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HomeMy WebLinkAbout20160620Transcript Volume I.pdfBEFORE THE IDAHO PUBLIC UTILIT]ES COMMISSION IN THE MATTER OF DIAMOND BAR ESTATES WATER COMPANYIS APPLICATION FOR AUTHORITY TO INCREASE ITS RATES AND CHARGES FOR WATER SERVICE IN THE STATE OF IDAHO ) ) )' ) ) ) ) CASE NO. DIA-W-15-01 PUBLIC HEARING BEEORE COMMISSIONER PAUL KJELLANDER (Presiding) COMMISSIONER KRISTINE RAPER COMMTSSIONER ERIC ANDERSON PLACE:Lakel-and High SchooL 7006 West Highway 53 Rathdrum, Idaho June 7, 20L6DATE: 6 f:Niar fftrr:C)om <\:Ernso CNc) VOLUME f-Pagesl-62 CSB REPORTING C ertifted S ho rth and Repo rte rs Post Office Box9774 Boise,Idaho 83707 c sbreportin g@ yahoo. com Ph: 208-890-5198 Fax: 1-888-623-6899 Reporter: Constance Bucy, CSR ORIGINAL 1 2 3 4 5 6 7 o 9 10 11 t2 13 L4 15 t6 t1 1B 79 20 2L 22 23 24 25 CSB REPORTTNG (208 ) 890-s198 APPEARANCES For the Staff:Daphne Huang, Esq. Deputy Attorney General 472 West WashingtonBoise, ldaho 83720-0074 APPEARANCES 1 ) 3 4 5 6 1 I 9 10 11 72 13 74 15 t6 71 1B 79 20 2L 22 23 24 atr1_ -) CSB REPORTING (208 ) 890-5198 TNDEX WITNESS EXAMINATION BY PAGE Nate Simmons ( Public ) Bryce Wells (Publ-ic) Eric Hallgren ( Public ) Mike Ti-11ery ( PubIic ) Darrel Ramus ( PubIic ) Mary Boettcher ( Public ) Statement Commissioner Statement Commissioner Commissioner Statement Statement Statement Statement Kj ellander Kj ellander Raper 3 13 l1 79 20 27 24 26 55 INDEX 1 2 3 4 5 o 1 B 9 10 11 72 13 74 15 t6 71 1B 79 20 2I 22 Z5 24 RATHDRUM IDAHO TUESDAY JUNE 1 2016 7:00 P M. COMMISSIONER KJELLANDER: Good evening, ladies and gentlemen. This is the time and place for a public hearing in the matter of Diamond Bar Estates Water Company's application for authority to increase its rates and charges for water service in the State of ldaho. It's afso referred to as Case No. DIA-W-15-01. My name is Paul KjeIIander. I'm the Chaj-rman of this particular hearing this evening. I'm one of the three Commissioners. To my right is Kristine Raper, and to my teft is Commissioner Eric Anderson. Also with us here from the Commission is our Deputy Attorney General who represents the Commissi-on Staff, Daphne Huang. The lntent this evening for this specific public hearing is for the three Commissioners to take public testimony to complete the building of the record. Once the record is completely built and the case is closed, the three Commissioners will- then deliberate based on all the evidence and all the matters that are part of the offlcial record of the case. We serve as a three-panel judiciary body and our role, again, thls evening is to help ensure that your testimony is included appropriately in the record. We CSB REPORTING (208 ) 890-s198 COLLOQUY B 9 r0 1 2 3 4 5 6 '7 11 T2 13 74 15 76 7'7 1B 19 20 27 22 ZJ .AL.+ 25 CSB REPORTING (208 ) 890-s198 also have a court reporter with us this evening. She may ask you to sfow down a little bit. Shers very competent, but there are times in which we need to slow things down just to make sure that we get everything in the record. With that, then, the way that we will operate this evening is that I wiII call your name to come up and testify. I know that we have you stand up. That's probably not in my mind the most convenient and friendly thing to do. Could we lower that and put a chaj-r there so somebody could slt down just to make it a l-ittl-e less intimidating? THE AUD]ENCE: paperwork on it. Maybe a second chair to put some COMMISSIONER KJELLANDER: While Gene Fadness is doing that, and I should have noticed that before, f'11 go ahead and explain again what the process wiII be. We'11- invite you up, call your name, have you come and sit next to the microphone. The first thing that wil-I happen is that Commissioner Raper wiII ask you to raise your hand and she'lf get you sworn in offlcially for the record, and then the Deputy Attorney General will- ask you just a few brief questions to get you officially on the record. At that point, then, you wilf be asked to provide your statement or testimony that you would Iike COLLOQUY a 1 Z 3 4 5 6 1 B 9 10 11 72 13 L4 15 L6 t'7 1B 79 20 27 22 23 24 25 CSB REPORTING (208 ) 890-5198 to present to us at the Commission, and then once you're complete with that, there may be an opportunity for us if we want to ask a few fo11ow-up questj-ons based on what you've said. ft's official-ly referred to as cross-examination, but it's not the Perry Mason style where somebody is trying to trip you up on anything. There may just be a clarification, so with that, then, why don't we begin with the first individual- signed up to testify and that 1s Nate Simmons. NATE SIMMONS, appearing as a public witness, having been duly sworn, was examined and testif ied as fo]lows: EXAMINATION BY MS. HUANG: O. Good evening, Mr. Simmons. A. HeI1o. O. Could you please state your name and spell your last name for the record? It's Nate Simmons, S-i-m-m-o-n-s. O. Also, for the record, coul-d you please state your mailing address? A. 1655 West Diamond Bar Road, Rathdrum, Idaho, STMMONSPublic o 1 aL 3 4 5 6 7 I 9 10 11 t2 13 L4 15 76 t1 1B 19 )i 2t 22 23 24 25 CSB REPORTING (208 ) 890-s198 B3Bs8. O. Are you a customer of Dlamond Bar? A. I am O. Please provide your testlmony. (Pause in proceedings. ) THE WITNESS: To start wi-th, I'm goi-ng to kind of read through this and this is just a copy of it for whoever wants it. COMMISSIONER KJELLANDER: Let's see if we can get this closer to you. THE WITNESS: As stated, my name is Nate Simmons. I've already submitted comments to the original rate j-ncrease request, dS well as the PUC Staff response. Just so you understand that I am not just a homeowner who doesn't want to pay an exorbitant increase no matter the justification, I want you to know where I am coming from on this matter. I had a 35-year career in facil-ities at the Boeing Company. I did many jobs over the years, including project management, constructj-on management, managing budgets, identifying and solving problems, and value engineering. I believe this gj-ves me a good foundation to evaluate the appropriateness of the proposed huge rate increase proposed by Diamond Bar Estates Water District. Since the Water District filed their request SIMMONS Public for a rate increase last year, there have been several steps along the way; a public workshop, a chance for the homeowners to input thelr thoughtsi the posting of the PUC Staff report with reconimendations; and finally, the response from the Water District. We homeowners now have the opportunity to present thoughts and questions publicly after which the Commission wil-l make a decision as to how much the water rates wilf be allowed to rise. Unfortunately, there are still several important issues to consider before an informed and just decision can be made by the Commission. Major areas to discuss include the operations of the company and whether it has been operated in a prudent and efficient manner, whether they have provided good service to customers, whether aII costs and revenues have been properly accounted for, and whether the PUC Staff has done a thorough job of i-nvesti-gating the validity of the rate request. This speci-fica11y includes several key items already presented by the homeowners but ignored in the Staff report. The first area I'd Iike to address is the Company operations and whether they are prudent and have been done smartly. To start with, why was a 50 horsepower pump installed originally agalnst the contractor's recommendation, thus incurring higher 2 3 4 ( 6 1 8 9 10 11 72 13 l4 15 16 71 18 79 )i 27 22 )2 24 25 CSB REPORT]NG(208) 890-s198 SIMMONS PubIic 1 2 3 4 5 6 1 B 9 10 11 t2 13 74 15 16 71 1B 19 20 27 22 23 24 )\ CSB REPORTING(208) B 90-s198 operating costs every time the pump failed? Why was no action taken when it was stated in 2002 that there was a problem with the efectrical system? When pump life is expected to be 75-20 years, why was there never a thorough investigation of the problem until after six or seven failures in 13 years? After only two or three failures, there should have been a thorough root cause analysis done to avoid future problems. Failure to do so is a failure of proper management and causes the customers to pay more than they should. When Kootenai Electric Cooperative requires all motors larger than 20 horsepower to have a soft start lnstalled, why has this never been done? Why has there been no action to replace the soft start for the pump slnce the AEI Engineering report stated it was a requirement? I have talked to AEI Engineering as welI as an electrical contractor and both state that it's the most important thing to do to maximize the pump life. To relate it to a personal level, operating without the soft start on these motors is like revving up your car engine to 3000 RPM before shifting into drive and not expecting any damage to occur. Per the documents filed by the Water District SIMMONS PubIic 1 2 3 4 5 6 1 B 9 10 11 t2 13 74 15 t6 t1 1B 19 20 2L 22 23 .Az.t 25 and the PUC/ it is clear that the Company is not run efficiently and effectively. There are clearly i-ssues wlth the bookkeeping and the annual reports, ds welf as the consultant that was non-responsive. AII these things caused more work for the PUC Staffr ds well- as those of us trying to understand the rate request, and it is not justified to reward the Company and punish the customers for thls. The Company claims that the staff is working more hours, yet does not present justification why. Since they are basically serving al-most the same number of customers, there should not be a reason for allowing j-ncreased hours worked. Time spent solving problems of their own making should not be compensated. Any increase in labor costs shoul-d be limited to cost of living factors. The second area I want to address is the cost and revenue issues. As I had presented in the chart that I had filed before, in 2010, the operations costs increased by about $18-20,000 over the previous year and years, and I have not seen a valid explanation from the Water District or the Staff for this, and with the service record showlng a pump failure at well- No. 2 that year, it appears to me that labor and expense was