102595.docx

Q.  Please state your name and business address for the record.
A.My name is Donald M. Oliason.  My business address is 472 West Washington Street in Boise, Idaho.
Q. By whom are you employed and in what capacity?
A.  I have been employed by the Idaho Public Utilities Commission as an electrical engineer since January 1990.
Q.  Please describe your educational background and engineering experience.
A.  I received Bachelor of Science degrees in Civil and Electrical Engineering from the University of Idaho and I am a registered Electrical Engineer in the states of Washington and Idaho.  In addition to my work with the Public Utilities Commission, I have had 24 years of experience in various engineering and operating positions with an electric, water and natural gas utility.
Q.What is the purpose of your testimony?
A.The purpose of my testimony is to review the general design of the water system, to review operational problems, to discuss customer metering, and to support the new rates agreed to in the Settlement Stipulation
between Staff and Capitol Water Corporation (Capitol Water; Company).
Q.What conclusions have you reached?
A. I conclude the following:
1.  The water system is properly designed and is adequate to serve existing customers.
2.  The pressure problem encountered this past summer will be improved by the return of Well No. 3 to production.
3.  The iron problem needs the attention of a consultant.
4.  Installation of residential meters is not cost effective.
5.  Well metering should be repaired and made operational as agreed to in the Settlement Stipulation.
6.  New rates should be established by adding a uniform percentage to the tariffs as identified in Attachment No. 2 of the Settlement Stipulation.
SYSTEM DESIGN:
Q.Please describe the general configuration and design of the water system operated by Capitol Water Corporation.
A.Capitol Water serves 2,220 residential customers and 147 commercial customers in an area of approximately four square miles in the near southwest part of Boise.  It is bounded roughly by Northview Street on the south, Ustick Road on the north, N. Maple Grove on the west, and Curtis Road on the east.
The system has six wells.  Well No. 3 was recently de-rated from 1,500 gallons per minute (gpm) to 850 gpm.  Well No. 2 was previously de-rated from 500 gpm to 250 gpm.  The current capacity of all six wells is  5,200 gpm.  I will discuss the potential effect of the reduced capacity later in my testimony.  The wells are pressure regulated and designed to turn on whenever pressure sensors call for more pressure.
There are no storage reservoirs but this is not unusual for small water systems.
Commercial customers are metered and pay a metered rate.  Residential customers are not metered and pay a flat rate.
Water mains are generally 6-inch and 8-inch in diameter and provide adequate fire flows.
OPERATIONAL PROBLEMS:
Q.Has Capitol Water experienced pressure problems?
A. Yes.  During the peak irrigation time for 1995, Well No. 3 was out of service for repairs which left the system with a reduced capacity of 4,350 gpm.  At some parts of the system, pressure was measured at      35 pounds per square inch (psi).  This is a fairly low pressure but still above the 20 psi minimum set by the Division of Environmental Quality.
Q.With Well No. 3 back in operation, will that eliminate a low pressure problem next summer?
A.It is possible that the system may not operate at design pressure during next year's summer peak consumption, but any pressure decrease should be less than experienced this past summer.  The system capacity last summer with Well No. 3 out of service was 4,350 gpm.  Next summer the system capacity will be 5,200 gpm.
Q.If there should be a pressure problem next summer, what do you recommend?
A.Capitol Water tried alternate day lawn watering this past summer with unknown success.  I recommend a much more intense promotional campaign to influence customers if a pressure problem should arise.
Q.Capitol Water has a problem with iron discoloration.  How do you assess this problem and what do you recommend?
A.At the present time I would rate this problem as moderately severe aesthetically.  It causes an orange-brown color and stains appliances.  It looks bad.  Capitol Water has been giving its customers a free chemical that cleans washing machines, dish washers, etc to alleviate the problem when rust appears.
The Idaho Division of Environmental Quality advised me that iron in the water will not endanger anyone's health.  Iron discoloration is not a continuous problem and tends to show up during the summertime.  
There are several solutions to this problem.  One is to chlorinate the water to kill the iron bacteria and at the same time add a sequestering agent to the water which acts to keep the iron in solution.  Other alternatives are to drill a new well, or deepen the existing well and hope that the new water will have much lower concentrations of iron.  These are not easy solutions and I encourage the Company hire an experienced consultant to determine the best course of action.
