20070516Vol I Oral Argument.pdf

ORI GINAL
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF UNITED WATER IDAHO INC. FOR
AUTHORITY TO AMEND AND REVISE
CERTIFICATE OF CONVENIENCE AND
NECESSITY NO. 143 AND FOR
APPROVAL OF A SPECIAL FACILITIES
AGREEMENT WITH AVIMOR LLC.
) ~ASE NO. UWI-W-O7-
ORAL ARGUMENT
BEFORE
PLACE:
COMMISSIONER MACK A. REDFORD (Presiding)
COMMISSIONER MARSHA SMITH
COMMISSIONER PAUL KJELLANDER
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Commission Hearing Room
472 West Washington
Boise , Idaho Cf)cr1
DATE:May 11 , 2 0 0 7
VOLUME I - Pages 1 - 51
CSB REPORTING
Constance S. Bucy, CSR No. 187
17688 Allendale Road * Wilder, Idaho 83676
[phone] * [phone]
Email csb(fYheritagewifi.com
For the Staff:Weldon Stutzman , Esq.
Deputy Attorney General
472 West Washington
Boise, Idaho 83720-0074
For United Water Idaho:McDEVITT & MILLER
by Dean J. Miller , Esq.
420 West Bannock StreetBoise, Idaho 83702
For the City of Eagle:MOORE SMITH BUXTON & TURCKE
by Bruce M. Smith , Esq.
950 West Bannock , Suite 250Boise, Idaho 83702
For Avimor LLC:Batt & Fisher
by John R. Hammond , Esq.
101 South Capitol Blvd.
Suite 500Boise, Idaho 83702
CSB REPORTING
Wilder , Idaho
APPEARANCES
83676
FRIDAY , MAY 11 , 2007 , 10: 00 A., BOISE , IDAHO
CHAIRMAN REDFORD:Okay.Come to order , please.
name is Mack Redford and 1'm a Commissioner of the Idaho
Public Utilities Commission and today I'm acting as
Chairman of this hearing.This is my first time as Chairman,
so everybody, please, bear with me.m sure you will do
that.
This is a hearing in the matter of the application
of United Water Idaho , Inc., for authority to amend and
revise its Certificate of Public Convenience and Necessity,
No. 143 , and for approval of a Special Facilities Agreement
wi th Avimor, LLC.
At this time I'd like to take appearances, please.
MR. MILLER:Thank you, Mr. Chairman.On behalf of the
applicant, Dean J. Miller , of the firm McDevitt & Miller.
With me today is Mr. Greg Wyatt, the general manager of
Uni ted Water Company.
MR. HAMMOND:Chairman Redford, my name is John Hammond
from Batt & Fisher.We represent Avimor -- Avimor, LLC, who
has intervened -- or who has entered into the Special
Facili ties Agreement and is directly impacted by this -- this
case.Wi th me today is Dan Richter of Avimor.
CHAIRMAN REDFORD:And you have intervened?
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MR. HAMMOND:Yes, Your Honor.Yes.
MR. STUTZMAN:Thank you, Mr. Chairman.Weldon
Stutzman, Deputy Attorney General , on behalf of the
Commission Staff.
MR. SMITH:Mr. Chairman , Bruce Smith and Susan
Buxton from Moore, Smith, Buxton & Turcke, on behalf of the
Ci ty of Eagle.We have filed a petition to intervene this
morning.
CHAIRMAN REDFORD:And that petition will be granted.
MR. SMITH:Thank you.
MR. MILLER:Mr. Chairman?
CHAIRMAN: REDFORD:Mr. Miller.
MR. MILLER:Wi th respect to the intervention petition
just filed by Eagle, could I been heard on that?
CHAIRMAN REDFORD:Certainly.
MR. MILLER:d like to note, Mr. Chairman, Members of
the Commission, that the file stamp on the petition to
intervene is dated 9: 55 today.The public notice for this
case was issued on February 14th, I believe, of this year.
The application has been a matter of public record for many
months.A hearing -- a procedural schedule has been
previously established by the Commission.The City of Eagle
has in every respect ignored that procedural schedule and now
at this late moment, five minutes before the start of the
hearing, seeks to intervene and as far as we can tell
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introduce into the case issues that are brand new.It would
be prej udicial to United Water to allow the inj ection of
these issues at this late date and require us to, within five
minutes of the filing of those issues , be prepared to respond
to them.It would be prej udicial to expand the scope of this
proceeding beyond what the scope has been previously
established as.And as we, in the five minutes we have had
to review the application , understand that the city seeks to
inj ect an issue having to do with potentially conflicting
service territory boundaries between the City of Eagle and
Uni ted Water , an lssue that has not been presented in any way
prior to this moment.It would be highly prej udicial to
expand the scope of this proceeding to inj ect a brand new
issue when the Staff and parties have carefully -- both have
-- both carefully tried to brief and fully explore the issues
that have been properly presented.To now at this moment
inj ect these issues into this proceeding would be highly
prej udicial and improper.
Wi th respect to the noncompliance by Eagle of --
wi th procedural requirements, I wanted to just refer to a
case that was cited by the Idaho Supreme Court just last
week , which on the surface doesn t appear to be particularly
relevant, but actually it is.And there a party filed a
complaint, but failed to serve it wi thin the six months
required by the Idaho civil rules, but informally gave a copy
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of the complaint to the defendant for the purpose of
settlement negotiations, but just forgot to formally serve
it.And the court held that rules -- procedural rules mean
what they say.If you don t file wi thin six months, you have
not complied with the rules and the case was dismissed.
have a copy of it here if you I re interested.But the point
is procedural rules do matter and with all due respect to the
ci ty, the city has completely disregarded those rules.
to allow the city to elbow itself into this case at this last
moment is improper, prej udicial , and we obj ect.
CHAIRMAN REDFORD:Thank you.ll hear from the city.
MR. SMITH:Thank you, Mr. Chairman.Wi th all due
respect to counsel for United Water , the city had originally
filed some comments on this matter and the particular concern
that we had at the time we filed our comments were that the
documents that had been filed by United Water , the --
including the testimony of Mr. Greg Wyatt and the draft -- or
I guess it was the final of the Special Facilities Agreement,
contained inconsistencies and as we went through those
documents trying to sort through them, trying to figure out
how to reconcile them , we were unable to do that at the time.
And so we filed comments to that effect with the Commission
and , then , we have had some subsequent meetings with -- with
Avimor and we think we have resolved some of these, but we
are not quite certain that all of them have been resolved.
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At one of those meetings the
--
it was our understanding the
SFA was going to be modified and -- to make it consistent
wi th our discussions and that has not happened., we are
petitioning to intervene here to, basically, protect these --
the interest and positions that the city has as -- for
today s hearing, as I understand it, the thing that will be
addressed to the Commission is the Staff's comments and the
applicant's petition.So, other than being in support of
Staff's recommendation on a public hearing, I don t know that
we have a lot to address today.We are certainly not trying
to expand the scope of today ' s hearing.
CHAIRMAN REDFORD:And I thank you.No.m going to
rule that your petition for intervention is granted and
think that the record indicates that all parties were aware
that the City of Eagle had an interest or had comments.
