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Home My WebLink About20060324Reply comments.pdfFALLS WATER COMPANY 1770 Sabin Dr, Idaho Falls, Idaho 83406-6747 Website: www.faliswater.com Tel.: (208) 522-130, Fax: (208) 522-4099 " i' - '' ..,- "" March 23, 2006 "-': : - r ), ,: ,--' -) , , c. '" ' Idaho Public Utilities Commission 472 West Washington Street PO Box 83720 Boise, Idaho 83720-0074 Attached are seven (7) copies of the rebuttal comments for case no. FLS-05-1. Also enclosed is a 3.5" disk with a pdf file of the rebuttal comments. If you need anything else, please, let me know what you need. Thank you K. Scott Bruce Manager Falls Water Company, Inc. Enclosures K. Scott Bruce Falls Water Company, Inc. 1770 Sabin Dr Idaho Falls, ill 83406 Tel. (208) 522-1300 Fax (208) 522-4099 E-mail: scott(~Jallswater.com Representative for Falls Water Company, Inc. " '-. ' 'oJ, ;Liii,:;C:" ~.;" 'i' '~" BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION OF FALLS WATER COMPANY, INc. FOR AUTHORITY TO INCREASE ITS RATES AND CHARGES CASE NO. FLS-O5- REBUTTAL COMMENTS OF FALLS WATER COMPANY INe. Falls Water Company, Inc., in response to the Comments of the Commission Staff issued March 3, 2006, submits the following comments. COMPANY COMMENTS ACCOUNTING ISSUES OPERATING REVENUES Company accepts staff's adjustments to normalize revenues. OPERATING EXPENSES Company accepts staff adjustment A - Expenses, Regulatory & Bad Debt Expense - Staff Adjustment E, Ammortization Expense and Interest Expense - Staff Adjustment G, and Income Tax Expense - Staff Adjustment H. Company Adjustment 1 - Meter Reader Labor Expense Company accepts the staff's Employee Labor and Benefits - Staff Adjustment B with the following exception to the labor meter reading expense. The adjustment made by staff calculates that the meter reading labor takes only 20 hours each month to complete during the seven months that meters are read. The meter reading labor hours were 20 hours each month in the year 2000. Approximately 1 200 meters have been added to the meter reading route since July 2000. The current number of meters read each month starting April 2006 will be 2311. Additional meters will be added as new construction customers come on to the system. Another addition to meters read by the meter reader will be the conversion of the unmetered flat rate customers to metered. With the current number of meters in the water system, the meter reader will work 44 hours each month to complete the reading of the system. At the staff's proposed rate of$18.79 per hour the labor meter reading expense should be $5 787.32 plus 18.24% for employer payroll expenses (ie. Workers Compensation Insurance, FICA, FUT A, State Unemployment Insurance, etc.) for a total labor meter reading expense of $6 842.92. This adds $3 732.50 back to staff proposed yearly labor meter reading expense of 110.42. Company Adjustment 2 - Office and Phone Expenses Telephone Expense - Staff Adjustment C proposed to remove $1 200.00 from the telephone expense for cell phones used by the part time meter reader and the office receptionist. The company can accept that the expense for the two cell phones should not be paid by the customers. However, the company disagrees with the amount that is being deducted. The expense to the company for the two phones is not $50.00 per phone per month as the staff adjustment indicates. The rate structure for the billing for the company cell phones has two plans with three phones per plan. The first phone on each plan is $131.70 and $116.85 respectively. The second phone per plan is $28.44 and $27.44 respectively. The third phone is $6.41 per plan. The company contends that the adjustment for cell phones should be $6.41 per phone per month or $153.84 annually instead of the $1 200.00 annual adjustment made by staff. The company proposes that $1 046.16 be added back to the telephone expense for a total annual telephone expense of$10 965.00. In staff comments page 21 paragraph 3, it is recommended that the company provide water conservation information to the customers. To provide a billing stuffer for conservation to the customers, the company asks that the office expense be adjusted to allow for the printing and handling of the bill stuffer by the company s third party billing preparer. The cost to print and stuffthe conservation billing stuffer is $0.225 each. The total cost to send the conservation billing stuffer to 908 customers, the total number of customer at the end of 2005, is $654.30. The original rate case application did not include this expense. Company Adjustment 3 - Transportation and Training Expenses Company requests adjustments to Transportation Expense - Staff Adjustment D to include the current cost of fuel in the transportation calculation. Company recognizes that fuel costs have decreased from the costs used when calculating annual gasoline costs at the time it prepared the rate case application in late October 2005. Staff's price for regular grade gasoline of $2.269 may have been reflective of the retail price in late February 2006. However, the retail gasoline price for the Rocky Mountain Region as of March 20 