UWI4221.docx

1 BOISE, IDAHO, WEDNESDAY, APRIL 22, 1998, 9:30 A. M.
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4 COMMISSIONER NELSON: Good morning. This
5 is the time and place set for our hearing in the
6 application of United Water Idaho Inc. to revise and
7 increase rates charged for water service. This is our
8 Case UWI-W-97-6.
9 To start this morning, let's take the
10 appearances of the parties. Mr. Miller.
11 MR. MILLER: Thank you, Mr. Chairman. Dean
12 J. Miller of the firm McDevitt & Miller on behalf of the
13 Applicant United Water Idaho. I'd also like to introduce
14 to the Commission Mr. Walton F. Hill who is the vice
15 president for regulatory law of United Water Management
16 and Services Company. Mr. Hill is a member in good
17 standing of the Pennsylvania and New Jersey bar
18 associations and we would ask that Mr. Hill be associated
19 as counsel for the purpose of participating in this
20 proceeding.
21 COMMISSIONER NELSON: All right, we can
22 grant that.
23 Ms. Ullman.
24 MS. ULLMAN: I'm Sharon Ullman. I am an
25 intervenor in the case. I am here on behalf of the
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CSB REPORTING COLLOQUY
Wilder, Idaho 83676
1 ratepayers of United Water in general.
2 COMMISSIONER NELSON: And Mr. Fothergill.
3 MR. FOTHERGILL: Al Fothergill for the
4 Idaho Citizens Coalition.
5 COMMISSIONER NELSON: And Mr. Woodbury.
6 MR. WOODBURY: Scott Woodbury, Deputy
7 Attorney General, for Commission Staff.
8 COMMISSIONER NELSON: Is anybody here for
9 Hidden Springs or for Eagle Water? Okay, those parties
10 were both granted intervention, but apparently decided
11 not to participate today. Do we --
12 MR. WOODBURY: Mr. Chairman, there was also
13 the Coalition of United Water Customers and they're not
14 here either.
15 COMMISSIONER NELSON: Oh.
16 MS. ULLMAN: Mr. Chairman, Mr. Richardson
17 asked me to pass along the comment that they do not
18 intend to be here today.
19 COMMISSIONER NELSON: All right, thank
20 you. With that, I guess I would ask if there's any
21 preliminary matters before we go to the testimony of the
22 witnesses.
23 MR. MILLER: We have just a couple of
24 items, Mr. Chairman, if I could.
25 COMMISSIONER NELSON: All right.
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CSB REPORTING COLLOQUY
Wilder, Idaho 83676
1 MR. MILLER: First, just for the
2 convenience of the Commission, I would like to call the
3 Commission's attention to United Water Exhibit No. 20
4 which is part of Mr. Healy's rebuttal testimony and it
5 will be a while before we actually introduce this, but I
6 thought I would just call it to the Commission's
7 attention simply because it provides, I think, for
8 informational purposes just a good overview of where
9 United Water believes the case sits at this point
10 following the adjustments proposed by Staff, and we will
11 later on indicate on that exhibit which adjustments are
12 now without contest so the Commission will have sort of a
13 guide to the issues in the case.
14 COMMISSIONER NELSON: Okay, thank you.
15 MR. MILLER: So then the other item that
16 I'd like, I guess, just the Commission's guidance on is
17 this: The Commission will recall that this application
18 was filed in two stages; the first stage a revenue
19 requirement stage and the second stage a cost of service
20 stage. In the application, the Company requested as the
21 relief to be awarded in this case that at the conclusion
22 of this case whatever rates the Commission authorizes be
23 implemented upon a uniform percentage basis.
24 It was the Company's impression that on two
25 occasions the Commission agreed to that request. Then in
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CSB REPORTING COLLOQUY
Wilder, Idaho 83676
1 the rebuttal testimony filed by Mr. Powers and by
2 Ms. Ullman, there was a request stated in the testimony
3 rather than a motion that any rate increase would be
4 deferred until the end of Phase 2. The Company in
5 response to that filed a motion to strike that testimony
6 setting forth a number of reasons based on equity and law
7 as to why rates should be implemented at the end of this
8 proceeding.
9 My understanding is the Commission
10 determined that motion was premature and that it should
11 be raised again at the hearing, so this is a long way
12 around of asking whether the Commission would desire that
13 that motion be raised now or we wait until the testimony
14 that it's directed at is actually offered, so I'm just
15 asking for the Commission's guidance on how you would
16 like us to proceed in that respect.
17 COMMISSIONER NELSON: I think we'll wait
18 until that testimony is offered and then we would have a
19 chance to discuss what's coming and have a response for
20 you.
21 MR. MILLER: All right, well, I just wanted
22 to alert the Commission --
23 COMMISSIONER NELSON: That's fine.
24 MR. MILLER: -- alert the Commission to
25 that issue that needs to be resolved and we'll resolve it
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Wilder, Idaho 83676
1 as you suggest. Those, I believe, are the only
2 preliminary items that we have.
3 COMMISSIONER NELSON: Okay. Well, if
4 there's nothing further, why, then we'll go to you,
5 Mr. Miller, for your first witness.
6 MR. MILLER: Thank you, Mr. Chairman. The
7 Applicant would call William C. Linam.
8 While Mr. Linam is taking the stand, I
9 might indicate that it is the Applicant's intention to
10 present the direct testimony of its witnesses, then hear
11 the testimony of the Staff and intervenors and then the
12 rebuttal testimony of the Company witnesses.
13 COMMISSIONER NELSON: Okay, that would be
14 fine.
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16 WILLIAM C. LINAM,
17 produced as a witness at the instance of United Water
18 Idaho Inc., having been first duly sworn, was examined
19 and testified as follows:
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21 DIRECT EXAMINATION
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23 BY MR. MILLER:
24 Q Sir, would you state your name, please?
25 A William C. Linam.
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CSB REPORTING LINAM (Di)
Wilder, Idaho 83676 United Water Idaho Inc.
1 Q And by whom are you employed, Mr. Linam?
2 A I'm employed by United Water Idaho.
3 Q And in what capacity are you employed by
4 United Water Idaho?
5 A I'm employed as the general manager.
6 Q Mr. Linam, in connection with this
7 proceeding, did you have occasion to previously file
8 written prefiled direct testimony?
9 A Yes, I did. I filed testimony consisting
10 of 19 pages of text and two exhibits.
11 Q And with respect to the -- those would be
12 Exhibits No. 1 and 2?
13 A Yes, that is correct.
14 Q Very good. With respect to the written
15 prefiled testimony, are there any additions or
16 corrections that need to be made to the testimony?
17 A Yes, there are.
18 Q Would you point those out for the
19 Commission, please?
20 A If you'd refer to page 3, line 6, the
21 number that's on that line that is "71" should read "74."
22 Q And what is the reason for that change or
23 correction?
24 A I believe we omitted the three wells that
25 are located at Warm Springs Mesa.
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CSB REPORTING LINAM (Di)
Wilder, Idaho 83676 United Water Idaho Inc.
1 Q Very good. Other corrections or additions?
2 A Yes, if you'd refer to page 4, line 24, it
3 should read "C97D105" rather than "C97D102."
4 Q And what's the reason for that change?
5 A It was a clerical error.
6 Q Very good. Any others, Mr. Linam?
7 A And page 13, line 4 should read "C97D015"
8 rather than "C97D101."
9 Q And that's the same as before?
10 A That's the same error.
11 Q Any other corrections or additions?
12 A No, there are not.
13 Q Now, just for informative purposes, if I
14 might, Mr. Linam, one of your exhibits which you filed
15 with your testimony is Exhibit No. 2; is that correct?
16 A That is correct.
17 Q And for the convenience of the Commission,
18 have you prepared an enlargement of that exhibit?
19 A Yes, I have.
20 Q Is that the poster that we see to your
21 right?
22 A It would have to be to my left, but, yes,
23 it is.
24 COMMISSIONER NELSON: When you're
25 left-handed to start with, it's always difficult.
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CSB REPORTING LINAM (Di)
Wilder, Idaho 83676 United Water Idaho Inc.
1 Q BY MR. MILLER: And does that exhibit
2 depict the location of a number of the acquisitions and
3 capital projects that are at issue in this case?
4 A Yes, it does.
5 Q And just for the convenience of the
6 Commission just to give the Commission and the parties a
7 visual depiction of the relevant locations of those
8 items, could you on the enlarged exhibit point out what
9 Section A is, what Section B is and so on?
10 A Yes, I can. May I approach the exhibit?
11 COMMISSIONER NELSON: Sure.
12 THE WITNESS: The exhibit primarily depicts
13 the area that is west of the downtown Boise area. If you
14 look at the extreme right-hand side or the eastern piece
15 of the exhibit it's denoted as Section D and this is a
16 section where we have anticipated drilling a new well and
17 putting in a piece of transmission main to tie into an
18 area we refer to as the Hidden Hollow area because it has
19 a storage reservoir that we named Hidden Hollow which is
20 located just north of Hill Road on Hidden Hollow.
21 We have Section C, which is again to the
22 eastern section of the exhibit, north of Section D which
23 depicts an area where we made a major main extension from
24 the Hidden Hollow reservoir area over to tie into a
25 section that we refer to as Floating Feather/Redwood
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CSB REPORTING LINAM (Di)
Wilder, Idaho 83676 United Water Idaho Inc.
1 Creek which is designated as Section A on our exhibit and
2 that is to the extreme western side or left-hand side of
3 the exhibit, and then to the south of the City of Eagle
4 area and to the southern part of our exhibit we have a
5 Section B which we designated as the Island Woods area
6 which primarily consists of two wells and some
7 transmission and distribution mains located in a future
8 subdivision.
9 Q BY MR. MILLER: Very good. With that
10 explanation and illustration, Mr. Linam, if I asked you
11 the questions that are set forth in your direct prefiled
12 testimony, would your answers today be the same?
13 A Yes, they would.
14 Q To the best of your knowledge, are the
15 answers set forth in your direct prefiled testimony true
16 and correct?
17 A Yes, they are.
18 MR. MILLER: Mr. Chairman, we would ask
19 that the direct prefiled testimony of Mr. Linam be spread
20 on the record as if read and Exhibits No. 1 and 2 be
21 marked.
22 COMMISSIONER NELSON: Without objection,
23 why, so ordered.
24 (The following prefiled testimony of
25 Mr. William Linam is spread upon the record.)
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CSB REPORTING LINAM (Di)
Wilder, Idaho 83676 United Water Idaho Inc.
1 Q What is your name and address?
2 A My name is William C. Linam and my business
3 address is 8248 W. Victory Road, Boise, Idaho 83707.
4 Q By whom are you employed and in what
5 capacity?
6 A I am employed by United Water Idaho Inc.
7 (UWID or the Company) as General Manager.
8 Q Please describe your work experience.
9 A I have been employed at United Waterworks
10 Inc. since March, 1970. I have worked in various
11 capacities in several states since my employment,
12 including engineering services for our companies located
13 in Arkansas, Missouri, Indiana, Illinois, Delaware,
14 Pennsylvania, Idaho, Oregon, and California; Manager of
15 United Water Idaho and management oversight as Region
16 Manager for our companies located in Pennsylvania,
17 Delaware, New Jersey, Arkansas, Virginia, Florida, Maine,
18 Connecticut, New York, Indiana, Illinois, Missouri, Rhode
19 Island and New Mexico. I assumed my current position as
20 General Manager on July 1, 1997.
21 Q Please describe your educational background
22 and other qualifications.
23 A I am a graduate of the University of
24 Arkansas with Bachelor and Master of Science degrees in
25 Civil Engineering. I have completed approximately 40
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Linam, Di 1
United Water Idaho Inc.
1 combined semester hours of business courses at the
2 University of Arkansas, Boise State University, and Penn
3 State University. I have previously provided testimony
4 concerning engineering and/or operations before the
5 Pennsylvania, Arkansas, Delaware, New Mexico, and
6 Illinois Regulatory Utility Commissions.
7 Q What are your duties as General Manager of
8 United Water Idaho?
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Linam, Di 1A
United Water Idaho Inc.
1 A My duties basically are to deal with the
2 daily operation in providing potable water to the
3 customers of UWID. I supervise the various departments
4 of Engineering, Production, Transmission & Distribution,
5 Customer Service, Billing, Automation, Planning, and
6 Accounting in meeting their responsibilities of the
7 delivery of potable water and the related services in
8 dealing with customers.
9 These functions include planning for the raw water
10 source, construction, maintenance, and operation of the
11 treatment and pumping facilities; construction,
12 maintenance, and operation of the distribution system
13 including mains, services, and storage tanks; responding
14 to customer needs regarding initial service or
15 discontinuing service, by reading customer meters,
16 processing and delivery of bills, and responding to
17 customer needs through the Customer Service
18 Representatives. Also included is supervision of the
19 individual responsibilities for following all regulations
20 in regard to safety, complying with the Safe Drinking
21 Water Act, and other similar requirements.
22 Q Will you be spending 100% of your time in
23 the future dealing with management issues at United Water
24 Idaho?
25 A No, I anticipate that I will spend
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Linam, Di 2
United Water Idaho Inc.
1 approximately 85% of my time dealing with management
2 issues at United Water Idaho and 15% of my time providing
3 some management oversight for our companies in Arkansas,
4 Missouri, and Illinois. Any time spent on other
5 companies will be billed to them along with the
6 appropriate payroll overheads, and will be supported by
7 time records.
8 Q What is the purpose of your testimony?
9 A I will testify to the operations of the
10 Company and the necessity for certain capital additions.
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Linam, Di 2A
United Water Idaho Inc.
1 Q Would you please describe the operations of
2 United Water Idaho?
3 A United Water Idaho provides domestic water
4 service and fire protection to approximately 57,350
5 residential, commercial, industrial, private fire
6 protection and public authority customers within the City
7 of Boise and the immediate surrounding area. Currently
8 our source of supply is one surface water treatment plant
9 and 74 deep wells which are located throughout a service
10 area of approximately 120 square miles. At this time,
11 water treatment essentially consists of the addition of
12 chlorine for system residuals and sequestration for the
13 well supplies. At the surface water treatment plant the
14 treatment ranges from direct filtration to full
15 coagulation, settling and filtration depending on the
16 quality of the raw water. The combined production
17 capacity of all sources is approximately 82 million
18 gallons per day. During the test year, the maximum day
19 production was 79.2 million gallons, the minimum day
20 production was 16.0 million gallons, while average day
21 production was approximately 37 million gallons per day.
22 The distribution system consists of approximately
23 746 miles of water main varying in size from 2 inches to
24 30 inches in diameter. The distribution system is also
25 provided with 27.4 million gallons of storage capacity
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Linam, Di 3
United Water Idaho Inc.
1 contained in 29 ground-level reservoirs.
2 Due to differences in elevation within the
3 coverage of the service area, United Water Idaho has 7
4 different pressure zones. This is necessary to maintain
5 a reasonable range of pressure at our customers points of
6 use. Connections from adjacent pressure zones allow us
7 to transport water between some pressure zones, but we
8 can't however, transport water from each pressure zone to
9 all 6 of the other pressure zones. Since we have over 70
10 sources
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United Water Idaho Inc.
1 (points from which water originates), the customers
2 within the area of influence of a particular source
3 normally will receive water from that source. These
4 various sources are analogous to the wave action that
5 results from tossing a pebble into a large body of water.
6 The customer near the source will begin to use up the
7 water and as distance from the source increases, more
8 water will be consumed until the supply from a particular
9 source is exhausted and adjacent customers then receive
10 water from a different source.
11 Q What is the current average annual
12 residential water bill?
13 A Currently, the average residential bill is
14 approximately $285, exclusive of DEQ fees and franchise
15 tax.
16 Q Would you briefly explain why the Company
17 is seeking a rate increase at this time?
18 A Basically, the Company has continued, or
19 has through governmental mandate been required, to make
20 large capital investments in utility plant. As a result,
21 the Company's rate base of $74,330,596, as allowed in our
22 last rate proceeding, has increased to $84,200,741 in
23 this proceeding. In order to provide sufficient capital
24 so that the Company can maintain a sound financial
25 position and provide quality service to our customers, an
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Linam, Di 4
United Water Idaho Inc.
1 increase in rates is necessary.
2 Q You indicated earlier that you would
3 address certain capital projects. Please describe these
4 projects.
5 A All of the capital projects are detailed in
6 Company Witness Brown's testimony. However, there are a
7 few projects on which I wish to comment. These projects
8 are the Boise River Intake (C96A007); the N.W. Pipeline,
9 Hill Road to Floating Feather (C97D105); the investment
10 in the area west of Eagle; the Pierce Park/Gary Lane
11 investment; and the Company's Information Technology
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Linam, Di 4A
United Water Idaho Inc.
1 initiatives. First is the Boise River Intake project
2 consisting of a water intake structure on the Boise River
3 and some 2,900 feet of 30-inch discharge main through the
4 Surprise Valley Canyon Wall cut for State Highway 21.
5 The total cost of this project is $1,882,531. The
6 purpose of this intake and transmission main is to supply
7 Boise River water to a future second surface water
8 treatment plant. The plant will be necessary to serve
9 the southeast Boise area which has been designated as a
10 Groundwater Management Area due to lack of adequate
11 groundwater within that area.
