UWI122MN.docx

1 BOISE, IDAHO, MONDAY, JANUARY 22, 1996, 9:30 A. M.
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4 COMMISSIONER SMITH: Good morning, ladies
5 and gentlemen. This is the time and place set for
6 hearing in Idaho Public Utilities Commission Case
7 No. UWI-W-95-2, in the matter of the application of
8 United Water Idaho, Inc. for approval of an agreement to
9 exchange service areas and to amend and revise
10 certificate of convenience and necessity No. 143.
11 The first thing we'll do this morning is
12 take the appearances of the parties. Would you like to
13 start, Mr. Bergquist?
14 MR. BERGQUIST: Yes. Kenneth G. Bergquist,
15 attorney for the applicant.
16 COMMISSIONER SMITH: Thank you.
17 Mr. Kline.
18 MR. KLINE: Thank you. Barton L. Kline of
19 the Evans, Keene law firm appearing on behalf of the
20 Coventry Association, the Gary Lane Meadows Homeowners
21 Association and the Pierce Park Meadows Homeowners
22 Association.
23 COMMISSIONER SMITH: Can we call you the
24 Homeowners Associations?
25 MR. KLINE: That would be great.
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CSB REPORTING COLLOQUY
Wilder, Idaho 83676
1 COMMISSIONER SMITH: And Mr. Woodbury.
2 MR. WOODBURY: Scott Woodbury, Deputy
3 Attorney General, for Commission Staff.
4 COMMISSIONER SMITH: All right, and you,
5 sir, in the back.
6 MR. STRICKLING: Doug Strickling, Boise
7 City Attorney's Office, representing the intervenor Boise
8 City and the City of Boise.
9 COMMISSIONER SMITH: Are you making an
10 appearance here, Mr. Strickling, or are you just here to
11 see if we're going to grant your motion?
12 MR. STRICKLING: I'm here to see if you're
13 going to grant the motion and I'll be sitting through
14 watching.
15 COMMISSIONER SMITH: Well, if we don't
16 grant your motion, you could ask questions, so it's your
17 choice.
18 MR. STRICKLING: We would renew our motion
19 to withdraw.
20 MR. BERGQUIST: The applicant has to no
21 objection to the motion.
22 COMMISSIONER SMITH: The Commission will
23 grant your motion, Mr. Strickling, to withdraw as a party
24 in the case, so I won't be calling on you to ask
25 questions.
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CSB REPORTING COLLOQUY
Wilder, Idaho 83676
1 MR. STRICKLING: Thank you.
2 COMMISSIONER SMITH: All right, I guess
3 the -- are there any preliminary matters that need to be
4 taken up before we go to the applicant's case?
5 COMMISSIONER NELSON: I have one,
6 Madam Chair.
7 COMMISSIONER SMITH: Yes,
8 President Nelson.
9 COMMISSIONER NELSON: Thank you. Before
10 the proceeding gets underway, why, I want to disclose to
11 the party and any members of the public present that I
12 reside in the area served by Garden City that's the
13 subject of this case. I've been advised by the Attorney
14 General that this situation does not represent a conflict
15 of interest pursuant to the Ethics in Government Act and
16 I have determined that I am able to render an impartial
17 decision in this matter.
18 COMMISSIONER SMITH: I guess this would be
19 the time if any of the parties object to
20 Commissioner Nelson's statement to so state for the
21 record.
22 MR. BERGQUIST: The applicant has no
23 objection.
24 MR. KLINE: No objection.
25 MR. WOODBURY: Staff has no objection.
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CSB REPORTING COLLOQUY
Wilder, Idaho 83676
1 COMMISSIONER SMITH: Okay, with that, then,
2 Mr. Bergquist, we'll go to the applicant's case.
3 MR. BERGQUIST: I do have one, I think,
4 preliminary matter. The rebuttal testimony that was
5 filed on behalf of Mr. Healy, Mr. Booe and Mr. Brown
6 erroneously in the lower right-hand corner showed it as
7 the direct testimony rather than rebuttal testimony. It
8 was an oversight which we didn't catch, of course, until
9 after it was filed.
10 We call Mr. Booe.
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12 WAYNE L. BOOE,
13 produced as a witness at the instance of United Water
14 Idaho, Inc., having been first duly sworn, was examined
15 and testified as follows:
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17 DIRECT EXAMINATION
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19 BY MR. BERGQUIST:
20 Q Would you state your name, please, sir?
21 A My name is Wayne Booe. I'm president of
22 United Water Idaho and my current address is 8248 West
23 Victory in Boise.
24 Q And have you prepared and prefiled
25 testimony concerning this matter, Mr. Booe?
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CSB REPORTING BOOE (Di)
Wilder, Idaho 83676 United Water Idaho
1 A Yes, I have.
2 MR. BERGQUIST: With that, does the
3 Commission desire to have the testimony spread on the
4 record?
5 COMMISSIONER SMITH: Are you asking for the
6 direct?
7 MR. BERGQUIST: Yes.
8 COMMISSIONER SMITH: If there's no
9 objection, we would spread the direct testimony upon the
10 record as if read.
11 MR. BERGQUIST: Thank you.
12 COMMISSIONER SMITH: Mr. Bergquist, would
13 it be your desire to save the rebuttal and do that
14 later?
15 MR. BERGQUIST: I believe so,
16 Commissioner Smith.
17 COMMISSIONER SMITH: Okay.
18 (The following prefiled testimony of
19 Mr. Wayne Booe is spread upon the record.)
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CSB REPORTING BOOE (Di)
Wilder, Idaho 83676 United Water Idaho
1 Q Please state your name and business
2 address.
3 A Wayne L. Booe. My business address is 8248
4 West Victory Road, Boise, Idaho 83709.
5 Q By whom and in what capacity are you
6 employed?
7 A I am employed by United Water Idaho Inc. as
8 President and General Manager.
9 Q How long have you been employed by the
10 Company?
11 A Since September, 1973. During April, 1995
12 our company name changed from Boise Water Corporation to
13 United Water Idaho.
14 Q Would you please state your educational and
15 business background?
16 A I was graduated from Joplin Junior College,
17 Joplin, Missouri in 1961, and subsequently attended
18 Missouri Southern State College where I majored in
19 Business. I have also completed special courses in
20 financial management, National Association of Regulatory
21 Utility Commissioners seminars and workshops relative to
22 the Regulation of Water Utilities, and other trade
23 related seminars.
24 On July 1, 1959 while attending college, I was
25 hired as a laborer with Joplin Waterworks Company,
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Booe, Di
United Water Idaho Inc.
1 Joplin, Missouri. Between July 1959 to November 15, 1969
2 I remained with Joplin Waterworks Company and continued
3 my education. Throughout this period, I worked in
4 various positions which included Laborer, Meter Reader,
5 Meter Repairman, Meter Shop Foreman, Customer Serviceman,
6 Equipment Maintenance Man, Water Treatment Operator, High
7 Service Pump Operator, Laboratory Technician, and
8 Superintendent of Production. I served as President of
9 the Local Union for a one-year period.
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Booe, Di
United Water Idaho Inc.
1 On November 15, 1969 I accepted a position as
2 instructor at Water and Wastewater Technical School,
3 located at Crowder Junior College, Neosho, Missouri. I
4 was primarily engaged in the training of water plant
5 operators. I was also responsible for several short
6 courses designed to acquaint professional engineers,
7 foreign country designees, and others to the water and
8 wastewater treatment field. I also worked with personnel
9 from Department of Interior - U.S. Parks. I earned Class
10 "A" waterworks operator's certificates from two states.
11 On September 1, 1971 I accepted a position with
12 General Waterworks Corporation as local manager of
13 Russellville Water Company, Russellville, Arkansas. At
14 that time, the system served about 4,500 customers.
15 On July 1, 1972 I was promoted to the position of
16 Manager of Capital City Water Company, Jefferson City,
17 Missouri. At that time, the system served about 8,000
18 customers.
19 On October 1, 1973 I was promoted to the position
20 of Vice President and Manager of Boise Water Corporation
21 in Boise, Idaho. At that time the system served about
22 26,000 customers; today there over 56,000 customers.
23 During 1983 I also assumed administrative
24 responsibility for 2 water systems in the State of
25 Washington. The companies were sold during 1986, and I
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Booe, Di
United Water Idaho Inc.
1 was promoted to President of Boise Water Corporation, a
2 position I enthusiastically accepted and hold today.
3 On January 1, 1990 I was promoted to the position
4 of Western Region Vice
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Booe, Di
United Water Idaho Inc.
1 President and I had the administrative responsibility for
2 Boise Water Corporation as well as companies located in
3 New Mexico, Arkansas, Missouri and Illinois.
4 Q What is the purpose of your testimony
5 today?
6 A The purpose is twofold. First I would like
7 to describe the development of our water company and
8 service as we enjoy it today. Second, I would like to
9 discuss the proposed acquisition of some of Garden City's
10 water facilities and what prompted the company to
11 consider the acquisition.
12 Q Will you briefly explain the history of
13 United Water?
14 A Our water utility has provided domestic
15 water source in Boise and adjacent areas in Ada County
16 since 1890. In 1945 it became a subsidiary of General
17 Waterworks Corporation. During 1994, General Waterworks
18 parent GWC Corp. was acquired by United Water Resources
19 Inc. Boise Water Corporation became a subsidiary of
20 United Water Resources Inc. In March, 1995 the Company's
21 name was changed from Boise Water Corporation to United
22 Water Idaho Inc.
23 Q Would you please describe the operations of
24 United Water Idaho?
25 A United Water Idaho provides water service
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Booe, Di
United Water Idaho Inc.
1 and fire protection to approximately 56,000 residential,
2 commercial, industrial, private fire protection and
3 public authority customers within the City of Boise and
4 the immediate surrounding area. Currently, our source of
5 supply is 59 deep wells, 1 water treatment plant and 1
6 Ranney collector well system. Our sources are
7 strategically located throughout our 100 square mile
8 service area. The combined pumping capacity of all of
9 our sources is approximately 78 million gallons per
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Booe, Di
United Water Idaho Inc.
1 day. The distribution system consists of approximately
2 700 miles of water mainline varying in size from 2 inches
3 to 30 inches in diameter. The system is also provided
4 with about 28 million gallons of storage capacity
5 contained in 26 ground level reservoirs. Because of our
6 system design, we have back-up capabilities which would
7 allow us to continue providing service in the event of
8 one or more source failures.
9 Q Why is United Water pursuing an acquisition
10 of Garden City's water facilities as outlined in the
11 company's application?
12 A Primarily the areas of acquisition and
13 divestment, as outlined in the company's application,
14 have been the source of community problems and confusion
15 between Garden City and Boise City over the past several
16 years. In my opinion, the confusion is directly
17 attributed to the growth being experienced by both
18 cities. By allowing United Water to make the acquisition
19 of specified Garden City facilities, and by allowing
20 United Water to divest itself of specified water
21 facilities which are situated within Garden City, a
22 service dispute which has lasted 20 years can be brought
23 to an acceptable resolution. I feel the acquisition and
24 divestment of these facilities will enhance harmony
25 between the cities of Boise and Garden City and reinforce
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Booe, Di
United Water Idaho Inc.
1 the prevailing and positive spirit of Mayors Coles and
2 Ellis.
3 Q Will you give a short history of the area
4 which has been the subject of dispute for the past 20
5 years?
6 A The company first committed to serve the
7 area known as `Millstream Subdivision' during the latter
8 1970's. Shortly thereafter, Garden City began a policy
9 of extending its
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Booe, Di
United Water Idaho Inc.
1 municipal water system into the area(s) west of Glenwood
2 Boulevard, north of State Street and south of Hill Road
3 with the expectation it would annex, or at least provide
4 water service to, areas between Pierce Park Lane and
5 Highway 55, and into the areas west of Glenwood
6 Boulevard. An anticipated annexation was the area
7 encompassing Millstream Subdivision. The areas north of
8 State Street and south of Hill Road were proposed by
9 Garden City to be included within its area of impact, and
10 was distinguished as such within their comprehensive
11 planning. The mayor of Garden City, at the time, was Ray
12 Eld. Throughout several meetings between Mayor Eld and
13 me, I was constantly asked to abandon our service within
14 the Millstream area, and to relinquish control to Garden
15 City. At the time, Richard Eardley was mayor of the city
16 of Boise, and Boise made it known they would like to
17 maintain the areas of impact and in accordance with
18 Boise's comprehensive plan. The ensuing years of city
19 boundary and impact disputes resulted in uncertainty over
20 who could or should be providing water service into these
21 zones. As I recall the matter ended up in court, and I
22 believe the resolution was a mutual agreement to allow
23 the residents to decide whether they should live in
24 Garden City or Boise. During the 1980's, While Mayor
25 Dirk Kempthorne was serving Boise and Mayor Jay Davis was
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Booe, Di
United Water Idaho Inc.
1 serving Garden City, an election was held through which
2 the residents of the area between Pierce Park and Highway
3 55 voted to be included in the Boise City area of impact.
4 Even so, Garden City continued the expansion of its water
5 system into the area after the Boise City area of impact
6 had been determined. Although the unincorporated areas
7 within the proposed service territory were within the
8 City of Boise
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Booe, Di
United Water Idaho Inc.
1 area of impact, the cities agreed to discuss
2 renegotiating service to the areas. During 1991, several
3 developers came to the company and asked us to extend our
4 certificated service boundaries into the area to provide
5 service to their respective subdivisions. The company
6 filed an application with the Commission, in Case
7 BOI-W-91-2 and the City of Boise, through its elected
8 officials, supported the application. Garden City
9 intervened in the case. The Commission issued Order
10 No. 24109 on January 24, 1992 which authorized expansion
11 of the company's boundaries of service. This is what
12 prompted the Pierce Park water mainline extension. In
13 addition, on page 3 of Order No. 24109, the Commission
14 stated the following: "The water system operated by
15 Garden City outside its municipal boundaries is not
16 subject to Commission regulation. Customers may not
17 appeal to this Commission for assistance with quality of
18 service problems or complaints about rates, nor may these
19 customers vote in the municipal elections of Garden City.
20 The Garden City Council determines the rates and terms of
21 service, yet these customers do not have any ability to
22 influence the policies of the Council through the
23 electoral process."
24 Q What has transpired in this matter since
25 that time?
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Booe, Di
United Water Idaho Inc.
1 A Under the leadership of Mayors Coles and
2 Ellis, the cities of Boise and Garden City have agreed to
3 effect a logical relocation of their respective area of
4 city impact boundaries. A Memorandum of Understanding
5 between the two cities was executed by Mayor Coles and
6 Mayor Ellis in December, 1994. Exhibit 1 is a copy of
7 the Memorandum of Understanding in which Garden City
8 agreed to the following:
9 Garden City shall cooperate with Boise Water
10 Corporation (United Water) to
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Booe, Di
United Water Idaho Inc.