There is a letter in the file, dated March 14 , 2007 , from the
Ci ty of Eagle.I don I t know whether the other parties
recei ved a copy of that, but at least on the face of things
it appears that everyone was aware that the City of Eagle has
an interest and I think it's appropriate to -- to take the --
the issue of Eagle s concern , because it is so -- the City of
Eagle and the proposed development and the area are so
commingled as far as water service is concerned and I think
that this Commission takes the attitude that we like to look
at the substance of the proceeding as -- more than exactly
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the form.So, I I m going to grant your petition.
MR. SMITH:Thank you.
CHAIRMAN REDFORD:Are there any other preliminary
matters that we need to take care of?Okay.Well , you
the moving party, Mr. Miller.Would you, please, proceed.
MR. MILLER:Yes.Thank you --
CHAIRMAN REDFORD:I was going to say Joe.
MR. MILLER:Just whatever is fine.
CHAIRMAN REDFORD:Mr. Miller.
MR. MILLER:Mr. Miller will work, too.Thank you , Mr.
Chairman , very much , and members of the Commission, for the
time you have allowed for this argument this morning.Let me
just -- I'll say preliminarily that the company regrets it
when we find ourself at odds with the Staff.We -- the
company always tries to resolve matters with Staff through
accommodation and I think generally we are successful at
that.There do, regrettably come sometimes when it'
necessary to present matters directly to you and we
appreciate your willingness to consider our point of view in
circumstances such as this.
As the Commission knows, we have filed an
application that has two maj or components.The first is the
expansion of United Water I s service territory to serve an
area known as Avimor and the second is for the approval of a
Special Facilities Agreement for the construction of
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facili ties that are necessary to accomplish that.Many
aspects of the application are not in dispute between the
company and the Staff.There are, though , two outstanding
issues that require your attention.
First, Staff argues that the certificate should
-- or should not be extended beyond the first stage of the
Avimor development and that a new docket should be opened to
reexamination line extension and developer contribution
rules.This, apparently, is aimed at finding a new system
that would require developers to contribute some or all of
source and supply costs.And, second, the Staff obj ects
the proposed transmission of a -- proposed treatment of a
transmission line investment , which is proposed under the
Special Facilities Agreement , to be advanced initially by the
developer , with the possibility of refunds at a later time.
Staff argues that this line should be contributed by the
developer without the possibility for future refunds.Those
are the two outstanding issues between the company and Staff.
, let me turn first , if I could, to the
certificate issue -- certificate issue and I think a
discussion of this issue properly starts with one central
observation and that is that United Water and Avimor have
structured their arrangements in a way that is fully
consistent with the Commission I s existing rules, which
don t think is disputed.But this central observation has at
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least a few other implications.The first is Avimor has
recei ved no special treatment.Avimor has not received any
preferential treatment in the formation of these arrangements
than any other developer has., this is not a case of
preference or special treatment.
Another observation that flows from the first
that United Water s existing rules do a good job of
mi tigating those costs.The framework of those rules are
simple , as the Commission knows , and that is developers
contribute without refund distribution facilities and source
of supply and related investments are funded through rates.
And this system has served to moderate growth in rate base
despi te the rapid addition of customers in recent years.
Since United Water s last fully contested rate case in 2004
United Water has added almost 7 000 customers to its system.
Yet , the combination of developer contributions and
depreciation have moderate growth and rate base such that
Uni ted Water does not anticipate the need for a new rate case
certainly wi thin the next year and probably more., United
Water I S existing rules already do a good job of accommodating
growth costs or costs associated with the system expansion.
Another observation that flows from the first is
that United Water s existing rules are legally sound.As the
Commission recalls, they were adopted in response to the
Supreme Court's decision in the Building Contractor s case
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and they were specifically designed to respond to the court'
prohibi tion against discrimination in the structuring of
utili ty rates and charges.The current rules are the rules
that Staff proposed back in Case 96-4 and have been in place
and working well for a long time.
Staff in its comments suggests that as a way around
the discrimination problem, the Commission can impose
condi tions upon the certificate of expansion and presumably
in some undefined way, as a condition of the expansion,
require developers to contribute some portion of the source
of supply costs.I won t go into great detail on legal
arguments , but we have pointed out in our comments our belief
that Staff has misread Idaho Code Section 61-526, which
relates to the ability of the Commission to impose conditions
when one utility is about to interfere with the operations of
another.But it has no application in this case where
service is being proposed into an unserved service territory
and there is no conflict with the plan of an existing
facility.
We have also suggested that Staff's idea to in some
undefined way shift source of supply cost to new developments
and customers raises serious discrimination problems under
current law.Now , admittedly, the facts of these home
builders and building contractors case are not identical to
those here and lawyers can enj oy debating what the Supreme
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Court would do with the facts that are presented here , but
from a decision-maker ' s point of view, I think the important
fact is this:Any scheme that creates a difference in
treatment based on old versus new customers is legally
The Commission has been to the Supreme Court twicesuspect.
on this point and the Commission -- the Court has been clear
twice each time in response.And it's for these reasons that
we think a new proceeding aimed at examining rules and United
Water s regulations is ill-advised.In the absence of a
changed law regarding discrimination, any change that could
come out of such a proceeding will likely be doubtful from a
legal point of view and with , again, due respect to the
Staff , there hasn I t been even a preliminary showing that
there is some other potential method that would be
practically superior to the current method.No straw man has
been deposed, nothing to -- nothing in specifics of how the
current rules would be changed under current law to achieve a
practicably superior result has been identified.
Another point that flows from my very first
observation is that the current rules reflect a fair
balancing of numerous public interest considerations.They
balance fairly the interest of existing customers, the
interests of new customers, and the interest of society in
general.Again , with due respect, Staff's proposal seems
motivated by a very narrow public interest consideration
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only one public interest consideration.We also think that a
de facto moratorium on development would create great
uncertainty.As we have indicated, there are developers who
are relying on the existence of current rules.To suddenly
put those into suspension would create a great amount of
uncertainty.It would raise difficult questions as who
entitled to proceed under the current rules versus who must
wai t for the subsequent rules to be adopted.The Commission
recalls that these questions of grandfathering that come up,
whenever there is a proposed change of rules, are very
difficul t to resolve on a fair basis.
And, finally, we think that United Water and Avimor
are entitled to have their application judged based on the
rules that existed when we filed the application.And, once
again, going back to my central observation , the application
is completely consistent with the current rules.
So, let me shift briefly now to the second issue,
which is the transmission line issue.Here, too --
COMMISSIONER KJELLANDER:Mr. Chairman , I guess before
we go to the second issue, there is some questions that at
least I have on first issue that I'd like to kind of just
toss out --
MR. MILLER:Certainly.
COMMISSIONER KJELLANDER:-- before I forget them.The
way you describe the legal considerations here, it sounds
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like what we really had is the possibility of a case of first
impression as it looks to phase one versus subsequent phases.
How that's dealt with , if that's not certificated, may well
end up being a case of first impression.Is that a correct
characterization of the way you described it?It seemed to
suggest that the rules that you were pointing to didn
necessarily address currently uncertificated areas.
