20030828Final Order No 29330.pdf

Office of the Secretary
Service Date
August 28, 2003
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE SALE/PURCHASE
OF BITTERROOT WATER COMPANY.
ORDER NO. 29330
CASE NO. BIT-03-
On June 17, 2003, documentation was filed with the Idaho Public Utilities
Commission (Commission) pertaining to the sale/purchase of the Bitterroot Water Company.
The Bitterroot Water Company (Bitterroot; Company) is a regulated public utility maintaining
and operating a water system and water supply and providing water service to approximately 101
customers in Kootenai County, Idaho in an area more particularly described as Silver Meadow
subdivision located in Township 53 North, Range 03 West, Sections 20 and 29, Boise-Meridian
Kootenai County, Idaho, as recorded in the Kootenai County Recorder Office, Record No.
1375350. Certificate of Public Convenience and Necessity No. 319 was issued to Bitterroot
Water Company, Inc. by the Commission on December 14, 1995. Reference Case No. GNR-
95-, Order No. 26268.
As reflected in the second amended Purchase Agreement filed with the Commission
on July 7, 2003, the Seller, Bruce Burnett, agrees to sell Kenneth and Cathy Rickel of Kootenai
County, Idaho, hereinafter called Purchasers, the Company stock of Bitterroot Water Company,
Inc., consisting of 100 000 shares of stock for the purchase price of $50 000. Pursuant to terms
of payment, Seller acknowledges receipt of $25 000 for 50 000 shares of stock. The balance of
the purchase price for the remaining 50 000 shares is payable at 8% per annum commencing
June 1 2003. Payments shall be $303.32 per month with the first payment being due on the 15
day of the month following Commission approval of this stock transfer. Payments will be due
month to month until the balance is paid in full. The unpaid balance is secured by a promissory
note. Seller will retain possession of the balance of the shares until the note is paid.
The addresses of Seller and Purchasers are:
Seller: Bruce Burnett, 4240 Old Seward Highway, Suite 13, Anchorage, AK 99503
Purchasers: Kenneth and Cathy Rickel, PO Box 1261 , Hayden Lake, ID 83835
ORDER NO. 29330
The SalelPurchase Agreement recites that. the underlying Certificate No. 319 for
Bitterroot Water Company, Inc. will not change as a result of this transaction. No change in
rates has been requested.
As reflected in the initial filing, the attorney for the Purchasers states that while this
is not to be a consolidation of water companies, his clients, the Rickels, currently own the
contiguous water company that bears their name. (Rickel Water Company - Commission
Certificate No. 324.) Both parties to the sale/purchase agree that it only makes economies of
scale and logistical sense that the companies be owned by local people. Further, it is recited that
the companies share a common reservoir and some infrastructure.
On July 25 , 2003, Commission Notices of Application and Modified Procedure were
issued in Case No. BIT-03-01. The deadline for filing written comments was August 14
2003. Commission Staffwas the only party to file comments.
Staff Comments and Recommendations
Staff recommends (1) that the Commission approve the sale of Bitterroot Water
Company, Inc.s stock to Kathy and Kenneth Rickel; (2) prohibit the Company from recording
any costs of this transaction on the books of the corporation; (3) direct the Company to attain full
compliance with DEQ certified operator requirements; and (4) direct the Company to file
amended tariff pages reflecting the change of ownership and a new tariff for the Staff-
recommended $25 reconnection charge.
As reflected in Staff s comments, the proposed owners, Ken and Kathy Rickel
currently own and operate the Rickel Water Company adjacent to, and interconnected with, the
Bitterroot water system. The Rickels, Staff contends, have an established history of successfully
operating the Rickel Water Company in compliance with Commission requirements.
Staff notes that as a developer-owned and operated system, the physical plant of
Bitterroot is considered contributed property to the water corporation (IDAPA 31.36.01.103) and
therefore has no net value (rate base) for ratemaking purposes. Staff has informed the Rickels
that the plant valuation of Bitterroot will be carried forward at its existing zero net value for
ratemaking purposes and that the $50 000 stock purchase price should not be recorded on the
books of Bitterroot Water Company. The stock purchase is a personal investment by the Rickels
and as such is not recoverable from ratepayers.
ORDER NO. 29330
Staff states that it has contacted the Idaho Department of Environmental Quality
(DEQ) to ensure that both the Rickel and the Bitterroot systems are in compliance with DEQ
regulations. DEQ informed Staff that both systems are in compliance except that neither system
currently has a certified operator. DEQ requires that each system have not one but two certified
operators. (Reference IDAP A 58.01.08.554-561). Mrs. Rickel told Staff that her husband Ken
and his brother would be taking a certification course in the near future. With common
ownership, the Rickels themselves will be able to satisfy the requirement for both the Bitterroot
and the Rickel water systems.