1 provide service on a temporary basis to developing
2 areas between Pierce Park and Gary Lane within
3 Boise City limits to eliminate further duplication
4 of infrastructure in anticipation of transferring
5 the Garden City Water System, located north of
6 State Street, to Boise Water Corporation (United
7 Water) in exchange for the Boise Water Corporation
8 (United Water) Water System located in the Garden
9 City Millstream Subdivision and other
10 considerations as determined by appraisal of the
11 two water systems. Garden City agrees to provide
12 interim water service, on a contractual basis, to
13 the area north of State Street. Garden City will
14 continue to work with the Boise Water Corporation
15 (United Water) to expedite the appraisals and
16 transfers. The target date for submission of the
17 transfer plan to the Idaho Public Utilities
18 Commission is March 1, 1995.
19 Q Were you, or any employee of United Water a
20 party to the discussions which led to the previously
21 mentioned Memorandum of Understanding?
22 A Not really. I had a brief discussion with
23 Mayor Ted Ellis at the latter part of 1994 and he
24 informed me it appeared as though both cities would reach
25 an agreement with respect to city boundaries. Mayor
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Booe, Di
United Water Idaho Inc.
1 Ellis, in his usual positive demeanor, said this would
2 allow both cities to effectively plan their lines of city
3 boundaries. Shortly thereafter, Mayor Coles called me
4 and said he and Mayor Ellis had been discussing a
5 prospective agreement. He asked me not to meet with
6 Garden City, pertaining to water service, until after an
7 agreement between the cities had been reached. Later,
8 Mayor Coles called me and said an agreement had been
9 reached, and the company could proceed to have
10 discussions with
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Booe, Di
United Water Idaho Inc.
1 Garden City with respect to water service north of State
2 Street.
3 Q What was the company's reaction?
4 A We immediately met with Mayor Ellis and
5 Garden City Public Works Director, Randy Dearden, to
6 establish a series of negotiating sessions in accordance
7 with the Memorandum of Understanding. This action
8 considered an exchange of the Millstream facilities for
9 the Garden City facilities located north of State Street,
10 between Pierce Park Lane and Gary Lane.
11 Q Do you believe the company should be
12 allowed to service the proposed Garden City area and
13 relinquish service to the Millstream area?
14 A Yes. I believe Mayors Coles and Ellis
15 should be applauded for their continuing efforts to bring
16 peace in this matter. The redefined and newly
17 established boundaries of service for the City of Boise,
18 United Water and Garden City will eliminate confusion and
19 allow orderly development patterns for Boise and Garden
20 City to emerge. The North State Area is with the Boise
21 City limits and within United Water's certificated
22 service area.
23 Q Do you believe the exchange agreement
24 reached between Garden City and United Water is fair, and
25 if so, would you please explain your reasoning.
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Booe, Di
United Water Idaho Inc.
1 A Yes. According to the Memorandum of
2 Understanding between Garden City and Boise, it was
3 agreed Garden City would transfer their assets in the
4 affected area as determined by appraisals of the two
5 water systems, and other considerations. Garden City
6 consulting engineers started with a price of about $2
7 million and the Millstream system in exchange for the
8 Garden City facilities. After several meetings a
9 sales/purchase price of $593,000
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Booe, Di
United Water Idaho Inc.
1 and the Company owned facilities within the Millstream
2 area, was agreed to by both parties subject to the
3 approval of Idaho Public Utilities Commission. According
4 to a financial analysis of Jerry Healy, the Company's
5 Coordinator of Planning and Rates, the operating revenues
6 will be sufficient to support this level of investment,
7 and United Water's existing customers will not be
8 adversely impacted by this agreement.
9 Q Was an agreement reached with Garden City?
10 A Yes. A Service Area Exchange Agreement was
11 entered into on July 20, 1995. Exhibit 2 is a copy of
12 the Agreement.
13 Q Have you or any employee of United Water
14 inspected the Garden City facilities, in an effort to
15 determine their condition?
16 A Yes. I have visited the area and inspected
17 the facilities on more than one occasion with Witnesses
18 Healy and Brown. Witness Brown has included in his
19 testimony his professional opinion of the condition of
20 the facilities.
21 Q Have any of the present Garden City
22 customers who would be affected by this exchange
23 contacted you to discuss the proposal?
24 A No. I believe fewer than five have
25 discussed the proposal with Jerry Healy.
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Booe, Di
United Water Idaho Inc.
1 Q Do you know if Garden City scheduled any
2 public hearings with respect to the proposed exchange of
3 facilities?
4 A Yes. According to what I have been told,
5 Garden City held one or more public meetings with respect
6 to the exchange.
7 Q Did United Water notify its customers
8 residing within the Millstream Subdivision and
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Booe, Di
United Water Idaho Inc.
1 surrounding area of the proposed exchange, and of the
2 company's filing of its application with the Commission?
3 A Yes. During August, 1995, the company
4 included a message on the regular bills of the customers
5 who would be affected by the exchange. The message read:
6 On July 20th, 1995 United Water Idaho and the city
7 of Garden City entered into a service area
8 exchange agreement. United Water Idaho, Inc.
9 filed an application with the Idaho Public
10 Utilities Commission on July 28th, 1995 requesting
11 approval of the agreement. If the application is
12 approved by the IPUC, your water service will be
13 provided by the city of Garden City in the near
14 future. Further details regarding the exchange of
15 service areas will be provided to you during the
16 course of the proceedings.
17 Q Do you feel there are other compelling
18 reasons for granting the company's application?
19 A Yes. One operator of a water system within
20 the designated area will allow the operator of the system
21 to maintain some level of control with respect to the
22 number of deep wells which may be drilled within the area
23 in the future. This will provide some assurance for the
24 protection of the aquifer.
25 Q With respect to water rates, what concerns
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Booe, Di
United Water Idaho Inc.
1 do you believe the existing Garden City customers in the
2 North State Area might have?
3 A The summertime water rates in effect at
4 United Water are different than those experienced in
5 Garden City at present. There is no question the
6 company's summertime rates are higher. In my opinion,
7 higher summertime rates for all water users within the
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Booe, Di
United Water Idaho Inc.
1 valley should be implemented to encourage conservation of
2 our resource and to discourage waste.
3 Q Does Garden City currently have a
4 formalized conservation program in place.
5 A To the best of my knowledge, no.
6 Q Would United Water extend its conservation
7 programs, now in effect, to include this newly expanded
8 area?
9 A Yes. These programs include leak checks,
10 water audit programs, water efficient landscaping
11 programs as well as others. Jerry Healy will discuss
12 each of the programs in greater detail.
13 Q Do you have any other comments or
14 statements you wish to add at this time?
15 A Yes. We at United Water are pledged to
16 provide the best possible water service to our customers
17 at the most economical rates. Included in our pledge is
18 the assurance we will respond to our customers; we will
19 continue to routinely monitor our sources of supplies and
20 maintain our facilities; we will continue to participate
21 in well-head protection programs; we will continue to
22 test our water supply in our state certified laboratory
23 and/or in the laboratories administered by the State of
24 Idaho; and we will continue in our efforts to meet the
25 mandated requirements of the Safe Drinking Water Act, as
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Booe, Di
United Water Idaho Inc.
1 administered by the Sate of Idaho and the U.S.
2 Environmental Protection Agency.
3 Q Does this conclude your testimony?
4 A Yes it does.
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Booe, Di
United Water Idaho Inc.
1 (The following proceedings were had in
2 open hearing.)
3 MR. BERGQUIST: He's available for
4 cross-examination.
5 COMMISSIONER SMITH: Okay, and did we
6 identify Exhibits 1 and 2?
7 With that, do we have questions,
8 Mr. Kline?
9 MR. KLINE: I do have a few questions,
10 Madam Chairman.
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12 CROSS-EXAMINATION
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14 BY MR. KLINE:
15 Q Mr. Booe, if the Commission ultimately
16 determines that it's in the public interest for this
17 exchange of customers to take place and service territory
18 to take place, the people that I represent, the
19 Neighborhood Associations, have two concerns: Number
20 one, the increase in rates that would result as part of
21 the exchange; and, secondly, concerns about the ability
22 of their water quality to be improved over time, and so
23 I'd like to ask you a couple of questions about those two
24 subjects.
25 A All right, sir.
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CSB REPORTING BOOE (X)
Wilder, Idaho 83676 United Water Idaho
1 Q First of all, I'd like to talk to you a
2 little bit about the latter issue, the water quality and
3 water pressure. In reading Mr. Brown's testimony, it
4 appears that one of the things that people are kind of
5 hoping will occur as far as improving the water pressure
6 is that Garden City will make some improvements to their
7 system during 1996 that will improve the pressure on the
8 system; is that your understanding?
9 A Yes.
10 Q At this point in time does Boise Water have
11 any kind of a contract or any kind of way to enforce the
12 upgrade of that system for pressure purposes by Garden
13 City?
14 A The only thing, Mr. Kline, that I can refer
15 to would be the contractual arrangement, whereas United
16 Water could get out of the contract in the event that
17 they did not make the improvements or in the event that
18 the water quality fell beneath what we expected or
19 anticipated. I might add, however, according to
20 Mr. Brown's testimony, the pressure will be improved once
21 we make the interconnections to the reservoir which is
22 located up on the end of Gary Lane or up in Seaman's
23 Gulch, if you will, and we certainly have every intent of
24 going forward to improve water quality in that particular
25 area, because that, after all, is to me one of the
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CSB REPORTING BOOE (X)
Wilder, Idaho 83676 United Water Idaho
1 hallmarks of our company. We essentially believe in good
2 service and good quality or at least to the level that
3 we're capable of delivering.
4 The Garden City, and I hope my answer isn't
5 too long for you, Mr. Kline, but Garden City, I might
6 refer to that as the North State Area, when I say Garden
7 City, I mean North State, Garden City has not had any
8 type of annual flushing program at all. The North State
9 Area is 14 years old. One of the first things that we
10 would do immediately once this is approved by this
11 Commission is I would direct our crews to go out and
12 launch a flushing program in that area. I think that by
13 and large would help clear up some of the water quality
14 problems.
15 In addition to that, as I've said in my
16 testimony and this may be in my rebuttal testimony, in
17 addition, I have said that I pledge to Mr. Patterson and
18 to the Associations that we will launch an immediate
19 evaluation of that system which would include, number
20 one, engineering, microbiology and biologists,
21 hydrogeologists and so forth to allow us to see how we
22 might improve service there. Mr. Patterson in his
23 testimony has continually referred to poor water quality
24 and I would certainly anticipate that would change and it
25 would start changing immediately with the flushing of
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CSB REPORTING BOOE (X)
Wilder, Idaho 83676 United Water Idaho
1 that system. I trust I've answered your question.
2 Q Well, I still have a couple more questions,
3 though, along those lines.
4 A Okay.
5 Q If the efforts by Garden City in 1996 were
6 either not undertaken or weren't successful in improving
7 the pressure up in the North State Area, is it United
8 Water's intention in either 1996 or 1997 to make the
9 interconnections that you discussed in your answer?
10 A Yes, sir. In fact, in the agreement that
11 we have with Garden City, one reason that we have left a
12 window in there of two years is to give us time to
13 evaluate the entire area and to see what really needs to
14 be done, but, yes, the interconnection could be made
15 immediately which would improve the pressure.
16 Q Could be made or will be made?
17 A I would pledge to Mr. Patterson we will
18 make those connections.
19 Q In 1997?
20 A In 1996.
21 Q All right. I'd also like to ask you a
22 little bit about the water quality improvements. Have
23 you thought about what time frames you would use to
24 implement those water quality improvements?
25 A I wish I could tell you we would do it
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1 immediately, but, you know, when you're dealing with
2 water quality, it's a little bit different than a system
3 arrangement or design and improving pressure. Based upon
4 what I've been told and what I've read, there is a severe
5 iron problem in the North State Area. I don't know if
6 the iron problem is a result of what's coming from the
7 wells that are being used there, because the wells that
8 are furnishing it, it appears as though it's a little bit
9 high, the source water appears like the iron is a little
10 bit high. There could be some iron bacteria in the
11 system which we're not aware and, of course, we would
12 have to treat that.
13 We may want to look in terms of using
14 phosphate to treat the water supply there. All of these
15 things will require some time for us to evaluate. I hope
16 that our record speaks for itself. We had a real severe
17 problem quite similar in the Maple Hills area and it took
18 us more than two years to resolve that problem, but,
19 thankfully, we finally got it resolved and it was
20 necessary for us to deepen the wells there to a better
21 water quality, and so I'm kind of dancing around your
22 question, but to resolve water quality problems will
23 probably take just a little bit longer and a little
24 further analysis.
25 Q Mr. Booe, the Associations have proposed,
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1 I'm sure you know from our testimony, that there be a
2 phase-in of the rates to bridge the gap between the
3 existing Garden City rates and the higher United Water
4 rates, and one of the aspects of that phase-in was the
5 concept of tying the phase-in to an improvement in the
6 water pressure and the water quality, in other words, to
7 give the Company an economic incentive to move as
8 expeditiously as possible to make those improvements. Is
9 there anything unreasonable about that concept, Mr. Booe?
10 A I don't know if I would characterize it as
11 unreasonable for the Associations to make such a request;
12 however, if we talked in terms of phased-in rates, then
13 it does not appear as though the rates, revenues that
14 would be received would support the investment in that
15 system. I will hasten to add that one thing that the
16 North State residents are going to notice is that they
17 will have a voice in this entire thing of regulatory
18 matters with respect to utilities, because once they
19 become our customers, their voice will be through the
20 Public Utilities Commission and the Public Utilities
21 Commission, Mr. Kline, will certainly keep their eye on
22 us. If we say we are going to make improvements, the
23 Public Utilities Commission will watch us and they can
24 compel us to do that. They have done that in the past on
25 occasion.
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1 Q I understand, Mr. Booe, and I think both
2 you and I would agree, though, that having a complaint
3 proceeding before the IPUC is not a particularly
4 satisfactory way to resolve those kinds of service
5 problems and that's why I'm wondering why it might not
6 make some sense to have a phase-in program that is tied
7 to actual performance by the utility of improvements in
8 water quality and at the same time would allow some
9 decrease in the, I guess, shock is the way I would
10 describe it of going from the lower rates to the higher
11 rates, is that something that United Water simply rejects
12 out of hand?
13 A I think it really should be at the rates of
14 United Water because they are going to receive
15 essentially the same services as our other customers do,
16 Mr. Kline, and so personally, I would reject the
17 phased-in rates. We would certainly discuss that,
18 however; that is, if the Commission elected to go that
19 way, we would certainly discuss it among ourselves.
20 MR. KLINE: Thank you. That's all the
21 questions I have of this witness.
22 COMMISSIONER SMITH: Thank you, Mr. Kline.
23 Mr. Woodbury.
24 MR. WOODBURY: Thank you, Madam Chair.
25
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1 CROSS-EXAMINATION
2
3 BY MR. WOODBURY:
4 Q Mr. Booe, how are you this morning? I have
5 a number of questions. You state in your direct
6 testimony on page 5 as far as the reasons the Company is
7 attempting to acquire the North State Area is that in the
8 past, United Water and Garden City have been apparently
9 enmeshed in disputes regarding service. Could you
10 indicate how United Water operations have been affected
11 by failing to specifically conform to the city and area
12 of impact boundaries?
