950823v3.docx

Q.Please state your name and business address for the record.
A.My name is Rose Schulte.  My business address is 472 West Washington Street, Boise, Idaho.
Q.By whom are you employed and in what capacity?
A.I am employed by the Idaho Public Utilities Commission as a Utilities Compliance Investigator in the Consumer Assistance Section.
Q.What is your relevant employment history?
A.I have been employed with the Idaho Public Utilities Commission since October, 1978 and as a Utilities Compliance Investigator since October, 1987.
Q.Have you previously testified before this Commission?
A.Yes, I have.
Q.What areas will you be covering in your testimony?
A.I will be addressing the following issues:  1) customer relations, 2) billings, (3) tariffs and (4) general rules and regulations for small water utilities.
Q.What is your testimony regarding customer relations?
A.The Commission Staff first became aware of Packsaddle Development Corporation (Company) and its problems with its customer relations when the Consumer Staff received five informal complaints and two inquiries regarding the rates, billing practices, restricted water use, and poor maintenance of the system.  Some complainants were disgruntled with the Company's practice of shutting the service off without notice to make repairs or add new customers to the service.  Other complainants believe the recent repairs made on the system were caused by the Company's poor maintenance to the pump and well.  As frequently occurs with developer-owned and operated systems, some of the issues raised concern the development itself instead of the water system, and are not under the purview of the Commission.  For example, customers complained about landscaping, road maintenance, and covenants and agreements between the developer and lot purchasers.
In December 1994, the Company advised its water customers of an increase in water rates from $15 to $28 beginning February 1, 1995, and ultimately $74 beginning May 1, 1995 per household.  The customers were concerned about the change in rates and the threat of disconnection of service if they failed to pay the requested amount.  Consequently, on January 17, 1995, the Commission received a petition signed by approximately 20 people from the Packsaddle Estates Subdivision requesting an investigation of the Company and its practices.  The Commission issued Order No. 25908 directing Staff to conduct an investigation of the Company's records pertaining to the sale of water.
Q.Has the Staff met with the Company or its customers?
A.Staff Auditor Bob Smith and I conducted an informal meeting with the customers and Company personnel on July 7, 1995, in Driggs, Idaho.  The meeting was held to further explain the Staff Report following the investigation of the Company.  Staff witness Smith will discuss in his testimony aspects of this report.  Those attending asked questions regarding regulation, ratemaking and rate design, the Commission's hearing process, and alternatives to regulation.
Q.What are your findings regarding customer relations?
A.Packsaddle Development Corporation has a serious customer relations problem.  The informal complaints filed with this Commission indicate that a considerable degree of distrust and animosity exists between the Company and some of its customers.  The customers’ expectations regarding service and system management are not being met.  The level of distrust must be reduced and better methods of communicating must be developed.  The Company must remember that it does not just furnish water; it also provides a service.  Customers expect to receive good service at a reasonable price.  They also expect to be treated in a cordial and respectful manner.  The Company has a right to expect to be treated similarly.  The Company must develop a plan of action aimed at improving its customer relations by restoring customers' confidence in the Company and providing good service on a day-to-day basis.
Q.In what way can the Commission Staff assist the Company in developing a plan of action to remedy the customer relations problem?
A.The Commission Staff strives to be accessible and responsive to regulated utilities and their customers.  Staff can help identify ways in which the Company can improve its communication with consumers and comply with Commission requirements.  The Company must adopt the Utility Customer Relation Rules (UCRR) and the Utility Customer Information Rules (UCIR).  See Exhibit No. 107.  These rules provide a template for just, reasonable, and non-discriminatory treatment of customers.  The Commission Staff has provided copies of the rules to the Company and is currently discussing implementation with the utility.
Q.What billing policies did the Company have prior to Staff investigation?
A.Customers did not receive bills or receipts on a regular and timely basis unless they paid an additional fee.  Some customers made payments monthly, yearly, or as Company personnel requested.  The water rate was initially $6 per month, and eventually was raised to $15.  Beginning on February 1, 1995, the rate was increased to $28 per month to help defray the costs of repairs and improvements the Company made to the system.  Beginning on May 1, 1995, the rate would have increased to $74 per month.  However, the Company sent another notice on June 12, 1995, informing customers that beginning May 1, 1995, the monthly rate would be $46.63 per month.  This rate was not discussed in any of the alternatives contained in Staff’s report.  Staff is unclear how the Company arrived at this amount.
Q.What measures has the Company taken to change its billing policies?
A.In response to Commission Order No. 26077, issued June 29, 1995, the Company began billing its customers $28 per month.  In July, Packsaddle customers received a billing statement with a new bill format that shows charges and payments received.  However, the past due date reflects less than one week for customers to submit payment.  I recommend that the new bill format show a due date for payment to comply with Rule UCR No. 202 which requires a minimum of at least fifteen days between the time the bill is issued and the due date for payment.
