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Home My WebLink About20250123Comments_3.pdf From: Peter B To: secretary Subject: Case#PLW-W-24-02-Priest Lake Water,LLC Date: Wednesday,January 22,2025 2:35:07 PM Attachments: Letter to IPUC-Final draft.docx CAUTION: This email originated outside the State of Idaho network. Verify links and attachments BEFORE you click or open, even if you recognize and/or trust the sender. Contact your agency service desk with any concerns. Please find attached my comments regarding the above-referenced rate case. If you have any questions,please feel free to email me or call at 509-220-7215. Thank you. Peter Bock 72 Turtle Lane, Priest Lake, ID 83856 IPUC Case PLW-W-24-02 Priest Lake Water, LLC/Marvin Estates Comments submitted by: Peter Bock, 72 Turtle Lane, Priest Lake, ID 83856 Properties owned in Marvin Estates served by PLW, LLC: 67 Ryan Road, Priest Lake ID 83856 1 am writing regarding the huge water rate increase that is about to be imposed by Priest Lake Water, LLC, hereafter, PLW. (Permit#97-9802) IPUC case#'s PLW-W-24-01 and PLW- W-24-02. PLW sent a notice to the Marvin Estates property owners regarding the rate increase, dated 1-1-25. In that notice, it states, `:..The Idaho Public Utility Commission has recommended that the monthly rate be increased to$98 per meter per month': First off, I would hope that the IPUC would inform the rate payers involved and give them time to respond before committing to a rate increase. I would also hope that the IPUC would review the rate filing application before committing to a rate increase, especially one that is 165% higher than the current rates being changed. I also see that the rate case on your website (PLW-W-24-02) is now open for comments, but no decisions have been made regarding the new rate structure. I'm a bit confused as to how PLW could claim IPUC recommended the rate structure,when it hasn't gone through your process. If this rate structure stands, this represents a 165% increase in rates with no change in service! Since 2021, when Jared Horlacher bought Priest Lake Water, LLC, our rates will have increased from $30/mo. to $37/mo., (23%) and now, according to PLW, the IPUC is recommending, a 165% increase on top of previous increases?That is simply unsustainable and far above any water rates in the area. I live in Outlet Bay,just down the road and have a shop in Marvin Estates. Outlet Bay Water district charges$75/Qtr., currently, but plans to increase their rates to$90/Qtr. at some point. Huckleberry Bay charges$80/mo., for both water and sewer. A friend in Kalispel Bay pays $250/year. Another friend in Coolin pays $250/year. Still another friend that lives in the US Forest Service housing pays$40/month. Something seems very wrong with this situation. Do we have access to the books of the water company, to do a private audit, as I'm sure the regulating agencies do?There is no way PLW's costs to run this small water system can be this much higher than all the other systems in the area. I believe he is mixing capital improvement costs, which should be born by PLW, with ongoing costs to provide the water. There was no Balance Sheet in the rate increase request, so there might be other items that should not be put on the backs of the rate payers and should be capitalized and depreciated as a PLW asset. As an example, on reason #3 from the rate increase notice, PLW listed, "Maintenance of aging infrastructure; including the water tank. That is PLW property and should be maintained by PLW. If a special assessment is needed it should be after the work is completed, so we have actual costs to review. For instance, we just paid a special assessment in Outlet Bay for tank scrubbing and maintenance and sealing. It came to about$300/household ...one time, and the tank is much bigger than PLW's tank. Another example of what I think are capital improvements from PLW's rate increase letter is Reason #4, "making improvements to the well lot" The well lot is PLW property and should not have anything to do with the rates we pay.Any improvements should be capitalized by the company and not charged to the water customers. Plus, the owner of PLW has an excavation business as well, so are they going out for competitive bids or, are they planning on the PLW customers to pay for his excavation company to do the work on his property?A good gig if you can get it, I suppose. The PLW owner has also mentioned he would like funds to pay for a "storage building on the water district's lot."It appears that PLW wants us to pay for their infrastructure that has nothing to do with our water.These appear to be one-time expenses that they want to mix into our on-going monthly rates. PLW mentions in their application to the IPUC other grandiose improvements, like "modern technology to monitor