MR. MILLER:Let me start trying to respond and if
don I t respond in a way that addresses the question you have
in mind, please, let me know, so I can try to be sure I have
addressed the question that you re asking.If you look at a
map of United Water service territory, you will see that
there are many areas that are not fully built out, that are
not fully developed, and you will see that United Water
currently doesn t have the supply resources to serve those
unbuil t out areas.But United Water s whole purpose in
being, essentially -- maybe not quite the whole purpose --
to plan for the future, so that it can serve into its -- the
portions of its service territory that is uncertificated.
can t build facilities in advance of the need for service,
because through painful experience United Water has learned
the meaning of the phrase used and useful.So, what United
Water has to do is proj ect demand over a period of time and
builds supply to meet that demand without going over
significantly the demand line and runnlng into a used and
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useful problem.So, that's what United Water does all the
time is operate its business, so that its supply line meets
the demand line, but does not exceed it significantly.
That's what occurs in its service territory generally
already., in that respect I don t see the Avimor
development as being materially different from that.That is
the area that currently is unserved will go into United
Water s planned demand line and over the years United Water
will build supply to make sure it hits that demand line.But
if United Water today builds facilities to serve all of that
area , the result from the Commission would be quite
predictable on a used and useful basis., in that respect
I don t see it as materially different from the way United
Water operates its business.
, if I didn t get exactly what you were getting
at, I would be happy to try again.
COMMISSIONER KJELLANDER:Well , let me -- let me move to
a different question.Unless missing part of the
characterization from Staff's filing, United Water says that
it has the water supply to accommodate phase one.
MR. MILLER:That I S correct.
COMMISSIONER KJELLANDER:Everybody has a pretty good
sense of ultimately what the next phase is intended to be.
Avimor has done I think a fairly decent job of being
forthright about what their intent is.The question that
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seems to be at the core of Staff I s consideration is -- is
what about those subsequent phases and what about the water
supply and there is nothing that I have seen that suggests
that United Water knows how it intends to serve that and what
the costs of the water supply itself might be , because,
again, he said earlier on, it all ends up going into rate
base.And that I s , I guess, the area that I see as perhaps
the case of first impression going forward as we deal with
certificated versus uncertificated areas.But what's United
Water s position about that future supply of water
especially in a state where getting access to water rights
isn t necessarily a piece of cake.
MR. MILLER:Two points if I could.I mentioned a
moment ago that United Water plans its operations so that its
supply line is meeting its proj ected demand line.If this
area is not included in United Water s service territory, it
would be imprudent for United Water to plan to serve it.The
Commission would not allow , I don t think, investments made
on the speculative hunch that it might some day have a
certificate to serve this area.
United Water has been in the business of meeting
the demand curve for a hundred years.That's what it does.
For United Water to be expected to say today precisely what
sources it will develop to meet that future demand is placing
an unrealistic expectation on a company whose business is to
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do that.If United Water today had the facilities to serve
that future area, those investments and that source of supply
would undoubtedly not be allowed in rates under a used and
useful test.So, on the one hand, it's unfair to expect the
company to have on hand resources to serve that future
development when we know the company could not earn a return
on those investments.On the other hand, if the area
allowed into United Water I s service territory and becomes
part of its demand line planning, United Water will , as it
always has , build and acquire its supply to -- to meet that
demand.But it, frankly, is impossible to say today where we
are going to drill a well , where we are going to put a
treatment plant , precisely where those facilities will be,
so --
CHAIRMAN REDFORD:Commissioners, any questions?
COMMISSIONER KJELLANDER:m not finished.
CHAIRMAN REDFORD:Oh, I'm sorry.
COMMISSIONER KJELLANDER:So, what you re saying is you
need to phase that in the company I s approach to dealing with
those certificated -- or possible certificated areas , so why
would it be unreasonable, then , to phase in a certificate?
Here is phase one , there you have it.Now , let's look to the
next thing, you bring it up and you deal with it.It sounds
like that is something that isn t completely and totally
wi thout having some merit based on your description of how
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you look at your business plan going forward.You don t have
to answer.
I guess the other question , really, is you mention
the phrase de facto moratorium , alluding to the fact that our
decision could, in fact , result in de facto moratorium to new
construction.I know where you I re headed with that and
guess the question really gets to the point is what stops any
developer from doing exactly what happens around the state of
Idaho of developing their own water company, either as a
private water company that is unregulated , or as a separate
brand new water company that is regulated?Nothing in any
decision we would make would kill future development, because
they would still have that opportunity and perhaps , unless
I I m mistaken , have the opportunity to create a water company
that is not touched by our jurisdiction whatsoever.
MR. MILLER:Two responses, if I could.First, when I
use the phrase de facto moratorium , I apologize for
--
I now
recognize that I used it in a way that I didn I t explain
clearly.I didn t intend to say that the Commission
decision in this case would amount to a de facto moratorium.
I intended to say that if the Commission embarked on Staff'
proposal to create a new case to reexamine United Water
rules and regulations, that that case could have the effect
of a de facto moratorium by putting all of United Water
rules and regulations into doubt and raising the question of
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whether those would be in place or not in place for the
future., I use that phrase with respect to the potential
for a subsequent case, not to what we are considering in this
case.
As to your second point, I think an underlying
question is is the creation of multiple water utili ties in
the public interest.We have indicated, for example, that
the Department of Environmental Quality
--
or Environmental
Quali ty Water Resources -- Environmental Quality, discourages
creation of new public water systems by requiring develop --
or potential systems to explore connecting to existing
systems and if they choose not to connect to existing systems
to explain why they didn So, you re right in theory, new
water companies could be created.There is a significant
public interest question of whether that I s a good thing to
encourage and it's been the Commission I s policy as far as I
can understand it , to discourage the creation of multiple
small water utili ties and to promote the consolidation of
water provision into companies that have the financial and
managerial resources to operate a company in the public
interest and in a safe way.
So, you re correct that is a potential and whether
it's a good potential or a bad bow potential is a judgment
for you to make.
CHAIRMAN REDFORD:Commissioner Smith?
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COMMISSIONER SMITH:Thank you.I think that one of the
Staff's arguments for limiting the size of the certificated
area that the Commission would approve is that if we approve
the larger area , United Water will be obligated to provide
water to the development regardless of cost.m wondering
if that's your view of the utility s responsibility once it
has a certificated area.
MR. MILLER:Thank you, Commissioner.It's not my Vlew
-- the company is always going to be cognizant of the level
of investment required to accomplish service and if the level
of investment is beyond a level that the Commission would
find prudent, it seems to me that the company is not
obligated to -- to serve.Idaho Power service territory
encompasses the top of Borah Peak.Nobody suggests that
Idaho Power has an obligation to build a line to the top of
Borah Peak to serve somebody.So, the concept of obligation
to serve , it seems to me, is not a legal mandate, but is more
in the nature of a general regulatory compact that a utility
will undertake to provide service where it's feasible and in
a way that under economic analysis the Commission would find
reasonable.
COMMISSIONER SMITH:Thank you.That's all.
