20090603final_order_no_30832.pdf

Office ofthe Secretary
Service Date
June 3, 2009
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF BAR CIRCLE "S" WATER
CORPORATION FOR AUTHORIZATION
TO BORROW FUNDS TO MAKE WATER
SYSTEM IMPROVEMENTS ORDER NO. 30832
CASE NO. BCS-09-
On May 4, 2009, Bar Circle "S" Water Company (Bar Circle "Company)
requested authority to borrow $55 000 to pay for certain water system improvements which
include: (a) installing a six-inch flow meter; (b) abandonment of a well that is no longer in
servIce; and (c) conversion from manual meter reading to an automated electronic reading
system.
The Idaho Department of Environmental Quality (IDEQ) has instructed the Applicant
to install a six-inch recording flow meter on the discharge side of the Company s booster pumps
by July 1, 2009. App., Exh. 1. The total cost for the purchase and installation of the flow meter
is estimated to be $9 935. App., Exh. 2. The Applicant has been informed that there is at least a
four-week lead time for receipt of the meter from the date of the order. Bar Circle "S" has
placed the order for the flow meter with United Pump and Drilling to insure installation prior to
the July 1 2009, date required by IDEQ.
Bar Circle "S" owns a six-inch well that is no longer in servIce and must be
abandoned in compliance with IDEQ and Idaho Department of Water Resources (IDWR) rules
and regulations. IDAPA 37.03.09.012 and IDAPA 58.01.08.009. The estimated total cost to
complete the abandonment of the well by United Pump and Drilling and Avondale Construction
is $4 500. App., Exhs. 3 and 4.
Finally, the Applicant intends to convert its current manual meter reading system to
an automated electronic reading system. The Company claims that growth on the Bar Circle "
system has exceeded the capacity of current manual reading methods.Conversion to the
automated system will avoid the necessity to hire additional part-time employees and will make
it possible to read customer meters in the winter months when snow accumulation makes the
manual reading impossible. The Company also indicates that its experience in the past has
shown that the use of temporary or part-time employees generally produces numerous errors in
ORDER NO. 30832
meter reading and requires supervisory review. The quote received by the Company from
General Pacific Inc. for all the equipment necessary to complete the conversion and training in
its use is $39 585.33. App., Exh. 5. All individual customer meters will require a retrofit of the
existing mechanical equipment with the electronic equipment. The estimated cost by Avondale
Construction to complete the retrofit of customer meters is $5 400. App., Exh. 6. The total cost
of converting to an automated meter reading system is $44 985.33.
The estimated total costs of all system improvements are summarized as follows:
(a) Installation of flow meter $ 9 935.
(b) Abandonment of unused 6-inch well $ 4 500.
(c) Conversion to electronic meter reading system $44.985.
Total Cost oflmprovements $59,420.
The Applicant has acquired a commitment for financing the improvements from
Community Bank in Post Falls, Idaho, in the amount of $55 000. App., Exh. 7. Interest on the
loan will be a floating rate at one percentage point over the prime rate published in the Wall
Street Journal and the term of the loan is for five years. The current interest rate would be
25%.
STAFF REVIEW
At present, the two production wells owned and operated by the Company are
equipped with flow measuring devices. Both of the production wells discharge to an 180 000-
gallon storage reservoir. Water is drawn from the tank to supply the system by four booster
pumps and one fire pump in parallel. The IDEQ letter to Bar Circle "S" on April 20, 2009,
reiterates IDEQ's requirements of installing a recording flow meter on the discharge line of the
four booster pumps and that this meter needs to be installed prior to July 1 , 2009, in order to
capture peak-demand this summer.
Since the old well owned by the Company is no longer in service, the Company plans
to abandon the well in compliance with the current rules and regulations by IDEQ and IDWR.
The IDEQ rules pertaining to abandonment of wells are cited in IDAPA 58.01.08.510.09 - Well
Abandonment. The IDWR rules pertaining to abandonment of wells are cited in IDAP
37.03.09.025.16 - Decommissioning (Abandoning) of Wells. The Idaho Department of Water
Resources apprised Staff that the new rules for decommissioning wells were recently approved
by the Legislature and effective May 8 , 2009.
