20030428Public Hearing.pdf

1

1 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

2

3

4

5 IN THE MATTER OF PONDEROSA CASE NO. PTE-W-03-1

6 TERRACE ESTATES WATER HEARING RE OSC

7 SYSTEM INC.'S FAILURE TO

8 COMPLY WITH COMMISSION ORDERS

9

10

11

12

13

14 APPEARANCES:

15 HEARING EXAMINER: Stephen M. Ayers
1424 Sherman Avenue
16 Suite 100
Coeur d'Alene, Idaho 83814
17
ATTORNEY FOR STAFF: Lisa D. Nordstrom
18 Post Office Box 83720
Boise, Idaho 83720-0074
19
ROBAER COBOTT, PRO SE: 2626 Wrenco Loop Road
20 Sandpoint, Idaho 83864

21
TOP OF IDAHO REPORTING
22 CINDY F. HANOVER, CSR, RPR
HCR 60, BOX 276A
23 Bonners Ferry, Idaho
[phone]
24

25

2

1 I N D E X

2 PAGE

3 Direct Examination of Michael Fuss

4 by Ms. Nordstrom: 11

5 Cross-examination by Mr. Cobott: 30

6 Redirect Examination by Ms. Nordstrom: 46

7 Direct Examination by Mr. Cobott in Pro Se: 53

8 Cross-examination by Ms. Nordstrom: 58

9

10 EXHIBITS:

11

12 Prefiled Direct Testimony of
Michael Fuss including Exhibits 1- 21: 12 & 51
13
Testimony Submission of R. Cobott
14 dated April 16, 2003: 56

15

16

17

18

19

20

21

22

23

24

25

3

1 SANDPOINT, IDAHO; MONDAY, APRIL 28, 2003; 9:30 A.M.

2 HEARING EXAMINER: This is the hearing that's

3 been scheduled on an Order to Show Cause before the

4 Idaho Public Utilities Commission.

5 My name is Stephen M. Ayers. I've been

6 appointed by the Commission to conduct this hearing.

7 This is In the Matter of Ponderosa Terrace Estates

8 Water System, Inc., Case No. PTE-W-03-1.

9 We are here today solely on the issue of

10 whether or not Ponderosa Terrace Estates Water System,

11 which I will refer to as "the company" just for

12 brevity; so, when I say, "company," I'm referring to

13 the corporation. I may call it "Ponderosa Terrace."

14 When I'm speaking, that's what I'm referring to.

15 For the record let's take the appearances

16 first by staff.

17 MS. NORDSTROM: Thank you.

18 My name is Lisa Nordstrom. I'm a Deputy

19 Attorney General representing the Commission's staff

20 in this case. Seated with me at the table is Michael

21 Fuss. He is a staff engineer.

22 COMMISSIONER AYERS: Thank you. You, sir,

23 you are?

24 MR. COBOTT: My name is Robaer Cobott. I'm

25 the owner of Ponderosa Terrace Estates Water System.

4

1 HEARING EXAMINER: Are you also an officer of

2 the corporation?

3 MR. COBOTT: President.

4 HEARING EXAMINER: You are President?

5 MR. COBOTT: Yes.

6 HEARING EXAMINER: The corporation is not

7 represented by counsel -- by an attorney -- in any

8 fashion today?

9 MR. COBOTT: No.

10 HEARING EXAMINER: You'll be doing the entire

11 representation for the company; is that correct?

12 MR. COBOTT: Yes.

13 HEARING EXAMINER: All right.

14 Is there anything preliminarily either side

15 wants to take up on the record before we proceed with

16 the hearing?

17 MS. NORDSTROM: Not at this time.

18 HEARING EXAMINER: Mr. Cobott?

19 MR. COBOTT: Yes. I sent P. U. C. my answer

20 to their show cause. In that answer I listed many,

21 many items that I wanted answers to.

22 I also made it in my inexperienced way a

23 show cause directed to P. U. C. to show cause. They

24 tried -- they made a -- they gave me an answer to one

25 question which was very vague.

5

1 It is the same question that I've asked

2 many, many times of P. U. C., and I never have gotten

3 a straight answer.

4 And that question is why am I being

5 discriminated against? I thought there was another --

6 25 -- I mean 28 or 30 privately owned public

7 utilities in the State of Idaho that was under their

8 control. Now I find out there is only 25.

9 Something just occurred to me on the way

10 down here today. What happened to the other 1 or 2 or

11 3 that were part of their supervision in the last year

12 and a half that are no longer under their

13 supervision. What happened to those companies?

14 The other thing is I know there is many,

15 many privately owned public utilities in the State of

16 Idaho. They just made a statement in that reply that

17 there was 2,600 public utilities.

18 Most of them are municipalities and

19 associations, but I know there is many privately owned

20 public utilities just like mine.

21 I was told by Bob Smith, who is in the

22 courtroom here today, on his first meeting with me --

23 MS. NORDSTROM: Your Honor, I would --

24 sorry.

25 Mr. Hearing Examiner, I would object at this

6

1 point. He has failed to state a matter to be taken

2 care of at least preliminarily. This is perhaps more

3 appropriate for his testimony.

4 I'm not sure it's an issue that can be

5 addressed at this point. Staff has replied to some of

6 these concerns through a production response. We

7 treated it as a production request; however, that is

8 not in the record.

9 And I'm a little uncomfortable with him

10 referring to things that are not in the record at this

11 point.

12 HEARING EXAMINER: The nature of my inquiry

13 was was there any preliminary matters that we had to

14 take up before the hearing, and I don't want to

15 supplant your testimony with just an administrative

16 matter --

17 MR. COBOTT: What do you mean by that?

18 HEARING EXAMINER: Well, you'll be allowed to

19 give --

20 MR. COBOTT: I understand.

21 HEARING EXAMINER: -- testimony under oath

22 and --

23 MR. COBOTT: About what was -- I understand.

24 But what were you asking? What can I respond to?

25 HEARING EXAMINER: I was asking if there was

7

1 anything we need to address before we started the

2 hearing. I wasn't aware of any myself. Ms. Nordstrom

3 said she wasn't aware of any.

4 You were bringing up quite a number of

5 matters which are obviously important to you

6 concerning your water association and conduct by the

7 P. U. C.

8 But what we are here today for is a very

9 limited-in-scope hearing, and that has to do with the

10 three matters in which the Public Utilities

11 Commissioners ordered that you respond to.

12 And they ordered that you file testimony

13 that explains why the Commission should not seek to --

14 not seek imposition of civil and or criminal penalties

15 for noncompliance with Commission orders, why the

16 Commission's current rates are inadequate to recover

17 Ponderosa's expenses, and what rates Ponderosa

18 believes should be implemented.

19 That's what you were ordered to -- I assume

20 that's what your submission to comply addressed. The

21 Commission found upon the representations of Staff

22 that there is probable cause to believe that the

23 company failed, omitted, or neglected to obey,

24 observe, or comply with Commission orders, rules,

25 directions or requirements as required by Chapter 7,

8

1 Title 61 of the Idaho Code.

2 And more specifically that Ponderosa; one,

3 made material misrepresentations to customers

4 regarding the Commission's involvement in regulating

5 the company; two, made material misrepresentations to

6 customers regarding rates to be charged for seasonal

7 disconnections; three, threatened to disconnect

8 customers in a manner inconsistent with prior

9 Commission orders and administrative rules and; four,

10 billed customers for usage or lack thereof in a manner

11 inconsistent with prior Commission orders.

12 Of course, there is an order that the

13 company show cause why the Commission should not

14 formally find that the company as a regulated utility

15 that has failed to comply with the Commission orders,

16 rules, directions, or requirements.

17 That's why you were required to appear here

18 today and show cause why the Commission should first

19 of all not seek a civil penalty of $2,000 per day for

20 each day the utility has failed to comply with

21 Commission orders pursuant to Idaho Code 61-706; two,

22 petition the First Judicial District, which is the

23 judicial district we are in including Bonner County,

24 for an injunction prohibiting Ponderosa from charging

25 rates different than those ordered by the Commission;

9

1 three, request the Court to place the company in

2 receivership and or; four, file criminal misdemeanor

3 charges under Idaho Code section 61-709 for failure to

4 comply with the Commission order.

5 So that's what we are here to have this

6 hearing on, and you are raising a lot of other issues

7 that, as I say, are maybe beyond the scope of the

8 hearing.

9 If you get too far afield -- and I realize

10 this is all interconnected to an extent -- but, if

11 get too far afield, I'll find that your testimony is

12 irrelevant. Or, if you are going on about some other

13 agency -- the State of Idaho for instance -- then I'll

14 have to rein you in a bit and probably sustain

15 objections that you are going into matters that are

16 not going to be considered by me because I find that

17 they are not germane to the issues that I'll be

18 recommending to the commissioners.

19 So with that, as I believe I explained

20 earlier, I have not acted as hearing officer for the

21 Public Utilities Commission. I have been in a lot of

22 court matters however, and normally, when there is an

23 Order to Show Cause, the person who the Order is

24 directed to goes first with the testimony.

25 But what is the experience of your time

10

1 before the Commission, Ms. Nordstrom?

2 MS. NORDSTROM: Typically, in my experience

3 Commission Staff goes first because we have the burden

4 of proof in this case; so that would be my

5 recommendation.

6 I'm hoping that with Mr. Fuss's testimony we

7 can clarify some of the issues and perhaps find a way

8 to resolve some of the issues that we have in this

9 case.

10 To the extent that that might expedite this

11 hearing, that would be my recommendation.

12 HEARING EXAMINER: All right.

13 MR. COBOTT: Can I have an answer to that?

14 HEARING EXAMINER: Go ahead.

15 MR. COBOTT: When the August 8 supposedly

16 final order came out from P. U. C., which I was told

17 by Mrs. Nordstrom and Michael Fuss, that this was a

18 final order. It was final. That means it cannot be

19 changed. So on and so forth.

20 We talked about it after it came out. We

21 went through some tariffs. So on and so forth. I was

22 perfectly happy with this. I wasn't a hundred percent

23 happy, but I went along with it just to try to be

24 cooperative. I went along with this order.

25 HEARING EXAMINER: Well, all we are trying to

11

1 establish now is the procedure we are going to follow

2 here today.

