20181214Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANI'ERSON
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:CHRIS HECHT
DECEMBER 13,2018DATE:
SUBJECT: APPLICATION OF BAR CIRCLE "S" RANCH TO EXTEND SERVICE;
cAsE NO. BCS-W-18-01
On July 3 I , 201 8, Bar Circle 'oS" Ranch, Inc. filed an Application requesting approval to
extend service to two undeveloped lots. A six-inch main would extend east from Dolan Road to
Lot l, Block I of Garwood Comer), which is one of two large lots comprising Canvood Corner,
a proposed subdivision to be developed by McCarthy Capital, Inc. The Company also requested
approval to extend a ten-inch main from its existing ten-inch main on Garwood Road to a second
lot (Lot 2, Block l, Garwood Corner). The preliminary plat for Garwood Corner shows 25
residential lots of approximately five acres each. The two main extensions would be looped to
provide water within the proposed subdivision. The proposal indicated that McCarthy Capital,
Inc., would be responsible for the installation of the system (mains, connections, meter pits and
meters) within the suMivision, which it would then tum over to Bar Circle "S".
Staffsought to determine whether the proposed subdivision was within the Company's
current certificated area. If the proposed subdivision was located outside of the Company's
current certificated service area, it would be necessary for the Company to request an
amendment to its CPCN. Staffwould then need to determine whether the current system could
adequately serve the new subdivision.
Staff also needed clarification from the Company as to whether it intended to follow its
cunent tariff provisions with respect to its main extension agreement and its non-recurring rate
schedule with respect to collection of hook-up fees and connection fees.
DECISION MEMORANDUM DECEMBER 13,2OI8I
CERTII'ICATED AREA (CPCN No.296)
Staff determined that the proposed subdivision was within boundaries of the Company's
certificated tenitory as amended in OrderNo.28895 (BCS-W-O1-01). In response to Staffs
Production Requests, the Company provided plat maps, including legaldescriptions, which
verified the location of the subdivision and shows the two planned connections to the Company's
existing system. The Company confirmed that its CPCN includes property to the east of Hwy
95, which is beyond the eastern boundary of the proposed subdivision. The certificated area
includes the existing system adjacent to the proposed subdivision on its southern and westem
border, as well as land to the east to the subdivision. The northern border of the suMivision is
the northern boundary of its certificated area.
Based on StafPs findings and the Company's concurrence that thc subdivision is within
the certificated area, Staff recommends that the Commission approve the main extensions
requested and allow the Company to provide service to customers within the Garwood Corner
subdivision without further amendment to the CPCN.
SYSTEM ADEQUACY
The Company maintains that its existing system has the ability to meet the needs of the
customers within the proposed subdivision. The most recent Enhanced Sanitary Survey
performed by ldaho Department of Environmental Quality in 2016 confirms the Company's
position that the system is sufficient to serve its current service area. Staff production requests
asked for further information regarding the systems wells and storage capacity, The Company's
responses were not sufficient to make any determination without additional Production Requests.
However, since the proposed subdivision is within the Company's cerlificated service areq
further investigation will be conducted in the normal course of review by Staff.
TARIFF COMPLIANCE
The Company's Application indicates that it intends to charge the new customers within
Carwood Corner the monthly rates for water service previously approved by the Commission.
Staff sought to clarifo what the Company's inlent was with respect to collection of
hookup fees. The Company's Tariff provides two non-recurring charges for new customers,
which apply in different circumstances. The Tariff states that:
7DECISION MEMORANDUM DECEMBER I3,20I8
For a first time connection to the Bar Circle "S" Water Company system when an
existing service line and meter base are already in place on the property the charge
is $400.00.
If there is no service line tap to the Company's water rnains or meter box in place on
the property the charge is $2 500.00.
The Company's response to Sta{f Production Requests included a one-page signed
agreement between Rob McCarthy, President of McCarthy Capital, Inc., and Robert Turnipseed,
as owner of Bar Circle "S'o Waler Company. Staffs understanding is that McCarthy Capital will
pay Bar Circle "S" a "$2,500 per lot hook up fee" for each of the twenty six lots within the
proposed subdivision. The collection of the water hook-up Ge as allowed in Bar Circle "S"
Tariff would not typically occur until the owner of the lot requested service and is meant to cover
the cost of improvements necessary to provide service to the customer. In this particular
circumstance, subsequent customers within the subdivision who request water service will not
have to pay Bar Circle "S" a $2,500 hook up fee, since it was already paid by the developer.
While this arrangement differs from what is required in the Company's Tariff, Staffdoes not
object to it. Staffrecommends (hat the Commission grant the Company a one-time waiver from
its Tariffprovision and approve this alternative arangement.
The agreement between the McCarthy Capital and Bar Circle "S" also states that "All
financial arangements are met by McCarthy Capital Inc. (to) run water line for 26 homes and
loa (including) main and services." The Commission's Uniform Main Extension Rule for Water
Utilities governs how a water utility provides service to new customers in situations where a
main extension from the utility's existing distribution system is required. The Rule was
previously incorporated into Bar Circle "S" Tariff. Section C of the Rule applies to extensions to
serve subdivisions. Staffs understanding is that Bar Circle S does not intend to collect an
advance payment from the applicant/suMivision developer, which is allowed under Rule C.l.c.
Instead, the Applicant will construct and install the necessary facilities and, upon completion,
convey ownership to Bar Circle "S". Staff does not object to these altemative iurangements, and
recommends that the Commission grant the Company a one-time waiver from the Uniform Main
Extension Rule and approve the Company's alternative arrangement with McCarthy Capital.
The hookup fee as allowed by the Company's tariff is to offset the costs of improvements
necessary to provide service to new customers. In this particular instance, the Company's intent
3DECISION MEMORANDUM DECEMBER 13,20I8
to collect the money prior to providing actual service to the customer will require that the
Company properly record the funds in its accounting books to avoid the possibility of negative
rate base. Commission Staff will review the ffeatment of these funds in a subsequent general
rate case.
STAFF' RECOMMENDATION
Staff recommends that the Commission issue an order that allows the Company to
proceed with providing service to the proposed subdivision, Ganuood Corner. Staffconfirms
that the proposed subdivision is within the Company certificated territory and the customers are
entitled to service as allowed by Bar Circle "S" Water Company under Certificate No. 296, and
under the Company's approved tariffrates and in accordance with the Commission's Rules and
Regulations. Staff recommends that the Comrnission allow the Company a waiver to its tariff
that allows the Cornpany to collect its hook-up fees from the developer, and allows the developer
to construct the system and then convey ownership of it to the Company.
COMMISSION DECISION
Does the Commissiol wish to approve the Company's request to provide service to the
proposed Garwood Comer as allowed by the Company's current CPCN?
Does the Commission wish to grant the tariffwaiver related to the cxtension and payment
ofhook-up fees?
Chris Hecht
Udmcmos/BCS-lY-l 8.0 I dcc mcmo
4DECISION MEMORANDUM DECEMBER I3,2OI8
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