incorrectly allocated from the private homeowner to the CSB REPORT]NG(208) 890-s198 S]MMONS Publ-ic 1 2 3 4 5 6 1 B 9 10 11 72 13 74 15 t6 l1 1B t9 )o 21 ZZ 23 24 25 CSB REPORTING(208) 890-s198 Water District, and this cannot be allowed and must be removed from the base. From 2008 unt1l 2014, annual revenues were wit.hin approxj-mately $2,500 each year. However, we know that the Company received insurance payments of 5,530, 9,500, and 4,110 during these years. Tt is inconceivabfe that payments like these would not cause greater fluctuation in the annual revenues in the annual reports, and thus, we must conclude that the j-nsurance payments were improperly excluded from the revenues in these annual reports and this, of course, cannot be allowed. Why should the Company be granted a guaranteed L2 percent return when their o\^/n poor decision making allows them to increase the plant in service values and thus get a higher return? f'd l-ike to address the actual customer service of the Company. I lived for L1 years in Maple Va11ey, Washington. We had a house out in the woods and a private water company that supplied our house. It was significantly larger than this one, but in the 11 years, I don't recall a single outage in that entire time, yet I have endured at Ieast four major outages in just four years here. These outages have ranged from two to t9 days, during which time our lawns and plants were at risk. This is clearly lnferior and unacceptable service SIMMONS PubIic 1 2 3 4 5 6 1 I 9 10 11 72 13 t4 15 76 I1 1B 79 20 27 ZZ a') 24 25 CSB REPORTING (208 ) 890-s198 The outages incurred by the Company aflowed air to enter the system, which caused two hot water recirculation pumps 1n my house to burn out. I requested to have the Company call me whenever they were aware of an outage so I could protect the pumps, but they argued against it and did not care that they caused my pumps to faif. I was actually hung up on one time when asking why I did not get a call to alert me. Customer service appears to be a foreign concept to them. I woul-d like to have the Commission direct the Company to establish a group email or texting alert system so they could notify customers immediately of outages and service restorations. The Public Utiliti-es Commission Staff. I was very disappointed in what the Staff posted in response to the Diamond Bar Estates Water District and the homeowners' input. I feel that there are many significant issues that were raised by myself and other homeowners that were ignored or just glossed over in the report. As a result, several of them must be brought up again at the public hearing, and I understand that while not every single question or comment needs to be addressed, there are several issues raised that deserve an explanation. Of particular concern are the huge expense jump in 2010 and the treatment of the insurance SIMMONS PubI ic 1 2 3 4 5 6 1 B 9 10 11 12 13 L4 15 l6 L1 1B 79 20 2t aaLL Z) 24 25 CSB REPORTING(208) 890-s198 SIMMONS PubIic compensation for the pump failures. The PUC Staff states they are going against normal accounting treatment by allowing recovery of costs for early retirement .of an asset. They state that unique circumstances exist that justlfies this. However, the unique circumstance is that improper management of the system caused the pumps to fail prematurely and thus allowing recovery of these costs is basically rewarding management i-ncompetence to the detriment of the customers and this cannot be allowed. Miscellaneous thoughts. I was told in a conversation a year or so ago with Mr. Turnlpseed that the pump failures were the fauft of Kootenai Electric and he was trying to get them to compensate him for the problems that he was having with his pumps and electrical service. However, at the same time, he refused to take any responsibility for allowing air to get into the lines and cause my two recirculation pump failures. AIlowing the air into the lines caused me to spend over $900 to replace them. When reading through the documents in this case, it's clear that the Water District expects to be paid for time and money spent to prepare their case. Wel1, I personalJ-y have spent probably 50-60 hours working on this case, so who is going to compensate me? t0 11 72 -1 11J 1 2 3 4 5 6 1 B 9 10 l4 15 l6 t1 1B t9 20 27 22 23 24 1tr, Sometimes company owners and execs need to be like exempt employees; they do not get overt-ime pay and must invest their own time for the good of the company and to build up the company va1ue. I dj-d t.hat i-n my career and they can do it as welI. f believe that if Diamond Bar Water District is guaranteed a 12 percent return and the customers are forced to pay for their poor management, then homeowners should be guaranteed to get our water supplied without interruptions in service. In the long term, I believe the only way to do this is to grant leqaI rights to access water from the backup No. 2 well when necessary. Thls wil-l protect the investments in our homes as wel-l as all-ows us to avoid having to move into motels the next time the pump fails if there's a new owner of that property. In the Water District's response to the PUC Staff report, the Company tries to justlfy ignoring the key AEI Engineering recommendation to install a soft start system to protect the pump. Their justification i-s that they aren't sure it's needed and they don't have the money and they think everything is working fine. Well, everythlng was always working fine in the past right up until the point when the pumps failed. Cutting corners and using short-sighted logic like is this a perfect CSB REPORTING (208 ) 890-5198 SIMMONS Public 11 1 2 trJ 6 1 I 9 10 11 t2 13 74 15 t6 l1 1B 19 20 21 22 23 24 25 CSB REPORT]NG (2oB ) B9o-5198 t2 SIMMONS Public example of the management and operational problems within this Company. In the public workshop and in other PUC documents, prudent is a word that is often used. Given everything that has been presented to the Public Util-1ties Commission by the Diamond Bar Estates Water District customers, it is abundantly clear that the water system has not been prudently managed. It is imperative that the Commissj-oners recognize this and refuse to award the Water District for their shortcomings as a Company. The Commissioners must ignore the recommendation of the Staff and take action to adjust the rate downward from the Staff recommendation to take i-nto account the problems and issues that we have brought forward. Thank you for allowing me to present my thoughts to you today and for your careful consj-deration and implementation of them as ;ustified. I also urge you to carefully consider the concerns submitted previously by other homeowners and myself to the PUC website. Thank you - COMMISSIONER KJELLANDER: Thank you, Mr. S j-mmons. Let's see if we have any questions. Are there questions from the Commission? EXAMINATION BY COMMISSIONER KJELLANDER: O. I just have a couple of quick fo1Iow-ups and if you don't have answers to them, that's fine, but you mentioned the soft start for the pumps. In the course of your investigation, were you ever quoted or did you ever run across what the range of costs might be for a soft start assoclated wlth the pumps that you described? A. I think he may have mentioned, like, $8,000 and I talked to an electrlcal contractor and just kind of wlth the information that I forwarded to him and without any site survey or anything, he suggested it might run in the nej-ghborhood of $12,000, but I suspect he was probably, you know, giving a cushion there, you know, and I told him, I sai-d, "H.y, this is just baII parking the thing and you can't be hel-d to it or anything like that without doing a site survey and understanding what's there, " but somewhere in that range, but, again, that was the key item identified, you know, by Kootenal Electric, by the contractor, by the engineering firm, and even $8-12,000, that's less than one pump replacement. O. Thank you, and I won't hold you to those numbers and you clarifled where they came from and I appreciate that. The other question that I had is you 2 3 4 5 6 1 B 9 10 11 t2 13 L4 15 76 71 1B t9 20 21 22 23 24 25 CSB REPORTING (208 ) 890-s198 13 SIMMONS (Com) Public 1 2 3 4 5 6 1 8 9 10 11 t2 13 t4 15 76 t1 1B 79 20 27 aaLZ )? 24 25 CSB REPORTING(208) 890-s198 SIMMONS (Com) Public mentioned some outages that ranged anywhere from two to 79 days and when you started to look at some of those outages as a customer, how did you deal with water durj-ng that time frame? A. Wel-I, when their pump fails or something happens and we lose water pressure, ds far as I understand, in the past they have switched over to what's referred to as well No. 2, whj-ch is a wel-l on Mr. Turnipseed's property, and he has referred to that to me in conversations. f've had some conversations with him in the four years that f've been here when we have outages and stuff. I was never I never understood that it was not a part of the Water Distrlct until- we started looking into this and so, you know, he stated, I think it was in his first responses, there was, like, 35 questions or something that he responded to and he had a response in there that says basically, "Okay, you guys have no right to that and, you know, it goes with the property, " but given the history of what's gone on here, I have some grave concerns over what happens. You know, as he stated in one of his things, he's 84 years old, you know, so how much tlme does he have left, what happens to his property, and Lf, you know, you start getting into more pump fai-lures and outages and stuff, if that property goes to someone else t4 1 2 3 4 5 6 1 B 9 10 11 t2 13 l4 15 76 l1 1B t9 20 27 )) ZJ .AL.) 25 CSB REPORT]NG(208) 890-s198 SIMMONS (Com) Public and they have no need to help supply us with water, you know, and if you have a two-week outage, you know, what' that going to do for your lawns, for your plants and alf of that. You know, f mean, you can't f l-ush your toilet. You can't take a shower. You can't wash dishes. You can't cook. You know, all of your normal functj-ons cannot be done without the water, you know, and if you had something like that happen, you know, we probably a1l wou1d