19980923_1.docx

MINUTES OF DECISION MEETING
SEPTEMBER 23, 1998 - 1:30 P.M.
In attendance were Commissioners Dennis Hansen, Ralph Nelson and Marsha H. Smith and staff members Carolee Hall, Birdelle Brown, Doug Cooley, David Scott, Scott Woodbury, Randy Lobb, Tonya Clark, Cheri Copsey, Stephanie Miller, Wayne Hart, Birdelle Brown, Rita Scott, Terri Carlock and Myrna Walters. Also in attendance was Dean J. Miller, Attorney at Law.
Commissioner President Dennis Hansen called the meeting to order and welcomed all in attendance.
Items from the Published September 23, 1998 Agenda were discussed and acted upon as recorded herein.
APPROVAL OF MINUTES FROM PREVIOUS MEETINGS
1. Minutes of September 15, 1998 Decision Meeting (Draft of Minutes previously circulated to the Commissioners for review and corrections were made).
Commissioner Hansen made a motion to approved the minutes; vote taken; motion carried unanimously.
CONSENT AGENDA
Items 2 through 10 listed on the Consent Agenda Portion of the Agenda were considered at this time.
Commissioner President Hansen asked if there were questions or comments on any of the items on the Consent Agenda?
Commissioners Nelson and Smith had none. Commissioner Nelson then made a motion to approve the items on the consent agenda; vote taken; motion carried unanimously.
MATTERS IN PROGRESS
11. Carolee Hall’s September 14, 1998 Decision Memorandum re: Fremont Telcom Requesting Approval to Introduce Number Reserve Service and “Grandfather” Its Suspension Service Effective October 1, 1998.
Carolee reviewed the decision memorandum. Said staff felt that depending on USF disbursements to offset any revenue deficiencies that may result from any filing is not appropriate business practice for a regulated company. Staff would support this filing if it could ascertain some reassurance that Fremont would meet its revenue requirements with the decline of Suspension Service customers and the increase in Number Reserve customers. Staff recommended denying the filing until Fremont submits a complete filing that includes the appropriate cost analysis.
Commissioner Hansen had a question regarding the NECA funding. Asked if this filing was denied, would the company be denied some funding they are now getting from NECA?
Carolee responded that it might change the funding mechanism. When calculating NECA funding, they count suspension service lines as working, revenue producing loops and decrease Fremont’s disbursements from the NECA funding pool. Fremont contends that the vacation/suspended lines are not revenue producing lines and that this methodology is decreasing its federal funding.  
Commissioner Smith said she needed to make sure she understood what Carolee’s concerns were. Asked if her concern was that the $6 does not cover the costs of the number reserve?
Carolee said it probably will cover the cost.
Commissioner Smith asked if the $13.50 service order charge was a concern?
Was she worried that that didn’t cover cost?
Carolee said that would probably cover cost.
Commissioner Smith asked if what she was worried about was the revenue requirement declining? But said if these rates are set to cover costs, doesn’t that mean there is something wrong with the other costs?
Carolee said yes.
Commissioner Nelson commented the revenues, not revenue requirement,  would perhaps decline.
Carolee said Fremont gave staff an overview and the first revenue change showed a negative revenue as a result of customers dropping off the suspension service and going with number reserve. Asked if that would be a problem in recovering costs and they couldn’t answer that. It is a revenue problem not the cost.
Commissioner Hansen asked if there was really going to be much activity with existing customers being  grandfathered? Or did she see a lot of them changing?
Carolee responded that as a customer, she would forego that service because of the increase in charge.
Commissioner Smith asked - but if they are paying $5 now and it goes to $6 for number reserve, where is the revenue loss?
Carolee said Fremont thinks there will be customers dropping off.
Commissioner Smith commented she thought that number reserve arose because Fremont had a scarcity of facilities and the Commission was concerned people who wanted service year-round would be denied service because of those suspending service.
Carolee said that was the original filing by the company.
Commissioner Smith said she thought those who thought it was important enough to pay $5 would still feel strongly enough to pay $6 a month for that. Said her speculation might not be any better than anyone else, but didn’t have a problem with this.
Commissioner Nelson said when he read through this he thought the filing would affect NECA funding but they are both counted as a line.
Carolee explained. Said Fremont still gets 50% of the revenue in a suspension tariff while it is going on. If Fremont disconnects the line and only reserves the number and the listing then that loop is not counted at the NECA level. Fremont has challenged NECA for a further definition because they feel in suspension that it is not an active loop and they shouldn’t be penalized for the suspension service.
Commissioner Nelson asked - under suspension service they get funding?
Carolee said they get reduced funding.
Commissioner Nelson asked about number reserve?
NECA funding will go up because it is a non-working loop.
Commissioner Hansen said that NECA is trailing two years? It won’t affect the funding right now - for this year?
Carolee said that was correct.
Commissioner Smith said NECA gives so much a loop. If they reduce their price, they are still getting revenue out of that loop. Number reserve would get them more money from NECA, NECA funding covers the gap in funding.
Commissioner Nelson asked why they want to do this? Did they think they will get it back from USF?
Carolee said yes. Said there were also lots of comments from the Island Park people originally.  They can pay $12.05; they can pay $6 and know they will have the same number and probably a line or they can pay nothing and not have the same number and not have a directory listing.
Commissioner Nelson said he thought this looked like a more attractive service to the customers unless they are worried about getting a line.