13 A Yes, sir. I'm trying to find the
14 particular area that you're referring to.
15 Q Starting at page 5, line 6, and then going
16 on down.
17 A Line 6?
18 Q Yeah. You talk about it being the source
19 of community problems and confusion.
20 A Yes.
21 Q Is it more with respect to -- I mean, does
22 it provide any operational problems to the Company in the
23 way growth is being met in the area?
24 A No, I don't think so, sir. I think
25 essentially, as I've said here, I think this certainly
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1 has been a source of irritation to both communities for
2 the past 20 years and I think it is going to allow both
3 communities to work in harmony.
4 Q Is a franchise required by Garden City to
5 serve within their city limits or area of impact?
6 A To the best of my knowledge, no.
7 Q When Millstream, the Millstream area, was
8 developed and Boise Water started providing service to
9 them, was that area within Garden City or its area of
10 impact?
11 A It was within the -- if there was an area
12 of impact at that time, it was within the area of
13 impact. It was annexed after Boise Water, then Boise
14 Water, started serving the area that it came into the
15 city limits.
16 Q If it was within the area of impact, do you
17 know why Boise Water attempted to provide service there?
18 A In Millstream?
19 Q Yes.
20 A Because we were asked to do so and at that
21 time it was not part of Garden City.
22 Q Okay; so you were concerned only with the
23 city limits, not really the area of impact in determining
24 whether to serve?
25 A Yes. In fact, there had never been any
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1 objection from Garden City relative to serving any of
2 those areas that was within the perimeter of their
3 boundaries.
4 Q Starting on about line 21, page 5, you
5 speak about Garden City began a policy of extending into
6 the North State Area. When did that extension of service
7 start to take place?
8 A Well, it was shortly after Millstream was
9 annexed into the city in the 1970's, the latter part of
10 the 1970's, I would say. In fact, at one time I was told
11 by officials from Garden City they had every thought of
12 annexing land as far as Horseshoe Bend into the City of
13 Garden City and so it was about that time when all of
14 this started when they began their annexation proposals.
15 I think it was the latter part of the 1970's.
16 Q You state that the mayor of Garden City, on
17 page 6, line 8, constantly requested Boise Water to
18 abandon service to the Millstream area --
19 A Yes, sir.
20 Q -- or relinquish control of that. Now, is
21 there sort of a -- how were these requests communicated
22 to Boise Water?
23 A The mayor and the city engineer would call
24 me and ask for a meeting, and this is prior to moving in
25 the city hall they're in now, and I would go visit with
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1 them, sometimes as late as 7:00, 8:00, 9:00 o'clock in
2 the evening and essentially, they would say you should
3 not be serving in Garden City. From their perspective,
4 it was illegal, and they said what we want you to do is
5 abandon your service and just relinquish all control to
6 us.
7 Q There was no request to purchase this
8 system?
9 A No, absolutely not. In fact, I said if you
10 really are serious about this, perhaps we could strike a
11 deal where we would sell that portion of the system to
12 you and they said absolutely not. We feel as though you
13 should just abandon the system.
14 Q Did that ever develop into any litigation?
15 A No, sir.
16 Q The city never --
17 A The Millstream did not develop into
18 litigation, no, sir.
19 Q And the city never initiated any
20 condemnation proceedings?
21 A No, sir.
22 Q Does the Company still believe that it has
23 a right to serve Millstream?
24 A You mean if this deal, this proposal, was
25 approved --
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1 Q Yeah.
2 A -- that we would have the right to serve
3 Millstream, no, sir, we would relinquish the right.
4 Q No, not if the deal is approved, but, I
5 mean, assuming there was no exchange agreement.
6 A Yes, we have a right to serve there.
7 Q Okay. On page 7 of your direct testimony,
8 you relate a matter before this Commission in the Boise
9 Water 91-2 case regarding boundaries of service in that
10 Pierce Park area.
11 A Yes.
12 Q Could you explain why the Company felt
13 compelled to file a certificate application with respect
14 to service there?
15 A In Pierce Park? Primarily, we were asked
16 by several developers to amend our certificated area to
17 serve in that particular area and I don't know if there
18 was any disagreement between the developers and/or the
19 City of Garden City or not, but that was primarily why we
20 were asked to serve there.
21 Q Was that area located within Garden City
22 limits?
23 A Not at that time, I don't believe so, and I
24 will stand corrected on that answer, because there was an
25 election held either shortly before or shortly after,
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1 whereas the people decided they wanted to be served by
2 the City of Boise.
3 Q If a proposed area of service is contested
4 by a municipal water provider, do you feel that it's
5 necessary to get some sort of ruling from either the
6 Commission or court as to your right to serve?
7 A Yes, I think it's always wise to go to the
8 Commission and ask for a ruling.
9 Q Do you make any distinction whether it's a
10 municipal water provider and, say, another regulated
11 utility?
12 A Do I make any distinction? I'm not really
13 sure I understand. If you're saying if there was a
14 municipal water system serving an area that we were
15 adjoining or adjacent to --
16 Q Let's say the Eagle area where you're
17 running into the service --
18 A Yes.
19 Q -- territory of Eagle Water.
20 A Yes.
21 Q Do you feel that it's wise, I guess, or
22 prudent --
23 A Absolutely.
24 Q Do you make any distinction between service
25 to contiguous areas or non-contiguous areas as to whether
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1 an application for a certificate is --
2 A Yes, we do, and the one that comes to mind,
3 of course, is the area in and around Capitol Water.
4 There are several places where we are adjacent to Capitol
5 Water and the distinction we make is when someone asks
6 for us to serve them and if Capitol Water has facilities
7 in close proximity thereto, then many times we would ask
8 the Commission to give us some direction or we would meet
9 with the owner of the affected utility to discuss it or
10 we would meet with the developer and the owner, so we
11 certainly consider that.
12 Q You speak, starting on page 7, around
13 line 16, of the Memorandum of Understanding which was
14 entered into between Garden City and Boise City, and
15 you're familiar with the memorandum?
16 A I'm fairly familiar with it, yes, sir.
17 Q It speaks, and I think it's your Exhibit 1,
18 page 2, paragraph 1, it speaks of service boundaries in
19 the Five Mile area. Does United Water provide water
20 service in that area?
21 A In the Five Mile area? We do not provide
22 any service north of Chinden. We serve Five Mile on the
23 south side of Chinden around Hewlett Packard, but nothing
24 on the north side.
25 Q And so when the Memorandum of Understanding
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1 speaks to possible adjustment of area of impact and city
2 boundaries in that area, are there any implications to
3 United Water?
4 A No, sir.
5 Q So there will not be another readjustment
6 of your service area as a result of that?
7 A No, sir.
8 Q In the memorandum on page 7,
9 paragraph 11.a., it speaks to a city impact area
10 agreement with Ada County. Do you know whether that
11 agreement was, has been entered into between Garden City
12 and Ada County?
13 A I do not, no, sir.
14 Q Is it your understanding that the
15 Memorandum of Understanding by its terms prohibits
16 competition in the service area outside of area of impact
17 and city boundaries?
18 A Yes, sir.
19 Q And so that's something that's accomplished
20 by the Memorandum of Understanding as well as, I guess,
21 repeated within the exchange agreement?
22 A Yes, sir.
23 Q On page 9 of your direct testimony in
24 speaking of the negotiated price for this proposed
25 exchange, you state that Garden City consulting engineers
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1 started with a price of about 2 million. Who were the
2 consulting engineers retained by Garden City?
3 A I can supply that information. I'm sorry,
4 I can't recall the name, although that was in the
5 conversation. I'm sure Mr. Healy has that in his papers
6 there.
7 Q That will be a better question maybe for
8 Mr. Healy?
9 A Yes.
10 Q You indicate that -- anyway they started
11 with this price of about $2 million. Do you know whether
12 that had any basis?
13 A I'm sure everything has a basis when you
14 talk about engineering, but they brought in some
15 information and demonstrated why they felt it was worth
16 $2 million and, of course, we rejected that.
17 Q Are you familiar with a document that
18 apparently Garden City prepared called a Preliminary
19 Estimate of Value?
20 A Yes, I think so.
21 Q And that had replacement costs and cost
22 basis and depreciated value?
23 A Yes, sir.
24 Q And did any of those figures even approach
25 $2 million?
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1 A No, but that came much later.
2 Q Okay. Is the agreement itself, the
3 exchange agreement, contingent upon authorized recovery
4 of the purchase price?
5 A Yes.
6 Q On page 10 of your direct testimony,
7 starting about line 3, you speak of the financial
8 analysis and you state that operating revenues will be
9 sufficient to support this level of investment. When you
10 speak of level of investment, what are you referring to?
11 A I'm referring --
12 Q Just the exchange purchase price of
13 $593,250?
14 A I'm referring to that purchase price, yes.
15 Q That figure only?
16 A Yes, and that was based upon information
17 which was provided to me by witness Healy.
18 Q By who?
19 A Witness Healy.
20 Q Okay, and that revenue is dependent in
21 great part on the number of customers?
22 A I would say it is, yes.
23 Q And is the Company still of the belief that
24 there are 912 customers in the North State Area?
25 A No, sir. In fact, it was represented to us
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1 there was 912 customers as we went through the
2 negotiating process. Then later, through information
3 they supplied to us, we discovered they could only
4 account for, I think it was, 771 customers or somewhere
5 in that neighborhood. It may have been slightly more or
6 less and so we are looking into that particular matter;
7 however, we have told Garden City the purchase price
8 rises and falls upon the number of customers and if the
9 customers are less, then the purchase price is going to
10 be less.
11 Q Well, assuming that the number of meters is
12 equivalent to the number of customers and that there are
13 771 customers, what then will be the purchase price?
14 A I do not have a number, sir; however, I
15 think we would probably do it on a -- we would probably
16 come up with a formula based upon an investment per
17 customer or at a proportionate level of some kind.
18 Q Would Mr. Healy be prepared to provide that
19 figure?
20 A I think Mr. Healy could be prepared to do
21 that, yes.
22 Q The level of investment, then, does not
23 include costs of interconnection, does it?
24 A The costs of interconnection, that's not
25 included in here, I don't believe.
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1 Q Or the supply well?
2 A Yes, and I believe Mr. Brown has that in
3 his testimony, again, it sounds as though I'm passing
4 everything along, but in his testimony, I believe there
5 were four points of possible connection that would have
6 to be made.
7 Q When you state that United Water existing
8 customers will not be adversely impacted by this
9 agreement, is there an understanding of the Company that
10 these additional costs for interconnection, supply well,
11 technical study, community outreach are costs that the
12 existing customers will not be asked to bear?
13 A Under the -- what we know about the system
14 today the customers would not be adversely impacted. If
15 it was necessary for us to drill a well, it costs about
16 $300,000 and, of course, that would be funded primarily
17 by connection fees which would be paid by new customers,
18 but as we know it today, no, they would not be adversely
19 impacted. In fact, I believe Mr. Lobb has said so in his
20 own testimony.
21 Q If some sort of separate accounting or
22 essentially would the Company be accounting in such a
23 manner that we would be able to determine what particular
24 costs are attributed to the North State Area acquisition?
25 A I believe our accounting system is capable
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1 of doing that. In fact, I believe it does it today.
2 Q Would it be better to ask one of your other
3 witnesses as to the water quality and water pressure
4 results?
5 A I believe Mr. Brown has addressed that in
6 his direct testimony.
7 Q Okay, and so when you make the statement
8 regarding the existing customers will not be adversely
9 impacted --
10 A Yes.
11 Q -- then you're relying on your other
12 witnesses?
13 A Yes.
14 Q Okay. The service area exchange agreement
15 was executed on July 20th. Were the Company's Millstream
16 Area customers provided prior notice that the Company was
17 considering divesting itself of them?
18 A Not prior to the official notice that we
19 sent each of our customers.
20 Q Has the Company conducted any public
21 meetings in either the North State Area or the Millstream
22 Area?
23 A Not in the north -- no, sir, we have not.
24 The city, as I have understood it, noticed a meeting at
25 city hall with respect to the North State Area, but we
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1 have not had any open meeting with our customers.
2 Q Can you explain or do you believe that the
3 interests of the North State Area customers and the
4 Millstream Area customers were a consideration of Garden
5 City and United Water in this exchange agreement?
6 A Well, it was certainly a consideration of
7 ours. I don't know about Garden City. I'm sure it was,
8 though.
9 Q And yet, the Company didn't inquire as to
10 whether or not the customers wanted to be exchanged?
11 A No, we did not.
12 Q On page 10 of your direct testimony, you
13 talk about determining the condition of the Garden City
14 facilities. Could you indicate how the Company appraised
15 and inspected the Garden City facilities?
16 A I personally drove to the area and took
17 random, if you will random, sampling of different lots,
18 looked at the meter boxes. I looked at the meter sets
19 themselves.
20 Q Was there an independent appraisal
21 performed?
22 A No, there was not.
23 Q Did Garden City provide full access to all
24 of its books and records?
25 A Well, yes, they did; however, their books
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1 and records as we know them aren't kept in the same
2 manner and so there was not the level of accounting that
3 we would normally expect to find in a regulated utility.
4 Q And could you then describe the books and
5 records that were received?
6 A Primarily, the books and records that I
7 reviewed was related to customer service, to customer
8 billing and so forth, tariffs and so forth. Their
9 engineering furnished some information which I believe is
10 part of the exhibit you referred to earlier related to
11 the facilities which they had. I'm not sure if it's on
12 that particular exhibit or not, but as Mr. Brown has
13 said, we determined there was about 54,000 feet of main
14 line, about 95 percent of that is six inches in diameter
15 or larger, so those are the kind of records that was made
16 available to us.
17 Q And has Garden City provided you all the
18 information that you've requested?
19 A They have either provided it to us or told
20 us it wasn't available.
21 Q Okay, did you make related inquiries with
22 respect to the system with Water Resources and Central
23 District Health?
24 A I believe we did. I'm sure Mr. Brown could
25 probably answer that question much better than I, but,
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1 yes, I believe we did.
2 Q On page 10 of your testimony, starting at
3 about line 17, you're asked a question, "Do you know if
4 Garden City scheduled any public hearings with respect to
5 the proposed exchange of facilities?" And you said,
6 "Yes. According to what I have been told...", told by
7 whom?
8 A I was told that by the mayor of Garden City
9 and I was also furnished a notice which was sent out to
10 the public in that particular area.
11 Q When you say one or more public meetings,
12 how many meetings were held?
13 A To the best of my knowledge, there was one.
14 Q And when did that meeting take place, do
15 you know? After the date of the exchange agreement?
16 A Yes, it did, and I might add while we're
17 talking about that, in that particular notice that went
18 out, they also referred to the number of customers which
19 we have since discovered may be in error.
20 Q Did United Water attend that meeting?
21 A No, sir, we did not.
22 Q And do you know whether any of the
23 customers attended the meeting?
