950823.docx

Q.Please state your name and business address for the record.
A. My name is Donald M. Oliason.  My business address is 472 West Washington Street in Boise, Idaho.
Q.  By whom are you employed and in what capacity?
A.  I have been employed by the Idaho Public Utilities Commission as an electrical engineer since January 1990.
Q.  Please describe your educational background and engineering experience.
A.  I received Bachelor of Science degrees in Civil and Electrical Engineering from the University of Idaho and I am a registered Electrical Engineer in the states of Washington and Idaho.  In addition to my work with the Public Utilities Commission, I have had 24 years of experience in various engineering and operating positions with an electric, water and natural gas utility.
Q. What is the purpose of your testimony?
A.The purpose of my testimony is to describe the water system owned and operated by the Packsaddle Development Corp.(Packsaddle), to provide an evaluation regarding the adequacy of the system, examine the
feasibility of metering, and to recommend a rate design for permanent and seasonal customers.
Q. What conclusions have you reached?
A.In regard to the adequacy of the system, I conclude that the water system is more than adequate to serve the existing customers, and it is adequate to serve the domestic needs of the full development of 90 homes.
In regard to rate design, I recommend an annual flat rate.    
I conclude that the cost of meters would put further upward pressure on rates and there are not yet compelling reasons to install meters.
Q.Please describe the Packsaddle water system.
A.Packsaddle is a gravity system fed by two wells and two storage reservoirs.  Exhibit No. 103 shows the location of the wells and storage and the distribution lines.  The original well is rated 35 gallons per minute (gpm), the newer well is rated 70 gpm and the two reservoirs hold 88,000 gallons.
The wells are not equipped with flow meters.  The reservoir and wells are at the highest elevation in the development with gravity water flow to all lots except for about 10% of the lots near the reservoir which are served by a booster pump required to give adequate pressure to these lots.
From the reservoir, the land slopes down to the north and to the east.  The system has two pressure-reducing valves to avoid over-pressure for the lots at the lower elevations.
Q.What is the peak capability of the Packsaddle system?
A.One can assume that the reservoir will supply water during the daytime with refill to occur during twelve hours at night by the two wells with 105 gpm total capacity.  Therefore the allowed storage deliverability during the day would be 105 gpm.  
The peak capability of the Packsaddle system is 105 gpm from the two wells, and 105 gpm from storage for a total of 210 gpm.
The maximum storage that can be used during the day is 105 gpm x 12 hours x 60 minutes or 75,600 gallons which leaves 12,400 gallons in storage for emergency use.
Q.Is 210 gpm sufficient for the full development of 90 homes?
A.A typical, normal, metered subdivision with 90 homes would require 2.0 gpm per customer.  This design flow is for a subdivision whose lots are not more than one-half acre each.  Unmetered subdivisions tend to use about twice as much water.
Packsaddle is not a typical subdivision and customers are not metered.  Many of the lots are several acres each and larger.  However, of the 27 customers, only a few have a lawn and garden and these occupy only a small portion of the lot.  I assume that this kind of development, with low summer irrigation requirements, will continue as new homes are built.  Because of this I believe 2.0 gpm per customer is a reasonable design number to use for Packsaddle and with 90 homes the peak demand on the water system will be 2.0 x 90 or 180 gpm.  Certainly, the 210 gpm capability of the water system is sufficient for the 27 existing customers.
The addition of the 27 homes has taken place over some 20 years so the residential growth has been very slow.  I believe the Company, considering the slow growth, would have time to consider reasonable options should new homes come on line with a higher irrigation use.  The Company could apply to the Commission for a metered irrigation rate to recover the higher costs associated with higher usage or the Company could request the Commission to approve a restriction on irrigation to not more than one half acre.
Q.There has been discussion of the possibility of installing customer meters.  What would such meters cost and what would be the cost effect on customers?
A.I can provide an approximate cost by referring to the United Water Idaho (United Water) unit costs for metering.  For an existing customer who only needs a 3/4 inch meter and meter base the cost is $202.  For a new customer who requires a service connection to the water main in addition to the meter and meter base, the unit cost is $426.  Packsaddle would not have quantity discounts available in either materials or construction, so its costs for an existing customer would probably be about $300 and it would be about $500 for a new customer.
Assuming the Company installs meters for existing customers and the investment is allowed in rate base, the cost to each customer would be an additional $5.09 per month (see testimony of Staff witness Smith, Exhibit No. 102).
Q.Do you recommend installation of customer water meters?
A.I do not recommend the installation of meters at the present time because we have no evidence that meter installation would be a prudent investment. However, I do recommend that the Company install a meter box and meter base for each new customer so that meters can be installed easily in the future if they are needed.
