20050718Response to staff comments.pdf

BAR CIRCLE '8' WATER CD
PO BOX 1870
HA YD EN ID 83835
208 665 9200
208 665 9300 FAX
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Idaho Public Utilities Commission
o. Box 83720
Boise, Idaho 83720-0074
Attn: Commission Secretary
Subject: Company response to PUC Staff Comments re BCS- W -05-
The Bar Circle "s" Water Company (Company) has reviewed the comments filed by the
Commission Staff (Staff) on July 8, 2005. The Company has the following comments to
make in response to those filed by the Staff.
1. In the third full paragraph on Page 4 of its comments, Staff states "The Company
is not going to construct the new storage facility. The Company is using an
engineer s estimate of the cost to construct the water facility as a surrogate for the
cost of the Company s existing storage capacity." The Company will at some
point in the not too distant future construct a new storage facility. Indeed, the
Company has already performed preliminary excavation work to level and
compact a pad for the construction of a new reservoir. The Company has not yet
determined the size of the new reservoir but used the above mentioned engineer
estimate as a surrogate for the costs of a new reservoir that has not yet been
engineered and designed. As stated in the Company s Application, the Company
believes the costs of the surrogate 20,000 gallon reservoir are conservative due to
the small size of the 20 000 gallon surrogate. The Company will within the next
year file an Application for a line extension tariff to accommodate growing
demand adjacent to the Company s existing service territory. Appropriate
Certificate Applications will also be filed.
2. The first full sentence on Page 5 of the Staff Comments indicates that Staff
reviewed fire protection Tariffs of United Water and Eagle Water. The Staff went
on in the following paragraph to acknowledge that in this case
, "
The storage
requirement is for a dedicated volume of storage that will always be held ready
for the commercial fire protection service." The Company does not believe that
Bar Circle "s" Water Company can be compared equitably with these two much
larger water systems that enjoy a greater diversity of customer mix. Staff
acknowledges that the Company s fire protection reserve is dedicated and cannot
be us~d to meet other water demand needs. The larger companies with greater
customer diversity need not construct and set aside storage capacity equal to the
sum total of all customer fire suppression requirements. The odds of all
customers demanding fire protection simultaneously are astronomical.
3. Beginning with the third full paragraph on Page 5 of its comments the Staff
begins to explains it's calculations with the following comment: While fixed
costs of storage are not necessarily recovered in the customer charge, Staff used
the current minimum customer charge adjusted for the monthly volume allowance
as a proxy for fixed costs associated with water storage." Staff then eliminated
from the $15.00 per month minimum charge, $0.95 for each 1 000 gallons
included in the minimum charge or $7.12 (7 500 gallons x $.95) leaving $7.88 as
Staffs proxy fixed charge for determining a fire protection tariff rate. The $0.
Staff deducted is the incremental rate per 1 ,000 gallons of consumption in excess
of the 7 500 gallons included in the Company s minimum charge approved by the
Commission. The Company notes that no cost of service study has ever been
performed for Bar Circle "S" Water Company to allocate fixed and variable costs.
Rather, a simple bill frequency analysis has been used to establish a rate design
that is fair and equitable among a homogeneous group of residential customers.
Staff s "proxy" simply has no basis. Both the minimum charge and the
commodity in excess of the minimum consumption include fixed and variable
costs that have not been segregated in any manner.
4. After developing the $7.88 storage proxy fixed rate, Staff calculates the
equivalent number of residential customers that could be served by the dedicated
storage to be 46.4 customers. Using the 46.4 equivalent customers and applying
the $7.88 Storage Proxy Fixed Cost, Staff determines that a monthly fire
suppression rate should be $365.63 per month. Staff then recommends the
$365.63 be collected through rates for fire hydrants at $9.50 per month and
building sprinkler systems at $48.13 per month. Staff provides no rational for the
allocation of its proposed total monthly revenue requirement between the two
services.
In summation, the Company believes its proposal, as included in the application is
conservative, based on sound regulatory methodology, timely and responsive to the needs
of both the Company and its customers.
Respectfully,
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Robert N Turnipseed, Owner &.:t-