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Home My WebLink About20160129Comment.pdfRE CE IV ED MichaelR.Meehan “flic Iw)o el 14201 N.Ramsey Rd.jit c.J iIH ..‘ Rathdrum,ID 8385$IDAHO PUBLIC T;cOMMISSION Jan.25,2016 Idaho Public Utilities Commission P.O.Box $3720 Boise,ID $3 720-0074 In Re:Case No.DIA-W-15-01 Objection to Proposed Rate Increase Gentlemen: I believe the proposed rate increase is based on a number of points which must be investigated thoroughly and the results made public. In Exhibit 1 there is shown “plant in Service”at $48,388 and accumulated depreciation of 16,669.The Applicant has admitted in prior conversations that the plant’s costs were completely recaptured by the sale of all the lots.His lot prices were 1/3 land,,1/3 infrastructure (including water system),and 1/3 profit.When the lots were sold out the water system became the property of the HO Association at no cost.(Applicant painted a dire picture the HO wold incur,I.E.hiring a water manager,that the HO deeded the water system back to Applicant.) In spite of the costs being fuiiy recovered,the PUC in its infinite wisdom allowed for the subsequent of a second recapture.If the PUC where to truly act in the interest of the rate payers,this depreciation should be stopped immediately,I have no expectation the PUC will act in such a manner,see comments at the end of this letter. If the above were followed the Rate Base would be $9679.(See revised Exhibit 1 attached.) Exhibit 2 Applicant requests an increase it the amount paid for utilities,assume this can be substantiated by actual invoice. The same holds true for the water testing expense.The testing must be limited to lab costs only,not the cost of an employee obtaining the sample,that wages are covered under Admin. further the water testing adjustment include meter reading.As this is performed by an employee it would appear that the rate payer is being charged twice for the same expense.If a helper is used it is a once per moth fee and should only require minimum wage help.The same applies to pump service, labor,operation and maintenance..As to Applicant’s request for on-call duties.The fact that Applicant has not take a salary is not relevant as he has,to my knowledge,no specific training is water related mechanical issues. What was done to repair the system,do invoices support the stated charge,are they once again charging for time included elsewhere. The increase due to “bookkeeping”will be hard to justify on any reasonable basis.This is semi-skilled labor at best and any reasonable accounting software simplifies the time required.Also the Company seems to be tech phobic.F or example they hand write write the monthly invoices,see sample attached. A few minutes with a writer program and it’s printer instructions could set op invoice production for all the monthly invoice base on the flat rate.After once done all that would need to be done on a monthly basis would be to change the rate,an exception might be called for if a ratepayer is in arrears.. How often is that the case? Secondly if the meter reader used a tablet or similar device the data could be downloaded into a spreadsheet program where the bill could be created and sent to the printer at the same time as feeding thee accounting software the accounts receivable account. As seen from the preceding paragraphs,Applicant would seem to have an aversion to implementing technology to improve office efficiency.For that reason there should be no increase in compensation. If he were to use a portion of the “working capital”to invest in new equipment and an individual to set up up he would find that hours would be reduced.Since these hours generate income for “related parties”it is highly unlikely that anything will happen.Doesn’t the PUC look at efficieny when evaluating expenses?If not,why not? There is aflaw involved in the billing.The 6 month flat rate covers 5,500 gallons per month,33,000 gallons for the 6 month period.Ifa rate payer payer uses for example 4,500/month or 2 7 000for the period.He paidfor something he did not receive.In May he uses 6,500 gallons to start a garden,get the lawn going etc.he is hit with an overage charge.It would be betterfor a rate payer to check his meter in April determine how much less he used that what he is being charged and then flood the property up to the 33,000 gallon usage. Anotherflaw in the billing is that they do not ill the same time each month.Thus,fthey bill 3 days before month’s end a customer may be below the 55oo gallon limit.Thefollowing month they may bill at month’s end,in which case the mmonth has 33 or 34 days.Ifthe reading indicates over 5500 gallons the customer is hit with the higher overage rate.This should be address I the staffs review qf individual billing records,fthey take the time to do such things As to the salaries