20030310_406.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:LISA NORDSTROM
DATE:MARCH 6, 2003
RE:NON-COMPLIANCE
SYSTEM.
OF PONDEROSA TERRACE ESTATES WATER
On August 8, 2002, the Commission authorized Ponderosa Terrace Estates Water
System (Ponderosa) to collect monthly rates in the amount of $48 for Full-Time and Part-Time
customers and $25 for Active Service customers 1 for service rendered on or after August 1 , 2002.
Order No. 29086. In its Order on Reconsideration the Commission directed Ponderosa and
Commission Staff to submit a report detailing customer class inventory (membership) changes
once the grace period expired on October 15, 2002, and the impact these changes may have on
Ponderosa s revenues. Order No. 29123.
Staffs Report indicated that even though Ponderosa was under-collecting its revenue
requirement, neither Staff nor Ponderosa recommended a change in rates at that time. Report at
2. Based on a number of inquiries received by the Commission, it was apparent that some
confusion existed regarding the implementation of the Commission s Orders and the Company
treatment of seasonal disconnections. Because Staff and the Company did not agree on the
treatment of seasonally disconnected customers, Staff requested clarification of Order No. 29086
in that regard so that it could properly advise customers and the Company. Id.
In response to these concerns about seasonal disconnection, the Commission in
December 2002 clarified Order No. 29086 and authorized Ponderosa to involuntarily move a
customer to the Inactive Service customer class if the customer remained disconnected from the
system for longer than eight full months. Order No. 29172. If the customer later sought to
1 "Active Service" customers have service extended to the lot and have aboveground access to water.
DECISION MEMORANDUM
resume service after the eight months had passed, the Commission directed Ponderosa to retain
the following information to justify imposition of a $2 500 hook-up fee: 1) its customer payment
and disconnection records and 2) proof that notice ofPonderosa s intent to move the customer to
Inactive Service and require a $2 500 hook-up fee upon reconnection was sent via certified mail.
Id.
NON-COMPLIANCE WITH ORDER NO. 29172
Ponderosa Letter to Customers:Several customers sent Staff a copy of a Company
letter dated January 2, 2003. The letter (Attachment A) advised customers that the "Ponderosa
Terrace Estates Water System Inc. is no longer going to be involved with the Idaho Public
Utilities Commission." Mr. Robaer Cobott, Ponderosa s owner and author of the letter, noted
that "since P.C. has been involved in my water system I have lost many customers" who have
drilled wells or withdrawn from the system. He further informed customers that this had reduced
Ponderosa s annual revenues by $9 200 from the $26 600 Commission-authorized revenue
requirement. As a result of Order No. 29172 issued in December 2002, Ponderosa asserted that
the Commission s decision to allow Part-Time and Active Service customers to pay for just a
four-month minimum of water reduced the Company s revenue by $6,400. Consequently, the
Company s annual revenues are now less than $10 000.
Mr. Cobott wrote
, "
this water system cannot operate under the current condition that
u.C. is trying to impose" and that he is going to try to save the water company for those
customers needing service. Effective January 1 , 2002, Mr. Cobott informed customers that only
two customer classes - Resident and Non-Resident - would exist, as he had "before the P.u.e.
got involved." Under his plan, Residents (a customer "who lives on his property all year ) pay
$48 per month and Non-Residents ("part-time use or no use at all") pay $25 per month.
Although this rate structure is similar to the one approved by Commission Order No.
29086 August 2002, Mr. Cobott deviated from the Commission s seasonal disconnection
directives in Order No. 29172. The letter threatened customers that "if you do not pay a monthly
charge to help maintain this system then you will not be able to hookup to the system in the
future." Thus, Non-Residents must pay a monthly charge of $25 per lot to keep water service.
Ponderosa allowed customers that are not currently making monthly water payments 30 days
from the date of the letter to decide whether to be part of the system or "be withdrawn from any
future use from this system.
DECISION MEMORANDUM
Under these conditions, Mr. Cobott believes that the Company will still be operating
$10 000 under the Commission-authorized revenue requirement if every customer pays their bill.
