIONS
On March 26, 2024, a customer-initiated meeting was held from 5:00 to 7:00 pm at the
Sagle, Idaho, Senior Center.
There was strong attendance, including representatives from Staff, IRWA, IDEQ, as well
as 36 people in person and six people attending online,that represented 25 community
households of Farko.
The intent of this meeting was for Farko to answer questions of the attendees and to
determine if the community wished to take over management of Farko. If so, the goal was to
elect a new board and proceed with necessary documentation and develop a path forward. The
consensus from the customers was that placing a new management board of Farko and
maintaining the existing not-for-profit organization would be in the customers' best interest.
Several customers volunteered for each of the board positions and were then voted on by
the customers present.
The new board of directors, as voted on by customers of the water system are as
follows:
Chairman: Cody Freer
Co-Chairman: John Kuba
Secretary: Stephani Blackburn
Co-Secretary: Nick Pignotti,
Treasurer: Brenny Ross
Board Member: Marte Cellura
Board Member: Daniel Valdez
Support from the IRWA was offered to assist and to provide training to the new board.
Additionally, there were six individuals identified that were interested in becoming licensed
operators to ensure a seamless transition. It was noted by the new Board of Directors that
business will run as usual as the new board is brought on board and any future changes will be
voted on by the water customer members.
STAFF COMMENTS 4 JUNE 12, 2024

STAFF RECOMMENDATION
Staff recommends the Commission recognize PTE's transfer to Farko and cancel CPCN
No. 393.
Respectfully submitted this 12''day of June 2024.
Michael Duval
Deputy Attorney General
Technical Staff: Travis Culbertson
Jon Kruck
I:\Utility\UMISC\COMMENTS\PTE-W-24-01 Comments.doex
STAFF COMMENTS 5 JUNE 12, 2024

CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE ON THIS 12TH DAY OF JUNE, 2024, SERVED
THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE NO. PTE-W-
24-01, BY E-MAILING A COPY THEREOF, TO THE FOLLOWING:
Larry Fairfax
Farko Water System, Inc.
P.O. Box 826
468665 Hwy 95 N. Unit 738
Sagle, ID 83860
farkowaterQw-nai I.com
KERI HAWkdER
CERTIFICATE OF SERVICE