20171005_brandon.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: BRANDON KARPEN
DEPUTY ATTORNEY GENERAL

DATE: SEPTEMBER 14, 2017

SUBJECT: INVESTIGATION INTO VP, INC., AN UNREGULATED NORTHERN
IDAHO WATER COMPANY

VP, Inc., is a private water and sewer company located near Sandpoint, Idaho. The
Company has been viewed as part of the neighborhood association and thus has not been
regulated by the Commission and does not possess a certificate of public convenience and
necessity. The operating conditions of the Company have changed in recent years and Staff
believes that a review to determine if the Company’s business should be regulated is appropriate.
Accordingly, Staff is requesting that the Commission direct the Staff to open an investigation
into VP to determine if the Company should be regulated, and if so, recommend further action to
comply with applicable law.
BACKGROUND
VP serves a residential development and golf club called the Idaho Club. In 2016, a large
undeveloped portion of the development, and land holding the golf course, and certain sewage
and water infrastructure, was purchased by Valiant Idaho, LLC in a Sheriff’s sale. The sewage
infrastructure in Valiant-owned land includes the system’s wastewater lagoon and underground
piping. With regard to water infrastructure, two large storage reservoirs, several booster pumps
and piping is located in the same area. VP owns and operates two groundwater wells, and
associated plant, and provides service to a number of residential properties that were not part of
the Sheriff’s sale. The water and sewer system are completely interconnected.
Among other issues, the subject of plant ownership and service to the Valiant parcels has
been the subject of litigation in state court. See Genesis Golf Builders v Pend Oreille Bonner, et
al., Case No. cv-2009-0001810 (Idaho 1st Dist., April 2017) (order granting injunction). There, it
DECISION MEMORANDUM 2
was ordered that VP construct all necessary infrastructure to isolate the sewer and water systems,
and that Valiant continue to provide sewer service to VP customers until the systems are isolated.
Id. At 2-4. As the owner/operator of the system’s two wells, VP was also ordered to provide the
Valiant parcels with water service until Valiant constructs its own well. VP was also ordered to
comply with “all applicable rules and regulations of the IDEQ and/or the Idaho Public Utilities
Commission.” Id. At 6.
Valiant has inquired with Commission Staff about VP’s status with the Commission, and
after finding out that VP was not currently regulated, indicated that VP is not being run as an
entity of the neighborhood association, but rather it is being run for profit and should fall under
Commission jurisdiction. Valiant has asserted that VP is charging exorbitant rates to the owners
of the Valiant parcels, and requested that the Commission look into whether or not VP should be
regulated by the Commission.
STAFF RECOMMENDATION
Staff believes that, with the complaints from Valiant and the district court order, there is
sufficient evidence to merit an investigation into VP. An investigation would include data
requests to VP, and request to examine company records, concluding in a recommendation to the
Commission for further action, if any.
Due to the nature of the shared system, the associated litigation, and other factors, Staff
believes that this investigation may not be completed for some time. Staff will continue to update
the Commission of progress in the investigation, and provide recommendations for further action
if necessary. Staff further notes once the water system is divided, a similar investigation into
Valiant may be appropriate.
COMMISSION DECISION
Does the Commission wish to direct Staff to open an investigation into VP to determine
if the utility should be regulated by the Commission, and recommend further action, as outlined
above?

M:VPINC_bk