3 MR. COBOTT: Well, that's fine.

4 HEARING EXAMINER: She suggested that the

5 Commission -- are you objecting --

6 MR. COBOTT: I'm not objecting, and I want to

7 make it quite clear that I was in complete acceptance

8 and compliance with the August 8 order, and I wanted

9 to live by it.

10 HEARING EXAMINER: All right.

11 You may proceed, Ms. Nordstrom.

12 MS. NORDSTROM: Thank you, Mr. Hearing

13 Examiner.

14 The Staff would call Michael Fuss as its

15 first witness.

16 MICHAEL FUSS,

17 called as a witness by and on

18 behalf of the Commission Staff,

19 having been first duly sworn,

20 was examined and testified as follows:

21

22 DIRECT EXAMINATION

23 BY MS. NORDSTROM:

24 Q Good morning.

25 A Good morning.

12

1 Q Please state your name for the record and spell

2 your last name for the record?

3 A Michael Fuss, F-U-S-S.

4 Q By whom are you employed and in what capacity?

5 A I'm employed by the Idaho Public Utilities

6 Commission as Staff Engineer.

7 Q Are you the same Michael Fuss that filed direct

8 testimony on April 1, 2002, and prepared Exhibits 1

9 through 21?

10 A Yes, I am.

11 Q Do you have any corrections or changes to your

12 testimony or exhibits?

13 A None that I'm aware of.

14 Q If I were to ask you the same questions set out

15 in your prefiled testimony, would your answers be the

16 same today?

17 A Yes.

18 Q I would move that the prefiled testimony of

19 Michael Fuss be spread upon the record as if read and

20 Exhibits 1 through 21 be marked for identification.

21 HEARING EXAMINER: Is there any objection by

22 you, sir?

23 MR. COBOTT: Complete objection.

24 HEARING EXAMINER: State the nature of your

25 objection.

13

1 MR. COBOTT: My objection is that Michael

2 Fuss worked for Idaho Public Utilities Commission, and

3 he is partial.

4 He has to protect his job, and the way he

5 interprets things is not exactly the way that the

6 comments and conversations between him and I were

7 conversed.

8 HEARING EXAMINER: Well, I find that your

9 objection goes to the actual testimony that he has

10 given in the prefiled testimony or that he is about to

11 give; so I'll overrule the objection and the prefiled

12 testimony will be admitted.

13 MR. COBOTT: Can we hear every one of the

14 testimony -- questions 1 through 21?

15 HEARING EXAMINER: I haven't seen it but, as

16 I understand, those are exhibits to the testimony; is

17 that correct?

18 MS. NORDSTROM: That's correct.

19 HEARING EXAMINER: They are not actual -- has

20 Mr. Cobott been furnished with a copy of that?

21 MS. NORDSTROM: Yes, a copy was sent to him.

22 HEARING EXAMINER: Did you receive a copy of

23 the prefiled testimony?

24 MR. COBOTT: I could have. I'm not too

25 reluctant to waste my time and energy on anything that

14

1 P. U. C. sends me. They lie and cannot be trusted,

2 and I have no use for them.

3 I'm going to show in my testimony why they

4 have lied and why Lisa Nordstrom and Michael Fuss --

5 I'm going on and on, but I'm going to be heard here.

6 I wasn't heard on the last hearing, but I'm going to

7 be heard here.

8 HEARING EXAMINER: You'll have that

9 opportunity.

10 MR. COBOTT: You bet.

11 HEARING EXAMINER: Your answer is you are not

12 sure if you received prefiled testimony or not?

13 MR. COBOTT: I received paperwork from them.

14 I did not look at it.

15 MS. NORDSTROM: I would note for the record

16 that a copy was sent to Mr. Cobott as attested on the

17 Certificate of Service that is attached to the

18 testimony, and Mr. Cobott has testified under oath in

19 the past that he has thrown out Commission

20 correspondence.

21 HEARING EXAMINER: Well, the prefiled

22 testimony will be admitted into the record. You may

23 continue.

24 MS. NORDSTROM: Thank you.

25 BY MS. NORDSTROM:

15

1 Q Mr. Fuss, have you read Mr. Cobott's response to

2 your testimony in this case?

3 A Yes, I have.

4 Q Mr. Cobott has alleged that the Commission

5 discriminates against his water company by not

6 regulating all such water companies in the State.

7 Do you believe that the Commission is

8 discriminating against Ponderosa and the other 24

9 water companies it regulates?

10 A No. According to Title 61 of Idaho Code, the

11 Public Utilities Commission is vested with the

12 authority to regulate all for profit water companies

13 and water utilities that serve the public.

14 Q Are all public water companies public utilities

15 as defined by the Idaho Code?

16 A Not necessarily, no. There are things such as

17 municipalities and homeowner associations that would

18 not be regulated.

19 Q Do these other entities -- the municipalities,

20 the cooperatives, various nonprofits -- do they

21 compose the majority of water companies in the State

22 of Idaho?

23 A To my knowledge, yes.

24 Q Do you believe that other public utilities exist

25 that should be but are not currently regulated by the

16

1 Commission?

2 A I believe that it is likely that there are some

3 that do exist; however, I also believe, as a staff

4 member, we would assume that the water companies are

5 following the Idaho Code and, if they were to serve

6 the public, they would apply for and receive a

7 Certificate of Convenience and Necessity. So before

8 they went into operation.

9 Otherwise, I suppose, they would be in

10 violation of Title 61.

11 Q So, Mr. Fuss, are you saying that in order for

12 for profit water utilities to do business in Idaho

13 they must receive a Certificate of Public Convenience

14 and Necessity from the Idaho Public Utilities

15 Commission first before they start operating?

16 A Before they start legally operating, correct.

17 Q Are there civil or criminal penalties for not

18 doing so?

19 A I believe there are.

20 Q Are you aware of anytime when the Commission has

21 not enforced its jurisdiction over water utilities

22 once it become aware of a public utility that was not

23 regulated?

24 A Not since I've been at the Commission. I've been

25 with the Commission, I believe, nearly three years.

17

1 And we've received, as staff members, Staff has

2 received several complaints.

3 And we have looked into each one and tried

4 to determine whether it falls within or not within the

5 Commission's jurisdiction. If it has "falled" within

6 the Commission's jurisdiction, we move the cases

7 forward as needed.

8 Q Have you ever known the Commission to ignore a

9 water utility that needed to be regulated that it was

10 aware of?

11 A Not that I'm aware of.

12 Q How did the Commission first learn of Ponderosa

13 Estates Water Company?

14 A I believe the Commission received several

15 complaints regarding a recent rate increase.

16 Q What happened at that point?

17 A At that point we began an investigation into

18 Ponderosa to try to determine whether or not it should

19 fall within the Commission's jurisdiction.

20 Q Do you believe that the Commission is trying to

21 force Mr. Cobott's company out of business?

22 A No. I don't believe so. The best interests of

23 the customers is to provide a continuous operating

24 water system within reasonable rates, and the best

25 interest of the company is to have an opportunity to

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1 earn a reasonable rate of return on their investment.

2 If the Commission were to try to run the

3 company out of business, neither one of those things

4 could occur.

5 Q So, if I understand you correctly, what you are

6 saying is that it is in the Commission's and the

7 customer's best interest if the company can stay in

8 business and provide reasonable service and rates for

9 water service?

10 A That's correct.

11 Q Do you believe the rules and rates imposed by the

12 Commission have driven away Ponderosa's customers?

13 A I don't believe that to be the case. The initial

14 investigation was started from complaints for rates

15 that were imposed at that time of $60 for resident

16 customers and $30 for nonresidents.

17 And the rates currently in place are 48 and

18 25 though the definitions are slightly different.

19 Q So, if I understand you correctly, the rates

20 imposed by the Commission are actually less than what

21 Mr. Cobott was charging his customers before the

22 Commission came into the picture?

23 A That's correct.

24 Q What do you believe is a reasonable rate of

25 return for this company?

19

1 A In the previous hearings, I believe, the rate of

2 return was established to be -- or the revenue

3 requirement, the total amount of revenues that should

4 be received for the company was twenty-six thousand

5 six hundred and some dollars.

6 I believe that is still a valid number.

7 That does include a return on Mr. Cobott's investments

8 of well improvements of over $3,000 and associated

9 depreciation and tax implications.

10 Q So his return on his investment is $3,000?

11 A $3,000.

12 Q Approximately how much were made in well

13 improvements?

14 A Approximately $2,500 was included in the initial

15 case.

16 Q By "the initial case" are you referring to Case

17 No. GNR-W-01-1?

18 A Yes.

19 Q Mr. Fuss, if you believe that the company's rate

20 or asset base is valued at just over $25,000, what do

21 you think of the Idaho Tax Commission's assessment of

22 the company's value at $130,000 as mentioned in

23 Mr. Cobott's response filed on April 8, 2003, at Page

24 2?

25 A I certainly cannot speak for the Tax Commission.

20

1 I don't work for the Tax Commission nor am I a tax

2 accountant.

3 However, it is my understanding that Staff

4 has contacted some individuals at the Tax Commission,

5 and it was -- I believe that that assessment was

6 performed in May of 2002, prior to the Commission's

7 order.

8 And it's my understanding that the tax

9 Commission receives copies of the Commission's orders,

10 and I would assume or suggest to Mr. Cobott that he

11 would work with the Tax Commission given the

12 information that has come out of the Commission's

13 previous hearing. Work with the Tax Commission to

14 include the information that has come out of the

15 Public Utilities Commission's final hearing.

16 Q To your knowledge does the Tax Commission use the

17 Public Utilities Commission's orders as part of its

18 appraisal process?

19 A I believe that they do use Commission orders for

20 -- in their appraisal process. I cannot speak to

21 their entire process.

22 Q So it might be to Mr. Cobott's benefit to contact

23 the Idaho Tax Commission now that the Public Utilities

24 Commission issued an order last summer, correct?

25 A Yes.

21

1 Q Are you familiar with the number of customers

2 currently on Ponderosa's system?

3 A I made several trips to the system and tried to

4 determine the number of customers that are still on.

5 It is difficult to determine, but based on

6 Mr. Cobott's response I do have a general

7 understanding of the number that are there; and it is

8 significantly less than what we started with.