Staff notes that both corporations are in good standing with the Idaho Secretary of
State. Staff believes that this sale of stock will not adversely impact the customers of either
water system and further believes that common ownership and management of the two water
systems may provide operational efficiencies that currently do not exist.
Staff reminds the Company that although a rate change is not requested at this time
should a request occur in the future, proper customer notification and an additional application
with the Commission will be required. Staff recommends that the Commission s Order make it
clear that the Commission sets water rates after an audit and investigation of the Company
income and expenses during a rate case. Customers will have an opportunity to review any
future rate change Application and offer comments prior to the Commission s final decision.
Staff notes that on July 1 , 2003 , Bitterroot provided its customers with individual
notice regarding the proposed sale of the water system to Ken and Kathy Rickel. Staff has
received no comments from Bitterroot customers regarding the proposed sale.
Staff notes that both Rickel Water Company and Bitterroot Water Company are in
general compliance with the rules and regulations of the Commission, including the Utility
Customer Relations Rules (IDAPA 31.21.01), Utility Customer Information Rules (IDAPA
31.21.02), and Small Water Company Policies (IDAP A 31.36.01). Staff states that it will work
with the Companies to make minor revisions to the annual rule summaries pursuant to
Commission rule changes, that became effective in May of this year.
Additionally, Staff notes that the rule summary for Bitterroot Water Company
indicates there is a reconnection fee of $25. However, Bitterroot has no approved tariff for a $25
reconnection charge. The Company has never imposed the unauthorized fee because it has never
disconnected a customer. Because a $25 fee is reasonable and comparable with other approved
ORDER NO. 29330
reconnection charges, Staff recommends the Commission approve a $25 reconnection charge
even though it was not included in the Application. Staff further recommends that the
Commission allow the reconnection charge to be included with the full set of replacement tariffs
to be submitted by the new owners after the sale is approved.
Commission Findings
The Commission has reviewed the filings of record in Case No. BIT-03-
including the comments and recommendations of Commission Staff. Commission approval has
been requested of the sale/purchase of Bitterroot Water Company stock. Bitterroot serves 101
customers in Kootenai County. The sale of Bitterroot stock is in effect a sale of the Company.
The purchasers are Kenneth & Cathy Rickel, owners of the Rickel Water Company, a
Commission regulated utility in good standing. The two water systems are contiguous and share
a common reservoir and some infrastructure. Rickel Water Company serves 21 customers.
What is proposed, we recognize, is not a consolidation of water companies. Bitterroot will
continue to operate under its present Certificate No. 319. An amendment to tariff sheets will be
required to reflect the change in ownership. Under the facts presented we find the proposed
sale/purchase of Bitterroot Water Company stock to the Rickels to be in the public interest and
the best interest of Bitterroot customers.
Bitterroot continues to be subject to the rules and regulations of the Commission
including the Utility Customer Relations Rules (IDAP A 31.21.01), Utility Customer Information
Rules (IDAPA 31.21.02), and Small Water Company Policies (IDAPA 31.36.01). Additionally,
the Company is expected to comply with DEQ certified operator requirements. Reference
IDAPA 58.01.08.554-561.
The Commission further finds it reasonable to administratively conform the
Company s tariffs to what it has represented in its annual rule summaries. In doing so, we find it
reasonable to approve the Staff-recommended reconnection fee of $25.00 for Bitterroot Water
Company and direct the Company to file a conforming tariff.
Regarding the $50 000 Bitterroot stock purchase price, we find that the purchase is a
personal investment by the Rickels and as such is not recoverable from Bitterroot ratepayers.
The transaction costs are therefore not to be recorded on the books of the corporation.
ORDER NO. 29330
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Bitterroot Water
Company, a water utility, and the sale/purchase of the ~ompany s stock, pursuant to Title 61 of
the Idaho Code 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 Commission does hereby approve the proposed sale by Bruce
Burnett and purchase by Kenneth & Cathy Rickel of the Company stock of Bitterroot Water
Company, Inc.
IT IS FURTHER ORDERED and Bitterroot Water Company is directed to file
amended tariff sheets reflecting the change in ownership.
IT IS FURTHER ORDERED and the Commission does hereby approve a
reconnection charge of $25.00 for Bitterroot Water Company, Inc. The Company is directed to
file a conforming tariff.
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.
ORDER NO. 29330
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ;1.. ft
day of August 2003.
r;WL JMARSHA H. SMITH, COMMISSIONER
ATTEST:
Je D. Jewell
Commission Secretary
bls/O:BITWO301 sw
ORDER NO. 29330