20180322Staff 1-23 to NW Natural.pdf

BRANDON KARPEN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-03s7
IDAHO BAR NO. 7956
RECEIVED
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Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
NORTHWEST NATURAL WATER COMPANY,
LLC TO ACQUIRE FALLS WATER COMPANY
FIRST PRODUCTION
REQUEST OF THE
COMMISSION STAFF TO
NORTHWEST NATURAL
WATER COMPANY, LLC
The Staff of the Idaho Public Utilities Commission request that Northwest Natural Water
Company, LLC (Company; NW Natural) provide the following documents and information as
soon as possible, by THURSDAY, APRIL 12,2018,
This Production Request is continuing, and the Company is requested to provide, by way
of supplementary responses, additional documents that it or any person acting on its behalf may
later obtain that will augment the documents produced.
Please provide answers to each question, supporting workpapers that provide detail or are
the source of information used in calculations. The Company is reminded that responses
pursuant to Commission Rules of Procedure must include the name and phone number of the
FIRST PRODUCTION REQUEST
TO NORTHWEST NATURAL
WATER COMPANY
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CASE NO. FLS.W.l8-OT
I MARCH 22,2018
Street Address for Express Mail:
472W, WASHINGTON
BOISE, IDAHO 83702-5918
person preparing the document, and the name, location and phone number of the record holder
and if different the witness who can sponsor the answer at hearing if need be. IDAPA
31.01.01.228.
In addition to the written copies provided as response to the questions, please provide all
Excel and electronic files on CD with formulas activated.
REQUEST NO. 1: The Company states that it has a long-term goal to acquire, manage,
and develop a o'meaningful water utility business". (Palfreyman Direct at 3.) What safeguards
are in place to prevent Falls Water customers from being burdened with overhead costs scaled
for a potentially larger water business that would not exist if Falls Water remained a stand-alone
water utility? Will an inordinate cost burden be borne by Falls Water, as a consequence of it
being acquired?
REQUEST NO. 2: Post-acquisition, will Falls Water customers be billed through the
same billing system as the system used for NW Natural's gas customers?
REQUEST NO. 3: In NW Natural Gas' last general rate case, what was the per-
customer cost approved for the billing function (on an annual revenue requirement basis)?
REQUEST NO. 4: Post-acquisition, will any NW Natural gas system billing costs be
allocated to Falls Water?
REQUEST NO. 5: The Company cited achieving economies of scale, including for
"billing systems", as a benefit of NW Natural's acquisition of Falls Water Company.
(Palfreyman Direct at 3.) Has NW Natural quantified potential savings associated with the
economies of scale of its billing systems?
a. If yes, please provide the current average cost per Falls Water customer for customer
billing and the expected average cost per Falls Water customer for customer billing
subsequent to the acquisition.
b. If no, how did NW Natural determine that the allocated cost of its billing system to
Falls Water customers represents a savings relative to the cost of the current Falls
Water billing system?
FIRST PRODUCTION REQUEST
TO NORTHWEST NATURAL
WATER COMPANY 2 MARCH 22,2018
REQUEST NO. 6: With respect to the economy of scale savings from technology
investments, please provide some examples of savings for Falls Water and quantify these
savings.
REQUEST NO. 7: With respect to the economy of scale savings from integrated
planning processes, please provide some examples of savings and quantify these savings.
REQUEST NO. 8: What is the estimated current Falls Water expenditure for integrated
planning processes?
REQUEST NO. 9: If Falls Water estimated expenditures for the integrated planning
process is unknown, how did NW Natural determine that the allocated cost of the integrated
planning processes represents a savings relative to the current cost of the Falls Water integrated
planning processes? (Palfreyman Direct at 3.)
REQUEST NO. 10: With respect to the economy of scale savings from shared services,
please provide some examples of savings and quantify these savings.
REQUEST NO. 11: Given that NW Natural intends to maintain the current Falls Water
operation and retain Falls Water staff, how can NW Natural support its claim of shared services
savings? (Palfreyman Direct at 3.)
