20080111final_order_no_30484.pdf

Office of the Secretary
Service Date
January 11 , 2008
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF FALLS WATER COMPANY FOR AN
ORDER AUTHORIZING INCREASES IN
THE COMPANY'S RATES AND CHARGES
FOR WATER SERVICE
ORDER NO. 30484
CASE NO. FLS-07-
On July 27 2007, Falls Water Company filed a general rate case Application initially
seeking authority to increase its metered rates an average of 46.2%. If approved, the rates would
increase the Company s annual revenue by $330 705. Because the Company is in the process of
converting its remaining flat-rate residential customers to metered service, the Company did not
request any increase in its flat-rate service. Falls Water anticipates that it will finish converting
its remaining flat-rate customers to metered service by mid-2008.
approximately 3 200 customers near Ammon and Idaho Falls.
The Company serves
The Commission Staff was the only other party to participate in this case. After
performing its audit, Staff filed its comments on November 21 2007. Staff recommended Falls
Water s annual revenues be increased by approximately $176 900, or an average increase in its
metered rates of 24.7%. The Company filed rebuttal comments on December 7, 2007, agreeing
with some Staff adjustments and disputing others. On rebuttal the Company amended its
proposed rate increase to 44.22%.
After reviewing the comments of the parties, the testimony at our public hearing and
the customer comments, the Commission authorizes Falls Water to increase its metered rates an
average of 27.93%, resulting in an annual revenue increase of $200 060. The rates contained in
this Order shall be effective for service rendered on or after January 14 2008.
BACKGROUND
In its Application Falls Water maintained that its revenues are no longer reasonable
given the Company s increasing costs. The Company reported that it is in the final stages of
converting the remaining flat-rate residential customers (approximately 350) to metered service.
Falls Water anticipates completing the installation of its remaining meters by mid-2008.
In Order No. 30404, the Commission set a deadline for intervention and suspended
the Company s Application for a period of 30 days plus 5 months from September 1 , 2007.
ORDER NO. 30484
There were no petitions to intervene. On September 4, 2007, the Commission Secretary issued
the Notice of Parties identifying the Company and Commission Staff as parties. The parties
subsequently recommended the rate case be processed under Modified Procedure and the
Commission convene a public hearing in Idaho Falls. The purpose of the public hearing was to
take testimony from customers and members of the public.
On October 24, 2007, the Commission issued Order No. 30457 adopting the parties
proposed schedule. Staff conducted a public workshop in Idaho Falls on November 15 and filed
its written comments on November 21 , 2007. Falls Water filed its rebuttal comments on
December 7 and the Commission held its public hearing in Idaho Falls on December 18, 2007.
The customer who testified at the public hearing and the six customers who submitted written
comments all oppose the rate increase mostly objecting to the size of the proposed increase. In
addition, several customers complained of poor water pressure during the past summer.
TEST YEAR AND CAPITAL STRUCTURE
1. Test Year.The Company s Application uses a test year ending December 31
2006, based upon 12 months of actual data adjusted to normalize revenues and included "known
and measurable" changes. Application at 2. Staff did not oppose the use of the 2006 test year.
Staff Comments at 2, 13. We find the use of the 2006 test year reasonable for purposes of this
case.
2. Capital Structure/Rate of Return. The Company proposed a capital structure of
60.01 % long-term debt and 39.99% common equity. Company Exh. 3. The Company proposed
to use the actual cost of its long-term debt: $248 944 at 3.25% and $94 382 at 6.0%. Id. The
Company requested a 12.0% return on its common equity. As shown in the table below, this
capital structure produces an overall rate of return of 7.2%. Staff agreed with the Company
proposed capital structure and its costs for debt and equity. Staff Comments at 2. Based upon
our review of the parties' comments , we adopt the proposed capital structure shown below. We
find that the capital structure produces a 7.2% overall rate of return, which is just and reasonable.
The 12% return on equity is consistent with the equity returns authorized for other small water
companIes.
ORDER NO. 30484
Component
Long-term Debt
Long-term Loan
Common Equity
Amount
$248 944
382
228,791
$572 117
Capital Structure
Percent of
Capital
43.51%
16.50%
39.99%
100.