have to move to motels for that time, and so for that reason, I'm thinking that there shoul-d be some rights granted, not like full time or anything, but in the event of a failure, you know, that maybe thatts something that can be used to bring somethinq of value to homeowners, you know, as a compensatj-on for some of the rate increase that we're going to incur, which ffm convinced has been the faul-t of poor management and not keeping the system up as it shoul-d be. As I sa j-d, expected lifetime on a pump l-ike this is 75-20 years. COMMISSIONER KJELLANDER: Wel1, thank you. Let me see if there are any questions from our Deputy Attorney General-. MS. HUANG: No questions. COMMISSIONER KJELLANDER: Mr. Simmons, thank you very much for your testimony today. I certainly do 15 1 2 3 4 trJ 6 1 8 9 10 11 72 13 t4 15 76 t1 1B 19 )n 27 )) 23 24 25 CSB REPORTING (208 ) 890-s198 appreciate it and it certainly looks as if you've put in a tremendous amount of tlme into that testimony and I'11 l-ook forward to seeing the transcript, too, and rereading that, so thank you very much. THE WITNESS: You' re wel-come. (The witness left the stand. ) COMMISSIONER KJELLANDER: We'1I call now Bryce We11s. MR. WELLS: I'm person. I didn't realize some questions. going to yield to the next it was testimony. I just had COMMISSIONER KJELLANDER: One thing that we can do is at the break or before we leave, Lf you would like, we have in the back our public j-nformation officer who might be abl-e to address some of your questions or at l-east point you to some individuals with Staff that might be abfe to assist you as wel-}. I don't want you to think that there won't be a way to try to get you some answers to your questions. Thank you. COMMISSIONER RAPER: AIso, Mr. Simmons is clearly very eloquent in the way he put his testimony together. Therers no expectation that I don't want anyone to be intimidated by the fevel at which he partlcipated in the public hearing. If you just want to come up and have a few things to say and get a l_ittle off !6 COLLOQUY 1 2 3 4 5 6 1 B 9 10 11 72 13 74 15 t6 t1 1B t9 20 2t 22 23 24 LJ CSB REPORT]NG (208 ) 8e0-s198 WELLS PubIic your chest, that is what this opportunity is for as we11, so when we have eloquent speakers come first, some people become intimidated. MR. WELLS: I will. COMMISSIONER KJELLANDER: Irm never going to let her talk again. You're more than wefcome to if you'd fike. BRYCE WELLS, appearing as a public witness, having been duly sworn, was examined and testif ied as f oIl-ows: EXAMINAT]ON BY MS. HUANG: O. Good evening. A. Hi. O. Could you please state your name and spell your Iast name for the record? A. Bryce WeIls, W-e-l--1-s. O. What is your malling address? A. 3691 CJ Court, Rathdrum, Idaho. a. Are you a customer of Dj-amond Bar? A. Yes. O. Please provide your testimony. L1 1 2 3 4 5 6 1 B 9 10 11 !2 13 t4 15 76 t1 1B 19 20 27 22 23 24 25 CSB REPORTING(208) 890-s198 WELLS Public A. Okay. Wel-l, several- concerns . First of al-l-, we're retired on social- security and three out of the l-ast seven years we got a zero raise and, you know, my bill in the summertime runs as much as 130 just so I can water my yard and stuff, and last year I believe it was Mrs. Iinaudible] showed up at my doorstep after I paid that hiqh bill and said, "Our pump is out, you can't water. " Okay, nobody ever came back and told me I could water. My lawn died. Nobody ever notified me that it was okay to start watering again. They just notified me that I couldn't water, which I thought was, you know, pretty rude, because my lawn died, basically, and anyway if it gets too much of an increase, I guess we're just golng to have to put rocks out there or something, because we can't afford that, not on a fixed income like that, but my other concern was f read in one of the last reports there that he wasn't going to file a claim, because they were going to cance.l- the insurance. WeII, if they're going to cancel you 1f you file a c1aim, go ahead and file the claim. At some polnt you're going to file a claim anyway, so go ahead and file it and get the thing fixed. You know, you don't even have insurance, then, if they're going to cancel you if you file another claim, 1B so find another company, then, to insure you, but we shoul-dn't be expected to pay for that, and then there have been severaf notices that we got that there was some slight contamlnation, too, and has that been addressed each time? What's causing the contamination? That's basically aJ-1 I have. COMMISSIONER KJELLANDER: Thank you. We'll- see if there are some questlons from members of the Commisslon. EXAMINATION BY COMMISSIONER KJELLANDER: O. There is an issue that you brought up that was also referenced by Mr. Simmons and that was you weren't aware of when you could begin using water for watering the property. Do you have a ce1l phone? A. Yes - 0. So if there was some type of group text to customers that coul-d notify you, even though it might not get everybody, but a group text that might be set up that could send that out to say A. Wefl, dt the time I was the only home in that part of the subdivision. O. But if there was an outage, there woul-d be a 3 4 trJ 6 1 9 10 11 72 13 t4 15 t6 71 18 79 20 2t 22 z3 24 25 CSB REPORT]NG(208) 890-5198 WELLS (Com) Public 79 1 2 ? 4 5 6 1 B 9 10 11 1/)LZ 13 14 15 76 71 1B 19 20 2t 22 23 24 25 CSB REPORTING (208 ) 890-s198 WELLS (Com) PubIic way for them to contact you? A. Yeah, absolutely. COMMISSIONER KJELLANDER: Thank you. Are there other questions? THE WITNESS: But they do have my phone number and stuff. COMMISSIONER RAPER: Just one quick question. EXAMINAT]ON BY COMMISS]ONER RAPER: O. Contaminations of the water system -- A. We were notified over the past f've been there five years, you know, they got it cleared up right away or somethi-ng, but it was, Iike, a slight contamination of something was the notice. O. How did they notify you of that? A. By mai}. COMMISSIONER RAPER: Okay. THE WITNESS: Which I would have preferred by phone, so I could have the choice of whether I want to use the water. COMMISSIONER RAPER: Of course. Thank you. COMMISSIONER KJELLANDER: Are there any further questions? If not, we'II go to the Deputy Attorney 20 1 2 3 4 5 6 1 B 9 10 11 72 13 L4 15 76 71 1B T9 )n 2t 22 ZJ 24 25 CSB REPORTING (208 ) 890-s198 27 HALLGREN Public General, dny ques Hallgren. ERIC HALLGREN, appearing as a public witness, having been duly sworn, was examined and testified as fol-Iows: EXAMINATION BY MS. HUANG: A. Good evening. Could you please state your name and spe1l your last name for the record? A. Sure, Eric Ha1lgren, H-a-1-I-g-r-e-n. O. What is your maillng address? A. 74052 North Rodeo Road, Rathdrum, Idaho, 83858. O. Are you a customer of Diamond Bar? A. I am. O. Pl-ease provide your testimony. A. I'11 just ditto everything that Nate said. He's going to cover most of what I was going to talk about. I've been a customer for 18 years. Irve lived in the development from pretty much around the start of it. The concern I have over I'm trying to think of this as an overview. I submitted comments as part of the homeowner's association committee that we formed. I 1 2 3 4 tr 6 1 B 9 10 11 l2 13 l4 1tr.IJ 76 t1 1B 19 20 21, 22 ZJ 24 25 CSB REPORT]NG (208 ) 890-s198 HALLGREN Public think there's a problem when you have eight pumps, starting with the first one, over 22 years you have eight water pumps that have been replaced. I think there's a problem here and I know that starting in 2075 or last year when they had the engineer come in, there's finally been some realization that there's el-ectrical- problems and some other things that were never addressed, and I guess it's irritating to a lot of us that the rate base and everything that the Staff relies on 1s based on this historical history of afI these pump faj-fures, so it's kind of hard if you don't have something that reaIly worked right to begin with, how do you establish a proper rate base for the customers. I guess part of my comments, f'ff kind of reinforce what I sent in, from thelr own response to your f have it listed here as Request No. tl, Reply to the Second Production Request of Staff, from 2002 forward, Mr. Turnipseed stated that they knew there was poor power comlng from Kootenai Electricr so this was many, many years ago from the start that they knew there was a problem, but I don't see in any of the record here up until- thls AEI Engineering report that anyone was brought in to finally Sdy, "What do we need to do here to establish a good sound systemr " so everything that stems from that and all the and most of what f see in the 22 9 10 1 2 3 4 5 6 7 B 11 72 l-3 I4 15 L6 t1 1B 19 20 21 22 23 24 25 CSB REPORTING(208) 890-s198 HALLGREN PubIic rate case, and I'm not an accountant, but it seems l-ike itrs all based on these pump failures, because thatrs the bul-k of the cost of the water system, and I don't know if there's an easy answer for you guys. f dread your jobs, because you have to come up with a balanclng act here, but I rea1Iy think historically you have to also look that Mr. Turnipseed was the developer of this 1and, too, so he started this whole project, these five-acre tracts of land, and I know it was turned over to him. I was at that meeting when we turned the water system over to him, but from that polnt forward, I just don't understand why we've had this number of failures. It just seems if an 18-year amortizatj-on is normal on a pump, why do we have eight fail-ures in 22 years? That's a pump fallure every two or three years on average, so that's pretty much it. I'l-I rely on the comments that I submitted already and if you have any questions. COMMISSIONER KJELLANDER: Let's see if we have any questions. Any questions from the members of the Commission? Ms. Huang? MS. HUANG: No questions. COMMISSIONER KJELLANDER: I certainly appreci-ate your testj-mony and thank you very much. 1 2 3 4 5 6 1 B 9 10 11 t2 13 74 15 76 t1 1B 79 )n 2t 22 23 24 25 CSB REPORT]NG (208 ) 890-5198 TILLERY Public THE WITNESS: Thank you. (The witness l-eft the stand. ) COMMISSIONER KJELLANDER: We will call_ now Mike Ti1 1ery. MIKE TTLLERY, appearing as a public witness, having been first duty sworn, testif ied