20181214Decision Memo.pdf

DECISION MEMORANDUM
TO COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:BRANDON KARPEN
DEPUTY ATTORNEY GENERAL
DATE: DECEMBER 14,2018
SUBJECT: EAGLE WATER COMPANY'S APPLICATION FOR APPROVAL OF A
CUSTOMER SURCHARGE; CASE NO. EAG-W-15-01
On November 10, 2015, Eagle Water Company filed an Application seeking authority
to implement an immediate and temporary surcharge of 53.82% on customers' water usage in
excess of 600 cubic feet per month. The Company also requested permission to access funds in
an existing surcharge account. The new surcharge and the existing balance in the surcharge
account would be used by Eagle Water to pay for several large capital improvement projects, and
its legal and accounting fees associated with this proceeding. Application at 3-5.
On December 3, 2015, the Commission issued a Notice of Application and Notice of
Intervention Deadline. No intervenors appeared. The Commission also suspended the proposed
effective date for a period of 90 days, until March 10, 2016. Order No. 33430. The Company
subsequently agreed to several further suspensions. See Order Nos. 33478, 33509. On August 10,
2016, the Commission approved a stipulation between the Company and Staff to stay all
proceedings in this matter for one year, or "until such a time that the parties file a joint motion to
lift the stay." Order No. 33567. In October 2017, the Commission granted an indefinite stay of
all proceedings. Order No. 3391 l.
On December 14, 2018, Staff filed a Motion requesting the Commission approve a
settlement in this matter, and order a procedural schedule. This motion is now before the
Commission.
DECISION MEMORANDUM I
PROPOSED SETTLEMENT
As an initial matter, the parties represent that the Stipulation and proposed Settlement
is in the public interest and is fair, just and reasonable. The parties acknowledge that the
Commission is not bound by these representations and that the Commission will independently
review the proposed settlement to decide whether to approve it, reject it, or state conditions
under which to accept it. By way of summary, the Stipulation and Settlement proposes to fully
resolve the case as follows:
I. 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 underlying application. Based on an extensive
audit conducted by Staff, the parties agree that a one-time accounting correction be made. That
is, an elimination of negative base in 2008 of $1,236,375 in year 2008 represented in
contributions in aid of construction.
3. Capitalized Plant
The parties have agreed to allow capitalization of improperly documented plant. The
parties have agreed to include the Company's well 8, meters, repairs, equipment, materials, and
labor. Going forward, the Company must properly document and capitalize all plant and labor.
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 Tarffi
The Company agreed to work with Staff to update the Company's tariff language to
the Commission's satisfaction.
2DECISION MEMORANDUM
STAFF RECOMMENDATION
Staff recommends that the Commission issue Notice of the proposed settlement, and
an Order that the parties file written comments in support of the proposed settlement within 2l
days and that public comments remain open for the same period.
COMMISSION DECISION
Does the Commission wish to issue an Order that adopts the recommended schedule
as described above?
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aJDECISION MEMORANDUM
BRANDON KARPEN, ISB No. 7956
Deputy Attorney General
State of Idaho
Idaho Public Utilities Commission Staff
P.O. Box 83720
Boise, Idaho 83720-007 4
Telephone: [phone]
Facsimile: [phone]
[e-mail]. eov
IN THE MATTER OF EAGLE WATER
COMPANY'S APPLICATION FOR
AUTHORITY TO IMPLEMENT A
CUSTOMER SURCHARGE
- ,:j Lrlrl i tr f:ii l0: r+ 9
::-r.^r,
cAsE NO. EAG-W-15-01
MOTION FOR APPROVAL OF
STIPULATION AI\[D SETTLEMENT
fi i;-;:: j\,/I D
BEF'ORE THE IDAHO PUBLIC UTILITIES COMMISSION
The Idaho Public Utilities Commission Staffhereby moves the Commission for an Order
accepting the Settlement Stipulation filed herewith. See Commission Rules 56,216 and274.
1. On November 10, 2015, Eagle Water Company filed an Application seeking
authority to implement an immediate and temporary surcharge of 53.82% on customers' water
usage in excess of 600 cubic feet per month. The Company also requested permission to access
funds in an existing surcharge account.
2. The Commission suspended the proposed effective date several times, and
eventually stayed the application indefinitely. See Order Nos. 33478, 33509, 33567, and 3391 l.
3. After numerous audits, and extensive settlement discussions, the Staff and the
Company (the only Parties appearing in the case), agreed to resolve and settle all issues in the case.
A copy of the signed Stipulation evidencing that settlement is attached to this motion as
Attachment l.
MOTION FORAPPROVAL OF STIPULATION AND SETTLEMENT- I
4. The Parties respectfully request that the Commission consider the Motion, the
Stipulation, and the comments in support of the Stipulation to be filed at a later time.
5. As noted in the Stipulation, the Parties agree that the agreement is in the public
interest and that all of its terms and conditions are fair, just and reasonable.
NOW, THEREFORE, the Parties respectfully request that the Commission issue an order
in Case No. EAG-W-I5-01 granting this Motion and accepting the Stipulation (Attachment 1), in
its entirety, without material change or condition.