Cost
25%
00%
12.
Weie:hted Cost
1.41 %
99%
80%
7.20%
Source: Company Exh. 3; Staff Comments at 2.
EXPENSE AND REVENUE ISSUES
A. Agreed Expense Adjustments
1. Agreed Expense Adiustments. The Company proposed pro forma adjustments to
nine expense categories. Exh. No.2. The Company proposed a revenue adjustment of $28 060
to eliminate the flat-rate schedule (caused by the conversion to metered service) and annualized
customer revenues for the test year. Exh. 2, Co!. B. Regulatory fees associated with the increase
in revenues were also adjusted. Staff accepted these adjustments. The Company also proposed
and Staff accepted expense adjustments for source of supply, administration, equipment and
vehicles, rate case expense, pro forma depreciation expense, and property and irrigation taxes.
Exh. 2, Cols. E, F, H, I, J, K.
In its comments, Staff recommended the Commission not accept two adjustments
proposed by the Company. Staff recommended that accounting and legal expenses be reduced
by $956.83 and $4 067.25, respectively. Staff Comments at 6-, Attch. 1 , Co!. C, ll. 28-29. In
its rebuttal comments, the Company concurred with Staffs adjustment for accounting and
attorney fees. Rebuttal Comments at 3. Based upon the record and the agreement of the parties
the Commission finds these agreed adjustments to the test year are reasonable.
B. Disputed Adjustments
Wage and Salary Adiustments In its November 21 comments, Staff
recommended the Commission reduce the salary and benefits expenses for an employee who was
to be hired on December 10, 2007. Staff also deleted a proposed pay increase of 5.25% that was
scheduled to begin on December 18, 2007. These two Staff adjustments would reduce the
Company s proposed labor expenses by $31 023.12. Staff Comments at 4.
In its rebuttal comments, the Company asserted that it did actually hire the new
employee but at a smaller wage than initially proposed in its Application. The Company also
ORDER NO. 30484
took exception to Staffs proposed 5.25% pay adjustment. The Company indicated that it did
increase the salaries of its employees. The 5.25% wage increase results in an increase in the
annual salary and expenses of $3 905. The annual match for the 401(k) also increased wage
expenses by $98.51. Thus, the Company agreed that a reduction in wages and salary expense was
reasonable but only a reduction of $6 665.90.
Company s adjustment on rebuttal.
Rebuttal at 1-Staff concurred with the
Commission FindinJ!s Given the subsequent agreement between the Company and
Staff, the Commission finds the Company s labor adjustments in its rebuttal are reasonable. The
Company has demonstrated it did hire the new employee and increased the wages of its
employees. Consequently, we accept the Company s wages and salary expense adjustments
totaling $6 665.90.
2. Office Rental Expense Staff also recommended the Commission reduce the
Company s test year office rental expense by $24 643.50. Staff Comments at 4-5. Although the
Company anticipated renting new office space in 2008, Staff alleged the new office is not yet
under construction. Staff maintained the time to include the additional rental expense in rates is
when the Company actually moves from its current office to the new facilities. Consequently,
Staff maintained the new office space is not yet "used and useful." Id. at 5.
On rebuttal , the Company urged the Commission to include the increased office
rental expense. The Company stated the increased rental expense will allow the utility to
consolidate its "office, maintenance and storage functions at one location.Rebuttal at 2.
Construction (of the new building) will begin in the early spring of 2008 and we expect to
occupy the facilities by June of 2008. . . .Id. The Company also maintained that the "used and
useful" test is normally associated with assets and not expenses.
Commission FindinJ!s Based upon our review of the parties' comments , we find it
is appropriate to disallow the proposed increase in office rental expense from the test year.
Although we do not question Falls Water s desire to move into its new quarters , we find it
inappropriate to allow the increase in rental expense at this time. As the Company conceded
the new building has not yet been constructed, the permitting process has
begun, land has been acquired by the building owner and lease agreements
are in place. Construction has been delayed due to delays in the permitting
process and now freezing weather has delayed commencement of
construction.