12 Q If there is a lack of groundwater in the
13 area, why do you anticipate that development will occur?
14 A Southeast Boise was included within the
15 Boise City Comprehensive Plan as a targeted growth area.
16 Growth was encouraged in and directed to this area by the
17 City. Growth in southeast Boise has remained strong for
18 United Water Idaho during the 1990's with the addition of
19 2,059 new customers in the Gowen service level. This
20 service level has increased its customer base by an
21 average of 9.3% annually from 1990 through 1996. The
22 growth in the Gowen service level which includes
23 southeast Boise, has outpaced system-wide customer
24 growth, with the system-wide growth during the 1990's
25 averaging 3.1%. United Water Idaho forecasts that strong
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Linam, Di 5
United Water Idaho Inc.
1 growth will continue in southeast Boise for several
2 reasons: (1) the Boise City 1995 Amended Comprehensive
3 Plan identifies southeast Boise as a designated growth
4 area, stating: "The significant portion of Boise growth
5 that may occur over the next 20 years will be in
6 southeast Boise." (2) historical growth trends have
7 shown an increase in development over the past several
8 years; (3) the immense availability of vacant land with
9 high development potential provides a perfect environment
10 for development; (4) progressive
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Linam, Di 5A
United Water Idaho Inc.
1 residential, commercial and industrial developers such as
2 Columbia Village, Micron Technology, Inc., J.R. Simplot
3 Co., the Outlet Mall, and the Boise Airport which are all
4 located in southeast Boise, and many other new customers
5 in the area. All of these reasons show a major
6 commitment towards southeast Boise as a prime growth
7 area.
8 Q Please more fully describe the points
9 you've just mentioned.
10 A Historical Growth
11 As stated above, the Gowen Service Level has shown strong
12 growth over the past several years averaging a 9.3%
13 increase in customers during the 1990's. The 1996
14 customer growth for this service level was 342 new
15 customers or an 8.3% increase. When looking at
16 system-wide growth, the three major areas of new customer
17 growth were in Main Service Level, West Boise (1st Bench
18 Service Level) and southeast Boise (Gowen Service Level).
19 During 1996, United Water added 1046 new customers to our
20 core system, of which approximately 33% of these new
21 customers were located in southeast Boise. This shows a
22 dramatic trend towards new development in this area of
23 Boise.
24 Available Vacant Land for Development
25 Due to rapid growth in Boise over the past several years
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Linam, Di 6
United Water Idaho Inc.
1 the surrounding vacant land in close proximity to
2 downtown Boise has been developed. More and more
3 farmland has been claimed for residential and commercial
4 development heading towards the west and the City of
5 Meridian's boundary. In the near future, available
6 vacant land to the west will be built out due to
7 topography limitations and building quotas in the
8 foothills, forcing new development over to the south.
9 With inadequate sewer facilities in the southwest and the
10 location and the expansion of the Boise Airport, the
11 major development focus will be aimed at the
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Linam, Di 6A
United Water Idaho Inc.
1 southeast. The southeast portion of Boise has unlimited
2 vacant land potential and with the major infrastructure,
3 such as Hwy. 21, I-84 and significant sewer transmission
4 capacity already in place, this area of Ada County has
5 been designated for current and future development.
6 Growth Projections
7 All major planning and city planning documents such as
8 Ada Planning Association (APA), Idaho Power and the Boise
9 City Comprehensive Plan (July '95) support continued
10 strong growth in southeast Boise. The APA which is the
11 major planning authority in Boise and the major source
12 for growth projections, is planning for an 8.6% annual
13 increase in the number of new residential, commercial and
14 industrial households and businesses through the year
15 2000. The APA projections match United Water's current
16 and future customer growth projections of approximately
17 8.3%.
18 Current Development
19 The current development pace in southeast Boise, as
20 stated above, is extremely strong with many of the key
21 developers and commercial and industrial businesses
22 presently focused on this area. On the residential end,
23 development such as Surprise Valley, Columbia Village and
24 the Harris Ranch development all show strong future
25 growth. With Micron being the largest employer in Idaho
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Linam, Di 7
United Water Idaho Inc.
1 and being centered in southeast Boise, more and more
2 employees will be looking for housing close to their
3 workplace. Also showing an increase in the development
4 pace is the commercial development adjacent to I-84 and
5 the Boise Airport. With the announced expansion of the
6 airport, and the growth of Ada County, many more
7 commercial businesses will look for development potential
8 close to the Boise Airport for more efficient operations.
9 It is obvious that the major
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Linam, Di 7A
United Water Idaho Inc.
1 players in the development arena are poised for long-term
2 growth within this area of Ada County.
3 Q Has the Boise River intake structure and
4 transmission main been constructed?
5 A Yes.
6 Q Why was the intake structure and
7 transmission main constructed at this time?
8 A With the dramatic increased demand
9 projection in southeast Boise, United Water Idaho had to
10 develop plans to significantly increase water supply to
11 this area. We examined four potential sources of supply
12 to fill this shortfall.
13 1) Wells within the area
14 The groundwater supply availability in
15 southeast Boise is very limited and thus
16 the area has been designated as a
17 groundwater management area by the Idaho
18 Department of Water Resources. The
19 southeast Boise aquifer cannot supply even
20 our current customers' needs.
21 2) Wells outside the area
22 An interim supply well field has been
23 developed outside the area in the vicinity
24 of Pleasant Valley Road and south of the
25 airport (see the southeast Boise Water
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Linam, Di 8
United Water Idaho Inc.
1 Supply Project, jointly funded by Micron
2 Technology, Inc. and United Water Idaho).
3 This supply is limited by capacity and
4 time. The maximum capacity of the 24-inch
5 line is about 10 MGD. The projected
6 southeast Boise demand is approximately 22
7 MGD. It is also limited by time as it is
8 projected that construction of the new
9 residential development within the next
10 four to seven years will require the water
11 from this well field to serve the new
12 development.
13 3) Marden Water Treatment Plant
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United Water Idaho Inc.
1 The Marden Water Treatment Plant's ability
2 to deliver water to southeast Boise is
3 limited by two major factors: available
4 capacity and transmission line costs. As
5 mentioned above, the projected demand for
6 southeast Boise is 22 MGD. The design
7 capacity of Marden is 16 MGD when fully
8 expanded and we project that this full
9 capacity will be utilized within the Main
10 Service Level. The Marden Street Plant
11 cannot physically be expanded beyond the
12 site limitation. Even if the Marden Plant
13 could be further expanded, the cost factor
14 of running a major transmission line from
15 Marden to the Columbia Bench would likely
16 exceed $10 million, not including the
17 capital cost for the necessary plant
18 capacity.
19 4) A new water treatment plant.
20 The last alternative considered was the
21 addition of a new water treatment plant
22 located in the vicinity of the Columbia
23 Bench.
24 Presented with this analysis, it was clear that a new
25 water treatment plant, located in the vicinity of the
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Linam, Di 9
United Water Idaho Inc.
1 Columbia Bench was the only reliable alternative source
2 of supply for this area. The next step was to locate a
3 site for the intake and pumping station. The Boise River
4 fronts the Columbia Bench from the New York Canal
5 diversion dam downstream to approximately the diversion
6 dam for the Ridenbaugh Canal. From the New York Canal
7 dam to the new Highway 21 bridge, the river runs parallel
8 to the rock cliffs of the Columbia Bench. Shortly after
9 the bridge, the river turns north, away from the Columbia
10 and along the Barber Pool wildlife refuge area. Further
11 downstream the river turns back to the south where the
12 Ridenbaugh Canal diversion dam is located (see Exhibit 1
13 for an aerial photograph of this area). This results in
14 a very limited potential for siting a river intake and
15 pumping station. The river frontage between the Highway
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United Water Idaho Inc.
1 bridge and the New York Canal dam is typically quite
2 steep and rocky, providing very limited space for the
3 intake facilities. The most feasible site is just
4 downstream from the bridge where an existing pumping
5 station was located and used by the Harris family for
6 irrigating their land to the west, currently the Surprise
7 Valley land development.
8 Coincident with this analysis, Micron Technology,
9 Inc., the J.R. Simplot Company and the Surprise Valley
10 Limited Partnership were working with the Bureau of
11 Reclamation and others on a proposal to upgrade this
12 existing river diversion. We recognized the importance
13 of this site and negotiated with this group to include
14 United Water Idaho as a partner in the construction of
15 the facilities.
16 The opportunity to utilize an existing diversion
17 is extremely important. There is a strong effort among
18 conservation groups to legislatively prohibit any new
19 diversion points along the lower Boise River. This
20 legislation has not yet been passed, but it illustrates
21 the strong sentiment against additional diversions from
22 the river. Therefore, the ability to take advantage of
23 an existing site has averted a potentially long legal
24 battle to get a new diversion approved.
25 The timing of the construction has been dictated
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United Water Idaho Inc.
1 by forces over which United Water Idaho does not have
2 control. Micron and Surprise Valley need water from this
3 system by the spring of 1998. Simplot has near-term, but
4 less immediate needs. As a result, the project had to be
5 constructed to deliver water to these parties by early
6 1998.
7 The initial application by these parties to place
8 a pipeline in the Highway 21 roadway (then under
9 construction) was denied. The Idaho Transportation
10 Department was concerned about roadbed integrity. After
11 additional meetings
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United Water Idaho Inc.
1 the Idaho Transportation Department called a conference
2 of all interested parties in the river intake project as
3 well as all other utilities. At that meeting, the Idaho
4 Transportation Department stated that utility facilities
5 could be placed in the roadway immediately before finish
6 grade and asphalting. None could be placed after that
7 time.
8 If the 30-inch pipeline had not been placed
9 pursuant to the timing of the Idaho Transportation
10 Department directive, the only available route for the
11 pipeline would require drilling and blasting through an
12 80 foot high rock escarpment on the side of the roadbed.
13 This work would involve significant damage to and
14 destruction of part of the Oregon Trail. Permits for
15 such destruction and damage to the Oregon Trail would be
16 problematical if not impossible to obtain. In addition,
17 by installing both pipes at the same time, we were able
18 to share this cost with the other partners, thus
19 significantly reducing the cost for United Water Idaho.
20 Construction costs for the intake structure and
21 the building have been shared on an equal basis between
22 United Water Idaho and the other parties. The east half
23 of the facility is dedicated to United Water Idaho's use.
24 At this time, no pumps, electrical equipment or other
25 mechanical equipment have been installed in our half of
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United Water Idaho Inc.
1 the facility. This is the approach we have taken on the
2 entire project. Only those portions of the work have
3 been constructed which cannot be delayed until the plant
4 is built.
5 Q Was the economy of construction cost the
6 reason a decision was made to make the investment at this
7 time?
8 A No. The reasons for making the investment
9 at this time were the mandate of the Idaho Transportation
10 Department, the probability of not securing a diversion
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United Water Idaho Inc.
1 permit in the future, and our obligation to serve. There
2 were no other viable alternatives for water service to
3 the area. If the structure was not completed at this
4 time it would have been impossible to install the
5 facilities at a later date.
6 Q Are you aware that Idaho Code 61-502A
7 restricts rates that authorize a return on property not
8 providing utility service?
9 A Yes, however, the section recognizes an
10 exception for investments incurred in response to an
11 extreme emergency. Here, the investment was undertaken
12 in response to a mandate from government to either
13 install the facilities now or be precluded from ever
14 installing them. Since there is no other viable method
15 for serving the area, and in light of the Company's
16 obligation to serve the area, the Company had no choice
17 but to make the investment now. In addition as I
18 indicated above since there were other parties doing work
19 we were able to do the construction more economically.
20 Q So, what are you proposing in this case?
21 A I am proposing that this investment be
22 included in rate base. We undertook this investment now
23 due to our obligation to provide service, the requirement
24 of the Idaho Transportation Department and the
25 probability of not securing a diversion permit in the
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United Water Idaho Inc.
1 future.
2 Q Are there other capital projects on which
3 you want to comment?
4 A Yes, I wish to address the investment in
5 the Eagle area. The Eagle area acquisition can be
6 separated into two areas. One area is what I will refer
7 to as Floating Feather/Redwood Creek (Exhibit 2, Section
8 A) and the other is referred to as Island Woods (Exhibit
9 2, Section B). The Floating Feather/Redwood Creek area
10 is recorded on our books and records at a cost of
11 $872,724 as of June 30, 1997. The customers in the
12 immediate area are 45 residential customers and 2
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Linam, Di 12A
United Water Idaho Inc.
1 schools requiring both domestic and fire protection
2 service. The capacity of these two wells is 5.0 MGD and
3 the usage in the immediate area including fire protection
4 is 2.17 MGD. This results in 2 to 3 MGD being available
5 for use in the other areas deficient in supply. By
6 completing project C97D105 included in Witness Brown's
7 testimony at a cost of $940,000 we are able to transport
8 this water to the Hidden Hollow Reservoir (Exhibit 2,
9 Section C) which is part of the main pressure zone of
10 United Water Idaho's system. This is the pressure zone
11 of the downtown Boise area and the area northwest of the
12 downtown area. Prior to the availability of this water,
13 the main pressure zone had a supply deficiency of 6 MGD.
14 This capacity helps overcome this deficiency. Our
15 original 1997 capital plan included a project (Exhibit 2,
16 Section D) at a projected cost of $980,000 to help
17 overcome this deficiency. Test drilling in the State
18 Street area indicated that the volume of water needed to
19 improve the deficiency in the main pressure zone was not
20 assured. Therefore the known quantity in the Redwood
21 Creek/Floating Feather area was tied into the United
22 Water Idaho main system to help overcome the deficiency.
23 This not only supplied a known quantity of 2 to 3 MGD but
24 eliminated, for the immediate future, another planned
25 capital investment of $980,000. Our position is that the
41
Linam, Di 13
United Water Idaho Inc.
1 Floating Feather/Redwood Creek project provides benefits
2 to customers in this area as well as all customers of
3 United Water Idaho and as such, all of the investment is
4 included in rate base.
5 In regard to Island Woods, the original cost of
6 the source of supply was $334,477 for which we paid
7 $276,150. The original cost of the distribution system
8 was $225,198 for which we paid $103,850. Had we been
9 involved in the original development and entered into a
10 main extension agreement under the rules in effect at the
11 time of the purchase, the guaranteed revenue calculated
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United Water Idaho Inc.
1 would have resulted in an investment of approximately
2 $1,400 per new customer. As of September, 1997, there
3 were 81 customers receiving service from this
4 distribution system which would support an investment,
5 following the rules in effect at the time, of $113,400
6 which is greater than the purchase price for the
7 distribution system and therefore we have included the
8 entire purchase price of $103,850 in our rate base. The
9 source capacity in Island Woods is 2.6 MGD or 1,800 GPM.
10 Current requirements for source are 1,000 GPM for the
11 fire flows and approximately 120 GPM for peak hour
12 domestic service or 1,120 GPM which equates to 62% of the
13 current capacity. Therefore, until this system is tied
14 into the overall distribution system of United Water
15 Idaho or until the customer base supports the total
16 capacity requirements of the source, we are only
17 requesting rate base inclusion of 62% of the investment
18 in the source with the remainder being placed in plant
19 held for future use.
20 Q What other areas regarding capital
21 expenditures do you want to comment on?
22 A I want to address the Pierce Park/Gary Lane
23 main installation, the investment of which was disallowed
24 in Case BOI-W-93-1 and BOI-W-93-3. The Commission
25 stated, "we have valid concern whether the Company's
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Linam, Di 14
United Water Idaho Inc.
1 ratepayers have been adequately protected from costs
2 Boise Water has incurred in competing with Garden City."
3 Q In case numbers BOI-W-93-1 and BOI-W-93-3,
4 the Commission required the Company to enter into a
5 special facilities contract as a way of financing the
6 line extension. Has that been done?
7 A No it has not.
8 Q Why has the company not entered into such a
9 contract?
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United Water Idaho Inc.
1 A Since the time of the prior Commission
2 orders it has become apparent to the Company that this
3 requirement was impossible to fulfill. In conversations
4 with developers we were told that developers would seek
5 to obtain service from Garden City rather than enter into
6 such an agreement.
7 Q Would service by Garden City in the area
8 west of Gary Lane have been in the public interest?
9 A No. There was already a conflict between
10 Boise City and Garden City concerning area of service, in
11 that United Water Idaho was serving within the city
12 limits of Garden City and Garden City was serving
13 customers within the city limits of Boise. Boise City
14 had already charged United Water Idaho with the task of
15 attempting to work out a solution to the problem. For
16 Garden City to serve the area west of Gary Lane would
17 have compounded this problem. Normally a city finds it
18 is much better to deal with one entity in providing
19 service within their city limits versus dealing with
20 multiple entities or another city.
21 Q Since the time of the prior Orders have
22 there been any significant changes in circumstances?
23 A Yes. The main has become a vital link to
24 provide adequate service to a major service area of
25 United Water Idaho's main service zone. In 1995 a new
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Linam, Di 15
United Water Idaho Inc.
