20060227_1480.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:DONOV AN E. WALKER
DATE:FEBRUARY 27, 2006
SUBJECT:UNITED WATER'S GENERAL RATE CASE APPLICATION - CASE NO.
UWI-06-
On February 10 2006, United Water Idaho Inc. filed a general rate case Application
seeking authority to increase its rates an average of 17.91%. If approved the Company
revenues would increase by $5 921 691 annually. United Water provides service to
approximately 79 000 customers, or a population of about 225 000, in Boise and the surrounding
areas. The Company s Application includes proposed tariffs and requests an effective date of
March 13, 2006.
THE APPLICATION
United Water s Application states that since the entry of the final Order in its last rate
case, Order No. 29838 in Case No. UWI-04-, it has been unable to earn its allowed return on
investment, and that the primary purpose of this Application is to update the Company
ratemaking calculations to conform to the requirements of Order No. 29838. Application at 4-
The Company requests expedited treatment of the Application because the primary purpose is to
update the ratemaking calculations to conform to the requirements ofthe last rate case Order. Id.
The Application requests a revenue increase of $5 921 691 resulting in a uniform
percentage increase in rates of 17.97%. Application at 2. The Company proposes an increase in
rate base of $14 190,462 (from $126 824 685 to $141 015 147), and increased operating costs of
764 530 (from $20 144 532 to $22 909 062). Wyatt Direct at 4-5. The Application alleges
that the revenue realized under the presently authorized rates produces a rate of return of 5.929%
based on a test year ending April 30 , 2006. Application at 3. The proposed increase would
provide a rate of return of 8.427%. Application at 2. The Company states that the two biggest
DECISION MEMORANDUM
drivers for this rate increase filing are to capture its investments using a 13-month average rate
base, and a $1.7 million increase in the Company s pension expense obligation under ERISA.
Wyatt Direct at 4.
The Company filed, along with its Application, a Motion for Waiver of Rule 121 (e)
which requires the filing of cost of capital and cost service studies. The Company states that
because of the relatively short amount of time that has passed since its last rate case, where the
Commission accepted and approved a settlement regarding the overall weighted cost of capital
between Staff and the Company, it is proposing to carry forward the results and methods
contained in that settlement. Additionally, because of the short amount of time that has passed
since the last rate case where the Company s cost of service and rate design were reviewed, the
Company is not presenting a new cost of service study or a separate cost of service witness. The
Company proposes a uniform percentage increase to rates without any change in rate design.
STAFF RECOMMENDATION
Because it is not possible to perform the necessary audit and reVIew of the
Company s Application prior to the March 13 , 2006 effective date of the proposed increase in
rates, Staff recommends the Commission suspend that effective date. Idaho Code 99 61-622 and
61-623. Staff recommends that a notice of the Company s Application be issued, with a deadline
for intervention of March 21 , 2006. Staff does not object to the Company s request for a waiver
of the Rule 121(e) requirement regarding the filing of a cost of capital and cost of service study,
although Staff will conduct its own calculations relating to the Company s cost of capital and
may present testimony for the Commission s consideration.
COMMISSION DECISION
Does the Commission wish to suspend the effective date of March 13, 2006 for the
proposed rate increase pursuant to Idaho Code 99 61-622 and 61-623? Does the Commission
wish to issue a notice ofthe Company s Application? Does the Commission wish to approve the
Company s Motion for Waiver of Rule 121(e) regarding the filing of cost of capital and cost of
service studies?
DONOV AN E. WALKER
DECISION MEMORANDUM