its water...water tank levels, temperatures and well levels",security fencing around the well house property,and a backup generator" These will be company assets and should be booked as such, not added to the base rate of providing the commodity(water). I'm guessing to check all of the meters it might take 2-3 hours per quarter.The owner of PLW lives a block or so away from the water tank, so checking the tank can't take much time either. If PLW wants those improvements, that's their prerogative, but not something rate payers should have to pay for. The owner has claimed that since he bought PLW from Larry Marvin in 2020-21 he hasn't taken an income from the business and yet he was able to pay the business off within three years from the profits of the company. While not"income"subject to FICA, etc., using profits in this manner is the equivalent of getting paid. He also owns a couple of trucks, a Kubota UTV, a Pump truck and so forth.Without a Balance Sheet we have no way of knowing which items, if any, are considered PLW property versus private property. I recently read, IDAPA 31 -IDAHO PUBLIC UTILITIES COMMISSION,31.36.01 -Policies and Presumptions for Small Water Companies. It states under the heading, "What is the purpose of this rule" "It is presumed that the capital investment in plant associated with the system is contributed capital, i.e., that this capital investment will be excluded from rate base." I also want to note that in the IPUC CPCN document (pg. 3 of 4) under`Rates and Rules', it states that "it is expected that there will be start-up losses in the operation of the system until the number of customers has reached 75% or 80% of the number for which the system was designed" Marvin Estates is currently about 63% complete, as far as lots having water, so whoever operates the water system should expect some losses going forward for a while. Another point that I think is important is that with the new, higher proposed rates, PLW has increased the monthly standard usage allowance to 30,000 gallons from 10,000 gallons. doubt anyone uses anywhere near that amount of water per month. Perhaps in July- September a few homes use that quantity. I don't have access to those records, but in speaking with many neighbors, only a couple have ever been hit with the surcharge for exceeding the 10,000 limit, and again, it was for a month or two in the late summer. Their overage fees, even at the newly proposed $3/1000 gallons, would never come close to $98/month. In other words, the 30,000 gallons vs 10,000 gallons a phantom benefit that comes at a very high real monthly cost. Please know that most of us are retired or working-class families. Our homeowner's insurance went up massively this year(40%to 100%)for all of us. Inflation is making everything cost more. Our property taxes went down this year only because the school levy failed. Do people have to make a choice between affording water or helping educate the kids in West Bonner County? Again, I'm very confused as to why the IPUC has recommended this large rate increase and hope you will reconsider after seeing the evidence provided by PLW and comments from the neighborhood. I could go on, but hopefully this is sufficient for you to not approve the requested massive increase in our water bills. Respectfully, Peter Bock From: Donna Herak To: secretary Subject: PLW-W-24-02 comments Date: Wednesday,January 22,2025 4:08:12 PM Attachments: IPUC PLwater Ilc case comments.docx CAUTION: This email originated outside the State of Idaho network. Verify links and attachments BEFORE you click or open, even if you recognize and/or trust the sender. Contact your agency service desk with any concerns. To Whom it may concern: Attached are my comments regarding PLW-W-24-02 rate case. Please post to the website at your convenience. Donna Herak IPUC Case PLW-W-24-02 Priest Lake Water, LLC/Marvin Estates Comments submitted by Donna Herak, 72 Turtle Lane, Priest Lake ID 83856 IPUC Staff and Commissioners: I own property in Marvin Estates and am a customer of Priest Lake Water LLC, which has requested a rate increase in water rates, hook up fees and commodity charges over minimum use. BACKGROUND Priest Lake Water, LLC is owned and operated by Jarod Horlacher, a current resident of Marvin Estates. His full time business is Excavation Services. This water system exclusively services Marvin Estates. Water rates prior to this proposed increase in rate schedules never made a distinction between "commercial" and "residential" lots. All were equally charged. Commercial businesses on commercial lots over many years have consisted of a bookkeeping practice, a massage therapist, an electrician company and 2 vacation rentals (Airbnb/VBRO). We have a commercial lot in Marvin Estates and have been a water customer since 2009. My