20071123Comments.pdf

DONALD L. HOWELL, II
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3366
NOV 21 Pl~ 3: 34
IDAi'lO PUBLi~ ''''"
UTiLITIES COMMI;:Sllh¡
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
FALLS WATER COMPANY FORAN ORDER )
AUTHORIZING INCREASES IN THE )
COMPANY'S RATES AND CHARGES FOR )WATER SERVICE. )
)
)
CASE NO. FLS-W-07-1
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Donald L. Howell, II, Deputy Attorney General, and submits the following
comments in response to Order No. 30457.
BACKGROUND
On July 27, 2007, Falls Water Company fied a general rate case Application seeking
authority to increase its annual revenue by $330,705 and metered rates by approximately 46.2%.
Falls Water serves approximately 3,200 customers near Amon and Idaho Falls. Because the
Company is in the process of installng meters for its curent flat-rate customers, the Company is
not requesting any increase in its flat-rate residential service under Schedule R-2. The Company
anticipates that it will have converted all of its existing flat-rate customers to metered service by
, mid-2008.
STAFF COMMENTS 1 NOVEMBER 21,2007
The Commission's Order No. 30457 determined that the case be processed via Modified
Procedure with a public hearing to be held December 18, 2007 in Idaho Falls. Based upon the
Staffs audit, the Staf is recommending an anual revenue increase of approximately $176,900
to $893,127, or an average increase in rates of24.71 %. The accounting and rate adjustments
recommended by Staff are discussed in greater detail below.
ACCOUNTING ISSUES
A. Test Year, Adjusted Revenues, Capital Structure, and Overall Rate of Return
The Company proposes using 2006 as its test year. The operating revenues for Falls
Water are being properly biled under the existing taiffs on file with the Commission. The
accounting for operating revenues is consistent with the requirements of the Uniform System of
Accounts, as adopted by this Commission. The major source of revenue for Falls Water is the
sale of water to residential, commercial and industrial customers. The Company also receives
revenue from hook-up fees. In 2006, actual operating revenues totaled $688,123.
The Company proposed a revenue adjustment of $28,060 to eliminate the flat-rate
schedule and anualize test year revenues for the year-end customer base. This adjustment also
includes a normalization adjustment which is discussed below. Regulatory fee expenses
associated with the increase in revenues were also adjusted. Staff accepts this adjustment.
Average water consumption and power-cost-per-customer in 2006 were lower than in
any of the previous six years. Staffhas reviewed the Company's analysis of power costs and
water consumption for those six years and agrees with the Company's use of the six-year
average to estimate normalized test year revenue and power costs. The analysis shows that
consumption in the test year on a per customer basis was approximately 8.3% lower than the
previous six-year average. Applying the increase to the various customer classes results in
normalized test year metered consumption and power cost.
The Company proposes a capital structure of 60.01 % Long Term Debt and 39.99%
Common Equity. The Company proposes to use the actual cost of the long-term debt and a 112%
retur on common equity. The capital structure proposed, along with the weighted actual cost of
debt of 2.4% and 12% retur on common equity produces a 7.2% overall rate of retur. Staff
agrees with the calculation of the capital structure and accepts the retur on equity of 12% as
being reasonable (Company Exhibit 3). This retur on equity is consistent with prior
Commission Orders for small water companies.
STAFF COMMENTS 2 NOVEMBER 21,2007
In sumary, Staff accepts the Company requested test year, the adjusted test year
revenues, capital structure and the overall rate of retur.
