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HomeMy WebLinkAbout19901026.docx Minutes of Decision Meeting October 26, 1990 - 10:15 a.m. In attendance: Commissioners Joe Miller, Perry Swisher and Ralph Nelson. Staff members Lori Mann, Randy Lobb, Bev Barker, Gary Richardson, Dave Hattaway and Myrna Walters. First topic was continuation of the discussion on BOI-W-90-1. Page 19 of Decision Memo - Test year expense adjustments - Overtime. Commissioner Swisher said Commissioner Miller thinks historic is reasonable and I think about the same.  Exposure to the Clean Air Act exposes them to more. Commissioner Nelson said if we are only putting in the 1-12th, am more comfortable. (1) Three positions on test year amount. (2) Three year historical average or (3) Dave Hattaway's projected expenses based on increased workforce. Commissioner Swisher said Dave Hattaway looked at the CADD system and said it will reduce.  Don't think so.  Exposure is greater in the test year. Dave Hattaway said adjustment he has is 3-year average. Commissioner Miller asked if it was based on future projection? Discussed Dave Hattaway's proposal. Dave Hattaway said that was just further justification  for using  the average. Commissioner Nelson said he thought it was reasonable if we are not picking up all of those high and ignoring low. Dave Hattaway explained the factors he used.  Said his recommendation is in '89 dollars based on average. Commissioner Nelson asked what company said about 3 year average? Lori Mann said they said id didn't take into account growth over the past 3 years. -2- Commissioner Nelson said he thought 3 year average of overtime was reasonable. Commissioner Miller said he guessed he agreed but wasn't sure whose recommendation it was. Okayed 3 year average (adjusted to current wage scale). POSTAGE - Commissioner Swisher said he thought they couldn't continue to do it the way they are. Commissioner Nelson said he thought next time there could be an adjustment for this. Decision:  Okayed conversion.  No problems with numbers. **Incorporate annual billing. V.  Rate Allocation and Rate Design - Page 36. Commissioner Swisher said based on Randy Lobb's work on trying to deal with new costs, cost of new development, based on Power's testimony and based on our decision to bifurcate the completion of the line extension hassle, what about asking the company to do something like the following:  Seems to him when such a high percentage of a utility's costs are electricity, that it is way past time to calculate that into their operating costs via rate design and direct the company to do just that.  Suppose the reason that rate design here has been so primitive and everything else so sophisticated that in a big company like General Waterworks, the relative cost of electricity is so low has caused management to make decisions that are insufficient.  What about asking staff and Boise Water, etc. to come up with some rate designs that will lower their costs. Commissioner Nelson said he liked that but think we are pushing forward our decision on what the rates should be. Commissioner Swisher said no.  Go ahead with it but invite all parties to come in with rate design ideas.  Gave example - his call from J. R. Simplot.  Seems to him we should invite the parties to come up with innovative rates. Randy Lobb said the company's argument is they haven't done a cost of service study.  A cost of service study needs to be done to see where costs can be cut by innovative rates.  Company says it will take a long time. -3- Commissioner Miller asked after you get through it, where are we? Randy Lobb said he thought it would get down to a discussion of how you should do the study and how you should break out categories of costs.  At the end of the study, everyone could speak to it. Commissioner Miller asked what the capabilities are? Commissioner Swisher said he thought we could find in other commissions, perhaps Wisconsin, some ideas. Commissioner Nelson suggested Tom Stevens of Nevada. Randy Lobb thought it would have to be similar water systems. Commissioner Swisher said we have people living where they are assessed by the canal company.  Some still have access.  It wouldn't hurt to put some heat on the company to devise the means for maximum retention of urban use of canal water to reduce the cost of culinary water.  It wouldn't make sense to keep going on like we are. Commissioner Miller said if we make the call for a cost of service and rate design study after this case is filed, would that make sense with the line extension case in house? Randy Lobb said he thought line extension could be discussed now.  There is a lot of interest in it.  Don't see why it would prevent that from going forward. Commissioner Swisher said if it changes things after the fact, doesn't mean we can't deal with it now. Randy Lobb explained his proposal.  Thought a cost of service study would solidify some of the numbers. Commissioner Swisher said if it gave you a base for peakshaving and motivation to retain that irrigation water, all of those things are in the public interest. Randy Lobb said you can use what you want in the cost of service.  Think you could be flexible. Commissioner Miller asked Randy Lobb how it would come out on seasonal rate, etc.? Randy Lobb spoke to seasonal rates. -4- Commissioner Miller asked Randy Lobb about seasonal rate - thought Power was convincing. Randy Lobb said he didn't think it will be as drastic as Power indicated.  Think in the future cost savings would be higher.  Said he was hesitant to make drastic changes.   