REQUEST NO. 12: Are shared services to Falls Water improved or enhanced after the
acquisition? Please explain. Also, please describe the tangible benefit to customers of (perhaps
expanded) shared services post-acquisition.
REQUEST NO. 13: When will the economies of scale be realized? Are economies of
scale expected to be zero or negative in the first year, post-acquisition?
FIRST PRODUCTION REQUEST
TO NORTHWEST NATURAL
WATER COMPANY J MARCH 22,2018
REQUEST NO. 14: Are economies of scale savings conditioned on employee attrition?
Please explain.
REQUEST NO. 15: Are economies of scale conditioned on water company acquisitions
in addition to Falls Water? In responding, please explain how the number of acquired systems
and their location affect economies of scale, and whether some threshold number of water
customers is necessary to realize these scale economies.
REQUEST NO. 16: In light of claimed scale economy savings that would tend to lower
the revenue requirement, does NW Natural plan to defer filing for a rate increase for a
predetermined period following the acquisition? Please explain.
REQUEST NO. 17: The Company states that water infrastructure in the United States
"is generally old and suffering from substantial deferred maintenance." Does this situation exist
at Falls Water? If not, does the Company expect the situation will exist for Falls Water in the
foreseeable future? (Palfreyman Direct at 2.)
REQUEST NO. 18: The Company lists some anticipated capital improvement projects.
(Palfreyman Direct at 5.) Assuming the acquisition is approved, when does NW Natural plan to
embark on capital projects? Please include descriptions of expenditures and associated estimated
costs.
REQUEST NO. 19: What are the estimates for population growth in the Falls Water
service territory?
REQUEST NO. 20: [n the opinion of NW Natural, does Falls Water currently have the
resources and expertise to invest in and execute on the upgrades and expansions required to
provide water service to its service territory? Please explain.
FIRST PRODUCTION REQUEST
TO NORTHWEST NATURAL
WATER COMPANY MARCH 22,20184
REQUEST NO.21: The Company states that Falls Water's president, Brent Johnson,
will continue in his current role for one year, and that Falls Waters' existing employees and
independent contractors will continue to work for the water utility and provide service to
customers. (Palfreyman Direct at 4-5.) Has NW Natural specihed a duration of its commitment
to existing employees and independent contractors (e.g., l-year, 3-years), or is this commitment
open-ended?
REQUEST NO.22: Would terminating existing Falls Water management, employees,
and severing relationships with independent contractors one year after the acquisition breach any
commitments made by NW Natural? Please explain.
REQUEST NO. 23: Do any benefits from economies of scale (from any source,
including from system operations or economies of scale related to overheads, shared services, or
other costs that apply across multiple business units) exist in addition to those specified above?
Please explain and quantify the scale economies.
Dated at Boise, Idaho, this LLQ day of March 2018.
Attorney General
Technical Staff: Bentley Erdwurm
i:umisc:prodreq/fl sw I 8. I bkbe prod req I
FIRST PRODUCTION REQUEST
TO NORTHWEST NATURAL
WATER COMPANY 5 MARCH 22,2018
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 22ND DAY OF MARCH 2018,
SERVED THE FOREGOING FIRST PRODUCTION REQUEST OF THE
COMMISSION STAFF TO NORTHWEST NATURAL WATER COMPANY, LLC IN
CASE NO. FLS-W-I8-OI, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
MICHAEL C CREAMER
PRESTON N CARTER
GIVENS PURSLEY LLP
601 W BANNOCK ST
BOISE ID 83702
E-MAIL: mcc@ givenspursley.com
prestoncarter@qivenspursley. com
ZACHARY D KRAVITZ
NORTHWEST NATURAL GAS CO
220 NW 2ND AVE
PORTLAND OR 97209
E-MAIL: [e-mail]
SECRETARY
CERTIFICATE OF SERVICE