20051116Comments.pdf

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SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 1895
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
BITTERROOT WATER COMPANY FOR
AUTHORITY TO INCREASE ITS RATES
CASE NO. BIT,II'-O5-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of
Modified Procedure and Notice of Comment Deadline issued on October 20 2005 , submits the
following comments.
BACKGROUND
On June 15, 2005 , Bitterroot Water Company, Inc. (Bitterroot; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) requesting a change in its
tariff rates from a metered base rate of $20 per month to a metered base rate of $45 per month.
No change is proposed in the commodity charge per 1 000 gallons of water consumed in excess
of 15 000 gallons per month. According to the Application, the proposed increase is to help
offset the increasing costs associated with the operation, maintenance and capital improvements
to the water system.
STAFF COMMENTS NOVEMBER 16, 2005
The Company s filed Annual Report for the year ending December 31 , 2004 reflects
annual revenue of $35 619 and annual operating and regulatory expenses of $39 233, a net loss
of $3 614. The Company proposes a 2004 test year with known and measurable adjustments of
$35 593 occurring in 2005 to determine its proposed revenue requirement of $71 212.
Bitterroot Water Company was established in 1995 by developer Bruce Burnett to
provide water service to the Silver Meadows subdivision in Kootenai County near Athol, Idaho.
It has been operating under the regulation of the Idaho Public Utilities Commission since
December 14, 1995 when the Commission issued Certificate of Public Convenience and
Necessity No. 319. Case No. GNR-95-, Order No. 26268. On June 17 2003, Bruce Burnett
filed documentation with the Commission for the sale of the water system s common stock to
Cathy and Kenneth Rickel, the owner and operators of Rickel Water Company, a public water
utility adjacent to and interconnected with the Bitterroot system. Order No. 29330 issued on
August 28, 2003 approved the sale of Bitterroot to the Rickels but stated that the purchase was a
personal investment and therefore not recorded on the books of the corporation or recoverable
from ratepayers. Staff has confirmed that the purchase price of the system is not recorded on the
books and Bitterroot is not seeking recovery of its investment in this case.
STAFF COMMENTS
Commission Staff performed a detailed audit of the Company s Application and financial
records, with an onsite audit occurring on October 11 , 2005. The audit consisted of a review of
Annual Reports, Commission Orders and prior Staff audits, along with a physical inspection of
the plant and distribution system and interviews with Company personnel. Staff verified the
accounting figures as reported on the Company s books and records. Staff also reviewed the
Company s internal controls and billing procedures along with sample invoices for water service.
The reservoir and pumping facilities were inspected and the Company s maintenance practices
and improvements were reviewed and discussed. As a result of the audit, Staff recommends a
revenue requirement of $50 968, an increase of $15 349 or 43.09 percent. Staff proposes a
variety of adjustments to the Company s request as illustrated on Attachment A and described in
detail later in this report.
STAFF COMMENTS NOVEMBER 16, 2005
System Characteristics
Upon review during a visit to the water system site, Bitterroot Water appeared to be in
acceptable condition with the exception of peak season heavy demand on the well and booster
pumps and some underground valves which were installed in an incorrect application and are
subject to corrosion and leakage. The concrete 100 000 gallon reservoir was clean and the pump
and equipment house built on top of the reservoir was clean and in good condition. The single
120 gpm well pump is sufficient to meet the needs of the company in all but the highest use
months. Interconnection with the Rickel Water system provides an alternative source of supply
in the event of capacity shortfall or pump failure (125 gpm well pump). There are two booster
pumps, one rated 30 hp and the second at 15 hp. There are plans already underway to add a third
booster pump (also 15 hp). In normal instances only one booster pump is required to meet
system demand, however, during peak hours the 30 hp booster pump cycles on and off
repeatedly with very short cycle time. The chlorination system was functioning and the Owner
reported that it is maintained monthly and checked frequently.