24 A I do not.
25 Q And do you know what representations, if
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1 any, were made at the meeting?
2 A I do not.
3 Q Page 11, line 12, you speak of other
4 compelling reasons for granting the application, and you
5 state that it will provide the Company with a greater
6 level of control with respect to the number of deep wells
7 which may be drilled and this will provide some assurance
8 for protection of the aquifer. Is the drilling of a well
9 a procedure requiring a license or permit?
10 A Yes, it does. In fact, the Department of
11 Water Resources is in charge or in control of those
12 particular water permits.
13 Q And so the type of oversight and
14 supervision is then performed by Water Resources?
15 A Yes; however, and I can't give you the
16 exact number, but I can tell you in the metropolitan area
17 of Boise and Ada County in the last year there were
18 several hundreds of permits filed for and based upon
19 conversations I've had with the Department of Water
20 Resources, they could not get around to look at half of
21 the requests that were made of them.
22 Q Well, with respect to the North State Area,
23 does the Company anticipate that if this exchange
24 agreement is not approved that there will be more deep
25 wells drilled?
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1 A Yes, I think there could be.
2 Q And who would they be drilled by?
3 A They could be drilled by irrigators, it
4 could be by Garden City itself. It could be, I suppose,
5 by any number. It could even be by an association that
6 would drill a well.
7 Q And do you anticipate that these wells by
8 irrigators will not be drilled or requested if United
9 Water purchases --
10 A Not necessarily, but I think that what it
11 does allow since we will be the watchdog of that
12 particular area, it allows us to either petition as an
13 opposing, in opposition to any wells being drilled if
14 it's necessary. It will be part of our ground water
15 model study that's under way and we certainly will be
16 looking at that very carefully.
17 Q The Company presently has, I guess, a
18 policy of providing -- well, I guess you have two hook-up
19 fees, one for a dual system and one for non-dual.
20 A That's correct.
21 Q Do you anticipate that there will be any
22 dual irrigation systems put in in the North State Area?
23 A Well, again, I think that would be a
24 function of those who are developing. If you're asking
25 about the existing, there could be, but I seriously doubt
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1 that it would happen because of the cost. On new
2 development, yes, it could very well be because the
3 developer would look at that as part of the cost of --
4 Q And are there any areas within the North
5 State Area that are susceptible to new development?
6 A Yes, I think there is some land available
7 for development in that area.
8 Q Does the Company have any estimates as to
9 future customers within the North State Area, additional
10 in-fill?
11 A No, sir.
12 Q Doesn't one of your other witnesses speak
13 of the opportunity for in-fill in the North State Area?
14 A Well, as I said, I think there's some land
15 in there that could be in-filled, several acres. I don't
16 know how many hundred acres, but, yes, there could be
17 in-filling and I believe Mr. Healy probably said so in
18 his testimony.
19 Q Will all of the -- referring to your
20 testimony on page 12, line 5, regarding United Water's
21 conservation programs --
22 A Yes.
23 Q -- will all of those programs be provided
24 to North State Area customers?
25 A Yes, sir.
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1 Q And with respect to the United Water
2 assurances, you state that the Company will continue to
3 routinely monitor its sources of supplies. If the source
4 of supply for the North State Area customers will
5 continue to be the Garden City wells, how does the
6 Company anticipate monitoring that source of supply?
7 A Well, as we --
8 Q At the well site?
9 A Yes, we would at the well site, we'll go to
10 customers' homes, we do that throughout the city now, and
11 that's part of the evaluation and analyses which I have
12 been speaking.
13 Q And if you anticipate that there is a
14 problem with the source of supply, has Garden City
15 committed to correct that problem at its own cost?
16 A They have said they would correct that
17 problem in 1996. That's what we have been told, yes.
18 Q But is that -- I understand from your
19 testimony that that's what you were told and I mean, is
20 there a written contractual commitment to do that?
21 A The only thing that we have is in the
22 contract document itself if they do not, then we have the
23 right to withdraw.
24 Q Where in the document are you referring
25 to?
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1 A If you'll bear with me a minute, let me
2 find that exhibit.
3 Q It's your Exhibit 2?
4 A Yes. Sir?
5 Q Yes.
6 A May I take just a moment and ask our
7 attorney?
8 Q Certainly.
9 A He can provide me with a copy of that. I
10 apologize.
11 Q Do you have a copy of Exhibit 2?
12 A I thought I did, yes.
13 MR. BERGQUIST: Don't you have a copy of
14 it?
15 THE WITNESS: May I?
16 MR. BERGQUIST: Sure.
17 (Mr. Bergquist approached the
18 witness.)
19 THE WITNESS: I believe I was probably
20 referring to the agreement where we are purchasing water
21 from Garden City to serve an area there.
22 Q BY MR. WOODBURY: Page 3, paragraph 4, is
23 that what you're referring to there, the water supply?
24 A Yes. I found the area. In Production
25 Request No. 8, Production Request No. 8, the Commission
55
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1 asks for a copy of a water purchase agreement listed
2 under the exchange agreement, paragraph 13 of the
3 existing agreements.
4 Q But it's my understanding that the
5 existing, the water purchase agreement is unrelated to
6 the exchange agreement. I mean, that's what your
7 paragraph 13 states.
8 A But that's what I was referring to.
9 Perhaps I misspoke. I was referring to that. I got the
10 two agreements confused in my mind.
11 Q Well --
12 MR. BERGQUIST: What was your specific
13 question, Counsel? I've lost track of it somewhere.
14 MR. WOODBURY: Oh, Mr. Booe was referring
15 to a commitment on the part of the city with respect to,
16 I guess, remedying water quality problems under the
17 exchange agreement and I was asking him to direct my
18 attention to that particular provision within the
19 exchange agreement which provided that commitment and I
20 guess I don't see it still.
21 THE WITNESS: And I misspoke in that
22 particular instance. I apologize.
23 Q BY MR. WOODBURY: When you stated earlier
24 that Garden City does not have an annual flushing
25 program, did you mean that they do not engage in any
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1 flushing?
2 A Based upon what we have been told, no, they
3 do not. The only time they would flush is if they had a
4 main line failure and it necessitated repair, then there
5 would be a certain amount of flushing take place at that
6 time, but, no, they do not.
7 Q Is it your -- well, to the extent that you
8 have this paragraph 13 indicating that the water purchase
9 agreement is unrelated to the service area exchange
10 agreement and that the duties of Garden City are
11 different under each, does United Water consider the
12 rights provided it under the prior existing water
13 purchase agreement to be paramount or superior to the
14 rights under the exchange agreement?
15 A I think that, yes, I think it would be
16 paramount.
17 Q Paramount or superior?
18 A Yes, or superior.
19 Q So then the rights under the exchange
20 agreement are less than the rights the Company has under
21 the --
22 A No, I can't say that, Counselor, that they
23 would be less. In fact, my understanding is that we
24 would purchase water from Garden City to keep us from
25 drilling a well. That was the original agreement. Then
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1 the next agreement was we could not begin to meet the
2 demand of the existing system without purchasing water
3 from Garden City for a two-year period. That would give
4 us time to do our evaluation and analyses and decide
5 whether we needed to add wells or continue purchasing
6 from them.
7 MR. WOODBURY: Okay, I guess I'll see you
8 again when you're on the stand with respect to your
9 rebuttal testimony. I have no further questions.
10 COMMISSIONER SMITH: Okay, do we have
11 questions from the Commissioners?
12 COMMISSIONER HANSEN: No.
13 COMMISSIONER NELSON: My questions were
14 asked, thank you. Oh, excuse me.
15 COMMISSIONER SMITH: Commissioner Nelson.
16
17 EXAMINATION
18
19 BY COMMISSIONER NELSON:
20 Q Mr. Booe, I read in here about exchanging
21 meters out and I wonder if you could explain to me why
22 that's necessary.
23 A We would take the meters that we have in
24 Millstream and move them over into the North State Area.
25 They would take the meters that they have in the North
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1 State Area and move them over to the Millstream Area and
2 it's primarily because we measure in hundreds of cubic
3 feet while Garden City measures in 1,000 gallons, so the
4 meters would really not be compatible.
5 It would be necessary for us to purchase a
6 few additional meters, which is included in the
7 production request that we furnished to the Commission,
8 and it would cost us about $10,000 which would be shared
9 between us, the Company and Garden City, the installation
10 costs. I think overall the primary cost would be about
11 33 or $34,000 to take care of that.
12 Q Do those go in and out through the existing
13 hole?
14 A Yes. The setter itself and the meter box
15 is compatible.
16 COMMISSIONER NELSON: Okay, thank you.
17 Those were all my questions.
18 COMMISSIONER SMITH: Okay, Mr. Booe, I just
19 have a couple.
20
21 EXAMINATION
22
23 BY COMMISSIONER SMITH:
24 Q First, with regard to the meeting that you
25 said you saw a notice that Garden City put out to its
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1 customers about the exchange?
2 A Yes.
3 Q I was curious if you knew when the meeting
4 occurred.
5 A I do not. All I can tell you is what's
6 contained in the notice.
7 MR. WOODBURY: I believe that notice is a
8 Staff exhibit.
9 Q BY COMMISSIONER SMITH: Okay. I was also
10 curious about the decision apparently on the part of
11 United Water not to attend the meeting. I mean, was it
12 actually a conscious decision not to attend the meeting
13 or did you just not know about the meeting until it was
14 too late?
15 A We had several discussions among ourselves
16 and I volunteered to attend the meeting personally, and
17 at one time the mayor and the director of public works
18 suggested that myself and Mr. Healy and perhaps others
19 should attend the meeting to describe our system and
20 then, all of a sudden, the meeting occurred and it was
21 after the meeting when I discovered that it had taken
22 place, so that's essentially the answer.
23 MR. WOODBURY: Madam Chair?
24 COMMISSIONER SMITH: Mr. Woodbury.
25 MR. WOODBURY: I misspoke. There is a
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1 public notice, a Garden City public notice, but it's just
2 of the exchange. It was not a notice of the hearing, so
3 I'm not certain when that took place.
4 COMMISSIONER SMITH: Right, thank you.
5 Q BY COMMISSIONER SMITH: I guess my other
6 question is I understand the desire of the City of Boise
7 and the City of Garden City to have their political
8 boundaries resolved so that there's not ongoing disputes
9 between them about their areas of authority and extension
10 of services they provide, so I understand the benefit to
11 the two cities of such an agreement. What I'm trying to
12 understand is the benefit to United Water of such an
13 agreement and I'm wondering if you could help me with
14 that.
15 A I will try. I think over the long run it's
16 going to help United Water's system because ultimately
17 there will be a day when the south side of the system
18 will be looped with the north side of the system. That's
19 not going to happen in the immediate future, but that's
20 going to happen, and in addition to that, I think it
21 removes any doubt or confusion with respect to who is
22 going to serve that area.
23 Many times in the past when developers
24 would ask us to serve, then we would be confronted with
25 Garden City deciding they would put main lines in the
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1 same area, and, of course, they're regulated by city
2 council, but still, yet, that happened many times and
3 there was a lot of confusion out in the northwest section
4 of the metropolitan area of the City of Boise and so
5 that's probably the two biggest reasons that I could cite
6 for extending.
7 In addition to that, at some point we can
8 probably rely upon other sources to back up that
9 particular system or that system could back up the system
10 that we know today, so I suppose those are all
11 philosophical suggestions, but I think they're very real,
12 too, and I think that that's the greatest thing that
13 could happen for United Water.
14 Frankly, I would like to see a unified
15 system. That's my own opinion. I think a unified system
16 is going to serve the needs of this community as we go
17 forward from this day much better than a fragmented
18 system. I see that in other utilities, so, frankly, you
19 know, that has been one of my objectives and missions, to
20 see us unified in this community and not fragmented.
21 COMMISSIONER SMITH: Do you have redirect,
22 Mr. Bergquist?
23 MR. BERGQUIST: Yes, I have a few
24 questions.
25
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1 REDIRECT EXAMINATION
2
3 BY MR. BERGQUIST:
4 Q Mr. Booe, do you have Exhibit 1 in front of
5 you there which is the Memorandum of Understanding?
6 A I hope I do.
7 Q I notice that that is a copy, a signed
8 copy, but it doesn't have the date entered on the first
9 paragraph of page 1. Do you recall, to your knowledge,
10 when this was executed?
11 A Shortly after the first of the year, 1995,
12 but I do not recall the exact date, no.
13 Q I think there was some reference to
14 sometime in December of 1994.
15 A Yeah, 1994 the mayor of Garden City and
16 Boise got together and hammered out this particular
17 proposal or Memorandum of Understanding and I do recall
18 it was prior to Christmas when Mayor Ellis called me and
19 told me what they were doing. Mayor Coles called me and
20 told me what was happening and Mayor Coles asked me not
21 to meet with Garden City until after they had a
22 Memorandum of Understanding in place. I do recall that
23 being in December, and it was shortly thereafter when
24 Mayor Coles and Mayor Ellis called me and said there had
25 been an agreement reached, so I noticed that that date
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1 was missing on mine as well.
2 Q Now, on your direct testimony on page 9 --
3 A Yes.
4 Q -- on line 8, the question reads, "Do you
5 believe the Company should be allowed to service the
6 proposed Garden City area and relinquish service to the
7 Millstream Area?" What do you mean by the proposed
8 Garden City area?
9 A I'm talking about the area which we
10 commonly refer to in this proceeding as the North State
11 Area.
12 Q You spoke about former Mayor Eld having
13 several conversations with you concerning relinquishment
14 of the system in the Millstream Area. Was that before or
15 after Garden City extended its city boundaries to include
16 the Millstream Area?
17 A The discussions occurred after they had
18 extended their boundaries.
19 Q And do you recall whether or not the
20 Company, Boise Water, had to apply to the Commission to
21 extend its certificated area to serve the Millstream
22 Area?
23 A Not in that particular instance, no.
24 Q You were already authorized to serve?
25 A I believe we were, yes. That was part of
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1 our certificated area.
2 Q Do you recall the Case BOI-W-91-2
3 concerning the dispute in the North State Area which
4 occurred about three years ago?
5 A You're talking about the Pierce Park?
6 Q Yes.
7 A Yes. Mr. Hepler testified in that
8 particular proceeding, but, yes, I do recall.
9 Q And quite a few of the problems involving
10 the area of impact of Garden City and the City of Boise
11 as well as city limits were discussed in that case, were
12 they not?
13 A Yes. There had been a great deal of
14 confusion at that time.
15 MR. BERGQUIST: I believe that's all I
16 have. Thank you.
17 COMMISSIONER SMITH: We thank you for your
18 help, Mr. Booe.
19 (The witness left the stand.)
20 COMMISSIONER SMITH: We're going to take
21 about a ten-minute break right now and be back at about a
22 quarter till.
23 (Recess.)
24 COMMISSIONER SMITH: We'll go back on the
25 record. Mr. Bergquist.
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1 MR. BERGQUIST: Call Mr. Brown.