CHAIRMAN REDFORD:I just have one question.And that
is aren t you, in effect, requesting a deviation from your
present tariff and your rules and regulations?It seems to
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me in reading those regulations , that they require a hundred
percent of the distribution cost to serve a new development
be contributed by the developer without refund.So, it seems
to me what you re doing is, in fact, as king for a change in
your rules and regulations to allow some of those costs to be
refundable.
MR. MILLER:Thank you , Mr. Chairman , for the
opportuni ty to clarify that.As the arrangements are
proposed, Avimor would contribute one hundred percent
wi thout the possibility for refund , all of the distribution
facili ties wi thin the development.That's according to
Uni ted Water I s standard line main -- line main extension
rules.That is completely standard for the -- for any
developer, that the developer contributes the distribution
system without refund and the source of supply resources are
provided through , pardon me , rates in general.So, that'
completely consistent with United's current tariff and rules.
The potential gray area is the transmission line
which I will discuss in a moment.Everything else is
completely in accordance with rules.The distribution
facili ties are contributed without the possibility of refund.
The special facilities are advanced subj ect to potential
refund in the future pursuant to Rules 74 and 75 , precisely
the way the rules are written , and a source of supply
provided through rates in general.So, we are not requesting
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a deviation from any rule with respect to the obligations of
developers.
CHAIRMAN REDFORD:What are the special facilities that
you re talking about?
MR. MILLER:In the usual development -- well, I'll call
a flat land development, the facilities required to serve the
development are the distribution pipes wi thin the streets in
the subdivision and the main line that connects at some point
to United Water I s existing main line facility somewhere.
Under the current rules that I have mentioned , the developer
contributes one hundred percent of that cost without refund
which is what's occurring here.And the source of supply,
the well, the associated equipment to get the water into the
system , are provided for in rates generally.And that's the
fair balancing of cost that I mentioned at the start , that
has served to moderate growth.
There are some facilities -- some developments that
require additional facilities , usually ones that are in the
foothills, that are some elevation above the existing service
levels , and those usually are booster facilities, pumps that
can move the water up to a higher elevation , and, then , a
storage reservoir that can hold the water there for service
and for fire protection.And those facilities are called
special facilities.And under the Commission s approved
rules, the developers advance the cost of those facilities,
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so that rate payers are not at risk in the event the
development goes bust or doesn t work.Then , when customers
are connected to the system and start producing revenue, the
developer becomes eligible for refunds that are calculated in
a way that's contained in United's tariffs and in the way
those investments , which are supply investments , slowly find
their way into rate base as those refunds are made and, then
eventually, when there is a rate case , they find their way
into rates , but only after there is revenue existing to
support the increase in rate base.So, even though the rate
base goes up, there is an offsetting amount of revenue to
support that rate base, so that it mitigates upward pressure
on ultimate rates.
So, in this case the special facilities in play or
involved are a booster station , a pump to help get the water
up the hill , which also is in a reservoir with some special
additions so that in the event of need, the reservoir can
push water back down to Hidden Springs, if there is a service
outage in Hidden Springs or a fire emergency.So, in
addition to boosting, it has a little bit of extra value in
providing additional source to the -- to the system
generally.
The question at issue between Staff and the company
is whether a portion of that -- those facilities, a high
pressure transmission line, should be considered part of the
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supply system and , thus, a special facility subj ect to refund
or whether it should be considered as part of the
distribution system and , thus , a part of the system that the
developer would contribute without refund.Our point of view
is that the transmission line in these circumstances is more
properly considered as a supply
--
as part of the supply
system and that's because it I S a high pressure transmission
line moving water at 200 pounds per square inch , which is
very much above the pressures in a distribution system.
it's part of the supply system.
Addi tionally, the -- we think considering it in
that way is consistent with the way the Commission has
treated similar facilities in previous cases , both the
Hidden Springs and Harris Ranch cases -- had transmission as
part of the supply system and were approved as advances for
refund.
And just one final note on this topic, which is a
practical note, and that is that the Special Facilities
Agreement is for a term of 15 years.After 15 years there
are no further opportunities for refunds.I won t go through
the math in detail , but it would take more than 3 000
customers to exhaust the refund advances for the booster and
storage parts of the proj ect.The point being that it'
maybe quite unlikely that refunds will ever be paid with
respect to this piece of investment, because of the numbers
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of customers that are required to pay for the first booster
and storage facility, before the expiration of the Special
Facili ties Agreement 15 years from now.So, just one final
point there.Even if it comes about that United Water pays
refunds for the transmission facility, it's very important to
keep in mind the basic structure of the special facility
format, which is that -- which is refunds are not paid until
there is revenue to support them , which has two important
consequences.First, existing rate payers are insulated from
speculative risk.That is United Water does not make this
investment, in effect, until there are customers to support
it.And , secondly, when the investment is made , the
mechanism significantly mitigates upward rate impact by
virtue of offsetting increased rate base with increased
revenue.
Well , I have taken much more of your time than
intended.I would be happy, if there are further questions
to try and respond.
CHAIRMAN REDFORD:I just have one other and it seems to
be that there is a gray area between these transmission
facili ties and the special facilities and probably in the
past there have been situations where the booster station and
the reservoir have been included as transmission facilities.
Is that what you re saying?And you re asking us to make
sure that that is considered an advance that's refundable , as
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opposed to a contribution?
MR. MILLER:That's correct , Mr. Chairman.
CHAIRMAN REDFORD:Okay.So, to that extent --
MR. MILLER:The best answer is that's correct.
CHAIRMAN REDFORD:To that extent you re asking us to
deviate from your -- from your rules and regulations.
MR. MILLER:I don t believe we are.In two previous
cases , Hidden Springs and Harris Ranch, it was found that
similar facilities are legitimately considered to be source
of supply facilities., we are not asking for a deviation
from the rules , it's a matter of -- the rules are the rules
and it's a matter of how do you characterize these
facilities , either as source of supply facilities or as
distribution facilities.For the reasons that we have
indicated, we think , as with prior cases, they are most
properly characterized as supply facilities., we are not
asking to bend the rules, we are just asking for a correct
characterization of the facilities.
CHAIRMAN REDFORD:Okay.Thank you.Any other
questions?Okay.Thank you, Mr. Miller.
MR. MILLER:Thank you, Mr. Chairman.
CHAIRMAN REDFORD:I think at this time we will hear the
intervener , who is in support of the application by United
Water; is that correct?
MR. HAMMOND:Yes , Chairman Redford.Chairman Redford
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and Commissioners, again , I'd like to reiterate our thanks
for allowing the opportunity to argue this case and being a
part of the process by written documents , modified
procedures., we do appreciate the opportunity to meet
wi th you today.And we believe that United Water
representation about the history of the case and -- and the
issues that they pointed out in terms of whether the
certificated area -- where the request to grant an expansion
should be granted in its current form as it's contained in
the application and , in addition , should the Special
Facilities Agreement, which provides for building of that
transmission line and the booster pump and the reservoir
that contract should be approved in its form.
