102595v4.docx

Q.Please state your name and address for the record.
A.My name is Terri Carlock.  My business address is 472 West Washington Street, Boise, Idaho.
Q.By whom are you employed and in what capacity?
A.I am employed by the Idaho Public Utilities Commission as the Accounting Section Supervisor.
Q.Please outline your educational background and experience.
A.I graduated from Boise State University in May 1980, with a B.B.A. Degree in Accounting and in Finance.  I have attended the annual regulatory studies
program sponsored by the National Association of Regulatory Utilities Commissioners (NARUC) at Michigan State University.  I chaired the NARUC Staff Subcommittee on Economics and Finance for over 3 years.  Under this subcommittee, I also chaired the Ad Hoc Committee on Diversification.  I have also attended various finance conferences, including the Public Utilities Finance/Advance Regulation Course at the University of Texas at Dallas, the National Society of Rate of Return Analysts' Financial Forums, the Regulatory Economics and Cost of Capital Conference in Utah, a Standard & Poor's Corporation Telecommunications Ratings Seminar and other non-utility specific finance seminars.  Since joining the Commission Staff in May 1980, I have participated in several audits, performed financial analysis on various companies and have presented testimony before this Commission on numerous occasions.
Q.What is the purpose of your testimony in this proceeding?
A.The purpose of my testimony is to evaluate the rate case Application of Capitol Water Corporation (Capitol Water or Company) in this proceeding.  I will discuss the Settlement Stipulation between Capitol Water Corporation and the Idaho Public Utilities Commission Staff (Staff).  I will provide a summary and overview of the Settlement Stipulation and explain why I believe the Settlement Stipulation is in the public interest.  I will also present the capital structure and costs for Capitol Water utilized in the Settlement Stipulation.
Q.Have you prepared exhibits to accompany
your testimony?
A.Yes, I am sponsoring Exhibit Nos. 107 and 108.
Exhibit No. 107 consists of the Settlement Stipulation between Capitol Water and the Staff.  Exhibit No. 108 reflects the capital structure and costs utilized.
Q.Please summarize the settlement provisions.
A.The following outline reflects the terms of the Settlement Stipulation:
*Rates will be set to recover additional revenues of $26,533 above 1994 adjusted base revenue levels as shown on Attachment No. 1 to the Settlement Stipulation.
*Rates will be increased as reflected on Attachment No. 2 to the Settlement Stipulation.
*Capitol Water agrees that it will install meters to measure flows from all of the Company's wells.  *Capitol Water will adequately document vehicle expenditures by vehicle.
*Capitol Water will institute reasonable procedures to maintain written records of all customer inquiries and complaints received by the Company.
*Capitol Water will continue to promote water conservation efforts.
*Capitol Water will restructure its capital financing to more accurately reflect Company Debt.
Q.Please explain why the Settlement Stipulation is reasonable and in the public interest.
A.The Settlement Stipulation establishes fair and reasonable rates for Capitol Water customers.  It also implements improvements with the Company's record keeping practices and operations without litigating the arguments and concerns during the hearing.
Q.The Settlement Stipulation will increase revenues by $26,533 above 1994 adjusted base revenue levels.  Why is this reasonable?
A.The increase in revenues is reasonable to provide a return on increased rate base and recover reasonable expense levels for Capitol Water.  Staff witness Stockton discusses the rate base and revenue requirement calculation in detail.
Q.Attachment No. 2 of the Settlement Stipulation reflects the rate levels to be charged by Capitol Water.  How were these rates determined?
A.These rates are established by Staff witness Oliason in his testimony and exhibits.
Q.The metering of the wells has been recommended for many years and was to be completed following the last rate case?  Why is it an issue in the Settlement Stipulation?
A.The metering of wells continues to be an issue since the meters were not operational.  Some of the meters installed were damaged by sand.  Capitol Water will be repairing or replacing meters on the wells and discussing the meter configuration further with Staff.  Staff witness Oliason discusses this further in his testimony.
Q.Please explain the record keeping required for vehicles.
A.Capitol Water has three vehicles that are used for Company business.  The Company will maintain receipts that will adequately identify the vehicle for which the expenditure was incurred.  This will allow more accurate allocation of vehicle expenditures for business and personal use.  Staff witness Stockton discusses the adjustment in this area.  Staff will audit the record keeping practices and improvements of Capitol Water on a regular basis.
Q.Please explain the agreement on promoting conservation efforts.
A.Staff witness Stokes discusses conservation efforts.  The Company has agreed to continue its efforts to promote water conservation.
Q.The Settlement Stipulation lists the requirement to maintain records of customer inquiries and complaints received by the Company.  What record keeping is required in this area?
A.Staff witness Stokes discusses the requirements for customer inquiry and complaint records.  This area of record keeping will also be monitored by Staff and discussed with the Company.
Q.Please discuss the restructuring of debt that the Company will implement.
A.Restructuring of debt was an issue I raised in the interim case.  The Company agrees that its debt does need to be restructured.  I have agreed to assist Capitol Water to find financing sources with more favorable terms.  The Settlement Stipulation will allow the Company and Staff to discuss areas of concern identified in the interim proceeding and work toward an acceptable solution.  Restructuring will improve Capitol Water's financial statements and aid the Company in meeting future financing requirements.  Restructuring will also assist with the cash flow problems experienced with well repairs.
Q.Please explain Exhibit No. 108.
A.Exhibit No. 108 reflects the capital structure and weighted cost of funds used in the Settlement Stipulation for Capitol Water Corporation.  It reflects Company financings as indicated by the records and Company representatives.  Capitol Water was granted an extension for the $15,000 note outstanding and due September 20, 1995.
A return on equity of 12% is used for the Settlement Stipulation.  It is the same return most recently authorized Warm Springs Mesa in Order No. 25445.  I believe a 12% return on equity is reasonable and the Company has agreed to utilize this return in the Settlement Stipulation and focus on restructuring the Company's financings to more accurately reflect Company debt and improve the financial statements.  The overall rate of return of 10.78% is shown on Exhibit No. 108.  It is utilized by Staff witness Stockton in the revenue requirement calculation and incorporated in the Settlement Stipulation.
Q.Does this conclude your direct testimony in this proceeding?
A.Yes, it does.