2
3 DANIEL M. BROWN,
4 produced as a witness at the instance of United Water
5 Idaho, Inc., having been first duly sworn, was examined
6 and testified as follows:
7
8 DIRECT EXAMINATION
9
10 BY MR. BERGQUIST:
11 Q Could you please state your name?
12 A Daniel Brown.
13 Q And by whom are you employed, Mr. Brown?
14 A United Water Idaho.
15 Q In what capacity?
16 A As the Company engineer.
17 Q Have you prepared and prefiled direct
18 testimony in this matter?
19 A Yes, I have.
20 Q Do you have any changes or corrections in
21 any of your testimony?
22 A Not to the direct testimony, but in my
23 rebuttal testimony, I do have a correction on page --
24 Q Well, we can get into that later.
25 A Oh, okay.
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Wilder, Idaho 83676 United Water Idaho
1 Q You don't have any on your direct
2 testimony?
3 A Not on direct, no.
4 Q And you are sponsoring certain exhibits,
5 are you not, Mr. Brown?
6 A I'm trying to remember now.
7 MR. WOODBURY: Exhibit 3.
8 Q BY MR. BERGQUIST: I think you had
9 Exhibit 3 which was a map.
10 A Yes.
11 Q If I were to ask you the questions set
12 forth in your prefiled testimony, would your answers be
13 the same?
14 A Yes.
15 MR. BERGQUIST: I would move that
16 Mr. Brown's direct testimony and his exhibit be spread on
17 the record.
18 COMMISSIONER SMITH: If there's no
19 objection, we'll spread the prefiled direct testimony of
20 Mr. Brown upon the record as if read and identify
21 Exhibit No. 3.
22 (The following prefiled testimony of
23 Mr. Daniel Brown is spread upon the record.)
24
25
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CSB REPORTING BROWN (Di)
Wilder, Idaho 83676 United Water Idaho
1 Q Please state your name and the nature of
2 your employment with United Water Idaho, Inc.
3 A Daniel Brown. My business address is 8248
4 W. Victory Road, Boise, Idaho 83709. I am the Company
5 Engineer, in charge of engineering for United Water
6 Idaho.
7 Q Please briefly describe your educational
8 and professional background.
9 A I received a bachelor of science degree in
10 Civil Engineering from the University of Idaho in 1976.
11 I was hired by Davenport Engineers January 1, 1977 and
12 worked primarily on water related projects for the cities
13 of Middleton and Fruitland, Idaho. On February 20, 1978
14 I was hired by Boise Water Corporation (subsequently
15 United Water Idaho). I worked as a staff engineer until
16 1983 when I became Company Engineer. I received my
17 professional engineer registration in July of 1981.
18 Q With respect to the pending application of
19 United Water to exchange service areas with the city of
20 Garden City, have you reviewed the facilities included in
21 the proposed exchange?
22 A Yes. Our engineering review was primarily
23 related to the condition of the facilities in the North
24 State area, existing water quality and operating pressure
25 information.
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United Water Idaho Inc.
1 Q Please describe the distribution system
2 included in the exchange.
3
4 /
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Brown, Di
United Water Idaho Inc.
1 A As of January 1995, the distribution system
2 was made up of the following water main footages:
3 12" 6,510 feet
4 10" 5,411 feet
5 8" 28,600 feet
6 6" 11,252 feet
7 4" 2,628 feet
8 Total 54,401 feet
9 The system is relatively new, with the oldest main being
10 installed 14 years ago, and is constructed of modern
11 materials, primarily ductile iron pipe and a minor amount
12 of PVC pipe. As a result, we anticipate maintenance
13 costs for this system will be minimal. Exhibit 3 is a
14 map of the North State Area.
15 Q Does the Company intend to purchase water
16 from Garden City to serve the North State Area?
17 A Yes.
18 Q How will the North State Area be served?
19 A The customers in the North State Area will
20 continue to be served from the same distribution system
21 and Garden City sources of supply as they are now. It is
22 anticipated that this area will ultimately be
23 interconnected with the United Water distribution system.
24
25
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United Water Idaho Inc.
1 Q Does the Company intend to purchase water
2 from Garden City to serve the North State Area?
3 A Yes. The water will be purchased from
4 Garden City based upon the customer's meter readings.
5 Q How will United Water control water quality
6 and pressure for this area?
7 A We will closely monitor water quality
8 issues and take the necessary steps to deal with problems
9 as they are identified. Regarding pressure, during the
10 summer of 1995, we monitored the North State pressure in
11 the vicinity of State Street and Gary Lane. We observed
12 daily pressure variations ranging from lows of 35 pounds
13 per square inch (psi) to highs of 80 psi. This is a
14 concern for both quality of service and for fire
15 protection.
16 Q What has the company proposed to deal with
17 this pressure problem?
18 A At this point in our analysis, it appears
19 there are three potential resolutions to this problem:
20 1) Garden City has stated plans to make improvements in
21 its system during 1996 which should relieve this
22 condition.
23 2) Intertie the North State system with United Water's
24 distribution system and pump the water needed to serve
25 the North State area from Garden City through the booster
pump(s) at our Gary Lane well/booster station.
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United Water Idaho Inc.
1 3) Intertie the North State system with United Water's
2 distribution system and pump the water needed to serve
3 the North State area from Garden City through new booster
4 pumps located on the water mains currently serving the
5 area.
6 In the latter two cases the North State area would be
7 tied into the new United Water Hidden Hollow reservoir
8 located on Seaman's Gulch road. This gravity feed
9 storage reservoir would stabilize the pressures, improve
10 fire protection and provide a backup supply in the case
11 of a power outage. Also, pumping the water provides us
12 the ability to maintain desired rates of flow as Garden
13 City's pressure fluctuates.
14 Q How will the Millstream service area be
15 cut-off from the United Water distribution system?
16 A A valve on the North Mitchell line will be
17 closed down and locked off.
18 Q How will the meters be exchanged?
19 A A contractor will be hired to pull the
20 meters from the Millstream and North State Areas. The
21 North State meters will be installed in Millstream with
22 the excess meters going back to Garden City. The
23 Millstream meters and the necessary number of new meters,
24 will be installed in the North State Area.
25 Q What is the contractor cost associated with
72
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United Water Idaho Inc.
1 the meter exchange?
2 A We anticipate a cost of approximately
3 $10,000.
4 Q Will this cost be shared between United
5 Water and Garden City?
6
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United Water Idaho Inc.
1 A Yes.
2 Q What is the benefit of United Water's plan
3 to purchase water from Garden City to serve the North
4 State area?
5 A The most significant factor is that United
6 Water will not have to develop additional source of
7 supply capacity to serve this area. These 912 customers
8 are estimated to consume approximately one million
9 gallons per day during the summertime. The cost for
10 drilling a new well to provide this supply capacity would
11 cost approximately $300,000. As a result, the ability to
12 purchase this water from Garden City is a benefit to the
13 United Water rate payers.
14 Q Are there any redundancies of which you are
15 aware between the United Water distribution system and
16 the North State distribution system.
17 A There are a couple of isolated areas where
18 Garden City and United Water mains run parallel to each
19 other (ie, approximately 1,450 feet in Bluebird and 4,000
20 feet in Gary Lane). Where two utilities develop
21 contiguous to each other, this situation is not unusual.
22 For example, this has occurred between United Water and
23 Capital Water Company and South County Water Company.
24 However, the potential for the continued development of
25 redundant plant between Garden City and United Water in
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United Water Idaho Inc.
1 the future is eliminated by the agreement which clarifies
2 the two utilities' service area boundaries.
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United Water Idaho Inc.
1 Q Does a single water purveyor in a given
2 service area enhance the operation and development of
3 groundwater wells?
4 A Yes. As stated by Wayne Booe, protection
5 of the aquifer is better assured by a single operator.
6 Adequate spacing and design of wells are under this
7 operator's full control and, as a result, conflict with
8 other well owners and potential litigation are minimized.
9 Q Does this conclude your testimony?
10 A Yes.
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United Water Idaho Inc.
1 (The following proceedings were had in
2 open hearing.)
3 MR. BERGQUIST: He's available for
4 cross-examination.
5 COMMISSIONER SMITH: Thank you.
6 Mr. Woodbury, do you have questions?
7 MR. WOODBURY: Yes, thank you.
8
9 CROSS-EXAMINATION
10
11 BY MR. WOODBURY:
12 Q Mr. Brown, you conducted the engineering
13 review of the exchange facilities?
14 A Yes.
15 Q Is there a standard or a generally accepted
16 procedure for a review of facilities?
17 A Well, I think -- well, not specifically,
18 no.
19 Q Does United Water have a generally accepted
20 procedure for conducting such a review?
21 A I would say it's generally yes, but it is
22 dependent, it certainly is dependent, on a case-by-case
23 basis.
24 Q Do you have a checklist that you go down?
25 A Not specifically, no.
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1 Q Have you received any specific training
2 regarding review and assessment of facilities?
3 A I have almost 18 years of operating or
4 engineering at Boise Water, United Water, which gives me
5 some idea of how to evaluate the systems.
6 Q And in reviewing or in assessing the
7 facilities in the North State Area, can you indicate what
8 procedures you followed?
9 A Primarily, we analyzed the water mains,
10 that was the biggest concern, where we are potentially
11 going to acquire a system that would necessitate an
12 ongoing maintenance problem as far as leaks and those
13 kinds of issues, and we found that the system was quite
14 new, relatively new, and felt that that would not be a
15 problem. Since we were not acquiring any sources,
16 directly acquiring any sources, of supply, that was not
17 an issue.
18 Q Did you request and were you provided with
19 the service records for the facilities in the North State
20 Area?
21 A I believe we were. Specifically, I don't
22 have that information.
23 Q You indicate that your review is also
24 related to the existing water quality and what is the
25 nature of your review in that area?
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CSB REPORTING BROWN (X)
Wilder, Idaho 83676 United Water Idaho
1 A What we did is we acquired from Garden City
2 all of the most recent water quality analyses that were
3 done on all of their wells.
4 Q Garden City, is that an integrated system,
5 all of its wells connected?
6 A I think for the most part they are.
7 They've drilled and equipped a new well on the northwest
8 portion of their system that they've been working to
9 intertie, but I don't know at this time if it's tied in
10 or not. As far as I know, the rest of it is.
11 Q So with respect to the source wells, you
12 can't really look to any particular well or wells as
13 being the source for the North State Area?
14 A Not specifically, no.
15 Q When you performed all of your water
16 quality testing, was that done at the well source or was
17 that done within the distribution system?
18 A The data we received was taken at the
19 wells. The compilation of data that we have was at the
20 wells and that was performed by a certified lab. It was
21 not performed by us.
22 Q You did not perform that?
23 A It was data that --
24 Q The data was prepared and furnished to you
25 by Garden City?
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CSB REPORTING BROWN (X)
Wilder, Idaho 83676 United Water Idaho
1 A We got copies of the lab reports from
2 Garden City.
3 Q And did you conduct any independent study?
4 A No.
5 Q I mean, as far as independent, any Company
6 study?
7 A No.
8 Q With respect to your review on operating
9 pressure information, again, can you indicate the nature
10 of that review?
11 A We in 1995 completed the agreement for
12 purchasing water from Garden City. We were quoted and we
13 tested some pressures ourselves as far as what the
14 operating pressure would be. We found that their
15 pressure was lower than our pressure in that area and in
16 order for us to purchase water, we would have to install
17 a booster station to do that.
18 Q And how many sites did you use for testing
19 in the North State Area?
20 A What we did is actually test the area where
21 we were going to be pumping from. That was our primary
22 concern.
23 Q What is that location?
24 A Near the intersection of State Street and
25 Gary Lane. We did find during the operation, however, of
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CSB REPORTING BROWN (X)
Wilder, Idaho 83676 United Water Idaho
1 the booster station that at times the Garden City
2 pressure dropped off sufficiently that we had to shut off
3 the pump because their pressure was inadequate to draw
4 water further, so that certainly does imply that there
5 were likely problems elsewhere in their system.
6 Q Does not or does?
7 A It would imply that they would have low
8 pressure problems elsewhere in the system.
9 Q And I believe you indicate on page 4 that
10 the daily pressure variations were from 35 to 80 psi, and
11 what is an acceptable range of pressure?
12 A Generally, I would say that --
13 Q What is the average system pressure within
14 United Water's system?
15 A I would say between 50 -- in an area maybe
16 of approximately 50 pounds to 70 pounds.
17 Q So 35 pounds per square inch is
18 unacceptably low?
19 A Well, that is the minimum allowed pressure
20 by the health department.
21 Q Okay. With respect to the distribution
22 system, page 2 of your testimony, you state: "The system
23 is relatively new, with the oldest main being installed
24 14 years ago, and is constructed of modern materials,
25 primarily ductile iron pipe and a minor amount of PVC
81
CSB REPORTING BROWN (X)
Wilder, Idaho 83676 United Water Idaho
1 pipe." How did you obtain that information and reach
2 your conclusions?
3 A From Garden City.
4 Q You reviewed city records, then?
5 A They provided us with data. I believe that
6 actually was compiled by their consulting engineer, Doby
7 Engineering.
8 Q Are you aware that -- do the construction
9 standards, requirements conform with United Water's
10 practice and standards?
11 A Generally, I would say that they would.
12 Q In what areas don't they?
13 A I mean, I would assume they do. I don't
14 have any specific data to say that they wouldn't.
15 Q You state that you anticipate minimal
16 maintenance costs. What is the Company's estimate of
17 maintenance --
18 A Well --
19 Q -- on an annual basis?
20 A The purpose for my comment in that regard
21 was, the United Water system certainly being over 100
22 years old, we have main materials that are subject to
23 maintenance problems at a much higher degree than the
24 more modern PVC and ductile iron mains. For instance,
25 some years ago, we did an analysis in our system finding
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Wilder, Idaho 83676 United Water Idaho
1 that a large percentage of our maintenance, very large
2 percentage of our maintenance, costs were due to the
3 mains that were installed between the turn of the century
4 and the 1940s, and the maintenance costs associated with
5 the later-installed materials, specifically any of the
6 ductile iron and PVC, were minimal, so what I would
7 anticipate at Garden City would parallel what we
8 experience in the United Water system.
9 Q And so what would be the maintenance costs
10 associated with this area on an annual basis?
11 A I couldn't estimate that. I would say I
12 would be very surprised if they had any leaks.
13 Q Could you explain what your investigation
14 consisted of with respect to the source of supply?
15 A Primarily, it was associated with the water
16 quality that we discussed a moment ago.
17 Q You state that purchased water will be
18 based upon meter readings. Will there be any unmetered
19 use of water?
20 A Not that we're aware of.
21 Q Who has access to the fire hydrants in the
22 area?
23 A I suppose, conceivably, anybody has access
24 to the fire hydrants, but, for the most part, within our
25 system a user of a fire hydrant acquires a fire hydrant
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Wilder, Idaho 83676 United Water Idaho
1 metering permit from us. We relay that information to
2 the fire departments to know that someone is using it and
3 so it is not just a free use, generally. Other users may
4 be the highway district that would use it for street
5 cleaning purposes.