as fol-lows: EXAM]NAT]ON BY MS. HUANG: O. Good evening. A. Good evening. O. Please state your name and spell your last name for the record. A. Michael- Tillery. Last name is gpelled T-i-l-t-e-r-y. O. What j-s your mailing address? A. 2961 West Diamond Bar Road, Rathdrum, Tdaho, B3B5B. O. You are a customer of Diamond Bar Estates? A. I am. O. Pl-ease provide your testimony. A. I only want to add to the previous testimony 24 1 2 3 4 5 6 1 B 9 10 11 t2 1)AJ t4 15 15 l1 1B t9 20 21 22 11 .A 25 CSB REPORTING (208 ) 890-s198 TILLERY Publ ic that one of my concerns is in the final response by Diamond Bar Estates Water that was submitted on May 21th, to me it reflected somewhat of a casual attitude towards the in the final paragraph, I bel-ieve, what I'm gettinq to is that they said that the soft start system, which had been recommended by the consultant that they hired, may or may not solve the problem they have. I manaqed a multi-mlLIion doIIar data center for a Fortune 100 company and when I reached a point where I needed somebody to come in and help me, because I wasn't expected know everything, I was expected to find the answers to what the problems were, whether it was electrical or air conditioning or server configurations, but when I hlred a consultant, I hired somebody that I trusted, and when they gave me advice, I usually followed it, and I think that there is plenty of evidence that a soft start system is necessary in order to eliminate those possibilities for failure in the future, which is one of the big concerns that aII of the homeowners have. I happen to also be one of the directors in the HOA, so f woul-d like to see something more forceful from the Commission in guiding the Company to take actj-on on those things that have been recoflimended that would eliminate these failures in the future. There are a lot of different concerns that have been brought up, but 25 1 2 J 4 5 6 1 B 9 10 11 72 13 74 15 76 71 1B 79 20 27 22 23 24 25 CSB REPORTING (208 ) B9o-5198 RAMUS Public certainly, we shoul-d resolve the problems that have been identified and if there are contj-nued failures, then you have taken out those variables and you could move forward from there. That's really all I wanted to add at this point. COMMISSIONER KJELLANDER: Thank you. Letrs see if we have any questions from the Commissioners, and Ms. Huang? MS. HUANG: No questions. THE WITNESS: Thank you all. COMMISSIONER KJELLANDER: Thank you very much, Mr. TiIlery. (The witness left the stand. ) COMMISSIONER KJELLANDER: And now we caIl Darrel- Ramus. DARREL RAMUS, appeari-ng as a pubJ-ic witness, having been first duly sworn, testi-f ied as follows: EXAM]NATION BY MS. HUANG: O. Good evening. A. Good even j-ng . 26 1 2 3 .l 5 6 1 B 9 10 11 72 13 74 15 16 7'7 1B 19 20 27 22 l3 24 25 CSB REPORTING(208) 890-s198 RAMUS Public o. l-ast name A O. A the rest. O. Estates ? A. A. Could you please state your name and spell your for the record? fLrs Darrel- Ramus and thatrs R-a-m-u-s. What is your mailing address? 14126 North Rodeo Road, and you probably know And you are a customer of Dlamond Bar I am. Please provide your testimony. Thank you; so first of all, I woul-d l-ike to start by saying and reiterating what the other comments have been, I think mine wil-l- be klnd of an overview, I guess, of this, because I have a lot of the same comments and concerns, but I did want to step through a couple of what I think are the key issues that the board has to make a decisi-on on. I am also one of the directors of the homeowner's association. We did appreciate the Staff that came out during the workshop, but I think a l-ot of us after that fel-t many of our questions were not answered and maybe they were not that was not the proper forum to answer those questions, and we were hoping that they would be covered by the time we get to this step. After that workshop, a lot of homeowners came to the directors and 27 1 2 3 4 5 6 1 B o 10 11 t2 13 \4 15 l6 l1 1B 79 20 21 22 23 24 atr/ -) CSB REPORTING(208) 890-s198 RAMUS Public they said, "You guys need to do something about this and get involved, " and thatrs what we did. We put a lot of time and effort lnto researching the facts. We tried to formulate what we found and submit that to the PUC Staff, actually prior to their report so that would aII be on the table and available for everybody to look at. So ki-nd of going back and just a quick overview, one of the documents -- we actually formed a committee to look at this. One of the documents that was submitted addressed primarily the pump issues, which I think is really probably the crux of the costs that we're facing here, and I think it goes back to the letter that we submitted, it's dated May l2th here, I think it was submitted -- it was from Eric Hallgren who spoke earlier, but to reiterate what he said, ln 2002, and this is based on Response No. 11 of the current case number, So this is a quote apparently from the Company, "Erom 2002 forward, Diamond Bar Estates has been at the receiving end of inconsistent, unbalanced as weII as underpowered service from Kootenai Electric Co-op, " and, you know, So at that polnt I think there was also a pump replacement and that's when really, I think, the clock starts. The cfock starts in 2002 with a new pump and the knowledge that power is inadequate, and not to hop around too much here, but I want to go to the Staff 2B 1 2 3 4 5 6 1 B 9 10 11 I2 13 74 15 t6 L1 18 19 20 2L 22 24 25 CSB REPORTING (208 ) 890-s198 RAMUS Pubfic report, which I think, by the way I think, the Staff did a good job of collecting the facts and I think that they tried to be fair maybe across the board, maybe, I think, a 11ttle too fair, but I think the outcome of the facts, I think, are not that they're rewarding, I think we're kind of seeing a trend here, a fevel of incompetence. There's basj-ca11y a l-evel of which Pumps, I think, actually border on negligence, which I'l-1 go over here shortly, and as far as the way the Company operations go, I think Lhere's a lot of inconsistency if you start looking at the records and the numbers and the customers, this is no surprise that this aII turns out to be what we're facing today, so going back to that comment in 2002, out of the Staff report, they put a portion here from the Kootenai Electric Cooperative, their guidelines on when, amongst other things, when motors are j-nstalled, and one of the things down there that was actually highlighted, IEEE Standard 519-L992, says, "Variable frequency drives must meet the industry standard for harmonics. " f'm not an electrical engineer. I do work for a civil- engineering company, so I understand a littl-e bit about the engineering aspects of this, but, you know, I think that rlght there, there's a stated standard that has to be met and there's a question of whether that was 29 1 2 3 4 5 5 1 B 9 10 11 72 13 74 -LJ 76 71 1B 79 20 2T )a 23 24 25 met. There's also this is, I guess, Exhibit C from the same Staff report, these are from the National Electric Code Handbook and it talks about grounding systems and we haven't really talked about the grounding issues, but I think that was actual-1y one of the large issues that was also faced in reading that current engineering report that was done in 2075. There was a l-ot of concern about the grounding, how lightning strikes degrade that, and how the system was probably grandfathered in, so it's probably Iega1, but I donrt think it's meeting the standard that needs to be met, and sor you know, please, I urge you to look at those requiremenLs, because that is not a surprise and anyone that's in, you know, engineering, construction, development, and Mr. Turnipseed is a developer, he's put a lot of infrastructure in p1ace, these things should not be a surprise, and I think any time you put in infrastructure, \f I'm going to put an aj-r condi-tj-oner in my house, there are certain requirements that have to be met or you're not going to have the life span of that investment, and I think that's exactly what has happened here, so just to reiterate, I think, what Eric actually put in his about the known electrical problems, this is not a surprise and it's not an excuse, and I can see one pump failure in the life span of these pumps, maybe we CSB REPORTING(208) 890-s198 RAMUSPublic30 coul-d even say two, and in fact we did, because in 2002 and 2004, there were two pump replacements that I think were probably already recaptured during the last hearing in 2007, so in my view, we've already paid for two pumps and everything that we're facing now is, I think, bordering on negligence. Moving or, you know, the pump slzing, I think, was another issue. It was stated that there was let's see, Request No. 11 talking about the Company was instal-ling one of the pumps, they were saying that a 25 horsepower pump was required and a 50 horse would be excessive, and that somewhere in 2004 we magically went not only from a 50 horsepower, we went to a 60 horsepower pump, so, again, I am not an electri-cal- engineer. I don't know what kind of loads that's putting on the el-ectricaf system that was probably i-nadequate. I think newer pumps, Ilke a lot of things, the good news 1s they're more efficient, but the way they're more efficient, they probably have tighter windings, more electronics, you know, more components that require certain parameters in order to be effective and meet their life span of about that 18 believe, in the Staff report. I independently called as well- and heard the range 15'20 years that was quoted, some service providers years is a t.ypical life 2 3 4 5 6 '7 I 9 10 11 t2 13 74 15 t6 L7 1B t9 IU 27 22 z3 .AL.t 25 CSB REPORT]NG (208 ) 890-s198 31 RAMUSPublic 1 2 3 4 5 6 1 B 9 10 11 L2 13 74 15 t6 t1 1B t9 20 27 )) 23 aA 25 CSB REPORTING (208 ) 890-s198 RAMUS Public span of these types of pumps, so that's on the pumps and then what our committee this is primarily through Nate, he covered that pretty eloquently, but I do think that what Nate uncovered really goes to show just the lack of, you know, how to manage a business when you have annual reports where the end of the year doesn't match the beginning of t.he year, and then in these annual reports, he hiqhlighted where