Q.What steps will the Company need to take if the Staff's rate proposal is accepted?
A.Staff witness Oliason recommends an annual rate of $516, or $43 per month for water beginning January 1, 1996.  Customers may choose to be billed on an annual, quarterly, or monthly basis.  Customers must notify the Company of their preferred billing method by December 1, 1995, and the Company will bill accordingly in advance.  All customers will have at least 15 days to pay and will be subject to involuntary disconnection for non-payment.
Q.What other concerns do you have regarding the Company's billing practices?
A.In Order No. 26077, the Commission announced its decision to regulate the water service provided by Packsaddle Development Corp., and approved a $28 monthly rate to begin on July 1, 1995.  The Commission did not determine what the appropriate charge for water service would be prior to that date.  However, the Company billed their customers $28 retroactively for the months of February through June.  Some of the customers have continued to pay only $15 per month, thereby creating a past due amount.
The Company's inability to collect past due amounts are matters between the customers and Packsaddle.  Any preexisting contracts entered into between the Company and its present customers is superseded by the terms of Commission Order No. 26077.
The Company and its customers should come to an agreement regarding charges for water prior to the Commission's final Order in this case.  Any amounts owing prior to July 1, 1995, should not be included on the current bill in order to prevent any misunderstanding on a customer's account.  The Company may, of course, seek collection by other means.  The Company is not allowed to disconnect for non-payment of any amounts owing prior to regulation.
Q.Do you have additional concerns regarding the Company's policies?
A.Yes, I do.  In July, Packsaddle advised its customers that "once service is terminated, a reconnection fee of $75 during regular business hours, Monday through Friday, $100 after regular business hours, plus payment in full, will be necessary to reinstate service".
Q.Do you find the reconnection fee the Company has requested reasonable?
A.No.  The requested reconnection fee is not supported by any cost data or other evidence.  Reconnection fees assessed by other utilities under the jurisdiction of the Commission are not as onerous as that proposed by the Company.  A more reasonable fee is sufficient to recover the costs of performing the service.  Previously-approved involuntary reconnection fees for other water utilities range from $10.00 to $28.00.  See Staff Exhibit No. 108.
I recommend a $25 reconnect charge be allowed for customers involuntarily disconnected for a period of up to 30 days’ duration.  Credit related situations typically are resolved in less than 30 days, so establishing this time frame will allow the Company to make an objective distinction between involuntary disconnection or non-payment disconnection, and a voluntary or seasonal disconnection.  Staff witness Oliason recommends a seasonal reconnect fee for accounts closed in excess of 30 days.  However, a customer should not, in any instance, be charged for disconnection of service.
Q.What documents must the Company be required to file with the Commission?
A.The Company is required to file tariffs to reflect its rates and general service provisions for Commission approval.  The tariff shall include commodity rates, non-recurring charges, e.g., reconnection fees, and hook-up charges, and the general rules and regulations for small water companies.  The general rules and regulations for small water companies are designed to be applicable to all water companies so that no modifications or only minor modifications are necessary to meet the special needs of any specific water company.  This set of rules is intended primarily to address the responsibilities that the water company and its customers have to each other.  See Exhibit No. 109.  The Commission Staff has already been working with the Company to help them tailor their tariff schedules to comply with the Commission’s rules and regulations.
Q.What additional documents must be filed with the Commission?
A.Packsaddle Development Corporation must file an application for a Certificate of Public Convenience and Necessity to operate as a water corporation and public utility in Idaho.  A plat map with legal description attached is required to complete the application.
Q.Do you have additional tariff issues that need to be addressed?
A.Yes.  Staff witness Oliason recommends a hook-up fee for all new connections.  Packsaddle must submit a tariff schedule that reflects the rate and conditions for providing new service.
Q.What are your conclusions and recommendations?
A.I recommend the Company make a concerted effort to be sensitive to customer concerns and convey a good customer service attitude.  I encourage the Company to communicate with the customers, especially when service will need to be shut down for repairs or new connections.
I recommend the Company provide a bill to its customers on a monthly, quarterly, or annual basis and keep complete and accurate records of customer payments.
I recommend a fee of $25 for reconnection after involuntary disconnection be adopted.
I recommend the Company submit its General Rules and Regulations and tariff schedules for water rates and non-recurring charges, including a hook-up fee and reconnection fees for Commission approval.
The Company must file its application for a Certificate of Public Convenience and Necessity.
Q.Does this conclude your direct testimony in this proceeding?
A.Yes, it does.