960614RL.docx

Q.Please state your name and business address for the record.
A.My name is Randy Lobb and my business address is 472 West Washington Street, Boise, Idaho.
Q.By whom are you employed?
A.I am employed by the Idaho Public Utilities Commission as Engineering Supervisor.
Q.Are you the same Randy Lobb who previously filed direct testimony in this proceeding?
A.Yes, I am.
Q.What is the purpose of your reconsideration testimony?
A.The purpose of my reconsideration testimony is to respond to issues raised by Garden City witness Deardon and United Water Idaho (UWI) witness Brown in prefiled testimony on reconsideration regarding the Service Area Exchange Agreement between Garden City and UWI.
Q.Would you please summarize your reconsideration testimony?
A.Yes.  The testimony filed by Garden City and United Water Idaho (UWI) under reconsideration has not provided any significant additional evidence that the exchange will benefit the customers in the North State Area without adversely affecting existing UWI customers.  While Garden City has described some potential administrative and operational benefits of the exchange, neither party has presented an improved resolution to the pressure problems nor demonstrated a quantifiable method of immediately improving water quality.  What has been presented by both the Company and Garden City for reconsideration is a proposed phase-in of rates for North State customers.  While this proposal may make the exchange more acceptable to North State customers, it increases the subsidy required from existing UWI customers to purchase and repair a currently deficient developer/customer-contributed system.  As a result, my position in opposition to the proposed exchange remains unchanged.
Q.Please describe the problems identified by Mr. Deardon that could be eliminated by the exchange.
A.Mr. Deardon describes two problems that occur in the North State Area that apparently could be remedied if the exchange were approved.  They include eliminating poorly defined service areas which Garden City contends creates problems for employees and emergency personnel, and eliminating the problem presented by the inability of one city to enforce its water supply ordinances outside its municipal boundaries.  
Q.Are these problems caused by overlapping service territories and can they be solved by the proposed exchange?
A.Clearly, haphazard service connections by both providers could cause confusion but it should be confined to in-fill areas and only apply to water distribution-related situations.  Adequate fire protection should not be compromised by overlapping service areas if adequate pressure is provided.        Mr. Brown and Mr. Deardon have indicated in previous testimony and in response to Staff Production Request  No. 1, respectively, that Garden City has plans, unrelated to the exchange, to resolve pressure problems throughout its service territory.  
With respect to ordinance enforcement, the clerk of the City of Boise, in response to Staff inquiry, has indicated that it currently has no ordinances such as alternate-day sprinkling or mandatory rationing as they apply to water provided to end users.  As to the other example cited by Mr. Deardon, cross-connection control and backflow prevention is a state law placing primary responsibility with the water provider.  Therefore, it can be addressed by Garden City as a condition of service.  
Q.Mr. Deardon indicates that overlapping fire protection areas present a problem in the North State Area.  Is this a problem that could be resolved by the exchange?
A.Not necessarily.  Mr. Deardon states that the problem of overlapping fire protection is not confined to the North State Area but applies to the entire northwest metro area due to the number of political subdivisions involved.  
Q.What deficiencies has Mr. Deardon identified in the Garden City system serving the North State Area.  
A.Mr. Deardon indicates that the Garden City system has no storage reservoirs and therefore has difficulty maintaining adequate pressure in the North State Area.  He also states that Garden City’s only supply wells are near the Boise River and have higher than normal levels of iron and manganese which leads to discoloration.
Q.Do these deficiencies and the reasons for them differ from those presented at the original hearing?
A.The water quality problem in the North State Area and the reason it occurs was discussed at length during the original hearing in this case.  Likewise, the pressure problem was discussed in some detail.  However, Mr. Deardon’s testimony provides greater detail regarding why the pressure problem occurs and why neither it nor the water quality problem have been resolved.  According to Mr. Deardon’s testimony on pages 8 and 9, Garden City has no storage reservoirs and cannot construct the necessary facilities because hook-up fees collected from customers were reimbursed to developers who paid for oversized pipe.  Mr. Deardon also states that constructing the necessary facilities would require a general rate increase for all Garden City customers.
Q.Is Garden City's lack of capital for new water facilities and the consequential effect on Garden City water rates if the City constructs the facilities, a valid reason for approving the proposed exchange?