B. Expenses
The Company makes adjustments to nine expense categories, as shown on Company
Exhibit 2. The Company makes the following expense item adjustments:
1. Pro Form Labor Costs
2. Pro Form Rental Expense
3. Source of Supply Adjustment
4. Administrative Adjustment
5. Contract Services Adjustment
6. Eq~ipment and Vehicle Adjustment
7. Rate Case Expense Adjustment
8. Pro Form Depreciation Expense
9. Property and Irrigation Tax Adjustment.
Based upon its audit, Staff accepts the Company proposed adjustments for source of supply
expenses, administrative expenses, equipment and vehicle expenses, rate case expenses,
depreciation expense, and the property and irrigation tax expenses (Nos. 3-4,6-9 above). Staff
proposes adjustments to Pro Form Labor Costs (No.1), Pro Form Rental Expense (No.2), and
the Contract Services Adjustment (No.5). Staff also makes an adjustment to attorney expenses,
Account 631.3. Staff s adjustments are shown on Staff Attchment 1.
1. Staff Labor Cost Adjustment
The Company makes an adjustment for labor costs to reflect wage and salary levels at
current pay rates and planned increases to take effect December 2007 and payable in 2008. The
Company also includes expenses for a new employee. It is Staffs understanding that the new
employee will star in December 2007.
Staff makes an adjustment to labor costs, including employee benefits, to reflect the
actual salary of the new employee, and to anualize current labor costs for 2007. The Company
proposes to include a payroll increase effective December 18, 2007 which will be reflected in
STAFF COMMENTS 3 NOVEMBER 21,2007
2008 expenses. Staff has not included this increase as a pro forma adjustment to the 2006 test
year.
The test year is a 2006 test year, and pay increases to be paid in 2008 stretches the bound
of "known and measurable." In general, known and measurable changes are those that are
"known" - for example a signed contract for an event that will tae place in the future. By
"measurable" the cost of the expense - for example, the amount of the contract price is given,
and can be measured.
In this case, the Company has taen various 2006 rate base and expense items and
updated these items to reflect incremental changes that occured in 2007, and Staff agrees with
many of these. The projected pay increase has not yet taken place and there is insufficient
evidence that the suggested increases wil actually occur. For instace, the new employee to
begin December 10,2007 is scheduled to receive a 5% pay increase on December 18,2007. The
staring wage was estimated in the filing and it appears uneasonable to award a pay increase in
such a short time. It is more appropriate to reflect the increase afer the employee is hired and
actual change in salary (if any) is known.
Staff notes that the Company has a greater amount of control over pay issues than it has
over other types of expenses. Falls Water controls not only the timing of when pay increases
take effect, but also in the amount of the pay increases. The Company does not have this type of
control over other expenses, such as water testing, where the Company has limited control over
the cost of the testing.
Staffs adjustment to labor costs also reflects the actual salary offered to the new
employee. Staff reduced employee benefits by not including the Company matching of the
40 1 (k) program for the new employee. The cost of the matching 401(k) is not known at this time
because as the new employee does not star until December 2007. Moreover, it is not known
whether the new employee will take advantage of the Company-sponsored 401(k) program.
Staffs adjustment to labor costs and employee benefits reduces the Company proposed
expenses by $31,023.12. (Staff Attachment 1, Colum C, lines 11, 13, 14, 16).
2. Staff Rental Expense Adjustment
The Company includes the anticipated expenses to rent new office space but the new
office has not been constructed. While Staff recognizes the Company's desire for more office
space, the Company's adjustment for the lease of a new office, warehouse, and maintenance
STAFF COMMENTS 4 NOVEMBER 21,2007
space is premature. At the time of the on-site audit in late October 2007, construction on the new
offce and waehouse had not yet begun. Staff notes that the Company has long desired to move
to new facilities. The time tó include the additional rental expense in rates is when the Company
moves from its curent offce to new facilities. The new office space is not yet "used and useful"
to the utilty. Staffs adjustment decreases Company requested expenses by $24,643.50. (Staff
Attachment 1, Colum C, line 36).
3. Staff Contract Services Adjustments,
The Company's adjustment to Contract Services includes adjustments to various
accounts. Staff accepts most all the various account adjustments, with the exception of the
adjustment for the consulting expenses (Account 636.8) and the adjustment to accounting
expenses.