ORDER NO. 30484
Company Rebuttal at 2 (emphasis added). The Company noted that construction of the building
has been delayed but the Company expects to occupy its new facilities in June 2008. At this
juncture we find the new rental expense is too speculative to be "known." In other words, the
exact occupancy date is not certain. We find it is unreasonable to allow the Company to recover
12 months of rental expense when the facility may be occupied for only 6 months or less.
3. Consulting Services Expense. Staff also removed $24 000 in consulting fees.
Staff noted that Falls Water is currently paying $2 000 per month to RDI West for consulting
services. Staff recommended the consulting fees be removed for three reasons. First, RDI West
is a subsidiary of Frontier Property Group, the previous owner of Falls Water Company. Kelly
Howell is not only the president and a director of Frontier Property Group, but he is also a
director of Falls Water Company. Staff was concerned about the affiliate/interlocking
relationship between Falls Water and RDI West. Staff maintained that the agreement with RDI
West for consulting services raises concern about an affiliate transaction and the utility has the
burden of showing the consulting services were at reasonable cost. Staff Comments at 5-
Second, Staff asserted the consulting services of RDI West appear to duplicate the
services provided by the employees of Falls Water. In its production request No. 28, Staff asked
for a copy of the consulting contract between RDI West and Falls Water Company. In response
the president of Falls Water provided "terms" of the agreement but did not produce any written
contract signed by both parties. Id. at 5.
Finally, Staff argued that this expense should "more properly (be) viewed as part of
the (prior) sale (of the Company) and it should not be included as an expense for ratemaking
purposes.Id. at 5. The expenses paid to RDI West benefits the shareholders and should not be
paid by the customers. Id. at 6.
On rebuttal, the Company took exception to Staffs recommendation to remove the
consulting fees from the Company s expenses. The Company conceded that RDI West is a
subsidiary of Frontier Property Group (the previous owner of Falls Water Company) and that
Mr. Howell is an officer of Frontier Group and a director of Falls Water Company. Rebuttal at
3. Falls Water stated it pays no salary to the directors of the Company "due primarily to cash
flow restraints.Id. The Company maintained that the services of Mr. Howell through his
membership on the board and his past experience in operating the Company provide "a valuable
ORDER NO. 30484
resource to the management of the Company. The $24 000 paid to RDI West for 'consUlting
services' are in lieu of director fees.Id. at 3.
Commission FindinJ!s The Commission finds it is inappropriate to include the
consulting fees as a pro forma adjustment to the test year for three reasons. First, the Company
has failed to meet its burden of demonstrating the reasonableness of its agreement with RDI
West. Mr. Howell is on the Board of Directors for Falls Water and is an officer of Frontier
Property Group, the parent of RDI West. As Staff pointed out in its comments, our Supreme
Court has ruled that transactions between affiliated companies are to be subject to close scrutiny
and the utility has the burden of proving the reasonableness of its affiliated transactions. General
Telephone of the Northwest v. Idaho PUC 109 Idaho 942, 712 P.2d 651 (1986); Boise Water
Corporation v. Idaho PUC 97 Idaho 832, 555 P.2d 163 (1976). The same standard should apply
to transactions between the utility and entities owned or controlled by members of the board.
Falls Water s Board of Directors has a fiduciary duty to the Company and a transaction with
another company affiliated with a Board member deserves close scrutiny. Under this standard
the Company cannot simply rely on the fact that consulting expenses were incurred.
Second, as part of its audit, Staff asked in production request No. 28 for a copy of the
contract between Falls Water and RDI West. In response to this production request, the
Company provided no written contract but provided a Consulting Services "Agreement." Staff
Comments at 5. A review of this Agreement is instructive. In particular, the Agreement is not
dated, does not bear any signature from RDI West, and does not indicate any hourly rate for the
consulting services. The Agreement merely states that the consulting fee is $2 000 per month.
