20230608Comments of Commission Staff_Attachments.pdf

CLAIRE SHARP
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE,IDAHO 83720-0074
[phone]
IDAHO BAR NO.8026
Street Address for Express Mail:
11331 W CHINDEN BLVD,BLDG 8,SUITE 201-A
BOISE,ID 83714
Attorneyfor the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF ATOMIC WATER )WORKS APPLICATION FOR A )CASE NO.ATW-W-23-01
CERTIFICATE OF PUBLIC CONVENIENCE )
AND NECESSITY )
)COMMENTS OF THE
)COMMISSION STAFF
COMMISSION STAFF ("STAFF")OF the Idaho Public Utilities Commission
("Commission"),by and through its Attorneyof record,Claire Sharp,Deputy AttorneyGeneral,
submits the followingcomments.
BACKGROUND
On January 31,2023,Vickie O'Haro through her "company,BVL Farms LLCI doing
business as Atomic Water Works"("Company")applied to the Commission for a Certificate of
Public Convenience and Necessity ("CPCN"),to provide water service in disincorporated city of
Atomic City,Idaho.Application at 1.
I LLC is defined as a limited liability company.
STAFF COMMENTS 1 JUNE 8,2023
BVL Farms LLC is a wholly owned limited liability company,with one owner Vickie
O'Haro.It currentlyoperates in the disincorporated city of Atomic City,Idaho.BVL Farms LLC
was established in September 2022,and assumed the business name of the Company to provide
corporate protection for the water system assets and its owners.IDAPA 31.01.01 Rule 043.02
states,"a corporation must be represented by a licensed attorney."The Company is not represented
by an attorney.For a small water utility2 hiring an attorney is cost prohibitive and those expenses
are passed to the customers.At the time the Commission issued its Notice of Application,Order
No.35698,it was unclear who owned the water system.Now,Staff believes it is owned by a
single-entity LLC and may require legal representationto move forward with the CPCN.
On March 9,2023,the Commission issued a Notice of Application and established a 21-
day intervention period.Order No.35698.No party intervened in this case.
At the Commission's April 25,2023,Decision Meeting,Staff represented it had informally
conferred with the Company regarding public comment and Company reply deadlines.
The Company represents that it recently purchased the water system providing service in
Atomic City,Idaho.Id.
The Company's proposed rate schedule for residential customers is a flat rate of $55.00
monthly per residential connection,with a non-flowing rate of $27.50 monthly per residential
connection.Id.at Attachment 22.The Company's proposed rate schedule for commercial
customers is a flat rate of $111.00 per month.Id.at Attachment 19.
The Company provided notice of its purchase and the Application for a CPCN to customers
on October 25,2022.Id.at Attachment 22.
STAFF ANALYSIS
Overview
After reviewing the Application,responses to production requests,and additional
information from the Idaho Department of Environmental Quality ("IDEQ"),Staff recommends
the Commission approve the Company's Application for a CPCN.Staff also recommends the
Commission establish an annual revenue requirement of $17,096,representing an increase in the
Company's annual revenues of $920 or 5.7 percent,as discussed in greater detail below.
2 IDAPA 31.36.01.005.101 Section 36.01.005.101 -Small Water Companies Defined;Gross Revenue is less than
$50,000 annually;Customer Base is less than 300 customers.
STAFF COMMENTS 2 JUNE 8,2023
System Description
The Company provides water service to approximately thirty-onecustomers within the
unincorporatedtown of Atomic City,Idaho.Water for the system is sourced by two groundwater
wells,but currentlyonly one well is operational.3 The well produces at a flowrate of approximately
100 gallons-per-minute ("GPM")and is used to fill a 75,000-gallon potable water storage tank.A
booster station draws water from the tank and pressurizes the distribution system for customer use.
In March of 2023,IDEQ completed a sanitary survey of the system and noted "Deficiencies"along
with improvement recommendations that should be made to the system.In 2022,Bingham County
completed a Water Study4 ÍO RSSCSS the existing system and to determine any current or future
requirements needed.This study provides the new owner(s)with a roadmap to any currently
needed improvements and any future capital plans.
Water Rights-
Staff believes the current water rights included within the purchase of the water system
provide an adequate supply of potable water to meet the Company's current need and any near-
term potential growth.The two water rights in combination provide a total diversion amount of
237 GPM.
CompanyService Area
Staff recommends the Commission designate the Company's service area within the CPCN
as:(1)the W½of Section 3 Township 1 North,Range 31 East Boise Principal Meridian Idaho;
and (2)by including the map provided as Attachment A to Staff Comments.Staff identified and
confirmed the limits to the Company's service area through its review of water right 35-4209
provided in the Water Study.The water right authorizes the use of water in a prescribed manner
which in this case limits the Company's service to the municipal place of use described above.It
also limits the Company from providing water service beyond the water right boundary.
