20080326final_order_no_30516.pdf

Office of the Secretary
Service Date
March 26, 2008
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF BRIAN WATER CORPORATION FOR
AUTHORITY TO INCREASE ITS RATES
ORDER NO. 30516
CASE NO. BRN-07-
On September 10, 2007, Brian Water Corporation (Brian Water, Company) filed an
Application with the Idaho Public Utilities Commission (Commission) requesting that its
monthly base rate (minimum charge) for the first 4 000 gallons per month be increased from
$10.50 to $15.00. No other change in rates or charges was requested. The Company states that a
rate increase is needed to recover repair expenses, meter replacements, and power costs. No
supporting documentation was submitted. No effective date for new rates was proposed. The
Commission in this Order approves an increase in the monthly minimum base rate from $10.
to $12.50 and an increase in the commodity charge for monthly usage exceeding 4 000 gallons
from $1.08 to $1.35 per 1 000 gallons.
BACKGROUND
Brian Water is a regulated water utility providing water service under Certificate of
Public Convenience and Necessity No. 260. The Company has 46 residential customers in Brian
Park Subdivision, a development located in Ada County, Idaho, a few miles east of Boise along
old State Highway 21. The Company s water rates were last adjusted by the Commission in
Order No. 27998 issued April 22, 1999 in Case No. BRN-98-1. The current rates for water
service are a base rate of $10.50 per month for the first 4 000 gallons and a commodity rate of
$1.08 for each 1 000 gallons thereafter. The Company s proposed base rate increase of$4.50 per
month per customer would generate a $2,484 increase in annual revenue, an increase to
customers of $54 per year.
Notice of the Company s Application was issued by the Commission on
September 19, 2007. A public workshop for customers was held in Boise on January 16 2008.
The deadline for filing written comments was January 24, 2008. Commission Staff performed an
audit and investigation of the Company s financial records and physical plant and was the only
party to file comments. On February 5, 2008, the Company filed a reply proposing an
adjustment to water testing expense.
ORDER NO. 30516
Staff Recommendations
The Commission Staff contends that an increase of $3 170 in annual revenues is
required to provide for the Company s present and continued viability. This results in an annual
revenue requirement of $14 823, and an average rate increase of 27.2%. Staff recommends that
this be recovered by increasing the customer minimum charge for the first 4 000 gallons from
$10.50 to $12.50 per month and increasing the excess commodity charge for usage exceeding
000 gallons per month from $1.08 to $1.35. Staff calculates that this rate change, on average
will result in a total increase to customers of approximately $68.00 per year.
Staff recommends also that the Company bill customers monthly as its tariff requires;
and that the Company s tariffs, bills and notices be updated and revised to comply with
Commission Rules. Staff further recommends that an explanation of rates and summary of rules
be distributed to customers at the time of sign up and to existing customers on an annual basis as
required by Commission Rules.
Staff Analysis
As reflected in Staff comments, Brian Water does not maintain conventional journals
and ledgers. The Company s records for many recent years are incomplete. The records for year
2006 were the most substantially complete and form the basis for Staff s rate case analysis.
Brian Water is currently facing a trio of adverse financial circumstances: (1)
declining metered sales, (2) a rate schedule based upon nearly decade-old costs, and (3) the
expenses of maintaining an aging water system. Based on the results of Staff audit and analysis
Staff calculates a rate base (December 31 , 2006) of $18 558 (consisting of $59 358 plant-in-
service; ($24 228) accumulated depreciation; and ($16 512) on amortized contributions in aid of
construction). The Company did not specify a requested rate of return. Staff used a return on
equity of 12%, a return comparable to that recently authorized by the Commission for other
small water companies, e.g. Falls Water Company (FLS-07-01); Morning View Water
Company (MNV - W -06-01). With adjustments to 2006 test year expense (including updated
Company water testing expense), Staff calculates an annual revenue requirement of $14 823.
Staff notes that the only increase requested by the Company is a 43% increase in its
current minimum charge, from $10.50 per month to $15.00 per month. Staff believes that the
Company s proposal to increase the minimum charge without increasing the commodity charge
ORDER NO. 30516
is not in keeping with the Commission s historical approach to designing rates for small water
companies. First, it sends no conservation signal to customers and secondly, it does not reward
customers who consistently practice good water conservation.
Brian Water has two wells, a large well producing approximately 160 gallons per
minute (gpm) and a smaller well producing approximately 110 gpm. Well output is not currently
metered. Based on analysis of energy use and pump curves, Staff estimates lost and
unaccounted-for water for the system is high. Possible reasons for this include defective meters
and water leaks. This loss of water, Staff states, can be diagnosed and remedied by placing a
master meter at the pump outlets on both wells and embarking on a program of testing and
replacement of defective individual meters.
Consumption data over the past 10 years shows a decline in metered sales of
approximately 25% from 2002 through 2006. Staff cannot explain the reason for the decline. In
2007 consumption increased to 8 066 322 gallons 10% over that in 2006 and a figure more
closely approximating the Company s seven-year average annual usage, i., 8 338 881 gallons.