On the first point , on the expansion of the
certificated area or the request, Avimor believes that
allowing this expansion for United Water is in the best
interest of -- well , it is in the public interest I should
say and that is because United Water -- Avimor approached
Uni ted Water , because it knew that it was one of the only
utili ties -- maybe the only utility in this state that has
the sophistication and expertise and financial wherewithal to
actually assist in working with a proj ect of this
sophistication and because of that we believe that it is
good choice to use a qualified provider and to commit to
those 4 500 acres.Why?Because Avimor ' s going to control
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those 4 500 acres and is going to develop that in such a
manner to employ significant conservation features into that
development, which we believe will reduce cost in the long
I will get back to that in a moment.run.Jill mentioned
the sort of policy of the Commission to encourage connections
to existing systems or to have developers or new connections
look see if there is an existing system to connect to and to
evaluate that and the profits of whether that's in the public
interest or not.As the Commission is aware and as I am more
than painfully aware in recent cases, small water companies
--
and I'm not suggesting that Avimor or someone else out
there would be one
--
water companies often have a very
difficul t time , whether they are regulated or not by the
Commission , in meeting service standards and providing safe
service.There are many that do it, but the ones that,
unfortunately, don I t often become a huge problem and a
headache for the Commission, I realize and know , and
especially for consumers.That is why we think it's a good
idea to at this time allow United Water to have this extended
area , rather than to piecemeal it out and bring a possibility
that we have more confrontations with the City of Eagle
some other provider that swings in and decides they want to
serve in that area.We know that United Water is qualified
at least from Avimor ' s standpoint and has chosen to do that
and has chosen to commit to that.I think that's important.
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As I said before , the build out -- or the proposed
build out contains 4 500 acres.As I have mentioned in our
briefing, the development contains significant conservation
features, one being a water treatment plant , which will treat
water , create an affluent that can be reused throughout the
development.Tha t plant will have an initial capacity of
about 300 gallons
--
or 300,000 gallons per day, I believe
and can be ramped up significantly as the development grows.
That will reduce the need for water significantly, we
believe , in that area and will assist that development in
using less water than the average customer that is currently
in United Water s system.Avimor has used this sort of tool
In other areas , In New Mexico and Arizona and Utah , and it '
been successful in conserving water and reducing the need for
source of supply and also assisting their residents in
reducing their water bills.We believe that the Commission
in general , has always attempted to look at conservation
where it makes sense.Sometimes it does, sometimes it
doesn , monetarily.But in general we believe that
conservation is a good thing and the Commission would like to
encourage that.Avimor is certainly going that way
voluntarily before it ever came before the Commission.
addition to the big plant , they are installing low flow
features in every residence they are building.They are
limi ting the amount of turf that is going to be built into
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these residences.They are using recirculating pumps in
those houses that will also help to reduce consumption.
believe that those factors are -- in terms of the strain on
sources of supply are important to consider in this analysis
when you re considering whether there is enough supply to
serve or not.Getting to I think -- I I d like to try to
address Commissioner Kj ellander ' s question earlier about is
this a case of first impression, is this -- you know , because
there is a certificated area and an uncertificated area.
think from a common sense standpoint it's very difficult to
determine specifically who is causing the need for additional
supply.It I S hard to pin it down on one customer, whether
they are wi thin a boundary or not.Certainly growth , where
ever it occurs, when it occurs on United Water system , will
increase the need, probably, for more facilities and possibly
more supply, but it's just as likely that those 3,000
customers a year that are being added to the system currently
are causlng that demand and not Avimor ' s proj ect.I think
in general, when United Water is answering that question
about saYlng we are not certain about what our need is, I
think that's honest from the standpoint we don t know what is
going to come onto the system and where it's going to come on
and so to draw a line and force someone that is not currently
wi thin boundary -- wi thin the boundary to help pay for or pay
for in total supply that is benefiting those which are in the
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service territory that are also causing the growth , we -- or
the need for additional supply and facilities we think is --
lS an un -- we think that it is questionable to treat -- or
to create a classification based on that criteria and we
think based on the language in the Supreme Court cases , they
clearly state that new and old customers should not be
treated differently.There is -- there is no mention of a
certificated area in those cases , but that was an issue in
that case and there is no certainty, as Mr. Miller said , on
whether or not the court would come down on that -- on the
Commission s or the Staff's side if it were to go in that
direction.
MR. KJELLANDER:Which is my point of case of first
impression.
MR. HAMMOND:I don t think it is a case of first
impression.I think we have new customers and old customers,
where ever their location is --
COMMISSIONER KJELLANDER:Mr. Hammond , didn t you just
describe, though, that the Supreme Court cases did go
forward, did not deal with the issue of certification
whether it did or didn I t exist.So, to the issue of first
impression , that would to me seem to be a case In point going
forward , depending on how this were to unravel.
MR. HAMMOND:Well , I think that certainly is a
di fferent fact , but the core of it has not changed.New and
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old customers.I don t think certification makes a
difference.The cost or the need for new supply is not
solely caused by Avimor.I don t think -- I think it'
impossible and I don t think Staff has suggested that.
COMMISSIONER KJELLANDER:And , Mr. Hammond , to another
question -- and as you look at the certificated area that'
already certificated, isn t from what you know about public
utili ties law -- clearly we are not looking at any
certificated area today wi thin United Water s territory that
includes something like Borah Peak.We are looking at areas
that clearly are very close to city limits , if not in city
limi ts , in developed areas and wouldn t you say that it would
be nearly impossible wi thin the certificated area today not
to provide service to any of those areas that exist today?
MR. HAMMOND:Well , I think that's a Commission -- a
question the Commission has to answer.The Commission
obviously, has the duty to insure that the quality of
services provided are general to -- you know , to customers.
In addition , it has the duty to make sure that the utility is
not putting itself in financial harm.I f circumstances arose
in which the company was placed in that situation , even
wi thin its certificated territory, I believe the Commission
would have a hard decision to make.I don t think they are
mandated to serve supply -- or to serve if the economics do
not make sense.There has to be a solution.The Commission
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cannot put the company in financial peril.
COMMISSIONER KJELLANDER:But the obligation to serve is
only going to come up in a certificated area , not in an
uncertificated area., in terms of the Commission actually
having a tough decision to make, it only has that tough
decision to make in those areas that are already
certificated.
MR. HAMMOND:Yes, but I agree with you on that point
but I', again , saying it's difficult to differentiate who is
causing the growth , I guess I should say.And to simply
force that issue upon those that are outside the developed --
outside the current boundary, without including those who are
causing the need for supply wi thin it , seems to be unfair , I
believe.
COMMISSIONER KJELLANDER:It wasn t my intent derail you
from your comment --
MR. HAMMOND:No.That's okay.m trying to attempt
to answer the question as best I can.
COMMISSIONER KJELLANDER:And I appreciate that.Thank
you.
MR. HAMMOND:In addition -- you know , I'll move to the
second point.We believe that the SFA , or the Special
Facili ties Agreement , that involves those pieces of
equipment , the transmission line, the reservoir , and the
booster station , are consistent with the rules.There is a
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gray area in terms of whether that one piece -- that on-site
I believe , piece of transmission line should be considered
advanced or a contribution and freely admit Staff has
disagreed with allowing transmission to be an advance.
mean that -- obviously, that's been an issue before and the
Commission in the past has, obviously, been reluctant to
allow that to be an advance.We would just ask
respectfully, that the Commission look at this piece -- this
on a case by case basis -- or this issue on a case-by-case
basis , consider that it gave similar treatment to the Harris
Ranch development , to the Claremont development, to the
Hidden Springs development -- to consider that in light of
those cases, whether this should be a contribution or an
advance.