6 Q On page 4, line 5, you indicate that with
7 respect to the control of water quality and pressure, you
8 will clearly monitor the water quality issues and take
9 necessary steps to deal with the problems as they are
10 identified. Is it the intention of the Company to
11 install SCADA equipment for the purpose of monitoring in
12 the North State Area?
13 A Yes. In fact, we discussed the booster
14 station that was installed in 1995 and it has the SCADA
15 equipment there at this time.
16 Q And this permits the Company to engage in a
17 24-hour monitoring of system pressure and volume?
18 A That's correct.
19 Q And have you estimated what the cost of
20 installing that equipment would be in the North State
21 Area?
22 A We already have it there.
23 Q It's already there?
24 A At this booster station.
25 Q Okay, and that is where -- there's no
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Wilder, Idaho 83676 United Water Idaho
1 additional equipment that would be put in?
2 A No.
3 Q Could you explain the testing procedures
4 that will be followed once the North State Area is
5 acquired if approved?
6 A We would to gain familiarity with the water
7 quality issues, I haven't thought of a protocol yet of
8 exactly how we would approach this, but we would select a
9 number of sample sites and periodically, maybe monthly
10 for the first period of operation, take samples and see
11 what is happening as far as the delivery of water there.
12 We may work, attempt to work, more closely with Garden
13 City and how they operate and treat their water to --
14 maybe there's some things we could do there as well.
15 Q What access does United Water, will United
16 Water, have to the source wells? Is there an agreement?
17 A There isn't a written agreement. I know
18 that all of my conversations with the public works
19 director have been very positive, very open as far as how
20 they operate, and they're struggling with the same water
21 quality issues that we are and the attitude has been that
22 if we can offer them some solutions that we have learned
23 or maybe we can brainstorm up something new that neither
24 of us have tried yet, you know, they're very cooperative.
25 Q Will you please explain what you know about
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Wilder, Idaho 83676 United Water Idaho
1 the source wells and from whom you obtained that
2 information?
3 A Mainly the knowledge we have of the source
4 wells -- well, we do have the well drilling reports, so
5 we know how they were drilled and that information on
6 file. We got that from either Water Resources or Garden
7 City and the water quality data we got from Garden City.
8 Q Okay, did you make any specific requests of
9 your own to either Water Resources or Central District
10 Health with respect to those wells?
11 A No.
12 Q Is it my understanding that the water
13 pressure problems you feel will be remedied immediately
14 with intertie and connection to the booster stations?
15 A I believe that those pressure problems
16 would be remedied by that, yes.
17 Q And it is my understanding that you will go
18 forward with the intertie immediately and not attempt to
19 wait to see whether Garden City remedies the pressure
20 problems in whatever, '96, '97 or whatever year?
21 A Yes.
22 Q I do understand you to have said that the
23 pressure variance that you detected in your independent
24 testing is indicative of a system facility problem.
25 A I'm not sure where -- what was the cause of
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Wilder, Idaho 83676 United Water Idaho
1 that, if that was operations or what. That was actually
2 picked up by the SCADA system, the continuous monitoring
3 equipment that we had in the area.
4 Q Does Garden City have reservoir backup
5 capability?
6 A No, it does not.
7 Q And it is the intention of the Company upon
8 acquisition if approved to connect the North State Area
9 customers to the, to a reservoir?
10 A Yes, our existing distribution system in
11 the area is tied to the reservoir, so when we
12 interconnect the North State distribution system to ours,
13 it would be intertied with the reservoir.
14 Q Was it you that had the -- when did you
15 learn of the stated plans of Garden City to improve its
16 system in '96 with respect to water pressure? Was this a
17 conversation that you had with the city?
18 A During the ongoing discussions last summer,
19 or last year I should say, with Garden City, they
20 discussed some operational problems that they were
21 having, pressure problems, because their system had grown
22 to the extent that the northwest pressure was growing,
23 was getting too high, so they wanted to split the system
24 in half which would enable them to increase the pressure
25 on the southerly portion of the system, so that's -- and
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Wilder, Idaho 83676 United Water Idaho
1 they implied at the time that they wanted to go forward
2 with that.
3 Q You indicated that the low pressure of 35
4 is still an acceptable pressure under requirements, state
5 requirements?
6 A It is the minimum allowed pressure by the
7 Idaho Division of Environmental Quality. My concern
8 would be that that is near the source or that's near
9 State Street and considering the customers nearer to Hill
10 Road, I would think that their pressure would have
11 degraded below 35.
12 Q So unless the pressure were lower than
13 state requirements, Garden City would be under no
14 requirement to improve that pressure?
15 A I don't know who else would impose that.
16 Q Okay, you don't believe that Garden City
17 has committed itself to improve their pressure with any
18 agreement that it's entered into with United Water?
19 A Specifically, I can't speak to that, but I
20 would note that Garden City was not aware of those low
21 pressures until we called it to their attention.
22 Q Referring to your testimony on page 4 and
23 the top of page 5 with respect to interties, you speak of
24 intertie through an existing booster pump at Gary Lane,
25 well and booster station. Is it the Company's proposal
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CSB REPORTING BROWN (X)
Wilder, Idaho 83676 United Water Idaho
1 to do this intertie as opposed to the subsequent intertie
2 you speak of, a new booster pump intertying the North
3 State system with UWI's distribution system and pumping
4 the water needed to serve the North State Area customers
5 through a new booster pump? Do you intend to use an
6 existing pump or install a new pump?
7 A We would use the existing station and
8 upgrade it to a higher capacity.
9 Q And is it -- pursuant to Production Request
10 No. 15, the estimated costs of interconnection were
11 stated to be approximately $47,500. Is this an accurate
12 figure for what the Company is proposing?
13 A Yes, for the interties.
14 Q For the interties, yes. Would there be any
15 additional costs in tying into the Hidden Hollow
16 reservoir?
17 A Only the booster station upgrade.
18 Q That's included within the 47,000, then?
19 A No.
20 Q No?
21 A No.
22 Q When you say no, I think I'm a little
23 confused, then. You said that the costs of the booster
24 station upgrade and the intertie was 47,5, no additional
25 costs will be included for the reservoir and yet --
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CSB REPORTING BROWN (X)
Wilder, Idaho 83676 United Water Idaho
1 A No, you said -- what I understood your
2 question to be was, does the 47,500 constitute what is
3 required for the interties and I said yes. That does not
4 include the booster pump upgrade which would be probably
5 in the range of 10-$15,000.
6 Q Okay, thank you. With respect to the
7 Millstream Area customers and changes in service to them,
8 they will -- do they presently have reservoir backup
9 capability through United Water?
10 A Millstream?
11 Q Millstream.
12 A Yes.
13 Q And so when the Company turns the valve,
14 they'll no longer have that backup capability?
15 A That would be one of the trade-offs, I
16 would say.
17 Q Will the Millstream Area be tied into the
18 Garden City system?
19 A It's my understanding, yes.
20 Q And the Millstream Area presently has two
21 wells; is that correct?
22 A One.
23 Q One well?
24 A The Millstream is intertied with the
25 balance of the United Water distribution system, so
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CSB REPORTING BROWN (X)
Wilder, Idaho 83676 United Water Idaho
1 that's where its backup supply comes from.
2 Q And so do you anticipate that connecting to
3 the Garden City system will affect the water quality of
4 the Millstream Area customers?
5 A There will be a change in water quality.
6 It will be different wells serving the area, certainly;
7 however, there is a well in the Millstream Area, so
8 probably most of those customers will continue to receive
9 their -- they're the first customers next to the well, so
10 I would presume they would receive most of their water,
11 continue to receive most of their water, from that well.
12 Q But they will be tied in, it's your
13 understanding, to the rest of the Garden City system?
14 A That's right.
15 Q So is it possible that their water quality
16 could deteriorate?
17 A It could deteriorate, it could improve. I
18 don't know exactly which wells would be serving. I would
19 say --
20 Q Do you believe right now that the water
21 quality that you're providing to the Millstream Area is a
22 greater water quality than the Garden City system water?
23 A I don't know that I could answer that
24 specifically.
25 Q Will the water pressure of the Millstream
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Wilder, Idaho 83676 United Water Idaho
1 Area customers be affected?
2 A I would presume it will be affected. To
3 what degree, I don't know.
4 Q So that to the extent the water, there are
5 some system problems within the Garden City exchange,
6 then these customers can perhaps expect greater variance
7 in the water pressure than they presently experience with
8 United Water?
9 A I think that that's probably reasonable to
10 say; however, they're on the lower end of the Garden City
11 distribution system, so I would gather their pressure is
12 going to be adequate.
13 Q Does Garden City have any SCADA monitoring
14 system for its water distribution?
15 A I don't know for sure.
16 Q You don't know?
17 A No.
18 Q So the Millstream Area customers could be
19 very well without any monitoring of a SCADA nature, then?
20 A Well, could be.
21 Q And for this trade-off they'll have just a
22 lower price for their water?
23 A That's the effect, I would guess. I don't
24 know of any other.
25 Q Do you believe that -- I mean, these are
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Wilder, Idaho 83676 United Water Idaho
1 your customers right now, the Millstream Area customers,
2 do you feel that they're getting a fair shake in this
3 exchange? Would you like to live in Millstream?
4 A I don't think they're being treated
5 unfairly. I haven't really thought about that.
6 Q You state on page 6 of your testimony that
7 the cost of a new well would be approximately $300,000.
8 Is this a cost that the Company is looking at? Isn't the
9 Company only deferring that cost to its ratepayers for
10 two to ten years, this $300,000 well?
11 A Perhaps. As Wayne, as Mr. Booe previously
12 commented, we are looking at the source of supply issues
13 with regard to the northwest part of our distribution
14 system.
15 Q Do you anticipate that there will looping
16 from your south part to your north part?
17 A That is certainly one of the possibilities
18 in dealing with this. We've been faced with the
19 difficulty of getting water wells on the north side of
20 the river for some time and looping with the system to
21 the south has been one of the considerations for some
22 time as a possibility. It certainly makes sense to have
23 the well if you can get the water quality and the
24 capacity that you need in the area of service, however.
25 Q Should the cost of a supply well be
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Wilder, Idaho 83676 United Water Idaho
1 factored into the cost of acquisition?
2 A That's beyond my scope.
3 Q Whose scope would that be, Mr. Healy's?
4 A I would say that it is beyond mine and I
5 would presume Mr. Healy will be able to speak to that.
6 MR. WOODBURY: Okay. Madam Chair, I have
7 no further questions at this time. Thank you.
8 COMMISSIONER SMITH: Thank you.
9 Mr. Kline.
10 MR. KLINE: No, my questions were covered.
11 COMMISSIONER SMITH: Commissioners?
12 COMMISSIONER NELSON: I have one or two
13 questions. Thank you.
14
15 EXAMINATION
16
17 BY COMMISSIONER NELSON:
18 Q Mr. Brown, you were asked a lot of
19 questions about water quality today. I was wondering in
20 your testing how much difference is there between the
21 quality of the water that Garden City is providing and
22 what you're providing.
23 A That would be difficult to answer.
24 Q Why do the testing if there's no analysis?
25 A I don't understand.
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CSB REPORTING BROWN (Com)
Wilder, Idaho 83676 United Water Idaho
1 Q I mean, when you looked at the results,
2 what did you compare it to?
3 A Oh, we compared the results to the, like,
4 water quality standards, EPA standards, to know if their
5 quality of water was -- in regard to classifying their
6 water quality, we compared it against those standards.
7 Q How did you classify it?
8 A Well, we found that there were a few wells
9 that certainly did have higher than the aesthetic
10 recommended levels for iron and manganese, iron
11 specifically.
12 Q Well, most of the letters that we've
13 received from residents in that area talk about hard
14 water, so how hard is it?
15 A I'd have to -- I don't recall right off the
16 top of my head. I'd have to look.
17 Q That seems like that's a pretty big issue
18 for residents in that area. How hard is your water?
19 A I'm on a private well. I don't know for
20 sure. Oh, United Water?
21 Q Your Company, excuse me.
22 A It ranges.
23 Q You're on a private well?
24 A But it ranges. It's generally classified
25 as moderately hard.
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CSB REPORTING BROWN (Com)
Wilder, Idaho 83676 United Water Idaho
1 Q Moderately hard. How would you classify
2 Garden City's?
3 A I'd have to look up that information.
4 Q Do you have that information with you?
5 A I believe we have that.
6 Q Maybe when you come back for rebuttal, why,
7 you could answer that.
8 A Sure.
9 Q When you were testing the water pressure
10 and it was between 35 and 80 pounds, how long a period
11 did you test it?
12 A That was the result of two weeks of data
13 collection off of the SCADA system where it collects the
14 data on a 24-hour basis and we did it, specifically I
15 gathered that data off of two weeks, one week in July and
16 one week in August of '95.
17 Q Were they consistent between July and
18 August?
19 A Relatively consistent, yes.
20 COMMISSIONER NELSON: Okay, thank you.
21 Those were my questions.
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CSB REPORTING BROWN (Com)
Wilder, Idaho 83676 United Water Idaho
1 EXAMINATION
2
3 BY COMMISSIONER SMITH:
4 Q Well, Mr. Brown, I just have a couple of
5 what I hope are easy questions and perhaps I should have
6 asked Mr. Booe since this is his exhibit, do you have a
7 copy of his Exhibit No. 2 with the map?
8 A I believe I do.
9 Q It's page 8 of Exhibit 2 that shows what
10 we're referring to as the North State Area.
11 A No, I don't have it.
12 Q But my question is, generally, the North
13 State Area is bounded on the east by Pierce Park Lane --
14 A Yes.
15 Q -- and on the west by Gary Lane.
16 A Yes.
17 Q Who serves east of Pierce Park Lane?
18 A We do.
19 Q Does your service on the east come clear up
20 to Pierce Park?
21 A In a couple of spots it does, yes.
22 Q And west of Gary Lane, who serves west of
23 Gary Lane?
24 A We do.
25 Q Okay, and your service west of Gary Lane
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CSB REPORTING BROWN (Com)
Wilder, Idaho 83676 United Water Idaho
1 comes clear up to Gary Lane?
2 A Yes. There are a few subdivisions, mostly
3 north, Northerly Landover and a couple of others that I
4 don't recall.
5 Q So this is a little piece of area that
6 Garden City has been serving that is essentially within
7 two areas you already serve or between two areas?
8 A That's correct.
9 COMMISSIONER SMITH: Okay, thank you. That
10 was my question.
11 Do you have redirect, Mr. Bergquist?
12 MR. BERGQUIST: I don't believe I have any
13 questions. Thank you.
14 COMMISSIONER SMITH: Thank you, Mr. Brown.
15 THE WITNESS: Thanks.
16 (The witness left the stand.)
17 MR. BERGQUIST: I call Mr. Healy.
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CSB REPORTING BROWN (Com)
Wilder, Idaho 83676 United Water Idaho
1 JEREMIAH J. HEALY,
2 produced as a witness at the instance of United Water
3 Idaho, Inc., having been first duly sworn, was examined
4 and testified as follows:
5
6 DIRECT EXAMINATION
7
8 BY MR. BERGQUIST:
9 Q Would you please state your name and
10 business address?