As of December 31 , 2004, Bitterroot had 117 customers connected to the system with a
maximum monthly consumption of 5 979 502 gallons (July) and an annual consumption of
228 000 for the year 2004. The Annual Report states that 19 550 709 gallons were pumped
from its well by the Company, 4 239 770 gallons purchased from Rickel Water and 2 219 000
gallons sold to Rickel water in 2004, for a net purchase of2 020 770. Rickel Water Company is
a public utility operated under common ownership with Bitterroot and there is a charge of $3.
per every 10 000 gallons sold between the two companies. During 2004, a net of approximately
$600 worth of water was exchanged between the two companies. Staff recognizes the need to
sell water back and forth between the two companies to alleviate constraints on the system
during peak summer months, however, neither company has a tariff on file with the Commission
regarding such sales. In its order upon completion of this case, Staff recommends the
Commission instruct Bitterroot to file the appropriate tariff for commercial sale and purchase for
resale of water with justification for the rate.
Expense Adjustments
In its Application, the Company seeks recovery of $39 233 in expenses incurred in 2004
with an additional request for recovery of $31 979 of pro forma expenses (Adjustments A - P).
Staff reviewed the 2004 expenses for prudency and the pro-forma expenses for necessity. Staff
STAFF COMMENTS NOVEMBER 16, 2005
response to the Company s pro forma adjustments follow along with additional adjustments
proposed by Staff to test year expenses (Adjustments Q-S):
Adjustment A - Salaries
During 2004, the owners of Bitterroot Water Company paid themselves wages of $15 349
allocated between meter reading labor, administrative and general (A&G) labor, and operation
labor. In its Application, Bitterroot requested an additional $2 351 to be paid to the owner for
operation and management of the system, specifically an additional $1,175.50 for operation labor
and another $1 175.50 for administrative and general labor. Staff compared the salary request to
other water companies of similar size. In Order No. 29794 issued June 1 2005, the Commission
granted a $4 000 annual management fee to the owners of Country Club Hills Utilities, Inc.
(CCH), a water utility company near Idaho Falls serving 119 customers. The owner of Terra
Grande Water (Terra Grande) in Boise does not receive any salary or management fee while
providing service to 117 customers. Using these comparisons alone, the additional salary does
not seem to be warranted. However, Bitterroot Water Company is different in that the owner
personally does the maintenance and repair work himself and does not incur additional expenses
by outside contractors. Additionally, the service area of Bitterroot is considerably larger than the
service areas of Terra Grande and CCH. The lot sizes in the Bitterroot service area are five to
ten acres, as opposed to the much smaller lot sizes of other utilities, making the Bitterroot system
more time consuming to read all the meters and perform routine maintenance. Furthermore, as
discussed later in this report, the system is at an age where the maintenance requirements are
increasing from year to year. For these reasons, Staff believes that the Company s request to
increase the operation labor is reasonable. However, Staff does not recommend approval of the
requested increase for administrative and general labor. Staff reduces the Company s request by
175.50 and recommends approval of the Company s remaining pro-forma adjustment of
175.50 for operation labor.
Adjustment B - Purchased Water
The Company proposes to recover $200 per year for water purchased from Rickel Water.
However, the Company did not record any payments on its books for water purchases, even
though it is known that water was transferred from Rickel to Bitterroot and vice versa. Bitterroot
only records a purchase on its books when net purchases exceed $1 500. Because of the
STAFF COMMENTS NOVEMBER 16 , 2005
common ownership of the two companies, no approved tariff and no purchases recorded on its
books during 2004, Staff does not believe this adjustment to be appropriate. In the future, Staff
would like to see detailed transaction reports of water exchanged before it can recommend
recovery of the expense.
Adjustment C - Purchased Power
The Company states that the electricity rates it pays for power to run its water pumps
have increased an average of 15 percent per year. In its Application, the Company makes a pro
forma adjustment to test year purchased power expense of $1 ,098 , or 15 percent above 2004
levels. This estimate of2005 purchased power fails to satisfy the Commission s requirement
that post test-year adjustments be known and measurable. The Commission has historically
rejected estimates and forecasted figures as known and measurable, therefore Staff must reject
this specific adjustment.