9 Q To your knowledge how many customers are

10 currently on the system?

11 A According to Mr. Cobott's response, there are 12

12 residents and 21 nonresidents.

13 Q How many customers were on the system at the time

14 that the Commission's order was issued?

15 A I have that information --

16 Q I'm not looking for an exact number.

17 A Approximately 80, I believe. Well, on the system

18 80 some I believe.

19 Q So considerably more than are currently present?

20 A That's my understanding.

21 Q Can the existing customers generate the

22 authorized revenue requirement at current rates?

23 A Since -- I don't believe so because there was a

24 larger number of customers initially that were

25 included in the revenue calculation than are currently

22

1 paying rates today. So therefore there would be fewer

2 revenue returned.

3 Q In the company's response received on April 18 of

4 this year it describes the new rate structure the

5 company has apparently put in place in January of this

6 year.

7 Do you object to this rate structure?

8 A Not completely. I sent a letter in mid January

9 -- January 14 I believe -- I included a copy of that

10 letter in my testimony that I believe his proposal,

11 Mr. Cobott's proposal, had merit in that if those

12 rates were filed with the Commission and approved by

13 the Commission that it may resolve several issues

14 currently outstanding.

15 Q Were you willing to work with Mr. Cobott to try

16 and make that happen?

17 A Yes, as I indicated in my letter in January.

18 Q Did you get any kind of a response from

19 Mr. Cobott?

20 A No, I have not received any response.

21 Q Based on your review of the company's written

22 response earlier this month, what is your

23 understanding of the company's rate-design proposal?

24 A It is my understanding, again, reading through

25 his response, that he is proposing or the company is

23

1 proposing rates of $48 for resident landowners and $25

2 for nonresidents landowners.

3 That is based on 12 residents and 21

4 nonresident landowners. The company further indicated

5 it anticipates to generate a little over a $1,000 a

6 month or $13,200 per year from the rate proposal. And

7 that's assuming that each of the customers that they

8 have pay every month.

9 Q Would the company's proposal that you just

10 described collect the revenue requirement that was

11 approved by the Commission in Order No. 29086?

12 A No, it would not. Based on the company's

13 numbers, it would be less than -- significantly less

14 than the revenue requirement I mentioned earlier, the

15 26,000.

16 However, it may be the best proposal

17 currently presented for a couple reasons.

18 First, it would allow the company to

19 continue to provide -- it would continue to provide

20 stable rates and possibly it may encourage customer

21 growth if customers can see the rates will remain

22 stable.

23 It may also stabilize the company's

24 revenues. If the customers are paying, then the

25 company can get a better assurance that they will

24

1 continue to pay, and they will know what their return

2 will be.

3 I believe that even though some of the

4 customers have made uneconomic decisions and drilled

5 their own wells, if rates get much higher than those

6 proposed, well drilling will become an economic

7 alternative and even more customers will leave the

8 system.

9 Q When you talk about well drilling as being an

10 uneconomic decision, what do you mean by that?

11 A I have done some research on the cost of drilling

12 wells in the area. A number have been drilled since

13 we've begun these proceedings, and there is a limited

14 aquifer, and the cost to drill can be as high -- as

15 Mr. Cobott knows -- can get as high as 20 or 25

16 thousand dollars to drill a well, and they'll get very

17 little service.

18 So, if the system can work, for a customer

19 to spend in the neighborhood of 20 to 25 thousand

20 dollars to avoid paying a monthly rate of $48 or $25

21 seems like an uneconomic decision.

22 Q So you are implying that there must have been

23 some other reason why these customers drilled wells

24 other then a financial decision?

25 A I believe so, and I believe customers also have

25

1 more information now among many of their neighbors

2 that may have drilled, and they may not have known

3 what the cost of drilling these wells -- what the cost

4 of changing to a complete individual well system may

5 have cost them.

6 Now many customers should have that

7 information. It's readily available. So I think the

8 knowledge of the customer base has changed as well.

9 Q Would you be willing to assist Mr. Cobott with

10 the submission of tariffs and outline his rate

11 structure and customer definitions if the Commission

12 were to adopt the rates that he proposes?

13 A Yes.

14 Q Are there other concerns that you believe should

15 be addressed if Mr. Cobott's rate design is accepted

16 by the Commission?

17 A There are still a couple of outstanding issues.

18 The seasonal disconnection as well as the hookup fees.

19 Q Could you please explain these two issues as they

20 relate to Mr. Cobott's proposal?

21 A As I understand it, Mr. Cobott is proposing rates

22 that are an annual rate. It doesn't include any

23 seasonal disconnect provisions, and I believe, from a

24 practical standpoint in the unique situation and

25 circumstances presented with his water system, I can

26

1 agree with those provisions today.

2 Q So, if I understand you correctly, you agree with

3 Mr. Cobott that there shouldn't be a seasonal

4 disconnect provision?

5 A Well, from a practical standpoint today with what

6 we know and the changes in the customers, I believe

7 that something of that nature is necessary -- that

8 seasonal disconnects are not as necessary as they were

9 before.

10 Q Okay. So do you believe that customers should

11 pay a monthly payment for water service then?

12 A Yes, because the number of customers has gotten

13 smaller. The customers are going to need to continue

14 to pay something to keep the system in operation, and

15 keeping monthly rates, I believe, is one of the best

16 alternatives that exist today.

17 Q What do you think about the $2,500 hookup fee

18 that a customer must pay before initial service is

19 provided that Mr. Cobott discusses in his responses?

20 A I still believe that the 2,500 hookup fee is a

21 valid number -- the dollar figure -- hookup fee level

22 I should say.

23 However maybe -- however, I believe, that it

24 should be charged once when the customer initially

25 hooks up to the system. The hookup fee was

27

1 established based on the cost of drilling wells, and

2 the number of customers that could be served by the

3 wells once they are drilled.

4 Based on those two calculations, the 2,500

5 allows Mr. Cobott to drill another well at about every

6 10 customers, and that will be a requirement going

7 forward.

8 Now --

9 Q I'm sorry. Let me interrupt.

10 A Yes.

11 Q What is the Commission's current requirement

12 regarding hookup fees and reconnection fees?

13 A The Commission's current order states that the

14 customers who seasonally disconnect for less than 8

15 months need only pay $35 reconnection fee to resume

16 service.

17 Q Do you have a proposal that falls somewhere in

18 the middle between what the Commission's order

19 currently states and what Mr. Cobott is proposing?

20 A I believe so. Regarding the seasonal

21 disconnection, I have already made my statements on

22 the hookup fee. I think that's still valid.

23 But the seasonal disconnect. I believe,

24 would provide benefit to the system that customers

25 could pay either all back bills that may be owed to

28

1 the system from some date certain established by the

2 Commission or pay the hookup fee again.

3 It would then be up to the customers to make

4 their own individual choice should they pay all back

5 bills they would be owed to begin taking service again

6 if they were seasonally disconnected, or they chose

7 not to take service for some period of time, or they

8 could choose to pay the hookup fee. Whatever is less.

9 Q If customers were to pay the money that they owed

10 the company for water service already rendered or pay

11 this $2,500 hookup fee that you discussed, do you

12 think that would make the company whole?

13 A It seems to me that he would then get all of his

14 back payments, and he would meet the criteria that he

15 is requesting to be paid annually to pay for all the

16 usage that either they've used, or he is providing a

17 system for their use.

18 Q Do you think that this proposal that you are

19 recommending allows customers a chance to game the

20 system?

21 A I believe that is one of the advantages of this

22 is that a customer couldn't try to game the system by

23 seasonally disconnecting for a long period of time and

24 then trying to come back on and using it only for a

25 short period.

29

1 Customers would have to pay for every month,

2 and the company could then, I believe, be more assured

3 that it can remain in operation.

4 I mean, if this is the numbers that the

5 company believes it needs, it could remain in

6 operation, and everybody would receive water at a

7 reasonable rate.

8 Q Do you think that allowing customers to come

9 current on all their back bills as an alternative to

10 paying this $2,500 hookup fee would reduce the

11 incentive for customers to drill wells and leave the

12 system?

13 A Again, as I have stated before, I have done some

14 research on the cost of drilling wells, the cost of

15 other alternatives, and I believe they are limited in

16 this particular area.

17 There is a limited amount of groundwater.

18 There is a fairly high cost to drill wells. The wells

19 that are found often don't have adequate water without

20 special provisions for individual reservoirs; so I

21 believe that the options are fairly limited and, if

22 customers -- I believe, if customers had the

23 opportunity to take water without going to the other

24 larger expenses, then I believe that this is probably

25 the best alternative.

30

1 Q One last question, Mr. Fuss. If Ponderosa were

2 to agree to this proposal that you've outlined, how

3 would this affect Staff's recommendations regarding

4 the Commission's exercise of its civil and or criminal

5 judicial remedies?

6 A I believe if Mr. Cobott is willing to continue to

7 operate the water company under his proposed rate

8 design and allow customers to pay all back bills or

9 possibly the $2,500 hookup fee to resume service and

10 is willing to abide by the Commission's Customer

11 Relation Rules and other rules applicable to all water

12 companies, I believe Staff would recommend that the

13 Commission adopt, I suppose, that this is a settlement

14 in lieu of civil or criminal judicial remedies.

15 MS. NORDSTROM: Thank you. I don't have any

16 further questions for this witness at this time.

17 HEARING EXAMINER: Mr. Cobott, do you have

18 any questions of this witness?

19 MR. COBOTT: Oh, yeah.

20

21 CROSS-EXAMINATION

22 BY MR. COBOTT:

23 Q Mr. Fuss, is it possible that we can use the

24 terminology in regards to landowners as residents and

25 nonresidents instead of all these other names that

31

1 P. U. C. has come up?

2 It is 2 basically two groups of landowners

3 -- residents and nonresidents. Can we get that to

4 work?

5 A I believe there is an opportunity to get that to

6 work, yes.

7 Q Are you saying then that if somebody wants their

8 water shutoff for the season or they want it shut on

9 or turned on at the beginning of the spring and summer

10 season that there should be no charge?

11 Is this the way I'm interpreting that?

12 A The charge -- I believe in the tariffs that are

13 currently in place for the water company there is a

14 $35 reconnection charge for the -- for the company to

15 come out and turn on the company's own service valve.