understanding is that in 2023,the Priest Lake Food Bank attempted to purchase a commercial lot on HWY 57. The purchase of the lot was held up because the water company operator said his current water right did not allow for service to commercial lots.The water operator indicated he would apply for a commercial water right to rectify the situation, and the sale to the Food Bank was consummated. The water right was granted (see Appendix 5b of the application) in May of 2024. The application for CPCN and increases in rates and fees segregating into commercial and residential fee structures was submitted to the IPUC Oct. 8, 2024. RATE INCREASES Increases requested for water rates-165%, are based on a "proforma revenue requirement"that arrives at a $98/month be charged to 72 customers in order to erase that deficiency and achieve a pre- determined level of profitability. I have multiple questions as to the necessity of many of the items that go into generating that deficiency, as well as other charges and fees being proposed. I contend that this rate structure is exorbitant and unjustified, as well as inadequate to serve the variety of different lot characteristics defined and enforced by the Marvin Estates HOA. Attorney Fees: The attorney fees incurred by PLWIlc to procure the commercial water right(referred to above), and apply for a CPCN and rate schedule are being amortized at$2500/yr as "rate cases expenses" (exhib 2 schedule B) and in the "proforma revenue requirement"( exhib 4)., and contribute to the income deficiency arriving at the requested rate increase of$98/month. Is this is an allowable expense that is necessary to the operation of the water system, and if so, over how many years are these expenses being amortized. Does it comport with NARUC practices? Hook-up fees: Appendix 10 of the application includes current monthly water rate, but no mention of current hook up rates. The last rate info pertaining to hook up rates in my records indicates in 2021, hookup fees were $1200 for% meter residential. I can provide the IPUC with a pdf of this 2021 water agreement between lot owners and PLWIlc if necessary. I am surprised it was not included by the applicant. The proposed rate increase for hookups listed in Appendix 11 are$7500 for residential and $10,000 for commercial. Schedule 3 of appendix 11 indicates commercial and residential costs for both at$7500. The residential hookup rate increase is 525%. The commercial hookup rate increase is between 455%and 733% depending on what size meter (3/4",1" or 1.5" ) at the proposed $10,000 hookup rate. Commercial properties prior to this rate proposal were hooked up at residential rates, with no distinction. In Exhibit 13F of the application, Section 9.1 it states that: "The service connection is the property of the company, and as such,the company is responsible for its installation and maintenance. It consists of piping, curbstop and valve or meter box and a meter......" If these service connections are the property of PLWIIc,that would mean that they are part of the company's overall system, and would be capitalized and depreciated over the useful life of 35 years (according to NARUC practices). It appears that customers are paying the entire cost of the water company's connection apparatus up front, and then are also having the depreciated cost factored into their rate structure, thus paying again for their connection over time. Depreciation expenses are included in the "proforma revenue requirement" exhibit 4. In appendix 13E (company tariff), PLWIlc indicates that the COST of the hookup for both commercial and residential lots is$5999 for materials and $1500 for labor, $7500 total. In appendix 11 under "proposed rate structure"the "commercial new connection fee is listed at$10,000. There is no proposed "residential new connection fee on that page. On the following page, "schedule no. 3"there is a table that indicates residential AND commercial hookup fees are BOTH $7500. So the cost of the hookup is$7500 and the revenue fee for hookup is $7500, which would imply that PLWIIc procures no profit from a hookup, a/k/a a "wash". It could also indicate that the revenue fee for hookups is being capitalized,thus inflating depreciation and decreasing profitability. This accounting practice would understate income and make the company appear less profitable than it actually is. On PLWIIc's 2021 and 2022 profit and loss statement, there are revenue line items for hookups of $23,600 and $14,000 respectively. There is no balance sheet included, so it can't be determined if costs of these company owned hookups were capitalized and are a component of depreciation expense or if the costs of these hookups are perhaps in "materials for water system" expense. There is confusion and contradiction regarding the hookup fee