Second , I agree with Joe , it's sort of a last
dollar out analysis.In order to cover the investment for
that piece, which Staff is saying should be a contribution --
I mean they don t -- they do not disagree with some of it,
just this one piece.The company will have to hook up -- or
Avimor will have to connect nearly 7 600 customers and as
those customers , as Joe mentioned , the revenue will be there
to support the cost of adding that on.I really, sincerely,
doubt there is going to be any significant rate impact or
perhaps on rates and whether we ever get to recovering that
piece is a question nobody knows and will be driven by how
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successful the build out in Avimor is and those market
factors we can t determine.We are simply asking for an
opportuni ty to be able to recover that based on the existing
formula.I f there are any other questions, you know , I I 11
try to answer them as best I can and , once again, I thank you
for your time.
CHAIRMAN REDFORD:Mr. Stutzman.
MR. STUTZMAN:Thank you , Mr. Chairman.I think it'
important to keep in mind the current status of this case and
how it got here.This case has been processed so far by
modified procedure and that creates a very limited record.
Now , Staff , as you know , essentially, has made three
recommendations in this case.The first recommendation
relates to United Water s request for expansion of its
certificated service area.They ask the question to
--
they
ask the Commission to determine whether expansion of United
Water s area as requested is in the public interest.Now
everyone agrees, I think , that there may be several facts for
the Commission to consider when it evaluates the public
interest in expanding a utility s service area , but because
of the limited process of this case , there is very little
evidence on the public interest issues that might be involved
in expanding United Water s service area to approximately
500 acres of desert north of Boise.Clearly one important
public interest issue is the potential for significant added
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cost to United Water s existing body of rate payers.Staff
recommended that the company service area be expanded only to
phase one of Avimor ' s development and that recommendation was
based on the belief that so long as the parties facilities
agreement is changed to be consistent with current rules for
developer contribution of transmission lines , the public
interest at least will not be adversely affected.And
Staff's recommendation is premised on United Water
representation that it has an adequate water supply to serve
phase one of the development.There is no evidence in the
record to demonstrate that the company has an adequate supply
to provide water to more than phase one.Staff is concerned
that unknown costs for the company to obtain water sources
are potentially significant , if not huge, and if they are it
would be unfair to ask current rate payers to pay those
costs.
So, Staff's second recommendation is to have a
hearing and obtain evidence and build a record on costs and
any other public interest consideration that might be
invol ved in providing water to the rest of Avimor ' s
development.The evidence presented at a hearing might
support a conclusion that the Commission should place
condi tions on additional expansion of United Water
certificated area.Staff at this point is not trying to
recommend what those conditions should be.It would be
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premature to do that without real evidence about the costs
and other public interest issues involved in providing
service to the entire Avimor property.Staff'
recommendation to open a docket or it could be done in this
docket , it wouldn t have to be a new docket , and conduct a
hearing is precisely what is directed by Idaho law.Idaho
Code Section 61-528 directs the Commission when considering
issuance of a certificate of public convenience and
necessity.And I I d like to read a portion of that statute.
It states:The Commission shall have power after hearing
invol ving the financial ability and good faith of the
applicant and necessity of additional service in the
communi ty, to issue said certificate as prayed for , or to
refused to issue the same or to issue it for the construction
of any portion only of the contemplated street, railroad
line, plant or system or extension thereof or for the partial
exercise only of said right or privilege and may attach to
the exercise of the right granted by said certificate such
terms and conditions as in its judgment the public
convenience and necessity may require.
Now , given that clear authority, it cannot be
seriously debated that the Commission can conduct a hearing
to gather evidence on the public interest issues involved
amending United Water s certificate and , if justified by the
evidence, to attached terms and conditions to it as the
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Commission -- as in the Commission s judgment the public
convenience and necessity may require.Section 61-528
requires that a hearing be held so evidence can be presented
and that is all that Staff is recommending at this point.
Staff's third recommendation relates to the Special
Facili ties Agreement and here we take exception to maybe some
of the comments that counsel for United Water made.If the
Commission agrees with Staff's recommendation to amend the
certificate to include phase one , an issue arises in the
terms regarding the transmission line.Staff believes the
agreement should not be approved as written , because it calls
for United Water to refund to Avimor approximately two-thirds
of the cost of water transmission main required to bring the
water to the development.Staff believes that United Water
tariffs and Commission policy require that all construction
costs of the transmission lines be paid by a developer.
don I t think United Water in its reply comments argues that
Staff is incorrect on this point, but argues that allowing
for a refund in this case is reasonable.And I think there
is a statement in United Water s reply comments that is
perhaps instructive and why it believes it is reasonable in
this case to have its existing customers pay for some of the
water main for Avimor ' s proj ect.
At page five of United Water s reply comments is
the following statement:Avimor at one time appeared to have
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the intent and ability to form its own water company and
Uni ted Water sought to negotiate a facilities agreement that
would prevent that result , while remaining consistent with
Commission rules.I think that's a revealing statement.
Avimor apparently was willing and able to build its own water
system, in which case it would pay all of the system costs
and expect to recoup those costs in the sales of its lots.
Uni ted Water sought to prevent that result , presumably by
making its proposal more economically attractive to Avimor.
To make it more attractive , United Water agreed in the
facilities agreement to refund most of the water main costs
to the Avimor proj ect.
Staff's third recommendation is that the Special
Facili ties Agreement not be approved as written , but that it
be changed to be consistent with existing rules to require
that the transmission line costs be contributed by the
developer.Thank you.
COMMISSIONER KJELLANDER:Mr. St ut zman, with regards to
the transmission line , what makes it a transmission line?
it just the size?
MR. STUTZMAN:It's -- well, I'm not a technical expert
Commissioner , but if it's the main line to deliver water to
the proj ect and that's its purpose, it's a transmission line.
COMMISSIONER KJELLANDER:Mr. Stutzman , assume that I
know nothing, which probably won t take much of a stretch for
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you , what if I were to -- instead of having a transmission
line of a certain size , instead had two smaller lines that
ran water into the supply system , would that -- would those
two lines be considered transmission line?
MR. STUTZMAN:Yes.I think it's part of the
distribution system that delivers water to the development.
COMMI SS lONER KJELLANDER:So, it's function , not size?
MR. STUTZMAN:Right.
COMMISSIONER KJELLANDER:Okay.
CHAIRMAN REDFORD:Commissioner Smith?
COMMISSIONER SMITH:Wi th regard to Idaho Code 61-528 --
and I thought I heard you argue that the Commission has to
hold a hearing when a utility requests a certificate?
MR. STUTZMAN:I don t think it's required to hold a
hearing, it is authorized to hold a hearing to make
determinations about whether or not to attach terms and
condi tions to the certificate.