Commissioner Hansen said where they proposed rates covering the cost, it was hard for him to deny the application; because basically they are saying that the proposed rates are going to cover the costs and he would think if we move into a rate case with them, that other areas will show up and we will make the appropriate adjustment.
Commissioner Hansen then made a motion to approve this filing since cost will cover this.
Commissioner Nelson said he had another question. What cost information is required on tariff filings?
Carolee responded they usually show what the service itself will cost and what the revenue received will be; then take revenue minus cost.
Commissioner Nelson said it seemed to him it usually says the company indicates it appears revenue will cover costs. Is there an analysis on cost from the company?
Carolee said staff usually gets an analysis.
Commissioner Nelson said he was inclined to approve this but if we have a process that says everybody needs to go through this, have a problem with making an exception when they don’t send in data. But this does appear that costs are covered and there is a good chance the revenue will increase.
Commissioner Smith said her vote is based on Carolee Hall’s saying that costs are covered.
Vote on the motion was taken; motion carried unanimously.
12. Scott Woodbury’s September 14, 1998 Decision Memorandum re: Case Nos. GNR-W-97-2(Hidden Springs Water Co. LLC) UWI-W-97-3 (United Water Idaho) Certificate Application--Hidden Springs and
13. Case No. UWI-W-98-4 (United Water Idaho) Amended Rules and Regulations--Water Main Extensions.
Scott Woodbury reviewed the matters; said they are related items. No. 12 entails two applications for certificates in the Hidden Springs Community. Parties negotiated an agreement that was filed with the Commission in June of 1998 that is before the Commission today. If that agreement is approved by the Commission under the express terms proposed, United Water would be the provider of water service to the development and Hidden Springs would withdraw its application. Most of the concerns have been answered. Staff is also proposing modified procedure on 13 - United Water Amended Rules and Regulations - Water Main Extensions. Said the applicant is prepared to have this decided by the Commission and if the Commission wants to explore it further, staff is available for discussion.
Commissioner Hansen called for discussion.
Commissioner Smith said she tried to decide the issue of refunds but couldn’t find any arguments that go to policy questions to rest the decision on. Said she was at a loss as to the basis for staff’s contention that monies for extension should not be refunded and ramifications for that and the reasons for the Company’s proposal.
Randy Lobb spoke to what the current tariffs regarding line extensions are for United Water. Staff thought it was improper to provide the  refunds proposed in this case and not have other developers have the same rules.
Commissioner Smith asked if it was discriminatory?
Randy replied - yes.
Dean J. Miller, Attorney for United Water, then spoke to the issue. Said he thought it was important to observe that the end product re: line extension was reached through negotiations. Each party had to give and take to reach a final point agreeable to all for the purpose of getting to a point that was feasible for United to provide service, avoiding the problem of a new utility coming in that was probably not as sophisticated. Thought there were numerous advantages for United to provide service. Key feature is that the refunds that are called for will not be paid until there are actual customers connected. so there is no speculative risk. They only advance when customers are connected. By allowing Hidden Springs to advance these costs and with the refunds, it makes it financially viable for Hidden Springs to enter into the project under these terms. Have also pointed out that to the extent that rules for transmission are not standards, that the Commission often times in the past has approved optional arrangements that the company entered into. Commission has approved special contracts for gas to retain or prevent by-pass to the customers. Even though on its face arrangements might be discriminatory, there is good reason for a special rate. The Commission has approved special arrangements in the area of electricity for similar circumstances, so it is the company’s view that the non-standard feature of this agreement exists for a good purpose; that is making this deal work and there is significant precedence for the Commission to approve special arrangements when there is a valid public policy purpose for doing so. Had just one final comment - thanked the staff for working with both companies to try and narrow down the number of non-standard features so that we got to the point where there is only one non-standard feature.  
Commissioner Nelson asked Mr. Miller what the magnitude was of the variance that the Commission is asked to consider?
Mr. Miller responded that unfortunately Mr. Linam of United water is out of town today and he would have those calculations and could respond to that question. He could say that the companies have agreed that the total refunds could never exceed the amount invested. Companies have agreed that the actual cap should be in place so that there can never be a windfall in excess of investment. The refund amounts they were quite confident are not greater than the cost of associated facilities for existing United Water customers. Don’t think it is any more per customer of existing system. Beyond that on total refunds, to determine the different numbers, don’t have those.
Randy Lobb said in discussions it was basically determined that under normal consumption the revenue generated from the average customer probably wouldn’t cover much more than special facilities. The formula to determine refunds will vary by revenue generated by customers.  It is difficult to determine how much refund will be received from this project. On the average it was pretty well determined that if you have an average customer, Hidden Springs will recover the special facilities. If revenue is greater they will recover cots of distribution, etc.
Commissioner Hansen then asked if there were other questions?
Commissioner Smith said she would make a motion. Would move to adopt the stipulation and settlement as modified. Think there is an advantage to having United Water be the provider. If they can just get back cost of special facilities, is not concerned about this variance.  Would approve the agreement as modified.
Commissioner Hansen asked for discussion.
Hearing none, vote was taken; motion carried unanimously.
Scott Woodbury spoke briefly to No. 13 - Amended Rules and Regulations Proposed of United Water for water main extensions. Said staff had suggested language speaking to case by case basis, but would include that in their comments when the matter goes out on modified.
Commissioner Nelson then made a motion to put UWI-W-98-1 out on modified procedure; vote taken; motion carried unanimously.
Decision Meeting was then adjourned.
Dated at Boise, Idaho, this 24th day of September, 1998.
Myrna J. Walters
Commission Secretary