there was one, two, three, four, fi-ve, six, seven, seven numbers that were exactly 15,917 that showed up al-l over in these reports from 2008 to 2074. That's pretty coincidental-, and so I think there's a pretty high l-evef of maybe some sloppy recordkeeping here and we really can't make heads or tails out of this. I really trust and hope that the PUC Staff did. f'm not an accountant. I don't understand necessarily all the detalls, but I'm going to trust the Staff to do their job and due dili-gence on that. As homeowners, we kind of want answers as to why are these numbers the way they are, why do we have surges of numbers, where is the money that's paid from insurance costs. AI1 those kinds of things put us into a real questioning mode to try to understand whatrs going on here. I'm kind of going in chronol-oglcal order, So 32 those are two documents that are on the public record. Hopefully, in fact, I encourage if you have not read through each one of those, f think they outline some of our key issues that we have and maybe worth kind of rereading those again after the hearing here, and then moving on to the comments from Staff, f'm sure you guys have all- and gals have a1f looked at these and understand everything you've seen here, but one thing that really did stand out in my mind here is, you know, since the last rate case, the Company has made significant investments in the water system and they did. I mean, to be fair, they did invest, you know, booster pumps, gate valves, a lot of accessory stuff that was put in there, but down here under kind of the investment paragraph is the part that I really have concern with, and that's the Company replaced the main welI pump repeatedi-y 2070, 2072,2014, and twice in 2015, and if we're talking about the life span of these pumps, well, you know, it looks like the failure rates are accelerating, you know, and think that somewhere alonq the line from 2002 untiL 20 where there was finally something done about that, you know, I think a prudent businessman or an engineer or I 15 developer or a contractor or name almost any other discipline, I think that someone would sdy, even a homeowner would sdy, "Whatrs going on here? This is not 2 3 4 5 6 1 B 9 10 11 L2 13 l4 1trt_J t6 \1 1B t9 20 27 22 23 24 25 CSB REPORTING (208 ) 890-s198 RAMUS Public 33 1 2 3 4 5 6 1 B 9 10 11 72 13 74 15 75 t1 1B 79 20 2I ZZ 23 24 LJ CSB REPORTING(208) 890-s198 RAMUS PubIic normal. This is way beyond the norm, " and I think this is where the negllgence really comes lnto play here is this was just allowed to happen, and I think whatever j-nsurance reimbursements the Company received, they shoul-d probably consider that a gift, because I'm shocked that the insurance company didn't drop the insurance before they did. My understanding now as far as getting weII insurance, we don't have any coverage right now, and that's a big concern of ours. I think that the pump failures from 2070 to 2015, those shoul-d not be in our rate base. Okay, we paid for the 2002. We paid for the 2004. One of those should have lasted somewhere around 18 years. This is all just money that should not be spent by the ratepayers. This is someone that doesn't understand how to install- and follow directions, and so that's, I think, to kind of separate that out from the rest of my conversation, that is one of my requests and that's somethlng that we've talked about within our committee is we do not want to pay for those pump fail-ures. That is not fair and that is not prudent to have the ratepayers cover that. Now, we do appreciate that it. was spread over 18 years and I think it's ludicrous beyond that to say they want to have a recovery in four years, but f'm 34 1 2 3 4 5 6 1 8 9 10 11 \2 13 l4 1trt_J 76 11 1B 19 20 27 22 23 24 25 CSB REPORTING(208) B9o-s198 RAMUS Public saying I don't think any of those should be included, because that's the count, I bel1eve, is at seven pump fa j-lures since 2002, so I know it's a hard deci-sion, but I think that's kind of a key element that, I think, needs to be looked at. I'm not as militant as Nate on my organizattort, so please bear wi-th me, so, yeah, the other thing f was trying to find here -- well, two comments. The AEI report, which was helpful in 2075, I just want to emphasj-ze that should not be a surprise. That was the end game of a series of things that should have been obvj-ous to al-most anybody, and so I don't think if there is an excuse to sdy, "WelI, we didn't know about this until- 2015," that is not correct, because if you look at the requirements, which I'11 go over here a tittle bit more, there's other requirements that were just flat out ignored. The AEI Engineering report only reiterated the obvious, what is already in writing. If they woufd have after one or two pump faj-Iures talked to Kootenai Electric, followed the Nationaf Electric Code, pump manufacturers, therers plenty of evidence and guidance to show what should have been insta1led to eliminate aII those pump failures, so the part that rea1ly bothers me in the Staff report, though, it's on page 6, "Under normal accounting 35 treatment upon the early retirement of an asset, the remaining book vafue would be written off as an extraordinary loss and would not be recoverable in rates. Staff's proposed treatment recognizes the unique circumstances that regui-re muJ-tiple replacement and books the undepreciated book balance in a regulatory account to be amortized over the remainder of the depreciable life of the asset. " That's all- on page 6, and I think what this is saying is that the Staff recogni-zes the unique circumstances. Okay, wel-f, to me the unique circumstances is seven pump fail-ures and the fact that we shoul-d not be paying for thatr so, again, f 'm seeking a reversal of paying for all- those pumps. Whether it's amortized over 18 or four years, that is not something that should be recoverable by the rate base, and continuing on with the Staff report on page J, it does here iterate, and this basically coincides with my personal findings when I catted a few places up, the average remaining life span of the pumps is 18 years and that's because they were just put in, but basi-cally the Staff is agreeing with our findings that the life of a pump should be about 18 years and even if you had a freak fail-ure in there, So maybe you have two of them in an 18-year period, but not six or seven or whatever the 4 5 6 7 B 9 10 11 L2 13 74 15 L6 71 1B t9 20 27 22 23 .ALA 25 CSB REPORTING(208) 890-5198 RAMUS Public 36 number is becoming here. Some of these things, I think, are pretty minor. As far as some of the l-abor issues, f thlnk that they probably pale in compari-son to the pumps, so I might pass over that here in the j-nterest of time. The other little thing I hlqhlighted was the guaranteed rate of well-, it's not guaranteed -- the rate of return of 72 percent, the expected rate of return. I mean, I think for a cleanly operatj-ng, efficient company, absolutely, but if every time you make a mistake or you lose something or you're incompetent or yourre negligent, then the expectation should not be for the insurance to pay for it or the ratepayers to pay for it or somebody else to pay for it, and right now I think that's where we're dL. I think if that money was not recoverable by somebody else, I think there would probably be a lot more detail in al-l- those pump failures and they'd solve their a lot earl-ier than what happened, so I don't think we should be supporting this 1evel of incompetence at the expense of the ratepayers. I don't have a problem with the rate of return, but not on top of all these losses that we're expected to cover. The other comment that I had, and I think this was covered a little bit by Nate as we11", after, you 2 3 4 trJ 6 1 B 9 10 11 72 13 74 15 76 t1 18 L9 20 2l 22 ZJ 24 25 CSB REPORTING(208) 890-s198 RAMUS PubIic 3t know, we went to the workshop and al-l- of us submitted, a Iot of people submitted, comments, a lot of them very detailed, very researched comments, and we basically got one paragraph in here where we were acknowl-edged. A couple of people talked about, you know, they're on fixed incomes and then it said, "The Diamond Bar Homeowner's Association and several- customers express concern about the Company's operations and maintenance costs over the years, ds related to previous pump failures, and whether the Company properly reported changes in plant in service in its annuaf reports. Customers also express concern about the outages caused by the pump failures and continued access to the back-up water source," and that's it, f mean, rea1ly. I mean, I understand other things are lnherent in the analysis of the Staff, but that does not really begin to say our response. Our response is much greater than that and much more detailed than that, and, again, I encourage everyone to look at some of those l-ater responses that we produced, and I think that also brings up you know, I mean, this is bolling down to the cost i-ssue. We certainly don't want to pay for the levels of incompetence here, but we afso want to have some assurance in the future that wiII the pump fall again, and if it does, wil-f we have a backup pump, and so I 2 3 4 5 6 1 B 9 10 11 72 13 t4 15 T6 l1 1B 19 )n 2t ZZ 2? z4 25 CSB REPORTING (208 ) 890-s198 RAMUS Public 3B 1 2 )J 4 5 6 1 B 9 10 11 72 13 74 15 76 71 1B 79 20 2t 22 23 24 25 CSB REPORTING (208 ) 890-s198 RAMUS Public think another thing that we're asking is, and this has been mentioned on other testimony, is, you know, all of the recommendations from the el-ectrlcal engj-neer given the fact that we have this just crazy number of pump failures, I think that they should immediately find a way to go and fix all the problems, not just a soft start. I think there's a grounding issue. Maybe it's been resolved, maybe not. f've kind of heard that the ground issue, it was probably grandfathered in and it may not be adequate for the next series of lightning strj-kes. Apparently, lightning strikes degrade that system. It's not properly all tied together. Maybe that's been solved, I don't know, but I think it would be instead of;ust focusing on the soft start, I guess I'd ask the board to sdy, "You