1 distribution reservoir was constructed in Seaman's Gulch
2 (Hidden Hollow Reservoir) and it was connected to the
3 Pierce Park water main. (See Exhibit 2, Section D). This
4 reservoir provides water storage for fire protection and
5 peak demand to the customers who were added west of Gary
6 Lane, to the customers between Pierce Park and Gary Lane,
7 and all the customers in the West Main Service Zone.
8 Without the Pierce Park main, it would be impossible to
9 utilize the Hidden Hollow Reservoir for the customers to
10 the east of the reservoir by
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United Water Idaho Inc.
1 pumping water into the reservoir during off peak periods
2 and drawing water from the reservoir during peak periods.
3 Therefore, this main is not just providing service to the
4 several hundred customers west of Gary Lane. Due to the
5 overall infrastructure in the West Main Service Level,
6 approximately 5,000 customers are receiving direct
7 service from this main. In reality, due to the fact that
8 the overall capital plant of UWID is a necessary part of
9 providing service to the entire customer base of UWID,
10 each of these customers receive some benefit from this
11 main. This is the same theory employed to say that each
12 of the 57,350 customers receive a benefit from capital
13 investments made by the Company, and therefore the
14 associated revenue requirement as a result of the plant
15 is spread across the entire UWID customer base. From
16 this viewpoint, the investment for customers for the
17 Pierce Park/Gary Lane main is less than $4.50.
18 Q Based on these circumstances, in your
19 opinion, is the Pierce Park main used and useful in the
20 service of the customers of United Water Idaho?
21 A Yes. It has now become a vital link of
22 service for thousands of UWID's customers and its
23 depreciated value of $252,937 as of June 30, 1997,
24 properly should be part of the rate base of the Company.
25 Q In retrospect, would it have been fair to
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United Water Idaho Inc.
1 burden customers west of Gary Lane with a surcharge to
2 recover the costs of the main?
3 A No. It would have been very unfair for
4 those few customers to bear the total burden for a main
5 that, as pointed out above, has become a vital link to a
6 major service area of United Water Idaho's main service
7 zone. In addition, since the time of its construction,
8 United Water Idaho's shareholders have borne the cost of
9 the main. The Company has foregone approximately
10 $190,000 of revenue as a result of the investment not
11 being included in rate base.
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United Water Idaho Inc.
1 Q Please comment on the Company's Information
2 Technology (IT) initiatives.
3 A The IT initiatives that are being
4 implemented at UWID include hardware, software and
5 associated costs to upgrade the Company's computer Local
6 Area Network (LAN), convert to the Microsoft Office suite
7 of business software, link the Company's LAN to the UWR
8 Wide Area Network (WAN), create an Operations Data Base,
9 and create an Integrated Financial Management System
10 (IFMS) of business software. The IFMS is a business
11 software package of various modules including General
12 Ledger, Budgeting, Procurement, Time Entry/Payroll,
13 Project Costing and Asset Management. The IFMS system is
14 a client-server based computer system which replaces a
15 20+ year old main frame system that was essentially
16 obsolete. The capital costs associated with the
17 Company's IT initiatives are included in the testimony of
18 Mr. Brown.
19 Q Please explain why the IT initiatives were
20 implemented.
21 A The former Datapoint system was technically
22 antiquated and did not have a high level of technical
23 support. It did not provide the kind of information that
24 was needed for proper management and for customer
25 response. The information it did provide was not
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Linam, Di 17
United Water Idaho Inc.
1 available quickly enough under today's operating
2 environment. The Datapoint hardware and software was
3 out-of-date, did not meet minimum technical standards and
4 could no longer be adequately supported by a support
5 vendor due to bankruptcy of the parent company and the
6 low availability of parts. The existing system also
7 would not survive the year 2000 roll over problem. In
8 addition, the Datapoint hardware could not be used as a
9 basis of the infrastructure requirement of a current day
10 billing system.
11 Q Are there other areas on which you want to
12 comment?
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Linam, Di 17A
United Water Idaho Inc.
1 A Yes, in Witness Healy's testimony there is
2 a pro forma adjustment for two additional employees. I
3 want to comment on the reasons for adding these two
4 employees. The normal assumption is that due to the
5 increased customer base additional employees are needed.
6 Even with the two additional employees the customer count
7 is approximately 600 customers per employee, up from less
8 than 540 customers per employee a few years ago.
9 Basically, these additional employees are more a result
10 of a changing environment than an increased customer
11 base.
12 One of the additional employees is due to the
13 increased necessity to locate or "mark out" our mains and
14 service locations for others who are excavating in the
15 area. Although this "one-call" location requirement has
16 been in place for some time, we were initially receiving
17 requests for approximately 32 "mark outs" per day on
18 average. By 1997 the average number of requests for
19 "mark outs" has increased to 68 per day. The one
20 employee (locator) dedicated to this function in the past
21 simply could not perform the number requested. We were
22 having to prioritize the request for "mark outs" and not
23 respond to those that we deemed low risk with only one
24 locator. The risks became too great and a second locator
25 was added.
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United Water Idaho Inc.
1 The second employee added in the pro forma
2 adjustment is a Training Coordinator. Much of our
3 training in the past has been on the job training plus
4 sending employees to various outside training seminars.
5 While many of our employees are experts in their
6 technical tasks, they are not expert in teaching these
7 skills to others. In addition, there is an ever
8 increasing expectation from the customer in the service
9 they expect. Therefore, there was a greater need for
10 some assistance for the individuals that were experts in
11 their technical skills in
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United Water Idaho Inc.
1 teaching these skills to others and for someone to
2 coordinate the process of teaching customer service
3 skills to all employees.
4 Q Does this conclude your testimony?
5 A Yes.
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United Water Idaho Inc.
1 (The following proceedings were had in
2 open hearing.)
3 MR. MILLER: And with that, I believe
4 Mr. Linam is available for cross-examination.
5 COMMISSIONER NELSON: All right, thank
6 you.
7 Mr. Fothergill.
8 MR. FOTHERGILL: No, we have no questions.
9 COMMISSIONER NELSON: Thank you.
10 Ms. Ullman.
11 MS. ULLMAN: I do have a number of
12 questions for Mr. Linam.
13
14 CROSS-EXAMINATION
15
16 BY MS. ULLMAN:
17 Q Mr. Linam, for the record, will you please
18 state your annual salary?
19 A Yes, it's 124.
20 Q And what additional benefits do you
21 receive?
22 A I receive medical benefits. I receive
23 vacation. I receive various holidays. I receive -- I
24 have a Company car and I have some incentive pay or
25 salary at risk.
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Wilder, Idaho 83676 United Water Idaho Inc.
1 Q And, Mr. Linam, in 1998 what was the amount
2 of that incentive pay?
3 A I believe it was around 28.
4 Q And how many weeks of vacation do you
5 receive per year?
6 A I receive five weeks.
7 Q How many hours a day are you required to
8 work?
9 A However many hours it takes to get the job
10 done.
11 Q Does the Company have a policy for exempt
12 employees about the number of hours exempt employees are
13 required to work?
14 A Yes, we do. The official hours are 7.5
15 hours a day or 37.5 hours a week.
16 Q And did you not in your rebuttal testimony
17 indicate that most exempt employees actually work in
18 excess of that number of hours per week?
19 A Yes, I did.
20 Q And, therefore, is there any reason to keep
21 that required number of hours, that minimum number of
22 hours, at 37.5 or is it reasonable to raise it to 40
23 hours per week like many of the employers in this area?
24 A I assume there's no reason to make a
25 change.
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CSB REPORTING LINAM (X)
Wilder, Idaho 83676 United Water Idaho Inc.
1 Q Would you object to making a change like
2 that?
3 A Yes, I would.
4 Q Can you please tell me why?
5 A Because the established hours have been
6 based at 37.5 hours a week and that's been the agreement
7 with the employees.
8 MS. ULLMAN: Mr. Chairman, with your
9 permission, I have a number of exhibits that I would like
10 to enter and discuss.
11 COMMISSIONER NELSON: Would you like to do
12 that one at a time or do you have a --
13 MS. ULLMAN: Perhaps they could be passed
14 around and then we could go through them.
15 COMMISSIONER NELSON: Why don't you pass
16 them around and then we'll discuss them as they come up.
17 (Ms. Ullman distributing documents.)
18 MS. ULLMAN: Okay, I'd like to start with
19 the page marked "Sharon Ullman's Third Production
20 Request, Request No. 25" regarding the Company's health
21 insurance benefits.
22 COMMISSIONER NELSON: All right, do you
23 want to mark that?
24 MS. ULLMAN: I don't believe that I gave
25 one to Mr. Linam and that could be marked, I believe
56
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Wilder, Idaho 83676 United Water Idaho Inc.
1 we're up to 417.
2 COMMISSIONER NELSON: 417?
3 (Intervenor Sharon Ullman Exhibit
4 No. 417 was marked for identification.)
5 Q BY MS. ULLMAN: Mr. Linam, you receive
6 health insurance through the Company; is that correct?
7 A Yes, that is correct.
8 Q Would that be Option One or Option Two?
9 A That's Option Two.
10 Q Option Two? And that would be family
11 coverage?
12 A Yes, that is correct.
13 Q And can you read into the record, please,
14 the amount the Company pays per month for your health
15 insurance and the amount that you pay yourself for your
16 health insurance coverage?
17 A Yes. The total cost is $600.56 and the
18 contribution on the employee is $94.36.
19 Q And would you also read into the record for
20 other employees in the Company who choose Option One for
21 family coverage the amount the Company pays and the
22 amount that, for example, a non-bargaining employee,
23 non-bargaining unit employee, would pay?
24 A That was for family, was that the
25 question?
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Wilder, Idaho 83676 United Water Idaho Inc.
1 Q Yes.
2 A Yes. The amount the Company pays is
3 707.99. The non-bargaining unit employee pays 113.33.
4 Q Mr. Linam, do you consider this a generous
5 health insurance plan?
6 A I consider it an adequate health insurance
7 plan.
8 Q Now, I'd like to turn to the Sharon
9 Ullman's Third Production Request, Request No. 26, and,
10 Mr. Linam, do you have a copy of that?
11 A Yes, I do.
12 COMMISSIONER NELSON: Ms. Ullman, should we
13 mark this as 418?
14 MS. ULLMAN: Yes, please.
15 (Intervenor Sharon Ullman Exhibit
16 No. 418 was marked for identification.)
17 Q BY MS. ULLMAN: The Company in addition to
18 actually paying the benefits that you've listed so far
19 pays country club dues for you as well; is that correct?
20 A Yes, that is correct.
21 MR. MILLER: Mr. Chairman, I think it would
22 be most fair to refer to the complete answer there which
23 indicates that those are not part of the Company's rate
24 request.
25 COMMISSIONER NELSON: All right.
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Wilder, Idaho 83676 United Water Idaho Inc.
1 MS. ULLMAN: Mr. Chairman? Yes, I'm just
2 trying to establish what the entire compensation package
3 is.
4 COMMISSIONER NELSON: Right, okay. Tough
5 to remember to turn your mike on and off all the time,
6 but we'll try to remind you.
7 MR. MILLER: Thank you.
8 COMMISSIONER NELSON: Okay.
9 MS. ULLMAN: Now I would like to turn to
10 Sharon Ullman's Third Production Request, Request No. 24,
11 and have that marked Exhibit 419.
12 (Intervenor Sharon Ullman Exhibit
13 No. 419 was marked for identification.)
14 Q BY MS. ULLMAN: Do you have that document,
15 Mr. Linam?
16 A Yes, I do.
17 Q In January of 1998, will you please read
18 the names of the three recipients and the amounts of the
19 management incentives paid to each of those three
20 recipients?
21 A Yes. Benjamin H. Hepler, $5,410; William
22 C. Linam $28,660; Wayne L. Booe $7,860.
23 Q Okay. You replaced Mr. Booe in his
24 position at United Water when he retired, did you not?
25 A Yes, I did.
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Wilder, Idaho 83676 United Water Idaho Inc.
1 Q And can you refer back in January of 1997
2 and January of 1996 the amounts of management incentive
3 dollars that Mr. Booe received?
4 A Yes, I can. January of 1997 was 8,740 and
5 January of 1996 was 6,885.
6 Q Can you please explain why your, the amount
7 of your management incentive was, what, approximately
8 four times the amount of Mr. Booe's management
9 incentives?
10 A Yes. There was a change in the way that
11 management incentives and the target amount was
12 administered.
13 Q Can you explain what that change was,
14 please?
15 A Yes, it increased the amount of the pay at
16 risk.
17 Q Is this $28,000 part of your $124,000 worth
18 of annual compensation or is this in addition to the
19 $124,000?
20 A It's in addition to.
21 MS. ULLMAN: I would next like to turn to
22 the exhibit United Water Idaho 1998 Position Analysis and
23 mark it Exhibit 420.
24 (Intervenor Sharon Ullman Exhibit
25 No. 420 was marked for identification.)
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Wilder, Idaho 83676 United Water Idaho Inc.
1 Q BY MS. ULLMAN: Will you please read off
2 the first line where it is marked "Current Positions" the
3 title of president the salary of Mr. Booe in 1996, the
4 annual salary?
5 A Yes, it was $93,400.
6 Q So if you total Mr. Booe's salary in 1996,
7 even accounting for inflation and the management
8 incentives that he has received over the past few years,
9 you are receiving considerably in excess of what he was
10 receiving, are you not?
11 A Yes, I am.
12 Q And what is different about what you do
13 compared to what Mr. Booe does for the Company?
14 A The difference is in addition to my duties
15 at the Company, I have some duties at other companies as
16 well.
17 Q These duties at other companies, we are not
18 being billed as ratepayers for the responsibilities you
19 have at other companies, are we?
20 A That is correct, you are not.
21 Q And what percentage of your compensation is
22 actually paid by ratepayers of United Water in Boise?
23 A Eighty-five percent.
24 Q And if you take 85 percent of the
25 compensation you're currently receiving, that is still in
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Wilder, Idaho 83676 United Water Idaho Inc.
1 excess of what Mr. Booe was receiving when he was the
2 president of the Company, is it not?
3 A Yes, it is.
4 Q And Mr. Booe worked in Boise full time; is
5 that correct?
6 A Yes, he did.
7 Q And you actually do not work here full
8 time, you are out of the area at times not devoting your
9 time completely to the Boise area; is that correct?
10 A I am outside of the area of Boise at times,
11 yes.
12 Q Okay, and can you please justify why the
13 ratepayers of United Water should pay a higher salary for
14 the same position that Mr. Booe was doing a year ago, two
15 years ago?
16 A Salaries for individuals in positions is
17 based on experience, performance, education and for these
18 reasons, it was felt that my compensation was fair and
19 reasonable at the level that it's at.
20 Q Are you doing a better job than Mr. Booe
21 was doing?
22 A Do you want to explain "better"?
23 Q Are you contributing something further to
24 the Company that Mr. Booe was incapable of contributing?
25 A My background and experience is certainly
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Wilder, Idaho 83676 United Water Idaho Inc.
1 different than Mr. Booe's and I bring a different
2 perspective to the job than what Mr. Booe did.
3 Q Okay. I'd like you to turn to the exhibit
4 called "Table 1: Employment & Hourly Wages" which is from
5 the Idaho Department of Labor, Occupational Employment
6 and Wages in Idaho, 1996/1997 and if you would please
7 turn to the third page of that exhibit.
8 COMMISSIONER NELSON: Shall we mark this as
9 Exhibit 421?
10 MS. ULLMAN: Yes, please.
11 (Intervenor Sharon Ullman Exhibit
12 No. 421 was marked for identification.)
13 Q BY MS. ULLMAN: Where it discusses other
14 managerial and administrative occupations --
15 MR. MILLER: Mr. Chairman, could I ask a
16 question in aid of objection?
17 COMMISSIONER NELSON: Yes, sir.
18 MR. MILLER: Mr. Linam, have you seen
19 Exhibit 421 before?
20 THE WITNESS: I'm not real sure I followed
21 which one was Exhibit 421, but if it's the Bureau of the
22 Census --
23 MS. ULLMAN: No, it's Table 1: Employment &
24 Hourly Wages.
25 THE WITNESS: I'm not too sure I see it
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1 even now.
2 (Ms. Ullman approached the witness.)
3 THE WITNESS: No, I have not.
4 MR. MILLER: Was Exhibit 421 prepared by
5 you or by anyone who works for you?
6 THE WITNESS: No, it was not.
7 MR. MILLER: Mr. Chairman, I think we are
8 compelled to object to the exhibit and the questions
9 based on it, first because Mr. Linam has never seen this
10 before, it's not something that he prepared, so he's not
11 being impeached, can't be impeached by it, and obviously,
12 if the intervenor desired to introduce this information,
13 it could have been introduced as part of her rebuttal
14 testimony rather than cross-examination of a witness
15 who's never seen it before, so we just think it's unfair
16 to cross-examine the witness based on something he didn't
17 prepare and has never seen it before. We have no
18 information about where this came from and how it was
19 prepared or anything.