In closing, Mr. Cobott stated:
Last year P.C. caused me to lose $20 000 and they don t care. P.u.C. lied
to me, they told me that when their decision was made it was final. P.u.C. are
the ones that said the operating cost per year had to be $26 600. What gives
them the right to destroy this company and put the landowner into a situation
that might eliminate their water service.
Staff Letter to Ponderosa After receiving calls from customers and a copy of the
letter described above, Staff engineer Michael Fuss sent a letter (Attachment B) to Mr. Cobott on
January 23 , 2003. Although noting that some of the statements in the Company s January letter
were contrary to the Commission s Order, Staff indicated that Ponderosa s rate alternative may
have some merit given the Company s current financial situation. Staff requested Mr. Cobott'
assistance in gathering specific information that Staff could use to file an updated report with the
Commission. This report would examine the Company s financial status and determine if it had
deteriorated since October. The report would also evaluate whether Ponderosa s rate proposal
might improve the Company s financial status. Staff requested that Mr. Cobott provide the
requested information no later than February 18, 2003. Although Staff emphasized that
continued communication with the Commission was the best approach for Mr. Cobott and his
customers, as of this date Mr. Cobott has not responded to Staff s letter and information request.
Customer Bill:In early February, Staff received a copy of a customer bill
(Attachment C) in which Ponderosa charged a customer that had seasonally disconnected two
Non-Resident lots last fall for water service rendered the month of January 2003. The customer
paid Company employee Larry Fairfax $50 "upfront" to shut off the valves to these lots several
months ago. Because the customer was seasonally disconnected and did not request water
service during the month of January, Staff alleges the amount charged was contrary to Order No.
29172. The customer told Staff that he intended to pay the bill but that if the billing was
improper the Commission could return the payment to him.
STAFF RECOMMENDATION
Staff has attempted to work with Ponderosa to address the Company s concerns about
the rates imposed in Order No. 29172 to no avail. The Company is non-responsive to Staff
inquiries and customers are uncertain whether they should pay the amounts billed by Ponderosa
DECISION MEMORANDUM
or the amounts authorized by Commission Order. Consequently, Staff alleges there is sufficient
cause and recommends the Commission initiate an Order to Show Cause docket for Ponderosa
Terrace Estates Water System under a new case number. Prior to holding an evidentiary hearing
in Sandpoint, Staff recommends the Commission direct Staff to prefile testimony outlining
Ponderosa s failure to comply with Commission Orders, to which the Company would be
required to respond by a date certain prior to hearing. The Company s testimony should address:
1) why the Commission should not seek imposition of civil and/or criminal penalties for non-
compliance with Commission Orders; 2) explain how the Commission s current rates are
inadequate to recover Ponderosa s expenses; and 3) explain what rates Ponderosa believes
should be implemented. Because Mr. Cobott has refused to sign for and accept notice by
certified mail in the past, Staff recommends that Mr. Cobott be served with the Order to Show
Cause by personal service.
If Ponderosa fails to appear at the hearing, Staff recommends that the Commission
consider exercising the civil and criminal remedies available through the judicial system. This
may include: 1) petitioning the 1 5t Judicial District for an injunction prohibiting Ponderosa from
charging rates different than those ordered by the Commission; 2) requesting the Court place the
Company in receivership; or 3) filing criminal misdemeanor charges under Idaho Code ~ 61-709
for failure to comply with a Commission Order.
CO MMISSI ON D ECISI 0 N
Does the Commission wish to adopt Staff s recommendation as described above to
initiate an Order to Show Cause against Ponderosa? If not, how does the Commission wish to
proceed?
~~f::m
M:Ponderosa OSC In
DECISION MEMORANDUM
. f E. WATER SYSTEM INC.