Staff understands how increasing utility bills can impact small water companies with its
reliance on electricity to drive pumps. Staff reviewed the actual electric bills for the Company
through September 2005, and extrapolated the total through December to determine a more
precise, measurable purchased power expense to include in rates. Staff s calculation provides
the Company with $8 280 annually for purchased power compared to the 2004 actual expense of
323. This adjustment reduces the Company s proposed expense by $141.
Adjustment D - Testing Expenses
The Company requests an additional $240 over 2004 test year expenses to help recover
the costs of increased monthly testing requirements for lead, copper, fluoride, in-organics
volatile organics and nitrates. Because testing requirements and expenses vary from year to year
the Commission has traditionally accepted a normalized level of $750 per year per groundwater
well source. Bitterroot only has one well source and therefore Staff approves recovery of $750
for testing expenses.
Adjustment E - Chemical Expense
A comment from one Bitterroot customer indicated that he did not believe there was
adequate residual chlorine in the water system. While the minimum allowable residual chlorine
requirement of 0.20 ppm is not easily detectable by smell or taste, it is believed that the amount
STAFF COMMENTS NOVEMBER 16, 2005
of chlorine being used is adequate. Review of a letter from DEQ dated August 5 , 2004 showed
that DEQ did recommend chlorination to prevent a recurrence of biological film in the system.
The chlorination system has been operated continuously for the past year and the amount of
sodium hypochlorite used during the year was discussed with DEQ engineers.
The Company requested in its Application an additional $1 554 for the purchase of
chlorine. Though the chlorination is suggested rather than required for this system, Staff
believes it is appropriate. Staff does not object to this adjustment, however, Stafftakes exception
to the amount the Company is requesting to recover for chlorine testing (see Adjustment G).
Adjustment F - Well Pump Replacement
During the peak water usage month of July, usage per customer varied from a 4 100
gallon low to a high of213 500 gallons. The average customer water usage for that month was
53,400 gallons. The system runs at maximum capacity during the peak summer months and the
Company must purchase water from Rickel Water Company to meet demand as previously
discussed.
Even with the purchase of water from Rickel Water, the Bitterroot well pump is heavily
used in the peak months (more than 50 percent duty), which results in more on-off cycles and
more run time than is recommended for good maintenance and life of the motor and pump. This
results in higher maintenance costs and shortens the life of the pump and motor. In its
Application, the Company requests an additional $2 231 annually to recover the cost of a new 20
HP well pump over four years. However, conversations with the Company indicate that they
currently have not yet formalized plans to replace the pump and motor with a larger set. The
Company is aware of the issue and plans to address well pumping capacity soon. Because well
pump replacement is not imminent, Staff recommends that the Commission not allow this
expense to be recovered in rates at this time.
When the Company is ready to replace the well pump, it has other options available
under the regulatory framework to recover the cost at that time. The correct recordkeeping
procedure of capitalizing the pump by booking it to plant in service Account 101 will allow the
Company to recover the depreciation expense and earn a return on the investment in future rate
proceedings. The Company may also propose an additional surcharge if needed when the
replacement becomes imminent.
STAFF COMMENTS NOVEMBER 16, 2005
Adjustment G - Chlorination
In its Application, the Company is requesting to recover $9 700 annually for chlorine
testing and maintenance for the chlorine pumps. Because the chlorination system was recently
installed, the test year did not reflect any of the expenses associated with the practice. The
Company estimates the cost of routine chlorination testing to be $25 per day or $9 000 annually,
but much ofthis requested expense includes Ken Rickel's time. Because Mr. Rickel already
receives compensation for operating the system, and the testing for chlorination would fall under
the responsibilities of the operator position, Staff believes much of this adjustment is duplicative.
Of the $25 per test the Company requests, Staff believes that at least $20 was included to pay the
operator for administering the tests. Staff is willing to accept $5 per test or $1 800 per year for
the supplies used to administer the tests. Staff accordingly adjusts the Company s request by
200.
Adjustment H - Booster Pump Replacement and Maintenance
Following failure of the single 15 hp booster pump last year (shaft fracture) the Company
elected to add a third pump (15 hp to match the existing) and to inventory a spare motor and
impeller for the two 15 hp booster pumps. The second 15 hp booster pump and spare
motor/impeller set have been purchased and will be installed before next summer. Installation
the second pump will include an electronic system to alternate run time between the new and the
existing 15 hp booster pump. The 30 hp booster pump will be both a backup and serve as a fire
protection pump when hydrants are used. These actions are considered prudent for safe reliable
operation of the system.