issues and I would request the IPUC review these charges,fees and practices for consistency and reasonableness. I do not understand why commercial hookups should be so much greater than residential hookups, unless to discourage commercial activity. I also do not understand how costs of hookups could have increased up to 733%. Notices: Appendix 12, "copy of notice"to customers does not disclose the hookup rate fee increases. Copy of notice included in this appendix differs what customers received. Copy of notice included in Application filed 10/9/24 was not sent to customers until 1/2/25. Additionally, lot owners who are not current customers may not have received notice of rate increases because the notice was included in the quarterly billing. They don't receive a quarterly billing as they are not customers,yet. For example,the Priest Lake Food Bank, which purchased a commercial lot in 2023, has not received any notice that their proposed hook up fee may be increased by 733%.Are lot owners who have not yet built and are not yet water customers entitled to know of dramatic changes that could affect their plans? How would they be able to dissent to the proposal if they are not informed? Commodity Charges While there is a proposed increase in minimum usage from 10,000 gallons per month to 30,000 gallons per month included in the monthly rate increase, many residents cannot use that level of volume, so this benefit is negligible. Many residences have a native landscape that does not require intensive water. Lawns do not dominate the landscape. In those that do, most overages occur in July to September, and in many cases rarely if ever exceed 30,000 gallons/month. PLWIlc has received revenue for those overages. EPA studies indicate the average household uses 300 gallons of water/day. Average monthly household usage is 9300 gallons per month. PLWIlc is proposing to increase the minimum to 30,OOOgal/month for all lots as justification for the rate increase. In reality, there is no benefit to residential lots, and certainly not to commercial lots that have no residence or business, but are simply shops or storage facilities that do not consume water at household rates. There is no justification to hike water rates to account for these increased minimums given they are rarely breeched. RV lots,ADU,duplexes: Marvin Estates has one section for RV lots. They were designed by the original developer and water company owner to accommodate people who only spend the summer at Priest Lake. The HOA rules restrict residential use of these lots to only 7 months out of the year. The water rates in 2021 and prior accommodated this reality and were charged only for those months, so 50 to 60%of what full time residences paid. My understanding is that Priest Lake water Ilc increased these lots' water rates to be charged year round within the last year or so, even though RV lot owners technically cannot occupy those lots, nor do they use water during the imposed vacancy. The current rates charged these RV lots was not included in appendix 10 or 11. Restricted RV lots proposed rate schedule turns them into "residential" lots and charges them as such. PLWIlc is proposing an additional $50 just because its and RV lot. Is that per month or per year? It's not clear in the application. The Marvin Estate HOA restricts many residential lots to only single family occupancy. Even if a residential lot had an A.D.0 or other extra detached living space, it is not allowed to be rented or otherwise occupied by another family or person, other than as an occasional non-paying guest. PLWIIc proposed rate schedule charges these single family residences with and ADU with a $50 surcharge (per month?year?application is not clear)Technically, there can be no additional demand on the water system because they cannot accommodate another family per HOA rules. COMPARABLE COMMUNITY WATER RATES Water rates in the adjacent communities, Outlet Bay, Island Crest, Warren Beach, and Huckleberry Bay pay$30/mo, 21/mo.,21/mo and $40/mo ($80/mo water AND sewer)., respectively. If Marvin Estates is burdened by a $98/month rate, all of our properties immediately become non-competitive with comparable properties. The marketability of our properties becomes more challenging, and property owners will have to decrease asking prices to account for this perpetual outlandish rate schedule. REVENUE SHORTFALL 72 lots are current water customers,41 lots are not current water customers. Of those 72 water customers, some portion of those have not built a structure of any kind. They are in a "standby" position and yet they are paying monthly residential water rates as if the property was occupied full time. Very little water, if any, is used by these lots. There is no "standby" rate structure afforded them.The system was designed for 