The Agreement does require RDI West to consult with Falls Water s Board of Directors and
management to optimize the water system, assist in the design of the system, train and educate
the Board of Directors, and "Spend as Much Time is (sic) Needed by the Board either as a Group
or Individually." From the terms of the Agreement, it appears there is some redundancy between
the work product under the consulting agreement and the documents provided by the Company
engineering firm, Schiess & Associates.
Finally, we note that Mr. Howell (through RDI West) is paid $2 000 per month for
consulting but the officers and directors of Falls Water are not paid salaries "due primarily to
cash flow restraints." Rebuttal at 3. From this, it appears the only Falls Water director or officer
being paid is Mr. Howell. We concluded Falls Water has not adequately demonstrated that the
ORDER NO. 30484
amount it paid for consulting fees was reasonable and that the fees were necessary in the
ordinary course of the Company s business.
RATE BASE
A. Agreed Issues
The Company proposed several rate base adjustments, which were not contested by
Staff. First, the Company proposed adding $181 522.80 to rate base, which represents the cost of
the new meters added to the system in 2007 and 2008. The Company also proposed to add
$152 800, which represents the cost of constructing four separate line-looping projects in 2007.
The Company maintained that these projects are necessary to improve system reliability,
pressure and quality of service. Finally, the Company and Staff agreed that the Company
working capital should be based on 1/8th of authorized operating expenses. Application at 3
Exh. No.1; Staff Attch. 2. Based upon the agreement of the parties, we find these rate base
adjustments (subject to the operating adjustments decided above) to be reasonable. In particular
the Company indicated that its line-looping projects would improve water pressure in the system.
We note that several customers complained in their written comments of poor water pressure.
B. Disputed Issues
As described in greater detail below, Staff recommended three adjustments to the
Company s proposed rate base. The Company disputed these adjustments.
1. Well Site No.. Staff removed $160 000 from rate base, which represents the
cost of purchasing the property for the site for new Well No.9. Well No.9 was initially
expected to be online by November 2007, but the Company now anticipates it will be placed into
service in mid-2008. Staff made this adjustment for two reasons. First, because the well is not
currently used and useful and will not be placed into service until the summer of 2008 , Staff
removed $160 000 from rate base. Staff moved this amount to the "plant held for future use
account. Staff Comments at
Second, the property for Well No.9 was purchased from Rockwell Development, an
affiliate company of Falls Water Company. Staff Comments at 8. Staff noted that transactions
between utilities and their affiliates are subject to close scrutiny and Falls Water carries the
burden of proving the reasonableness of its affiliated transactions. Id. Staff asserted the
Company has not satisfactory demonstrated that the price of the lot was reasonable. The utility
ORDER NO. 30484
simply cannot rely upon the fact that expenditures were incurred for transactions with affiliates
to be included in rates. Id.
2. Water Rights. Staff also recommended the Commission remove $112 500 from
rate base which represents the down payment for water rights for Well No.9. Staff Comments at
7. Staff made this adjustment for two reasons. First, the purchase was not completed by the end
of the test year and the well is not yet in service. Staff stated that the well is not expected to
come online until the summer of 2008. Id. at 8. Staff removed this item from rate base and also
transferred this amount to "plant held for future use.Id. Staff agreed that when these items are
actually being used to provide service to Falls Water s customers then these items would be
properly included in rate base.
Second, Staff expressed concern that the purchase of water rights may have been
from a company that is affiliated with an officer of Falls Water. Falls Water indicated it entered
into an agreement to purchase water rights from Idaho Sod Farm. Although Staff could not find
a business name "Idaho Sod Farm " Staff did find a company called Idaho Sod, Inc. Jay
Johnson, the vice president of Falls Water, is listed on the annual reports filed with the Secretary
of State s office as the vice president of Idaho Sod, Inc. for the years 2003 through 2005. There
is no vice president listed on the annual reports filed for calendar years 2006 and 2007.
Id. at 8.
In its rebuttal, the Company objected to Staffs rate base adjustments and
characterized the Staff adjustments as "related and intertwined.Rebuttal at 3. The Company
indicated the Staff adjustment for water rights and Well No.9 ($272 500) have "double counted"
the Company rate base investments. Rebuttal at 4. The Company argued that Staffs
adjustments removed this amount from rate base as "plant held for future use" and again as a
contribution in aid of construction.Id. at 4.