11 A My name is Jeremiah Healy and my business
12 address is 8248 West Victory Road.
13 Q And have you prepared and filed some,
14 prefiled some, direct testimony in this matter?
15 A Yes, I have.
16 Q Are there any corrections or additions or
17 changes in that testimony?
18 A No, there are not.
19 Q And you also are sponsoring some exhibits,
20 are you not?
21 A Exhibit No. 4, yes.
22 Q If I were to ask you the questions set
23 forth in your prefiled testimony, would your answers be
24 the same?
25 A Yes, they would.
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CSB REPORTING HEALY (Di)
Wilder, Idaho 83676 United Water Idaho
1 MR. BERGQUIST: We would request that
2 Mr. Healy's testimony be spread on the record.
3 COMMISSIONER SMITH: If there's no
4 objection, it is so ordered.
5 (The following prefiled testimony of
6 Mr. Jeremiah Healy is spread upon the record.)
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CSB REPORTING HEALY (Di)
Wilder, Idaho 83676 United Water Idaho
1 Q Please state your name and business
2 address.
3 A Jeremiah J. Healy. My business address is
4 8248 West Victory Road, Boise, Idaho 83709.
5 Q By whom and in what capacity are you
6 employed?
7 A I am employed by United Water Idaho Inc.
8 My title is Coordinator of Planning and Rates.
9 Q How long have you been employed by United
10 Water Idaho?
11 A I have been employed by United Water, or a
12 subsidiary of its parent corporation, since February,
13 1980.
14 Q What have your responsibilities been during
15 this period of time?
16 A From February of 1980 until April of 1982,
17 I was employed as a Staff Accountant. My duties included
18 general accounting, Federal and State tax return
19 preparation and preparation of Public Utility Commission
20 Annual Reports. In May, 1982 I became an Internal
21 Auditor and was responsible for conducting financial
22 audits, assisting the external auditors in their duties
23 and performing various special audits. In 1983, I was
24 promoted to Senior Internal Auditor. In September, 1985
25 I became Accounting Supervisor for Boise Water
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Healy, Di
United Water Idaho Inc.
1 Corporation, United Water's Predecessor. In this
2 capacity, I was responsible for all accounting and
3 planning functions. In January, 1990 I was promoted to
4 the position of Financial Coordinator for the Western
5 Region of Boise Water's parent company.
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Healy, Di
United Water Idaho Inc.
1 My scope of responsibility included accounting and
2 operational and strategic planning for five water and/or
3 wastewater utilities located in Arkansas, Idaho,
4 Illinois, Missouri and New Mexico. In September, 1993 I
5 became Director of Rates and was responsible for
6 analyzing the performance of utilities and participating
7 in strategic decisions regarding the need for rate
8 relief. I directed the preparation and presentation of
9 rate cases before regulatory agencies. In November, 1994
10 I took up my present position at United Water as
11 Coordinator of Planning and Rates. My duties now include
12 responsibility for oversight and administration of the
13 accounting, planning and strategic planning, customer
14 service and the Company's water conservation program
15 efforts.
16 Q What is your educational background?
17 A I graduated Magna Cum Laude from the
18 University of South Carolina, Columbia, South Carolina
19 with a Bachelor of Science degree with a major in
20 accounting in May, 1977.
21 Q Have you appeared and presented expert
22 testimony before the Idaho Public Utilities Commission?
23 A Yes. I have testified in rate proceedings
24 before the Idaho Public Utilities Commission, as well as
25 having submitted written testimony before several other
103
Healy, Di
United Water Idaho Inc.
1 state utilities commissions.
2 Q What is the nature of your testimony in
3 this proceeding?
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Healy, Di
United Water Idaho Inc.
1 A I will address several issues with regard
2 to United Water's agreement with the City of Garden City
3 to sell/exchange portions of our respective water
4 systems. The issues I will address are enumerated as
5 follows:
6 1) Recent circumstances leading to the
7 consummation of the agreement.
8 2) Proposed regulatory treatment of purchase
9 price.
10 3) Rate impact on North State customers.
11 4) Customer service and water conservation
12 related issues.
13 5) Purchased water agreement.
14 Q What are the recent circumstances that led
15 to the signing of the agreement between United Water and
16 Garden City?
17 A Mr. Booe, in his testimony, provides
18 historical perspective on issues between the City of
19 Boise City and the City of Garden City with regard to
20 their respective areas of impact, and services provided
21 in those areas. The MOU executed in 1994, between Boise
22 City and Garden City attempted to clarify several issues
23 between the two municipalities, including paragraphs 1
24 and 2 regarding respective impact areas and encouraging
25 Garden City to cooperate with the former Boise Water
105
Healy, Di
United Water Idaho Inc.
1 Corporation, (now United Water) in accomplishing the
2 transfer of water system facilities between the two
3 entities to align with the new impact areas and city
4 boundaries. Garden City officials contacted United Water
5 shortly after the
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Healy, Di
United Water Idaho Inc.
1 execution of the MOU to commence negotiations. Formal
2 negotiations on the transfer of water facility assets
3 began in November, 1994 between United Water and Garden
4 City. After several negotiating sessions, the "Service
5 Area Exchange Agreement" was executed between the parties
6 in July, 1995. This agreement led to the filing of
7 United Water's current application requesting the IPUC to
8 approve the contract, approve the revision of United
9 Water's certificated area consistent with the agreement,
10 authorize United Water to charge the North State
11 Customers under existing rate schedules and allow rate
12 base treatment of United Water's investment in the Garden
13 City system.
14 Q How was the consideration for the
15 transaction established?
16 A As I mentioned previously, several
17 negotiating sessions were held during which the parties
18 attempted to agree on a net price for the system
19 exchange. United Water was not privy to Garden City's
20 negotiating strategy or goals. From United Water's point
21 of view, several factors were taken into account in
22 establishing the net value of the assets. Among the
23 factors considered were the following:
24 * United Water had 382 "Millstream"
25 customers. The "North State" area
107
Healy, Di
United Water Idaho Inc.
1 contained 912 Garden City customers. Thus,
2 United Water stands to increase it's
3 customer base by 530 customers.
4 * The North State area is within United
5 Water's certificated area and provides
6 service on both sides.
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Healy, Di
United Water Idaho Inc.
1 * The benefit to United Water of
2 incorporating the contiguous "North State"
3 area into our system.
4 * The "in-fill" potential in the North State
5 area at minimal additional investment.
6 * Existing United Water transmission and
7 distribution investment per customer was
8 utilized as a benchmark.
9 * The respective ages of the two systems and
10 its impact on operations and maintenance
11 expense. The "Millstream" area is of late
12 1970's vintage. The "North State" area is
13 early 1980's to recent vintage.
14 * The desire of United Water to accommodate
15 the intent of the MOU executed between
16 Garden City and Boise City.
17 * The opportunity, through the MOU and
18 Service Area Exchange Agreement, to settle
19 impact and service area issues that will
20 allow more orderly and efficient growth of
21 municipal and utility systems.
22 All of the above considerations played a part in
23 establishing, through arms-length discussion, a
24 consideration both parties found acceptable.
25 Q What is the basis for including United
Water's investment in the rate base of the Company?
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Healy, Di
United Water Idaho Inc.
1 A The consideration agreed upon in an
2 arms-length transaction between the two parties
3 respectively for the sale/exchange of the water facility
4 assets represents the cost of these assets first devoted
5 to utility service. United Water is entitled to earn a
6 fair rate of return on assets used and useful in the
7 provision of utility service.
8 Q Does the fact that developers contributed a
9 portion of these water facility assets to Garden City
10 have a bearing upon United Water's proposed rate base
11 treatment?
12 A No. Garden City had assets of value that
13 they owned and wished to sell. The method by which
14 Garden City came to own those assets has no bearing on
15 the treatment to be afforded the assets when they become
16 the property of a regulated utility.
17 Q Are any of the assets to be purchased by
18 United Water duplicative or unnecessarily redundant to
19 existing facilities?
20 A A small portion of the assets to be
21 acquired from Garden City could be considered duplicative
22 or unnecessarily redundant of existing facilities. Most
23 of these facilities were installed as the result of the
24 competitive and uncertain atmosphere existing in this
25 area prior to the recent understandings that have been
110
Healy, Di
United Water Idaho Inc.
1 reached between the municipalities and the definitive
2 determination of respective areas of impact. In the
3 future, duplicative facilities should be rare.
4 Q What do you estimate to be the annual rate
5 impact on a typical "North State" customer?
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Healy, Di
United Water Idaho Inc.
1 A Based on the average usage of United Water
2 residential customers, (156 CCF for the 12 months ended
3 10/15/95), the rate differential for a 3/4" meter
4 customer will be approximately $68.59 annually or a 34%
5 increase as calculated on Exhibit 4.
6 Q Is the 34% increase justified?
7 A It is difficult to compare water rate
8 differences between two diverse entities. Garden City is
9 a municipal corporation and, therefore, is not obligated
10 to pay Federal or State income taxes. Also, their rates
11 may or may not reflect their cost of service. United
12 Water is a regulated public utility and part of an
13 investor owned entity and, therefore, is subject to
14 Federal and State income taxation. Also, United Water's
15 rates are based on the cost of providing service. I
16 believe, not withstanding the proceeding, there are
17 several justifications for the 34% increase. With all
18 due respect to the Garden City's Public Works Department,
19 I believe United Water will provide a higher quality of
20 service to the North State area customers due to our
21 expertise and the fact that we are exclusively a water
22 purveyor. United Water has operations and maintenance
23 programs, water quality testing and monitoring programs,
24 customer service programs, as well as other areas of
25 expertise, that are well respected in this area and the
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United Water Idaho Inc.
1 Northwest. United Water's conservation oriented rate
2 structure will also help North State customers adjust and
3 economize their usage to reflect the arid climate
4 existent in the
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1 Treasure Valley. Toward this conservative end, the
2 Company's overall water conservation plan, and in
3 particular the residential water audit program and public
4 education programs, will be a benefit. In addition, the
5 fact that United Water is a regulated utility may provide
6 North State customers with an increased ability to
7 comment and have input on their quality of service,
8 either by direct input to the Company or by their ability
9 to participate in actions before the IPUC.
10 Q In your opinion, will the acquisition of
11 the North State area have an adverse impact on existing
12 United Water customers?
13 A No. I believe the integration of the North
14 State area into the United Water system will not
15 adversely impact any current customers.
16 Q Please comment on United Water's contracts
17 to purchase water from Garden City under the Service Area
18 Exchange Agreement, as well as under any other contracts.
19 A To allow for smooth integration of the
20 North State area into the United Water System, it was
21 decided that United Water should secure the right to
22 purchase source water from Garden City for a limited
23 time. This will allow Engineering and Operations staff
24 to consider options for future supply and what
25 integration alternative is best suited. Garden City has
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United Water Idaho Inc.
1 a reliable supply of water available that they were
2 willing to sell, allowing United Water to defer new
3 source investment. United Water had previously
4 (February, 1995) reached agreement with Garden
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United Water Idaho Inc.
1 City to allow the Company to purchase water from the City
2 at a Gary Lane/Glenwood site. This allows the Company to
3 adequately serve customers in that area. The partnership
4 with Garden City has allowed the Company additional
5 flexibility in meeting customer demand.
6 Q Does this conclude your testimony?
7 A Yes.
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United Water Idaho Inc.
1 (The following proceedings were had in
2 open hearing.)
3 MR. BERGQUIST: He's available for
4 cross-examination.
5 COMMISSIONER SMITH: And we'll identify
6 Exhibit No. 4.
7 Mr. Kline, do you have questions for
8 Mr. Healy?
9 MR. KLINE: I don't have any questions on
10 his direct testimony.
11 COMMISSIONER SMITH: Thank you.
12 Mr. Woodbury.
13 MR. WOODBURY: Thank you, Madam Chair.
14
15 CROSS-EXAMINATION
16
17 BY MR. WOODBURY:
18 Q Mr. Healy, referring to your testimony on
19 page 5, you speak of negotiating sessions with Garden
20 City which led up to this service area exchange
21 agreement. Did you participate in those negotiating
22 sessions?
23 A I did.
24 Q And did anyone else from United Water
25 participate?
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1 A Mr. Booe and I were the principal
2 negotiators for United Water. Mr. Brown was present at
3 several sessions, but Mr. Booe and I were the principal
4 negotiators.
5 Q And at the time you initiated those
6 negotiating sessions, had you already concluded your
7 analysis of the system that you were seeking to acquire?
8 A We did not initiate the negotiations. The
9 negotiations were initiated by the City of Garden City.
10 They contacted us upon the signing of their MOU, the City
11 of Boise City, and asked us if we would be interested in
12 pursuing negotiations. Those negotiations went on for a
13 period of about seven months. They commenced late in
14 1994 and went through July of '95 when our agreement was
15 signed and there was discussion throughout that period
16 and information gathering throughout that period of time.
17 Q And so your analysis was completed prior to
18 arriving at a price for the system?
19 A The principal analysis was complete. There
20 have been facts come to light after the signing of the
21 agreement that may have a bearing on the agreement.
22 Q What facts are you referring to?
23 A The principal fact would be the agreement
24 was made with the understanding that Garden City had 912
25 customers in the North State Area. In the discovery
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1 process of this application, when I contacted Garden City
2 to provide the breakout on meter size, their billing
3 people indicated that there may only be 771 customers.
4 Q And will that affect the revenue that's
5 generated?
6 A That would affect not only the revenue
7 generated but the purchase price United Water is willing
8 to pay. We have been in touch, I've been in touch
9 personally, with Mr. Dearden, the director of public
10 works, and we understand that a final customer count will
11 be substantiated and arrived at prior to carrying out the
12 agreement.
13 Q And if the customer count is 771, can you
14 estimate what the purchase price will be?
15 A What my understanding is with Mr. Dearden
16 is we will make appropriate adjustments. From my point
17 of view, those adjustments, I think, would be on the
18 general basis of a pro rata reduction in the investment.
19 Q And so that would reduce the $593,250 to
20 what?
21 A I haven't carried out that calculation.
22 Off the top of my head -- I mean, since this was a
23 negotiated agreement, we have further contact with Garden
24 City. If they can't substantiate the customers, we would
25 reopen the agreement and I would say the highest figure,
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1 perhaps, that United Water would be willing to pay would
2 be a prorated number, but I haven't done the calculations
3 on that number.
4 Q Are you familiar with the -- in speaking of
5 the rates and charges to the North State Area customers,
6 are you familiar with the consumption patterns of those
7 customers?
8 A Garden City provided us with billing
9 records for customers in the North State Area and I'm
10 generally familiar with their consumption patterns, yes.
11 Q And is their consumption pattern similar to
12 United Water?
13 A I think on the whole they are. As Mr. Booe
14 mentioned, we had occasion to drive through that area, in
15 many occasions to inspect the nature of the area, the
16 prospects for further development in that area and our
17 general observations were that their customers were
18 similar in many respects to what we would consider an
19 average United Water customer.