20 MS. ULLMAN: Mr. Chairman?
21 COMMISSIONER NELSON: Ms. Ullman.
22 MS. ULLMAN: If I might respond, you will
23 recall that I tried to get the Company's -- the responses
24 that were given to the Company by the Western Management
25 Group to the Idaho Cross-Industry Salary and Benefits
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1 Survey and that information was not made available to
2 me. The Commission decided on a two-to-one vote that the
3 confidentiality agreement the Company had with the
4 organization would be withheld; however, I was
5 specifically referred to the State of Idaho to receive
6 similar information. I did just that. I went to the
7 State of Idaho and obtained their Occupational Employment
8 and Wages in Idaho document.
9 I would be willing to enter this as an
10 exhibit in my own testimony later on; however, I think
11 considering the fact that the Company itself referred me
12 to this document, it is fair to actually question this
13 witness about this document.
14 COMMISSIONER NELSON: Mr. Linam, you're
15 planning to appear again in the rebuttal phase of this
16 case, are you?
17 THE WITNESS: Yes, I am.
18 COMMISSIONER NELSON: You filed rebuttal
19 testimony because I read it. I think, Ms. Ullman, it
20 would be better to wait until you've had a chance to
21 present your case and the Company's primary case is done
22 and then if on rebuttal you have further questions, why,
23 we could come back to Exhibit 421.
24 MS. ULLMAN: Okay, thank you, Mr. Chairman,
25 I will do that.
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1 Q BY MS. ULLMAN: Mr. Linam, you came to
2 Boise from United Water's parent company in New Jersey,
3 did you not?
4 A Actually, I came from the United Management
5 and Service Company which is a sister company, not a
6 parent.
7 Q And where is that company located, please?
8 A It's located in Harrington Park, New
9 Jersey.
10 Q And Harrington Park, New Jersey, is that in
11 the New York metropolitan area?
12 A Yes, it is.
13 Q Now, I would like you to turn to the other
14 exhibit, if I can find my own copy here, that I passed
15 out that starts with "Bureau of the Census, Economics and
16 Statistics Administration" and so on.
17 MR. MILLER: Is this going to be marked?
18 MS. ULLMAN: Mr. Chairman, I suspect that
19 Mr. Miller is again going to object, so I will phrase my
20 question in a manner to get the information.
21 Q BY MS. ULLMAN: Can you please compare the
22 cost of living in the area you came from in New Jersey,
23 the New York metropolitan area, to the cost of living in
24 Boise, Idaho?
25 MR. MILLER: Mr. Chairman, I really don't
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1 mean to interrupt here, but as the Chair indicated,
2 Mr. Linam will be back in his rebuttal testimony and the
3 questioning here really does relate to his rebuttal
4 testimony.
5 COMMISSIONER NELSON: Well, first, I think
6 we should mark the document that we were speaking of as
7 Exhibit 422 and while I didn't think that Ms. Ullman's
8 question necessarily referred to this document because
9 she was asking for his personal opinion, I think that
10 would be better saved for his rebuttal testimony.
11 MS. ULLMAN: Okay.
12 (Intervenor Sharon Ullman Exhibit
13 No. 422 was marked for identification.)
14 Q BY MS. ULLMAN: Mr. Linam, are you aware of
15 the fact that Idaho is a right-to-work state?
16 A Yes, I am.
17 Q And what does that mean to you, that it is
18 a right-to-work state?
19 A That means that as an employee even though
20 there may be a bargaining unit in that company that the
21 employees are not required to become a member of that
22 bargaining unit in order to retain their jobs.
23 Q Okay, and how many of United Water Idaho's
24 employees are union employees and how many are non-union?
25 A I believe 43 are non-union which would
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1 leave 54, I believe, as bargaining unit.
2 Q Okay, and to go back to a previous exhibit,
3 the Table 1: Employment & Hourly Wages and the United
4 Water Idaho 1998 Position Analysis, on the Employment &
5 Hourly Wages --
6 A Excuse me, could you refer me to that?
7 Q Yes, Table 1: Employment & Hourly Wages
8 exhibit.
9 MR. MILLER: What number?
10 COMMISSIONER NELSON: That's Exhibit 421.
11 MS. ULLMAN: And I believe the other one
12 was marked 420; is that correct?
13 COMMISSIONER NELSON: Yes.
14 MS. ULLMAN: Exhibits 420 and 421.
15 THE WITNESS: The 420 was the United Water
16 Idaho 1998 Position Analysis?
17 Q BY MS. ULLMAN: Yes. On Exhibit 421 if you
18 will go down to the line that is marked Plant & System
19 Workers, Water & and Liquid Waste Treatment Plant and
20 System Operators --
21 MR. MILLER: Pardon me, Mr. Chairman,
22 perhaps it's just confusion on my part, but it was my
23 impression that the Commission decided that questions
24 with respect to 421 should be deferred until rebuttal.
25 MS. ULLMAN: I will withdraw the question
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1 and wait, Mr. Chairman.
2 COMMISSIONER NELSON: All right, thank
3 you.
4 MS. ULLMAN: I will hold the rest of my
5 questions until Mr. Linam is discussing his rebuttal
6 testimony. Thank you, Mr. Chairman.
7 COMMISSIONER NELSON: Thank you.
8 Mr. Woodbury, do you have questions for
9 Mr. Linam?
10
11 CROSS-EXAMINATION
12
13 BY MR. WOODBURY:
14 Q Good morning, Mr. Linam, how are you?
15 A Good morning.
16 Q You've been general manager of United Water
17 Idaho since July 1 of '97; is that correct?
18 A Yes, that is correct.
19 Q That was also the end of the test year that
20 we're using in this case?
21 A Yes, that would be correct.
22 Q Okay, and as part of your -- you have
23 supervisory duties in most areas within the Company?
24 A Yes.
25 Q And have you reviewed the Company
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1 testimonies filed in this case?
2 A Yes, I have.
3 Q And do you approve of their substance and
4 tenor?
5 A Yes, I do.
6 Q And have you reviewed the written letters
7 and comments that have been filed in this case by the
8 customers of United Water?
9 A I reviewed some of those yesterday, yes.
10 Q And these are the customers that you serve,
11 how would you characterize the message that they were
12 trying to convey to the Commission in those letters?
13 A I guess I would characterize it as they
14 don't want the rate that they're paying for water to go
15 up, just as I would not want haircuts to go up.
16 Q Could you speak into your mike?
17 A I'm sorry, yes. I would characterize that
18 as they are opposed to the change in rates.
19 Q Okay, and were there a number of letters
20 from customers that appeared to be on fixed incomes,
21 social security, retired?
22 A I don't know that I could characterize it
23 as a number. I noted a couple, at least, that depicted
24 that they were on fixed incomes.
25 Q Would you agree that the Company's rate
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1 increases affect those customers perhaps most severely,
2 those that are on fixed incomes?
3 A I don't know that I could make that
4 evaluation. It's been my experience that a lot of people
5 say they're on fixed income, but that certainly does not
6 totally depict their financial position, but if a person
7 strictly was on an income, say, a social security income,
8 and that was their only means of income and was the sole
9 source of their financial resources, then I certainly
10 would agree with your statement.
11 Q When did you -- did your counsel provide
12 you with a package of letters from the Commission
13 yesterday?
14 A Yes, he did.
15 Q Okay, and do you recall the letter from
16 Mr. Karl Ellis? Do you have those letters before you?
17 A No, I do not.
18 Q And subject to check, this is what
19 Mr. Ellis says, "I'm on social security and I get $663
20 per month and we're due a 2.1 percent increase in
21 January. At the so-called only 12 cents per day, that
22 adds up to $3.60 per month and my social security
23 increase is 13.92 per month. That means United Water
24 would get approximately 25 percent of my increase." He
25 says, "No matter what I do to save water, rate increases
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1 incur. If I save one gallon, the Company cries that
2 they're not selling enough and want to charge me for two
3 anyway."
4 Do you have any response to these customers
5 for their plight?
6 A Well, I certainly sympathize with anyone
7 that's on an income of, I forgot exactly the number that
8 you were talking about, $660, I believe, in that
9 neighborhood, on that type of an income with any increase
10 for any services that they receive in life, but I would
11 not agree that any time that someone purchases a gallon
12 of water that we want to charge them for two, but other
13 than that, I don't know that I can make a lot of comments
14 concerning that letter.
15 Q You're aware, are you, that the Commission
16 in this case has rolled in the water quality case which
17 was UWI-W-96-6?
18 A Yes, I am.
19 Q And you've reviewed that case and the
20 comments that were filed, response comments that were
21 filed, by the Company?
22 A Yes, I have.
23 Q I think you actually addressed those more
24 in your rebuttal testimony, so we can take that up then.
25 Referring to your direct testimony on page 5, you're
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1 speaking of the Boise River Intake project. When the did
2 the Company first become aware of the supply constraints
3 in southeast Boise?
4 A We first became aware several years ago the
5 southeast Boise area was designated as a water management
6 area. I don't recall the exact date of that.
7 Q And prior to it being labeled a groundwater
8 management area, the Company was unaware that that
9 problem existed?
10 A I don't know the answer to that.
11 Q Would there be another Company witness that
12 would be a better person to ask that question of?
13 A I think Mr. Brown would be aware of the
14 history and background of when we were aware that there
15 was water deficiencies in that area.
16 Q In describing the need for this project,
17 you state that this area has been included within the
18 Boise City Comprehensive Plan as a targeted growth area
19 over the next 20 years. Can you describe United Water's
20 participation, if any, in the development of the Boise
21 City Comprehensive Plan?
22 A I don't believe that we had a tremendous
23 amount of input into the preparation of that plan other
24 than perhaps providing the planning and zoning with any
25 information that they requested from us.
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1 Q Did you apprise the city that their
2 targeted area of growth might present difficulties and
3 challenges in water supply?
4 A I don't know the answer to that.
5 Q Is there somebody from the Company that
6 regularly coordinates with the city with respect to
7 planning issues?
8 A Again, I think Mr. Brown would probably
9 provide a better answer for that.
10 Q You indicate on page 7 with respect to
11 growth projections for that area that the Ada Planning
12 Association has 8.6 percent growth per year through the
13 year 2000 and you state that United Water's current and
14 future customer growth projections for that area are 8.3
15 percent. Can you tell me how United Water puts together
16 its growth projections?
17 A I can tell you generally how it's done.
18 The engineering group would work with knowledge that
19 they've gained from working with the developers in the
20 area and working with the Boise City Comprehensive Plan
21 and reviewing information that they receive from other
22 entities such as Idaho Power and then would make
23 projections of the anticipated growth for that area.
24 Q And would that be Mr. Brown, also?
25 A He would be involved in that, yes.
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1 Q And would there be anybody from a higher
2 management level involved in that? You as supervisor?
3 A I would be involved discussing those types
4 of things with Mr. Brown and that's sort of the general
5 background that I gave you there.
6 Q You indicate, also, with respect to the
7 growth in the area, residential developments occurring in
8 Surprise Valley, Columbia Village and Harris Ranch. Do
9 you provide any water service to Surprise Valley?
10 A Yes, we do.
11 Q And is that domestic service only?
12 A Yes, it is.
13 Q And about how many customers do you have in
14 Surprise Valley, are you aware?
15 A I'm not aware. I don't recall.
16 Q And do you also provide service to Columbia
17 Village?
18 A Yes, we do.
19 Q And is that domestic service only, also?
20 A I don't recall.
21 Q And is there any commitment or agreement on
22 the part of the Company to provide service to the Harris
23 Ranch?
24 A I believe the Harris Ranch is within our
25 service area and that we have indicated to Harris Ranch
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1 that subject to following the provisions of service
2 within that certificated area that we would provide
3 service there.
4 Q Did you indicate in your testimony that
5 only, or perhaps one of your other witnesses that only,
6 part of the Harris Ranch lies within your service
7 territory?
8 A I don't believe that was in my testimony.
9 If you could point me to that.
10 Q I'm not sure where that appears. Maybe
11 that will develop later, but it's your belief, though,
12 that the entire Harris Ranch area falls within your
13 service area?
14 A It's my belief that at least part of it
15 lies within our service area. I don't know that I could
16 characterize it that the entire thing lies within our
17 service area.
18 Q Starting on page 8 of your testimony, you
19 start a discussion with respect to the Company's
20 exploration of four potential sources of supply in
21 southeast Boise and you first discuss wells within the
22 area and are you familiar with the Southeast Boise Water
23 Supply Project Agreement that was entered into? It's
24 dated March 7th, 1995, between Boise Water Corporation
25 and Micron Technology.
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1 A I haven't reviewed that in quite some time,
2 so my recollection of it right now is not real high.
3 Q If I were -- would you allow me the
4 right -- maybe you can review that after you get off the
5 stand this morning and I can perhaps address that in your
6 rebuttal --
7 A Sure.
8 Q -- questions on that. Thank you. In
9 discussing the -- well, you do discuss the Southeast
10 Boise Water Supply Project in your testimony, would you
11 agree?
12 A Yes, I do.
13 Q And you state that the supply is limited by
14 both capacity and time, that the maximum capacity of that
15 24-inch line is 10 million gallons per day, but you state
16 that there's a limited usefulness as far as time of four
17 to seven years and that there is projected growth in the
18 well field area which will require the waters that are
19 present and going through that pipeline; is that your
20 testimony?
21 A I believe that's correct, yes.
22 Q Did you have occasion to review the Boise
23 Water 95-1 case when the Southeast Boise Water Supply
24 Project Agreement was presented to the Commission for
25 approval?
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1 A No, I did not.
2 Q Could I ask that you perhaps also review
3 that? And I'm concerned with -- and you could perhaps
4 review that with the focus of whether there were any
5 representations by the Company or other parties regarding
6 supply being limited by time.
7 The third potential source that you examine
8 is the Marden water treatment plant. The present
9 capacity of the Marden plant is 8.0 million gallons per
10 day; is that correct?
11 A Yes, that is correct.
12 Q And apparently, you have expansion to begin
13 in 1998. Has that expansion already begun?
14 A Physical construction has not begun. The
15 bidding process is under way.
16 Q And you anticipate that the expansion will
17 be completed and an additional 8 million gallons per day
18 will be available beginning May of 1999?
19 A Yes, that is correct.
20 Q In your discussion of the fourth potential
21 source, the most viable option in the Company's
22 estimation is a new water treatment plant and you
23 indicate on page 10 that there's, there appears to be a
24 strong effort to legislatively prohibit any new diversion
25 points along the lower Boise River. Was there in fact
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1 any bills introduced into the legislature that you're
2 aware of?
3 A I'm not aware of any bills that were
4 introduced and this is the information that I gleaned
5 from discussion with our planning people and our
6 engineering people at United Water Idaho.
7 Q That would be Mr. Brown?
8 A Yes, it would.
9 Q All right. On page 11 you discuss, I
10 guess, conversations that took place with the Idaho
11 Transportation Department and your testimony states
12 utility facilities could be placed in the roadway
13 immediately before finish grade and asphalting and none
14 could be placed after that time, and this is what you
15 state was the message given to you by the Idaho
16 Transportation Department. Is there any actual letter or
17 documentation that exists where this is related?
18 A Again, I'd refer that to Mr. Brown.
19 Q Okay. Additional questions that I have
20 with respect to the Idaho Department of Transportation
21 and their representation and the Company's, the actions
22 the Company took at that point would also be better for
23 Mr. Brown with respect to the mandate of the Idaho
24 Department of Transportation whether consultation with
25 legal counsel occurred after that?
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1 A Yes, they would.
2 Q Pardon?
3 A Yes, they would.
4 Q With respect to termination of probability
5 of not securing a diversion permit in the future who was
6 consulted by the Company to draw that conclusion?
7 A Yes.
8 Q Okay, and with respect to the Company's
9 obligation to serve?
10 A I don't know that I would pass that one
11 off.
12 Q Do you have present capacity deficiency in
13 southeast Boise?
14 A At the current time we do not have
15 deficiency in southeast Boise.
16 Q Have there been any curtailments within the
17 recent years --
18 A No.
19 Q -- within that service level? Would
20 Mr. Brown also be the person to ask questions with
21 respect to Company determination that an extreme
22 emergency exists, existed?
23 A I think I could address that.
24 Q You do address Idaho Code 61-502A,
25 restriction on rates authorized and return on property
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1 not providing utility service and you note that there is
2 an exception upon a finding of an extreme emergency and
3 it appears that the extreme emergency identified by the
4 Company is addressed on line 7 of page 12, "Here, the
5 investment was undertaken in response to a mandate from
6 government to either install the facilities now or be
7 precluded from ever installing them."
8 A That's our belief, yes.
9 Q Okay, and that yet goes back to the, I
10 guess, the Company's dealings with the Idaho Department
11 of Transportation that you want me to discuss with
12 Mr. Brown?
13 A I think in addition not only to the Idaho
14 Department of Transportation, but the potential for the
15 diversion from the river, also.
16 Q Potential for diversions?
17 A Diversion of water from the river.
18 Q Okay, but does the Company have water
19 rights now with respect to your use of this diversion?