113 lots. It cannot expand outside its boundary at this time. Per CPCN Background info pdf found at IPCU website, page 3 "Rates and Rules": "If a company is serving a new development, it is expected that there will be start up losses in the operation of the system until the number of customers has reached 75or 80%of the number for which the system was designed". While Marvin Estates was established some years ago, it is still developing.The development sits currently at 64%capacity (72/113 = 64%) Losses at prevailing water market rates are to be expected. PLWIlc has provided the operator$42,162 of income over the three year period since it was purchased. The original owner incurred significant losses. The current operator was spared this economic loss, and was able to payoff the entire note payable (original Purchase$50,000) within three years utilizing this profit. It appears to this customer that PLWIIc's proposed rate is an attempt to force existing water customers to cover the shortfall caused by lack of development. At the proposed rate of$98/month,this exorbitant rate will discourage vacant lots in Marvin Estates to develop, or even consider becoming a water customer, potentially exacerbating the customer revenue issue. Once the development has all lots as customers, will the 72 lot owners who covered the revenue shortfall caused by the vacancies be refunded for their charitable contribution to PLWIIc? FINANCIAL STATEMENTS: Financial statements do not include Balance Sheet. Are assets being depreciated necessary to the operations of the water system? Do they include unnecessary equipment or equipment that is for occasional use that could otherwise be rented when needed? Is equipment utilized in the owner's primary excavation business on the water company balance sheet? Is the depreciation expense of the water system unnecessarily overstated? Are proposed assets to be acquired (item 9 of application cover sheet) such as inventory storage buildings necessary to the operation of the company? This cannot be discerned in the application. In the years 2021,2022 and 2023,there are over$41,000 in expenses for the line item "Materials for Water system", representing 54%, 58%and 39%of total expenses, respectively. How much of these expenses are actually capital expenditures? A water system is comprised of many small components that in aggregate make for one large asset, "the system". In the test year this number is $10,446. Are expenses that should be capitalized contributing to the "income deficiency" and thus the rate structure? Also, are any of these expenses for materials for future use, aka "inventory" an asset,which should only be expensed when utilized in the future,thus incorporating future expenses into the proposed rate structure in perpetuity? This can't be discerned in the application. Labor and contract services represent 100.8%of the "known changes" making up the "pro forma" expenses used to determine the proposed rate increase. The water company operator currently is the sole provider of those services, exclusively so.There does not appear to be any opportunity for competitive bidding for contracted services allowed.That is to the detriment of the rate payer. PLWIIc income in 2021, 2022, and 2023 generated enough profit to pay off the entire cost of what he purchased the entire system for in 2020. In essence, it appears the water operator in his "proforma" appendix 8, is reclassifying his current profitability into "wages and contract labor", an expense,thus driving the "proforma revenue requirement" (exhibit 4) into a deficit,which arrives at an excessive rate fee born by the customers of the system. This seems like double dipping,guaranteeing both a desired wage AND a desired profitability. Return on investment is determined by the risk of the investment,the higher the risk the higher the return expected. The operator has built in virtually no risk, but yet is asking for an 11% return on investment, in addition to guaranteed wages and profitability. Depreciation of water system assets are governed by NARUC depreciation practices. Useful lives for water system assets are quite long... 20 to 50 years depending on asset class. Has this practice been applied by PLWIIc?Applying shorter useful lives would contribute to greater expense than necessary (less profit) and thus contribute to an expense structure that indicates higher rates than necessary. I ask the IPUC to investigate these financial issues and their contribution to the "proforma income deficiency", resulting in the excessive rate schedule proposed. CONCLUSION: PLWIlc is a very small water company that is at only 64%of its capacity and revenue realization. The operator worked for the prior owner and knew the condition of the system and acquired it at a bargain. We all want the company