CUSTOMER METERING:
Q.During Capitol Water's last rate case there was discussion about whether or not meters should be installed for residential customers.  At that time the recommendation was that meters should not be installed because of cost.  Do you have any reason at this time to recommend otherwise?
A.No, I do not.  It is true that metered customers use less water on the average than unmetered customers.  For the Capitol Water system, I estimate that the peak demand would average about 1.7 gpm per customer if customers were metered.  Without meters, customers use about 50% more, so 2,200 Capitol Water customers require an additional 1870 gpm compared to metered customers.  When customer growth requires an additional source of water, residential meters, by reducing peak demand, could save the investment in a new well of about $150,000.  On the other hand the cost to install meters for 2,200 residential customers would be $1,100,000.  This estimate is based on the unit costs of United Water Idaho which turn out to be $500 per meter.  The effect on rates would be an additional $5.00 per month for each residential customer.  There are other advantages to having customer metering.  The Company could identify system growth fairly precisely and know when to plan for a new water source.  Meters would eliminate any argument that a low-use customer is subsidizing a high-use customer.  Each customer would pay in proportion to use.  Meter data would allow a review of the allocation of costs between residential and commercial customers and allow a better estimate of daily peak consumption.  However, some of these advantages can be achieved by having meters on the wells.
I inquired of the Idaho Department of Water Resources and the Division of Environmental Quality regarding the status of the aquifer in the vicinity of Capitol Water's service area.  I was reassured in each case that Capitol Water's aquifer (500 to 700 feet deep) is not in any danger of depletion.  A news article in the Statesman on 9/27/95 expressed concern about the aquifer in the “Boise area.”  However, the aquifer discussed was that which exists from 100 to 150 feet below the surface, not the deeper aquifer used by Capitol Water.
In summary, I find that the installation of residential meters is not cost effective.  If the Company will make its well metering operational, we can get data on consumption that is almost as good as from residential meters because we can subtract the commercial consumption from the total well production to get the residential consumption.
Q.In Capitol Water's last rate case, the Commission directed the Company to install meters on its wells.  Was this accomplished?
A.Yes, for the most part.  Meters were installed on five of the six wells.  No meter was installed on Well No. 2 because there was no room in the well house and it would have been very expensive to build a vault to house the meter.  This is not a problem because Well No. 2 is the smallest well at 250 gpm and its contribution to the system can be reasonably estimated.
Meters at Well Nos. 1, 3 & 4  are not operational and need repair or replacement.  Information from these meters will provide the basis to review the allocation of costs between residential and commercial customers.  In the Stipulation Settlement, the Company has agreed to repair and keep these meters operational.    RATE DESIGN:
Q.Do you recommend any change in rate design from existing tariffs?
A.No.  We presently have no data with which to review the sharing of revenue requirement between commercial and residential customers.  Staff witness Kathy Stockton recommends a revenue requirement that is 6.97% above the pro-forma test year revenue.  I recommend that a uniform 6.97% be added to each tariff schedule in accordance with the Settlement Stipulation.
Q. What rates have been stipulated to?
A.The rates for most residential customers (3/4 inch service) will increase from $8.06 per month to $8.62 in the winter and in the summer with lawn watering, the increase will be from $18.40 per month to $19.68
Commercial customers have a three-step metered rate.  The first step increases from $0.79 to $0.85/100 cu. ft.; the second step increases from $0.45 to $0.48/100 cu. ft.; and the third step increases from $0.34 to $0.36/100 cu.ft.  For a complete list of new rates with each meter size, see Exhibit No. 111.
Q. Please compare Capitol Water's new rates with the rates of United Water Idaho and South County Water.
A. In the summertime, typical residential water consumption is 5,000 to 7,000 cubic feet.  Capitol Water’s residential customers will pay 30% to 70% less than customers of South County Water, and they will pay about one-third of the United Water Idaho price.
In the wintertime, typical residential water consumption is less than 1,000 cubic feet.  A typical winter bill will be $7 to $9 for customers of Capitol and South County Water, and about $12 for customers of United Water Idaho.
Summer or winter, the prices to be paid by commercial customers of Capitol Water will be almost identical to the prices of South County Water.  United Water Idaho prices are roughly double those of the other two water companies.
Exhibit No. 112 shows monthly bills for different amounts of consumption for Capital Water, South County Water, and United Water Idaho.
Q.Does this conclude your direct testimony?
A.Yes, it does.