20061120Supplemental comments.pdf

CECELIA A. GASSNER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 6977
RECEIVED
2006 NOV 20 PM I: 55
ID/.,i-iO F\ibL.
UTiliTIES COMf'AI~SjO;':
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
CAPITOL WATER CORPORATION FOR
AUTHORITY TO INCREASE ITS RATES AND
CHARGES FOR WATER SERVICE IN THE
ST ATE OF IDAHO CASE NO. CAP-O6-
SUPPLEMENTAL COMMENTS
OF THE COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission, by and through its Attorney of
record, Cece1ia A. Gassner, Deputy Attorney General, submits the following supplemental
comments in this matter.
BACKGROUND
Staff filed its Comments in this matter on October 12, 2006, in response to the Notice of
Modified Procedure and Notice of Public Workshop issued on September 6, 2006. Order No.
30124. Capitol Water Corporation ("Capitol Water" or the "Company ) filed reply comments on
October 26, 2006.
STAFF SUPPLEMENTAL ANALYSIS
Capitol Water Corporation filed Reply Comments in this case on October 26, 2006. The
Company s Reply Comments accept or concur with most of the Staff Adjustments previously
filed in Staff Comments on October 12 2006 and expands on others. The Company proposed
SUPPLEMENTAL COMMENTS NOVEMBER 20, 2006
two additional expense adjustments and identified the revenue issues to be decided. These Staff
Supplemental Comments are intended to provide the Commission with the revenue requirement
impact of the additional adjustments presented by the Company and explain the proper treatment
for the revenue adjustments in this case for revenue requirement purposes. The changes
discussed should be evaluated using the Staff recommendation in the original Comments as the
starting point with a revenue requirement of$619 610 and a percentage increase of28.47% in
revenues.
The Company identified two additional expense adjustments. The first reflects the
ongoing cost to inspect, service and maintain the standby generator and proposes to treat these as
a normal operating expense in this case and stop paying for these expenses fIom surcharge
revenues. These expenses and any associated taxes fIom the increased revenues will be
accounted for as part of the normal business operation rather than the surcharge. The rationale is
consistent with the Staff adjustments for PCA surcharges and phosphate purchases. If accepted
by the Commission, this adjustment increases the revenue requirement by $1 718 for an
incremental increase of 0.36%. The second expense adjustment is a proposal to amortize and
include rate case expenses in the final revenue requirement. The $3 588 amortized over three
years results in an expense increase of$1 195. The incremental revenue requirement increase for
the rate case amortization is $1 554 or 0.33%, if accepted.
There are three revenue issues to be decided by the Commission. The first is the
normalized revenue adjustment proposed by Staff in its comments. The second is the Staff
proposed elimination of the hydrant tariff and the treatment of revenues for this change. And the
third is the computer programming and billing error associated with the surcharge for metered
customers. All of these revenue issues have been further explored by Staff and the Company and
the final Staff evaluations have been accepted by the Company s consultant, Bob Smith.
Subsequent to filing its comments, the Staff discovered that the prior tariff had omitted
identifying the minimum allocation of water included in rates for its metered customers. This
resulted in the Staff adjustment to customer revenues being incorrectly calculated. This
adjustment should be removed, increasing the revenue deficiency by $6,493. The net revenue
increase is 2.13%.
The Staff proposal to remove the hydrant tariff was accepted by the Company. The
hydrant tariff revenues of $4 788 collected during the test period will now be received fIom other
customer groups. Since this will be a change in the source of revenue and not new revenues
SUPPLEMENTAL COMMENTS NOVEMBER 20, 2006
there is no gross-up for taxes as shown in the Reply Comments. The redistribution of revenues
will occur as part of the rate design.
The computer programming and billing error was discovered by Staff when reevaluating
the customer revenue adjustment discussed above. The computer formula for calculating the
surcharge on metered bills was incorrectly programmed resulting in an over collection of
$21 553 fIom metered customers. The error has been corrected and the Company will continue
to work with the Staff to properly return the over collection to the proper customers with the
resolution filed with the Commission. The correction of the over collection fIom metered
customers will not change the revenue requirement. The correction will redistribute the revenue
requirement to the proper customers consistent with the tariffs.
The cumulative revenue requirement, if all the proposed adjustments are accepted by the
Commission, is $624 713. This is a revenue increase of 31.3 % above test year revenues. The
elimination of the hydrant tariff and correcting the computer programming billing error
redistributes the revenues resulting in an increase of38.99% above the currently approved tariffs.
After further analysis, the Staff proposes a revised tariff that addresses and includes this
minimum allocation.
To meet the revenue requirement of$621 713, Staff has applied a weighted average
increase of rates to establish the correct allocation of revenue fIom overall company revenue and
rounded the tariff charges. The tariff proposed by Staff, and attached to these supplemental
comments as Attachment A, results in an overall increase of38.75% due to the rounding ofrates
over the Company s prior tariff rates as adjusted for the billing error.
STAFF RECOMMENDATIONS
The Staff would like to amend its prior recommendations Nos. 1 and 6 to read as follows:
1. Staff recommends increasing revenues by $148 908 or 31.3 % to recover the
revenue requirement of $621 713, if all adjustments are accepted.
6. Staff recommends that the Company file tariffs incorporating Staff's
recommendations for Schedule No.1 (non-metered Customers), Schedule No.
(Metered Customers) and Schedule No.4 (Fire Sprinkler Systems and/or Inside
Hose Connections) as described in the rate design set forth in Exhibit A attached
to these supplemental comments.
SUPPLEMENTAL COMMENTS NOVEMBER 20, 2006
-rt--
Respectfully submitted this day of November 2006.
Cecelia
Deputy Attorney General
CG:umisc/comments/capwO6.l supplemental
SUPPLEMENTAL COMMENTS NOVEMBER 20, 2006
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CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 20TH DAY OF NOVEMBER 2006
SERVED THE FOREGOING SUPPLEMENTAL COMMENTS OF THE
COMMISSION STAFF IN CASE NO. CAP-06-, BY MAILING A COpy
THEREOF, POSTAGE PREPAID, TO THE FOLLOWING:
H, ROBERT PRICE
CAPITOL WATER CORP
2626 N ELDORDO ST
BOISE ID 83704
ROBERT E SMITH
2209 N BRYSON RD
BOISE ID 83713
SECRETARY
CERTIFICATE OF SERVICE