20 A We do not have water rights at the current
21 time that would cover the need for the water from that
22 diversion. Those are being acquired over a period of
23 years and it is our anticipation of having those water
24 rights by the time the plant would be needed.
25 Q Have you assessed the probability that the
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1 Company might be unable to obtain water rights in
2 sufficient quantity for this project?
3 A We've assessed that potential and it's our
4 belief that we can obtain those water rights.
5 Q And how much water do you intend to divert
6 and how are you going to -- and to whom are you -- who
7 are you trying to obtain those water rights from?
8 A It's my recollection that the potential for
9 that plant, we're talking about probably 8 million
10 gallons per day initially and we are attempting to obtain
11 those water rights from various water districts, from
12 anyone that has water rights that is available. We are
13 actively pursuing those water rights and we also are
14 pursuing with the various departments the possibility of
15 a substantial portion of the supply that we need to be
16 designated as irrigation supply which gives us the
17 opportunity to enter the water bank for irrigators and
18 remove water from the water bank in order to supply water
19 for the water right needs.
20 Q Has the Company initiated any planning with
21 respect to the water treatment facility that would be
22 installed or on line 2005?
23 A We have not initiated any detailed
24 planning. We've done just some rough site planning-type
25 planning for future projections of the footprint that
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1 would be needed in order to build such a plant.
2 Q Would the proposed water treatment plant
3 have any similarity to the Marden plant?
4 A We haven't made that determination at this
5 point in time.
6 Q Would the Company be proposing to treat the
7 water with chlorine?
8 A If we built it today, I'm confident that
9 they would have some similarities and that we would be
10 proposing to treat it with chlorine. If we build it five
11 years from now, with the change in technology and the
12 difference in cost in, say, a membrane technology, there
13 certainly may be a different treatment method that will
14 be available at that point in time versus today.
15 Q Are there any parties in southeast Boise
16 that are engaged in an aquifer recharge program, to your
17 knowledge?
18 A Yes, there are.
19 Q And who are those parties?
20 A That would be Micron.
21 Q Pardon?
22 A Micron.
23 Q And have they made application for some
24 permits to do so and do you know the status of that?
25 A It's my belief that they have made
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1 application for permits to do so and I don't know exactly
2 what the status is at this point.
3 Q Are they diverting any water at the east
4 Boise diversion at this point, Micron and Simplot?
5 A I don't know if they're diverting water
6 today or not.
7 Q Was there an indication that the water was
8 needed April by Surprise Valley, April of '98, from that
9 diversion? Are they also one of the parties?
10 A There's two questions there.
11 Q Are they one of the parties to the
12 diversion project, Surprise Valley?
13 A Yes, I believe they are.
14 Q And are they presently diverting water?
15 A I don't know the answer to that.
16 Q Okay. I'd like to move on to your
17 discussion starting on page 12 with the Eagle area
18 investment and did you have the opportunity or occasion
19 or, I guess, inclination to review the Eagle Water 95-1
20 case and the Commission's orders in that matter?
21 A I did not review that.
22 Q Do you know which case that I'm referring
23 to, the one in which the Company acquired Floating
24 Feather, Redwood Creek and Island Woods?
25 A I do know, yes.
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1 Q Do you know what the Company's estimates
2 for growth in customer base were in that case?
3 A I do not.
4 Q Would you accept, subject to check, that
5 United Water estimated a growth in customer base over the
6 next five years of between 200 and 250 customers per year
7 in the Eagle area?
8 A I would accept that, subject to check.
9 Q And do you know whether there has been
10 growth of that magnitude from '95 through the present?
11 A Could I have a moment, please? Could I ask
12 a question about the subject to check, that was 250?
13 Q Between 200 and 250 customers.
14 A In total?
15 Q Yes.
16 A There has not been that magnitude of growth
17 in that area.
18 Q You indicate that for the Floating
19 Feather/Redwood Creek area there are 45 residential
20 customers in your testimony.
21 A During the test year, that's correct, yes.
22 Q And do you know whether the 45 residential
23 customers was the number that was used by Mr. Gradilone
24 in his customer number and revenue projections?
25 A I do not.
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1 Q You state on page 13 that the capacity of
2 the two wells, the one at Redwood Creek and the Floating
3 Feather well, is 5.0 million gallons per day and that
4 current usage in the immediate area is 2.17 million
5 gallons per day. What percentage of that 2.17 million
6 gallons per day is for fire flow?
7 A The majority of it, 95 percent plus.
8 Q Does the Company anticipate providing water
9 supply to meet the new demand placed on the City of
10 Eagle's system by customer growth?
11 A No, we do not.
12 Q What is United Water's obligation to
13 provide water to the City of Eagle from the Floating
14 Feather/Redwood Creek wells?
15 A I don't know that our obligation is to
16 supply it from any particular spot. Our obligation to
17 supply water to the City of Eagle is for backup fire
18 protection.
19 Q Is that what the language of the contract
20 states?
21 A I don't recall.
22 Q Would there be any witness that would be
23 more familiar with the underlying contracts in the Eagle
24 area?
25 A I don't believe so. We could certainly
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1 look at the contract.
2 Q Your counsel has reminded me that you
3 discuss that in your rebuttal, so you'll remember later.
4 A Yes, I will.
5 Q Moving along to your discussion of the
6 Pierce Park/Gary Lane main installation starting on
7 page 14, thereabouts, did you have occasion to review the
8 Boise Water 93-1 and 93-3 cases? You address them in
9 your testimony.
10 A I'm basically familiar with those.
11 Q Okay. The question that is propounded to
12 yourself is that the Commission required the Company to
13 enter into a special facilities contract as a way of
14 financing the line extension and has that been done, and
15 your response was no and I guess your use of the term
16 "required" is that it's your belief that the Commission
17 mandated that?
18 A I guess that would be my general
19 interpretation of required.
20 Q Is the Company not obliged to comply with
21 Commission orders?
22 A They are, yes.
23 Q And can the Company choose which orders to
24 follow and which to disregard?
25 A No, we cannot.
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1 Q And did you seek relief from the mandate of
2 the Commission's order?
3 A Not to my knowledge.
4 MR. WOODBURY: Thank you, Mr. Linam.
5 That's all the questions I have on your direct
6 testimony.
7 COMMISSIONER NELSON: Thank you,
8 Mr. Woodbury. Why don't we take a ten-minute break now.
9 (Recess.)
10 COMMISSIONER NELSON: Okay, if we could go
11 back on the record, we'll take questions from the
12 Commission. Commissioner Smith.
13 COMMISSIONER SMITH: Just one real easy
14 one.
15
16 EXAMINATION
17
18 BY COMMISSIONER SMITH:
19 Q On page 12 of your testimony at line 10,
20 you refer to the Company's obligation to serve the area
21 which I think is the -- I forgot which area it was --
22 southeast Boise area. I'm curious where your presently
23 certificated area extends to and if you could kind of
24 show that to me, I assume Exhibit 1 is what I should look
25 at.
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1 A I'm not sure that Exhibit 1 is a real good
2 exhibit for depicting the service area, but I believe it
3 comes south of this area that is Highway 21 and it's
4 still even south of this area. I'd really need to get, I
5 guess, a certificated area map to delineate that any
6 better.
7 COMMISSIONER SMITH: Okay, that would be
8 helpful. Thank you.
9 COMMISSIONER NELSON: Okay, I just had one
10 question.
11
12 EXAMINATION
13
14 BY COMMISSIONER NELSON:
15 Q When you were discussing the southeast
16 Boise area and what was available in that area, I guess I
17 was under the impression that it was for various reasons
18 not practical to drill any wells in that area, is that
19 correct, or any more wells?
20 A Any more wells. I believe it's the case
21 that the wells that we've drilled and taking water into
22 that area have been outside of that water management area
23 so that the water has been transported from outside that
24 area into that area.
25 Q So you're currently using all of the supply
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1 that might be available from that area?
2 A That's correct.
3 COMMISSIONER NELSON: Okay, thank you.
4 Mr. Miller, do you have redirect?
5 MR. MILLER: Thank you, Mr. Chairman, a
6 few.
7
8 REDIRECT EXAMINATION
9
10 BY MR. MILLER:
11 Q Mr. Linam, how long have you been employed
12 in the water utility industry?
13 A Approximately 28 years.
14 Q And in general, what have been the range of
15 your responsibilities in the course of that employment?
16 A I've served from a staff engineer to what
17 we called a district and region engineer to a company
18 manager, an assistant region manager, a region manager.
19 Q And for how long have you been engaged in
20 what we might call executive level responsibilities?
21 A Since about 1982, so, what, that's 16
22 years.
23 Q Based on your experience in the water
24 utility industry and at executive levels, are you
25 familiar with the compensation that is paid to executives
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1 with duties similar to yours?
2 A Yes, I am and the compensation that I
3 receive is similar to that compensation of people with
4 those duties. In addition to that, I've reviewed some
5 areas of compensation in this area, for example,
6 reviewing some 10-K's and have noted that in the private
7 sector that looking at sort of the lowest paid executive
8 that's listed in a 10-K, I'm somewhere in the 40 to 60
9 percent of that range and looking at, say, another
10 utility, for example, a power company, my compensation is
11 about 65 percent of the lowest paid executive that's
12 listed in a 10-K.
13 Q Based on that experience and your review of
14 other information, do you have an opinion as to whether
15 the compensation paid to you is reasonable when compared
16 to executives with similar responsibilities?
17 A My opinion is that it is reasonable, yes.
18 Q I just wanted to make sure on one point.
19 We have this Exhibit 418 where in the response to the
20 interrogatory the Company indicated that it has paid
21 country club dues for some of the executives. Is it true
22 and correct as recited in the exhibit that those expenses
23 are not included in rate case proceedings?
24 A That is correct, they are not included in
25 the request for recovery.
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1 Q Very good. Mr. Woodbury asked some
2 questions regarding letters that had been received at the
3 Commission. During the recess, were you able to actually
4 count the number of letters that the Commission has
5 received from customers?
6 A I was able to count the ones I have. I'm
7 not absolutely certain that I had every one of them, but
8 it looked like there was about 12 to 15 and I haven't
9 checked with Mr. Woodbury, but that seemed like that was
10 about the number.
11 Q How many customers does United Water have?
12 How many customers does the Company serve?
13 A The number of customers in the case was
14 57,000 plus. I believe currently we have right at 58,000
15 customers.
16 Q So out of 58,000 customers, only somewhere
17 in the vicinity of 15 have submitted comments, informal
18 comments, in this case?
19 A That's the way it appeared to me, yes.
20 Q Mr. Woodbury also discussed with you the
21 concern about rate impacts, particularly for those of
22 modest means. Could you explain for the Commission what
23 the Company does to operate in an efficient way so as to
24 minimize the rate impacts for its customers?
25 A Yes. We continually look for ways to
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1 economize. We try to measure our performance to continue
2 to increase our productivity. In the area of supply, we
3 continue to look for economic ways to increase our supply
4 and provide the water to the customers that meet their
5 expectations, but yet, at a cost that is reasonable and
6 just for them.
7 For example, United Water Idaho and this
8 Boise Valley, although we're blessed with a groundwater
9 supply, there is a high level of iron and manganese in
10 various areas located throughout the subsurface here, so
11 with water being the universal solvent, there is the
12 potential for the iron and manganese to be in the water,
13 and in the areas that it is higher than the recommended
14 standard, secondary standard, for iron and manganese, we
15 try to either replace that water by redrilling and by
16 locating a strata where these levels of iron and
17 manganese are less or we try to sequester those so that
18 the customers get the water that is acceptable to them,
19 but yet, trying to do it on an economic basis.
20 Q And obviously, as a regulated utility, the
21 expenses and investments of the Company are subject to
22 audit and review by this Commission to ensure their
23 reasonableness?
24 A That's correct.
25 Q And that's what we're here for today, isn't
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1 it?
2 A It seems to be.
3 Q You were asked some questions regarding the
4 mandate from the Idaho Department of Transportation to
5 either install the diversion facilities now or be forever
6 precluded from installing them. Having reviewed the
7 testimony in this case, is there any testimony from any
8 party that questions whether or not that mandate existed?
9 A I haven't seen that, no.
10 Q Now, with respect to the -- you were asked
11 some questions regarding estimated growth in the Eagle
12 area. Was there some intervening event unexpected and
13 beyond the control of the Company that changed the actual
14 customer growth in that area occurring after the
15 estimates were made?
16 A I believe there was a moratorium placed in
17 that area because of the waste water facilities for a
18 period of time.
19 Q And the Company had no way of predicting
20 that event at the time its original estimates were made;
21 is that correct?
22 A Not to my knowledge.
23 Q You were asked some questions regarding the
24 Pierce Park/Gary Lane investment. First, has Staff or
25 any other party proposed disallowing that investment in
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1 this proceeding?
2 A I don't believe they have, no.
3 Q And I think it would be useful to explain
4 to the Commission why it was that a special facilities
5 agreement was never or never materialized, if you could
6 do that for us, please.
7 A I think the main reason that it didn't
8 materialize is although the Commission ordered us to
9 enter into an agreement, the other party didn't seem to
10 comply with that Order and they -- it was our experience
11 that we were not able to reach an agreement with the
12 other party to enter into such an agreement.
13 Q So it simply became impossible to do, is
14 that basically it?
15 A That's basically my understanding, yes.
16 Q And in your direct testimony on page 14
17 going on to page 15, you provide some further explanation
18 of those circumstances. To your knowledge, has any party
19 filed rebuttal testimony refuting that portion of your
20 testimony?
21 A Not to my knowledge, no.
22 Q Very good. Just to go back one moment to
23 these letters that the Commission has received, based on
24 your review, how many of those expressed concerns about
25 any type of service quality issues?
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1 A I don't have the exact number, but it
2 certainly wasn't all of them that had written, because
3 the majority of them seemed to be expressing a concern
4 about the cost rather than expressing concerns about the
5 service. The one I believe that Mr. Woodbury questioned
6 me about did express some concerns about some
7 discoloration and expressed some concerns about
8 fluctuation in pressure.
9 We did look at that area as to fluctuations
10 in pressure and it is in an area that is served by the
11 confluence of about four wells. The main sizes are 12, 6
12 and 8-inch mains. It's sort of a mystery as to why there
13 would be fluctuation in pressure to the extent that seems
14 to be indicated in the letter; therefore, we're going to
15 have to do something to determine how that fluctuation is
16 materializing, but there seemed to be two or three
17 others, as I recall, in that package that Mr. Woodbury
18 was referring to that also complained about some service
19 area, primarily with some discoloration, I believe, with
20 the iron and manganese I was referring to and I believe
21 that was the basis of those concerns other than the cost.
22 Q So as I understand your testimony, when you
23 became aware of these letters yesterday, is it correct
24 that the Company immediately undertook investigation to
25 determine the source of these concerns and what could be
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1 done about them?
2 A I did give those to our customer service
3 manager and asked that they be looked into and so, yes,
4 they are being looked into.
5 Q Very good, and again of the 58,000
6 customers the Company serves, in this proceeding anyway,
7 only five of those customers have expressed concerns
8 about quality of service or quality of water; is that
9 correct?
10 A I don't know the exact number out of that
11 15, but there was, I think it seems like there was,
12 three, four, five, something like that.
13 MR. MILLER: All right, very good.
14 That's all the redirect I have,
15 Mr. Chairman. Thank you.
16 COMMISSIONER NELSON: Thank you,
17 Mr. Miller.
18 Mr. Linam, thank you for your testimony.
19 We'll give you a break here.
20 THE WITNESS: Thank you.
21 (The witness left the stand.)
22 COMMISSIONER NELSON: I might before you
23 call your next witness say because of our public hearing
24 tonight, why, I'm anticipating that we'll put in a fairly
25 full day today and see how much we can get covered, take
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1 a break for dinner and then come back and conduct the
2 public hearing, unless somebody is having a big problem
3 with that.
4 MR. MILLER: Up to 5:00 o'clock, fine.
5 COMMISSIONER NELSON: Okay, we're ready for
6 your next witness.
7 MR. MILLER: Thank you, Mr. Chairman. The
8 Applicant would call Jeremiah Healy.
9
10 JEREMIAH J. HEALY,
11 produced as a witness at the instance of United Water
12 Idaho Inc., having been first duly sworn, was examined
13 and testified as follows:
14
15 DIRECT EXAMINATION
16
17 BY MR. MILLER:
18 Q Sir, would you state your name, please?
19 A Jeremiah J. Healy.
20 Q And by whom are you employed?
21 A I'm employed by United Water Idaho.
22 Q And in what capacity?
23 A Coordinator of planning and rates.
24 Q And what is the general scope of your
25 duties and responsibilities in that position?
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Wilder, Idaho 83676 United Water Idaho Inc.
1 A The general scope is overlooking the
2 financial operations of the Company, the operating,
3 planning, the strategic planning, as well as assisting in
4 rate filings and other special projects as directed by my
5 boss.
6 Q Very good. Now, in connection with this
7 proceeding, did you previously have occasion to prefile
8 certain written direct testimony?
9 A Yes, I did.
10 Q And how many pages comprise your written
11 direct testimony?
12 A Sixteen pages of text and Exhibits No. 5, 6
13 and 7.