Staff uses the 2007 consumption data in the calculation of rate design because it is more
representative of normal usage. Currently the minimum charge accounts for 48% of the revenue
for the Company and the commodity charge accounts for 52% of the total revenue generation.
Staff sees no reason to change that relationship and calculates that the Company can recover its
revenue requirement by increasing its minimum charge from $10.50 to $12.50 with no change to
the 4 000-gallon allowance, and increasing the excess commodity charge from $1.08 to $1.35 per
000 gallons.
Staff investigation revealed that the Company is out of compliance with Commission
Customer Information Rules and requirements regarding initial and annual explanation (to
customers) of rate schedules (Rule 101), Utility Customer Relations Rule 701 regarding
Summary of Rules, Rules 201 (Issuance of Bills - Contents of Bills) and Rule 305 (Contents of
Notice of Intent to Terminate Service). IDAPA 31.21.01 and 31.21.02. Examples of missing
information include the itemization of charges on bills, due date of the bills, and Commission
contact information on notices. Staff is willing to assist the Company in bringing itself into
compliance with current rules and regulations.
ORDER NO. 30516
Commission Findings
The Commission has reviewed and considered the filings of record in Case No.
BRN-07-01 including the comments and recommendations of Commission Staff and the
Company s reply. We find it reasonable to process this case and issue our Order based on the
established record and without further notice or proceedings. Reference IDAP A 31.01.01.204.
Staff in this case recommends an increase greater than the amount requested by Brian
Water. The Commission notes that its authority and power to determine the reasonableness of
the Company s rates and charges is derived from statute, Idaho Code, Title 61 - Public Utilities
Law. In this case, the Commission considered Commission Staffs report, analysis, and
conclusions.Staffs recommendations were the results of its investigation, discovery, and
inspection. Idaho Code ~ 61-610; IDAPA 31.01.01.221-240. Our grant of authority to
determine and fix rates includes the power to investigate. See Idaho Code ~ 61-502 -
Determination of Rates; 61-503 - Power to Investigate and Fix Rates and Regulation. Brian
Water for its part has a statutory duty to maintain adequate, efficient, just, and reasonable
service. Idaho Code ~ 61-302 - Maintenance of Adequate Service. We have a reciprocal duty
customers to ensure that the Company has the wherewithal to provide such service.
In determining the reasonableness of Brian Water s tariff rates, we must consider
whether they provide the Company with enough revenue to meet its maintenance and operation
obligations as they come due, and provide it with the ability and means to make necessary
repairs and replacements to its water system in an otherwise timely and efficient manner.
In reviewing the record, we find Staff s proposed revenue requirement and rate
design to be fair, just, and reasonable. We find that the Company s request was not based on an
accounting analysis of the Company s financial position or on a standard revenue requirement
methodology. Based on our consideration of the established record, we find it reasonable to
approve a calculated revenue requirement for Brian Water of $14 823 and to establish the
following tariff rates for metered service: An increase in the Company s base rate for the first
000 gallons per month from $10.50 to $12.50 and an increase in the excess commodity charge
(over 4 000 gallons per month) from $1.08 to $1.35 per 1 000 gallons. As calculated by Staff
we find that this rate change, on average, will result in a total increase to customers of
approximately $68 per year, or 27.2%.
ORDER NO. 30516
The revenue requirement in rates that we approve is derived from an approved
adjusted 2006 test year operating expense of $11 442, a 12% equity return on an approved
calculated rate base of $18 558 and a pre-tax income requirement of $14 277. The Company is
directed to file amended tariff sheets reflecting the approved rates.
Staff notes with some concern that there appears to be a possibility of significant
unaccounted-for water in Brian Water s system. This problem, Staff states, can be addressed by
metering the two wellheads and testing and replacing defective customer meters. Water is a
resource that must be conserved and not wasted. We encourage the Company to take steps to
better manage and husband this resource.
As reflected in Staff comments, Brian Water is out of compliance with Commission
Utility Customer Information Rule 101 , and Utility Customer Relations Rules 201 , 305 and 701.
The Company also reads meters and bills customers in a manner other than required by its tariffs.
We direct the Company to bring itself into compliance with Commission rules and regulations
and further direct the Company to read meters and bill customers on a monthly schedule.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction and authority over Brian
Water Corporation, a water utility, and the issues raised in this case, 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 in Case No. BRN-07-01 does hereby approve a
170 or 27.2% increase in authorized annual revenue for Brian Water Corporation for a total
authorized annual revenue requirement of $14 823.
IT IS FURTHER ORDERED and the Commission does hereby authorize and
establish tariff rates and charges as set out above for an effective date of April 1 , 2008. The
Company is required to file tariff sheets consistent with this Order.
IT IS FURTHER ORDERED and the Company is directed to revise its current rules
and regulations to conform to Commission requirements and to read meters and bill its customers
monthly.
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)
ORDER NO. 30516
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code ~ 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this tJ.(,rl-
day of March 2008.
MACK A. REDFO
MARSHA H. SMITH, COMMISSIONER
ATTEST:
~AJ.
. D. Jewell
Commission Secretary
O:BRN-O7-
ORDER NO. 30516