3 Well #02 is not in operation because it does not currently have a pump in place.
4 The Bingham County -Atomic City Water System Facility Planning Study was providedin response to Production
Requests No(s)11-15.
STAFF COMMENTS 3 JUNE 8,2023
Revenue Requirement
The Company charges a flat monthly rate for water service,with separate rates for
residential,non-flowing residential,and commercial customers.The Company requested an
increase in rates to generate $19,848 in annual revenue.However,the Company's Application
only supports a revenue requirement of $16,051.Staff calculated a revenue requirement of
$17,096,as shown on Attachment B.
O&M Expense
The Company has been operating the water business since November 2022.The expenses
included in the Application only include three to four months of expenses.Staff annualized the
expenses and recommends an O&M expense of $15,601.Attachment C,Column C,Line 6.
Purchased Power Costs
A large expense for the Company is purchased power costs.The expense was calculated
using four months of invoices provided by the Company and an additional eight invoices from
Bingham County.Staff recommends the Company be permitted to recover annual power costs of
$4,260.
Water Operator
The Company contracts with a certified water operator located in Aberdeen,Idaho.The
water operator charges a monthlyfee of $700.00.Staff believes the fee is reasonable and should
be included as an O&M expense.However,any additional fees and expenses above the monthly
base fee of $700 should be evaluatedfor proper accounting treatment.Additional charges outside
the water operator's monthly fee may qualify as a capital investment in the system.For example,
if the water operator performs repairs to extend the life of the water system,the costs of the repairs
may be capitalized and booked to plant-in-service and depreciated accordingly."
Street Lighting
Prior to being acquired by the Company,the water system was operated by Bingham
County.When billingfor the electricity used by the water system,Idaho Power included the billing
costs for street lighting within the same account as the water system.The cost for street lighting
*If system repairs are not recorded correctly,it prevents the company from fully recovering a return on itsinvestmentfortherepairoverthelifeoftheasset.
STAFF COMMENTS 4 JUNE 8,2023
is no longer the responsibility of the Company and it should be separated from the billing.Staff
believes that it is no longer the obligation or responsibility of the water company to provide street
lightingto the disincorporated town.Staff recommends the Company remove the billingfor street
lighting from the metered billingaccount and separately pay for street lighting outside of the water
company.If residents and/or businesses want to maintain street lighting in place for the area,then
they should work separately with Idaho Power to find another means to pay to keep them in place.
Fees and Taxes
The Company did not include Commission assessment fees,property taxes,IDEQ fees,
federal and state taxes,and other fees in its Application.Staff calculated an additional $595 to be
recoverable and included in rates.Attachment C,Column B,line 13.
Rate Base
Rate base is the summation of the net plant in service and working capital.Staff
recommends a total rate base of $1,950,which was not included in the Company's Application.
Attachment B,Column B,Line 1.Pursuant to Idaho Administrative ("IDAPA")Code Rule
31.36.01.102.Section 31.36.01 .102 -PRESUMPTION OF CONTRIBUTED CAPITAL "[i]n
issuing certificates for a small water company or in setting rates for a small water company,it will
be presumed that the capital investment in plant associated with the system is contributed capital,
i.e.,that this capital investment will be excluded from rate base.(7-1-93)".Because the system is
funded with contributed capital,the Company does not have plant-in-service that qualifies for rate
base treatment.The Company did not request recovery of any plant items or the purchase price of
the water system.
When repairs or maintenance is performed on the water system that extends the life of the
system,the Company may capitalize the costs.In a future rate case proceeding,the Company may
then seek recovery and earn a fair return on all undepreciated capitalized costs.Staff encourages
STAFF COMMENTS 5 JUNE 8,2023
the owners to discuss this with Staff and seek proper accounting treatment of capitalized costs
when they start to occur.
Staff recommends a working capital allowance of $1,950,which is a component of rate
base.Working capital is needed to fund the day-to-day operations of the Company.Staff used
the one-eighth method to calculate the value of working capital to be included in rate base.
Rate of Return
Staff recommends a return on equity of 11.0 percent.In Order No.33658 and Order No.
33910,similar water utilities were authorized an 11.0 percent return on equity.This return on
equity is the same as the overall rate of return since there is no authorized Company debt.
Rate Design
The Company proposes to charge a monthly flat rate for thirty-one customers.Staff
believes that maintaining a flat rate design is reasonable at this time.However,the water system
has meters in place,but the Company is not currentlyreading meters to determine consumption
data of its customers.Staff recommends the Company begin reading meters and obtaining and
retaining consumption data to inform other rate design options in its next general rate case.