14 Q With respect to your written direct
15 testimony, are there any additions or corrections that
16 should be made in the nature of clerical or other
17 corrections?
18 A None that I'm aware of.
19 Q Since the time the Company filed both its
20 direct testimony and its rebuttal testimony, even after
21 the filing of rebuttal testimony, have any events
22 occurred that caused the necessity of any other or
23 additional adjustments to the Company's case?
24 A I believe there's been one event that fits
25 that category.
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Wilder, Idaho 83676 United Water Idaho Inc.
1 Q And could you describe or tell us what that
2 event is?
3 A Sure. Shortly after the Company filed its
4 rebuttal, the Company became aware that our power
5 provider, Idaho Power Company, due to the lack of
6 snowpack this year has requested from the Commission
7 permission to raise its rates effective May 16th, 1998,
8 I believe, a general increase I understand of about
9 8 percent, although it may impact some customers, some
10 larger customers, more significantly than that.
11 Q In the initial case that the Company filed,
12 did you prepare and submit schedule 1, page 7 of Exhibit
13 No. 5?
14 A I did, yes.
15 Q And was that the Company's adjustment to
16 purchased power expense?
17 A Yes.
18 Q Based on the Idaho Power Company filing and
19 your understanding of its impact on United Water Company,
20 have you prepared an amended schedule 1, page 7 to
21 Exhibit No. 5?
22 A Yes, I have.
23 Q Do you have a copy of that with you?
24 A I do, yes.
25 MR. MILLER: Could I approach the
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Wilder, Idaho 83676 United Water Idaho Inc.
1 Commission?
2 COMMISSIONER NELSON: Yes.
3 (Mr. Miller distributing documents.)
4 Q BY MR. MILLER: And you have amended
5 schedule 5 -- Exhibit 5, schedule 1, page 7 in front of
6 you?
7 A Yes, I do.
8 Q And could you just very briefly indicate
9 for the Commission how that exhibit, that schedule, was
10 prepared and what it now reflects?
11 A Sure. The original schedule was prepared
12 based on test year power usage priced out at current
13 rates and at the time the Company filed its direct case
14 and also its rebuttal case, the rates that were in effect
15 were the rates, I believe, that were effective May 16th
16 of 1997, so those were the rates we used to price our
17 consumption of power.
18 Since this event has come to our knowledge,
19 my adjustment to this exhibit is what I believe to be the
20 minimum adjustment to our power expense that will occur
21 if Idaho Power's request is approved, and my
22 understanding is that that would raise the per kilowatt
23 cost minutely. When applied, though, to the nearly
24 31 million kilowatt-hours of power that we consume, it
25 causes a $58,419 adjustment, and as I state, I've been in
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CSB REPORTING HEALY (Di)
Wilder, Idaho 83676 United Water Idaho Inc.
1 contact with Idaho Power to determine -- I believe this
2 is the minimum impact. I'm anxious to hear from them
3 whether it will be any more than that.
4 Q And, of course, at this point it's unknown
5 whether or not the Commission will approve the Idaho
6 Power application as filed?
7 A Correct.
8 Q So there are two kinds of uncertainties
9 here: first, whether the Company knows precisely what
10 the rate impact would be; and, secondly, whether or not
11 it will be approved at all or in what amount?
12 A Correct, although I guess my understanding
13 from past power cost adjustments is it's a verification
14 of their data, so I anticipate that the adjustment will
15 be granted.
16 Q Is it, though, I guess the Company's
17 request based on this information that whatever the
18 Commission does approve in connection with the Idaho
19 Power surcharge be recognized as an adjustment to the
20 United Water rate case?
21 A That would be our request, certainly.
22 Q Very good, and then just one other area
23 before I turn you over. There have been, of course, in
24 the various testimonies a number of proposed
25 adjustments. Some of them started out as disputed
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CSB REPORTING HEALY (Di)
Wilder, Idaho 83676 United Water Idaho Inc.
1 adjustments, as time has gone on, some of them have
2 somewhat resolved themselves. Just for the Commission's
3 information, could you at this moment provide us an
4 itemization of adjustments that, to your knowledge, are
5 not now disputed as between the Company and the Staff
6 anyway?
7 A Yes.
8 Q And while you're doing that, although it
9 has not been admitted, would it be useful for us to
10 follow along on your Exhibit 20 that lays out the various
11 adjustments or no?
12 A That may be useful, yes. In my rebuttal
13 testimony, Exhibit 20, yes. Starting with page 1 of 5 of
14 Exhibit 20, Staff witness Smith and I spoke this morning
15 and have agreed with regard to page 1 of 5 that the
16 adjustment that the Company has proposed in column B is
17 acceptable to both the Company and the Staff.
18 Q Column B?
19 A Column B, yes, and we also agreed that the
20 adjustment indicated in column C is acceptable to both
21 the Company and the Staff, and then turning to page 2 of
22 5 -- and incidentally, there is a correction. That says
23 "Exhibit No. 10." It is intended to say "Exhibit
24 No. 20, page 2 of 5." Starting in column C, Staff
25 witness Smith has made an adjustment to the ad valorem
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Wilder, Idaho 83676 United Water Idaho Inc.
1 taxes that the Company agrees with. Column D as well,
2 the Company agrees with the adjustment. Column E, the
3 Company agrees with that adjustment. Column F, the
4 Company agrees with that adjustment. Column G, the
5 Company agrees with that adjustment. Column H, the
6 Company agrees with that adjustment, and turning to
7 page 3 of 5 of Exhibit No. 20 -- I'm sorry, this is one
8 place where this exhibit will not serve this purpose, if
9 I could suggest another exhibit that would.
10 Q All right, thanks.
11 A In Mr. Smith's testimony, Mr. Smith has
12 Exhibit No. 115 where he similarly summarizes the Staff's
13 case in a manner similar to what the Company did in my
14 rebuttal testimony. On page 1 of 2 in Exhibit 115,
15 column K indicates an adjustment to the Company's
16 operations and maintenance expense to correct a payroll
17 tax adjustment. The Company indicated in its rebuttal
18 that they felt that adjustment was a duplication of an
19 adjustment the Company made and Mr. Smith has agreed that
20 that is the case, so we have agreed to reverse that
21 adjustment.
22 Q And is that then your understanding of
23 issues previously in contest which are now at least as
24 between the Company and the Staff no longer a dispute?
25 A That's my understanding of our conversation
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Wilder, Idaho 83676 United Water Idaho Inc.
1 this morning, yes.
2 Q Very good. With that, if I asked you the
3 questions that are set forth in your written direct
4 prefiled testimony today, would your answers be the same?
5 A They would be.
6 Q To the best of your knowledge, are they
7 true and correct?
8 A Yes, they are.
9 MR. MILLER: Very good. Mr. Chairman, the
10 witness is available for cross-examination. I apologize
11 for the length of time taking to get him on the record,
12 but, hopefully, it will in the bigger scheme of things
13 prove efficient.
14 COMMISSIONER NELSON: Thank you. If
15 there's no objection, we would order the testimony of
16 Mr. Healy spread upon the record and mark Exhibits 5, 6
17 and 7.
18 (The following prefiled testimony of
19 Mr. Jeremiah Healy is spread upon the record.)
20
21
22
23
24
25
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CSB REPORTING HEALY (Di)
Wilder, Idaho 83676 United Water Idaho Inc.
1 Q Please state your name and business
2 address?
3 A Jeremiah J. Healy, 8248 West Victory Road,
4 Boise, Idaho 83709.
5 Q By whom are you employed and in what
6 capacity?
7 A I am employed by United Water Idaho Inc.
8 (UWID or "the Company) in the capacity of Coordinator of
9 Planning and Rates.
10 Q How long have you been employed by United
11 Water Idaho?
12 A I have been employed by United Water Idaho
13 and United Water Management and Services Company since
14 February, 1980.
15 Q Briefly describe your responsibilities
16 during your tenure?
17 A As a Staff Accountant with the Central
18 Region Office in Harrisburg, PA until April, 1982 I
19 performed general accounting, prepared federal and state
20 tax returns and public utility commission annual reports.
21 In May 1982 I became an Internal Auditor responsible for
22 conducting financial and special audits on regulated and
23 nonregulated subsidiaries. From September 1985 until
24 December 1989 I was Accounting Supervisor for United
25 Water Idaho. In this capacity, I was responsible for
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Healy, Di 1
United Water Idaho Inc.
1 accounting and planning functions. In January, 1990 I
2 became Financial Coordinator responsible for accounting,
3 budgeting and strategic planning for five water and/or
4 wastewater utilities. From August, 1993 until October,
5 1994 I was Director of Rates at United Water Management
6 and Services Company. In this capacity I prepared rate
7 filings for various utility subsidiaries. In November
8 1994 I assumed my current position.
9 Q What is your educational background?
10 A I was granted a Bachelor of Science degree
11 with a major in accounting from the University of South
12 Carolina in May, 1977.
13
14 /
15
16 /
17
18 /
19
20
21
22
23
24
25
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Healy, Di 1A
United Water Idaho Inc.
1 Q Before what regulatory commissions have you
2 appeared and presented expert testimony?
3 A I have testified in various proceedings
4 before the Idaho Public Utilities Commission and I have
5 submitted written testimony before the regulatory bodies
6 in Illinois and Arkansas.
7 Q In connection with the Company's present
8 application for an increase in rates and charges, what is
9 the scope of your participation and testimony?
10 A I analyzed the Company's books and records
11 and prepared the necessary accounting exhibits to adjust
12 operating expenses.
13 Q Describe generally the approach you have
14 taken in preparing the accounting exhibits.
15 A I have prepared exhibits setting forth the
16 operating results of UWID for the test year consisting of
17 the twelve months ended June 30, 1997. To this test
18 period, normalizing and annualizing adjustments were made
19 to reflect operating results at the year end level.
20 For operation and maintenance expenses, I
21 have relied on information produced within the Company as
22 the basis for my adjustments. For depreciation,
23 operating taxes and income taxes, supporting details are
24 shown which provide the basis for the adjustments.
25 Q Have you prepared from the Company's books
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Healy, Di 2
United Water Idaho Inc.
1 and records a series of exhibits depicting the Company's
2 balance sheet and operating income statement for the test
3 year ended June 30, 1997?
4 A Yes, I have prepared Exhibits No. 6 and 7
5 which illustrate the Company's balance sheet (Exhibit
6 No. 6) and operating income statement per books (Exhibit
7 No. 7). Both of these exhibits are based upon results
8 for the test period.
9
10 /
11
12 /
13
14 /
15
16
17
18
19
20
21
22
23
24
25
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Healy, Di 2A
United Water Idaho Inc.
1 Q Have you prepared an Exhibit which
2 indicates the pro forma operating income of United Water
3 Idaho Inc. at existing and proposed rates?
4 A Yes. I have prepared Exhibit No. 5 which
5 is titled "Statement of Operating Income Per Books and
6 Pro Forma under Present and Proposed rates for the year
7 ended June 30, 1997."
8 Column 1 identifies the schedule which
9 details the test year pro forma adjustments in Column 3.
10 Column 2 indicates the elements of operating income. The
11 amounts therein are per books, as shown in Exhibit No. 7.
12 Column 3 shows a summary of test year adjustments made to
13 operating revenues and expenses. The adjustment to
14 operating revenue shown on line 4 will be explained by
15 Witness Gradilone. The adjustments to operation and
16 maintenance expenses, summarized on line 6, are detailed
17 in Exhibit No. 5, Schedule 1 and they will be explained
18 in conjunction therewith. The adjustments to
19 depreciation expense, amortization of plant held for
20 future use and amortization of utility plant acquisition
21 adjustments summarized on lines 7, 8 and 9 are detailed
22 in Exhibit No. 5, Schedule 2, pages 1 to 4, and will be
23 explained in conjunction therewith. The adjustments to
24 operating taxes summarized on lines 11 and 12 are
25 detailed in Exhibit No. 5, Schedule 3, pages 1 to 4, and
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Healy, Di 3
United Water Idaho Inc.
1 will be explained in conjunction therewith. Column 4
2 shows the adjusted operating income at existing rates for
3 the test period. Column 5 indicates the adjustments to
4 operating revenues, operation and maintenance expenses,
5 and income taxes under the rates proposed herein. The
6 adjustment to operating revenues of $3,424,516 was
7 computed based on a 9.76% rate of return on test year
8 rate base. Column 6 shows the adjusted operating income
9 at the rates proposed herein. The income
10
11 /
12
13 /
14
15 /
16
17
18
19
20
21
22
23
24
25
111
Healy, Di 3A
United Water Idaho Inc.
1 taxes shown on lines 17 and 18 were computed as indicated
2 on Exhibit No. 5, Schedule 4, and will be explained in
3 conjunction therewith.
4 Q Returning to Column 3 of Exhibit No. 5,
5 please explain the adjustments to operating expenses?
6 A Operation and maintenance expenses have
7 been increased by $605,608 (Schedule 1). Depreciation
8 and amortization expense has been increased by $391,391
9 (Schedule 2). Ad Valorem taxes have been increased by
10 $242,499 (Schedule 3). Payroll Taxes have been increased
11 by $14,844 (Schedule 3). Federal income taxes have
12 decreased $558,803 and State income taxes have been
13 increased by $58,104 (Schedule 4).
14 The details supporting the operation and
15 maintenance expense adjustments are shown on the 30 pages
16 which comprise Schedule 1. Page 1 is a summary of
17 adjustments made to operation and maintenance expense, as
18 well as depreciation and amortization and taxes other for
19 the test year. Pages 2 through 30 illustrate the details
20 of such adjustments for operation and maintenance
21 expense. There are 29 adjustments to operation and
22 maintenance expense, totaling $605,608. This amount is
23 indicated on Exhibit No. 5, Column 3, line 6.
24 Q Please describe the various normalizing and
25 annualizing adjustments to operation and maintenance
112
Healy, Di 4
United Water Idaho Inc.
1 expense.
2 A Adjustment No. 1 increases payroll expense
3 by $263,603 (Schedule 1, Page 2). This adjustment
4 reflects anticipated pay increases for salaried employees
5 to be effective April 1, 1998. For union employees, the
6 pay rates used reflect the rates called for in the
7 current contract to be effective April 1, 1998. For all
8 employees, the total hours by employee covering the
9 period July 1, 1996 through June 30,
10
11 /
12
13 /
14
15 /
16
17
18
19
20
21
22
23
24
25
113
Healy, Di 4A
United Water Idaho Inc.
1 1997 were determined and applied to the anticipated pay
2 rates indicated above. The personnel establishment
3 reflects the current group of employees plus two new
4 positions to be filled before commencement of the
5 hearings in this matter as discussed in Witness Linam's
6 testimony. A test year based ratio of labor charged to
7 operation and maintenance expense was applied to total
8 labor.
9 Q Have you recognized the fact that General
10 Manager Linam devotes 15% of his time to other United
11 Water properties?
12 A Yes. Only that portion of Mr. Linam's
13 salary and payroll overheads that pertain to UWID has
14 been utilized in establishing pro forma payroll expense.
15 Adjustment No. 2 increases the Company's
16 contribution to the 401(K) thrift plan by $6,397
17 (Schedule 1, Page 3) based upon historical participation
18 rates in this supplemental pension plan. The
19 supplemental retirement contribution of $82,340
20 represents employer matching of employee contributions
21 into the plan. The Company matches 50% of an employees
22 contributions up to a maximum of 2% of regular annual pay
23 for hourly employees and 3% for salaried employees.
24 Adjustment No. 3 for $36,583 (Schedule 1, Page 4)
25 reimburses the Company for expenses incurred in complying
114
Healy, Di 5
United Water Idaho Inc.
1 with the Information Collection Rule provision of the
2 Safe Drinking Water Act. The company anticipates
3 spending $109,750 between July, 1997 and December, 1998
4 to complete sampling and testing requirements. Since
5 this is not an annual expense, the Company is deferring
6 the total cost and is proposing a three year recovery.
7 Adjustment No. 4 decreases chemical expense by
8 $705 (Schedule 1, Page 5). The usages upon which this
9 adjustment is predicated are test period actual. Current
10 pricing information is used to develop total cost.
11
12 /
13
14 /
15
16 /
17
18
19
20
21
22
23
24
25
115
Healy, Di 5A
United Water Idaho Inc.
1 Adjustment No. 5 increases test year expense by
2 $20,968 for purchased water expense (Schedule 1, Page 6).
3 The Company recently contracted with the City of Garden
4 City to purchase water to augment supplies in the North
5 State area between May 1 and September 30, the summer
6 season. However, the test year contained only a partial
7 amount of summer season usage.
8 Adjustment No. 6 decreases purchased power cost by
9 $31,807 (Schedule 1, Page 7). The power costs were
10 computed by applying the tariff rates of the Idaho Power
11 Company in effect at May 16, 1997 to test year usage of
12 demand (KW), energy (kwh) and base load capacity. The
13 Company is billed by Idaho Power under three different
14 tariffs. The billing determinants were obtained from the
15 power bills rendered to the Company from July 1, 1996 to
16 June 30, 1997. Current tariff rates were applied to the
17 above determinants and resulted in a pro forma purchased
18 power cost of $1,004,407 while test year expense was
19 $1,036,214.