Bev Barker spoke to the barriers of irrigation. Commissioner Swisher said if we can get these parties in, city hall people, etc. Randy Lobb said regarding the cost of service study, think company is going to push for one in the line extension case. Commissioner Miller said he thought it shouldn't be announced in this order.  As soon as line extension is done, open up a cost of service case. Commissioner Swisher said he thought there was a way to give signal without giving up the store.  Power's testimony points in that direction. Lori Mann asked if they wanted straight across the board and not much cost of service. Commissioner Swisher said if we go across the board we cannot ignore Power or Consumer Division.  Have to look at the record. Commissioner Nelson said one thing we might do is:  am not in favor of service charge but look at minimum and adjust it. Commissioner Miller said he thought we need to get to change in minimum bill.  Generally Power's theory makes sense.  His basic argument is quite clear and quite strong.  Only problem with his approach is that seasonal rate, summer rate, it is based on the assumption that you use more in the summer and some people don't.  That is unfair. Randy Lobb said he looked at a couple bills and used Power's assumptions. Questions on Page 40. Commissioner Miller said he didn't know if there is a way to move to seasonal.  Wouldn't go as far as Power went but if there is some movement, someway to make a differential -5- recognizing we don't have enough information to know how far you really should go but something that establishes the precedent or policy or decision that that is the direction we want to go.  If there was someway to push the summer rate up some. Commissioner Nelson - And winter rate down to the point where we can't be faulted too badly for not having a detailed study. Randy Lobb said you could increase commodity rate.  Think it is currently 54 year round. Commissioner Nelson said he thought it might be reasonable to go 10 cents lower in the winter and 5 cents higher in the summer. Commissioner Swisher suggested waiting to see what incremental  (revenue requirement) increase will be. Commissioner Nelson suggested moving minimum down and drop minimum charge somewhat, then we have addressed that complaint.  Suggested lowering the minimum rate and minimum useage. Adjourned - reconvened at 3:45 p.m. In attendance were:  Commissioners Joe Miller, Perry Swisher and Ralph Nelson; and staff members Mike Gilmore, Gary Richardson, Terri Carlock and Myrna Walters. Went to Page 22 of the Boise Water Decision Memo. IV  Rate of Return   Commissioner Nelson said he agreed with Terri Carlock except for the dividend reinvestment.  Thought Brooks made good point. Terri Carlock explained that you not only compound the dividend but the growth factor.   Brooks was annual and Carlock quarterly. Commissioner Nelson asked if it made much difference? Terri Carlock said .3.  1/2% difference if you compound both.  Just growth is .2. -6- Commissioner Nelson said compounding the dividend is more difference than he thought.  Thought was to compound dividend but not the growth. Terri Carlock said Brooks threw it all in together.  You can easily pull one out. Commissioner Miller asked what the rationale was? Terri Carlock said because it is paid quarterly. Commissioner Nelson said more realistic way would be annual growth rate with quarterly dividend. Terri Carlock said that is the way it used to be.  Now it could be 18 to 24 months. Commissioner Nelson said it would still be appropriate, if you get into compounding 18 to 24 months out you fowl up your model. Commissioner Miller asked about Brooks' assault on value line. Commissioner Nelson said:  Really felt you could use either one.  If we go through this as it is laid out, can accept capital structure of General Waterworks.  Both witnesses did. Commissioner Miller said if you use quarterly dividend and annual growth compounded, what does that do to Terri Carlock's equity? Commissioner Nelson said it would move the midpoint up about 30 basis points.  It would be 12.75 to 12.8. In attendance at this time were:  Bev Barker, Gary Richardson, Stephanie Miller and Dave Hattaway. Commissioner Miller said one of the arguments between Terri Carlock and company had to do with whether you put dividend reinvestment in yearly or quarterly.  Terri Carlock said annually. Commissioner Nelson said he accepts Terri Carlock's recommendation on everything but that point.  Think quarterly reinvestment is more realistic.  If you do that that moves Terri Carlock's return on equity to 12.75, contrasted to Brooks' 13.5.  Said then the only question is do you want to move anything from midpoint because of management, send a signal, etc.  Don't we award Boise Water something because of good management? -7- Commissioner Swisher said reason was material improvement. Commissioner Nelson said he didn't have a recommendation either way.  Would accept Terri Carlock's position of risk being General Waterworks', not Boise Water. Commissioner Swisher said he didn't see anything out there, plus or minus. Commissioner Miller asked about floatation costs and market pressure? Terri Carlock said she included 8% for floatation costs which is based on actual costs for one and average for water companies. Commissioner Swisher said General Waterworks has invested in New England States and it is not going well there but it is here. Commissioner Nelson said he didn't think we have seen the risk because of the Safe Water Drinking Act.  Said to say the company being rating a 2 and using 3 isn't a reality.  Didn't think much of their argument. Page 35 - Everything the way it is except 12.75 or 12.8 depending on how the numbers work out. **Will have Terri Carlock figure the difference.  