In its Application, Bitterroot requested $2 971 amortized over four years for a new 15 HP
booster pump and another $5 118 amortized over four years for a new 30 HP booster pump.
Because the current 30 HP pump is still operational and the addition of a second 15 HP pump
eliminates the constraints on the existing 30 HP pump, Staff believes the purchase of a 30 HP
pump is no longer necessary. The second 15 HP pump was purchased by the Company and
therefore is a known and measurable expense that should be recovered in rates, however, Staff
disagrees with the Company s proposed accounting treatment of the pump. The booster pump is
a capital investment that should be booked to plant in service and depreciated over its useful life.
Staff believes the useful life of a 15 HP booster pump should be at least seven years. The
corresponding depreciation expense when using a seven-year estimated useful life is $425. Staff
STAFF COMMENTS NOVEMBER 16, 2005
removes the $2 622 adjustment proposed by the Company for booster pump replacement and
maintenance, and creates a depreciation expense of $425 for recovery. Because the Company
has previously expensed all capital investments, the Company did not propose a rate base in this
proceeding. By booking the booster pump to plant in service, the corresponding rate base and
return would be as follows:
Plant in Service
less Accumulated Depreciation
$ 2 971
-( 0 ?
Net Plant in Service
Rate of Return
$ 2 971
11%
Return on Capital 327
Staff believes a return on equity of 11 percent is appropriate for Bitterroot Water Company in
this proceeding and increases the Company s revenue requirement by $327 for its return on
capital investment.
Adjustment I - Meter Maintenance
The Company has proposed to begin replacing meters based on information from a
vendor that meters become inaccurate in the 1 000 000-gallon total flow range. It is recognized
in the water industry that water meters mostly under-record flow the older they become.
Although one technical paper was reviewed that proposed economic replacement of meters at
1,400 000 gallons based on under-measurement of flow and the high cost of water in Arizona
that paper was inconclusive regarding the economics of replacement. All other data reviewed
consistently stated that meters have an expected life of 10 to 25 years and that maintenance
cleaning and calibration should be performed at least every seven to ten years (National
Environmental Services Center
, "
Water Meters , Zane Sutterfield, P.E. and Vipin Bhardwa).
There are several meter brands available that are intended for 10 000 000 gallons or more of
service (DLJ and American Meter Co. for example). The water meters installed at Bitter Root
Water are Kent C700 and Badger RCDL 70 meters. Both are bronze cast body meters and
should have a much longer life than 1 000 000 gallons. With these specific meters, if accuracy
due to wear of the measurement parts is a concern, the Company can maintain the meters by
removing the measuring chamber assembly for repair or replacement. Some vendors offer an
STAFF COMMENTS NOVEMBER 16, 2005
exchange service for replacement of measuring cartridges. It is recommended that the Company
consider a maintenance action of replacing some of the older measuring chamber cartridges and
test the accuracy of the removed cartridges to determine what need for replacement exists. These
costs should be a part of routine maintenance.
The Company requested in its Application an additional $3 050 over the test year amount
of$I 537 for meter maintenance. Staff does not accept this adjustment and believes the test year
figure allows the Company sufficient revenue for meter maintenance. If meters need to be
replaced, the Company should capitalize the cost of those meters with recovery in a later case.
Adjustment J - Grounds Maintenance
The Company is seeking an additional $346.14 per year for grounds maintenance;
specifically $38.46 per month for nine months for weed control measures. The Company s test
year expense of $35 is not sufficient and therefore an adjustment is necessary. However, Staff
believes that one or two properly timed applications of weed control would be adequate. Staff
accepts a pro forma adjustment to test year expenses of $54, and reduces the Company s pro
forma request by $292.
Adjustment K - Backflow Prevention
The Company has proposed to implement installation of I-inch angle check valves for
backflow prevention for all customers at a total system cost of $2 000 per year over a four-year
period. Idaho Drinking Water Standards do not require backflow prevention at the residential
connection, however the practice is required in other northwestern states. Given that there is no
backflow prevention presently installed for domestic use on 87 of the 117 customer residences
and that there is no way of positively determining whether any such devices are installed on the
customer s irrigation systems, this program is considered prudent for health reasons and can be
implemented with reasonable costs and effort.
