20070309Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
CO MMISSI 0 NER RED FO RD
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:CECELIA A. GASSNER
DATE:MARCH 6, 2007
SUBJECT:CAPITOL WATER CORPORATION'S APPLICATION FOR APPROVAL
OF CUSTOMER REFUNDS, CASE NO. CAP-07-
On January 9, 2007, Capitol Water Corporation filed an Application for approval of
customer refunds. If approved the Company would refund approximately $65 000 to its
customers.
On February 2, 2007, the Commission issued a Notice of Application and Modified
Procedure and solicited comments from interested persons. The only comments received were
filed by Staff.
THE APPLICATION
Capitol Water s Application states that during the course of its recent rate case, Case
No. CAP-06-, a billing error was discovered that resulted in overcharges to certain metered
customers. The total over-billing from December 1 , 2003 until September 1 , 2006 , was
approximately $65 000. In this Application, the Company proposes a mechanism to return these
overcharges to the pertinent customers.
The Company proposes the following plan to distribute the necessary refunds:
1) To the 99 customers currently connected to the water system to whom the
Company owes a refund of $100 or less, an immediate credit to each of
their respective accounts in the proper amount;
2) To the 18 former customers to whom the Company owes a collective
269., by locating them and issuing them refund checks;
3) To the 13 former customers who were in arrears on their accounts, by
reducing the amount owed to them by the amount in arrears;
DECISION MEMORANDUM
4) To the 112 current customers to whom the Company owes more than
$100 each, bill credits each month over a 36-month period. The total
credits would be calculated as an amortization of the refund principal due
together with interest at the Commission s approved rate for customer
deposits of 5%. These refunds represent an aggregate total of
$58 937.26. The billing credits would reduce the Company s monthly
revenues by $1 767.51 during the refund period.
ST AFF COMMENTS
Staff commented that it believes the Company has identified the impacted customers
and the corresponding overcharges, and is proposing a reasonable method for providing the
refunds. Staff also noted that the over-billing total of approximately $65 000 over the three-year
period is consistent with Staffs analysis of metered customers that were over-billed. Therefore
Staff generally supports the Company s proposed method for refunding metered customers that
were over-billed from December 1 , 2003 through September 1 , 2006.
Staff also voiced its concern regarding the 18 former customers no longer taking
service from the Company to whom the Company owes refunds totaling $2 269.30. In the event
that the former customers who have left the system cannot be located, the Company proposes to
transfer to the Company s surcharge account, funds equal to the amount of the refunds due to
those customers. Staff believes that any refund checks for customers that cannot be located may
be subject to Idaho s unclaimed property law Idaho Code ~ 14-501 et seq.and that depositing
the unreturned refunds in the Company surcharge account would be inappropriate.
For those customers owed more than $100, the Company proposes to refund the
principal due with interest at the Commission s approved rate for customer deposits. Staff
agrees with the Company s proposal to apply interest at a rate equal to the current customer
deposit rate of 5%. While the customer deposit rate has the potential to change yearly, Staff
believes that keeping the interest rate at 5% for the entire 36-month amortization period , rather
than changing it to reflect any future changes to the customer deposit rate, is reasonable. Staff
noted that the amount of interest is minimal, and keeping the methodology for the refunds simple
is beneficial to customers.
STAFF RECOMMENDATION
Staff recommended that the Application be approved, except that the Company be
directed to handle any amounts owed to former customers who cannot be located in accordance
with Idaho s unclaimed property laws. Staff also recommended that the Company keep track of
DECISION MEMORANDUM
the refunds and file a report with the Commission detailing the amount of refunds pending and
the amount of refunds paid, and any other pertinent information necessary to keep track of the
balance of the refunds with the Company s next quarterly surcharge report and then annually
thereafter. Staff had further recommended that the Company file its customer notice with the
Commission prior to sending it to customers. The Company has done so since the Staff filed its
comments, and the Staff believes the notice is adequate.
CO MMISSI 0 N D ECISI
Does the Commission desire to approve the Company s proposed mechanism to
provide refunds to certain customers? Does the Commission desire to do anything else with
regards to this matter?
u~ b-.CECELIA . GASSNER
M:CAP-O7-cg2
DECISION MEMORANDUM