A.No, quite the contrary.  The collection of hook-up fees from new customers and the contribution of facilities by developers bolster the Staff’s position that North State facilities have been contributed to Garden City and should not be allowed in UWI rate base. Not only should contributed facilities not be allowed in rate base, UWI rate payers should not be expected to fund needed system improvements.
Q.Won’t the North State customers provide sufficient new revenue to recover the purchase price and required system improvements now that the price of water purchased from Garden City has been reduced and system purchase price reflects an accurate customer total?
A.No.  The resulting revenue deficiency of this proposal is worse than it was originally due to the proposed phase-in of North State customer rates.  The price reduction due to more accurate customer totals is simply offset by the reduction in revenue from fewer customers.  In addition, the cost of interconnecting and utilizing UWI system resources in the winter has not been included.  The testimony of Staff witness Madonna Faunce provides a more detailed analysis of revenue requirement and revenue deficiency.   
Q.Does Mr. Deardon provide any additional information regarding pressure improvement as a result of the exchange?
A.No.  Mr. Deardon states that system pressure problems will be immediately remedied when the system is interconnected to the UWI system.  Company witness Brown testified in the first case as follows:
Q.Is it my understanding that the
water pressure problems you feel will
be remedied immediately with intertie
and connection to the booster stations?
A.I believe that those pressure
problems would be remedied by that, yes.
Q.And is it my understanding that you willgo forward with the intertie immediately and not attempt to wait to
see whether Garden City remedies the pressure problems...?
A.Yes.
Q.And it is the intention of the
Company upon acquisition if approved to connect the North State Area customers
to a reservoir?
A.Yes, our existing distribution
system in the area is tied to the
reservoir, so when we interconnect
the North State distribution system
to ours, it would be intertied with
the reservoir.
Based on the foregoing, Mr. Deardon’s testimony regarding resolution of the pressure problem does not provide any additional information or indicate any additional benefit to North State customers that was not previously described at the first hearing.
Q.Has Mr. Brown provided any additional testimony regarding resolution of pressure problems?
A.It does not appear that he has.  On page 1 of his testimony on reconsideration, Mr. Brown states:
  we plan to proceed immediately with
the interconnection referred to in
my previous testimony.  These inter-connections will effectively integrate
the North State Area into theUnited
Water distribution system and our
Hidden Hollow reservoir.

This testimony simply reiterates testimony provided in the previous hearing.
Q.Does Mr. Deardon or Mr. Brown provide any additional information to show that water quality will improve in the North State Area as a result of the exchange?
A.Both Mr. Deardon and Mr. Brown indicate that as a result of interconnection by UWI, peak period water supplies from Garden City will mix with UWI supplies to provide the North State customers a diluted version of the poor quality water currently received from Garden City alone.  Mr. Brown also indicates that UWI will use its own sources of supply in non-peak periods to further improve quality.
Q.Will use of existing UWI sources in the area improve water quality?
A.Possibly.  However, according to the testimony of Mr. Brown during the first hearing in this case, both providers are dealing with the same aquifer and the wells of UWI generally have a range of hardness, iron and manganese similar to those found in the wells of the Garden City system.
Q.How will improvement in water quality be determined?
A.Neither Garden City nor UWI have proposed a method to monitor water quality after interconnection to determine if it has improved and by how much.  Mr. Brown has indicated that a pilot program designed to address water quality problems in northwest Boise will be operational within the next two years.  The nature, location and extent of the pilot program is not described.
Q.Haven’t Garden City and UWI proposed a rate phase-in for North State customers that is dependent upon water quality improvement?
A.No.  The proposed rate phase-in is dependent upon pressure improvement, not water quality improvement.  As I have previously indicated in my testimony, both the original proposal and the proposal filed under reconsideration provide for immediate resolution of the pressure problem through interconnection with the UWI system.
Q.Isn’t the rate phase-in an appropriate way to reduce customer opposition to the exchange even though it is not tied to water quality improvement?
A.From the North State customer perspective, I would expect the rate phase-in proposal to be an improvement over the original proposal regardless of what it is dependent upon.  However, from the perspective of existing UWI ratepayers, the rate phase-in simply increases the revenue deficiency resulting from the exchange.
Q.In summary, has your original position changed as a result of the additional testimony filed on reconsideration?
A.No.  Although the new proposal increases the potential for water quality improvement, the benefits derived from the exchange do not justify the payment made to Garden City or the subsidy that will be required by UWI customers.  
Q.Does that conclude your reconsideration testimony?
A.Yes it does.