The current rate structure includes three charges:(1)residential,(2)residential non-
flowing,and (3)commercial.There are seventeen residential,ten residential non-flowing,and
four commercial customers.Staff recommends that two classes stay in place and one rate class be
removed entirely.
The residential non-flowing customer class was put in place when the water system was
operated by a municipality.At the time,the municipality installed meters and recovered the costs
of the meters from all landowners,including those that did not receive water from the system.
When the town of Atomic City was disincorporated in 2020,Bingham County took over the assets
and the billing.Bingham County continued to charge the non-flowing rate.When the Company
acquired the water system,it continued to use the billingstructure that was currentlyin place.Staff
believes the operations of the water system should be paid for by those that use the services.Those
who do not use water from the system should not be charged for water not used.Thus,Staff
recommends removing the residential non-flowingclass.
STAFF COMMENTS 6 JUNE 8,2023
The proposed rates recover a base rate revenue of $19,848.Applying Staff's adjustments
to rate base,O&M expenses,fees,taxes,and capital structure,the rates need to recover a base
revenue of $17,096.Staff recommends that the rates for residential customers be as filed,or
$55.00,for an increase of 48.6 percent.Staff also recommends the commercial customer rates be
set at $123.00 per month,for an increase of 10.8 percent.The commercial customers'usage is
more seasonal,which puts a larger demand on the system during the spring and summer months.
Staff's recommended rates are outlined in Attachment D,Column D.
Tariffs and Other Documents
The Company submitted a draft tariff with a schedule and non-recurring charges that are
based on the Commission's Model Tariff.Staff will collaborate with the Company to update its
tariff upon the issuance of a Final Order.
The Company also included copies of other required documents such as late notices,
disconnection notices,the annual explanation of rate,and the annual rules summary.Staff will
work with the Company to ensure they are provided to customers when necessary.
Non-Recurring Charges
Non-recurring charges are fees that the Company can enforce if the Commission deems
them appropriate.The Company has requested non-recuring charges as part of their tariff.Staff
has reviewed the non-recurring charges and recommend adjusting the return check charge,see
below,and approve the rest as filed.
Return Check Charge
The Company requested a $37.00 returned check fee.Idaho Code §28-22-105 allows a
company to collect additional charges when a check has not been honored,but the amount is not
to exceed twenty dollars ($20.00)or the face amount of the check,whichever is less.Consistent
with the statute,Staff recommends setting a return check charge fee when a payment has been
returned for insufficient funds at $20.00.
Reconnection Charge
The Company asked for a reconnection fee when the account has been involuntarily
disconnected.The Company requests a $75.00 fee when reconnected during normal business
hours,and $150.00 when the request for reconnection is after normal business hours.A
STAFF COMMENTS 7 JUNE 8,2023
reconnection charge is appropriate followingan involuntary disconnection of service.Staff
believes the amount requested is reasonable due to the unique area where the water system is
located and the travel time a water operator needs to get to the service territory to perform the
action(s).
Voluntary Shut-OffCharge
The Company also requests a $20 shut-off charge for customers that voluntarilydisconnect
during normal business hours and a $40.00 shut-off charge after business hours.Staff supports
the Company's proposed shut-off charge.
Late Payment Charge
In the Company's proposed tariff,it lists a late payment charge of one percent monthly on
unpaid balances at the time of the next billing date.Staff supports a late payment charge to
encourage prompt payment of bills and a one percent charge has previously been allowed to
utilities that have requested one.
Hookup Fee
Staff believes a hookup fee is required for new customers.The Company will incur
additional costs when a new customer installs their service line into the Company's distribution
system.The hookup fee allows the Company to recover costs to connect with new customers.The
Company requested a $200.00 hookup fee and Staff recommends setting the hookup fee as filed.
Reporting
Per Idaho Code §61-405,"every public utility shall file an annual report with the
Commission,verified by the oath of an officer thereof.[S]hall be filed on or before the fifteenth
day of April in each year."Annual reports contain company information,revenues,expenses,
income statement,balance sheet,plant in service,accumulated depreciation,a statement of
retained earnings,capital stock detail,long-term debt detail,system engineering data,and
customer statistics.The Commission will supply the Company with a template and the Company
may request the template in Excel format.
Per Idaho Code §61-1003,the Company is required to submit their gross intrastate
operatingrevenues ("GIOR")on or before April first of each year.The GIOR is the total revenues
STAFF COMMENTS 8 JUNE 8,2023
from its utility business in Idaho for the previous fiscal year,which the fiscal year is defined as
being January to December.
CUSTOMER NOTIFICATION AND COMMENTS
The Commission's Rules of Procedure,Rule 125,requires customer notification when a
Company requests a rate change (from previously approved rates).The system was purchased in
2022 by the Company from Bingham County and is requesting a CPCN.
The Company sent all customers a notice of the Company's Application to the
Commission.To date,no public comments have been received.