20 Q But they do not pay a summertime
21 conservation rate; is that correct?
22 A To the best of my knowledge, their
23 commodity rate is constant throughout the year.
24 Q And so the Company does anticipate that
25 instituting your summer rate will send a conservation
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1 price signal and reduce consumption?
2 A I would anticipate it would send a price
3 signal. I would say whether that reduces consumption or
4 not is -- I couldn't tell you at this time.
5 Q Did United Water when it instituted its
6 summertime rate see any change in consumption patterns in
7 its own customers?
8 A It's very difficult to tell. Our
9 conservation rates, our summer rate, I believe, was
10 established in 1994, perhaps 1993. There are many
11 factors that impact the consumption of water, weather
12 being in my opinion the primary determinant, so, for
13 example, this past year we noticed that in general our
14 customer consumption was lower than what we would
15 consider an average year, but it's difficult for us to
16 measure the exact nature of why the lower consumption
17 occurs. It could be conservation rates, it could be
18 merely a demand situation.
19 Q You speak on page 5, starting at line 15,
20 relevant factors in establishing the net value of the
21 assets, the first of those being the number of
22 customers. Is it the -- which is the important figure, I
23 guess, just the net increase in the number of customers
24 for the purpose of the Company in determining whether the
25 revenue for the purchase that customers will pay their
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1 own way?
2 A I mean, there are several ways to look at
3 this. In the negotiating sessions, I mean, our knowledge
4 was that we would increase our customer base by 530
5 customers. If you're looking at it from a financial
6 point of view, it would depend in my opinion on what
7 investment you were looking at. If you were looking at
8 our investment in the North State Area as a gross number,
9 in other words, the negotiated price reflected the fact
10 that we were both purchasing part of their system and
11 surrendering part of our system, so you can look at the
12 financial performance in several lights, but, generally,
13 if you're just looking at North State as an isolated
14 system, I would propose that you look at our gross
15 investment in that area compared to the total revenue
16 derived from all customers in the North State Area.
17 Q So the 771 customer figure would be the
18 number that this Commission should consider as opposed to
19 the 389 net customers realized?
20 A Right now it's not clear. The 912 in my
21 opinion is what Garden City represented they have in that
22 area.
23 Q When did the Company first learn that that
24 figure might not be correct and, I guess, then explain to
25 me why you didn't take steps between then and now to
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1 determine what the exact number of customers is?
2 A We're waiting for Garden City to comply
3 with our -- the first knowledge we had that there could
4 be a problem with the customer counts was between the
5 negotiating period and the discovery period when we asked
6 Garden City to provide information with regard to those
7 customer counts. On several occasions they were asked to
8 provide that and for whatever reason they weren't able to
9 provide it, but why we haven't taken steps is I've been
10 in contact with Mr. Dearden in Garden City and they are
11 still in the process of coming up with an exact number,
12 at which time we will most likely -- it's possible we'll
13 even count them door to door because the voracity of
14 their records is subject to some dispute at this point.
15 Q But the Company responded to the Production
16 Request No. 6 of the Staff in September 20th of 1995 and
17 it indicated there that the total number of meters was
18 771, and so between then and now you still haven't been
19 able to verify that number?
20 A I have not attempted to verify it. I've
21 asked Mr. Dearden to provide a number that is reliable
22 and we've let Garden City know that in our opinion the
23 contract was premised on 912 customers and if there are
24 more or less customers, the price would be adjusted
25 accordingly.
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1 Q Is there an understanding between United
2 Water and Boise City as to how the fire hydrants, who
3 should own those?
4 A To my knowledge, there is not an
5 understanding at this time. Our practice in United
6 Water, we do not own the fire hydrants on our system is
7 my understanding, but I'm not aware of discussions
8 between us and the city prior to approval of this
9 agreement as to how the hydrants will be handled.
10 Q Do you know how many hydrants there are in
11 the North State Area?
12 A I do not.
13 Q Could I refer you to -- do you have a copy
14 of the production requests and the answers?
15 A I think I do, yes.
16 Q In Production Request No. 2, this was the
17 preliminary estimate of value prepared by, I'm assuming,
18 Garden City.
19 MR. BERGQUIST: No. 2?
20 MR. WOODBURY: No. 2. It was the
21 attachment to your answer.
22 THE WITNESS: I do have that, yes.
23 Q BY MR. WOODBURY: Is that figure -- this
24 was data that the Company relied upon because it was
25 provided by Garden City?
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1 A I wouldn't say we relied upon it, other
2 than from a statistical nature.
3 Q From a statistical nature?
4 A Yes.
5 Q One of the subdivisions is hydrants?
6 A Correct.
7 Q And is that $1,500 figure, was that a
8 construction cost figure, I guess, per hydrant?
9 A My recollection of this exhibit is that is
10 a, I believe that that is the replacement cost.
11 Q Replacement cost, and does the -- does
12 United Water have a similar replacement cost for
13 hydrants?
14 A I'm sure we have a replacement cost. I
15 don't know what it is.
16 Q Is the following -- the total figure there,
17 44, at the end of that column, bottom of the column, is
18 that the total number of hydrants in the North State
19 Area, is that what that represents?
20 A I think that's what they're purporting to
21 represent, yes.
22 Q And the Company has not verified that?
23 A At this time we haven't.
24 Q Is it your intention to, I guess, verify
25 that all of the plant is in place before this deal is
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1 consummated or just the number of customers?
2 A I think we have a pretty good idea that
3 every customer receiving service there's plant in place.
4 Garden City is having difficulty providing information on
5 a number of issues, not only customer counts but with
6 regard to their investment in their system. Garden City
7 is under an obligation by the contract to provide us with
8 all available documents relating to their system.
9 Q And so you're not aware of any agreement
10 between United Water to give those hydrants to Boise
11 City?
12 A I guess my opinion would be that would be
13 my expectation, but I'm not aware of any discussions
14 between United Water and the City of Boise with regard to
15 the fire hydrants. That's not to say one hasn't
16 occurred.
17 Q Are you paying for the value of those
18 hydrants as part of the purchase price?
19 A Generally. We bought their transmission
20 and distribution system in that area.
21 Q Do you anticipate that the hydrants will be
22 sold to Boise City or just gifted to Boise City?
23 A I couldn't say.
24 Q Would Mr. Booe be a better person to ask
25 that question of?
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1 A Perhaps he would be, yes.
2 Q You speak of the in-fill potential in the
3 North State Area at minimal additional investment. It's
4 my understanding talking to Booe, though, that the number
5 of potential additional customers has not been
6 estimated.
7 A Actually, it has been generally estimated
8 in my opinion. Wayne and I and Mr. Dearden toured the
9 North State Area, generally the area between Pierce Park
10 and Gary Lane, on a couple of occasions, one occasion
11 specifically to assess the in-fill potential. Garden
12 City had represented a number to us on what we could
13 expect the potential additional connections in that area
14 and we --
15 Q What was the number provided to you by
16 Garden City?
17 A To the best of my recollection, Mr. Dearden
18 indicated that there could be as many as 250 customers
19 that were fronted and ready to serve in that area.
20 Q Was this already platted and approved
21 subdivisions?
22 A That was our initial understanding. That
23 was the question we asked, for either platted and
24 approved or existing subdivisions with empty lots. As we
25 toured the area, we generally found that we weren't
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1 comfortable with the number 250.
2 Q So did you ask the city for further
3 documentation or verification of that number?
4 A We came to an agreement with Mr. Dearden
5 that in our opinion the number was probably closer to
6 140.
7 Q And so will this -- did you come to that
8 agreement before or after you arrived at the exchange
9 agreement price?
10 A During that process.
11 Q And so did the in-fill potential affect the
12 price that United Water was willing to pay?
13 A Yeah, I believe I mentioned that in my
14 testimony. We gave some weight to the in-fill potential,
15 yes.
16 Q I think -- okay, and was this a dollar
17 figure that you calculated this was worth or is it just
18 no figure attributed to it?
19 A That's a difficult question. You know,
20 United Water being a regulated utility tends to look at
21 investment in one way, the City of Garden City looks at
22 it in another way. It was a factor considered. I can't
23 say that there was a specific dollar amount placed on the
24 in-fill potential. We were aware of the potential.
25 Q When you ask for Commission authorization
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1 to include the investment in rate base, are you asking
2 that it be included immediately and rates be adjusted or
3 are you saying after the Company's next general rate
4 case?
5 A We are asking that, if possible, we get
6 some assurance that that investment would be included in
7 rate base at our next general rate proceeding, not
8 immediately.
9 Q And you state on page 7 that the
10 contribution of the facilities, I guess the question as
11 to the contribution of facilities, by the developers to
12 Garden City should have no bearing on this Commission's
13 determination as to appropriate rate base treatment of
14 the acquisition amount?
15 A That's my opinion, yes.
16 Q And do you know whether there's any basis
17 in utility accounting practice or Commission policy for
18 such a position?
19 A I think there are accepted accounting
20 procedures that generally apply to transactions of this
21 nature. On occasion, there is reason found to depart
22 from those procedures.
23 Q And what are the factors that give rise to
24 those departures from the procedures? What has to be
25 shown?
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1 A I believe that there are factors with
2 regard to whether the customers will receive any benefit,
3 perhaps whether there's impact on existing customers. I
4 would think the factors would vary given the situation.
5 We believe there are many factors in this case that
6 justify including our investment in rate base.
7 Q But all of the factors that you think are
8 relevant have been cited by the Company witnesses, you're
9 not keeping any of those to yourself, are you?
10 A In my rebuttal, I believe I enumerate the
11 reasons. I think there are substantial reasons.
12 Q In speaking of duplicative or unnecessarily
13 redundant facilities, you indicate in a production
14 response to Staff that there were two areas, one east of
15 Gary Lane along Bluebird Street, a 16-inch UWI
16 distribution main parallels an 8-inch Garden City line
17 and it's the Company's intent to connect that over to the
18 16-inch line; is that correct?
19 A I don't know if that is our intent.
20 Q You don't. You don't know whether that's
21 one -- is that one of the redundant systems that you --
22 this is Production Request No. 22. Do you have that?
23 A I think I do, yes. I do have it.
24 Q When you speak of east of Gary Lane along
25 Bluebird Street, how long do these lines parallel each
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1 other? Is this a matter of feet or blocks?
2 A To the best of my recollection, it's a
3 matter of several blocks, but I could stand corrected on
4 that.
5 Q Okay, and did the Company take into
6 consideration the redundant facilities in determining its
7 value to the acquired property?
8 A I think generally in complying or entering
9 into negotiations with Garden City we were aware where
10 two providers are providing service in the same area or
11 close to the same area there is potential for maybe
12 duplicative facilities or at least facilities that are
13 unnecessarily in place and would not be sized in the same
14 manner if one utility was serving that area, so we were
15 aware that our competition, so to speak, with Garden City
16 has in some cases caused either United Water or the
17 municipality to put in facilities that may not strictly
18 be necessary.
19 Q Did you attempt to assess or to attribute a
20 value to the redundant facilities?
21 A We did not attempt to attribute a value.
22 We specifically wrote in our agreement with them, though,
23 the benefit of, one of the benefits of, this agreement
24 being that this type of duplicative asset would be
25 minimized in the future if we could agree on areas to be
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1 served by each utility.
2 Q Did Garden City provide original cost data
3 on the North State Area?
4 A In the -- original cost data, actually,
5 they did not provide.
6 Q They provided cost of replacement data?
7 A Correct. In the response to an
8 interrogatory we looked at earlier, they did supply us
9 with some replacement cost data.
10 Q And your engineering staff, I guess,
11 reviewed that data to determine its reasonableness?
12 A Our engineers were aware of that data. As
13 Mr. Booe indicated in his testimony, Garden City in our
14 initial negotiating sessions came in and asked us to pay
15 $2 million for their facilities. We considered that
16 request to be unreasonable. They came back, and my
17 recollection is that their response to our position on
18 that was they came back, with this document that was
19 incorporated into the interrogatory and we gave that some
20 more credibility than the $2 million figure; however, we
21 continued to negotiate. I don't recall that that
22 particular document was particularly germane to our
23 negotiations.
24 Q In determining the annual rate impact on a
25 typical North State Area customer, you indicate on page 7
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1 that, I guess, you anticipated the increase on an annual
2 basis to be about 34 percent and you state that this was
3 based on average United Water customer usage of 156 CCF
4 per year, and yet, do you recall whether this type of
5 usage compares favorably with the figures provided by
6 Garden City as far as annual usage?
7 A In driving through the area and observing
8 the area --
9 Q I don't understand how --
10 COMMISSIONER SMITH: Mr. Woodbury.
11 MR. WOODBURY: Madam Chair.
12 COMMISSIONER SMITH: It's very unsettling
13 to have the witness continually interrupted in his
14 responses.
15 MR. WOODBURY: Oh, I apologize for that.
16 COMMISSIONER SMITH: And I'm still
17 struggling to find your reference on page 7, so if you
18 could help me with that.
19 MR. WOODBURY: It was starting line 19.
20 COMMISSIONER SMITH: Okay, I've got you.
21 All right, thank you. Sorry for the interruption.
22 MR. WOODBURY: Well, I'm sorry for how the
23 record is going to look.
24 Q BY MR. WOODBURY: My question is in
25 determining customer usage, don't you look at the
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1 Company's billing data as opposed to a drive through the
2 area?
3 A I think both methods have been used. We
4 have billing data from Garden City on that area.
5 Frankly, much of their billing data I found to have some
6 errors and I wasn't comfortable with. A drive-through,
7 though, we're quite familiar when we look at landscaping
8 and yard sizes, what that might translate into in terms
9 of water usage.
10 Q I think I touched on this with perhaps one
11 of your other witnesses, you state that United Water will
12 provide a higher quality of service to the North State
13 Area customers and in making that statement, aren't you
14 also stating that the Millstream Area customers will
15 receive a lower quality of service?
16 A I don't believe I'm making that statement.
17 There are many factors, I believe, to be weighed here.
18 One is service. I think we can unequivocally say that we
19 feel that the North State customers will see a general
20 increase in the quality of their service. The Millstream
21 customers, I have not been contacted by any Millstream
22 customers. As Mr. Brown indicated, they will -- it might
23 be that they will receive the same water they are
24 receiving now. We're not privy to Garden City's plans in
25 that regard, but there is no doubt that Garden City will
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1 be -- those Millstream customers will be provided service
2 by the municipality in which they reside, so they will
3 have an avenue to comment on that service, like they do
4 now.
5 MR. WOODBURY: Madam Chair, I still have
6 some questions for Mr. Healy and I think that will take
7 us beyond noon and I would ask that we could adjourn now
8 for lunch because I have a need to go to the end of the
9 hall and use the facilities there.
10 COMMISSIONER SMITH: It is a good time to
11 break for lunch and why don't we take up again at 1:15.
12 MR. WOODBURY: Thank you.
13 (Noon recess.)
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