The Company has yet to begin installing the check valves and intends to initiate
installation after the conclusion of this current rate case. Under proper regulatory accounting
treatment, the Company would have installed the check valves prior to requesting recovery of the
costs. The costs would have been capitalized with the associated depreciation expense and
return on the investment recovered in rates. Staff understands that for small water companies
lack of capital makes it difficult to spend first and recover later. Therefore, Staff proposes a
STAFF COMMENTS NOVEMBER 16, 2005
dedicated reserve account established with the inclusion of $2 000 per year recoverable in rates
to be used solely for the purpose of testing and installing the check valves for backflow
prevention. Staff would continue to audit the reserve account to assure the Commission and
ratepayers that the money is being used for its designated purpose and that any funds remaining
after all backflow prevention is complete are refunded to the customers. If the Commission
desires a second alternative, Staff calculates that a customer surcharge of $1.24 per month for 48
months applied to all 117 customers would cover the Company s estimated cost of $80.00 per
backflow prevention valve for the 87 residences that do not yet have backflow prevention
devices installed.
Adjustment L - Backhoe
The Company included in its Application a pro forma adjustment of $2 000 for the
purchase of a backhoe ($40 000 cost amortized over 20 years). Staff rejects the adjustment
primarily for three reasons: (1) The cost of the backhoe should be allocated among Rickel Water
Company, Bitterroot Water Company and personal use; (2) a substantive cost-benefit analysis
comparing rental and purchase options was not performed and submitted by the Company, and
(3) because the Company has not purchased the backhoe, the cost is not a known and measurable
post test-year expenditure. Therefore, Staff does not believe the inclusion ofthe additional
000 is justified at this time.
Adjustment M- Accounting Services
The Company s 2004 expenses for accounting services was $2 628 consisting of$550 for
the preparation of tax returns, $1 178 for outside bookkeeping services and $900 paid to the
owners Ken and Cathy Rickel. The Company proposes an adjustment to test year expenses of
372 for total recovery of $6 000 annually for accounting services. Staff reviewed the
expenses and charges for the tax preparation and bookkeeping and believes them to be
appropriate. Staff was, however, unable to verify the necessity to increase the expense to $6 000
annually. Staff recommends rate case expenses of$I 500 be amortized over five years or $300
per year. Staff accepts an annual bookkeeping expense of $1 800, the tax preparation fee of
$550, an amortization of rate case expenses of$300 per year and the $900 paid to the Rickels for
their accounting work, for a total of$3 550. This reduces the Company s requested revenue
requirement by $2 450 annually.
STAFF COMMENTS NOVEMBER 16, 2005
Adjustment N - Outside Services
In its Application, the Company requested a pro forma adjustment of $500 for
preparation of the corporation s tax return. Because Staff included the tax preparer s fees in
Adjustment M above, this adjustment is duplicative. Staff removes $500 from the Company
requested pro forma revenue requirement to remove the Company s oversight.
Adjustment 0 - Property Insurance
The Company s Application states that its test year property insurance expense was
803.48; and the Company is asking for a pro forma adjustment to this expense of $73.34 for a
total insurance expense of$6 876.82. After reviewing the face page of the insurance policy, the
total annual premium for the insurance was listed as $4 244. The difference between the amount
of the premium on the face page of the policy and the amount stated by the Company is
attributable to two factors: (1) The Company included in the annual insurance expense the
amount it paid to the prior water system owner for pre-paid insurance at the time the Rickels
purchased the water company in 2003. This extra payment totaled $2 364.48. Since this
payment represents both a non-recurring expense and an out of test period expense, it should not
be included in the current test year expenses. (2) The balance of $195 is a finance charge
because the Company elected to pay the annual premium over time. Staff recommends the
Company be allowed to recover $4 439 annually, the amount of the premium as stated on the
face page of the insurance policy plus the $195 finance charge allowing the Company to make
monthly payments for cash flow purposes.
Adjustment P - Miscellaneous General Expenses
The Company reported test year miscellaneous general expenses of $1 ,316. Included in
the Company s Application is a request for an additional $640 for equipment rentals. Scrutiny
miscellaneous expenses typically results in the discovery of many one-time, non-recurring
charges that should be excluded from rates because of long-standing precedent precluding a
company from recovering extraordinary expenses as if they were to occur each and every year.