guys need to go t.hrough the report systematically item by item of the reconimendations and make sure you have those things covered, " because it's not just a soft start or just one thing that led to this. It's everything that has been neglected on the system and we see the outcome, and llke a lot of times I try to teII my kids, "If you do the same thing, do you expect a different outcomer " and in this case, I mean, seriously, my fear is we're going to get our rate and you're going to go off into the sunset and that pump is going to break again or the property is going to seIl, 39 and if that pump breaks again, we don't water this timer so we're not asking to or something like that, but we need to assurance that that's going to be tied a future failure at some level-. have any backup own the property have some to the system for Looking now at the Company response, again, this has been covered a little bit already, but f think there's, you know, really probably three things that I would kind of highlight here. One comes down to the pumps, that there's just flo, you know there's not even a possibility of accepting maybe some responsibility here. ft's all whether I get my money back in four years or 18 years, and I just donrt think that's even a proper question. The proper question is how do we get to the poi-nt we're having so many pump f ail-ures and is it even prudent to be asking the ratepayers to cover that, and I think the answer is no. On the salary expense, you know, f know everyone can say we've had, you know, a rough couple of years. f'm not on a fixed income, but I like to telf people I haven't got a raise in eight years, so f don't know if that's fixed or not, but it's sure looking that way, and then I did look up some statistics on the Consumer Price Index, rf I can find it here briefly. Over this period of tlme from 2001 until current, the 2 3 4 5 6 1 B 9 10 11 72 13 l4 15 76 l1 18 79 20 2t 22 23 .AZ+ 25 CSB REPORTING (208 ) 890-s198 RAMUS Public40 1 2 3 4 5 6 1 I 9 10 11 72 IJ 74 15 t6 71 18 79 20 27 22 23 24 25 Consumer Price fndex inflation was 15 percent, and I understand that's nationwide, thlngs can vary, but generally speaking, 15 percent is an inflation calculator, you know, so that would be everything, including labor, materials, pumps, things like that, and so I certainly wouldn't see anythlng greater than 15 percent. Idaho stands out if you l-ook at the median household income over that same period of years from 2007 to 2016 was a total of two percent, not per year, a total- of two percent, so I think we're dealing with some pretty small numbers here, and frm not asking everyone just to not have rates, but I think it needs to be justified rates and, again, 1et's not reward inefficiencies. Maybe Iet's look for ways to be more efficient. How do we contact our customers quicker. You know, maybe there's phones. There's emaif. f think there's a fot of other things that can be done, a lot of paper, you know, kind of stuff that comes in the mail that might be automated and I believe these same people run several companies or certainl-y water districts, so I think there's a little bit of a potential gain if we donrt util-ize whatever they approve for other associated businesses as well, So that's really all I have, I think, primarily on labor rates. CSB REPORT]NG (208 ) 890-s198 RAMUS Public47 1a Z 3 4 5 6 1 B 9 10 11 72 13 74 15 16 t1 ao-LO 79 20 2l 22 23 .ALA ZJ CSB REPORTING(208) 890-s198 RAMUS PubIic Then going towards the last page of the Company response, that Iast paragraph, I think, that Mlke Tillery had mentloned really hit me wrong, f guess, and I think, if anything, that one paragraph realIy shows what we're facing as customers here, and, you know, we're talking about an $8,000 investment, maybe 72, I've heard I think I heard the $12,000 number may have included some improvements to the grounding system, f don't know that for sure, but I think werre somewhere in the $B-12r000 range would put in a soft start and maybe some other improvements that have not been done per the engineering report, but the Company response to alI that is, "This device 1s relatively expensive, at a cost of $8,000, and may or may not reduce costs in the future. The Company does not have the funds to lnstall this device and is not sure it is needed because the system seems to be working we1l," and f don't know if you can put a pause in what you're typing there, but that's what I did when I read thls. I basically said, "What are you talking about," because it is not working well. We have looked at the history, the pump failure after pump fail-ure. I live across from the pump and I can't count the number of times f've seen cranes and trucks suppliers, engineers. f mean, it's been a circus, f mean, quite literally over there, and I think we all A1 4 6 1 know the answer now, but, again, I'm going back to what a prudent company would do in a circumstance. I think any company, any organization, would you really have gone this far for this many years and then turn around and ask somebody else to pay for your mistakes, and that's the way I see it and I just don't think it's even reasonable, so, again, it goes back to the same theme, I don't think that those pumps should be put on our rate base. Kind of methodically moving ahead, the other thing we did was not only did we talk to engineers and suppliers and do our own research, we contacted an attorney and we asked for at least a legal opinion of what they thought we were facing. The attorney's name is Susan Weeks. I forget the company she works with. She provided, though, some lega1 research and she gave us a legal opinion. We didn't think it was necessary to bring her here tonight, but she did glve us some guidance and so f want to step through this, because I think it reiterates what we're talking about. She developed two questions or issues. One is do the requested increases to rates charged to customers for water service by publlc utilities have to be reasonable? The second question is, is an increase is a requested increase in rates charged to the customers of approximately BO percent a reasonable increase? So her CSB REPORTING (208 ) 890-5198 RAMUS Publ ic B 9 10 11 72 13 74 15 t5 t1 1U 10LJ 20 27 22 23 24 25 43 1 2 3 4 5 6 1 B 9 10 11 l2 13 t4 15 76 l1 18 L9 20 2\ 22 23 24 CSB REPORTING (208 ) 890-s198 44 RAMUS Public brief answer to No. 1 as far as does the Public Utilities Commission have to basically promote a reasonab1e rate and her answer is yes. Under Idaho Code 61-301, charges demanded by a public utility must be "just and reasonable. " It goes on to sdy, "Additionally, the Public Utilities Commi-ssion has the authority to approve, reject, oy modify a rate or charge proposed to ensure that such charges are just, fair, and reasonable." Those are in quotes, and we tal-ked about the word prudent comes up. I think thls is a very similar thing. That's actually in the Idaho Code. The answer to the second questi-on is, is the current 80 percent request reasonable, and the answer is like1y no. A requested increase of approximately B0 percent in rates charged to customers is not a reasonable increase based upon prior administrative orders issued by the Commission, because the Water Company has not experienced significant growth in its customer base, nor has it made significant capital improvements to its water systems. Additionally, much of the increase is coming as a resul-t of increased maintenance costs for replacement of defective water pumps, which are arguably the result of negli-gence in installation or operation. That's a brief outline of what we received and 1 2 3 4 5 6 1 B 9 10 11 72 13 74 15 15 71 1B 79 20 27 )) )') 24 25 CSB REPORTING (208 ) 890-s198 RAMUS PubIlc it backs up you know, I didn't see this until just recently and it's basically the same conclusion that we I ve come to ourselves. It goes through a statement of facts and some analyses. Some of the analyses, I think, here goes on to iterate how requested increases to rates charged by the PUC for water servj-ce provided to customers must be just and reasonable, a determination made by the Commission on a case-by-case basis, and I think what she's pointing out here is that obviously the Commission and the Staff, you've done a lot of your research and it is case by case. You guys are not trylng to blanket, you know, one number across the entire State of fdaho, but I think in this case, the detaj-l-s, you know, are in those pump failures and in the lack of following the guidelines to j-nstall those, so anyway she goes on to say under Idaho Code we stated that one before, but there's another one here, Tdaho Code oh, I'm sorry, it's the same thing. A reasonable charge varies from case to case, and so I think I've already summarized that. You guys have obviously the authority. I don't need to reiterate this for the record, you know, to judge us on a case-by-case basis. And then another item she covered here is whether the requested increase is reasonabl-e and it 45 1 2 3 4 5 6 1 B 9 10 11 I2 13 74 15 76 '1 '1 1B 79 20 27 aaLL 24 25 CSB REPORTING(208) 890-5198 46 RAMUS PubIic basically says the Commissi-on has rarely approved a rate increase case as hiqh as B0 percent and I hope that we're to at least down to what the Staff requested, but I think there's pressure to kind of go back up and I hope we don't;ust have this, Iike, just divide it in half and call it a day, because I think that both of these are too high for the reasons I'm talking about. I don't think somewhere between what the Staff recommended and what the Company wants is where we should be. I think it needs to be below what the Staff requested, because we're paying for seven pumps and thatrs not right. f won't quote al-l- those cases there, so an analysi-s of the above orders and other orders issued by the PUC leads to the concfusion the PUC consi-ders each case on an lndividual basis. Without much reference to prior cases or decisions, we could not conclude, therefore, that an B0 percent increase in the customer rate charge is, per S€, unreasonabl-e. However, the best indicator whether an B0 percent increase woul-d be unreasonable is to look at the pri-or decision of