Staff removes the consulting fees in its entirety. The Company is currently paying
$2,000 per month to RDI West for consulting fees. In its application, the Company includes an
additional $4,000 to anualize the amount paid during 2006 ($20,000). The work papers
associated with the Application state, "RDI West is the consulting firm hired by the new owners
to advise them on owning a water utility. The consulting firm is paid $2,000 per month." Staff
evaluated this expense and found it to be more properly viewed as par of the sale and it should
not be included as an expense for ratemaking puroses.
RDI West is a subsidiar of Frontier Property Group, Ltd, the previous owner of Falls
Water Company. Kelly Howell is not only the president and a director of Frontier Property
Group, he is also a director of Falls Water Company, as listed on the anual report filed with the
Secretary of State' offce of February 15,2007. Through an internet search, Staff found the
following description for RDI West, "The mobile home rental ar of Frontier Property."
In response to Production Request 28, Staff asked for a copy of the contract between RDI
West and the owners of Falls Water Company and/or Falls Water Company. In response, Brent
Johnson, president of Falls Water Company, provided terms of the agreement, but no written
contract. Mr. Johnson also sumarized the major benefits that the Board attributes to RDI West.
There are two ratemaking issues for the consulting expense. First, Staff is concerned
about the affiliate/interlocking relationship between the Board of Falls Water Company and RDI
West. The agreement and transaction with RDI West is an affiiate transaction and the utility has
not met its burden of proof showing the consulting services were at a reasonable cost and are not
STAFF COMMENTS 5 NOVEMBER 21,2007
duplicated by information provided by other employees. Second, it appears to Staff that the
consultation service ofRDI West duplicates what the employees of Falls Water are capable of
providing to the new owners. The benefits to the Board provided by RDI West are also
duplicated by the work that the Engineering firm, Schiess and Associates, has already provided
to Falls Water Company.
Staff finds that this agreement comes as a result of the change in ownership of the
Company. The expenses paid to RDI West benefit the shareholders, and as such, constitute a
shareholder expense and should not be paid by the customers. Staffs adjustment removes
$24,000. (Staff Attachment 1, Column C, line 35).
A. Staff Accounting Adjustments
Staff next makes an adjustment to Accounting expense, Account 631.2. Staff removes
the amounts included by the Company related to the change in ownership ofthe Company. Not
only are these costs a one-time cost, and not reflective of ongoing accounting costs, these costs
are related to the change in ownership and they directly benefit the shareholders and not the
customers. These costs are more appropriately reported below the line, borne by the
shareholders, and not paid by customers. Staffs adjustment removes $630.
Staff also proposes to average the accounting costs for tax preparation for the tax years
2005 and 2006. The increase in costs for ta preparation for tax year 2006 over 2005 is $653.66.
With the change in ownership came a change in the Company's accounting firm. There was also
a change from a C-Corp to an S-Corp. In discussion with Company management, Staff has
leared that the Company intended to change accounting firms regardless of the change in
ownership.
The new accountant is also an investor in one of the many affliate companies that the
new owners share. While the charges for the new accounting firm are based on the accountant's
normal biling rates, Staff notes that the change in ownership requires more tax forms than
previously required. The additional accounting cost is associated with the corporate change of
ownership and may not reflect the future costs. Staffs adjustment for averaging the ta
accounting expenses is $326.83. Staffs entire accounting adjustment reduces expenses by
$956.83. (Attachment 1, Column C, line 28).
STAFF COMMENTS 6 NOVEMBER 21,2007
5. Staff Attorney Fees Adjustment
Staff also adjusts attorney expenses, Account 631.3 to remove the attorney expenses
related to the change in ownership of the Company. These expenses are not reflective of on-
going expenses,' and benefit the shareholders - not the customers. As such, these expenses
should be recorded below the line and borne by the shareholders, not paid by the customers.
Staffs adjustment removes $4,067.25. (Attchment 1, Column C, line 29).
