20061019order_no_30155.pdf

Office of the Secretary
Service Date
October 19 2006
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION TO
SELL THE ALGOMA WATER SYSTEM
CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY NO. 396 ORDER NO. 30155
CASE NO. AWS-06-
On May 18, 2006 Algoma Water System ("Algoma" or "Company ) filed an
Application with the Commission seeking approval of amendment of its Certificate of Public
Convenience and Necessity (CPCN) to reflect a change in ownership. Pursuant to Idaho Code
61-526, the Commission has the authority to approve such amendment. On June 16, 2006, the
Commission issued a Notice of Application and Modified Procedure. Order No. 30075. In such
Order, the Commission set a comment deadline of August 15, 2006. By Minute Order on
August 3 , 2006, the comment deadline was extended to September 15 , 2006. The only
comments received were submitted by Commission Staff, and the Company did not submit any
reply comments.
THE APPLICATION
In the Application, Algoma states that the ownership of the business has transferred
from Larry and Christopher Neu to Paul Greenwood, and it seeks approval of amendment of
Public Convenience and Necessity No. 396 to reflect this. The Application contains certain
information related to the sale and the fiscal status and business plans of the new owner. In
addition, the Application states that the new owner does not intend to ask for a change in rates
and charges for services at this time.
STAFF COMMENTS
Finance
Mr. Greenwood has a business background in real estate development and business
management. He presented to the Commission a personal financial statement indicating a net
worth that represents sufficient financial strength to support the ownership of the water system.
He owns a landscaping business in California and three sewer systems in Bonner County, Idaho.
Although these sewer companies are not regulated by the Commission, these systems are similar
in enough respects to indicate that he has experience in operating a utility.
ORDER NO. 30155
The water system (physical plant) under the ownership of the previous owner had no
rate base recorded on the annual reports and therefore none of the rates reflect a return on any
capital investment. Additionally, the prior owner acknowledged that all improvements to the
water system that were made during the period of time he owned the system were accounted for
as expenses and not as capital improvements. The new owner has acknowledged that he will not
claim any of the purchase price as rate base at this time or in any future rate case. Therefore, the
purchase price of the assets purchased by the new owner as recorded on the Company s books
will not be included in rate base or earn a return, and as such will not be recoverable from
customers in rates.
The new owner agreed that the operation of the water company will not include any
sharing of expenses or overhead costs with any of his other business operations. He also agreed
that the accounting for the water system would be separated from the accounting for any other
business so that the expenses of operating the water system would be easily identifiable.
The 2005 Annual Report for Algoma reported a long-term debt to Panhandle State
Bank in the amount of $32 305.90. According to Company responses to Staffs production
requests, this long-term debt will be paid in full from the purchase proceeds and the new owner
does not intend to incur any other debt that would be secured by the assets of the water system as
he begins the operation of the utility.
En2ineerin2
Staff contacted the Idaho Department of Environmental Quality (DEQ) to ensure that
Algoma is in compliance with DEQ regulations. DEQ informed Staff that the system is
substantially in compliance, except that the system had no certified operator, as required by
DEQ, at the time of discussions between Staff and DEQ. Algoma has since demonstrated to
Staff that a state-certified operator with Water Systems Management, Inc. has been hired to
manage the system. Therefore, with a certified operator, Algoma will be able to satisfy that
requirement ofthe state. This operator s company also provides 24-hour emergency response for
maintenance needs. Staff is convinced that overall service of the Company is likely to improve
due to the contract with Water Systems Management, Inc.
Algoma s system is currently non-metered. The previous owners of the Company
had indicated interest in metering in the past, however, no meters have been installed. Staff
ORDER NO. 30155
addressed metering with the Company and learned that there are no future plans for meter
installation.
Consumer Relations
A notice to Algoma s customers was filed with its Application. The notice was
mailed to customers as required by the Utility Customer Information Rules (IDAP A
31.21.02.102). The original notice mailed to customers with their April billing notice reflected
an incorrect Commission mailing address. Staff brought this to the attention of the Company. A
corrected notice was to be sent out but the Company has not provided Staff with a mailing date.
The Commission has received one inquiry and one complaint from January 2003
until September 11 , 2006. The inquiry was asking for the name and address of then-new owner.
The Commission has received no complaints regarding customer service or billing practices
during the time the prior owner owned the Company. In September 2006, a complaint was filed
regarding the difficulty in contacting the billing agent for Algoma. The only phone number
listed on consumer bills and notices is for Deal Pump & Electric. It should be made clear on all
customer notices and billing statements that customers should contact Deal Pump & Electric for
emergency repairs and to call the Company s bookkeeper for billing questions and to make
payment arrangements. Further, as neither phone number will answer as "Algoma Water
customers need to be made aware of whom they are calling.