themselves how does the rate being paid fit the local market for semi-skilled employees?How is the payroll determined?Applicant runs multiple businesses out of one office,do the employees keep time sheets but business?If not,why not? A revised Exhibit 2 is attached. Unstated Issue How is the Company organized?The Secretary of State’s website show the business running under an assumed name,no mention of an LLC.If the business is an LLC does it have one principal or two or more.If only one then the profit or loss from schedule C goes to Line 12 of the 1040 and is taxed as ordinary income.If there are 2 or more then the tax has to follow partnership rules which provide for tax loss carry forward,etc. Does the PUC ever check this? If an individual is the tax loss benefit considered when examining the rate proposal? Exhibit 3. Rate of Return at 12%for a company such as Applicant seems out of line with reality.12%might be acceptable for a utility traded on a a stock exchange where is is necessary to generate a return sufficient to pay dividend.For a privately held company this should not be considered anywhere near acceptable. A rat of return more like a risk free investment as 10 year Treasury notes,I.E.2%seems more appropriate as the community cannot go with out water.I assume the PUC for ease of it’s duties has decided to apply 12%to all utilities regardless of facts on the ground. The rest of the rating action shown in this exhibit rests on the shaky ground of numbers previously shown.Why should any of the business be shown to be taxed at 15 &8%unless justified by each operations schedule C.The utility companies Appticant controls are being charged in with the other businesses,personal income and retirement benefits.The PUC should address these issues by requiring the Schedule C for the bushiness in question be provided as part of any filing. A revised exhibit 3 is attached.This shows the maximum rate increase should be no more than 29%, even less if Applicant refuses to include the technology upgrades. Conclusion:Applicant should not receive more than a 10%increase in each of the base rate and the overage rate,I.E.S32?month &5.88/1000/gallons The PUC (Will staffs work papers be made public?) The rate payers for the most part think that the Public”in the Commissions title applies to them.It does not,it refers the the “Public Utility”Rate payer is left out of the process. I understand that I have wasted my time putting these thoughts to paper,as disjointed as they may seem.Assuming the Applicant is using the same consultant as previously that individual is a former member of the PUC staff.Undoubtedly he has had conversations with the staff,off the record of course to get an idea as to what they might be willing to approve.The application is then constructed to generate a higher number.The staff will come to CDA and make a great show of auditing the books, checking salary rates etc.The Commissioners may,if they want a trip to CDA,stay at the resort,enjoy a nice meal somewhere,hold a hearing.They will then return to Boise and accept the staff recommendation. Sincerely Michael R Meehan cc:Diamond Bar Esates Home Owners Association tDiamond Bar Estates Water Co PC Box 1670,Hayden ID 63835Emergency661-1560,772-5050 Qfflca 665-9200 Billing Date •//‘.Water Billing for period ______________ Domestic-current reading -——--—prey reading _________________ Irrigation-current reading -prey reading- otal usage ________________ Excess Gallons _______________ Past Due Amt $Previous balance $-.- PaymentRec’d$ —--,-Current month $.Q--/ Totalnowdue$.-.Due date _____________ 0—5500 gals $29.00 5501 and over 3.80/per thousand galsEx:50000 gals minus 5500 gals =44,500 divided by 1000 x .80 =$35.60 plus $29.00Totaldue$64.60 (Minimum charge of $29.00 covers both meters and includes the flrst 5500 gallonsofusage) Sheet3 Exhibit 1 Rate Base Caculation ratecase expense 5000 working Capital 4679 9679 Page 1 Sheeti Exhibit 3 rate base 9679.00 roi 002 net op 193.58 gross up 1.1699 rev 226.47 loss 2437.00 net loss 5 yr 2437 add rev 2663.47 amortization test rev 26338.00 rev req 29001.47 rate inc.i.io gross up inc.tax 100 -0.02481 99.97519 sttax 0.05 4.9987595 94.9764305 0.1 9.49764305 85.47878745 1.169880891 Page 1 Sheet2 Exhibit 2 adjustments revenue metered 25696 25696 revenue other 642 642 total revenue 26338 26338 labor o&m 1084 1084 labor a&g 5325 5325 power 9511 479 9990 materials o&m 328 328 Materials a&go&m 6 6 contract servs 456 456 water testing 7731 7731 bank chgs 526 526 ins.2238 2238 pump repairs 5750 5750 total operating expe 27205 33434 depreciation 1881 1881 1881 rate case 1105 1105 reg.Fees 277 277 prop tax 302 302 total expenses 29665 36999 net income -3327 10661 less tax benefit -432.51 107 net loss -2894.49 10554 net income -2894 -10554 gain/loss assumed at 10%federal 3%state Page 1