Co Rate Base
Staff makes two adjustments to the Company rate base calculation. Staff includes all the
Contributions in Aid of Construction and removes Plant Held for Future Use. The Company
included in rate base only the contributions that have off-setting plant transactions. Curently the
Company receives contributions in Aid of Construction in the form of "impact fees" on a per
acre basis from developers as part of Falls Water's line extension agreements. The Company
uses these dollars to offset the cost of new source of supply and other associated plant items.
Although the funds have not been spent on plant items, it is appropriate to include the
contributions as they are received both on the books and in the rate base calculation. Staffs
adjustment adds $438,600.87 to contributions in aid of constrction. (Staff Attachment 2,
Column B, line 9). The plant additions wil be properly reflected in rate base as the additions are
placed into service.
Staff has also removed from rate base the down payment on the water rights and the cost
for the purchase of the well site for Well #9. The Well was initially expected to be online by
November of2007. It is now anticipated that it wil come on line by the middle of2008.
Because these plant items are not currently used and useful, Staff removes them from rate base.
Staff removes $112,500 for the down payment for the water rights and $160,000 for the purchase
of the well site. These items are properly included in rate base when Well #9 begins providing
water to customers. When the Company requests ratemaking treatment for these two items in the
future, the expenditures will then be evaluated for prudency. This adjustment transfers $272,500
from rate base to "Plant Held for Future Use." Staff s calculation of rate base reflects this
adjustment as shown on Staff Attachment 2. (Staff Attachment 2, Colum B, line 4).
STAFF COMMENTS 7 NOVEMBER 21,2007
D. Affliate Transactions
In its analysis and investigation of the Company's Application, Staff found that there may
be a potential for financial conflcts of interest and misuse of customer fuds though affiliate
transactions. Staff notes that Idaho law.subjects business transactions between utilties and their
affiiates to close scrutiny and the regulated utilty cars the burden of proving the
reasonableness of its affiliate transactions. The utilty canot simply rely upon the fact that
expenditures were incurred for transactions with affiiates to be included in rates. For affiiate
expenses to be justified, the utilty needs to provide compelling evidence of ar's length
bargaining or costs between the utilty and the affiiate.
The potential for conflict arises because the affiliate could infate expenses charged to the
regulated utilty. Regulated utilties are allowed to recover their costs incured in the service of
providing an essential service. A utilty canot inflate its expenses in transactions with the
affiiate and then request recovery from customers for those inflated expenses.
In Production Request 27, Staff asked for the names of any and all companies owned by
the shareholders of Falls Water and/or the President, Vice President and Secretary/Treasurer of
Falls Water Company. The Company provided the names of nine companies owned by the
President, Vice President and Secretar/Treasurer.
In an examination of the tax retu prepared for Falls Water Company for 2006, Staff
noted that five people, as shareholders of Falls Water Company, received IRS Form 1065
(Schedule K -1, Partner's Share of Income, deductions, Credits, etc.). Staff checked the Idaho
Secretary of State's website, and found several other companies that list at least one of the five
shareholders as an owner of the other Company. For example, Falls Water Company entered
into an agreement to purchase water rights from Idaho Sod Far. The purchase was not
completed by the end of the test year. Staff could not find a business named "Idaho Sod Farm"
on the Secretary of State's website. However, Staff did find a company ealled "Idaho Sod, Inc."
Jay Johnson, the Vice President of Falls Water, is listed on the anual reports fied with the
Secretary of State's offce as the Vice President of Idaho Sod, Inc. for the years 2003, 2004, and
2005. There is no Vice President listed on the annual reports fied for 2006 and 2007.
Falls Water Company also purchased land for the well site for Well #9 from Rockwell
Development, an affiliated company. This well and the associated water rights are being
financed by a loan from the State Revolving Water Fund and from contributions in aid of
construction. The well is expected to come online in the sumer of2008. Staffis also
STAFF COMMENTS 8 NOVEMBER 21, 2007
concerned about this future affiiate transaction. This transaction, as well as any other affiliate
transactions, shall be more fully scrutinized when they are completed and when Falls Water
requests ratemaking treatment in its next general rate case.