the PUC in regards to the specific Company at issue, which is Diamond Bar Estates Water Company. ln 2001, the Diamond Bar Estates Water Company filed an applicatj-on to increase its rates by 81 percent l-ast time. Similar to now, the Company argued its 1 2 3 4 5 6 1 B o 10 11 L2 13 L4 15 l6 l1 1B l9 20 2l 22 23 24 25 CSB REPORTING (208 ) 890-s198 increase was necessary because it operated at a loss for several years prior and an increase would help cover its operating costs. The Commission ultimately granted a 59 percent increase, and the reason I want to read this is it leads to some of the fabor and this is from the last 2001 case. The Commission rejected the Company's requested increase in bookkeeping services as unreasonable due to the fact that the Company cou.Id outsource the bookkeeping to a different company that wou1d charge much less than projected. In doing so, the Commission stated transactions with unregulated affil-iate companies must receive a greater degree of scrutiny, and the Company has the burden to come forward with substantial evidence establishing the increases in amounts paid are 1ust., reasonable transactions, so additlonally, the Commission rejected the Company's requested increase of the watermaster salary, because the system had not undergone any changes to justify the additional time or expertise, so I think we're back at that same place today. Nothing realJ-y has changed in the operation of the Company. There really has not been any significant expansion, except for tying in the one subdivision. I think that had actually already occurred by 2001, but the only improvements have been putting broken pumps back in RAMUS PubI i c 1 2 3 4 5 o 1 B 9 10 11 L2 13 l4 15 t6 71 1B 19 20 2l 1') 23 24 25 CSB REPORTING (208 ) 890-5198 RAMUS Public the ground. Other than that, there rea1Iy has not been improvements to the system, so considering the Commission's previous Order, the requested increase with bookkeepi-ng and watermaster expenses may be unreasonable unless the Company can show the amounts paid for such services are reasonable. You know, so I didn't see anywhere in the Staff report or the Company responses what a cost would be if they were to outsource that to maybe a more effj-cient operation. As for the increased maintenance of water pumps, the Commission 1ikeIy would not aflow the Company to include the maintenance charges in its rate base. A simil-ar situation regardi-ng placement of meters happened 1n the Bitterroot Water Company in 2006. That's Case No. BIT-W-05-1, and I don't know if that sets a precedent, but I think it goes to show at some point and we're talking water meters in thls case. We're not talking expensive pumps that with the labor and crane and everything necessary are pushing $15,000 every time that thing fails, so I think we have a much greater problem than what they faced in that case. If the Diamond Bar Estates Homeowner's Assoclation could show the cost of the replacement of the water pumps has i-ncreased as a result of negligence in installation and maintenance or the like, it would be 4B 1 2 3 4 5 6 1 I 9 10 11 72 13 74 15 76 t1 1B 19 20 2t )) 23 24 25 CSB REPORTING (208 ) B9o-s198 49 RAMUS Public appropriat.e for the Commission to incl-ude that charge in the rate it woul-d be inappropriate, sorry, to include that in the rate base calculations. An increase in rate base charges to compensate for water pump replacement in that situation woul-d be unreasonable, again, reiterating, I think, our findlngs. The last thing from the orders is that the Commission makes findings based on specific evidence in question. It strongly takes into account the opinions of the Company's customers and the findings of its own Staff. Requested i-ncreases for rising electrlcity costs are certainfy considered reasonable. Requested increases for rising adminj-strative cosLs, such as salaries and bookkeeping, may be consldered reasonabl-e based on the situation, but in the past, it's been considered unreasonable, again, if it could be done more efficlently by outsourcing. Requested j-ncreases for maintenance and repair may be considered unreasonable j-f repairs are needed as a result of negligence or lmproper maintenance. Ultimately what is reasonabl-e must be determined by the Commissj-on, obviously, so I guess we're just urging you, you know, don't just look over the Staff reports necessarily. Let's look at the details on thls and let's understand what we're paying for are broken pumps, six or seven of them since the l-ast tlme that we were before the Commission. We have a string of pumps that I thlnk are probably going to l-ead to another failure if we don't get the soft start included in that as wel1, and I did tal-k to an el-ectrical engineer on the soft start. Itrs basicall-y beating t.he motor up. ft's siamming it on and slamming if off and over time with smaller windings and electronics, it's going to beat that pump up and I don't think it's going to last 18 years, unfortunately, so in order for t.he public utility to justify increased rates charged to the customers, a public utility must show its proposed rates are reasonabfe and I think 80 percent is certainl-y unreasonable by a long shot, and I think that what the Staff recommended is unreasonabl-e as weII, because all we're doj-ng is buying broken pumps. We're not getting improvement in the system, and I wanted to go back after reading that legal opinion, I just want to step back into the Staf f report f or a mj-nute. I think there's several places that would have from 2002, w€ already talked about the pump manufacturer said you don't even need to go to a large pump, that 25 is adequate, but if you choose to go to a 50 or, magically or mysteriously I should sdy, a 50 l-ater oDr the Kootenai Electric Cooperative, and this is on 3 4 5 6 B 9 10 11 L2 13 t4 15 76 1,1 1B 19 ZU 27 22 ZJ -Aztt 25 CSB REPORT]NG(208) 890-s198 RAMUS PubI ic 50 1 2 3 4 tr 6 1 B 9 10 11 t2 13 t4 15 75 L'l 1B 19 20 2t ZZ LJ 24 25 CSB REPORTING (208 ) 890-5198 RAMUS Public Attachment C of the Staff report, aII motors 20 horsepower or larger shal-I have soft start. It says shal-I. It doesn't say should, may. Itrs saying you shall have soft start and, you know, so from 2002 oD, maybe even before, ds soon as that 50 horsepower pump all those 60s that failed, that alone right there is a failure to read the instructions, a slmple instruction Kootenai Electric Cooperative that anybody in this business should adhere to, and then, again, I talked about you have to have basically clean power, I think, what it is talking about on the harmonics. and and by AS Kootenai Electric did step up and they put the transformer in and I think it cost them 18 grand or somethinq like that. They did not charge that. I don't know if that displays guilt or just they want to get it past where theyrre dt, but I think that part has been sol-ved. I think we're all- fortunate that's not part df our rate base, and then still, again, ily concern is with the National Electric Code and that's the grounding and that's why I think the Commission really should go back and sdy, you know, all the recoflrmendations by the engineering firm given your failure rate needs to be implemented, and then I guess so then what wj-Il- happen, of course, is somebody has to pay for it and I'm certainly not asking to have more put on our rate base, 51 1 2 3 4 trJ 6 1 B 9 10 11 72 13 t4 15 t6 7'l 1B 79 /lt 2L aaL' 23 24 25 CSB REPORTING (208 ) 890-5198 RAMUS PubIic but f think there's an exchange that woul-d be reasonabl-e and that's 1ike, you know, we can pay for improvements to the system, but only if we're going to subtract the l-ast six or seven pump failures since the last time the Commission was here. We can't pay for both. That is unreasonable and to leave it at the status quo now, we're going to be doing that, we're going to buy the six or seven broken pumps I think it's five actually si-nce the last 2007 and our system wil-l still be lingering out there wlth no teeth telJ-ing somebody they need to go out and get fj-ttings, so I think it's going to be an embarrassing problem for everybody down the road here if we get another pump failure and after all this we haven't solved anythlng. Anyway, I guess I'm just asking, you know, if we're going to put if we're going to add more to what the Staff recommends, we need to subtract something, because for me, that's, 1ike, the highest amount that makes any sense. Thatrs only if we're fixing something, so, again, I would subtract out the five pumps and say that's on your own negligence and take some money that you otherwise would have gotten and let's go fix the system and be done with it, and beyond that, I think just the concern is if we don't get that system fixed, then we 52 1 aL 3 4 5 6 7 B o 10 11 72 1-)J.J 74 15 L6 L1 1B 79 20 27 22 )? 24 25 CSB REPORTING (208 ) 890-5198 RAMUS PubIic need to have access to that second pump, because it's goi-ng to happen again, and I'Il- conclude there. COMMISSIONER KJELLANDER: Thank you. Let's see if we have any questions. COMMISSIONER RAPER: I just have one cfarification to make and maybe several of you who have already testlfied feel a Ilttle bit better, Staff's role and responsibilities is sometj-mes mj-sunderstood. Staff comes to the workshop and presents to you the case so that i-t's not adversarial between you and your utility, so that's why they were there and to answer questions and, you know, they've already looked over the record and they're there to be he1pful. As far as the detail within Staff 's comments goes, Staff is a party to an.. case period, so 1t is our three decision to fully weigh alt of the evidencer So I appreciate in looking at it from your perspective that a paragraph at the end of many other pages of analyses is not adequate in your opinion, but I can tefl- you with every assurance that that is not the end of the story by any means. Staff threw that j-n because they were part of the workshop and because they sensed everyone's discontent about what was going ofl, but it is the Commissioners' responsibility to weigh all- of the evidence, including your testimony agai-nst Staff's 53 1 2 3 4 5 6 1 I 9 10 11 72 13 74 15 L6 11 18 79 ZU 2L 22 LJ .ALA 25 CSB REPORTING (208 ) 890-s198 RAMUS PubIic testimony, against the application that was origlnally fiIed, so I just want to assure you that if there was anythlng that you think was missed in Staff's testimony that wasn't adequately covered, which you went into detail on, that those arenrt missed. Everything that you've said tonight will al-so be part of the record and it wil-l- all be consj-dered by the three of us when we make our flnal decision on the case. THE WITNESS: We11, thank you, I appreciate that. COMMISSIONER KJELLANDER: Thank you. Are there any other questions? And from the Deputy Attorney General ? MS. HUANG: No. COMMISSIONER KJELLANDER: Mr. Ramus, thank you very much for your testimony. THE WITNESS: Okay, thank you. (The witness left the stand. ) COMMfSSIONER KJELLANDER: And we wil-1 call Mary Boettcher? MS. BOETTCHER: Boettcher. COMMISSIONER KJELLANDER: Oh, I'm so far off. MS . BOETTCHER: That ' s okay. I ' l-l- answer to anything. 