2006 is $2.395 per gallon of regular grade gasoline. This price was taken from the Energy Information Administration website: http://www.eia.doe.gov/oil gas/petroleum/data publications/wr~/printer friendly version.htmlCompany recognizes that prices for gasoline are not stable and will continue to fluctuate. However company requests that the best known and reasonable pricing be used for this expense item. The company adjustment for the price of gasoline will increase the transportation expense by $1 032. over the staff's proposal for the transportation expense. Company requests adjustments to Training Expense - Staff Adjustment F. Company seeks to reclassify costs removed from transportation expense for travel and lodging pertaining to employee training in the amount of $954.50. Company has over the past two years sought to give more training opportunities to its employees. The addition of a new full-time employee in 2004 and the addition of another full-time employee and a part-time employee in 2005 have effectively doubled our work force during that time. The company wishes to continue to provide effective and beneficial training for its employees. Many of the classes and seminars to which our employees go are local; however, not all of the training needs are fulfilled in the Eastern Idaho area. The needed training will sometimes require that an employee travel outside our area for that training. Company feels that it is appropriate to train its employees well and well-trained employees benefit the customer. As the number of employees has increased, the expenditure necessary to properly train our employees has risen. Company requested adjustments to Staff's comments would result in an increase to revenues of $72 728.00 or 12.83% (See Attachment A). ENGINEERING ISSUES Metering of Un metered Customers Company agrees with Staff that the unmetered customers have a very high water usage rates. The high usage rate is attributable to plumbing fixture leaks that go unrepaired, excessive sprinkling of lawns and landscaping, and customers leaving water running during the winter to prevent frozen pipes. Another hidden water use would be water main and service line leaks that are unknown and the water usage from such leaks is calculated as part of the unmetered customers usage. The efficient utilization of existing water rights can postpone the need to purchase additional water rights. Staff comments suggest that the Company is seeking to initiate a program to replace 5% of its meters each year. The Company has been replacing 5% of its meters for the past four years. The Company s proposal in the original rate case application (found on page 4 paragraph 2) sought to use the meters from its replacement program to meter the unmetered customers over a six-year period. The Company did not propose a separate meter installation budget item in addition to its current meter replacement plan in order to meter unmetered customers in the system. The Company is not financially able to meet the Staff's proposed plan to meter all unmetered customers within three years. Currently, the Company has committed the Contributions-ill-Aid of Construction funds in its Capital Improvements Fund for a new well to be constructed during the next 14 months. The Company proposes that the Commission either allow the Company to meter unmetered customers within six years as originally proposed, or if the metering of unmetered customers is to be done within three years the Company proposes that a surcharge be granted to finance the project within the three years proposed by Staff. The amount of the surcharge would be $0.96 per customer per month for 36 months. The surcharge amount is derived as follows: Total Meters required Meters from Company s meter replacement program Additional new meters to be purchased Cost of237 new meters (fY $155.40 Installation for 472 residences with correct meter barrel Cost of installation for 89 residences with no meter barrel Cost of installation for 24 residences with wrong meter barrel Cost of 348 meters from company meter replacement program Total Cost of meter installation project Less: Cost of 348 meters from meter replacement program Cost oflabor to install 585 meters Total incremental cost for surcharge Total customers December 31, 2005 Per customer portion of incremental cost Monthly per customer surcharge for 36 months 585 348 237 $ 36 829. $ 16 359.52 $ 47 615. $ 14 786. $ 54,079. $169 670. ($54 079.20) ($14.625.00) $100 966. 