Commission FindinJ!s We address Staffs first two adjustments regarding Well No.
9 together. Based upon our review of the record, we reject the Company s argument. First, the
Company does not dispute that Well No.9 is not currently used to provide services to customers
and will not be put into service until mid-2008. Rebuttal at 3-4. As such, the Company
investment in the property and the water rights associated with the well are not used and useful
and are appropriately classified as "plant held for future use.
The Commission has adopted a Uniform System of Accounts (USOA) for water
utilities. IDAPA 31.12.01.104. More specifically, USOA Account 103 (Plant Held for Future
ORDER NO. 30484
Use) provides that utilities such as Falls Water "shall include the original cost of property owned
and held for future use in utility service under a definite plan for such use." Based upon the
definition of Account 1 03, it appears that the $272 500 costs associated with Well No.9 were
properly classified as plant held for future use because the assets are not currently used and
useful. Moreover, it is uncertain when the well will actually be placed into service.
Second, noticeably absent from the Company s rebuttal was any argument addressing
Staffs affiliated transaction arguments for Well No.9 for both the property and water rights.
We find there is substantial and competent evidence that the property for Well No.9 was
purchased from an affiliate of Falls Water. For affiliate expense to be justified, the utility needs
to provide compelling evidence of arm s length bargaining when incurring costs between the
utility and the affiliate. In addition, it appears that the water rights were acquired from a
company affiliated with Falls Water s vice president. Because we determine that these rate base
items are properly classified as plant held for future use, we do not need to conclusively
determine at this point whether the cost for the property and water rights were reasonable.
However, at such time as the Company brings the well into service, we expect it to demonstrate
to the Commission s satisfaction the reasonableness of its costs for the purchase of the lot and
water rights for Well No.
We further find the Company s "double counting" argument is unpersuasive. Staffs
accounting adjustments are in compliance with the appropriate accounting standards in the
USOA. Account 271 (Contributions in Aid of Construction) provides that this account shall
include: "Any amount or item of money, services or property received by a utility, from any
person or governmental agency, any portion of which is provided at no cost to the utility, which
represents an addition or transfer to the capital of the utility, and which is utilized to offset the
acquisition, improvement or construction costs of the utility s property, facilities or equipment
used to provide utility services to the public." The $272 500 representing Well No.9 costs is
appropriately classified as "plant held for future use." The funds used to acquire these assets (the
lot for Well No.9 and the down payment for water rights) come from Account 271
(Contributions in Aid of Construction). Consequently, the Staff has made two accounting
adjustments but it does not constitute inappropriate accounting or double counting under the
USOA. In essence, the contributions require one accounting entry and plant held for future use
requires the second accounting entry. When Well No.9 comes online, the Company carries the
ORDER NO. 30484
burden of showing the reasonable and prudent costs associated with Well No.9 should be
included in rate base.
3. Contributions in Aid of Construction. The Staff also proposed to remove from
rate base $166 100.87 because this amount represents "contributions in aid of construction.
Staff explained the Company currently receives contributions in aid of construction in the form
of "impact fees" on a per acre basis from subdivision developers as part of Falls Water s line
extension agreements. Staff Comments at 7. Contributions in aid of construction (Account 271)
offset rate base because developers are "contributing" fees that are used to subsequently acquire
new sources of supply and other associated plant items. Id. The separate adjustments removing
the contributions in aid of construction ($166 100.87), the down payment for water rights
($112 500), and the purchase price for the property for Well No.9 ($160 000) removes
$438 600.87 from rate base. Staff Comments at 7, Staff Attch. 2.
The Company also objected to Staffs impact fee adjustment of $166 100.87 for two
reasons. First, Falls Water maintained that it is unique among water utilities because it collects a
contribution in aid of construction (i., impact fees) from developers to pay for future sources
of supply and storage assets required to meet growth on the system.
. ..