20 Adjustment No. 7 increases the cost of providing
21 medical and dental care, long term disability insurance
22 and group term life insurance coverage to employees by
23 $53,839 (Schedule 1, Page 8). The pro forma cost of
24 providing the various coverages was applied to the June,
25 1997 level of employees plus the two positions discussed
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Healy, Di 6
United Water Idaho Inc.
1 earlier. Contributions from union employees offsetting
2 these costs were calculated based on amounts specified in
3 the labor contract currently in force. Contributions
4 from non-union employees were based on the current level
5 for single, parent/child and family coverage.
6 Q Why did you use pro forma cost of coverage
7 in your calculation?
8 A The cost of providing medical and dental
9 coverage has fluctuated significantly over the last
10 several years. For example, United Water's cost for
11 Family
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Healy, Di 6A
United Water Idaho Inc.
1 Coverage under the Comprehensive Medical and Dental Plan
2 was $488.49 in 1996, $406.07 in 1997 (a 17% decrease) and
3 is expected to be $637.53 for 1998 (a 57% increase over
4 1997; 31% over 1996). The rates for 1998 were used in
5 developing the pro forma cost of the coverage since it is
6 a known and measurable cost. It is anticipated that
7 Company employees may be offered a second medical and
8 dental option at the open enrollment period upcoming in
9 late fall, 1997. As this information becomes available,
10 the cost of providing medical and dental coverage will be
11 updated.
12 Adjustment No. 8 increases test year expense by
13 $4,907 (Schedule 1, Page 9) for the normalization of
14 uncollectibles account expense based on a 3-year average
15 experience. The uncollectible account rate of 0.3213%
16 was determined by dividing $200,778 of 3-year net
17 uncollectibles by 3-year revenues of $62,479,576. The
18 uncollectible percent of 0.3213% was applied to pro forma
19 revenues at existing rates. The calculation resulted in
20 an uncollectibles account expense greater than the test
21 year level.
22 Adjustment No. 9 increases test year expense by
23 $3,497 for the normalization of the IPUC assessment
24 (Schedule 1, Page 10). The most recent Commission
25 assessment indicates a billing rate of 0.2348% which is
118
Healy, Di 7
United Water Idaho Inc.
1 applied to pro forma operating revenue and results in a
2 pro forma assessment greater than test year expense.
3 Adjustment No. 10 increases test year expense by
4 $18,785 by increasing the level of employee relocation
5 expense amortization (Schedule 1, Page 11). The Company
6 anticipates deferred expenses of $118,465 to be incurred
7 prior to the hearing in this matter for employees Healy,
8 Linam and Schaefer. This deferred expense is proposed to
9 be amortized over a five year period. This
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Healy, Di 7A
United Water Idaho Inc.
1 results in a level of annual relocation expense of
2 $23,693, $18,785 higher than the test year level of
3 $4,908.
4 Adjustment No. 11 increases test year expense by
5 $20,036 for business insurance cost (Schedule 1, Page
6 12). The Company's pro forma general liability, excess
7 liability, worker's compensation and other coverage
8 premiums cover the period January 1, 1997 through January
9 1, 1998 with the exception of two minor coverages, which
10 have a fiscal year. Uninsured claim experience
11 represents a normalized level of such cost. Pro forma
12 premiums and cost amount to $353,601 which is $20,036
13 greater than test year expense of $333,565.
14 Adjustment No. 12 decreases test year expense by
15 $37,835 for employee pension cost (Schedule 1, Page 13).
16 This adjustment reflects the estimated 1997 SFAS87 cost
17 as developed by the Company's actuary for bargaining and
18 non-bargaining units of the Company and is consistent
19 with the usual treatment afforded pension expense by the
20 Commission.
21 Adjustment No. 13 increases test year cost by
22 $98,980 for the annualization and normalization of PBOP
23 (Post Retirement Benefits Other Than Pension; Schedule 1,
24 Page 14). The pro forma level of expense represents the
25 actual 1997 SFAS 106 cost as developed by the Company's
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Healy, Di 8
United Water Idaho Inc.
1 actuary plus a 20-year amortization of the deferred
2 portion of SFAS 106 expense. The test year contained
3 essentially eight months of PBOP expense authorized in
4 Case (UWI-W-96-3) pursuant to IPUC Order No. 26671 which
5 granted recognition of this expense and amortization of
6 the deferral.
7 Adjustment No. 14 increases the level of
8 Management and Service charges by $80,078 (Schedule 1,
9 page 15). The test period level of
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Healy, Di 8A
United Water Idaho Inc.
1 Management and Service charges were $868,565. However
2 due to recording variations, this level is not
3 representative of the annual expense. For example, the
4 1995 annual expense was $917,834, the 1996 annual expense
5 was $902,451 and the 1997, which contains 7 months actual
6 data and 5 months projected data, indicates a pro forma
7 level of Management and Service charges of $948,643 or
8 $80,078 higher than the test year level of $868,565. The
9 1997 charge indicates a 5% increase over year end 1996
10 and reflects the level of services received. These
11 services provided to United Water Idaho from United Water
12 Management & Services are provided pursuant to an
13 agreement between the companies.
14 Adjustment No. 15 increases test year expense by
15 $4,211 for customer computer billing charges (Schedule 1,
16 page 16). The customer computer billing consists of two
17 components. EDS, an unaffiliated company, charges
18 $0.11312 per bill for computer processing charges based
19 on test year levels. An additional charge of $0.05188
20 per bill is incurred for the cost of billing supplies,
21 software updates and other billing related cost. The
22 combined rate is $0.1650 per bill, and this was applied
23 to the June, 1997 base number of bills processed
24 annually.
25 Adjustment No. 16 increases test year customer
122
Healy, Di 9
United Water Idaho Inc.
1 postage cost by $1,666 (Schedule 1, page 17). There were
2 57,299 customers at June 30, 1997 who receive 6 bills per
3 year for a total of 343,794 bills. Based on test year
4 expense and bill volume, it cost the Company an average
5 of $0.26358 in postage for each bill, or $90,617 (343,794
6 bills @ $0.26358 each). Added to this amount is $36,030
7 for postage incurred for customer communications other
8 than bills as well as postage on return to office bills
9 for a total pro forma cost of $126,647 which is $1,666
10 greater than test year postage expense.
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Healy, Di 9A
United Water Idaho Inc.
1 Adjustment No. 17 increases test year expense by
2 $115, 654 for the amortization of current rate case
3 expense and the unamortized balance of two prior
4 proceedings, the Connection Fee case (UWI-W-96-4) and the
5 Water Quality (UWI-W-96-6) investigation (Schedule 1,
6 Page 18). It is estimated that the current rate case
7 will cost approximately $300,000 to which $36,813, the
8 unamortized balance from the prior proceedings, is added
9 to reflect a total unamortized balance of $336,813. The
10 $336,813 is divided by 2 years to reflect an annual
11 amortization of $168,407. Deducting test year expense of
12 $52,753 produces an adjustment of $115,654.
13 Adjustment No. 18 decreases test year expense by
14 $36,340 for the normalization of contract employee
15 expense (Schedule 1, page 19). The Company anticipates a
16 need in the rate year for one contract employee, a
17 payables clerk, who is currently of service to the
18 Company. The pro forma level of contract employee
19 expense is $27,040, $36,340 lower than the test year
20 level of $63,380.
21 Adjustment No. 19 eliminates $21,653 of expenses
22 recorded as dues, advertising, charitable contributions,
23 subscriptions and memberships which are not considered
24 appropriate for rate making purposes based upon prior
25 Commission decisions (Schedule 1, page 20).
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Healy, Di 10
United Water Idaho Inc.
1 Adjustment No. 20 (Schedule 1, page 21) increases
2 transportation and fuel expense by $20,298. The Company
3 will be increasing the size of its vehicle fleet by two
4 vehicles in 1998 (one for the new locator, one for field
5 use by the Engineering Department for a total of 61
6 vehicles) as well as replacing four other vehicles.
7 Appropriate offsetting adjustments for the retired
8 vehicles have been made in rate base and depreciation
9 projections.
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Healy, Di 10A
United Water Idaho Inc.
1 Adjustment No. 21 (Schedule 1, page 22) adjusts
2 upward the annual cost of supporting the StarNet portion
3 of the Information Technology (IT) infrastructure by
4 $103,092 over the test year level. Pro forma expense of
5 $174,372 includes StarNet, frame relay and work station
6 support for 53 work stations. This expense represents
7 the ongoing level of outside services required to monitor
8 and maintain work stations and servers. Witness Linam
9 discusses the benefits of the Company's IT initiatives in
10 his testimony.
11 Adjustment No. 22 decreases test year expense by
12 $121,465 for the normalization of payroll and
13 transportation overheads chargeable to other than
14 Operations and Maintenance expense (Schedule 1, page 23).
15 The relationship of payroll related expenses to payroll
16 dollars is 36.29%. Added to this percentage is 13.54%
17 for non-work days, which, when combined, totals 49.83%.
18 The transportation related expense relationship to
19 payroll dollars is 12.18%. The combined payroll and
20 transportation overhead rate is 62.01%. When 62.01% is
21 applied to pro forma non - O&M payroll, the result is a
22 pro forma overhead credit of $523,400, which is $121,465
23 greater than test year overhead credit of $401,935.
24 Adjustment No. 23 (Schedule 1, page 24) increases
25 test year expense by $54,055 in recognition of the
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Healy, Di 11
United Water Idaho Inc.
1 additional operation and maintenance expense that will be
2 incurred as a result of increasing the level of customers
3 for the test year as well as annualization of
4 acquisitions. The adjustment is based upon the
5 relationship of test year levels of purchased power,
6 chemicals, transportation, general insurance, customer
7 accounting and T&D cost excluding payroll (the variable
8 cost) to test year revenue. The variable cost represents
9 11.87% of
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Healy, Di 11A
United Water Idaho Inc.
1 revenue (line 11). The 11.87% variable cost was applied
2 to customer growth revenue of $455,289 resulting in
3 additional O&M expense of $54,055.
4 Adjustment No. 24 (Schedule 1, page 25) annualizes
5 the level of amortization expense for the Treasure Valley
6 Hydrologic Study contribution made by the Company and
7 allowed in Case UWI-W-96-3, Order No. 26671. The annual
8 allowance is $25,000; the test year contained only a
9 partial year of amortization amounting to $14,728
10 resulting in a $10,272 pro forma adjustment.
11 Adjustment No. 25 normalizes the test year level
12 of expenses associated with the full amortization of the
13 deferred conservation plan (Schedule 1, page 26) and
14 results in a decrease of $11,148 to O&M expense.
15 Adjustment No. 26 (Schedule 1, page 27) decreases
16 test year expense by $18,210 in recognition of reduced
17 operation cost associated with Witness Gradilone's
18 weather normalization adjustment. The adjustment is
19 based upon the relationship of purchased power and
20 chemical cost (the variable cost) to test year revenue.
21 The variable cost represent 5.53% of revenue (line 7).
22 The 5.53% variable cost was applied to the weather
23 normalization revenue impact of ($329,151) resulting in
24 reduced O&M expense of $18,210.
25 Adjustment No. 27 (Schedule 1, page 28) decreases
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Healy, Di 12
United Water Idaho Inc.
1 the test year level of expense by $8,226 associated with
2 amortization of the deferred Data Center Consolidation
3 cost. This amortized expense has an annual impact of
4 $16,461, $8,226 less than the test year level of $24,687.
5 Adjustment No. 28 (Schedule 1, page 29) increases
6 test year expense by $7,473 related to expenses incurred
7 and deferred in appealing Idaho State Tax Commission
8 (ISTC) appraisals and ad valorem tax expense. The
9 Company appealed the 1996 appraisal which resulted in
10 reduced property taxes and was
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Healy, Di 12A
United Water Idaho Inc.
1 granted a three year amortization of the appeal expenses
2 in UWI-W-96-3, Order No. 26671. In 1997 the Company
3 again appealed the ISTC appraisal, was successful in
4 reducing the appraisal and incurred an additional $23,238
5 in appeal cost. The recalculated amortization from the
6 unamortized balance of the prior appeal cost and new
7 appeal cost produces a pro forma amortization of $9,582;
8 this is $7,950 above the test year level of $1,632.
9 Adjustment No. 29 (Schedule 1, page 30) reduces
10 test year expense $31,397 for the anticipated reduction
11 in leased telemetry line expense associated with the
12 usage of mass radios, as discussed in Witness Brown's
13 testimony. During the test period, the Company incurred
14 lease expense of $49,397 for a group of nine telemetry
15 accounts from U.S. West. These nine accounts are
16 anticipated to cost $18,000 in the rate year, a decrease
17 of $31,397.
18 Q Please explain Exhibit No. 5, Schedule 2.
19 A Exhibit No. 5, Schedule 2 consists of two
20 pages. Page 1 summarizes the adjustment to depreciation
21 expense in the amount of $376,664. Pro forma
22 depreciation expense amounts to $3,466,079. This is
23 $376,664 greater than depreciation recorded during the
24 test year of $3,089,415 due to increases in the Company's
25 investment in plant.
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Healy, Di 13
United Water Idaho Inc.
1 Page 2 of Schedule 2 shows the depreciable
2 basis of Utility Plant by primary account, net of
3 contributions, the depreciation rate for each account and
4 the annual depreciation expense by primary account. Pro
5 forma annual depreciation expense is carried forward to
6 Page 1 in order to determine the adjustment needed to
7 test year expense. The depreciation rates used are the
8 same as those utilized in prior rate case filings.
9 Q Please explain Exhibit No. 5, Schedule 2,
10 Page 3?
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Healy, Di 13A
United Water Idaho Inc.
1 A Exhibit No. 5, Schedule 2, Page 3 adjusts
2 amortization of plant held for future use upward by
3 $25,000. The Company was granted this expense at this
4 level in UWI-W-96-3, Order No. 26671 but failed to record
5 the expense in the test period. Two months of expense
6 were recorded, however, the expense was recorded "below
7 the line" in error.
8 Q Please explain Exhibit No. 5, Schedule 2,
9 Page 4?
10 A Exhibit No. 5, Schedule 2, Page 4 decreases
11 test year expense by $10,273 for the amortization of
12 Utility Plant Acquisition Adjustments. The UPAA account
13 has a balance of negative $193,922 as of June 30, 1997
14 and is comprised of acquisition adjustments related to
15 the Company's purchase of Banbury, $33,700; Warm Springs
16 Mesa, $62,302; Redwood Creek, ($110,249); and Island
17 Woods, ($179,675). The Company proposes amortizing, over
18 20 years, the Warm Springs Mesa and Redwood Creek UPAA's,
19 as well as a portion of the Island Woods UPAA, as
20 indicated in Witness Linam's testimony and reflected in
21 the rate base adjustment of Witness Gennari.
22 Q Please explain Exhibit No. 5, Schedule 3,
23 Page 1?
24 A Exhibit No. 5, Schedule 3, Page 1 increases
25 test year Ad Valorem taxes by $242,499. The schedule
132
Healy, Di 14
United Water Idaho Inc.
1 details the methodology used to arrive at a pro forma
2 level of Ad Valorem expense. Essentially, the last
3 appraisal rendered by the Idaho State Tax Commission in
4 August, 1997 representing the appraised value of United
5 Water Idaho's property as of January 1, 1997 is increased
6 by an eight year average increase factor of 7.17% to
7 arrive at the anticipated appraised value as of January
8 1, 1998. To this appraisal valuation I applied the
9 latest known average levy rate from Ada County (per the
10 tax bill received in November,
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Healy, Di 14A
United Water Idaho Inc.
1 1996) to determine pro forma Ad Valorem taxes of
2 $1,235,403. The test year level was $992,904, producing
3 an adjustment of $242,499.
4 Q Please explain Exhibit No. 5, Schedule 3,
5 Pages 2, 3 and 4?
6 A Exhibit No. 5, Schedule 3, Pages 2, 3 and 4
7 increase test year payroll taxes by $14,844. Page 2
8 indicates an increase in FICA taxes of $20,014. Page 3
9 shows a decrease of $5,333 in Idaho unemployment taxes.
10 Page 4 reflects an increase of $163 in Federal
11 unemployment taxes.
12 Q Please explain Exhibit No. 5, Schedule 4.
13 A Exhibit No. 5, Schedule 4 shows the
14 calculation of state and federal income taxes at existing
15 and proposed rates. The amounts shown on line 1 of
16 columns 1 and 2 are the same as the amounts shown on line
17 15 of columns 4 and 6 of the summary schedule of Exhibit
18 No. 4. These figures represent operating income before
19 income taxes. From these figures must be deducted the
20 applicable statutory deductions when computing the state
21 and federal income taxes.
22 The first deduction is imputed interest expense
23 and it is deductible in the computation of both state and
24 federal taxable income. The calculation for the interest
25 deduction is shown in Note A on lines 13 through 17. The
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Healy, Di 15
United Water Idaho Inc.
1 deduction of interest is shown on line 3 and is
2 self-explanatory.
