20200818_jh1.pdf

DECISION MEMORANDUM 1

DECISION MEMORANDUM

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

FROM: JOHN R. HAMMOND JR.

DATE: AUGUST 12, 2020

RE: CDS STONERIDGE UTILITIES, LLC CHARGING CUSTOMERS IN
EXCESS OF THE COMMISSION-APPROVED TARIFF RATE FOR A
NEW WATER SERVICE CONNECTION

CDS Stoneridge Utilities, LLC, owned by JD Resort, Inc. (collectively the “Company”)
is in northern Idaho near the city of Blanchard, where it provides water service to its customers.
The Commission Staff’s (“Staff”) audit of the Company has uncovered that the Company is
charging customers more for new connections to the Company’s system than the $1,200 non-
recurring rate (the “Hook-Up Fee”) allowed by the Company’s tariff. See CDS Stoneridge
Utilities, LLC’s Tariff Schedule 2. Additionally, customers have complained that the Company is
charging more than the tariff rate for a new connection to the Company’s water system or is
refusing to connect customers unless they pay more than the $1,200 Hook-up Fee specified in the
tariff.
BACKGROUND
In Case No. SWS-W-18-01, the Commission considered whether to approve the
transfer of the Company to J.D. Resort, Inc. The Commission stated there, “we remind the current
operator of the water company that no rates, charges, terms, or conditions of service can be altered
without Commission approval.” Order No. 34291 at 3. J.D. Resort, Inc. took control of and began
operating the Company’s water system in November 2018, before the Commission approved the
transfer. On August 2, 2019, the Commission approved the sale of the Company and transfer of
Certificate of Public Convenience and Necessity No. 395 to JD Resort, Inc. See Order No. 34391.
Order No. 34391 required the Company to report quarterly on all non-recurring charges it collected
during the preceding quarter to ensure that the Company was collecting only Commission-
approved charges. Order No. 34391 at 4. Further, the Commission stated “[the Company] cannot
DECISION MEMORANDUM 2

bill customers for rates or charges that are not in [the Company’s] current Commission-approved
Tariffs.” Id. citing Idaho Code § 61-313.
On June 4, 2020, the Company filed a Tariff Advice requesting that it be allowed to
increase the Hook-up Fee from $1,200 to $9,735. Tariff Advice at 1, Case No. SWS-W-20-01.
The Company requests that its proposed Hook-Up Fee take effect on July 27, 2020. Id. On June
25, 2020, the Commission found that “[d]ue to the significant, proposed increase to the Hook-up
Fee and the complexity of issues surrounding it, the Commission treats the Company’s tariff advice
as an application[.]” See Order No. 34702 at 1. The Commission issued a Notice of Application
and Notice of Modified Procedure, and suspended the Company’s proposed effective date for the
requested, increased Hook-up Fee until January 26, 2021. Id. at 3.
STAFF AUDIT AND CUSTOMER COMPLAINTS
Staff’s audit has uncovered evidence that from November of 2018 until the end of the
2019 calendar year, the Company has charged 16 customers at least $4,000 each to connect to the
water system.1 The Company’s tariff only allows the Company to charge a $1,200 Hook-up Fee.
See CDS Stoneridge Tariff Schedule 2.
Staff has also received at least 10 customer complaints involving the amount the
Company is charging to connect customers to the water system, and/or the Company’s refusal to
connect a customer to the water system unless they pay charges exceeding $1,200.
In a March 25, 2020 complaint, a customer complained that they were charged $4,600
to connect to the water system. Staff requested that the Company respond. After continued
requests the Company finally responded that it charged the customer an additional $2,800 (over
the $1,200 in the tariff) to connect the customer because it needed to expand its water system to
reach the customer and that the Company’s actual cost to connect this customer exceeded $6,000.2
Based on the information received by Staff, the customer was within the Company’s service
territory.
In a July 22, 2020 complaint, the customer forwarded Staff a copy of the Company’s
APPLICATION FOR WATER/SEWER CONNECTION. See Exhibit A. The Application
provides that a “WATER HOOK-UP” costs $1,200 and that a “CONTRIBUTION IN AID OF

1 One customer was allegedly charged $4,600 and the remaining 15 customers were charged $4,000 each. The
cumulative total of these overcharges in 2019 is $45,400.