16 In the proposal that, I believe, that you've

17 made in your response and I concurred with, is that

18 customers would pay for the service annually, not

19 whether they are there or not.

20 Q I don't follow. Are they going to pay the $35?

21 A I believe that is in the tariff already, yes. I

22 believe the purpose of that is to pay for you or your

23 staff to physically go to the site and turn their

24 services on.

25 Q In my letter dated to P. U. C. dated, I guess, it

32

1 was April 18 or something like that I never -- all I

2 really ever talked about in there was -- April 16 --

3 all I really talked about in there was the resident

4 fees and nonresident fees. I didn't go into detail on

5 hookup fees or anything else.

6 What I was proposing in the letters I sent

7 out to the landowners was simply this: If you didn't

8 want to be part of the system, if you didn't want to

9 help pay for the system, the upkeep, management,

10 repairs, maintenance of the system, then you would be

11 taken off the system.

12 There was no fee determined for them to come

13 back on because in my line of thinking it was that

14 rather than play games with them, I was going to not

15 let them back on for any amount of money.

16 You are proposing here to go back to

17 P. U. C.'s finding of $2,500. If someone pulls away

18 from the system for a period of time, 30 or 90 days or

19 whatever, and didn't respond; then they would have to

20 pay $2,500 to get hooked up again; is that correct?

21 A I believe the proposal that I stated was that a

22 customer -- if they were a customer before and they

23 chose to disconnect, they could pay all of their back

24 bills that would have incurred between the time they

25 disconnected and they wanted to reconnect -- be that

33

1 30 days or 60 -- then they could be back on the

2 system.

3 That's the proposal as opposed to the $2,500

4 fee.

5 Q Do you think that would be as much of a deterrent

6 as a plain $2,500? In other words if you were paying

7 $25 a month, you could go quite a few years before you

8 ever got to $2,500.

9 The way these people think they would rather

10 do that. There is no interest or penalties that

11 P. U. C. imposes. So for roughly $300 a year they can

12 go for 8 years without paying. They can receive

13 interest on their money or whatever.

14 And then come back at the very last minute

15 and pay their $2,400 and get back on the system. What

16 you are saying is that while they are off of this

17 system I have to continually carry them on the books

18 showing a 25 or 48 dollar per month charge to their

19 account when they are not paying. There is no

20 response. They say they want off the system.

21 Why then do I have to put them back on the

22 system after a year or two years or whenever it is

23 convenient for them?

24 Let's say they bought it for investment

25 purposes or they bought -- they've got a small cabin

34

1 or something on it, and they are not using it now for

2 whatever reason. Three years from now they sell it.

3 In the meantime they haven't made any

4 payments. All of a sudden they only have to pay $900

5 to get back on the system.

6 That isn't right, and I disagree with that

7 line of thinking.

8 What is your response?

9 A I don't understand the question. There was lots

10 of stuff there, but I didn't pick out a question.

11 HEARING EXAMINER: I think it would be

12 helpful if you could ask more succinct questions so he

13 could respond.

14 BY MR. COBOTT:

15 Q If a customer paying $2,500 a month elected not

16 to pay and after a three-year period he decides to

17 sell his property, all he has to come up with is $900

18 to get his water turned back on again.

19 During this three-year period he has paid

20 nothing for the maintenance and upkeep of this water

21 system. Do you think that is fair?

22 A The proposal to allow customers to pay back bills

23 was in the interest to try to continue to get revenue

24 to the company not so much as to the customer so that

25 there would be at least the chance that the company

35

1 would get the revenue eventually from the customers.

2 If they had actually taken service before I

3 would assume they are going to want to take service or

4 continue to take service at least on a partial year

5 basis.

6 If all back bills were paid, the company

7 would continue to receive some revenue. If there was

8 only the alternative of never taking water again or to

9 pay a fairly high fee, customers may choose to forego

10 that even longer.

11 So the interest was to try to give them,

12 customers, options to continue to pay to the company.

13 Q What you are saying then is this would probably,

14 using the same customer I just talked about, this

15 would probably be an incentive for that customer to

16 come back on the system and pay the $900 then to drill

17 a $2,500 well?

18 A I believe it gives them an opportunity to pay

19 their back bills what is owed and, if rates are based

20 on -- if these rates that you've proposed can keep you

21 in business, then hopefully getting all of the revenue

22 from these customers will keep you in business and

23 help you to continue to operate.

24 Q This is a completely different proposal than the

25 August 8 final order from P. U. C.; is that correct?

36

1 A It is different than the rates and the current

2 tariffs, correct. And that's what -- this is again a

3 proposal that Staff has put together that we would be

4 willing to work with to propose to the Commission so

5 that the Commission would then have to approve of this

6 proposal and rate options.

7 Q Is there any type of provision that can be made

8 for these landowners that elect to not pay over a

9 period of time for interest and penalties?

10 A Penalties are not typically included in customer

11 rates, and interest is not typically -- I don't know

12 of any water companies that collect interest on

13 outstanding balances currently regulated by the

14 Commission.

15 Q Do you think this is right? After all, the water

16 system is not getting revenue. They are having to

17 wait for three, four, five, six, seven, eight years

18 for this revenue, and they are just basically getting

19 the revenue. Nothing else.

20 I don't know of any institution that has to

21 do with money or fees that does not allow some type of

22 interest or penalties whether it be credit cards or

23 other utilities such as power companies, gas

24 companies.

25 They all, after a certain amount of days,

37

1 they charge a penalty and a fine and interest. Why is

2 it that this cannot be put forth in this situation?

3 I'm having to go without this money.

4 I'm having to do without it; so in essence

5 if you take 5 years of money and sure they pay the

6 $1,500, but in reality I'm not getting the $1,500. Am

7 I?

8 If I take away the loss of interest and so

9 on and so forth in that money I'm probably only ending

10 up with around $1,200.

11 HEARING EXAMINER: Mr. Cobott, the problem

12 with your questions to this particular witness is that

13 it is more like a statement or argument and then

14 asking him to comment back.

15 I think the appropriate way to proceed is

16 just ask him specific questions so that he can

17 respond, and you'll have your opportunity to present

18 any proposal you'd like or any rationale for a rate

19 structure from the stand if you'd like to.

20 But it is very difficult for me to follow

21 exactly what his testimony -- which is all we are

22 concerned with right now -- is and what he has to

23 say. Then, when you get on the stand, you can make

24 other proposals.

25 BY MR. COBOTT:

38

1 Q What do you mean by the customer paying all back

2 water bills? How far back do you mean BY that?

3 A I would propose there would be a date set by -- a

4 date certain that would begin this new rate proposal,

5 and on a going-forward basis that all delinquent

6 payments back to that date certain would then have to

7 be paid.

8 I don't believe that it could go prior to

9 some date set by the Commission because it would be

10 what they consider retroactive rate making; so it

11 would be some point today or in the future.

12 Q Would it be like the original order from the

13 Commission -- the same as?

14 A The date would have to be -- it would be a

15 similar order as the Commission ordered, yes. But I

16 believe the date would be at some point between now

17 and when the Commission would make that order that

18 would come back to.

19 Otherwise it would be considered retroactive

20 rate making which is contrary to State code, I

21 believe, it is. I'm not exactly sure.

22 Q I would like that clarified because, as you are

23 well aware, I had many customers that owed me monies

24 prior to the Commission's involvement. I believe it

25 was in September of 2001.

39

1 The Commission said I could not collect this

2 money. I would have to go to quitclaims court or

3 whenever.

4 I was wondering if that was going to change

5 or stay the same as the Commission ordered.

6 MS. NORDSTROM: Is there a question that

7 Mr. Fuss can answer for you?

8 MR. COBOTT: I thought I asked the question.

9 MS. NORDSTROM: I didn't hear a question.

10 Could you rephrase it?

11 MR. COBOTT: I wanted to know if it was going

12 to be the same date, or would it be something three or

13 four years prior that I could collect on?

14 MS. NORDSTROM: I don't think this witness

15 can answer that question. Ultimately whatever date

16 that back bills could be collectable would have to be

17 a date set by the Commission.

18 And I think that what Mr. Fuss is stating

19 that it can't be in the past because it doesn't give

20 adequate notice to customers and therefore would be

21 considered retroactive rate setting which the Idaho

22 Supreme Court has held to be unconstitutional.

23 So it would have to be at some point in the

24 future, but Mr. Fuss doesn't know what that date is,

25 and he doesn't have authority to set that date. So he

40

1 can't narrow that down for you.

2 HEARING EXAMINER: Well, to rule on the

3 objection, can you answer his question?

4 THE WITNESS: Well --

5 HEARING EXAMINER: Just a "yes" or "no."

6 THE WITNESS: No, I cannot pick the date.

7 HEARING EXAMINER: All right.

8 BY MR. COBOTT:

9 Q Do agree that P. U. C.'s rate structure and

10 classification of landowners drove away landowners

11 from the system?

12 A No, I don't. As mentioned earlier, I spoke to

13 that earlier that the rate structure was less than the

14 rates in place prior to the Commission.

15 Q You are not aware of the customers that pulled

16 away from the system because they didn't want to --

17 they were seasonal.

18 They were there only two or three months out

19 of the year, and they did not want to pay the $48; so

20 they pulled out of the system. You are not aware of

21 that happening? Didn't I give you paperwork to that

22 extent? "Pulaski" was one of the names.

23 HEARING EXAMINER: Let's ask one question at

24 a time. I think the first question was did he not

25 give you some information regarding people that had

41

1 not paid?

2 THE WITNESS: Yes, I did receive some

3 information of customers that had not paid their

4 bills.

5 BY MR. COBOTT:

6 Q Did you not receive a letter from Pulaski stating

7 that he did not want to be part of the system anymore

8 because he did not want to pay $48? It is in some of

9 your paperwork that you sent me -- a copy of that

10 letter?

11 A I don't recall if it's in some of the paperwork.

12 I'd have to see the letter to say that.

13 Q Okay. What constitutes a utility to be

14 supervised?

15 A To be regulated?

16 Q Supervised, regulated, whatever?

17 A Well, I don't have -- it is fairly well spelled

18 out in Title 61 of the Idaho Code. I don't have it

19 with me to be able to quote it.

