20070918notice_of_application_order_no_30430.pdf

Office ofthe Secretary
Service Date
September 18,2007
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF EAGLE WATER
COMPANY'S CAPITAL IMPROVEMENT
REPORT AND APPLICATION TO
CONTINUE THE EXISTING SURCHARGE
CASE NO. EAG-07-
NOTICE OF APPLICATION AND
ENGINEERING REPORT
ORDER NO. 30430
On August 6, 2007, Eagle Water Company filed its system-wide Engineering Report
and an Application to recover the professional fees (engineering, legal, accounting) for
preparation of the Report and Application. As stated by the Commission, the purpose of the
Engineering Report was to identify infrastructure improvements necessary to serve Eagle Water
and its customers now and in the present. The Company was also ordered to file an application
seeking approval to begin construction on the necessary infrastructure improvements and to
propose a new rate design to recover the costs of the identified improvements. Order No. 30331
at 1.
In the present Application, Eagle Water reports that on July 10 2007, the Eagle City
Council approved an "Asset Purchase Agreement" which would allow the City to purchase the
utility. As set out in the Purchase Agreement, the parties anticipate that the transaction will close
in November 2007. Application at ~ 21. Once the City acquires the Company, the
Commission s regulatory supervision over the utility would end. Idaho Code 9 61-104.
However, Eagle Water requests that the Commission address several issues in the interim. These
issues are outlined in greater detail below.
BACKGROUND
The history behind this case is contained in Order No. 30266 but the pertinent events
are briefly outlined here. In August 2005 , the Commission issued an emergency Order directing
Eagle Water to "use all deliberate speed" to increase water pressure in a portion of its service
territory. In addition to taking immediate actions, the Company was directed to prepare an
engineering report to address the chronic low-pressure problems in its system and to project its
water supply needs for the future. The engineering report was to "serve as a 'road map' for
NOTICE OF APPLICA nON AND
ENGINEERING REPORT
ORDER NO. 30430
determining exactly what infrastructure improvements are necessary to serve present and future
needs of Eagle Water and its customers." Order No. 29903 at
To recover the costs of preparing the engineering study, the Commission authorized
Eagle Water to implement a rate surcharge. Order No. 29969. The surcharge was based upon
the legal and engineering fees necessary to prepare the engineering report and to file the
accompanying application. Based upon cost estimates provided by the Company, the surcharge
was designed to recover $112 414.
After the Commission issued its surcharge Order, Eagle Water and the Department of
Environmental Quality (DEQ) signed a "Consent Order " which among other issues, required
Eagle Water to submit the engineering report to DEQ for approval. DEQ directed that Eagle
Water submit a preliminary engineering report for review and comment, followed by the
preparation of the final report.
Although the Commission directed that the engineering report should be completed
as soon as possible, its submission to the Commission has been significantly delayed. Eagle
Water attributed the delay to various issues including: The health of its primary engineer; the
need to engage another engineering firm; changing DEQ system requirements; and the DEQ
review process. Order Nos. 30213, 30266, 30331. In addition to the delays, the Company
reported that the cost of preparing the engineering report directly exceeded the amount
authorized by the Commission. Order Nos. 30266 at 2, 30331 at 2.
EAGLE WATER'FILING
A. The Engineering Report
YOU ARE HEREBY NOTIFIED that the Company acknowledges that the primary
purpose of the Engineering Report is to: (1) identify current system pressure and supply
deficiencies; and (2) identify, analyze and recommend necessary improvements. Executive
Summary at 1. The Report is several hundred pages in length and contains 11 appendices.
YOU ARE FURTHER NOTIFIED that based upon the anticipated growth in the City
of Eagle, the Company has projected customer growth out to the year 2026. Based upon this
data, the Company developed a model to determine peak-hour flow requirements for its system
in 2010 and 2026. Id. at 3. The Engineering Report's estimates are based upon "pressure, flow
and redundancy requirements" promulgated by DEQ in its Rules for Public Drinking Water
NOTICE OF APPLICA nON AND
ENGINEERING REPORT
ORDER NO. 30430
Systems, IDAPA 58.01.08. Based upon these parameters, a computer model was developed to
calculate the maximum day demand with fire flow and peak hour flow demand. Report at 5.
YOU ARE FURTHER NOTIFIED that the Engineering Report proposes that the
Company undertake several construction projects designed to "increase the service pressure
available fire flow, and water supply within the water system.Id. at 6. The Report classifies
the projects into three infrastructure categories: Mandatory, future, and suggested. The seven
projects and their categories are set out below:
PROJECT COST
ESTIMATE
Interconnect with an adjacent water system (M)$151 250
Replace Floating Feather valve (M)$ 43 120
New water source (Well) (F)$898 000
Booster pump for Well No.2 (F)$ 38 000
Additional system interconnection piping (Well No.6) (F)$253 600
Pump redundancy for main booster pump station (8)$ 51 700
Install recording flow monitors (8)$ 47 100
(M) = Mandatory (F) = Future (8) = Suggested
The Company projects that the first two projects should be constructed before the start of 2008
irrigation season.
