20190305final_order_no_34265.pdf

Office of the Secretary
Service Date
March 5,2019BEFORETHEIDAHOPUBLICUTILITIESCOMMISSION
IN THE MATTER OF EAGLE )CASE NO.EAG-W-15-01
WATER COMPANY'S APPLICATION )FOR AUTHORITY TO IMPLEMENT )
A CUSTOMER SURCHARGE )ORDER NO.34265
On December 28,2018,Commission Staff moved the Commission for an order
approving a Joint Settlement Stipulation between Staff and Eagle Water Company.If approved,
the SettlementStipulation would,among other things,adjust the Company's rate base and revenue
requirement to correct the Company's booking of capital expenditures and expenses from
regulated and nonregulatedoperations,and apply the Company's surcharge balances to the benefit
of customers.The Settlement Stipulation would not increase rates and charges for customers.
Having reviewed the record,the Commission finds the Settlement Stipulation is fair,
just,and reasonable.The Commission thus grants the Motion and approves the Settlement
Stipulation in the public interest as discussed below.
BACKGROUND
On November 10,2015,Eagle Water Company applied for authorityto implement an
immediate and temporary surcharge of 53.82%on customers'water usage over 600 cubic feet per
month.The Company also asked for permission to access funds in an existing surcharge account.
The Company proposed to use the new surcharge and the balance in the surcharge account to pay
for several large capital improvement projects,and for the legal and accounting fees associated
with the proceeding.Application at 3-5.
On December 3,2015,the Commission issued a Notice of Application and Notice of
Intervention Deadline.No one intervened.The Commission also suspended the proposed effective
date for 90 days,until March 10,2016.Order No.33430.The effective date was suspended several
more times after that (see Order Nos.33478 and 33509)and,in October 2017,Commission granted
an indefinite stay of all proceedings.Order No.33911.
The parties entered settlement discussions and,on December 14,2018,Staff moved the
Commission to approve the Settlement Stipulation.The Commission then lifted the stay,and
issued a Notice of Proposed Settlement and Notice of Modified Procedure that allowed interested
persons to comment on the proposed settlement until January 16,2019.Order No.34225.
ORDER NO.34265 1
Commission Staff filed the only comments,and recommended the Commission approve the
Settlement Stipulation.
The Settlement Stipulation and the Staff's Comments are summarized below.
THE SETTLEMENT STIPULATION AND COMMENTS
Staff believes the Settlement Stipulation is fair,just,and reasonable,and that the
Commission should approve it in the public interest.See Settlement Stipulation;Staff Comments
at 5.The Settlement Stipulation provides,in summary:
1.Rates and Charges
The resulting settlement will not increase rates or charges to any Eagle Water customer.
Rather,the Company will discontinue hookup charges of $600 per Tariff Schedule No.5.The
balance of the hookup charge account (approximately $370,000)will remain in the account to be
used as a line-of-credit.
2.Accounting Correction
The parties submit that the Company has accumulated a substantial negative rate base
through years of improperly booking capital expenditures,and failing to maintain documentation
of plant.The negative rate base has accumulated to the point of creating unsound ratemaking
requests,such as the proposed surcharge in the underlyingApplication.Based on an extensive
audit conducted by Staff,the parties agree that a one-time accounting correction be made.That is,
an elimination of $1,236,375in negative rate base beginning in 2008 by reducing contributions in
aid of construction by the same amount.
3.Capitalized Plant
The parties have agreed to allow capitalization of improperly documented plant
including the Company's well 8,meters,repairs,equipment,materials,and labor.Going forward,
the Company must properly document and capitalize all plant and labor,or recovery will be
disallowed.
4.Accounting and Reporting
The parties have agreed that the Company will provide Staff with quarterly reports of
costs and expenses.Staff will conduct routine audits to ensure proper booking of expenditures.
5.Collaboration on Tariffs
The Company agreed to work with Staff to update the Company's tariff language to
the Commission's satisfaction.
ORDER NO.34265 2
DISCUSSION AND FINDINGS
The Commission considers settlement stipulations under Rules 271-277.IDAPA
31.01.01.271-277.When a settlement is presented to the Commission,the Commission will
prescribe the procedures appropriate to the nature of the settlement to consider it.IDAPA
31.01.01.274.Further,proponents of a settlement must show that the settlement is reasonable,in
the public interest,or otherwise in accordance with law or regulatory policy.IDAPA
31.01.01.275.Finally,the Commission is not bound by settlement agreements.Instead,the
Commission "will independently review any settlement proposed to it to determine whether the
settlement is just,fair and reasonable,in the public interest,or otherwise in accordance with law
or regulatory policy."IDAPA 31.01.01.276.
We have reviewed the record,including the Company's Application,the Settlement
Stipulation,and Staff's Comments.We note all parties have signed the Settlement Stipulation and
support it,and that no one opposes it.Further,the Parties represent that the Settlement Stipulation
reasonably resolves the case and that it is in the public interest for the Commission to approve
it.We agree.
We note that the Settlement Stipulation would not increase customers'rates.Further,
it corrects accounting errors in which the Company improperlybooked capital expenditures and
inadequatelydocumented plant installation for years,which contributed to the Company having a
negative rate base.The Company also misallocated costs between the Company's regulated utility
business and the owners'unregulated construction business.The Settlement Stipulation
reasonably corrects how the Company booked these capital expenditures and expenses,and
enables the Company to use the balances in three surcharge accounts as a line-of-credit for future
plant investments to benefit customers.Accordingly,on the record before us,we find it reasonable
and appropriateto approve the Settlement Stipulation in the public interest.IDAPA 31.01.01.273.
ORDER
IT IS HEREBY ORDERED that the Motion is granted,and the Settlement Stipulation
is approved.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order.Within seven (7)
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §61-626.
ORDER NO.34265 3
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of March 2019.
PAUL KJEL NDER,PRESIDENT
KR INE RAPER,C MMISSIONER
ERIC ANDERSON,COMMISSIONER
Diane M.Hanian
Commission Secretary
EAGWl501_final_kk
ORDER NO.34265 4