908 34. Company agrees with Staff that a 3-year installation program would bring about the conservation benefits of this program in a timely manner. However, the Company is unable to implement a 3-yearconversion program for unmetered customers without additional financing in the form of the proposed surcharge. Tariff The Company adjusted the Staff's proposed tariff schedules to meet the Company recommended revenue requirement of$639 756.00 as shown in the table below: REVISED STAFF PROPOSED COMPANY PROPOSEDSCHEDULECURRENT TARIFF TARIFF TARIFF Minimum Commodity Minimum Commodity Minimum Commodity Charge Charge Charge Charge Charge Charge $11.50 $0.41 per $11.50 $0.45 per $11.58 $0.46 per 000 000 000 gallons over gallons over gallons over 000 000 000 $17.N/A $19.N/A $19.N/A $11.50 $0.41 per $11.50 $0.45 per $11.58 $0.46 per 000 000 000 gallons over gallons over gallons over 000 000 000 $11.50 $0.41 per $11.50 $0.45 per $11.58 $0.46 per 000 000 000 gallons over gallons over gallons over 000 000 000 The following table shows the resulting annual average bill for each customer class under the Company revised rate proposal as compared to the present bill and to the Staff's proposed rate. Annual Annual Average Bill Present Average Bill with Revised Average with Staff Percent Company PercentAnnual Bill Proposed Change from Proposed Change fromSchedule(Adjusted)Tariff Present Tariff Present, Metered Residential $202.$209.3.12%$211.79 4.4% , Flat Rate Residential $210.$235.12%$235.12% , Multi- Family $208.$215.3.3%$218.48 Commercial $388.$412.$419. Other Staff Engineering Comments Company accepts Staff's change in minimum charge water allowance from 20 000 gallons permonth to 12 000 gallons per month. Company also recognizes the importance of the Staff recommendation to better utilize the SCADA system to gather well production information. Weareprepared to implement this change. CUSTOMER RELATIONS Company is satisfied with Staff comments regarding customer relations. SUMMARY OF RECOMMENDATIONS Company recommendations are as follows: 1. Change tariffs as shown below to reflect an increase to revenues of $72 728.00 or 12.83%.2. Accept Staff recommendation for Company to provide water conservation/wise water use information to customers. 3. Accept Staff recommendation to implement the proposed $15 field collection charge and file a revised tariff that describes when the charge will apply.4. Either allow the Company to convert unmetered customer to metered in six years as Company originally proposed, or implement a $0.96 per customer per month surcharge for 36 months during which time the Company will convert unmetered customers to metered. 5. Accept Staffrecommendation to enhance existing SCADA software to implement better record keeping, especially for well production. 6. Accept Staff recommendation to require Company to provide previously unmetered customers with weatherization information to minimize frozen pipe problems at the time of conversion to metered status.7. File tariffs as described below. Commodity Charge, EachScheduleMinimum Chan!e, $000 Gallons over 12 000 Metered Residential $11.58 $0.46 Flat Rate Residential $19.N/A , Multi-Family $11.58 $0.46 , Commercial $11.58 $0.46 Respectfully submitted this 23rd day of March 2006. /(, K. Scott Bruce Manager Ordinary Income/Expense Income 400 . Operating Revenue 460 . Unmetered Revenue 461.1 . Metered Residential 461.2 . Commercial Revenue 474. Other Utility Revenue Total 400 . Operating Revenue Total Income Expense 601.5' labor Field 601.7' labor Meter Reading 601.8' labor Office 601.9' Admin - labor 603 . Salary Officers & Directors 604 . Employee Benefits 610. Purchased Water 615. Electrical Power 618. Chemicals 620.2 . Source M&S 620.6 . Distribution M&S 620.7' Postage 620.8 . Office 620.81 . Telephone Expense 620.82 . Bank Service Charges 620.83 . Office Utilities Expense 631.1' Engineering 631.2' Accounting 631.3' Attorney 635 . Testing 636.2 . Source Contract Repairs 636.3 . Trash 636.6 . Distribution Contract Repairs 636.7' Data Processing 641 . Rental of Property 642 . Rental of Equipment 650 . Transportation Expense 656 . Insurance Expense 660 . Advertising Expense 670 . Bad Debt Expense 675.1' Training Expenses 675.2 . Dues & Publications 675.4' IDHW Fee Expense 675.9 . Uncategorized Expenses Total Expense Net Ordinary Income Other Income/Expense Other Income 421 . Non-Utility Income Total Other Income Other Expense 403 . Depreciation Expense 407 . Amortization Expense - Other 408.10 . Regulatory Fee 426 . Misc. Non-Utility Expenses 427.3 . Interest Expense Total Other Expense Net Other Income Net Income Before Taxes 408 . Taxes 408.11' Property Taxes 409.10 . Fed Income Tax 409.11 . State Income Tax Total 408 . Taxes Net Income After Taxes STAFF Staff Return on Rate Base Recommended Overall Return on Rate Base Staff Revenue Deficiency Net to Gross Multiplier Staff Total Increase Recommended Staff Total Revenue Recommended Company Comments Falls Water Company, Inc. General Rate Case Fls-O5- Total Staff Proposed 124 145 427 188 058 637 567 028 567 028 130 561 110 42,777 62,368 704 23,255 112 102 919 952 091 24,496 872 744 919 762 966 715 893 4,406 3,410 395 198 906 078 868 845 529 9,468 054 926 900 870 988 100 540 160 869 626 626 015 1,453 1,471 46,940 (38 314) (11,446) 129 (2,149) 246) 734 179 535 48,714 2956 114 630,142 Corrected labor & Benefits Corrected Phone & Office Expense Adj. Corrected Transport & Training Exp 733 654 046 Total Co. Adjustments to Staff 733 654 046 032 032 955 955 733 700 987 420 Attachment 1 Total Company Pro osed 124 427 567 567 130 42, 102, 24,49 4,40 3,41 11, 547 1,45 1,47 COMPANY Return on Rate Base Requested Return on Rate Base % Company Revenue Deficiency Net to Gross Multiplier Total Increase Requested Total Revenue Requested (38 31' (18,86E (2,14~ 24f 59~ 295 72, 639,