20070809_2011.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
CO MMISSI 0 NER RED FO RD
COMMISSION SECRETARY
COMMISSION STAFF
FROM:DON HOWELL
DATE:AUGUST 6, 2007
SUBJECT:FALLS WATER COMPANY'S APPLICATION FOR A GENERAL RATE
INCREASE, CASE NO. FLS-07-
On July 27, 2007 , Falls Water Company filed a general rate case Application seeking
authority to increase its metered rates an average of 46.2%. Because the Company is in the
process of converting its flat rate customers to metered service, the Company is not requesting
any increase in its flat rate service under Schedule R-2. If approved, the Company s revenues
would increase $330,705 annually. The Company proposes using a 2006 test year. Falls Water
serves approximately 200 customers near Ammon and Idaho Falls. The Company proposes
that its new rates become effective with service provided on and after September 1 , 2007.
THE APPLICATION
A. Revenue
Falls Water maintains that its overall revenues are no longer reasonable given the
Company s increased costs. The Company further maintains that it is in the process of
complying with Order No. 30027 that requires the Company to convert its existing flat-rate
customers to metered service by mid-2008. Application at 2-3. The Company maintains that
installing the meters will increase its rate base by approximately $181 522. The Company
further maintains that the Company is constructing four separate line-looping projects to improve
system reliability, pressure and quality of service. The Company expects to complete these
projects in 2007 at a cost of$152 800. Application at 3 , Exh. 1. Finally, the Company proposes
a number of pro forma adjustments to its results of operation which increases the Company s test
year expenses by $144 854. Exh.
DECISION MEMORANDUM
Falls Water seeks a return on its rate base of 7., utilizing a return on common
equity of 12%. Application at 5; Exh. 3.
B. Rate Design
1. Metered Rates . In its Application, Falls Water proposes to increase the rates for
its metered customers but is not proposing any rate changes to it flat-rate customers. At such
time as these latter flat-rate customers are converted to metered service (by mid-2008), they will
begin to pay the metered rate. Application at 6. The Company is proposing to increase both the
monthly minimum charge and the commodity rate for all metered customers. The Company
proposes increasing the minimum charge for metered customers from $11.53 to $16.47, an
increase of 43%. Id. The Company proposes to increase the commodity rate for all metered
service from 48~ per 000 gallons to 73~ per 000 gallons, an increase of 52%. Id.
The Company maintains that the average residential meter customer will experience
an increase in their average bill of approximately 46.27%. If approved, the Company s new
meter rates would result in the average residential customers annual bill (tariff R-l) increasing
from $219.92 to $321.68, an increase in the annual rate of 46.27%. The average annual bill for
multi-family residential customers (R-3) would increase from $232.63 to $341.00 an average
annual increase of 46.59%
The average commercial customer will experience an increase in its rate of 47%. Id.
Exh. 5. The average annual bill for metered commercial customers (tariff C-2) would increase
from $415.23 to $618., or an average annual increase of 49%.
2. Connection Charge. The Company is also proposing an increase in its customer
connection for metered service. The Company is proposing that the connection charge for 1.
inch meter connection increase from $825 to $930 a 13% increase. The Company is also
proposing to increase the cost of its 2-inch meter connection from $900 to $1 205, an increase of
34%. Exh. 6.
Consistent with Utility Customer Information Rule 101 , the Company filed a copy of
its customer notice. The Company maintains that the customer notice was included with the bills
mailed on July 2007. The Company also made arrangements for publication of the customer
notice in the Post Register newspaper.
DECISION MEMORANDUM
STAFF RECOMMENDATION
Staff recommends that the Commission issue a Notice of Application and set a
deadline for intervention. Once the Commission Secretary issues a Notice of Parties, the parties
could meet informally to establish a schedule for processing this case.
COMMISSION DECISION
1. Does the Commission wish to issue a Notice of Application including a 14-day
deadline for intervention?
2. Unless suspended, the Company s Application would be effective on or about
September 2007. Does the Commission wish to suspend the proposed rates for a period of 30
days plus 5 months pursuant to Idaho Code 9 61-622?
3. Does the Commission desire to set a prehearing conference or should the parties
meet informally to discuss a proposed schedule to process this case and then notify the
Commission?
Don Howell
bls/M:FLS-O7-01 dh
DECISION MEMORANDUM