Rebuttal at 3. The
Company stated the contributed fees are considered "contributions held for future use, (and
operate as) an offset to property held for future use." Company Rebuttal at 4. The Company
books these contributions as "dedicated funds for future construction of source of supply and
storage facilities.Id.
Second, Falls Water asserted that Staffs removal of the $166 100.87 from rate base
precludes it "from earning a fair, just and reasonable return on investor fees.Id. The Company
maintained that Staff s accounting approach "artificially suppresses current rates to existing
customers and ensures future rate shock to all customers when a new water source or storage
asset is placed into service without the benefit of an additional contribution in aid of construction
offset." Id.
Commission Findings: The Company is correct that the $166 100 impact fee
contributions will normally be used to defray the costs of "future development of source of
supply and storage facilities. The Company treats these contributed funds as dedicated funds for
future construction of source of supply and storage facilities." However, the Company is not
correct in its statement that these contributions operate as "an offset to property held for future
ORDER NO. 30484
use." These contributions/impact fees represent capital "contributed" by developers "at no cost
to the utility.See supra definition of Account 271 at page 9. The contributions are not
provided by the shareholders so including the contributions in rate base and earning the overall
rate of return is not appropriate.
We also reject Falls Water s rebuttal argument that it is precluded from earning a fair
return on the $166 100.87. First, these contributions are not investor funds - they are contributed
funds. Second, nothing precludes the Company from using its impact fee contributions to earn
interest in secure financial investments (CDs, short-term bonds, etc.) until such time as these
funds are used to acquire utility plant.Given Falls Water s "unique ability to obtain
contributions in aid of construction in the form of impact fees, we see no reason why these funds
could not be used to generate short-term interest income until such time as the contributions are
used to acquire rate base assets.
In summary, we find the Company s rate base in this case to be $291 998. Having
determined the rate base, we find the Company s total revenue requirement is $916 243.27. This
results in an annual revenue increase of $200 060 or approximately a 27.93% increase in its
metered rates.
RATE DESIGN
A. Conservation Issues
In its comments, Staff recommended that Falls Water consider instituting a summer-
winter differential for the monthly minimum allowance of 12 000 gallons per customer. Staff
also recommended that when the Company completes installing meters for all its customers , the
Company consider instituting different minimum charges for customers with different meter
sizes. Staff Comments at 11. Staff noted that this is a common practice with water utilities
especially since most companies have higher fixed charges for larger meters. Id. at 12. "Setting
the minimum charge as a linear function of the meter size is a reasonable and simple approach.
Id. Consequently, Staff recommended that these two issues be addressed in the Company s next
general rate case.
The Company did not respond to these issues in its rebuttal. We find these are
reasonable suggestions and direct the Company to address these issue in its next rate case.
ORDER NO. 30484
B. Rate Structure
1. Non-Recurring Rates . The Company proposed to increase the connection charge
associated with the two larger meter sizes. The Company proposed that the connection charge
for its 1.inch meter be increased from $825 to $930. The Company also proposed to increase
the connection charge for its 2-inch meter from $900 to $1 205. The Company demonstrated in
Exhibit 6 that the current rates do not cover the cost of the meter materials (meter, fittings and
housing). Staff agreed with these two proposals. Based upon our review of the record, we find
the increase in the meter connection charges is reasonable.
2. Recurring Rates . Both the Company and Staffs recommended rate designs for
recurring monthly rates are based upon their respective annual revenue requirements. The
Company proposed a monthly minimum customer charge of $16., which includes 12 000
gallons of water usage. Staff proposed a monthly customer charge of $14., which includes
000 gallons of water usage. Both the Company and Staff proposed to continue the current
flat-rate monthly charge of $20.17 until meters are installed.
Commission FindinJ!s We find the monthly customer charge for metered customers
shall be set at $14.00. Setting the monthly charge at $14.00 results in a commodity charge above
the 12 000-gallon monthly allowance of $0.667 per 1 000 gallons. We find the monthly
minimum charge and the commodity charge to be just and reasonable.
