20050909Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
FROM:DON HOWELL
DATE:SEPTEMBER 8, 2005
SUBJECT:EAGLE WATER'S APPLICATION FOR A TEMPORARY SURCHARGE,
CASE NO. EAG-05-
On August 3, 2005, the Commission issued an emergency Order directing Eagle
Water to immediately address a water pressure problem in the Eagle Springs subdivision. The
Commission directed Eagle Water to "use all deliberate speed" to increase the low water
pressure. Order No. 29840. The Order also directed Eagle Water to prepare an engineering
report of its entire system. The report is to include a comprehensive analysis of the existing
system including projected water and facility needs to 2010. Id. at 3. Eagle Water was to advise
the Commission within 21 days of when the engineering study can be completed and submitted
to the Commission.
The Order also required Eagle Water to file an Application for a customer surcharge
in an amount sufficient to recover the costs of: (1) the immediate system improvements to
correct the low pressure conditions; (2) preparing the system engineering report; and (3) the
legal, accounting and engineering expenses to be incurred in the preparation of the report and the
surcharge application. Order No. 29840 at 3. The Commission directed the surcharge revenues
to be booked in a separate account and Eagle Water s use of the surcharge funds would be
restricted to recovering the costs of the three elements mentioned above.
THE SURCHARGE APPLICATION
1. Initial Costs.On August 24, 2005 Eagle Water filed its Application for a
temporary surcharge. Eagle Water asserted that it had alleviated the low-pressure problems by
replacing an 8-inch mainline that was connected to the booster pump serving Eagle Springs
subdivision with a 12-inch mainline. The Company stated that the cost of replacing the 8-inch
DECISION MEMORANDUM
mainline with the larger 12-inch mainline was $40 027. Application at 2. Eagle Water also
estimated the cost of producing the engineering report and the legal/accounting costs to prepare
the surcharge Application. These costs are reflected below.
ITEM
Replace 8-inch line
Engineering Report
Legal & Accounting Expenses
TOT AL
COST
$ 40 027
$ 79 895
7250
$127 172
Eagle Water stated that it will take between three to five months to complete the engineering
report. Exh. 4 , p. 5.
2. Additional Measures. Although the Company believes that it has adequately
addressed the immediate low-pressure problems in Eagle Springs, it is concerned that there may
be occasional drops in water pressure
, "
especially in light of the continued wasting of water that
has been observed in Eagle Springs." Surcharge Application at 2. In addition to the immediate
corrective measures, the Company s engineer has identified three additional measures which
may "further alleviate water pressure problems in the Eagle Springs area.These additional
measures are:
Option 1 - Increase the power of the current booster pump from
horsepower (HP) to 75 or 100 HP. The estimated cost of this option is
$87 075.
Option 2 - Installing an additional booster pump buried under Big Springs
Street at the 2 700- foot elevation. The estimated cost of this option is
$81 607.50 or approximately $1 600 per the 51 Eagle Water customers at the
highest elevation in Eagle Springs.
Option 3 - Drill a new well under an existing permit from IDWR to serve the
entire system. The estimated cost of this option is $390 305. The Company
has an existing permit to drill this well that expires on March 1 , 2006.
The Company estimates that Option 1 and Option 2 would take approximately six weeks to
implement. Option 3 would take 60 to 180 days. Id. at 4-5. The Company s preference is for
the Commission to authorize Option 3 (the new well).
The Company reports that it pumped 5.156 million gallons to meet customer demand
on July 17 2005. Based upon the maximum pumping rate of Eagle Water s current well system
DECISION MEMORANDUM
the Company calculates that the existing wells can supply a maximum of 7.138 million gallons
per day.
The Company asserts that based upon DEQ criteria for estimating peak hourly
demand, the peak demand for Eagle Water is approximately 2 000 gallons per minute (gpm). In
addition to this normal peak demand, the Company asserts that fire-flow requirements for public
safety are 1 500 gpm. Consequently, under a worse case scenario, the Company estimates peak
demand could exceed 3 500 gpm. Id. at 4. The Company calculates that the maximum pumping
rates of the four operational wells are: No.1 - 600 gpm; No.2 - 400 gpm; No.4 - 2 000 gpm;
and No.6 - 2 000 gpm.l The total pumping rate for the four wells is 4 000 gpm - 500 gpm
above the estimate peak demand. The Company calculates that if either Well No.4 or No.
should temporarily fail, there may "not be adequate quantity or pressure for the system" to meet
DEQ standards. Id. at 4.
3. The Surcharge The Company estimates that a monthly surcharge of 16.85% over
three years would recover the anticipated costs for: (1) correcting the immediate pressure
problems; (2) preparing the engineering report; (3) recovering the legal/accounting costs; and (4)
implementing either Option 1 or Option 2. This surcharge would recover $214 147. Exh. 8.
The Company s preferred alternative would be to recover the immediate costs (the
three elements) and implement Option 3 (the new well) for a total estimated cost of $517,477.
The Company s accountant has calculated a monthly surcharge of 40.85% would recover this
amount over three years. The Company estimates that this larger surcharge would be an
additional $9.16 per month for the average residential customer. Even with the proposed
surcharge, the Company asserts that its average customer s annual water bill would be lower
than the annual water rates for either the City of Eagle or United Water s customers. Eagle
Water Customer Notice.
4. Processing the Case. The Company proposes that its Surcharge Application be
processed under Modified Procedure. Eagle Water indicates it is in the process of mailing the
requisite customer notice to all of its customers and will issue a press release.
I In addition to the four operating wells (Nos. 1 , 2, 4, 6) the Company uses Well No.3 as a back-up supply source
(sand problems) and Well No.5 has never been developed. The proposed Option 3 new well would be Well No.
DECISION MEMORANDUM
ST AFF ANALYSIS
Staff recognizes that the Surcharge Application seeks recovery of more than the three
elements listed in Order No. 29840. However, Staff does not object to processing this case via
Modified Procedure with one additional condition. Staff recommends that the Commission
consider holding at least one public hearing on October 11 , 2005 for the purpose of obtaining
public comment regarding the Company Surcharge Application. The Staff further
recommends that written comments be due no later than October 14 2005.
Utilizing a comment period greater than 21 days would allow the Staff to conduct
discovery. The lengthened comment period would also allow the Company to further
supplement its Application with testimony in support of the various additional options that
address future needs and future low-pressure concerns.
COMMISSION DECISION
Does the Commission believe that this Application can be processed under Modified
Procedure? Does the Commission wish to schedule a public hearing for the purpose of receiving
public input? Does the Commission believe that an extended comment period in this case is
agreeable? Does the Commission believe that this Application may be processed without formal
evidentiary hearings?
AnYthing else?
pvr-/
Don Howell
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DECISION MEMORANDUM