54 1 ) 3 4 trJ 6 7 B 9 10 11 L2 13 74 15 15 T1 18 79 20 a1LL )) 23 24 25 CSB REPORTING(208) 890-s198 BOETTCHER Public MARY BOETTCHER, appearlng as a public witness, havj-ng been first duly sworn, testified as follows: EXAM]NATION BY MS. HUANG: O. P1ease state your name and spell your l-ast name for the record. A. Mary Boettcher. It's spelled B-o-e-t-t-c-h-e-r. O. What is your mailing address? A. 193'7 West Diamond Bar Road. O. You are a customer of Diamond Bar? A. We are, yes. O. Please provide your testimony. A. WeI1, I really don't have a lot to share. f've been pretty impressed with the research t.hat has gone into thls clalm by our neighbors. The committee for our homeowner's association, I just want to teIl them thank you for all their detail-s, but the one thing I wanted to address was property values. When my husband and I bought our piece of property, what attracted us to the piece was that there was a flat rate for irrigation, and there very few, if doy, trees on our 1ot, so we planted tr.tr 1 2 3 4 5 6 1 B 9 10 11 t2 13 74 15 76 l1 1B t9 20 2L .)aLL 23 24 25 CSB REPORT]NG (208 ) 890-s198 BOETTCHER Public over 100 trees, and we keep adding to that every yearr So in 2001 when the rate changed for that irrigation amount, it affected us significantly, but we understood that probably in all reality a flat rate for irrigation is something thatfs going to be kind of a thing in the past, so we swal-lowed it, but when we got this notice of an B0 percent increase, it was like whoa, that definitely caught our attention, so if it was like if I can't afford to pay to water my trees and take care of yard, my yard is not going to look as ni-ce and the property value of my home will- decrease, and I thlnk it is true for everyone else, and so just for an example, my husband and I broke down what we pay now versus what the new rate would be, and in July of last year, it was our highest dollar amount, it was for $222.56, and with the proposed increase, if our water gallons were to stay the same, 1t would be $400.43, so that's a 1ot, and I know Irm not alone in this, and so if my neighbors, maybe I can afford t.o pay my water biII, but what if my nelghbors cannot and so that's definitely going to affect the resafe of my home and maybe that's not important to other people, but it is important to me. COMMISSIONER KJELLANDER: Thank you. Let's see if we have any questions. Any from Ms. Huang? MS. HUANG: No questions. 56 2 )J (The witness left the stand. ) COMMISSIONER KJELLANDER: That exhausts the llst that we had of people who had signed up. Is there anyone who woul-d like to be signed up? If you'd like to, now is the time for that. Additionally, what I want to say is as we prepare to wrap up this portion of the process, that being the public hearing, is that we still will allow for written comments to come in, and in an earlier conversation wi-th the Deputy Attorney General, we were looking at this Friday, June 10th, for additional written comments if you would Iike to submit those, so please feel free to do so. You can either do it through our website, just reference this case number, or if you would like, you can al-so send in a hard copy, and so if there is no one else who like to testify tonight, what I would also l-ike to do is thank you very much for the time you took to come out and participate in this process. I can tell you that oftentimes we will- hol-d public hearlngs for much Iarger utilities and the rate increases that are there have some similar impacts that you're experiencing and we don't have much in the way of public testimony showing up. Having you show up really does assist us in the process. It gives us an opportunity to put faces to the reality of what the rate increases are and it also helps CSB REPORTING(208) 890-s198 4 5 6 1 B 9 10 11 t2 13 74 15 76 71 18 79 20 2t 22 ZJ 24 25 51 COLLOQUY us get some additional- insight into what yourre seeing as customers and so we certainl-y do appreciate the time and effort that you put into reviewing the testimony, participating in the workshops and doing due diligence as it rel-ates to, again, providing us additional information to consider. With that, then, just again a reminder that this Eriday, the 10th, wil-l- be the extended day in which we will allow additional written comments and for is it a question related to the case? Mr. Simmons, you've already been sworn in, so why don't you go ahead and just ask your question. MR. SIMMONS: Comment and question. Darrel referenced the Kootenai Electric cost for the transformer. When I talked to the engineer, he said it's actually $25,000, not 18, so that's something that was a benefit to the Water District that they didn't have to pay for. f wanted to point that out. The other thing is you tal-ked about trying to assure us that everything will be considered, you know, just because it wasn't in the Staff report there, so what I'm wondering is what do we expect to see from you? Is there going to be some explanation of some of these major key issues we've identifled or do we just get a note that says, "Okay, effective July 7, the new rate is"? 5 6 1 8 9 10 11 72 13 74 15 76 L1 18 19 20 27 22 23 24 25 CSB REPORTING (208 ) 890-5198 5B COLLOQUY 1 2 3 4 5 6 a B 9 10 11 T2 13 T4 15 76 71 18 79 20 27 )) 23 24 25 CSB REPORTING (208 ) 890-5198 COMM]SSIONER KJELLANDER :As far as the process and procedure, whJ-ch is a perfect question to ask in rel-ationship to procedure, once we get the official- record closed in which the finaf written comments will help us get to that point of closure, we then have an opportunity as Commlssioners to begin to more thoroughly del-ve into the specifics of the case and even begin the deliberation process, which could last several weeks. We may have a multitude of questions that we raise to parties in the case, specifically to Staff and 1ega1 counsel associated with that, and once we have finally come to the conclusion of what we feel- is fair, just, and reasonable, we then will issue a final Order, and that fi-nal Order typically can run anywhere from 10-30 pages or longer depending on the case itself. What we try to do is delve in not just to the issues that were presented, but also the justificatj-on and any related statutory responsibilities and obligations that we arrlve at to help us come to that general conclusion, and with that, then, it's call-ed the final Order. However, what you are al-l-owed to do, then, is request for reconsideration directly to the Commission and then that can begin a process in which we wi11, again, look at any new informatlon that may be presented to see if perhaps maybe there might need to be some 59 COLLOQUY 1 2 3 tt 5 6 1 I 9 10 11 72 13 1,4 15 76 t7 1B 19 ZU 21 22 23 24 25 CSB REPORTING (208 ) 890-s198 adjustments based on information that's provi-ded or a different interpretation of that information. After a period of reconsideration, if it's requested, then it woul-d all-ow a party to take that final Order directly to the state Supreme Court if they wanted to appeal that decision, so even though we call it a final- Order, there is still is a process for reconsideration and appeal, but you will very rarely see orders on any type of rate case that is much less than 10 pages. It often goes further than that, because there's so many movj-ng issues with that and an opportunity, too, for us to opine, and sometimes we just like to see what we really think on paper, So it can go out even further than 10 pagesr So thatrs what we can anticipate. As far as a tj-mefine, I don't know that there's a specific deadl-ine with regards to when the final- Order has to be issued. MS. HUANG: The effective date has been suspended until JuIy 1. COMMISSIONER KJELLANDER: So we have plenty of time, then, as a Commj-ssion to dellberate on that, but certainly we'11 have an Order out before July 1st so that whatever j-ncrease, if there is an increase, that is included in the Order will- give ample time for the utillty to put that in place for the effective date, so what Ir11 do at this point, because f can see we're going 60 COLLOQUY to kind of turn this into a Q&A piece, what I'l-1 do is I'll cl-ose down this section of the public hearing and then we can just ta1k, so with there being no further witnesses that we will calI thj-s evening, we, again, appreciate all- the testimony that was provlded and wlth that, then, thls aspect of the case comes to a close and we wil-1 adjourn this public hearing. (The Hearing adjourned at 8:30 p.m. ) 3 4 5 6 1 B 9 10 11 72 13 14 15 15 l1 18 19 20 27 tz 24 25 CSB REPORTING(208) 890-s198 67 COLLOQUY AUTHENTICATION This is to certify that the foregoing proceedings held in the matter of Diamond Bar Estates Water Company's application for authority to increase its rates and charges for water service in the State of Idaho, commencing at 7:00 p.m., oD Tuesday, June 1, 2016, at Lakeland High School, 7006 West Highway 53, Rathdrum, fdaho, is a true and correct transcript of said proceedings and the original thereof for the file of the Commi-ssion. CONSTANCE S. BUCY Certified Shorthand Reporter .:$I[+ili";:, .,'F..-:$* A;#;ft? {.,}f:! 5 6 1 8 9 10 11 72 13 t4 15 76 77 18 19 20 2L 22 23 24 25 CSB REPORTING (208 ) 890-s198 62 AUTHENTICATION