ULTIMATE FINDINGS OF FACT AND CONCLUSIONS OF LAW
Falls Water is a water corporation subject to our regulatory jurisdiction pursuant to
Idaho Code ~~ 61-125 and 61-129. Falls Water is an Idaho corporation and the holder of
Certificate of Public Convenience and Necessity No. 236. The Commission has jurisdiction over
this matter as authorized by Idaho Code ~~ 61-502 and 61-622.
Having fully reviewed the record in this proceeding, we find that the Company
. existing rates are unreasonable and do not afford sufficient revenue to the Company. We find
that it is just and reasonable for the Company to receive a 12.0% return on equity and an overall
rate of return of 7.2%. The Company is authorized to increase its annual revenues by $200 060
for a total revenue requirement of$916 243. See the Appendix to this Order.
We conclude that the rates and charges set in this Order are fair, just and reasonable.
ORDER NO. 30484
ORDER
IT IS HEREBY ORDERED that Falls Water Company s request to increase rates is
granted as conditioned and modified in this Order.
IT IS FURTHER ORDERED that the Company submit tariffs in compliance with the
rates identified in this Order. The rates and charges authorized by this Order are effective for
service rendered on or after January 14 2008.
IT IS FURTHER ORDERED that the Company address the following issues in its
next general rate case: (1) the 12 000-gallon usage allowance under the minimum monthly
charge; (2) the implementation of seasonal differentials in the allowance; and (3) whether the
minimum monthly charge should be different based upon meter size.
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. 30484
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this I r"
day of January 2008.
J~ lA
MACK A. DFORD, PRES I
~RSHA H. SMITH, COMMISSION
ATTEST:
5eiri D. JeWel
C~~mission Secretary
bls/O:FLS-07-01 dh3
ORDER NO. 30484
FALLS WATER COMPANY
REVENUES & EXPENSES
TEST YEAR ENDED 12/31/2006
Commission Order No. 30484
Case No. FLS-07-
Company
Pro osed
Ordinary Income/Expense
Income
400 . Operating Revenue
460 . Unmetered Revenue5 461.1 . Metered Residential6 461.2' Commercial Revenue
474. Other Utility Revenue
Total 400 . Operating Revenue
Total Income10 Expense
11 601.5 . Labor Field
12 601.7 . Labor Meter Reading
13 601.8' Labor Office
14 601.9' Admin - Labor15 603. Salary Officers & Directors16 604, Employee Benefits17 610. Purchased Water18 615. Electrical Power19 618. Chemicals
20 620.2 . Source M&S
21 620.6' Distribution M&S
22 620.7 . Postage
23 620.8 . Office
24 620.81 . Telephone Expense
25 620.82 . Bank service charges
26 620.83 . Office Utilites Expense
27 631.1' Engineering
28 631.2' Accounting
29 631.3' Attorney30 635 . Testing
31 636.2 . Source Contract Repairs
32 636.3 . Trash
33 636.6 . Distribution Contract Repairs
34 636.7' Data Processing
35 636.8 . Contract Service - Consulting36 641 . Rental of Property37 642 . Rental of Equipment38 650 . Transportation Expense39 656 . Insurance Expense40 660 . Advertising Expense41 665, Regulatory Commission Expenses42 670 . Bad Debt Expense
43 675.1 . Training Expenses
44 675.2 . Dues & Publications45 675.4 . DEQ Fee Expense
46 675.9' Uncategorized Expenses47 Total Expense
48 Net Ordinary Income49 Other Expense50 403 . Depreciation Expense51 408 . Taxes52 408.11 . Property Taxes53 409.10' Fed Income Tax54 409.11 . State Income Tax55 Total 408 . Taxes
56 408.10' Regulatory Fee57 Total Other Expense
58 Net Other Income
Net Income
Staff
Proposed
Commission
Order
693 756.693 756.693 756.
21,592.592.592.
835.835.835.
716 183.716 183.716 183.
716 183.716 183.24 716,18324
181 26418 172 240.185 169.
292.56.61762 292.
128 00106 112 63510 117 33156
81827 859.026.
11200 112.112.
109 77311 109.77311 109 773.
816.816.816.
10.719.719.10,719.
105.105.105.
293.14,293.293.
