20051201Response to staff comments.pdf

Binerroot Water Co., Inc.
PO Box 2306
Hayden Lake, ID 83835
Telephone: [phone] OR 208-660-2560
Fax: [phone]
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November 30 , 2005 Co') .
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Jean Jewell
Idaho Public Utilities Commission
PO Box 83720
Boise , ID 83720-0074
Express Mail: 472 W Washington
Boise, ID 83702-5983
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Re: Case No. BIT-;;r'-05-
Dear Ms. Jewell:
Please find attached our response to the COMMENTS OF THE COMMISSION
STAFF. The Company would like to thank the Staff for all of their hard work
reviewing the Company s application for rate increase.
Sincerely,
Susan Jacobson
Accounting Department
CC: Copy 1
Copy 2
Copy 3
Attached: Proposed Press Release/Customer Notice
Bitterroot Water Company
Case No. BIT - T -05-1
Response to the COMMENTS OF THE COMMISSION
Page 2
In response to the COMMENTS OF THE COMMISSION STAFF, the Company would
like to respond to each of the adjustments as follows:
Ad1ustment A - Salaries
As the Staff stated in the COMMENTS, the Company is hard to compare to other
small water companies due to the location and lot sizes of the Company. More
man hours are necessary due to these factors. Ken Rickel believes that he can
give his customers the best value for the lowest price by doing primarily all
the operational and maintenance tasks himself that are usually given to outside
contractors in small water companies where the owners are not involved. This is
not to say that he shouldn t be compensated for his services simply because he is
the owner. Mr. Rickel has drawn less salary in 2005 than 2004 so that a new
pump could be bought when the old one failed (see Adjustment H). The
Company understands the Staff's reasoning for the Administrative and General
salary reduction , but would ask that the Operation labor expense be increased by
the $1 176 requested due to daily chlorine testing time involved (see Adjustment
G) as well as more operational labor that will be needed to institute the backflow
prevention valve (see Adjustment K) and the isolation valve (see Adjustment S)
implementations. At the requested rate of $16 802 (approving the final $1 176),
Mr. Rickel would be paid $64.62 per day, based on a 5 day week or $17.50 per
hour assuming that he works 80 hours in any given month. That includes all the
operational maintenance and repairs, meter reading, collections , new customer
packet delivery and being onsite while customer hookups are in progress.
outside contractor would charge $25.00 per hour or much more to do the same
tasks. As the owner/operator, Mr. Rickel is on call to handle emergencies 24
hours a day, 7 days per week. Mr. Rickel does not keep a work log of the hours
he puts in , he just does what is needed when it is needed.
(Continued on next page)
Bitterroot Water Company
Case No. BIT - T -05-1
Response to the COMMENTS OF THE COMMISSION
Page 3
Adiustment B - Purchased Water
The Company will file tariffs for the commercial sale of water to Rickel Water
Company as recommended by the Staff and record water purchase/sale
transactions on a lower threshold (more frequent) basis.
Adiustment C - Purchased Power
The Company acknowledges Staff's decrease in proposed expense of $141.
Adiustment D - Testina Exoenses
The Company acknowledges Staff's normalized recovery level of $750 per year.
Adiustment E - Chemical Exoense
The Company acknowledges the Staff's recommendation of $1 600 for the
purchase of chlorine.
Adiustment F - Well Pumo Reolacement
The Company understands that it has other avenues to recover the pump
replacement cost when it occurs and will pursue them in the future.
Adiustment G - Chlorination
The Company agrees with the Staff that the labor portion of the testing should
not be included in this cost with the chemicals needed for testing. The Company
asks for the review and reclassification of time involved to Operation Labor (see
Adjustment A).
(Continued on next page)
Bitterroot Water Company
Case No. BIT - T -05-1
Response to the COMMENTS OF THE COMMISSION
Page 4
Adiustment H - Booster Pumo Reolacemen~enance
The Company understands that it has other avenues to recover the pump
replacement cost when failure occurs and will pursue them in the future.
Adiustment I - Meter Maintenance
The Company understands that it has other avenues to recover meter
replacement costs when incurred and will pursue them in the future.
Adiustment J - Grounds Maintenance
The Company is looking at several options for weed control around the pump
house and water meters. The DEQ will only allow Roundup to be sprayed but
Company is hesitant because the wind blows often in that area and could
damage customer lawns/gardens during application.