20 Q In the letter of show cause dated March 25, 2003,

21 Idaho Public Utilities Commission with the power and

22 jurisdiction to supervise and regulate every public

23 utility within the State of Idaho.

24 The Commission is also empowered by law to

25 investigate and affix rates and regulations of any

42

1 public utility including water corporations.

2 MS. NORDSTROM: Mr. Hearing Examiner, I don't

3 think this witness is qualified to give a legal

4 opinion as to what constitutes a water utility under

5 the Idaho Code.

6 He has referenced the code sections in his

7 testimony. I believe those code sections are also

8 referenced in the Notice of Hearing that Mr. Cobott is

9 referring to, the Commission's Order No. 29212.

10 But Mr. Fuss doesn't have a code in front of

11 him, and it doesn't appear as though he can recite it

12 off the top of his head; so I don't think he can

13 answer this question.

14 HEARING EXAMINER: Well, I'll sustain the

15 objection. It also goes beyond the scope of direct

16 examination -- my understanding is he's an engineer,

17 and he is trying to come up with -- most of our

18 discussion has apparently been on a proposed

19 settlement from Staff to you concerning what might be

20 proposed to the Commission.

21 But, if you want to ask him questions

22 concerning his direct testimony either what he's

23 testified earlier today or prefiled in the prefiled

24 testimony, you are free to do that of course.

25 But, as far as his legal conclusions, he is

43

1 not competent really to state what the authority of

2 the Commission is; so I'll sustain the objection.

3 BY MR. COBOTT:

4 Q Was the rate of revenue return granted by the

5 P. U. C. to be $26,600?

6 A Yes.

7 Q The rate of return at this time as I have stated

8 is around $13,000; is that correct?

9 A That's what you've stated is my understanding.

10 Q Is that less than half of what P. U. C. said I

11 needed to operate this system?

12 A I believe it is approximately half, yes.

13 Q I have had talks with the State Tax Commission,

14 and you made reference to that on the value of the

15 system on $130,000. I was quite irate when I saw

16 that.

17 I was told by -- I'm not going to mention

18 the staff members' names here until I get on testimony

19 if I have to -- but I was told that the system was

20 worthless, could not be sold, and would never make a

21 profit.

22 My question to the Tax Commission was, "How

23 did you come up with that $130,000?" They said they

24 got the information from P. U. C.

25 My question to them was, "Why didn't you

44

1 confer with P. U. C.? They did all this investigation

2 on my company. Why did you not confer with them to

3 find out what they think the value of this death

4 spiraled company's worth is?"

5 I would be better off to go on some other

6 endeavors to make profit than be with this company.

7 Why did they not confer with you to get this

8 value? How did this value come about? Does P. U. C.

9 and the State Tax Commission confer at all on these

10 issues?

11 MS. NORDSTROM: Could Mr. Cobott specify

12 which question he would like Mr. Fuss to answer?

13 BY MR. COBOTT:

14 Q On the issue of the value of the company of

15 $130,000. Why doesn't P. U. C. confer with the State

16 of Idaho? When they give the State of Idaho the

17 information that P. U. C. is now a public utility, at

18 the same time why don't they tell the State of Idaho

19 what this company is worth?

20 A As I mentioned before to try to -- I believe that

21 the Tax Commission does get copies of the P. U. C.

22 orders. What they do, I can't speak to that. I don't

23 work for them.

24 But, I believe, they do get a copy of the

25 orders, and in the orders of the initial case there

45

1 would have been a revenue requirement, et cetera.

2 Q I talked with Pat Birch at the Idaho State Tax

3 Commission. He had no idea how they came up with

4 that. He had no literature. No correspondence.

5 The fellow that made the determination is no

6 longer working there. They don't know how --

7 HEARING EXAMINER: Mr. Cobott, again, if you

8 have specific questions for this witness, please ask

9 them; otherwise any comments or testimony that you are

10 attempting to make will have to be done from the

11 stand.

12 You'll have your opportunity to do that but,

13 if you have specific questions -- I'm also having some

14 difficulty in understanding. Maybe I'll hear from

15 each of you if you want to respond.

16 But how the State Tax Commission has treated

17 you is germane to this specific order to show cause

18 that we are here on today. How is that relevant?

19 MR. COBOTT: It is in direct response to what

20 P. U. C. has told them about my company. I'm being

21 charged $1,254 for a $130,000 worth company.

22 HEARING EXAMINER: I can see how it may have

23 an impact on the expenses of the company and what rate

24 you'll be required to charge, but beyond that I don't

25 see any relevance to the Order to Show Cause.

46

1 Do you have anything you care to say,

2 Ms. Nordstrom?

3 MS. NORDSTROM: Staff only referred to

4 Mr. Cobott's comments regarding the Tax Commission to

5 advise Mr. Cobott that it would be in his company's

6 best interest to talk with the Tax Commission again

7 because there is a new valuation out and could

8 potentially lower his tax bill.

9 But, as to how these things are calculated

10 or who knows what or who talked to whom, Mr. Fuss

11 can't testify to that; and we agree that this line of

12 questioning, as far as its gotten, is not particularly

13 pertinent to this Order to Show Cause Hearing.

14 HEARING EXAMINER: Do you have anymore

15 questions of this witness, Mr. Cobott?

16 MR. COBOTT: I guess not because my questions

17 would not be answered; so no more questions.

18 HEARING EXAMINER: Any redirect?

19 MS. NORDSTROM: Yes, just a few questions.

20

21 REDIRECT EXAMINATION

22 BY MS. NORDSTROM:

23 Q Mr. Fuss, we discussed seasonal disconnect, and I

24 just want to clarify are you proposing that the

25 Commission do away with seasonal disconnections on a

47

1 going-forward basis?

2 A Yes.

3 Q And the reason why you are making that

4 recommendation is to -- is because of the changes in

5 the customer classes that have occurred. Is that the

6 reason for your proposal?

7 A Yes, the number of customers has changed, the

8 types of customers, and given the current

9 circumstances that, I believe, on a practical

10 standpoint it seems that seasonal disconnects will not

11 benefit either of the companies that want -- customers

12 that want to be seasonally disconnected or existing

13 customers that want to stay there full time. That the

14 seasonal disconnect does not appear to help either one

15 of them because the company is not generating enough

16 revenue to keep going.

17 And that's the interest of Staff is to keep

18 the company operating the system so the customers do

19 have an option take water.

20 Q So on that point Staff agrees with Mr. Cobott

21 that customers regardless of whether or not they take

22 water service should pay something each month for

23 having access to the Ponderosa Terrace Estates Water

24 System?

25 A Yes.

48

1 Q You discussed in your proposal either having

2 customers pay their back bills in coming current or

3 paying a $2,500 hookup fee. Whichever is less.

4 Is the goal of your proposal to get

5 customers back on the system and maximize the revenue

6 that Ponderosa receives for services it has already

7 rendered?

8 A The goal is to make the company whole. It is

9 providing the service and should be paid for the

10 services that are rendered.

11 Q Mr. Cobott had discussed a hypothetical situation

12 where a customer would pay $25 a month for 3 years so

13 $900 over 3 years.

14 And there was some concern about whether or

15 not that customer would have contributed to the upkeep

16 of the company if they were to just pay that $900 to

17 get back on the system.

18 Would that $900 contain monies that would

19 have gone to upkeep and maintenance of the system just

20 like they had paid all along rather than in a lump

21 sum?

22 A Yes, it would be the same rates.

23 Q So some of that money would go to maintenance and

24 ongoing operations?

25 A Once it is paid, yes, I would assume that's where

49

1 it would go.

2 Q The rates that Mr. Cobott is proposing is $48 and

3 $25 for the 2 rate classes that he has designed. It's

4 my understanding that these are the same numbers, the

5 same dollars amounts, that the Commission order

6 approved in August of 2002. It's just the customer

7 definitions that are different; is that correct?

8 A That's my understanding, yes.

9 Q Obviously customer definitions are fairly

10 significant in this matter, but do you object to his

11 customer definitions?

12 A No, I do not. If it makes it easier to manage

13 the system with those definitions, then I believe I

14 would be supportive.

15 Q Are you recommending that the Commission adopt

16 Mr. Cobott's rates which are the same as the previous

17 Commission order and his customer definitions if you

18 could resolve the uncertainties regarding hookup fees

19 and use of the Commissions's rules?

20 A Yes.

21 Q I just want to clarify when we talk about rates

22 of return and this $26,600 amount that we've been

23 discussing that the Commission ordered back in August.

24 Is that a guaranteed rate of return or the

25 opportunity to make that amount of money?

50

1 A Well, it's the -- looking at the expenses of the

2 company, the revenue requirement for the company was

3 established at 26,000 -- the rates established at that

4 time assuming all customers paid and everything

5 continued forward, those were the amounts that would

6 be collected.

7 The return on the investment was $3,000 and,

8 if the customers do not pay or they leave the system,

9 then it's, again, from a practical standpoint, it

10 cannot be collected.

11 It is an opportunity but, if customers leave

12 or choose not to pay, there is nothing that can be

13 done as far as I know.

14 Q Well, isn't it true that Mr. Cobott could raise

15 the rates in order to collect the $26,600 from the

16 fewer customers left on the system?

17 A That would be one possibility; however, I believe

18 that as rates continue to go up customers would then

19 -- more customers would likely leave.

20 I think the rates that are proposed by

21 Mr. Cobott, I think, will alleviate some of these

22 problems.

23 Q So, if the company can operate and stay in

24 business earning only $13,000 a year, is that in

25 violation of any Commission order?

51

1 A The company can choose to operate at a lower

2 revenue requirement; so it would not violate the

3 order.

4 Q So it would be up to the owner of the company

5 whether or not they wanted to operate at less than

6 what the Commission had previously authorized?

7 A Yes, I believe that to be the case.

8 MS. NORDSTROM: Thank you. I don't have any

9 further questions at this time.

10 HEARING EXAMINER: Mr. Cobott, limiting your

11 cross-examination just to what he testified to on re

12 direct, do you have any questions of this witness?

13 MR. COBOTT: I'd like to make a statement

14 that might expedite this hearing, but I guess I can't

15 do that.