Respectfully submitted this 146 day of December, 2018
ATTORNEY GENERAL
General
Attomey for the Idaho Public Utilities
Commission Staff
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o
MOTION FOR APPROVAL OF STIPULATION AND SETTLEMENT.2
BRANDON KARPEN, ISB No. 7956
Deputy Attorney General
P.O. Box 83720
Boise, Idaho 83720-007 4
Telephone: [phone]
Attontey for Conunission Staff
MOLLY O'LEARY, ISB No. 4996
BizCouirselor@Law, PLLC
1775 W. State Street #150
Boise,ldaho 83702
Telephone: [phone] I 06
AttorueyJor Eagle Water Company, Itrc.
IN THE MATTER OF EAGLB WATER
COMPANY'S APPLICATION FOR
AUTIIORITY TO IMPLEMENT A
CUSTOMER SURCHARGE
BEFORE THE IDAHO PUBLIC UTTLITIES COMMISSION
)
)
)
)
)
CASE NO. EAG-W.Is.OI
JOINT SETTLEMENT
STIPULATION
Thi.s Settlement Stipulation is entered into by Eagle Water Company and the Staff of
thc ldaho Public Utilities Commission (collectively, "Parties"). The Parties, by and through their
counsel of record, hereby stipulate and agree to the following:
INTRODUCTION
The Parties agree this Stipulation represents a fair, just and reasonable compromise of
the issues raised in Eagle Water's Application for authority to implemenl a customer surcharge,
and beyond the issues raised in the Company's Application to recognize the needs and conditions
of the Company. The resulting settlement will not increase rates or charges to customers, and is
in the public interest. The Parties believe the Stipulation and ils acceptance by the Commission
represents a reasonable resolution of the systemic issues identiFred in this matter. The Parties,
therefore, recommend that the Commission, in accordance with Rule 2'74, approve the
Stipulation and all of irs terms and conditions without material change or condition.
Attachment 1
EAG-W-I5-01
JOTNT SETTLEMENT STIPULATION
BACKGROUND
l. On November 10, 2015, Eagle Water filed an Application seeking authority to
implement a53.82% surcharge on customers' water usage. Eagle Water requested that its
Application be processed via Modified Procedurc and that the surcharge become effective in
approximately 30 days. On Decernber 3, 2015, the Commission issued Order No. 33430
suspending the proposed effective date for a period of 90 days, until March 10,2016.
2. On March 4,2}l6,with Eagle Water's concurrence, Staff filed a motion to furrher
suspend the proposed effective date in this matter for an additional 90 days, until June 8, 2016.
The Commission approved the Motion in Order No. 33478.
3. On April 25,2016, pursuant to ldaho Code E 6l-622(4). the parties jointly
stipulated to again suspend the effective date in this matter until September 6, 2016. The parties
further agreed that by July l, 2016, Eagle Water would inform Staff of its position on settlemcnt,
or if the Company would rather sel a schedute for modified procedure for the Application. The
Commission approved this request in Order No. 33509.
4. Following the stipulated suspensions, on August 10, 2016, by agreement, the the
case was stayed until a full resolution of the issues was reached, or dismissal was requested by
Staff. See Order Nos. 33557, 33836, and 3391 l.
5. On December 4, 2018, the Company and Staff agreed to a full settlement.
TERMS OF THE STIPULATION
6. Fair Resolution. The settlement is rcached as a fair resolution to several disputed
issues between the parties, recognizing that no party was likely to prevail on every issue at
hearing. The settlement results in a significant change to the Company's financial books through
the allowancc of a one-time accounting adjustment. Customer rates will remain the same. The
Parties consider this a one-time accounting correction-an atypical process unique to the
Company's circumstances. This is not a reward for the Company, but a measure to ensure
stability for the Company and its customers based on reasonable evidence.
7. Negative Rate Base. The parties agree that the Company has accumulated a
negative rate base through yeirrs of improperly booking capital expenditures, and providing
inadequate documentation of plant installation. The negative rate base has accumulaled to the
point of creating unsound ratemaking r€guests. The parties agree to a one time elimination of
negative base in 2008 by reducing $1,236,375 in year 2008 contributions in aid of construction.
JOTNT SETTLEMENT STIPULATION ?
Year 2008 is used for the purpose of settlement due to the construction of well number 8 during
that year. Until now, well 8 has only been partially capitalized. The settlement capitalizes all
documented well 8 costs as plant in service.
8. Plant. The plant in service referenced in the Company's Application will be
capitalized, so long as the plant has not been previously capitalized and is supported by invoices
and proper docurnentation. This includes plant, equipment, materials, and labor, as specified in
The Company shall be allowed to capitalize a l5?o labor adder for this plant to reflect the
Company's undocumented labor costs. Going forward, the Company must properly document
and capitalize actual labor costs.
9. Other Plant. The parties agree to allow capitalization of certain plant in service
items put in service 2009-2015, such as meters, wells, and repairs that should have been
capitalized previously by the company, but were found by Staff to be improperly booked by the
Company.