Bring in the figure.  Take what comes. Adjourned at 3:20 p.m. Reconvened at 1:30 p.m., Monday, October 29, 1990. In attendance were:  Commissioners Joe Miller, Perry Swisher and Ralph Nelson; and staff members Mike Gilmore, Terri Carlock, Bill Eastlake, Lynn Anderson, Birdelle Brown, Belinda Anderson, Randy Lobb, Stephanie Miller, Syd Lansing, Don Howell, Eileen Benner, Bev Barker, Lori Mann, Marsha Smith, and Myrna Walters. Items from the October 29, 1990 Agenda were discussed as follows. 4.  USF Checks. Question was:  What to do with USF checks at this time? Item was held at this time. -8- 1.  Birdelle Brown's October 26, 1990 Decision Memorandum re:  Mtn. Bell Advice No. 510 which adds LMS Wire Centers and reinstates Tariff for Eight-Party Service. Question was notification to the customers? Commissioner Nelson said he thought it would be a good time to give notice about LMS. Discussed the 8-party line. Commissioner Miller asked Commissioner Nelson if what he was speaking to was notification to all exchanges for LMS? Commissioner Swisher asked about the band designation? Belinda Anderson responded. Commissioner Swisher said customers should be notified. Commissioner Nelson said lets ask them to put in a one-time bill stuffer for this.  Company is to run it by staff. Eileen Benner spoke to the question of USF checks - Administrator will continue to receive everything until January. Eileen Benner brought up Albion's increase since September 1989. Commissioner Miller asked Eileen Benner to look it over in detail and do a report - (USF). 2.  Belinda Anderson's October 26, 1990 Decision Memorandum re:  Part Two of Case No. GNR-T-90-6, Idaho Regional Exchange Carriers' Update for Intrastate Access Tariff. After brief discussion, Commissioners approved recommendations. 5.  Further discussion on Boise Water Corporation - BOI-W-90-1. Return on Equity number will be 12.75. Commissioner Miller said initial rationale is that isn't the best rationale for moving to that number. -9- Terri Carlock said you could use it but would apply it from the DCF alone, not midpoint.  Said this number is in the mid range and the record supports that range. Commissioner Swisher said he thought two kinds of risk should be mentioned in the order - one is that the testimony we had and the reality of the time when we are issuing the order, saying activity on the system is still high;  exposure that over time is that much activity is very much here.  Sears decision would cause pressure on west end of the system and the other is the increasing cloud of BPA and the Safe Water Drinking Act.  Those add some risk factors to this company. Commissioner Miller said he didn't place a lot of emphasis on the second point (Safe Water Drinking Act).  Is difficult to say with certainty it will cause problems.  Don't mind a reference to that in the order, but don't place a lot of weight on that. **Go with quarterly.  But it wasn't a very big factor to get to the 12.75. Commissioner Swisher asked Lori Mann to make a note that if something comes down from H&W, EPA, if the company wants to come in for relief, keep in mind that we searched the record for any indication of what was going on in the Idaho jurisdiction.   Randy Lobb passed out the numbers using three rate designs.  Explained the numbers. Commissioner Nelson said having a winter/summer billing will be a problem with bi-monthly billing. Randy Lobb said company will have to prorate or something.  Explained the second page.  They are actually '89 numbers. Third page was an across the board increase. Commissioner Miller said he thought he liked putting it on commodity charge.  It establishes a step in the direction of awareness and price and cost associated with useage.  Looked difficult to do the true summer rate because of problems with bi-monthly billings but it has some element of that in it. Commissioner Nelson said he liked the second rate better.  It sends a message to the company as to how we will look at this going down the road. -10- Randy Lobb spoke to Power's proposal. Commissioner Nelson said it leaves the guy who is using the minimum the same. Approved second method unanimously. Commissioner Swisher asked Lori Mann to say in the order something about future rate cases and the ability to depart from past practices.  This case was filed as if we had had no experience in the last dozen years.  There is nothing in there about energy costs and didn't get any information on the effects of water adjudication in Idaho, nothing on Safe Water Drinking Act, nothing on how to bill water in a conservation environment.  Lots of stuff we didn't get in this case. Commissioner Miller said we don't want to announce the stuff on Page 41 because it might "gum up" next week's case. INTERVENOR FUNDING. Intervenor funding was opposed by the company. Commissioner Nelson said he didn't have problem with Burnum's request since his request is so low.   Commissioners discussed Burnum's presentation. Commissioner Miller suggested cutting it to 40 hours at $75 an hour - $3,000. Commissioner Miller said to take 4 hours off of the hearing.   Spoke to what Burnum presented. Lori Mann said he did cross on mapping expenses. Commissioner Miller asked for his breakdown.  Wondered if reducing this little bill will send message to get quality of work. Commissioner Nelson asked about Fothergill's costs. Commissioner Miller said another way to do it is on his bill there is a 9.5 charge - take 9.5 out.  See no discernable benefit for the 9.5 hours - everything else is okay. -11- CONSERVATION Commissioner  Nelson said he was disappointed in what we got.  Didn't think there is anything to hang our hat on.  