A review of Algoma s recently revised forms, notices and billing statement show the
Company has taken the necessary steps to change their forms and come into compliance with
almost all the Utility Customer Relations Rules (IDAPA 31.21.01.000 et seq.and Utility
Customer Information Rules (IDAP A 31.21.02.000 et seq.
).
Some changes, however, still need
to be made to the customer notices and billing statement.
The Billing Statement does not clearly reflect a payment due date. The due date
should be at least 15 days after the billing date. An Invoice Statement mailed with the Billing
Statement includes a business term for payment due of "Net 15." Customers may not understand
that terminology. Therefore, Staff recommends that the statement be revised to clearly reflect
due dates.
The "Initial Notice" which provides customers with seven days to contact the
Company to avoid disconnection, cannot include payment demand of past due sewer charges to
avoid disconnection of water service. The listing of the phone number for an emergency contact
ORDER NO. 30155
set forth on the notice should inform customers they are calling Deal Pump & Electric, and not
Algoma. Customers should be provided with the phone number for Algoma s bookkeeper, who
also handles any billing issues.
The "Final Notice" has the phone number for an emergency repair contact rather than
for the bookkeeper, who is the only person authorized to make payment arrangements and
discuss billing questions. Her contact information should be clearly stated on the notice. Also
the amount stated for payment to avoid disconnection should not include any past due amount
for sewer. The current example of a billing statement that was provided to Staff does not make it
clear to customers that Algoma is not threatening disconnection of water for sewer charges that
are past due to Northern Utilities Sewer (a separate business of the owner that serves the same
customer base). The notice to customers of the possibility of disconnection because of overdue
water charges should not contain any reference to sewer charges that may also be due and owing
by the customer.
Lastly, the "Summary of Rules for Customers of Small Water Companies" document
should reflect the phone numbers for Company contacts identical to those used in other customer
notices. This document is the annual notice provided to customers of the tariff in place and rules
of which customers should be aware, and is a key information piece to let customers know how
to contact the Company in the event of issues or concerns. The contact information for billing
issues and repair needs is imperative and should be clearly stated on this document.
The Staff recommended that the Commission approve the transfer of the Certificate
of Public Convenience and Necessity for Algoma to Paul Greenwood. Staff further
recommended that Algoma be directed to revise its billing statements to address the concerns set
forth in Staff s comments.
COMMISSION FINDINGS AND CONCLUSIONS
The Commission has jurisdiction over Algoma and the subject matter of this
Application under Idaho Code ~~ 61-125 , 61-129, and 61-526. We find that the Application to
transfer the CPCN should be granted.
We further find that the billing statements and customer notices sent out by the
Company need to be clarified.In particular, all billing statements and customer notices
(including any notice demanding payment prior to disconnection) should include the contact
information for the Company s bookkeeper or other relevant person in order for customers to
ORDER NO. 30155
know who to contact in the event of a billing dispute or to make payment arrangements. They
should also contain the information for Deal Pump & Electric for any emergency repair issues
that arise and make it clear to customers that the contact information is for Deal Pump & Electric
and not Algoma. The "Summary of Rules for Customers of Small Water Companies" should
also include the contact information for the bookkeeper, clearly labeled to be for billing
questions and arrangements, and the contact information for Deal Pump & Electric for any
repairs or maintenance issues. In both cases, the identity of each person or company should be
made clear to the customer to reduce confusion as to whom the customer is contacting.
Also, rather than state on the bills that they are "Net 15 " the Company should include
an actual due date for the payment of each bill. This should make the deadline for payment
clearer to the customer and reduce billing confusion and disputes.
The Initial Notice and Final Notice sent to customers before service disconnection
should not include payment demand for past sewer charges. Those charges are for a separate
business and the two services may not be commingled in this fashion. The Company may not
include charges for sewer services in the total amount that is due to avoid disconnection of the
customer s water service.
Lastly, the Company should inform the Commission as to the mailing date of the
corrected Customer Notice of the Application.
ORDER
IT IS HEREBY ORDERED that the Application of Algoma Water System, Case No.
A WS- W -06-, is approved.
IT IS FURTHER ORDERED that Algoma Water System correct its billing
statements and customer notices as set forth in further detail in our Findings above. Algoma
must also inform the Commission as to the mailing date of the corrected Customer Notice of the
Application.
ORDER NO. 30155
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this I Of
day of October 2006.
ARSHA H. SMITH, COMMISSIONER
ATTEST:
~~
!7JCUMLV
Barbara Barrows
Assistant Commission Secretary
O:A WS-06-cg2
ORDER NO. 30155