COMMISSIONER SMITH:Okay.This is a utility that
already has a certificate; right?
MR. STUTZMAN:Yes.
COMMISSIONER SMITH:So, we are not debating the
company s financial ability and good faith.
MR. STUTZMAN:I think we are -- I think this section
applies to an amendment to a certificate to expand a new area
and I think those questions should be debated in other -- in
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that event.
COMMISSIONER SMITH:And what is the nature of the
evidence that you think would be presented to the Commission
on the public interest and are you anticipating a public
hearing and members of the public -- what is it that you
think we don t get from written comments that would suddenly
blossom forth in a hearing?
MR. STUTZMAN:Well , for example, Commissioner , we have
no evidence about whether costs would be incurred to obtain
addi tional source of water supply to the Avimor proj ect.
That can be flushed out in a hearing.We have no evidence
how -- where --
COMMISSIONER SMITH:Are you talking about phase one?
MR. STUTZMAN:No.m talking about a hearing to
consider expanding beyond phase one, so that we could answer
those questions , obtain information on those questions.
COMMISSIONER SMITH:you don want hearing
phase one issues.
MR.STUTZMAN:Right.Correct.
COMMISSIONER SMITH:Okay.Thank you.
CHAIRMAN REDFORD:I have no questions.We will now
hear from the City of Eagle.
MR. SMITH:Thank you , Mr. Chairman.Consistent with my
opening statement , we are not going to weigh in on this
matter today, other than to support Staff I s recommendation
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for the public hearing.I think Mr. Stutzman s comments
about information on what the cost of supply would be are
relevant.I think it would be helpful.Thank you.
CHAIRMAN REDFORD:Thank you.Commissioner Smith?
COMMISSIONER SMITH:And so just so I'm clear on this,
you also concur that no such evidence or hearing is necessary
for phase one?
MR. SMITH:I don t -- Commissioner Smith , I don t know
that we have a position on that right now.I can I t
personally see a reason for a hearing on phase one.I think
that the -- as I looked at the SFA, there was a requirement
for 500 gallons per minute.That is not a huge amount of
water , but the water supply for the remaining portion lS a
much more significant issue.So, with the -- my
determination is based on the 500 gallons per minute not
being a very significant amount.
COMMISSIONER SMITH:Thank you.
CHAIRMAN REDFORD:Is there anything else to -- would
you like to respond , Mr. Miller?
MR. MILLER:I wonder if I might suggest, Mr. Chairman
a short break to allow me to collect my thoughts, with the
idea that my response would be much pithier if I have a few
moments to --
CHAIRMAN REDFORD:Okay.We will take a ten minute
break.
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ORAL ARGUMENT
(A recess was had.
Okay.The hearing will come toCHAIRMAN REDFORD:
order.Mr. Miller, do you have a response to the city or the
Staff I S argument?
MR. MILLER:I do.Mr. Chairman , as promised I will try
to be pi thy.I think we have
CHAIRMAN REDFORD:I don t know if I know what that
means.
Concise.I believe thatMR. MILLER:Short.Brief.
based on the questions from the Commission that we have had a
full opportunity to respond to your concerns and to,
hopefully, respond in a way that I s helpful to you.I f there
are remaining questions, outstanding questions, items you
would like to take another swing at, I would be happy to try
to respond to anything that's still troubling you or still on
your mind or you think would be appropriate for me to take
another stab at.In the absence of that, let me just touch
on a few points very briefly.First, with respect to the
certificate statutes and Commissioner Smith I s line of
questions, I I d encourage the Commission to look at Idaho Code
Sections 61-526, 527 and 528, because they are -- there are
three separate statutes with respect to -- that govern
matters pertaining to certificates.And on first blush
kind of seemed odd that there would be that many different
But when you look at them , you canstatutes on certificates.
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see that each does serve a different purpose and relate to a
different topic.61-526 , obviously, relates to certificates
for the construction of facilities and the extension of
facili ties.Ini tially, Staff's legal argument was that this
was the section that controlled.Today, however , Staff
shifts away from 61-526 and takes us to 61-528.
Commissioner Smith pointed out, 61-528 deals with
certificates that authorize companies to be utilities, that
is a certificate to become a company.It's not a statute
that relates to certificates for the construction of
facilities., the reliance on 61-528 , which relates to the
creation of a utility, as Commissioner Smith I think
correctly pointed out, is not correct in this circumstance
where the issue is the extension of facilities, which is
controlled by 61-526 and our reply comments contained a
further extended discussion of what five
--
61-526 permits,
requires, and doesn t permit and doesn I t require.And I , of
course , won I t read those to you at this point.sure you
have had an opportunity to and will review those again.And,
then , just by parenthetical , 61-527 relates to service in
areas where a franchise agreement is required and the
requirement to obtain a certificate before exercising a right
of franchise., there are three different statutes
covering three different things.Staff's migration today to
61-528 is both new and not correct from a legal point of
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view.
I would want -- do want to respond to one thing --
other thing that Mr. Stutzman said, which was a reference to
a portion of our testimony or -- I believe is our testimony
where the company indicated that we negotiated this
arrangement with a view toward helping to prevent the
creation of a new small water company, which is true , but the
cri tical portion of that testimony is the statement that we
did it consistent with our existing rules , which goes back to
my very very first point , which was that United Water has , in
every respect, attempted to structure this arrangement in a
way that is consistent with its current rules and
regulations.Uni ted Water understands its rules.
believes that its rules are there for a purpose , which is to
be followed and applied even handedly to all comers , which is
precisely what the company attempted to do in this
circumstance.
Now , with respect to the question of should there
be a hearing on phase -- on everything beyond phase one , we
acknowledge the Commission can conduct an investigation , hold
hearings , examine the public interest, but would ask you to
consider what really is likely to come of that.
Mr. Hammond indicated, from both an engineering and an
economic and a legal point of view , it's very very difficult
to say that one little -- one piece of United Water s service
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WILDER , IDAHO 83676
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terri tory is the thing that's responsible for growth on its
system as a whole.United Water operates an integrated
system.It I S a fully integrated system.It grows as a
system.It's very difficult to say -- to attribute, both
legally and economically and from an engineering point of
view , growth to any one particular area of a system.So, our
point is that you may be embarking on a process that won
really provide the information Staff thinks it might and
Staff refers to -- I think the reference was unknown and
potentially huge.Of course , that begs the question , if they
are unknown , how do you know they are potentially huge.But,
in any event, the Staff may be asking you to embark on a
process that will not end up being very satisfactory to you
in terms of the information that you will ultimately obtain
from it.
, to bring it to a conclusion , our request of the
Commission , respectfully, is that the certificate expansion
be approved as requested in the application; that United
Water be authorized to provide service to the area pursuant
to its existing rules and regulations without deviation from
its rules and regulations; that the Special Facilities
Agreement be approved as proposed; that the Commission find
that refunds paid pursuant to the Special Facilities
Agreement are prudent and recoverable in a future rate
proceeding.
CSB REPORTING
WILDER , IDAHO 83676
ORAL ARGUMENT
Again , thank you very much for the opportunity to
discuss these matters with you and , again , if there are any
lingering doubts or questions you d like me to try and
address, I would be happy to.