Summary
Overall, Staff has found that Falls Water has kept its books in a satisfactory maner.
Staff believes the Company has put a great deal of effort into this general rate case filing which
has streamlined the review process. The Company has been available to answer Staffs
questions, and provide information in a timely and efficient manner.
Other than our concerns about affiiate transactions, Staff finds this Company to be well
managed and the. water system to be in good condition. Staff finds that the Company is proactive
towards providing efficient and reliable water service. The Company personnel are
knowledgeable about the water system, conscientious in securing and protecting water rights and
plans ahead to provide adequate water facilties but the groundwork for the new source has not
been stared - there is no engineering report, and there are no funds - and the customers are
feeling the adverse effects of a short supply of water, from low pressure to no pressure problems.
For the customers of Falls Water Company, this has not been the case.
ENGINEERING ISSUES
Water Usage
Falls Water Company's water usage in 2006 was 1.024 bilion gallons with an average
use per customer of 336,977 gallons, this is below the prior six-year average of 367,594 gallons
and below last year's average of 345,844 gallons. It is too early to tell if this decline is a trend or
simply weather related. The 2006 test year water usage reflects historical patterns with
approximately 50% of the water being used in the three hottest summer months of July, August
and September.
In Commission Order No. 30027, the Commission ordered the Company "to enhance its
SCADA software capabilities, to identify and better control its water loss and to improve its
delivery efficiency." Although the Company has not yet installed the System Control and Data
Acquisition (SCADA) softare, it has taken steps to control water loss and improve delivery
efficiency. Those steps include a program to detect and repair leaks and an accelerated schedule
to meter all its customers. The Company expects to have all customers metered by July 2008.
STAFF COMMENTS 9 NOVEMBER 21,2007
That is well ahead of the time schedule set out in Commission Order No. 30027, which stated,
"We would like to see the meters purchased and installed sooner rather than later, preferably
much sooner than six years."
Staff believes that metering will result in a significant reduction in water usage for
customers that had been un-metered and will enable the Company to more accurately compute its
lost and unaccounted for water quantity. Staff recommends that the Company continue to
improve delivery efficiency, through reduced losses and improved monitoring.
Rate Design
Staffs rate design is based on a Staff-adjusted anual revenue requirement of$893,127.
Staff is proposing a single commodity rate for all customer classes of $.626/1 ,000 gallons and a
monthly minimum charge of$14.00, which includes 12,000 gallons of water. A comparison of
the curent rates, Company proposed rates and the Staff proposed rates are shown in the
summar table below.
COMPANY
CURRENT PROPOSED STAFF PROPOSED
SCHEDULE TARIFF TARIFF TARIFF
Minimum Commodity Minimum Commodity Minimum Commodity
Charge Charge Charge Charge Charge Charge
R-l $11.3 $0.48 per Summer $14.00 $0.626 per
1,000 $16.47 $0.73 per 1,000 gallons
gallons over 1,000 over 12,000
12,000 gallons gallons
gallons over 12,000
gallons;
R-2 $20.17 N/A $20.17 N/A $20.17 N/A
R-3 $ 11.53 $0.48 per $16.47 $0.73 per $14.00 $0.626 per
1,000 1,000 1,000 gallons
gallons over gallons over 12,000
12,000 over 12,000 gallons
gallons gallons
C-2 $11.3 $0.48 per $16.47 $0.73 per $14.00 $0.626 per
1,000 1,000 1,000 gallons
gallons over gallons over 12,000
12,000 over 12,000 gallons
gallons gallons
The rates proposed by Staff produce the Staff s recommended revenue requirement of
$893,127. The Staff-proposed rates also send a price signal to encourage water conservation.
The minimum charge in the tariff proposed by Staff provides approximately 60% of required
STAFF COMMENTS 10 NOVEMBER 21, 2007
revenue while the excess use commodity charge wil provide 40%. This proposed ratio is
identical to the ratio included in the Company's proposed rate design. The Company's present
tariff structure provided approximately 62% of its revenue from fixed charges and 38% from
excess water commodity charges.