2626 "Loop Road
~~~p~ ' ,_
!!!o 83864
T elephont: 208-263-2720
*ear Landown
1: This Ie is to serve notice to landowners that the Ponderosa Terrace Estates Water
Ystem Ine. is . longer going to be involved with the Idah0 ~ublic ~tilities C~mm~ssion.
he P. U.C. has ade me conform to all their demands including taking all my mvOIces on
e operation 0 e water system to Boise so they could come up with a yearly opera,ting ~~
....,.. '" '.', -"...
st to operate water system. I disagreeded with their finding so there was a formal
aring in Jun 002 in Sandpoint Idaho to try an resolve the problems. Bero~e the heanBg
e P.C. said at the operating expense was $24,000 plus and after the hearmg the
xpenses were ermined to be 526,000 plus. The P.C. put all landowners in different
, asses deterrni by their water hookup on their lot. This gave the P.C. the ability to
arge the diff, nt landowner based on how tbey had classed them. The P.C did this
nd I was told at to charge the different classes so that the revenue received would
ke care of th xpenses. Since P.C. has been involved in my water system I have lost
any costome Some have put in their own well and otbers have just withdrawn frolD: the
stems. Did y , know that if a landowner puts in a well 8Dd your lot is next to JIb that y~ur
twill probab be coDsidered worthless. This information'I received from the Panhandle
: ' ealtb DepL ch states that a septic system can not be put in any closer than 100 feet
: all direction On October 30, 2002 Michael Fuss came up to the water system and took
. customer cia "nventory and came up with over a 56000.00 loss in revenue which reduced
.be an Dual rev ue to less than 520,000.00. Since October I have loss more customers which
.otals 53200.' loss revenue. Then the P.c. changes their mind and states that all
part time dwel : g, and active service customers only have to pay for water payment 4-months
tf the year. T ' reduces the revenue another $6400.00 a year. At this time the revenue to
tperate the sy ,has been reduced to less than 510,000.00 per year. Because of the above
1 have decided handle this problem myselve. There will be 2 classes of customers like I
~ad before P. '. got involved. Resident aDd Non-Resident. Resident customers will be charged
$48.00 per mo , and Non-Resident customers will be charged 525.00 per month. Resident is
.. customer tha ,ives on his property all year. Non-Resident is part time use or no use at alL
~on-Resident , not be used for resident use. If you as landowners, resident or non-resident
.0 not ~ay am , thlycharge to help maintain this system then you will not be able to hookup to tbe
4ystem m the f -, reo It's not fair for a few to pay for all the upkeep and the rest can come and go
~s ~hey please. ,his water system can not operate under the current condition that P.c. is trying
;0 impose. I'm ing to try to save this water company for all of you my customers that need
~his service. If ,u want to put in 'your own well please check first on all the different cos~ and""hat your mo ly electric charge will be to operate the well. You will be surprised. La.1downers
J!lbat a~e not m 'ng monthly water payments at present have 30 days from the date of this letter
~ decad~ to be rt on ~he syst~m or not. In don t here from you by letter or phone during this
.me period th ou will be withdrawn from any future water use from this system.
January 2, 2003
ATTACHMENT A
PAGE 1 of 2
. here is one th
stem. I will
ays I still-will
ow If I can
lose more th
, eir decission
er year had t
e landowner
rvice to your
r aU Non-
om the wate
nuary 1, 200
that everybody forgets about and that is I Robaer Cobott own this water
ke this system survive for you my customers and for myselve. If everbody
operating $10,000.00 a year under what the P.C. said I needed. I doort
e this work but I'm going to try. Last year P.C. caused the water system
$20,000.00 and they don t care. P.c. lied to me, they told me that when
s make it was final. P.C. are the ones that said that the operating cost
e $26,600.00. What gives them the right to destroy this company and pat
0 a situation that might eliminate their water service. In order to keep water
t or lots you are going to have to pay a monthly charge of $25.00 per lot
ent owners. If payments are not made you wi!! be eUminated permanently
stem. These new conditions described in this letter will go into effect on
THANK YOU
ATTACHMENT A
PAGE 2 of 2
IDAHO
PUBLIC UTILITIES
com mission
Dirk Kernpthorne. Governor
O. Box 83720, Boise, Idaho 83720-0074
January 23 2003
Paul Kjellander, President
Marsha H. Smith. Commissioner
Dennis S. Hansen, Commissioner
Robaer Cobott
Ponderosa Terrace Estates Water System
2626 Wrenco Loop Lane
Sandpoint, Idaho 83864
RE: Customer Letter Dated January 2, 2003
Dear Mr. Cobott:
The Commission has received inquiries from several customers regarding your
January 2, 2003 letter. I understand your frustrations and can sympathize with your situation.