CHAIRMAN REDFORD:Mr. Hammond , do you have anything?
Just briefly.Obviously, Avimor wouldMR. HAMMOND:
like to move forward and part of the decision today for when
the Commission issues an order will impact, obviously, its
decision moving forward against the ability to develop.
just ask that we move forward and reach a decision in this
case, whatever that may be.
In addition , I think there was a mention of Avimor
being able to supply water and United Water
--
or be the
water company and United Water wanted to prevent that.
think I can say today that Avimor did not want to be a water
company.They have provided that serVlce in the past in
other areas , but that is not part of what they wanted to do.
They don I t want to be in the water business.Therefore, they
looked to the most qualified provider in the area to assume
that role.So, thank you very much.
COMMISSIONER SMITH:Does
--
would Avimor ' s plans or
decisions be changed in any way by the Commission s decision
on whether to certificate only phase one or to certificate
all of the requested area?
MR. HAMMOND:Obviously, a grant of the first area
CSB REPORTING
WILDER , IDAHO 83676
ORAL ARGUMENT
you know , they want to see some expansion granted, so they
can proceed, obviously, with their first phase.It makes it
easier for them , obviously, from a planning standpoint,
because they wouldn t want these facilities built simply for
700 customers.If they have to
--
I mean they are bigger in
scope and size than
--
you know, for this proj ect and they
are building to meet the anticipated need.
COMMI SSIONER SMITH:And this would be the contributed
distribution facilities?
MR. HAMMOND:Oh, I believe it's also the transmission
and the reservoir and the booster station.
COMMISSIONER SMITH:Okay.
MR. HAMMOND:Both.The transient piece
--
I know this
is sort of off the topic , but I believe it was mentioned in
some testimony that why that I s important to the way it'
built is there is a potential for an aquifer
--
a natural
aquifer that is on or near Avimor ' s property that could be
used and accessed by this transmission pipeline for the
benefi t of this area of town.Now , obviously, that has not
been something that's been set in stone.There is going to
be continuing investigations.There is no guarantee that it
will be useful, but it is a possible additional benefit in
the future.
COMMISSIONER SMITH:Okay.
CHAIRMAN REDFORD:You I re not saying, are you, that if
CSB REPORTING
WILDER , IDAHO 83676
ORAL ARGUMENT
the Commission doesn t grant the entire certificated area
that the first phase will be scrapped?
MR. HAMMOND:I don t believe that.They are going to
move forward in good faith with their plans and because they
have to meet their contractual obligations with United Water
and other contracts they have entered into to develop this
land.It does impact the overall proj ect from the standpoint
that there is uncertainty going forward what is going to
happen with that additional area where they are planning to
develop.
CHAIRMAN REDFORD:You mentioned -- or Mr. Stutzman
mentioned in one of his -- in his argument that your brief or
Mr. Miller s brief stated that , in any event, the cost would
be passed onto the land purchasers or the lot purchasers.
, if you do get a refund, what happens to that refund?
goes back to the owners?
MR. HAMMOND:Are we talking about -- I guess I'm not
qui te certain about the question.Are we talking about if
Avimor was serving as the utility versus United Water or
CHAIRMAN REDFORD:The statement was made that all these
costs will be shifted to the land purchasers, the lot
purchasers, the homeowners and you will also, in the event
that you sell enough lots, be entitled to a refund.Is that
kind of a double recovery?
MR. HAMMOND:, I don I t believe so.If -- I'm trying
CSB REPORTING
WILDER , IDAHO 83676
ORAL ARGUMENT
to think of the best way to answer this question.In the
case of a small water company it's presumed under the
Commission s rules that the system
--
the system that is
being put in is contributed, i. e., the developer is
recovering the cost of putting that system in through the
sale of lots and if they have not they have the burden of
showing the Commission that they were not doing so and that
those costs should be placed into rate base in the small
water company
--
under the small water company rules.
don t know if -- if Avimor was the water company, which it'
not going to be , I don I t know that they would fall under
those rules based on the size of the development.Second, in
this case what Avimor would be entitled to under the
agreement, they would front the cost to build the facilities
the special facilities.They are contributing the cost of
the distribution system inside.They will not see, you know
any refund from United Water customers or United Water.
Whether they build that cost into the distribution cost that
they are going out of pocket for with no chance refund
from United Water
--
whether they are building that into the
cost of the lots I don t know.You know, I think the easy
answer is possibly.On the facilities, those refunds, as I
think Joe said
--
as they are paid when customers connect,
those would be added to United Water s rate base over a
period of time.m trying to answer your question.I hope
CSB REPORTING
WILDER, IDAHO 83676
ORAL ARGUMENT
I was helpful.
CHAIRMAN REDFORD:That's fine.
MR. MILLER:Mr. Chairman , if I might, since Mr. Wyatt
is completely familiar with the operation of the special
facili ties mechanism and its refund.I believe he could
provide a quick answer to your question, if that would be
permissible.
CHAIRMAN REDFORD:Okay.That's permissible.
MR. WYATT:Mr. Chair and Members of the Commission
it's my understanding through the extensive negotiations we
had with the Avimor representative that as they were
developing their econometric models for this development
they were factoring in those refunds into their cost profiles
for , you know , their -- how much they would be able to sell
lots for, how much would a house go for , and so forth., I
don I t believe that Avimor is seeing those refunds as kind
gravy just coming off the top, that they have already
factored into their cost model relative to the cost of lots
that they would charge to the customers.
CHAIRMAN REDFORD:Okay.Thank you.Any final
discussion by the City of Eagle or --
MR. SMITH:No, Mr. Chair.Thank you.
CHAIRMAN REDFORD:How about you, Mr. Stutzman?
MR. STUTZMAN:Nothing further , Mr. Chairman.
CHAIRMAN REDFORD:Okay.Well, the Commission will be
CSB REPORTING
WILDER , IDAHO 83676
ORAL ARGUMENT
In recess and this matter will be taken into consideration
and pursuant to the law and the rules the decision will be
made appropriately.And thank you very much for coming.
Appreciate your courtesies.
(Whereupon the hearing ended at 11:47 a.
CSB REPORTING
WILDER , IDAHO 83676
ORAL ARGUMENT
REPORTER'S CERTI FICATE
STATE. OF IDAHO ss.
Coun-:y of Ada
I, M~ DEAN WILL:S r Certified Shor-:~and Report er
and Notary Public in and for the s~ate of Idaho,
DO HER~BY CERTIFY:
That said heari~g was taken down by me in
shorthand at the time and place therein named and
thereaf~er reduced to typewriting by myselr, and
, 1 that the foregoing transcript co~tains a full, true
and verbat im ~ecord of said hear ing .
I furthe~ certify that I have no interest in the
event of th is action.
WITN~SS my ~a~d and seal this~day
I~~_, 2007,
~MUlUL
M. DEAN WIL~IS, CSR NO. 95 and
Notary Publ ic/: .
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ComTIu S s ion expires:15-10
CSB REPOF.T ING
vHLDER!IDAHO 83616
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ORAL ARGUMENT