As mentioned above, Falls Water is in the process of metering all flat rate customers. As
these customers are moved to the metered rates, their bils wil change, and the amount of
revenue the Company receives from these customers wil also change. The Company made an
adjustment to account for the proposed change, which projects revenue based on all flat rate
customers being on the proposed meter rates.
The Company also made an adjustment to normalize water consumption and revenue.
The average water use per customer in 2006 was lower than the average use in the prior six
years. Therefore, the Company adjusted revenue up to the six-year average. Staffis supportive
of this normalizing adjustment.
In its application, Falls Water requested that the Commission authorize an increase in the
new customer connection fee for 1.5 inch meters from the current $825 to $930. The Company
also proposed to increase the connection fee for 2-inch meters from the curent $900 to $1,205.
The Company provided an itemized breakdown of the cost of materials and labor in support of
its request. Staff reviewed the proposed increase in new service connection installation costs and
found them to be reasonable and within the average of other small water companes. Therefore,
Staff agrees with the Company that the increases are just and necessary. Staff recommends the
Commission approve the Company's proposed connection fees.
Staff believes there are three other rate design issues that should be addressed in the next
rate case. In the Company's last rate case Falls Water proposed a sumer/winter differential in
the monthly minimum allowance. The Commission stated in its Order in that case (Order No.
30027 at page 10): "We find it also reasonable to defer consideration of the Company's proposed
summer/winter differential in allowance levels until such time as the Company's flat rate
customers are metered."
The Company has indicated that all customers wil be metered prior to the Company's
next filing and at that time Falls Water will address the reasonableness of the summer/winter
differentiaL. When the conversion is complete, Staff believes it would be an appropriate time to
consider increasing the minimum charge for customers with larger meters. This is a common
practice with water utilties. Although water utilties may use differing rational to support the
STAFF COMMENTS 11 NOVEMBER 21, 2007
increased rate for larger meters, almost all have higher fixed charges for larger meters. The
American Water Works Association (AWWA) is supportive of this approach to rate design.
Setting the minimum charge as a linear fuction of the meter size is a reasonable and simple
approach. With this method, for example, the monthly minimum charge for a 2-inch meter
would be twice as much for a I-inch meter.
Staff recommends that the following issues be addressed in the next rate filing: 1) the
amount of the usage allowance contained in the minimum monthly charge; 2) consideration of
any seasonal differential in the allowance; and 3) the minimum charge as a function of meter
size.
CUSTOMER RELATIONS.,
A review of the eleven complaints and three inquiries received by the Consumer
Assistance Staff during 2006 and 2007 reveals that the Company is making an effort to maintain
good customer relations. The Company has demonstrated that it is willng to work with the
customers to prevent disconnections, and make extended payment arrangements to better fit the
customer's budget. In more than one instance the Company has continued to make payment
arangements with customers despite previous broken arangements, and has offered to extend
the payment arangement into, the future if the customer is wiling to pay even a portion of the
past due amount. This is beyond the requirements of the U CRR Rule 313, which states that the
Company can refuse to make payment arrangements if the customer had failed in the past to
make a payment on the agreed date. The Company has also been wiling to provide assistace
when problems develop on the customer's side of the meter such as leaking or freezing water
lines. IDAPA 31.21.01.313.
As the Company finishes the installation of meters, it has encountered customers who
were unaware of how much water they use. When these customers have questioned the high
usage reflected on their bils, the Company has taken steps to verify the meters are operating
correctly by field-testing the meters to insure accuracy.
Staff recommends that the Company formally track customer complaints and create
separate fies for these complaints as required in UCRR Rule 403, IDAPA 31.21.01.403. The
Rule requirements enable the Company to analyze customer complaints so that proactive steps
can be taen to reduce or eliminate similar complaints in the future. These records also allow
STAFF COMMENTS 12 NOVEMBER 21,2007
Staff to determine what issues have been raised by customers directly with the Company and
ensure compliance with the Commission's rules and orders.