3 The second deduction is the excess of pro forma
4 tax depreciation over pro forma book depreciation. The
5 excess tax depreciation is deducted from state taxable
6 income only since state income taxes are calculated on
7 the basis of flow through accounting while federal income
8 taxes are calculated on the basis of normalization
9 accounting. Lines 19 and 20 indicate the amounts used in
10 determining excess tax depreciation.
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Healy, Di 15A
United Water Idaho Inc.
1 The remaining calculations are self-explanatory
2 except for the amortization of investment tax credit
3 shown on Line 10. Federal income tax expense was reduced
4 by the amortization of ITC which is amortized ratably
5 over the lives of the assets and represents 2% of the ITC
6 claimed from 1971 through 1997.
7 Q Please explain the adjustment shown on line
8 6, Column 5 of Exhibit No. 5.
9 A The adjustment shown on line 6, Column 5 of
10 Exhibit No. 5 represents additional uncollectible expense
11 and IPUC assessment as a result of the pro forma
12 adjustment to operating revenue shown on line 4, Column 5
13 of Exhibit No. 5.
14 Q Does this conclude your testimony?
15 A Yes.
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Healy, Di 16
United Water Idaho Inc.
1 (The following proceedings were had in
2 open hearing.)
3 COMMISSIONER NELSON: Mr. Fothergill, do
4 you have questions?
5 MR. FOTHERGILL: No questions.
6 COMMISSIONER NELSON: Ms. Ullman.
7 MS. ULLMAN: Yes, Mr. Chairman, I do have a
8 few questions. I tried to get ahead of myself. I hope
9 Mr. Linam left up for you two pieces of paper which I
10 would like to have marked as Exhibits 423 and 424, the
11 first one, Sharon Ullman's Third Production Request,
12 Request No. 27.
13 COMMISSIONER NELSON: And that would be
14 423.
15 MS. ULLMAN: And Request No. 14 be marked
16 as 424.
17 (Intervenor Sharon Ullman Exhibit
18 Nos. 423 & 424 were marked for identification.)
19
20 CROSS-EXAMINATION
21
22 BY MS. ULLMAN:
23 Q Mr. Healy, I would like to draw your
24 attention to your Exhibit No. 5, schedule 3, page 1 from
25 your direct testimony regarding ad valorem taxes.
137
CSB REPORTING HEALY (X)
Wilder, Idaho 83676 United Water Idaho Inc.
1 A Bear with me, please, Ms. Ullman, one
2 second while I catch up with you.
3 Q First, did you have the other two exhibits,
4 are they up there?
5 A I have Production Request 27. The other
6 was 14?
7 Q Fourteen.
8 A And I do not see that here.
9 MS. ULLMAN: Okay.
10 (Ms. Ullman approached the witness.)
11 THE WITNESS: I'm sorry, could you refer me
12 again to the exhibit?
13 Q BY MS. ULLMAN: Yes, in your direct
14 testimony, Exhibit No. 5, schedule 3, page 1.
15 A Yes.
16 Q On line No. 5 where it says "Estimated 1997
17 Appraisal," in a telephone conversation you indicated to
18 me that that was intended to be 1998. Can you please
19 clarify whether that should be '97 or '98?
20 A I guess it's a matter of semantics. The
21 report -- this is an appraisal that was anticipated to be
22 in effect in the rate year. The report that the State
23 Tax Commission will utilize to, as a basis of their
24 appraisal is a 1997 annual report, so we receive their
25 appraisal in 1998, so, frankly, I've heard it called the
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CSB REPORTING HEALY (X)
Wilder, Idaho 83676 United Water Idaho Inc.
1 '98 appraisal, I've heard it called the '97 appraisal.
2 I don't have a problem calling it a '98 appraisal.
3 Q But referring now to Exhibit No. 423 where
4 you have data regarding tax years '93 through '97, this
5 estimated "1997" appraisal, that would correspond with
6 the tax year 1997, is that correct, on Exhibit 423?
7 A Yes.
8 Q Okay; so you would agree that instead of
9 $70,624,000 that the actual market value for the tax year
10 of 1997 is $65,899,778?
11 A Yes. As indicated on line 3 of my exhibit,
12 I would agree with that.
13 Q Okay. Referring now again to Exhibit 423,
14 when you look at the average levy from the tax years 1993
15 through '97, do you see a trend?
16 A I believe I do, yes.
17 Q And will you please indicate what that
18 trend is?
19 A Well, I guess I'd characterize it as a
20 slowing downward trend.
21 Q Okay. Where you give the average levy for
22 tax year 1997 in Exhibit 423, that is the actually levy?
23 A It's actually what I would characterize as
24 the actual weighted average levy. It's not an actual
25 levy for any particular piece of property.
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CSB REPORTING HEALY (X)
Wilder, Idaho 83676 United Water Idaho Inc.
1 Q Okay; so you would agree that it is
2 reasonable in your Exhibit No. 5, schedule 3, page 1 on
3 line 6 for the most recent levy rate rather than basing
4 it on 1996 taxes to substitute that 1997 number in there?
5 A I'd say not only do I believe it's
6 reasonable, I believe the Company through the conduct of
7 the Staff audit was asked what the actual levy rate was,
8 it was provided to Staff witness Smith, he made an
9 adjustment with regard to that and the Company has, as I
10 previously indicated, agreed that that is an appropriate
11 adjustment.
12 Q Okay. Now, referring to the numbers that
13 we now have on Exhibit No. 5, schedule 3, page 1 as 1997
14 taxes, would you please clarify for me whether we need in
15 this case 1998 taxes?
16 A Yes. My contention would be that because
17 the '98 tax clock began running on January 1st of 1998
18 that if it lends itself to reasonable deduction that,
19 yes, that would be a proper matching of revenue and
20 expense.
21 Q Okay; so we need to project out one more
22 year worth of taxes using a projected 1998 appraisal and
23 a projected 1998 levy average or, as you said, weighted
24 levy; is that correct?
25 A Whether we need to, I believe the Company
140
CSB REPORTING HEALY (X)
Wilder, Idaho 83676 United Water Idaho Inc.
1 has used this methodology in several cases and I don't
2 know that the projection has been contested. There has
3 certainly been discussion of using the best available
4 information and to my recollection in the last several
5 cases I've participated in that's been accomplished.
6 Q And you would agree that it's reasonable to
7 use a trend for the market value as well as the average
8 or weighted levy in order to determine that 1998 estimate
9 of taxes?
10 A Would that be reasonable? It could be
11 reasonable.
12 Q Okay.
13 A Sure.
14 Q And you have chosen originally in this
15 exhibit to use an average annual increase of the Idaho
16 market value for nine years; is that correct?
17 A Yes.
18 Q Where did you get nine years versus twelve
19 years versus two years, why nine years?
20 A I guess had I chosen ten we could ask why
21 not nine. Nine I believe represented a reasonable amount
22 of data in which to base an average on.
23 Q You used nine years for your estimate of
24 the Idaho market value; however, you simply took the most
25 recent levy for the 1996 taxes rather than looking at a
141
CSB REPORTING HEALY (X)
Wilder, Idaho 83676 United Water Idaho Inc.
1 trend. Can you please explain why you did not look at a
2 trend as far as the levy rate as well?
3 A Yes. I would like to point out that if we
4 looked at the trend in appraised values for the last two
5 years and used that trend to project an increase for
6 1998, unlike the levy going down, the market value
7 appraisal is going up, so I simply used the methodology I
8 used as reasonable. There are probably several
9 methodologies to use. I would -- my point was to try and
10 be fair to the customers and fair to the Company in the
11 approach I took.
12 The nine years of data on appraisals
13 indicated that three of those appraisals -- I mean,
14 there's actually eight appraisal differences or, I'm
15 sorry, seven appraisal differences. Three were higher
16 than the average I took, four were lower than the average
17 I took. The 7.17 average I took I believe is pretty well
18 right in the middle of those values.
19 On the levy side, I made a determination
20 that the levy decreases seemed to be significantly
21 slowing and I chose to use the most known levy rate that
22 was available and that was the levy rate that the Company
23 became aware of in November of '97.
24 Q You talked about being fair to the Company
25 and fair to the ratepayers as well. You've indicated
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CSB REPORTING HEALY (X)
Wilder, Idaho 83676 United Water Idaho Inc.
1 that the market value has been increasing while the
2 levies have been decreasing and yet, you chose to apply
3 an increase to the market value, but you left the levy at
4 an unchanged amount rather than decreasing it perhaps
5 even by a small amount. As you say if that trend is
6 slowing, perhaps you could have reduced it a bit?
7 A Perhaps a bit, sure.
8 Q Okay, and as far as two years versus nine
9 years versus five years, you would agree that there is no
10 particular accounting philosophy behind which number you
11 choose, that any number that you choose could
12 theoretically be justified for how many years that you
13 take to look at?
14 A No, I wouldn't agree with that. I believe
15 I could have picked a range of years that I myself would
16 have said was an unreasonable range. In the approach I
17 took, I determined a reasonable range of years and I
18 would agree there's probably no accounting methodology.
19 Common sense would be the methodology I used here,
20 business experience and so forth.
21 Q Mr. Healy, how long have you lived in this
22 area?
23 A All told, ten years.
24 Q So nine years ago you were here?
25 A 1985 I moved here, yes.
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1 Q Okay, and would you agree that taxes and
2 levy rates are sometimes influenced by the political
3 climate, the growth and so on, outside factors?
4 A I guess as a general statement I would
5 probably agree with that.
6 Q Okay, and do you think that the political
7 climate and these outside factors are more similar now to
8 what they were two years ago or nine years ago?
9 A Well, in a general sense my impression
10 would be that there's great pressure on taxing
11 authorities to keep tax increases reasonable. I don't
12 know, in my experience, my affiliation with United Water
13 Idaho, we have not felt that that prevailing pressure is
14 applied to us. We've seen our tax bill, which we can
15 talk about appraisals, we can talk about levy rates, but
16 what the Company, what the Company and our customers are
17 concerned with is our tax bill has gone up every year
18 that I can think of in the last decade.
19 Q Okay. You recall a case approximately two
20 years ago where this issue was first raised, do you not,
21 where the issue of ad valorem taxes and what the
22 Company's tax bill would be?
23 A The United Water case?
24 Q Yes.
25 A I do, yes.
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1 Q And the data ultimately became available
2 before the hearing, the final hearing, in the case; is
3 that correct?
4 A Which data?
5 Q Regarding the actual weighted levy and the
6 confirmed market value in order to determine the actual
7 tax bill; is that correct?
8 A And the statement was they became available
9 before the hearings?
10 Q Before the final hearing in the case two
11 years ago.
12 A And my recollection is that the appraised
13 value became available before the final hearing and the
14 levy became available, I believe, at the final hearing or
15 at the hearings.
16 Q And, Mr. Healy, in that case, who
17 ultimately turned out to be correct, you or me?
18 A Well, I guess I can't answer that question
19 easily. As I recall, you were able to discuss with the
20 Ada County and actually procured some data that they
21 would not give to me and my recollection is that when you
22 brought that data forward that the Company agreed that
23 that would be the appropriate average levy rate.
24 Preceding that, the Company had already
25 passed on the impact of the lower appraisal, the
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1 appraisal that the Company was able to contest before the
2 State Tax Commission, so I guess I can't say whether you
3 were right or I was right. We took the latest available
4 data and utilized it.
5 Q Would you agree that you were until that
6 data finally became available holding out that the tax
7 bill was going to be higher than it ultimately turned out
8 to be?
9 A I wouldn't -- I guess I have two points.
10 No. 1 is if the actual levy rate in that case was
11 appropriate, then I guess I'd say that the actual levy
12 rate that we've utilized in this case would also be
13 appropriate, and my second point is that the tone of your
14 question makes it sound when you're saying "holding out,"
15 the hearings in that case corresponded nicely with the
16 State Tax Commission hearings on our appraisal as well as
17 the availability of the levy rate. Both of those
18 reductions were passed on to our customers, so I do not
19 agree that the Company was holding out in any manner.
20 Q Let me rephrase the question. Did you
21 maintain your position with regard to the higher tax bill
22 as far as the levy was concerned until it was actually
23 proven that the weighted levy was going to be lower?
24 A Yes. I had no better information.
25 Q Okay, and then I ask again, ultimately, I
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1 did manage to prove that that levy was lower as I had
2 asserted from the beginning; is that correct?
3 A To the extent that the Company used in its
4 adjustment in what we called the make whole case the last
5 prior known levy rate, that's what we felt was
6 appropriate. When the next levy rate was determined,
7 that was then substituted. I mean, if you're determined
8 to make me say whether you're correct or not, I will say
9 that, you know, we appreciated your efforts to get
10 information we weren't able to get immediately that
11 benefited our customers.
12 Q You would agree, however, that at least
13 over the most recent five-year period, the period from
14 1993 through 1997, the four changes in levy, in weighted
15 levy, have all been going downward; is that correct?
16 A That's right.
17 Q So it is reasonable to expect that the levy
18 in the next tax year, 1998, will be lower yet?
19 A You know, I actually suspect that it will
20 be very slightly lower, but our pattern has been in the
21 last several cases to use, as you pointed out in the make
22 whole case, the latest available average levy rate and
23 that's what is being used in this case.
24 Q Okay. I'd like to ask you a question about
25 Exhibit 424 on a different topic, the cost of presenting
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1 a rate case before the Public Utilities Commission. This
2 is the Company's response to a request I submitted. I
3 had asked specifically for a detailed breakdown of all of
4 the costs that United Water Idaho expected to incur in
5 this rate case as well as the succeeding rate case. The
6 so-called detailed breakdown provided for -- what it
7 says, "UWM&S Rate Analyst, $181,575." Can you now
8 provide some additional, an additional breakdown, more
9 detail of what that entails?
10 A If I understood, your data request asked
11 for a detailed breakdown of the cost in the current
12 case. The 181,000 refers to the prior case and I'm not
13 prepared to give a detailed cost breakdown.
14 Q Okay. It was my understanding that the
15 breakdown from the previous case was an estimate or
16 projection of what the costs would be in this case; is
17 that correct?
18 A That's correct.
19 Q And the 181,000 and some odd dollars
20 expected to be paid for a rate analyst, can you please
21 give some additional explanation? Is that an hourly fee?
22 A I guess I need to clarify again. The 181
23 is not expected to be paid. The 181 was paid. The
24 workpapers that the Company submitted and are part of my
25 direct testimony as well as our workpapers indicate the
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1 break-out of costs that we expect to incur in the instant
2 case and, yes, they are based loosely on our experience
3 in the last case -- I'm sorry, in the Case BOI-W-93-3
4 because it was my judgment that the matters were similar
5 in nature.
6 Q Okay, and the projection of $300,000 in
7 deferred rate case expense in this rate proceeding as
8 well as the succeeding cost of service proceeding is
9 significantly higher than the amount of intervenor
10 funding that will be available; is that correct?
11 A I tend to agree with you. I'm not sure
12 what level of intervenor funding will be allowed in this
13 case, but based on my experience, I'd say the Company's
14 costs will be most likely higher than the level of
15 intervenor funding.
16 Q And certainly, there is some reason for
17 that with all of the production requests and the amount
18 of material the Company has had to gather and provide,
19 there is obviously reason for the Company to incur some
20 expense in submitting a rate case; is that correct?
21 A Yes.
22 Q It is my understanding that there will be
23 up to $25,000 worth of intervenor funding available in
24 each of the two parts of this case for a total of
25 $50,000, so would you also agree that the $300,000
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1 projected expense on the Company's part is six times
2 greater?
3 A Actually not because I anticipated the
4 intervenor funding as part of the 300,000, so I guess
5 with that correction, I'd submit that it's five times
6 greater. It could be given the 50,000 number.
7 Q Okay; so the Company actually has five
8 times, is spending and can spend up to five times as much
9 money as the ratepayers are able to spend without
10 incurring personal expenses in fighting the increase; is
11 that correct?
12 A I'm not sure I'd -- if I can rephrase what
13 you said, the Company can spend up to five times, you
14 know, I guess I can't agree with that because if there
15 were no intervenors, I guess what we spent would be
16 infinitesimally more, although I guess it could go the
17 other way, also. The point I would like to make is that
18 I believe that the Company's effort to put on a rate case
19 from stem to stern of that proceeding generally is much
20 more significant than intervenors who address selected
21 issues.
22 The Company prepares the case, the Company
23 responds to data requests, as you've indicated, the
24 Company accommodates the Staff audit of the case, the
25 Company puts a substantial effort into that and I believe
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1 that's a much more substantial effort. I don't believe
2 you can correlate the amount of effort put forth by the
3 Company as put forth by the intervenors.
4 MS. ULLMAN: Okay, thank you. That's all I
5 have.
6 COMMISSIONER NELSON: Thank you,
7 Ms. Ullman.
8 I think since we're approaching noon, it
9 would be a good time to take our lunch break. I'm going
10 to assume that Mr. Woodbury has more than 10 minutes of
11 cross and so why don't we recess and come back at 1:15.
12 MR. MILLER: Very good.
13 (Noon recess.)
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