I do recommend the installation of flow meters on each well to be read at least monthly and recorded in a permanent log. This would allow the Company to identify trends in water consumption, and it would allow insight into whether or not customer meters should be installed. Installation of customer meters would be appropriate if average usage per customer becomes unreasonably high to the extent that a new well may be required to allow build-out of the development. A decision on installing customer meters can be delayed pending the development of a record from the flow meters to be installed at each well.
Q.Do you recommend a hookup fee for new customers?
A.Yes, I do. A hookup fee is intended to cover the costs of labor and materials to connect a new customer. Its collection prevents upward pressure on rates. In this case, I suggest the hookup fee be based on the service connection, meter box, and meter base, but not the meter. I recommend this fee be $430 which is based on United Water's unit costs in Boise plus 10%.
If the Company prefers to install meters for each new customer, I recommend the fee be increased to $500 which is based on United Water's unit costs in Boise plus 10%.
Most regulated water companies in Idaho have hookup fees of between $200 and $600. See
Exhibit No. 104.
Q.Why did you base your hookup fee on the unit costs of United Water Corporation?
A.The Company provided Staff with two invoices which showed the cost ($440 and $508) of service connection, meter box, meter base and meter for two new customers. In my opinion, two invoices do not provide sufficient evidence of average costs, and that is why my recommended hookup charge is based on the average unit costs of United Water Corp. to serve as a proxy until such time as Packsaddle develops more cost data.
Q.Do you believe that a new customer should have the chance to hire his own contractor instead of paying the hookup fee?
A.Yes I do with certain conditions attached.  I propose that a new customer be allowed to hire his own contractor to install a new service connection subject to approval by the Company and provided the contractor agrees to perform the work in accordance with Company specifications.
Q.What kind of rate design do you recommend?
A.Since there are no meters and since there is currently no compelling reason to install meters, a flat rate design is the only reasonable choice.
Another reason for choosing a flat rate is that over 87% of the water system costs exist just to make water available regardless of whether any water is used.
Q.What rate do you recommend?
A.I recommend an annual flat rate of $516 per customer beginning January 1, 1996 with the option to make payment arrangements with the Company to pay quarterly or monthly.  I also propose a $129 reconnect fee in the case of a customer closing his account for more than 30 days and later requesting service be reestablished.
Because this is an annual flat rate, I recommend its effective date to be January 1, 1996 with the current $28 per month continuing through December 1995.
Q.How did you arrive at the rate of $516 per year per customer?
A.I used the annual revenue requirement calculated by Staff witness Smith and divided it by the number of equivalent full-time customers.  I developed the equivalent full-time customers by converting the number of seasonal customers to equivalent full time.  See Exhibit No. 106.
The revenue requirement on which this rate is based is the one identified as ALT #1 in Exhibit
No. 101 by Staff witness Smith.   ALT #1 does not recognize the investment in the new well and this is consistent with Commission policy expressed in IDAPA 31.36.01000 Rule 103 which states: ”In issuing certificates for a small water company or in setting rates for a small water company, it will be presumed that the capital investment in plant associated with the system is contributed capital, i.e., that this capital investment will be excluded from rate base.”  A small water company is defined as one having not more than $50,000 in gross water revenue or having less than 300 customers.  The above policy was established by General Order No. 174, Case No. P-300-21 and it presumes that a developer recovers his investment in a water system through the sale of lots.
Q.In the testimony of Staff witness Smith, page 14, line 14, he makes a calculation of revenue requirement per customer of $472.66 per year for 27 customers or $39.39 per month per customer.  Why is your rate calculation of $516 per year per customer ($43 per month per customer) different?
A.Staff witness Smith and I start out with the same annual revenue requirement of $12,761.78.  Staff witness Smith uses a customer number of 27 to calculate the dollars per year and the per customer dollars which produces average cost per customer if costs are spread evenly over all customers.
Because 10 of the 27 customers are seasonal, I spread the annual revenue requirement of $12,761.78 over 24.5 equivalent full-time customers to recognize that the seasonal customers will be paying for less than 12 months of water service each year.  
Q.Why do you propose an annual rate instead of a monthly rate?
A.I chose an annual rate to emphasize that the revenue requirement is almost all (87%) fixed annual cost independent of water usage.  I think it is likely that most customers will choose to pay monthly.  A customer who uses water for only 6 months each year will probably close his account during the winter and will be paying $252.  In this case the reconnect fee, representing 3 months of revenue, moves this customer into a more equitable sharing of water system costs.
Q.How does your recommended rate of $516 per year ($43 per month) compare with the amount customers currently pay?
A.Packsaddle established its monthly rate at $28.00 per month in February 1995.  It also informed its customers that the monthly rate would increase to $74.00 in May 1995.  By Order No. 26077 on June 29, 1995 the Commission set the monthly rate at $28.00 to be in effect until this rate case is resolved.
The monthly charge for most flat-rate water companies falls between $10 and $25 per month.  See Exhibit No. 105.
Q.Does this conclude your testimony?
A.Yes, it does.