STAFF RECOMMENDATION
Staff recommends the Commission:
1.Approve a CPCN;
2.Approve a revenue requirement of $17,096 as calculated on the attached exhibits;
3.Order the Company to discontinue street lighting under the Company name;
4.Approve rates as outline in Attachment D,Column D;
5.Approve a $20 returned transaction fee and the other non-recurring charges as filed;
and
6.Direct the Company to submit a signed updated tariff within 30 days of the effective
date of an Order.
Respectfully submitted this u day of June 2023.
Claire Sharp
Deputy Attorney General
Technical Staff:Travis Culbertson
Leena Gilman
Chris Hecht
Jon Kruck
Rick Keller
i:umisc/comments/atww23.lcstncigchjkmsrkcomments
STAFF COMMENTS 9 JUNE 8,2023
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 8th DAY OF JUNE 2023,SERVED
THE FOREGOING COMMENTS OF THE COMMISSION STAFF,IN CASE NO.
ATW-W-23-01,BY MAILING A COPY THEREOF,POSTAGE PREPAID,TO THE
FOLLOWING:
VICKIE O'HARO
OWNER/MANAGER
ATOMIC WATER WORKS
1772 N 2650 W
ATOMIC CITY ID 83215
E-MAIL:[e-mail]
'SECRETARY )
CERTIFICATE OF SERVICE

ATTACHMENT A
TO STAFF
COMMENTS IN
CASE NO.
ATW-W-23-01
ATOMIC CITY, IDAHO (Atomic Water Works)
May 17, 2023
0 0.05 0.1 0.2 mi
0 0.07 0.15 0.3 km
Compiled by the Bureau of Land Management (BLM), National Operations Center (NOC), OC-530., Esri, HERE, Garmin, iPC, Maxar
ATTACHMENT A

ATTACHMENT B
TO STAFF
COMMENTS IN
CASE NO.
ATW-W-23-01
Column Column Column
A B C
Test Year Staff Staff
Line Actual Proposed
1 -$ 1,950$ 1,950$
2 0.0%11.0%
3 -$ 215$
4 125$ (595)$ (470)$
5 (125)$ 685$
6 Net Operating Income Deficiency (125)$ 685$
7 Gross Up Factor 1.000000 1.343761
8 Total Incremental Revenue Requirement (125)$ 920$
9 Revenues at Existing Rates 16,176$ 16,176$
10 Total Revenue Requirement 16,051$ 17,096$
11 Percent Increase Required -0.8%5.7%
12 Total Gross Revenues 1.000000 1.000000
13 Net Revenue 1.000000 1.000000
14 State Income Tax Rate 0.06 - 0.058000
15 Federal Income Tax Base 1.000000 0.942000
16 Federal Income Tax Rate 0.21 - 0.197820
17 Net Operating Revenue 1.000000 0.744180
18 Net Income to Gross Revenue Multiplier 1.000000 1.343761
19 Composite Fed and State Tax Rate 0.00%25.58%
ATOMIC WATER WORKS
ATW-W-23-01
Staff Proposed Revenue Deficiency Calculation
Income Deficiency (Line 3 less Line 4)
Rate Base
Required Rate of Return
Income Required
Income Realized
ATTACHMENT B

ATTACHMENT C
TO STAFF
COMMENTS IN
CASE NO.
ATW-W-23-01
Column Column Column
A B C
Test Year Staff Staff
Line Estimate Adjustments Proposed
1 4,260$ 4,260$
2 229$ 229$
3 10,200$ 10,200$
4 300$ 300$
5 612$ 612$
6 Total Operation&Maintenance Expenses 15,601$ -$ 15,601$
7 50$ 50$
8 200$ 200$
9 Other Taxes/Fees DEQ Fees 205$ 205$
10 Bingham Ground Water Fee 450$ 450$
11 108$ 108$
12 32$ 32$
13 Total Taxes and Fees 450$ 595$ 1,045$
14 Total Expenses 16,051$ 595$ 16,646$
ATOMIC WATER WORKS
ATW-W-23-01
Staff Proposed Total Expense
ATTACHMENT C

ATTACHMENT D
TO STAFF
COMMENTS IN
CASE NO.
ATW-W-23-01
Column Column Column Column Column
A B C D E
Line Customer-Monthly Rate
Current
Rates Proposed Increase Proposed Increase
1 Residential Non-Flowing 27.50$ 27.50$ 0.0%
2 Residential 37.00$ 55.00$ 48.6% 55.00$ 48.6%
3 Commercial 111.00$ 111.00$ 0.0% 123.00$ 10.8%
ATOMIC WATER WORKS
ATW-W-23-01
Staff Proposed Rates Compared to Company Proposed Rates
ATTACHMENT D