16 HEARING EXAMINER: I think you can either

17 save it or discuss it with Staff maybe outside the

18 formalities of this proceeding.

19 MR. COBOTT: I have no questions at this

20 time.

21 HEARING EXAMINER: You may step down.

22 MS. NORDSTROM: The staff would move that

23 Mr. Fuss' exhibits, Nos. 1 through 21, be admitted

24 into the record.

25 HEARING EXAMINER: Now, have you provided

52

1 those here today?

2 MS. NORDSTROM: I believe they have been

3 provided to the Court Reporter.

4 HEARING EXAMINER: We'll be off the record.

5 (An off-the-record discussion was held.)

6 HEARING EXAMINER: I think this would be a

7 good time to take a morning recess; so we'll take a

8 fifteen-minute recess and reconvene at about 11:05.

9 (Whereupon, a recess was taken.)

10 HEARING EXAMINER: This hearing is again in

11 session following a recess.

12 During the course of the recess we discussed

13 some administrative things, and under the

14 circumstances the parties have requested some time in

15 which to conduct some negotiations.

16 So I'm going to again declare a recess until

17 1:00 at which time we will reconvene and complete the

18 hearing; so we'll be in recess until 1:00.

19 (A recess was taken.)

20 HEARING EXAMINER: The hearing is again in

21 session. Let the record reflect that Mr. Cobott is

22 present along with Staff and Staff's attorney.

23 Ms. Nordstrom, did the Staff have any

24 further witnesses or evidence to present?

25 MS. NORDSTROM: No, not at this time. Well,

53

1 maybe I should amend that. I should advise the

2 Hearing Examiner on the record that during our break

3 Staff and Ponderosa Terrace Estates Water Company

4 entered into some discussions and negotiations trying

5 to find a resolution of some of the issues going

6 forward in regards to the operation of the water

7 company.

8 And I think that we have come to an

9 agreement as to those issues. And, depending on what

10 would be most convenient, I could either put those on

11 the record now; or perhaps, after Mr. Cobott has had

12 an opportunity to address the show cause issues, I

13 could do it at that point. But just to advise you

14 that that has in fact taken place.

15 HEARING EXAMINER: All right.

16 Mr. Cobott, at this time you have the

17 opportunity to take the stand and testify with regard

18 the Order to Show Cause for the company.

19 Would you like to testify in this matter?

20 MR. COBOTT: Yes.

21 HEARING EXAMINER: Step forward and be sworn

22 please.

23 ROBAER COBOTT,

24 called as a witness on his own

25 behalf, having been first duly

54

1 sworn, was examined and testified

2 as follows:

3 HEARING EXAMINER: Be seated please. If you

4 would please state your name for the record.

5 MR. COBOTT: My name is Robaer Cobott.

6 HEARING EXAMINER: All right.

7 I guess preliminarily previously I believe

8 you filed with the Commission a document dated April

9 16, 2003, and this was your response that you filed as

10 required by the Show Cause order.

11 MR. COBOTT: Yes.

12 HEARING EXAMINER: Does this document fairly

13 set forth your statement with regard to the water

14 association -- correction -- the water corporation?

15 MR. COBOTT: Yes.

16 HEARING EXAMINER: Do you have any changes

17 you care to make in the instrument? It is all true

18 today as it was at the time that you wrote this?

19 MR. COBOTT: It was true as far as my

20 opinion.

21 HEARING EXAMINER: At that time?

22 MR. COBOTT: Yes.

23 HEARING EXAMINER: Anything else, Ms.

24 Nordstrom, with regard to spreading his testimony?

25 MS. NORDSTROM: I don't know if he intends

55

1 the documents that he attached intended for the Tax

2 Commission to be considered as exhibits or if he wants

3 those included as well?

4 HEARING EXAMINER: Do you want those exhibits

5 included?

6 MR. COBOTT: Yes.

7 MS. NORDSTROM: The other issue I have is I

8 would note that in his testimony -- I think on Page

9 3 -- he lists a number of items under the title,

10 "Order To Show Cause."

11 My concern is that some of these things I do

12 not believe the Commission has jurisdiction over. I

13 think a court of law would have the authority, but I

14 don't think the Commission can order them.

15 So, because the Commission doesn't have

16 jurisdiction, I would ask that those portions,

17 specifically, items number 1, 2, 3, 4, and 7 be

18 stricken from the record.

19 He has already made his objection that he

20 set out in item No. 6. He has already made that to

21 the Hearing Examiner. And Staff has attempted to

22 address item No. 5 through a letter sent last week.

23 HEARING EXAMINER: Was your motion as to 1,

24 2, 3 --

25 MS. NORDSTROM: 4 and 7.

56

1 HEARING EXAMINER: 4 and 7.

2 Do you understand the motion she is making?

3 Do you have any response to the objection?

4 MS. NORDSTROM: Do you have a copy of it?

5 MR. COBOTT: No. What is it that you want to

6 do?

7 MS. NORDSTROM: I would ask that numbers 1,

8 2, 3, 4, and 7 be taken out of the record because the

9 Commission can't authorize those things under law.

10 A court could, but this isn't a court right

11 now. We are in a courtroom, but we don't have an

12 official judge presiding. In this case we have a

13 Hearing Examiner.

14 So these things might be ordered in another

15 setting but not in an Order To Show Cause Hearing.

16 That was my concern.

17 MR. COBOTT: I agree.

18 HEARING EXAMINER: The submission made on

19 behalf of the company will be admitted with the

20 exceptions of items 1, 2, 3, 4, and 7 on Page 3.

21 MS. NORDSTROM: Other then that, Staff does

22 not have any objection to his testimony being spread

23 upon the record.

24 HEARING EXAMINER: Then the testimony as

25 submitted in Mr. Cobott's submission of April 16,

57

1 2003, will be admitted as part of the record.

2 At this time Mr. Cobott you can make

3 testimony with regard to the Order to Show Cause and

4 responding to that.

5 MR. COBOTT: Am I asked questions, or do I

6 just talk?

7 HEARING EXAMINER: Initially, you can just

8 make your statement, and you'll be subject to

9 cross-examination by Ms. Nordstrom.

10 MR. COBOTT: All I'm really concerned with is

11 that my company continues operating and does not go

12 broke.

13 What I put in my letter dated April 16 was a

14 lot of feelings of animosity, and they are my

15 feelings, and I would like to have some of these

16 questions answered.

17 But with the agreement that we've come up

18 with between Staff and myself in the last couple

19 hours, I don't want to go any further with my letter.

20 All I want to do is get the problems resolved, and it

21 looks like we are on the way to getting it resolved is

22 all I have to say.

23 HEARING EXAMINER: Do you have any questions

24 for this witness?

25 MS. NORDSTROM: I do.

58

1 CROSS-EXAMINATION

2 BY MS. NORDSTROM:

3 Q Mr. Cobott, I just want to make sure we have a

4 few things clear. First of all, your letter stated

5 that you believe that you have 12 residents and 21

6 nonresident customers. Is that still true today?

7 A That's correct.

8 Q Approximately how many lots are on your system?

9 A Approximately 82. And then there was some

10 parcels on the water system, but most of those have

11 pulled off the system.

12 Q So only about half of the lots or parcels are

13 actually customers?

14 A Ah --

15 Q That are at least paying their bills?

16 A At this time they are all lots. There are no

17 parcels left. I did have six or eight parcels, but

18 they all pulled out and put in their own wells and so

19 on and so forth.

20 Q Are you having a lot of trouble collecting bills

21 that you've sent your customers?

22 A The ones on the system right now, the 12

23 residents and the 21 nonresidents, as I class them,

24 have been paying. Those are the ones that are paying,

25 and they are paying on a monthly basis.

59

1 Q How many customers do you think are using water

2 but are not paying?

3 A There is none at this time.

4 Q Do you recall back in August of last year when

5 the Commission determined that the amount of revenue

6 necessary in order to operate the company was

7 approximately $26,600?

8 A Yes.

9 Q Do you think it is realistic for Ponderosa to

10 raise rates high enough to collect that $26,600

11 amount?

12 A No.

13 Q Why not?

14 A The people on the system which are the -- talking

15 about resident owners now -- are family people, low

16 income, two and three children. They just can't

17 afford it.

18 The rates would have to be in the 70 or 80

19 dollars a month, and they just can't do that. I would

20 like to receive the $26,600 a year but, with my

21 customer count at this time, it is unrealistic.

22 The people are willing and have been willing

23 to pay the $48 a month for resident and 25 for

24 nonresidents. I have gained about 6 customers that

25 have come back to the system since January when I sent

60

1 my letter out simply because they were able to pay a

2 lesser amount than what P. U. C. had instructed me to

3 charge them. This means a lot to the system for my

4 revenue.

5 Q What do you estimate is the revenue that you are

6 able to collect at this point is?

7 A It is probably pretty close to 12 or 13,000 a

8 year. The amount that I showed for last year -- and I

9 didn't think about this until actually today coming to

10 this hearing.

11 There is some monies in there that were paid

12 to me from -- previous to P. U. C.'s involvement.

13 Customers that felt they had to pay what they owed.

14 Not that much. Maybe a thousand dollars or 1,500.

15 I'm not sure.

16 But I would say at this time you are

17 probably looking at probably somewhere around $13,000.

18 Q I think the number mentioned in your letter is

19 $13,212 per year if everyone paid?

20 A Right.

21 Q Or that would be $1,101 per month?

22 A Right.

23 Q Are you willing to continue operating the company

24 for that $13,000 a year even though you could be

25 earning more?

61

1 A I'm willing to operate. I don't see how I could

2 earn more because in order to earn more I'd have to

3 raise the rates and, if I do that, more people will

4 put in wells, and it's a catch 22.

5 Q Do you think the company can stay in business if

6 it continues to charge the same rates?

7 A Yes, because I'm willing to participate more in

8 the maintenance and operation of the business than I

9 have in the past even though I live 25 miles a way.

10 Hopefully, when we get everything on a

11 stable basis, some monies can be put away for repair

12 and maintenance.

13 Right now I have repairs that need to be

14 done that I haven't been able to do, but we've had

15 lots of water this year. Lots of rain. So it is not

16 that big of a concern. A few leaks here and there.