ORDER NO. 30832
The Company plans to convert its manual meter reading system to an automated
electronic reading system. The Company cited in its Application, and in additional information
provided to Staff, several benefits of this conversion including: (a) avoiding the necessity of
hiring additional part-time employees to obtain monthly meter readings; (b) avoiding re-reading
meters due to previous reading errors, potential leaks or customer complaints due to unusually
high bills; (c) avoiding additional vehicle expenses due to travel from the office to meter sites to
re-read meters and conduct investigations; (d) avoiding extra time and expense in correcting
meter data computer input, recalculating water usage, preparation of and sending revised bills to
customers; (e) being able to identify leaks at the Company s service connection and/or broken
meters in a timely fashion thus eliminating potential revenue lost and additional operating
expense to the Company; (f) being able to identify leaks on customers' services in a timely
fashion; (g) being able to absorb new customer growth with minimal future labor costs; (h) being
able to read the meters in the winter season when snow accumulation makes manual reading
impossible; and (i) improving the Company s cash flow by being able to bill customers on a
monthly basis.
There are different levels of automated meter reading (AMR) technologies now
available in the market from a simple hand-held (touch-read) system to advanced AMR/ AMI
system. Bar Circle "S" has selected to use a mid-level technology, the mobile or drive-by meter
reading system. This technology requires installation of a radio frequency transmitter for each
customer meter and the meter flow data is automatically read by a mobile reading device that
includes navigational and mapping features.
As mentioned above, there are quantitative benefits and many qualitative benefits
from AMR installation. To evaluate the cost-effectiveness of installing AMR in the Company
water system, Staff attempted to estimate the number of years of payback. Staff also evaluated
the potential ratemaking treatment for the AMR system. Contact with Company consultant
Robert Smith was utilized to make the evaluation. Mr. Smith indicated a rate case was being
prepared for Bar Circle "S" and as part of that case, rate base treatment will be requested for the
AMR. The loan costs will be included as the only debt component in the overall rate of return.
At this time, Staff believes the Company can justify the AMR installation provided
rate base return over the life of the meters is used as the ratemaking treatment. This ratemaking
treatment will allow for the final AMR cost quantification and evaluation in the rate case. Staff
ORDER NO. 30832
encourages the Company to continue exploring the availability of . American Recovery and
Reinvestment Act of 2009 funding or stimulus money that may be available to water systems.
Bar Circle "S" requests authority to borrow $55 000. The commitment letter from
Community Bank provides the necessary financing terms to approve the loan request. Upon
completion of the loan, Staff recommends Bar Circle "S" be required to file all final executed
loan-related documents with the Commission.
COMMISSION FINDINGS
The Commission has reviewed and considered the filings of record in Case No. BCS-
09-01 including the Company s Application and supporting exhibits. Bar Circle "S" has met
the Commission s requirements for public notice (Application Exhibit 9). The proper filing fee
of$55.00 has been paid as provided by Idaho Code 9 91-905.
The Company requests Commission approval of its proposal to borrow $55 000 from
Community Bank in Post Falls, Idaho. The proceeds will be used to finance several
improvements to the Company s water system including: (a) installation of recording flow meter
as required by IDEQ; (b) proper abandonment and sealing of a six-inch well that is no longer
serviceable; and (c) installation of electronic meter reading equipment to improve efficiency and
accuracy of meter reading. These improvements, we find, will put the Company s water system
in compliance and will generally benefit the customers of Bar Circle ". The Commission finds
it reasonable to approve the Company s request to borrow $55 000 from the Community Bank.
We also find it reasonable to require Bar Circle "S" to file all final loan-related documents with
the Commission upon execution. We expect the Company to present a cost-benefit analysis of
its capital expenditures in its next rate case.
CONCLUSIONS OF LAW
The Commission has jurisdiction over Bar Circle "S" Water Company, a water utility,
and the issues presented in Case No. BCS-09-01 pursuant to the authority granted in Idaho
Code, Title 61 , and the Commission s Rules of Procedure, IDAPA 31.01.01.000 et seq.
ORDER
In consideration of the foregoing and as more particularly described above, IT IS
HEREBY ORDERED and the Company is hereby authorized to borrow $55 000 for water
system improvements from the Community Bank in Post Falls, Idaho.
ORDER NO. 30832
IT IS FURTHER ORDERED and the Company is directed to file a copy of all final
executed loan-related documents with the Commission.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code 9 61-626.
DONE by Order ofthe Idaho Public Utilities Commission at Boise, Idaho this ?;/vA..-
day of June 2009.
~~~
JI D. KEMPTON, P IDENT
MARSHA H. SMITH, COMMISSIONER
Commissioner Redford out of th e office
MACK A. REDFORD, COMMISSIONER
ATTEST:
fJzpj h aZi/L t??Jav\,OW S
Barbara Barrows
Assistant Commission Secretary
O:BCS-O9-01 sw
ORDER NO. 30832