In this case, Staff accepts the Company s test year level of miscellaneous expense but rejects the
Company s pro forma adjustment. Recovery of the test year level of miscellaneous expense
STAFF COMMENTS NOVEMBER 16, 2005
should provide the Company with sufficient resources for the many one-time expense that may
occur during a given year.
Adjustment Q - Bank Charges
During the test year, the Company incurred a $35 bank charge by Wells Fargo for a late
payment. Staff believes that this is not an appropriate expense for the Company to pass on to
ratepayers and removes $35 from the revenue requirement accordingly.
Adjustment R - Taxes
The Company requested $655 as income tax expense in its Application. This represents a
payment to the State ofIdaho in the amount of$75 and the balance to the IRS for taxes accrued
in the 2003 tax year. For the 2004 test year, the Company incurred a net operating loss for
income tax purposes and no federal income tax was due. It is not reasonable to assume that the
Company will continue to operate with a net loss for tax purposes, but it is reasonable to assume
that the Company will incur some additional federal tax liability. Therefore, Staff has calculated
federal income taxes of $49 based on its recommended revenue requirement. The income tax
liability for the State of Idaho is a minimum yearly obligation of $75. Therefore, Staff sets the
total tax expense at $124, reducing the Company s proposed expense by $531.
Adjustment S - Isolation Valves
After the Company originally filed its Application for a rate increase with the
Commission, it was brought to the attention of Staff that the Company is incurring additional
expenses not stated in its request. When the mains were originally installed, the service stubs
were installed for each lot with an isolation valve buried at the termination point. These original
individual residential isolation valves were bronze gate valves, which are not designed for direct
burial. In the past two years these valves have begun to fail, resulting in leaks and lost pressure.
The failures are only discovered when the leaks are of sufficient size to either be heard or to
create a surface water problem.
The Company believes that 60 of these valves remain in service and proposes a proactive
maintenance program aimed at replacing at least eight valves per year for the next several years
(more than eight if there are additional failures). The replacement valves will be of a fully
encapsulated body and stem design intended for direct burial. The estimated cost of replacement
STAFF COMMENTS NOVEMBER 16, 2005
including backhoe time, labor and materials is $500.00 per valve. Staff deems this pro-active
maintenance prudent, and as such, recovery is appropriate. Staff recommends a second
dedicated reserve account with $4 000 annually to replace, on average, eight valves per year.
Staff will continue to audit the Company verifying the expenditures for the valve replacement
and the balance in the reserve account to ensure that ratepayers are not being unduly over-
charged.
TARIFF STRUCTURE
The existing tariff structure includes a $20.00 per month minimum charge and a
commodity rate of $0.75 per thousand gallons of usage over 15 000 gallons in a month. The
Company requests an increase of the minimum monthly charge to $45.00 without a change to
either the amount of water included in the minimum or any change in the commodity rate. With
this structure approximately 80 percent of 2004 revenue was derived from the minimum monthly
charge and 20 percent from sale of commodity (approximately $28 300 and $7 300
respectively).
Given the significant peak placed on the system s well and booster pump capacity in
2004 and the growing recognition that the Rathdrum Aquifer is not an unlimited resource, Staff
believes it is reasonable to alter this split to cause a larger percentage of the Company s revenue
to be from the commodity rate. Additionally, there were several comments received from
Bitterroot customers suggesting that any increased tariff rely more heavily on commodity
charges than on the minimum charge. Staff proposes to increase the percent of revenue collected
through the commodity charge from 20 percent to 35 percent. A tariff structure of$24.00 per
month plus $1.65 for each 1 000 gallons of usage over 15 000 gallons will provide revenue of
$51 648 , based on the water sales of the test year (2004). Attachment B provides a rate proof
showing revenue generated at Staff proposed rates.
CONSUMER ISSUES
Staff has reviewed the Application for Service. A Notice to Customers of Proposed
Changes in Rates was filed with the Application. This Notice did not meet IDAP A 31.21.