RECOMMENDATIONS
1. Staff recommends use of a 2006 test year.
2. Staff recommends a 12% retur on equity and an overall retur on rate base of7.2%.
3. Staff recommends accepting the revenue adjustments proposed by the Company to
eliminate the flat rate schedule and annualize and normalized test year revenues.
4. Staff recommends a reduction in Labor and Employee Benefits expenses of
$31,023.11 from the Company proposed Labor and Employee Benefits expenses.
5. Staff recommends a reduction in Accounting expenses of$956.83 from the Company
proposed Accounting expenses.
6. Staff recommends a reduction in Attorney expenses of $4,067.25 from the Company
proposed Attorney expenses.
7. Staff recommends a reduction in Contract Service - Consulting expenses of $24,000
from the Company proposed Contract Service - Consulting expenses.
8. Staff recommends a reduction in Rental of Property expenses of $24,643.50 from
Company proposed Renta of Property expenses.
9. Staff recommends acceptace of the other Company proposed expense adjustments.
10. Staff recommends that all of the Contributions in Aid of Construction be reflected as
a reduction to rate base.
11. Staff recommends that the costs included in rate base for Well #9 be removed from
rate base and placed in Plant Held for Future Use.
12. Staff recommends that the Commission approve a rate base of$289,189.61.
13. . Staff recommends that the Commission set rates to recover a anual revenue
requirement of$893,126.87. This is an increase of$176,943.63 over test year
revenues and results in an average rate increase of24.71%.
14. Staff recommends a single commodity rate for all customer classes of $.626/1,000
gallons and a monthly minimum charge of$14.00, which includes 12,000 gallons of
water.
STAFF COMMENTS 13 NOVEMBER 21,2007
15. Staff recommends as par of its next general rate filing, that the Company review:
1) the amount of water consumption allowed with the minimum charge; 2) the size
and duration of a seasonal rate differential; and 3) the minimum charge as a fuction
of meter size.
16. Staff recommends that the Commission approve the increase in customer connection
fees from $825 to $930 for I-inch meters and from $900 to $1,205 for 2-inch meters.
17. Staff recommends that the Company formally track customer complaints and create
separate fies forthese complaints as required in UCRR Rule 403.
2jS'lRespectfully submitted this day of November 2007.
&ci~
Deputy Attorney General
Technical Staff: Kathy Stockton
Dave Schune
Dan Graves
Chris Hecht
i:umisc:commentsiflsw07.1 dhklsdesdgcwh
STAFF COMMENTS 14 NOVEMBER 21,2007
FALLS WATER COMPANY
REVENUES & EXPENSES
TEST YEAR ENDED 12131/2006
A B C D
Per Books Company Staff Staff
2006 Adjusted Adjustments Proposed
1 Ordinary Income/Expense
2 Income
3 400 . Operating Revenue
4 460 . Unmetered Revenue 116,570.61
6 461.1' Metered Residential 551,296.26 693,756.06
6 461.2' Commercial Revenue 19,421.02 21,592.19
7 474 . Oter Utilit Revenue 835.00 835.00
8 Total 40 . Operating Revenue ("688,122.89 716,183.24
9 Total Income 688,122.89 716,183.24 716,183.24
10 Expense
11 601.5 . Labor Field 108,518.03 181,264.18 (9,023.30)172,240.88