Adiustment K - Backflow Prevention
Staff recommends a dedicated reserve account in the amount of $2 000 per year
for 4 years or $1.24 surcharge per month per customer for 4 years for recovery
of the costs involved. The Company would prefer the surcharge method as the
recovery of the costs are guaranteed and not based on the unpredictability
customer excess usage. The Company also would like to know why the
surcharge only produces $6 963.84 ($1.24 x 12 months x 117 customers x 4
years) of cost recovery. The Company believes that a surcharge of $1.42 per
month producing $7 974.72 ($1.42 x 12 months x 117 customers x 4 years)
would more closely recover the total estimated cost of $8 000. The surcharge
would be placed in a dedicated reserve account for tracking purposes.
(Continued on next page)
Bitterroot Water Company
Case No. BIT - T -05-1
Response to the COMMENTS OF THE COMMISSION
Page 5
Adiustment L - Backhoe
The Company acknowledges Staff's exclusion of this item at this time.
Adiustment M - Accountina Services
In reviewing the Accounting Services adjustment (M) the Staff notes that it could
not justify the additional request. The Company submits that the Staff has
proposed the following:
(1) Bookkeeping Expense-Basic Books Plus
(2) Cathy Rickel Daily Tasks
(3) Tax Preparation Fee
(4) Rate Case Expense Amortization
Total Annual Expense
800 per year
$900 per year
$550 per year
$300 per year
$3.550
The Company would propose a reallocation and increase as follows:
(1) Bookkeeping Expense-Basic Books Plus $1,440 per year
(2) Cathy Rickel Daily Tasks $2 880 per year(3) Tax Preparation Fee $550 per year
(4) Rate Case Expense Amortization $300 per yearTotal Annual Expense
(1)Outside bookkeeping services include monthly invoicing (create , stuffenvelopes and apply postage), monthly bank reconciliations and annualreport preparation for Public Utilities Commission and ID Tax
Commission as well as tax return preparations.
(2)Daily tasks include picking up payments from post office box , postingpayments to customer accounts, relaying all meter reading information
and customer updates to bookkeeper for invoicing, creating deposits
and making bank deposits. Mrs. Rickel also coordinates and tracks the
changes of ownership, produces the new customer packets, returns
customer phone calls and maintains the individual customer files.
(Continued on next page)
Bitterroot Water Company
Case No. BIT-T-05-1
Response to the COMMENTS OF THE COMMISSION
Page 6
As the co-owner, Cathy Rickel is involved to lower costs as much
possible. Mrs. Rickel stopped taking payment for these tasks in 2004 as
there was not enough money for her to draw a salary for her
involvement as well as pay the ongoing bills of the water company.
Mrs. Rickel worked for free after March of 2004 and during 2005. This
cannot continue.
A salary of $2 880 per year (3 hours per week (Q) $20/hour) is included
and the Company believes this is reasonable compensation for her time.
If no salary is approved for Mrs. Rickel's time on daily tasks, all those
tasks will be turned over to the Bookkeeper at a higher cost and will
have to be recovered through a future rate increase to the detriment of
the customer.
(3)The tax preparation fee does not change.
(4)It should also be noted that the original request for this category did not
include the Rate Increase Expenses as there were no estimates at the
time the application was initially submitted. The Company is grateful for
the Staff's attention to and aid in the handling of these expenses.
Adiustment N - Outside Services
The Company acknowledges Staff's reduction of this item.
Adiustment 0 - Prooertv Insurance
The Company acknowledges the adjustments made by the Staff in this area.
Staff recommended that the Company be allowed to recover the face value of the
policy ($4 439) plus the $195 finance charge on an annual basis. The finance
charge would allow the Company to make the insurance payment in installments
to better regulate cash flow. The amount that is shown as Property Insurance on
the Results of Staff Audit detail is $4,439, which does not include the $195
finance charge as recommended by the Staff. This item needs to be added.
(Continued on next page)
Bitterroot Water Company
Case No. BIT - T -05-1
Response to the COMMENTS OF THE COMMISSION
Page 7
Adiustment P - Misc General Exoenses
The Company acknowledges Staff's reduction of this item.
Ad"ustment - Bank Char es
Company agrees that the $35.00 fee should not be recovered from the current
rate increase. However, the Company asks that the reduction be reclassified to
it's proper location on the Results of Audit Staff detail report from "Other" (no
expense initially exists in this category) to the "Miscellaneous General Expenses
where the charge was initially recorded.
Adiustment R - Taxes
The Company acknowledges Staff's reduction of this item.
