20151123_4838.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER RAPER
COMMISSION SECRETARY
COMMISSION STAFF

FROM: BRANDON KARPEN
DEPUTY ATTORNEY GENERAL

DATE: NOVEMBER 20, 2015

SUBJECT: EAGLE WATER COMPANY’S APPLICATION FOR APPROVAL OF A
CUSTOMER SURCHARGE, CASE NO. EAG-W-15-01

On November 10, 2015, Eagle Water Company filed an Application seeking authority
to implement an immediate and temporary surcharge of 53.82% on customers’ water usage in
excess of 600 cubic feet per month. The Company also requests permission to access existing
funds in its surcharge account. The new surcharge and the existing balance in the surcharge
account would be used by Eagle Water to pay for several large capital improvement projects, and
its legal and accounting fees associated with this proceeding. Application at 3-5. Eagle Water
further requests that its Application be processed via Modified Procedure and that the surcharge
become effective upon Commission Order pursuant to Idaho Code § 61-307.
BACKGROUND
Eagle Water serves approximately 3,500 customers in and around the City of Eagle.
See Application, Exhibit D. Its water supply is currently provided from six wells (Well Nos. 1,
2, 3, 6 and 7). See Order No. 30936. A seventh well, Well No. 8, which is a major subject of
this Application, has been drilled, but its operational status is unclear.
Since September 1992, Eagle Water has implemented various customer surcharges in
addition to its charges for water service and customer hook-up fees. See Eagle Water Rate
Schedule No. 5; Commission Order Nos. 29903, 29969, and 30936.
In 2005, the Company requested and received permission to implement a surcharge to
recover charges for engineering, accounting and legal expenses to remedy poor water pressure at
the time. In 2009, on the Company’s request, the Commission authorized the Company to
DECISION MEMORANDUM 2
collect additional surcharge revenue for legal and accounting costs, and specific items relating to
system maintenance.
THE APPLICATION
Eagle Water now seeks to recover the costs associated with several capital projects,
and professional fees (accounting and legal) through another customer surcharge. The capital
improvements and other expenses are outlined below.
CAPITAL IMPROVEMENTS COST
–
Subtotal $924,515.00

EXPENSES

Subtotal $ 10,725.00

The combined total for capital improvement projects and expenses is $935,240.
Application at 2-5.
To recover these actual and projected costs set out above, the Company proposes to
borrow $786,242 from D.L. Evans Bank. According to the proposed terms of the bank loan,
Eagle Water will borrow $786,242 at a variable interest rate of the Wall Street Journal Prime rate
+ 2.00% with a floor rate of 5.5% over a projected term of about five years. Application, Exh. C.
To repay the loan, the Company proposes to implement an immediate surcharge of 53.82% for
usage above 600 cubic feet per month. In addition to the surcharge, the Company also seeks
permission to access the remaining balance in the surcharge account. The Company reports the
current balance in the prior surcharge account is approximately $149,000. Application at 5. The
Company proposes to use these surcharge funds to offset costs. Id.
The Company estimates that if the surcharge is approved, a customer using 700 cubic
feet of water per month would experience an increase of 24 cents, to $8.24 per month. Eagle
Water claims that even if the surcharge is approved, its overall rates “are considerably lower than
DECISION MEMORANDUM 3
either the City of Eagle’s municipal water system rates or United Water-Idaho’s rates.”
Application, Exh. G. The Company requests that the surcharge take immediate effect.
Application at 6.
STAFF RECOMMENDATION
After reviewing the Application, Staff believes that a thorough review of the
Company’s Application is necessary. Staff thus recommends the Commission issue a Notice of
Application that suspends the requested immediate effective date by at least 90 days. See Idaho
Code § 61-622(3-4). Staff further recommends the Commission set a 14-day intervention
deadline, and direct Staff to informally confer with the parties about scheduling.
COMMISSION DECISION
Does the Commission wish to issue a Notice of Application that suspends Eagle
Water’s proposed immediate effective date by at least 90 days; establish a 14-day intervention
deadline; and direct Staff to informally confer with the parties about developing a schedule?

/s/ Brandon Karpen
Brandon Karpen
Deputy Attorney General

M:EAG-W-15-01_bk