2 Due to the Company’s lack of response it is unclear whether it charged this customer $4,000 or $4,600 to connect to
the water system, in either case such amount is well over the $1,200 Hook -up Fee in the tariff.
DECISION MEMORANDUM 3

CONSTRUCTION OF EXPANSION OF SYSTEM” has a $2,800 charge. Id. The Application
states that although the fee for a water connection is $1,200 it requires the customer to
acknowledge that:
I understand that this fee is only for the right to connect unto the Stoneridge Utility
water system and DOES NOT include any costs associated with the purchase of
parts or installation necessary to do the physical connection from one’s home to the
water meter. It also DOES NOT include any costs associated with purchase or
installation of pressure reducing and/or backflow prevention devices that may be
necessary for your particular lot to properly connect to the system.

See Exhibit A. The Company’s Application also discusses a contribution in aid of construction to
expand the system and provides:

There is a CAP Ex fee (operating expense) of $2,800.00. I understand that this fee
is only for the right to connect onto the StoneRidge Utility system. This fee DOES
NOT include any costs associated with the purchase of parts or installation
necessary to do the physical connection from one’s home to the system collection
lines.

Id. The additional fees set forth in the Company’s Application are not in the Company’s tariff.
Based on the foregoing, Staff asserts that the Company is violating Idaho Code § 61-
313, Commission Order No. 34691 and the tariff on an ongoing basis by charging and/or
demanding customers pay more to connect to the water system than authorized.
STAFF’S RECOMMENDATION
Staff recommends that the Commission investigate whether the Company has violated
Idaho Code § 61-313, Commission Order No. 34691 and the tariff by charging or threatening to
charge its customers more than a $1,200 Hook-Up Fee. If the Commission finds the Company
violated these authorities, then the Commission should order the Company to refund to customers
any fees they paid over $1,200 to connect to the Company’s water system. Staff also recommends
that the Commission order the Company to cease refusing to connect customers to the water system
unless they pay more than $1,200. Further, Staff recommends that the Commission consider
imposing penalties on the Company for its failure to comply with Commission authorities. See
Idaho Code § 61-701 et seq.
Staff also recommends that based on the results of Staff’s ongoing audit and the
customer complaints that the Commission on its own motion issue an emergency Order directing
the Company to:
DECISION MEMORANDUM 4

(1) cease all billing practices that conflict with the tariff;
(2) refrain from terminating service to customers who did not pay amounts that conflict
with the tariff;
(3) refrain from rejecting requests to connect to the water system unless the customer
pays an amount for a Hook-up Fee over the tariff rate of $1,200;
(4) send a copy to Staff of all records concerning new customer connections to the
water system since November of 2018 until present, including an itemization and description of
all charges the customer paid to connect to the Company’s water system; and
(5) such other relief as the Commission deems necessary.
COMMISSION DECISION
Does the Commission wish to open an investigation to determine whether the Company
has violated Idaho Code § 61-313, Commission Order No. 34691 and the Company’s tariff by
charging customers more than a $1,200 Hook-Up Fee?
Due to the results of Staff’s ongoing audit and the customer complaints, does the
Commission wish to issue an emergency Order directing the Company to:
(1) cease all billing practices that conflict with the tariff;
(2) refrain from terminating service to customers who did not pay amounts that conflict
with the tariff;
(3) refrain from rejecting requests to connect to the water system unless the customer
pays an amount for a Hook-up Fee over the tariff rate of $1,200;
(4) send a copy to Staff of all records concerning new customer connections to the
water system since November of 2018 until present, including an itemization and description of
all charges the customer paid to connect to the Company’s water system; and
(5) such other relief as the Commission deems necessary.

___________________________
John R. Hammond Jr.
Deputy Attorney General

I:\Legal\WATER\SWS_W_00_00_dec.memo.jh.docx