Adiustment S - Isolation Valves
The Company would prefer a surcharge method as the recovery of the costs are
guaranteed and not based on the unpredictability of customer excess usage. The
Company believes that a surcharge of $2.67 per month producing $29 989.44
($2.67 x 12 months x 117 customers x 8 years) would recover the estimated
total cost of $30,000 (60 valves (g) $500 each). The surcharge would be placed
in a dedicated reserve account for tracking purposes.
(Continued on next page)
Bitterroot Water Company
Case No. BIT-T-05-1
Response to the COMMENTS OF THE COMMISSION
Page 8
TARIFF STRUCTURE
The Company agrees with the intent of the rate increase to promote water
conservation by the customers. By increasing the commodity rate this purpose
may be achieved. The Company is encouraged that this will have the desired
effect, but the downside could be less income to the Company for ongoing
operating and maintenance costs. The Company proposes the following rates:
Minimum Charge $21.00 per month per customer
Surcharge-Backflow valves $1.42 per month per customer (4 years)
Surcharge-Isolation valves $2.per month per customer (8 years)
Total standard charge $25.09 per month per customer
This charge would be reduced with the expiration of the surcharges in 4
and 8 years respectively.
Commodity charge (Q) $1. 72/1000 gallons for gallons used over 15,000
The above charges were calculated using the following assumptions:Total Revenue Requirement $50,968
(per Results of Staff Audit)
Adjustments:
Salary Increase
Accounting Labor Increase
Property Insurance Increase
Adjusted Total Revenue Requirement
650/0 to be recovered through
standard charges $35 073.
350/0 to be recovered through
commodity charges $18,885.
176
620
$195
$53.959
Stru ctu re :
Minimum $21.00 X 117 customers X 12 months
Surcharge #1 $1.42 X 117 customers X 12 months
Surcharge #2 $2.67 X 117 customers X 12 months
Commodity Chg $1.72/1000 gallons X 10 879 888 gal
Projected Annual Revenue
$29 484.
993.
$3,748.
$18,713.41
$53.959.
(Continued on next page)
Bitterroot Water Company
Case No. BIT - T -05-1
Response to the COMMENTS OF THE COMMISSION
Page 9
CONSUMER ISSUES
As stated in the COMMENTS OF THE COMMISSION STAFF, a Notice to Customers
of Proposed Changes in Rates was filed with the initial Application. The Staff
COMMENTS state that this notice did not comply as it did not include the overall
dollar amount requested or the percent of the increase. As per the attached
copy of the Notice that was included with the initial filing, the proposed amount
of t~e rate increase is indeed included, while the Company agrees that the
percent of the increase was not initially included.
The COMMENTS state also that the Company was notified of the need for the
above changes and that the Company took no action. The Company was NOT
notified regarding any changes needed for the Notice nor was there any direction
from the PUC as to when this notice should be sent out to Customers. If the
Company had been notified as stated the Company would have made immediate
corrections and sent out the notice to customers as directed. The Company
willing compliance and promptness in all other requests for information during
the application and audit phases of this project supports this fact.
miscommunication by the PUC should not be construed as the Company being
out of compliance.
ceo
Bitterroot Water Company Requests An Increase in Rates Citing
Rising Power and System Improvement Costs
CONTACT: Ken Rickel , President
(208) 208-683-8105 or 208-660-2560
Bitterroot Water Company has filed a request with the Idaho Public
Utilities Commission for a rate increase in the base water rate from
$20 per month to $45 per month to help offset the increasing costs
associated with the operation , maintenance and capital improvements
to the water system. There would be no increase in the charge for
gallons used in excess of the 15 000 base amount allowed.
The company last filed for a rate increase in 1998 while serving 54
customers. The system has now expanded to serve 116 customers and
is considered to be at capacity based on the number and size of the
lots now included in the subdivision. Further growth would be based
on subdividing existing lots.
In the last 12 months, the system has been systematically reviewed
and upgraded to maintain compliance with increasingly tougher
government standards for water quality. The increased operating
expenses are largely out of the company s control. Rising power costs
play the biggest role in recent operating expense increases.
The rate proposal is subject to public review and will be reviewed and
approved by the Idaho Public Utilities Commission. A copy of the
application is available for public review at the Bitterroot Water
Company Office and the office of the Idaho Public Utilities Commission.
Bitterroot Water Company, organized in 1995, is an independent
owner-operated water utility whose purpose is to supply water for
domestic, commercial , industrial and fire protection purposes. The
Company is subject to the regulations of the Idaho Public Utilities
Commission as well as various Federal and State regulatory agencies
concerning water quality standards.