As more customers continue to drill wells and other customers refuse to pay their bills, it appears
likely that Ponderosa will be lUlable to collect its $26 600 revenue requirement. This factual
situation is usually referred to as a "death spiral" - as rates go up to meet the revenue needs of
the utility, more and more customers leave the system, thereby causing a revenue shortfall.
If this occurs, the Ponderosa system may notbe financially viable as a public water
system. The expenses are too high, the revenue ITom too few customers is too low, and the
infrastructure is too strained.. Even though some of the statements in your January 2 letter are
contrary to the Commission s Order, Staff believes your rate alternative may have merit given
the current fmancial situation. Consequently, with your assistance we would like to file an
updated report with the Commission describing how much the financial status of the system has
deteriorated since October and how your rate proposal might improve the financial situation.
In order for us to accurately and persuasively present this information to the Commission
we will need detailed information ITom you. We need to know, to the best of your knowledge:
Which customers have drilled their oWfJ wells and what lots are likely to leave the
system as a result of the well drilling. We ve heard different estimates ITam a
number of customers, but as the OWfJer of the system you are in the best position to
assess how many lots have left the water system.
How many customers remain in each rate classification. Please provide a summary
of the water payments that were made for each month from August to December of
2002. We need this information to demonstrate to the Commission in concrete
numbers the declining status of your system.
Please provide the amolUlt of monthly revenue you expect to receive from your
proposed rate alternative.
ATTACHMENT B
PAGE 1 of 2
Located at 472 West Washington Street, Boise, Idaho 83702
Tplpnhnnp' (?nR\ .qQ.:1.-nQnn I=~('~imilp' (?nR\ qq.:1.-q7~?
Robaer Cobott
January 23 2003
Page 2
Once the information detailing Ponderosa s current financial situation is provided and
described in a Staff report, the Commission will have an opportunity to review the current
conditions, consider your rate proposal and perhaps modify its prior Order. Absent a request by
you and/or the Staffto modify the Order based on new information, the only alternatives are to
comply with the existing Commission Order or consider alternatives to regulation. 'In any case
the Commission needs to have a clear understanding of Ponderosa' s current fmancial situation.
We believe that continued communication with the Commission is the best approach for you and
your customers.
Please provide the above requested information and any other financial information that
you think might help your case at your earliest convenience or not later 'than February 18, 2003.
We will then promptly complete the report and submit it to the Commission. If you have any
questions regarding these tasks, please do not hesitate to contact me directly at [phone].
It is my hope that we can work together to improve Ponderosa s fmancial situation.
Sincerely,
~chael Fuss, PE
u:mfuss:PTE water/Ol1003
ATTACHMENT B
PAGE 2 of 2
~' ~~~' .;:
!if"
': ."'. :'' ."..Feb 06 03 01: asp D B P Z
. T. K WATER SYSTEM, INC
2626 Wrenco Loop
Sandpoint, ill 83864
208-263-2720
, "'------------
Non-Resident
BIk.1 Lots-
DATE
"-'-", .... --.,
TRANSACTION
1/2/'
1/3/'
1/13/'03
2131' 03
CURRENT
50.
Balance forward
INV
PMT
INV
'-"-..", '"-..---
THIS STATEMENT
IS FOR THE PREVIOUS
MONTH'S WATEF~ BILL
30 DJI.
PAST DUE
......-..,.. """"'-""""-""""'"
31-60 DAY~
:;o
;~ ...
1.
..~:425-252-3566
ta t,emen
~-"" ..
213/'
AMOUNT' DUE M'. OUNT ENC
50.
AMOUNT BALANCE
73.
- 73.
50.
73.
50.
..
DAYS OVER DAYS '\MOUNT DUE
DUE PAST' DUE
50.
. ..,_. ....-.-... ...,'... '...,.-........
ATTACHMENT C
PAGE 1 of 1