B. The Surcharge Application
YOU ARE FURTHER NOTIFIED that although the sale of the Company is pending,
Eagle Water makes several requests in its Application. First, the Company generally seeks
authority to recover the additional engineering, legal and accounting fees incurred in the
preparation of the Engineering Report and this Application. The Company maintains that its
costs in preparing the Engineering Report totaled $218 394. Application at ~ 14. To date, the
Company has paid $79 741 in engineering fees from the surcharge account. Consequently, the
Company seeks permission to recover its additional engineering fees totaling $138 653.
YOU ARE FURTHER NOTIFIED that the Company estimates that it has expended
$16 232 in legal fees for the preparation of the Engineering Report and the previous surcharge
NOTICE OF APPLICATION AND
ENGINEERING REPORT
ORDER NO. 30430
application. Id. at ~ 15. The Company notes that it has unpaid legal fees of about $4 897.1 The
Company also estimates the legal fees for this Application to be $12 000. Finally, the Company
seeks to recover about $863 in accounting fees.
YOU ARE FURTHER NOTIFIED that the Company requests authority to recover a
total of $201 434 in expended and anticipated fees, and to reimburse other accounts. The
Company requests authority to recover this amount from two sources. First, Eagle Water
requests that it be allowed to take possession of the existing balance in the surcharge account.
The Company reports that as of July 12, 2007, the balance in the surcharge account was about
$91 300. Second, the Company requests authority to borrow approximately $110 000 "to cover
the (remaining balance of the) professional fees.Id. at ~ 24. To pay this latter amount, the
Company proposes that the existing surcharge be continued. Presumably the surcharge would be
sufficient to defray payment of the $110 000 loan over two years. The Company requests that its
Application to recover the additional professional fees be processed under Modified Procedure.
YOU ARE FURTHER NOTIFIED that the Application and the Engineering Report
have been filed with the Commission and are available for public inspection during regular
...
business hours at the Commission offices. The Application and Engineering Report (except for
the appendices) are available on the Commission s website at www.pub.idaho.gov under "File
Room" and then "Water Cases.
DEADLINE FOR INTERVENTION
YOU ARE FURTHER NOTIFIED that persons desiring to intervene in this matter
for the purpose of presenting evidence or cross-examining witnesses at hearing must file a
Petition to Intervene with the Commission pursuant to this Commission s Rules of Procedure 72
and 73, IDAPA 31.01.01.072 and .073. Persons intending to participate at hearing must file a
Petition to Intervene no later than 14 days from the service date of this Order Persons
seeking intervenor status shall also provide the Commission Secretary with an electronic mail
address to facilitate further communications in this matter.
YOU ARE FURTHER NOTIFIED that persons desiring to present their views
without parties' rights of participation and cross-examination are not required to intervene and
may present their comments without prior notification to the Commission or to other parties.
1 The Company has paid some of the professional fees from other sources than the existing surcharge account and
seeks to reimburse other accounts by $45 021.
NOTICE OF APPLICATION AND
ENGINEERING REPORT
ORDER NO. 30430
YOU ARE FURTHER NOTIFIED that once the deadline for intervention has
passed, the Commission Secretary shall issue a Notice of Parties. The Notice of Parties shall
assign exhibit numbers to each party in this proceeding.
YOU ARE FURTHER NOTIFIED that after the Notice of Parties is issued, the
Commission anticipates that the parties will informally convene to devise a recommended
schedule to process this case. Once a schedule is developed, the Commission will subsequently
issue a Notice of Hearing. In addition to the schedule, the parties may discuss discovery
logistics, electronic service, and other scheduling matters.
YOU ARE FURTHER NOTIFIED that the Commission has jurisdiction over this
matter pursuant to Title 61 of the Idaho Code and specifically Idaho Code 99 61-302, 61-307
61-502, 61-503, 61-507, 61-622, and 61-623. The Commission may enter any final Order
consistent with its authority under Title 61.
YOU ARE FURTHER NOTIFIED that all proceedings in this matter will be
conducted pursuant to the Commission s Rules of Procedure, IDAPA 31.01.01.000 et seq.
DISCUSSION
As indicated in the Company s Application, it has entered into an Asset Purchase
Agreement with the City of Eagle. The parties anticipate that their purchase transaction will be
executed in November 2007. In the interim, Eagle Water has requested authority to recover
additional professional fees (engineering, legal, accounting) that were incurred in the completion
of the Engineering Report and the preparation of this Application. In Order No. 30331 the
Commission directed that the surcharge be continued (subject to refund) based upon the
increasing costs to complete the report. Consequently, this Application concerns itself with the
reasonableness of th~. fees, the proposed recovery, the proposed loan, and the manner of repaying
the loan.
ORDER
IT IS HEREBY ORDERED that persons desiring to intervene in this case for the
purpose of presenting evidence or cross-examination at hearing shall file a Petition to Intervene
with the Commission no later than fourteen (14) days from the service date ofthis Order.
... . .
IT IS FURTHER ORDERED that after the Notice of Parties is issued, the Staff shall
convene an informal prehearing conference with the parties to discuss the processing of this case.
NOTICE OF APPLICATION AND
ENGINEERING REPORT
ORDER NO. 30430
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this gt1-
day of September 2007.
LKJ , PRESIDENT
RSHA H. SMITH, COMMISSIONER
ATTEST:
~G ~ilJe D. JewellCo ission Secretary
bls/O:EAG-07-01 dh
NOTICE OF APPLICATION AND
ENGINEERING REPORT
ORDER NO. 30430