12 601.7' Labor Meter Reading 8,045.67
13 601.8 . Labor Ofce 47,765.09 59,292.80 (2,675.18)56,617.62
14 601.9' Admin. Labor 56,313.52 128,001.06 (15,365.96)112,635.10
16 603 . Salary Ofcers & Directors 2,304.00
16 604 . Employee Benefits 33,807.48 56,818.27 (3,958.67)52,859.60
17 610. Purchased Water 1,112.00 1,112.00 1,112.00
18 615' Electrical Power 89,380.23 109,773.11 109,773.11
19 618 . Chemicals 3,215.44 4,816.21 4,816.21
20 620.2 . Source M&S 6,387.84 10,719.97 10,719.97
21 620.6 . Distribution M&S 37,105.71 37,105.71 37,105.71
22 620.7 . Postage 12,416.05 14,293.89 14,293.89
23 620.8 . Offce 16,748.29 24,290.04 24,290.04
24 620.81 . Telephone Expense 13,170.66 12,824.06 12,824.06
26 620.82 . Bank service charges 1,667.09 1,731.00 1,731.00
26 620.83 . Ofce Utiltes Expense 2,931.41 4,636.15 4,636.15
27 631.1 . Engineering 1,282.50 1,282.50 1,282.50
28 631.2 . Accounting 2,471.34 3,125.00 (956.83)2,168.17
29 631.3 . Attorney 7,016.00 7,016.00 (4,067.25)2,948.75
30 636 . Testing 4,465.00 8,099.69 8,099.69
31 636.2 . Source Contract Repairs 1,400.00 1,400.00
32 636.3 . Trash 659.88 1,017.36 1,017.36
33 636.6 . Distribution Contract Repairs 10,615.25 30,420.00 30,420.00
34 636.7' Data Processing 3,44.00 3,716.00 3,716.00
35 636.8 . Contract Service - Consulting 20,000.00 24,000.00 (24,000.00)
36 641 . Rental of Propert 11,868.00 36,511.50 (24,643.50)11,868.00
37 642 . Rental of Equipment 13,762.50 20,108.20 20,108.20
38 650 . Transporttion Expense 27,371.54 35,013.23 35,013.23
39 656 . Insurance Expense 10,633.00 12,097.00 12,097.00
40 660 . Advertising Expense 2,081.45 2,081.45 2,081.45
41 665 . Regulatory Commission Expenses 1,679.55 4,879.55 4,879.55
42 670 . Bad Debt Expense 8,387.22 8,688.20 8,688.20
43 676.1 . Training Expenses 2,515.27 2,515.27 2,515.27
44 675.2 . Dues & Publications 962.75 1,275.00 1,275.00
45 676.4 . DEQ Fee Expense 11,986.34 10,988.00 10,988.00
46 676.9 . Uncategorized Expenses 125.00 125.00
47 Totl Expense 582,090.10 861,037.41 (84,690.70)776,346.71
48 Net Ordinary Income 106,032.79 (144,854.16)(60,163.47)
49 Other Expense
60 403 . Depreciation Expense 47,537.64 73,222.22 73,222.22
61 408. Taxes
52 408.11 . Propert Taxes 6,598.40 12,121.77 12,121.77
63 409.10' Fed Income Tax
64 409.11' State Income Tax 30.00 30.00
55 Total 408 . Taxes 6,598.40 12,151.77 12,151.77
66 408.10' Regulatory Fee 1,611.86 1,780.43 1,780.43
57 Total Other Expense 55,747.90 87,154.42 87,154.42
58 Net Other Income (55,747.90)(87,154.42)(87,154.42)
69 Net Income $50,284.89 (232,008.59)(147,317.89)
ÄttacIUenfi ....
Case No. FLS-W-07-1
Staff Comments
i 1/21/07
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I'Cl 0)0 ..N M Attachment 3........
Case No. FLS-W-07-1
Staff Comments
11/21/07
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 21sT DAY OF NOVEMBER 2007,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. FLS-W-07-01, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
K SCOTT BRUCE
FALLS WATER COMPANY INC
1770 SABIN DR
IDAHO FALLS ID 83406
ROBERT SMITH
UTILITY CONSULTANT
2209 N BRYSON RD
BOISE ID 83713
E-MAIL: utiltygroupcæyahoo.com
~~
SECRETA
CERTIFICATE OF SERVICE