to succeed, but it is currently a marginal operation due to lack of development. While the operator may want all of the bells and whistles of a state of the art system,that system should be built out when profitability allows. These increases appear to be exorbitant and unsupportable. The Marvin Estates neighborhood is comprised of retirees and working class families. This rate increase is unaffordable to most residents, especially retirees on fixed incomes and working class folk who are not seeing commensurate wage increases. The delineation between commercial and residential rate structures proposed is a complete surprise to those 30 commercial lots that have been in existence from the beginning. It seems the distinction between the lot characteristics could simply be addressed by the commodity charge over volume included, and the volume included should be representative of actual average use. I would ask that the IPUC investigate the finances of PLWIIc in order to resolve customer concerns about increases in their proposed rate structure. This request is simply unjustifiable and unaffordable to its current customer base. Thank you. Donna Herak From: DAVID BUTENSCHOEN To: secretary Subject: Comment on Priest Lake Water file Date: Wednesday,January 22,2025 9:55:17 PM Attachments: Hookup Fee(2).docx CAUTION? This email originated outside the State of Idaho network. Verify links and attachments BEFORE you click or open, even if you recognize and/or trust the sender. Contact your agency service desk with any concerns. Could you direct this to the Commissioners? Thank you very much. Idaho Public Utility Commission January 22, 2024 P.O. Box 83720 Boise, ID 83720-0074 11331 W. Chinden Blvd. Building 8, Suite 201 -A Boise, ID 83714 To whom It May Concern, I am writing again to further address the hookup fees listed on page 88 in Priest Lake Water LLC's filing IPUC Case # PLW-W-24-02. I am a retired plumber/pipefitter and have worked for several years as a cost estimator for a large plumbing and pipefitting corporation estimating material and labor costs to competitively bid jobs. My wife and I own Lot 12, Block 1 of Marvin Garden Estates which is presently a vacant lot, so I am very concerned with this severely overinflated hookup cost. I find the stated cost for labor and material of $7444 for a new hookup is very inflated, vague, contradictory, and, I believe this should definitely be reviewed by the Commission. On the material side of the schedule Mr. Horlacher's list of materials include "meter, meter pit, distribution line, valve(s), additional parts and materials, etc." (?) I priced out the listed material and included a meter setter with a backflow double check valve and water shutoff valve, which wasn't listed on the schedule. Without having the knowledge of the exact models and brands he plans to use, I priced high on all items (including the meter pit which I question the need) and came with an estimated cost of less than a third of the $5944 Mr. Horlacher has listed. The reason I question the meter pit is because Item 13 on page 6 of the filing states that vacant lots have meter pits installed, but they need to be replaced. Here he refers to item 9 on page 4 where he states that the wrong meter settler [sic] was used and the service needs a backflow double check. A lead free meter setter with a double check backflow preventer and a valve is readily available on the market that, I believe, will fit without replacing the installed meter pit. (If that what he was getting at) On the labor side I find the "10 hour minimum" exaggerated for setting a water meter. However, without knowing the scope of the work, a "time and material" figure would be more fair. Please see the Stoneridge Case No. SWS-W-20-01 Order No. 34969 for a comparison and final decision regarding an unfair hookup rate. However, this massive rate increase of 165% and the inflated hookup fee is all based on the cost for capital investments. (Please see Mr. Horlatcher's "Exciting News" letter on page 71 of the filing.) According to the Idaho Administrative Code: 31.36.01 -POLICIES AND PRESUMPTIONS FOR SMALL WATER COMPANY 102(Rule 103) "In issuing certificates for a small water company or in setting rates for a small water company, it will be presumed that the capital investment in plant associated with the system is contributed capital, i.e., that this capital investment will be excluded from rate base." I am not schooled in the law, but if I interpret this correctly, everything Mr. Horlacher is basing his rate increase on is to upgrade his infrastructure in the water system, expand his business, and an annual salary of $50,000 minimum. (Appendix 7B Page 52 of the filing) David &Nancy Butenschoen 1166 Lingbloom Road Bellingham, Washington 98226 Owner Lot 12, Block 1 Marvin Garden Estates.