Rule 102.01 in that the overall dollar amount requested was not listed, nor was the percent of the
increase. The Company was notified regarding the omission of information. Unfortunately, the
Company did not send either the original or a corrected Notice of Proposed Changes in Rates to
STAFF COMMENTS NOVEMBER 16, 2005
customers. This is in violation ofIDAPA 31.21.02 , Rule 102.01. The Company did, however
around October 27 2005, individually notify customers by postcard of the Workshop held on
November 2 2005.
Staff has also reviewed the Company bills, notices, and other forms, and has found a few
minor changes that need to be made. The Summary of Rules sent annually to customers clearly
and correctly states the hours service can be terminated, (only between the hours of 8:00 a.
and 4:00 p.m. Monday through Thursday, and 8:00 am and 2:00 p.m. on Friday or any day
immediately preceding any legal holiday). However the Final Notice of Water Termination form
states that water will be terminated by 5:00 p.m. To avoid any misinterpretation by customers
Staff suggests leaving out "BY 5:00 P." on the Final Notice form.
Also in the Summary of Rules, the Company states that customer will be charged an NSF
fee of $25. Staff supports the Company charging an NSF fee; however, only the maximum
amount allowed by statute $20 should be charged. (LC.28-22-107). Staff recommends that the
NSF fee be separately identified in the Company s tariff.
There have been no customer complaints filed with the Public Utilities Commission from
Bitterroot Water Customers over the past three years. Other than the water pressure problems
identified by customers in comments filed in this case, Staff is not aware of any customer
relations issues.
Staff held a public workshop in Athol on November 2, 2005, which was very well
attended. Approximately 50 customers were present and actively participated in the workshop.
By noon on November 15, 2005 , the Commission had received twenty written comments
from Bitterroot customers regarding the requested increase in rates. Several of the customers
commented on more than one issue. To summarize, nine customers agreed that a modest
increase in rates was probably warranted; however, they believed that the requested increase was
too high. Four customers stated the water pressure was poor. Five customers stated that they
would like to see the commodity rate be increased for customers using over 15 000 gallons per
month. They favored a rate that would more fairly spread the costs to customers with high
consumption. However, two customers commented they felt the rates for irrigation water were
already too high and would like to see the commodity rate lowered.
STAFF COMMENTS NOVEMBER 16, 2005
CONCLUSIONS AND RECOMMENDATIONS
Staff has determined that a $15 349 revenue increase (43.09%) is necessary to recover the
Company s revenue requirement, see Attachment A. Staff recommends the Commission
approve a tariff consisting of a $24.00 minimum monthly charge and a commodity charge of
$1.65 for each 1 000 gallons over 15 000 gallons per month as just, reasonable and sufficient.
Staff also recommend the Commission instruct Bitterroot Water Company to file tariffs
for the commercial sale of water.
Respectfully submitted this /6 day of November 2005.
Technical Staff: Donn English
Harry Hall
Carol Cooper
Joe Leckie
Dave Schunke
Scott Woodbury
Deputy Attorney General
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STAFF COMMENTS NOVEMBER 16 , 2005
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~9
6
8
Attachment B
BITTERROOT WATER, TARIFF STRUCTURE
Revenue
Current, 2004 requirement Proposed
REVENUE $ 39,233.$51 000.$51,647.
Monthly Minimum Charge
Revenue $33 150.$33 696.
Total Gallons Used 228 000
Gallonsl yr over 15,000 879 888 879 888 879 888
Commodity Revenue over
15,000 gal/custlmo 160 $17 850.$17 951.
Number Customers 117 117 117
Percent Revenue from
Minimum Monthly charge 79.20%65.00%
Percent Revenue from
Commodity Charge 20.80%35.00%
Minimum Monthly Charge $20.$23.$24.
Commodity Charge for
amount over 15,000
gallons $0.$1.$1.
Attachment B
Case No. BIT-05-
Staff Comments
11/16/05
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 16TH DAY OF NOVEMBER 2005
SERVED THE FOREGOING COMMENTS OF THE COMMMISSION STAFF, IN
CASE NO. BIT-05-, BY MAILING A COpy THEREOF, POSTAGE PREPAID
TO THE FOLLOWING:
KEN RICKEL
BITTERROOT WATER COMPANY
PO BOX 2306
HAYDEN LAKE, ID 83835
JQ
SECRET, Y
CERTIFICATE OF SERVICE