17 But I have to make it operate. I have to

18 make something off of it even if it's a nominal

19 amount. Something is better than nothing. That's

20 just the way it is.

21 Q I think one of the major areas of contention has

22 been the rules that the Commission put in place about

23 seasonal disconnection of customers?

24 A Correct.

25 Q Mr. Fuss has represented that customers be

62

1 required to pay a monthly bill. Is that the same as

2 your proposal?

3 A Yes.

4 Q Why do you think customers need to pay monthly?

5 A I feel that if customers or landowners have a lot

6 up there they should have to pay for -- to help pay

7 for the maintenance, upkeep, and operation of the

8 water system.

9 If they don't pay, the water system will not

10 survive. If I have to take another 5 or 6 thousand

11 dollars off of revenue off of the $13,000, it is going

12 to have to be shut down. Plain and simple.

13 If you want water to your lot, you want your

14 real estate value to stay at the highest possible

15 level because you have water to your lot, then you

16 have to pay for that. It is plain and simple.

17 If you don't want water, then that's their

18 option.

19 Q You had mentioned in your response that you had

20 knowledge of three for-profit utilities that you

21 thought should be regulated by the Public Utilities

22 Commission but are not currently regulated.

23 To Staff's knowledge no one has filed any

24 complaints with the Commission, and we are not aware

25 of who these companies are.

63

1 Do you know who they are so Staff might go

2 investigate?

3 A I was at a certification meeting here in

4 Sandpoint on March 6. There was possibly 15 to 20

5 people in that meeting. There were 3 companies in

6 there that never heard of P. U. C. There was 3 fellows

7 there. And they all work for this company in

8 Blanchard, Idaho. It's out at Stoneridge.

9 Stoneridge is a time-share. There's a big

10 golf course there. They've got up to 400 units, and

11 they admitted that it's water for profit. They'd

12 never heard of P. U. C. before.

13 There was a trailer park in Spirit Lake --

14 40 or 50 units, and there was another one in Hope,

15 Idaho with 40 or 50 units I think.

16 And they'd never heard of P. U. C., but they

17 were required by D. E. Q. to be certified, and that's

18 why they were at the class.

19 Q Do you recall what the names of these trailer

20 parks in Spirit Lake or Hope are?

21 A No, I don't. The owners were there at the

22 meetings, but I don't know the names. And I've been in

23 many other meetings or classes in Boise or

24 Coeur d'Alene where the same thing has happened.

25 And one of them had over a hundred people in

64

1 it, and I got up and made a little speech about P. U.

2 C.'s involvement in my company.

3 And none of the other companies had ever

4 heard of P. U. C. Now, they weren't all privately

5 owned public water systems. There were some

6 municipalities there and some homeowner associations,

7 but there were a lot of privately owned water systems.

8 My response to P. U. C. is, if I'm made to

9 come under these supervisions and jurisdictions of

10 P. U. C., then why aren't these other companies being

11 made to come under the same format that I'm having to

12 abide by?

13 Q Well, Staff will certainly investigate and try

14 and resolve that issue.

15 I wanted to ask you a little bit about the

16 letter that you sent to your customers. I believe it

17 was the January 2 letter.

18 In that letter you described the rates that

19 you -- the customer classes that you wanted to put

20 into effect going forward.

21 Why did you decide to use a different set of

22 customer definitions than what the Commission did?

23 A The Commission's definitions, as far as I was

24 concerned, was confusing, not only to me but to the

25 landowners.

65

1 They had dwellings, nondwellings. They had

2 active service and inactive service. Different prices

3 basically for all.

4 Now, the problem I was having was with the

5 nondwelling. The nondwelling they were charging $48

6 per month. These people, these landowners, were

7 part-time land use owners.

8 Some of them had homes; some of them had

9 trailers. Some of them had campers or whatever on

10 their property. P. U. C. was demanding $48 per month

11 the same as a full-time dwelling. These customers

12 were irate. They refused to pay it. They sent me

13 letters and pulled off of the system.

14 My letter of January 2 I changed everything

15 to simplify it to residents and nonresidents.

16 Residents are owners that live on their property 12

17 months a year.

18 In the past I've had resident owners that

19 have for an example spent six months on their

20 property, and then they might go to Arizona for four

21 or five months or something. At that time I would

22 change them from a resident to a nonresident.

23 And then, when they came back, they would

24 notify me, and I would make them a resident owner.

25 But at this time the 12 residents that I had were

66

1 there on the system are all full-time resident

2 owners.

3 I classed the other nondwelling active

4 service and inactive service. I classed all of those

5 into nonresidents, and their water charge was $25 per

6 month.

7 And I stated in that letter that if they

8 wanted this water system to continue and they wanted

9 the water to their lot that they were going to have to

10 pay for the upkeep and maintenance and operation of

11 this water system, not four months a year; but they

12 would have to pay for it for twelve months a year.

13 Q What was your plan? What did you tell them in

14 the letter was going to happen if they didn't pay

15 twelve months of the year?

16 A If they didn't want to pay this, I was going to

17 take them off of the system, and at that time I wasn't

18 going to let them come back on. It was all or

19 nothing. I was desperate.

20 I wanted to try to save my system and save

21 my investment. Keep the water flowing. And this was

22 the only way I could figure I could do this. I

23 couldn't operate with what P. U. C. had proposed.

24 Q So your letter eliminated the seasonal

25 disconnection language that the Commission had

67

1 ordered?

2 A Yes. I hadn't seen the language at that time

3 when I wrote that letter. In fact I have never seen

4 it. If a letter was sent to me, I haven't seen it to

5 my knowledge.

6 Q Actually I believe it was an order. I don't have

7 the exact order number in front of me, but it was

8 issued in December of 2002. Actually, it was Order

9 No. 29172 issued in December.

10 Did you get a copy of an order in December?

11 A No, I did not. I was gone a lot in January,

12 February. We do a show over in Seattle -- Seattle

13 Home Show and display our waterfalls. We manufacture

14 waterfalls.

15 Q If you didn't get a copy of the order that

16 described the changes regarding seasonal

17 disconnections, how did you know to send out the

18 letter in January saying that you weren't going to

19 have seasonal disconnections -- that everyone had to

20 pay twelve months out of the year?

21 A Because of the conversations I had with Michael

22 Fuss. Michael Fuss came up to the property on October

23 30, 2002, and we went over all the landowners. And he

24 informed me at that time what the Commission was

25 thinking about doing.

68

1 And then I conversed with him on phone calls

2 probably a couple of times after that, and he told me

3 that yes in fact the Commission was going to implement

4 this four months a year.

5 And I told him I was not going to agree to

6 this or put up with it or anything else. That was the

7 last conversation I had with Michael, and I have not

8 had a phone conversation with anybody since then.

9 Q Did you advise the Commission or the Staff or

10 anyone in writing of your concerns regarding the

11 seasonal disconnections?

12 A No. I was trying to save my company, and I felt

13 I wasn't going to get a fair shake from P. U. C. So I

14 just went on my own and let the chips fall where they

15 may.

16 Q In your January 2 letter you stated that the

17 Ponderosa Terrace Estates Water System was no longer

18 going to be involved with the Idaho Public Utilities

19 Commission.

20 What did mean by that?

21 A I wasn't going to agree to anything that the

22 Idaho Public Utilities said. They lied to me. I felt

23 they lied to me. That order dated August 8 on Page 18

24 under "Order" it says that my company is forced to

25 receive $26,600 per year. And it's based on $48 for

69

1 what they call dwelling and nondwelling and $25 for

2 all the other people.

3 That's how they came up with the $26,600. I

4 was also told by Staff that when this final order came

5 out it was final. It's a done deal. It's in writing,

6 and it's a done deal, and you can live by it.

7 We lived by it for about three months, and

8 then all of a sudden P. U. C. decided to change in no

9 regards to the loss of revenue, not only by the amount

10 of wells that were being put in and the amount of

11 customers pulling out of the system, but they were

12 also taking another $6,500 away from the nonactive

13 service and inactive service and nondwelling customers

14 that they said only had to pay 4 months a year instead

15 of 12.

16 When I started adding all this up, I'm down

17 under $10,000. This is not right. I was lied to. I

18 was not told that P. U. C. in all their wisdom can

19 make a statement, make a final order, and then change

20 it anytime they want.

21 I was not told that. I was told that a

22 final order is etched in stone, and that's what we

23 have to live by, and then all of a sudden it changes.

24 Q Well, did you advise the Commission that you had

25 lost customers and that this seasonal disconnection

70

1 plan was not going to work for your system?

2 A I advised Michael Fuss on a phone call.

3 Q Was that before or after the order was issued?

4 A Before.

5 Q Did you have any customers that indicated that

6 they wanted to seasonally disconnect after the

7 Commission issued that order in December?

8 A I believe I had one customer -- Lyle Peterson.

9 Q Did you send him monthly bills?

10 A Yes, I have. I lowered his payment from $48 for

11 the home that he was on -- the home that he has. He

12 only uses it for a month or 3 months a year.

13 P. U. C. said he had to pay $48. I changed

14 it to $25. I put him down as a nonresident. And then

15 he has an adjoining lot which I put down for $25.

16 So instead of him paying $73, I think, it

17 become $50. Lyle Peterson has paid every month. The

18 first month he sent a note saying that it was -- oh, I

19 was not conforming to P. U. C.'s regulations, but he

20 would pay it anyway. That's what he said in his

21 letter.

22 Q Well, we've made references earlier to the fact

23 that during the recess that you and the Staff have

24 entered into some discussions to try and resolve some

25 of these issues on a going-forward basis; is that

71

1 correct?

2 A That's correct, and I appreciate that.

3 Q Well, what I'd like to do is spell out some of

4 the things that have been discussed and just to make

5 sure that this is your understanding, and that this is

6 what we have agreed to in our discussions off the

7 record.

8 Is that fine with you?

9 A Yes.

10 MS. NORDSTROM: Is that how you would like to

11 handle that, Mr. Hearing Examiner, or would you like

12 to do that in some other fashion?

13 HEARING EXAMINER: That's fine. You may

14 proceed.

15 BY MS. NORDSTROM:

16 Q The first issue we discussed was how to define

17 customers, and you have proposed that customers be

18 defined in two classes: Residents and nonresident

19 classes.