10. Depreciation. Allow the Company to depreciate this newly capitalized plant and
begin depreciation as if placed in service, allowing for depreciation of the full amount.
ll. Meter Charges. The parties agree to allow the Company to continue to collect a
$245 meter charge. The Company agrees, that as a condition to allowing this charge, that it will
properly capitalize the meters and installation cost into plant-in-service in order to prevent a
reoccurrence of negative ratc base. Labor will be properly allocated between capitalized and
expensed amounts. The Cornpany acknowledges the meter charge may not change without prior
Commission approval.
12. Hookup charges/Line of credit. The Company will discontinue the $100 and $500
hookup charges it has been collecting pcr Tariff Schedule No. 5. The balance of the accounts that
contain the hookup charges ($365,580, as of July 12,2018) will be allowed to remain in the
surcharge account, and going fonvard be used as a line-of-credit (funds to be used and repaid).
The parties agree that the Company will deposit $45,288 of overearnings annually in to the
surchargc line-of-credit account beginning in 2016, This anangement shall remain until the
Company requests and the Commission approves different treatment.
13. Rent. The parties agree to allow the Company include in its revenue requirement
office rent of $950 per month. While Staff found that the Cornpany had improperly booked its
JOINT SETTLEMENT STtrULATION 3
office space rent in the past, the parties agree that $950 per month for the water company is a
reasonable compromise, and represents a proper market value.
14. Reallocation of costs. The Parties agree to Staff adjustments to the Company's
revenue requirement for rcallocation of costs between the Company and the owners' comingled
construction business. Costs were added and removed to properly rcflect the correct business
expenses and costs.
15. Water Testing. The parties agree to allow the Company to incrcase the revenue
requirement for water testing costs to better reflect the normalized costs over a 9-year testing
cycle.
16. Accounting and reporting. The Company aggress that it will provide Staff with
quaflerly reports. Staff will conduct routine audits to ensure propcr booking of expenditures.
17. Successor in lnterest. Any successor in interest to Eagle Water shall comply with
all terms of this agreement
CUSTOMER RATES
18. Customer Rates. The parties agree that the Company's water rates will be
unchanged as a result of this agreement.
19. Tariffs. The Company agrees to work with Smff to updates the Company's tariff
language.
FURTHER COOPERATION
20. Supporting Comments. The Parties will file written comments supporting this
Stipularion within 2l days of the Commission providing notice of the proposed Stipulation.
21. Just and Reasonable: The Parties agree that this Stipulation is in the public's
interest and that all of its terms and conditions are fair, just and reasonable. The Parties agree to
use their best efforts to obtain Commission approval of the Stipulation.
22. No Acknowledgement. No Party shall be bound, benefited or prejudiced by any
position asserted in the negotiation of this Stipulation, except to the extent expressly stated
herein, nor shall this Stipulation be construed as a waiver of the rights of any Party unless such
rights are expressly waived herein. Execution of this Stipulation shall not be deemed to
constitute an acknowledgement by any Pany of the validity or invalidity of any particular
method, theory or principle of regulation or cost recovery. No Party shall be deemed to have
agreed that any method, theory or principle of regulation or cost recovery employed in aniving at
JOINT SETTLEMENT STIPULATION 4
this Stipulation is appropriate for resolving any issues in any other proceeding in the furure. No
findings of fact or conclusion of larv other than those stated herein shall be deemed to be implicit
in this Stipulation.
23, Commission Approval. The obligations of the Parties under this Stipulation are
subject to the Commission's approval of this Stipulation in accordance rvith W 274-276.
24. Confidentiality. The Parties agree that this Stipulation represents a compromise of
the positions of the Parties. Therefore, other than any testimony filed in support of the approval
of this Stipulation, and except to thc extent necessary for a Party to explain bcforc the
Commission its own statements and positions rvith respect to the Stipulation, as dirccted by RP
27?, all statements made and positions taken in negotiations relating to this Stipulation shall be
confidential ond rvill not be admissible in evidence in this or any other proceeding.
25. Best Efforts. The Parties submit this Stipulation to the Cornmission and
recommend approval in is entirety. Parties shall support this Stipulation before the Commission,
and no Party shall appeal a Comrnission Order approving the Stipulation or an issue resolved by
the Stipulation. lf this Stipulation is chrllenged by any person not a party to the Stipulation, the
Parties to this Stipulation reserve the right to file testimony, cross-examine witnesses, and put on
such case, as they deem appropriate to respond fully to the issues presenled, including the right
to raise issues that are incorporated in the settlemenr embodied in this Stipulation.
Notwithstanding this reservation of rights, the Parties to this Stipulation agree that they will
continue to support the Commission's adoption of the terms of this Stipulation.
26. Counterparts. This Stipulation may be executed in counterparts and each signed
counterpart shall constitute an original docurnent.
DATED this/0dUay of December 2018.DATED this{tiy of December 2018
J*,i fhr)rcft-
Terri Carlock, Utilities Division Adminishator
Idaho Public Utilities Commissiott Sra/f
Robert V. DeS ., President
Eagle ll/ater Contpany, lnc,
JOTNT SETTLEMENT STIPULATION 5