24,290.24,29004 290.
82406 824.12.824.
73100 731.731.
63615 636.636.
282.282.28250
12500 168.16817
01600 94875 948.
09969 099.099.
1,400.1,400.1,400.
01736 01736 017.
30,420.30,42000 30,420.
3,716.716.716.
00000
511.868.868.
108.108.20 108.
35,01323 013.013.
097.12.09700 097.
081.45 081.45 081.45
879.87955 879.
688.688.688.
515.515.515.
275.27500 275.
10.988.988.988.
12500 125.125.
861 037.41 776 346.798 81392
(144 854.16)(60 163.47)(82 630.68)
22222 222.22222
12177 12177 12177
3000
12,15177
780.43
87,154.42
(87 154.42)
(232 008.59)
30.
12.151.
780.43
154.42
(87 154.42)
(169 785.10)
30.
151.
780.43
87,154.42
(87 154.42)
(147 317.89)
APPENDIX
CASE NO. FLS-07 -
ORDER NO. 30484
Page 1 of 3
FALLS WATER COMPANY
CALCULATION OF RATE BASE
COMMISSION ORDER 30484
CASE NO. FLS-07-
Rate Base 2006 (A)
Net Assets
1 Utility Plant in Service
Net Correcting Entry to Utility Plant in Service
Corrected Total of Utility Plant in Service
4 Staff adjustment to remove to Plant Held for Future Use (Well 9)
6 Less: Contributions in Aid of Construction
7 Company Correcting Entry to Contributions in Aid of Construction
8 Company Corrected Total of Contributions in Aid of Construction
9 Staff adjustment to Contributions in Aid of Construction
10 Staff Total Contributions in Aid of Construction11 Subtotal of Investor Owned Assets for Rate Base12 Less: Accumulated Depreciation13 Correcting Entry to Accumulated Depreciation14 Corrected Total of Accumulated Depreciation15 Less: Accum Amort of Contribution in Aid of Construction16 Correcting Entry to Accum Amort of CIAC17 Corrected Accum Amort of CIAC18 Total Accum Depr net of Accum Amort of CIAC
19 Corrected Net Utility Plant (ill 12/31/200620 Proforma additions to Plant (2007 & 2008 Meter Conversions)21 Proforma Additions to Plant (Line loop Extensions)
22 Working Capital (1/8 of Operation and Maintenance Expenses)
23 Rate Base
573 701.
794.
512 893.
158 680.44
491 076.
889.
43,633.
333.
Notes
(B)
673,496.
272 500.
2,400,996.
671 573.
438 600.
110 174.44
509 966.
967.
160 000.00 land for Well Site No.
112 500.00 Down Payment for water rights for Well Site No.
272 500.
160 00000 Ciac expended for land for Well Site No.
112 500.00 Ciac expended for down payment for water rights for Well Site No.
166 100.Unexpended Contributions in Aid of Construction
438,600.
(C)
290 821.
432 998.
(142 176.53)
181 522.
152 800.
851.
291 998.
APPENDIX
CASE NO. FLS-07 -
ORDER NO. 30484
Page 2 of 3
FALLS WATER COMPANY
CALCULATION OF REVENUE REQUIREMENT AND PERCENTAGE INCREASE
COMMISSION ORDER 30484
CASE NO. FLS-07 -
9 Revenue Increase Requirement
(A)(B)(C)
291 998.
20%
032.
(169 785.10)
190 817.
Non-Tax Taxable
169 785.
$ 21 032.
172,702.$ 27 357.40
$ 200,060.
716 183.
916 243.
27.93%
1 Rate Base
2 Required Rate of Return
3 Net Operating Income Requirement
4 Net Operating Income Realized
5 Net Operating Income Deficiency
6 Revenue Increase necessary to overcome loss
7 Revenue Increase Necessary For Income Requirement
8 Gross-up Factor
10 Total Revenue Increase Required
11 Adjusted Test Year Revenue
12 Total Revenue Requirement
13 Percent Increase Required
APPENDIX
CASE NO. FLS-O7-
ORDER NO. 30484
Page 3 of 3