20 It is my understanding that residents would

21 pay $48 per month. And residents are customers who

22 are full-time users who live year-round on their

23 property; is that correct?

24 A That's correct.

25 Q The second class of customers would be

72

1 nonresident customers who would pay $25 per month.

2 Nonresident customers would be defined as customers

3 who do not live on the property full-time, but only

4 live there part or none of the year.

5 The nonresident customer class would include

6 customers who could be served by the system even if

7 they are not physically connected to the system. Is

8 that your understanding?

9 A Yes.

10 Q Do you agree with those classifications of

11 customers?

12 A Yes.

13 Q Are you willing to implement those going forward

14 if the Commission were to approve that?

15 A Yes.

16 HEARING EXAMINER: Could I ask a question

17 here?

18 MS. NORDSTROM: Sure.

19 HEARING EXAMINER: You alluded to the fact

20 that you had part-time residents who would be away

21 from their properties for most if not all -- most of

22 the year. And then they would come back and inhabit

23 their dwelling on the property.

24 What category would they fall in?

25 MR. COBOTT: Nonresidents.

73

1 HEARING EXAMINER: So they would be charged

2 $25 per month year long regardless if they were there

3 or not?

4 MR. COBOTT: Yes. And the way that P. U. C.

5 described the -- they call it active service. I call

6 it nonresidents is because these people have a

7 residence on the property we cannot control when they

8 come and go.

9 We can't be up there every week or every day

10 as they come and go during the year. If they've got a

11 house on their property or a trailer or some type of a

12 structure that all they have to do is go and unlock it

13 and walk inside and live, then P. U. C. called them a

14 dwelling or a nondwelling charging them $48 a month.

15 I elected to charge them like I've done in

16 the past because they are part-time at $25 per month.

17 They've always paid it in the past, and they are

18 paying it now.

19 HEARING EXAMINER: Okay.

20 So we are all on the same page they are

21 either full-time residents or not. There are only two

22 categories?

23 MS. NORDSTROM: Correct.

24 HEARING EXAMINER: Okay. Thank you.

25 BY MS. NORDSTROM:

74

1 Q So the second major issue that we discussed

2 besides customer classes was hookup fees, and let me

3 know if this is your understanding of what we

4 discussed.

5 To connect to the system, customers with

6 delinquent bills must pay all of their unpaid bills

7 incurred since the date of a future Commission order,

8 the one that resolved this Order To Show Cause

9 Hearing, which would likely be approximately June,

10 2003, if the Commission were to approve this

11 settlement.

12 Or they would pay $2,500. Whichever is

13 less. The unpaid bills incurred since the Commission

14 took jurisdiction in the fall of 2001 must be paid at

15 the rate authorized by the Commission at the time

16 service was rendered.

17 Unpaid bills incurred prior to the

18 Commission taking jurisdiction must be collected

19 through non Commission means such as court. Is that

20 your understanding?

21 A That's my understanding.

22 Q Another fee that is applicable would be the

23 reconnection fee. And that is a $35 fee that

24 customers who have previously taken service but since

25 have been disconnected would have to pay in order to

75

1 have their water service physically turned on.

2 Is that your understanding of when that fee

3 would apply?

4 A Yes. That fee would apply plus they would have

5 to pay any back water bills that they might have.

6 Q Correct, under the hookup fee --

7 A Right, all the back bills, and then they have to

8 pay $35 hookup fee.

9 Q The last issue we discussed was the fact that if

10 this proposal, settlement proposal, were approved by

11 the Commission that the company would continue to

12 abide by the Commission's rules that apply to its

13 treatment of customers and the rules that are

14 applicable to all water utilities.

15 Are you willing to do that going forward?

16 A Yes, I am. And I abided by all the rules before

17 this problem surfaced. I abided by every rule that

18 they had. I wanted it to work. Whether it was

19 shut-off notices or whatever it was, I abided by the

20 rules.

21 Q Well, that is my understanding of the settlement

22 that has been reached between Staff and the company.

23 Is there anything else that you feel needs

24 to be added?

25 A The only thing -- and I have asked this question

76

1 before -- is late fees and interest which the

2 Commission is reluctant to impose.

3 I have charged interest and late fees prior

4 to P. U. C.'s involvement, and it does work. A lot of

5 these people elect not to be very punctual with their

6 water payments. I was able to collect the monies that

7 I needed a lot more evenly by charging the interest

8 and late fees.

9 A lot of people would -- if I charged them a

10 late fee and interest, they would call me up and be

11 mad or irate or something and, if they were only a

12 month or two, I would deduct the late fee and the

13 interest.

14 But you have a certain amount of customers

15 that it doesn't matter to them. I don't understand

16 them. I've got customers out there that in the past

17 that every bill they ever paid had a late fee and

18 interest on it. Every one.

19 And they'd pay it right down to zero

20 balance, and then they'd go off again, and six to

21 eight months later they'd come back and make a

22 payment.

23 It didn't make sense to me, but that is the

24 way they wanted to operate. It isn't fair to the

25 people that pay every month, and it's not fair to me

77

1 to be shorted this income.

2 And then these other customers can go along

3 for a year or whatever and not have to pay their bill,

4 and then pay it. Their money for their water is

5 needed on a monthly basis especially now.

6 Q Do you understand that Staff has not agreed to

7 any sort of a recommendation about interest or late

8 fees but is willing to bring that to the Commission's

9 attention and, if they want to reconsider it, they

10 can; but staff won't make a recommendation one way or

11 the other?

12 A Yes, I understand.

13 Q I believe at the beginning of the hearing,

14 Mr. Ayers, the Hearing Examiner, explained the four

15 reasons why the Commission asked you to come to this

16 Order To Show Cause Hearing to explain why Ponderosa

17 failed or neglected to obey the Commission's orders.

18 Specifically in regard to the Commission's

19 regulation of the company, seasonal disconnections,

20 disconnections of customers, threatening to disconnect

21 customers contrary to Commission rules, and billing

22 customers for seasonal disconnections when the

23 Commission said that wasn't allowed.

24 Did you want to make any response to that

25 that might explain, if you did those things, or why

78

1 you did those things?

2 A I don't know what you are referring to in

3 seasonal disconnect.

4 Q What I was referring to was when the Commission

5 said that customers would only have to pay for four

6 months out of the year that they could seasonally

7 disconnect for eight months out of the year so long as

8 they paid the other four?

9 A I was against this. I did what I had to do to

10 try to save my investment and my company and also be

11 able to furnish water to the customers.

12 Like I said before, a lot of these customers

13 up there are low-income families with two to three to

14 four children -- five children. They can't afford to

15 put in wells.

16 I don't like operating without getting the

17 revenue that P. U. C. says I should get, but I feel I

18 can still make this work with the revenue that I'm

19 going to receive.

20 I did what I had to do. I felt I had to do

21 it. I felt P. U. C. lied to me. I was not going to

22 take this sitting down. I was going to fight back,

23 and that's what I did.

24 MS. NORDSTROM: I think that is all the

25 questions that Staff has at this time for Mr. Cobott.

79

1 HEARING EXAMINER: Mr. Cobott, do you have

2 anything further you'd like to say in this hearing

3 before you are excused from the stand?

4 MR. COBOTT: If P. U. C. wants to reconsider

5 their position and make this system operate

6 reasonably, then I'm all for it. I have no problem

7 with what we discussed here before this hearing

8 resumed.

9 I think Lisa and Michael have done a good

10 job, and so has Bob. And I want to apologize to them

11 for my harshness in my letter dated April 16. I was

12 mad. Irate.

13 I found over the years that you get more

14 response by being harsh than you do by being mellow.

15 So I wasn't going to be mellow. I know these people

16 personally, and I have respect for them, but I felt I

17 had to do what I had to do.

18 And, again, I want to apologize for that,

19 and all I want is to get back on an even keel and have

20 their respect and be able to continue with the water

21 system. That's all I have to say.

22 HEARING EXAMINER: All right. Thank you.

23 You may step down.

24 Does either side have anything further to

25 present to the Hearing Officer?

80

1 MS. NORDSTROM: I don't have any further

2 witnesses.

3 Do you, Mr. Cobott?

4 MR. COBOTT: No.

5 MS. NORDSTROM: The one thing I would mention

6 is that Staff and Mr. Cobott have discussed

7 preparation of a written settlement that Staff will

8 prepare and then send to Mr. Cobott for his

9 signature.

10 And it's our understanding that that will be

11 faxed or mailed to the Commission so that it will be

12 in writing and signed what we have agreed to

13 specifically for their consideration as a separate

14 document.

15 And we'll anticipate that that will either

16 happen simultaneously with these proceedings or

17 separate to these proceedings.

18 HEARING EXAMINER: But in the near future I

19 assume?

20 MS. NORDSTROM: Next week.

21 HEARING EXAMINER: All right.

22 Well, I want to commend both Staff and

23 especially you, Mr. Cobott, in being willing to

24 discuss a proposed resolution anyway and to act in the

25 best interest, I think, of your customers and also for

81

1 the viability of your company. Hopefully it will all

2 work out.

3 Unless anyone has anything further, we'll be

4 adjourned.

5 (Wherein, this hearing adjourned

6 at approximately 2:00 P.M.)

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82

1 C E R T I F I C A T E

2 STATE OF IDAHO )

3 )ss

4 COUNTY OF BONNER)

5

6 I, CINDY F. HANOVER, a Certified Shorthand

7 Reporter and Notary, do hereby certify:

8 That the Hearing of the above-entitled

9 action was taken down by me in machine shorthand and

10 thereafter reduced to typewritten form under my

11 direction, and that the same was held before Hearing

12 Examiner, Stephen M. Ayers, in the Bonner County

13 Courthouse, Sandpoint, Idaho.

14 I further certify that this is a true and

15 correct record of all on-the-record proceedings had to

16 the best of my ability.

17 I further certify that I am not an attorney

18 for nor a relative of any of the said parties or

19 otherwise interested in the action.

20 IN WITNESS WHEREOF, I have hereunto set my

21 hand this _____ day of ___________, 2003.

22 __________________

23 CINDY F. HANOVER,

24 CSR No. 689

25