Would encourage a water education program that sends the pamphlets out in the spring instead of the fall. Commissioner Swisher said to compliment the company for getting community interest awareness. Commissioner Miller said to legitimize Bev Barker's work and perhaps require some feedback to the Commission over a period of time. Bev Barker said she is concerned about Boise Water not doing anything more than alternate day sprinkling and passing out pamphlets to school classes. Commissioner Miller asked Bev Barker if she was thinking of something more specific for commitments from the company? Bev Barker said yes - be specific. Lori Mann spoke to Boise Water presentations to groups, they don't advertise.  They aren't specific. Bev Barker suggested telling them to devise a plan for water conservation. Commissioner Swisher asked if we could say alternative sprinkling resolves pressure problem but is unrelated to nature.  It is not a volume saver. Commissioner Miller said water conservation program aimed at peak and capacity problem or conservation problem that is directed to less use of water all the  time, even in the winter, even when there is less justification for water conservation. Commissioner Nelson said if we are going for total volume, would be pushing for shower flow, etc.  This looks at summer peaks. Randy Lobb said electricity or chemical treatment are the only savings volumewise. Commissioner Swisher suggested saying in this order, signal to Idaho Power Company, that as you go down the road you want peakshaving and the price charged for pumping.  Whatever can be done in coordinating fashion for pumping costs is something to be done.  There are things you  could do to shave those peaks. -12- Randy Lobb said if you put together a least cost plan, there would be good conservation program and other choice would be new wells.  Am sure they did not look at conservation to avoid water treatment plant. Commissioner Miller said conservation for water companies is different than electricity.  For water companies the problem is the peak. Bev Barker said you don't want to discourage year-round conservation. Commissioner Miller said it would be fine to include language that the alternate day sprinkling is not true conservation program and require company to develop an irrigation conservation program in some period of time. Commissioner Nelson asked about Nevada's proposal. Suggested mentioning that as a type of proposal to use. CONSUMER ISSUES. Bev Barker said they haven't responded to the people who testified at the hearing. Commissioner Miller said problem with hook-up moratorium, there are innocent victims.  If we are serious about this, maybe we can say like in GTE, when you get your act together you get basis points back. Mike Gilmore suggested subdivision moratorium. Commissioner Miller said he is not convinced the hook-ups higher up are the problem with the north end. Bev Barker said company has said they have not  contacted the north end people. Commissioner Swisher suggested after order is out, write letter to Booe indicating we didn't have lapses when Booe was in charge.  That has stopped.  We need to get Booe's attention. Commissioner Miller suggested asking for a plan in the north end and put a rate of return link on that to emphasize we are serious about this. Commissioner Nelson said he didn't think their service was bad enough for a dip in the rate of return.  Like the idea of a letter to Booe.  Don't think it would be inappropriate to say that we are concerned by the fact that since those 18/20 people testified at the hearing no one from the company has called to respond to their complaints.  We are talking about an area that needs some attention. -13- Commissioner Swisher suggested saying by April 1 the company must file a specific plan with the Commission. Commissioner Miller said perhaps we should define the area specifically. Commissioner Nelson said from the north end area where complaints have been received.  That area in the north end from which we have had complaints may be broader than Camelsback Park area. Commissioner Swisher said since we had all that resolved in the 80s, how would it be to say in the order that customer complaint response system has become too thin with running them through local manager.  Need to say that is no longer reasonable. Commissioner Miller said on the north end thing, could require them to acquire an independent analyst to prepare a study and make recommendations about what should be done to upgrade the system.  In a way we would be saying we are not sure the company is competent  to do it themselves.  We want a result that is credible with the community. Commissioner Nelson said he would hate to say "independent".  Just say we want a plan. Commissioner Swisher said that is what CH2M Hill does. Commissioner Miller said if we just say file a plan, don't know what we will get. Commissioner Swisher suggested saying:  we will contract if staff isn't happy with what you propose. Mike Gilmore suggested telling them it could affect their rate of return next time. **Commissioner Swisher said to use Randy Lobb's language about captive customers with low pressure and hurdling over them to get new customers.... Commissioner Miller said we will carefully evaluate and if we find it is unsatisfactory we will take appropriate measures which may include hiring our own consultant. **Agreed to that language. Meeting adjourned. -14- Signature Page for October 29, 1990 Minutes.         DATED at Boise, Idaho this       day of January, 1991.                           PRESIDENT                           COMMISSIONER                           COMMISSIONER ATTEST:                               Commission Secretary 0003C