20180710final_order_no_34103.pdf

Office of the Secretary
Service Date
July 10,2018
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )CASE NO.FLS-W-18-01
OF NORTHWEST NATURAL WATER )COMPANY,LLC TO ACQUIREFALLS )ORDER NO.34103
WATER COMPANY )
On February 21,2018,Northwest Natural Water Company,LLC (NW Natural Water)
filed an Application requesting that the Commission approve its proposed acquisition of Falls
Water Company.
On March 14,2018,the Commission issued a Notice of Application and set an
intervention deadline of March 30,2018.No intervenors appeared and on May 8,2018,the
Commission ordered that the case be processed by modified procedure and set a comment deadline
of May 31,2018,and a June 7,2018 reply deadline.Staff and NW Natural Water filed timely
comments in support of the Application.
On May 21,2018,Commission Staff traveled to Ammon,Idaho,to conduct a public
workshop.No one participated in the workshop,and no public comments have been received.
THE APPLICATION
NW Natural Water is a wholly-ownedsubsidiary of Northwest Natural Gas Company,
a publicly traded gas company in Portland,Oregon.Application at 2.The gas company serves
approximately 730,000 customers in western Oregon and Washington.Id.Falls Water is a
privately held Idaho water company serving approximately 5,500 customers near Idaho Falls,
Idaho.Id.at 2-3.Falls Water holds Certificate of Public Convenience and Necessity (CPCN)No.
236.Id.
According to the Application,if approved by the Commission,Falls Water would
continue to operate in its current corporate form,with NW Natural owning its shares.Id.NW
Natural Water stated that no changes would be made to Falls Water's CPCN,employees,customer
base,or service area.Id.Further,NW Natural Water stated that Falls Water's owner would remain
president and manager of the water company for at least one year through the transition period.Id.
NW Natural Water further reported that the transaction would not cause an increase in rates.Id.
NW Natural stated that the Falls Water staff would all remain in place,and that NW
Natural Water would thus continue to "have the business experience,fmancial ability,and water
ORDER NO.34103 1
system expertise to continue to operate and maintain Fals Water's system."Id.at 4.NW Natural
Water clarified that it plans to make capital improvements to the Falls Water system,including
construction of well facilities,and possibly storage facilities.Id.
Finally,NW Natural Water stated it is taking steps toward reorganizing its corporate
structure.Specifically,it is making NW Natural Water a subsidiary of an overall Northwest
Natural holding company.NW Natural Water claimed this structure would better support growth
and healthierbusiness opportunities.To the extent necessary,NW Natural Water requests approval
of this reorganization.
COMMENTS
Staff reviewed the Application and conducted discovery.Staff reported to the
Commission that the acquisition would not increase the cost to operate,maintain,and expand the
Falls Water system because the system will function post-acquisition as it has pre-acquisition.
Rather,NW Natural Water has better access to capital markets'than Falls Water and can procure
lower-cost financing for system upgrades,if needed.
Staff stated its belief that NW Natural Water can operate the Falls Water system.Staff
reasoned that NW Natural Water is a well-regarded regulated utility with experience,expertise,
and financial resources to operate smaller utilities,such as Falls Water.Further,Staff determined
that NW Natural Water took appropriate time and resources to familiarize itself with the Falls
Water system,and develop a plan for operating the system going forward.Staff's opinion is
reinforced by NW Natural Water's decision to not make any immediate management or
employment changes to existing Falls Water staff.
Staff noted that neither company issued a direct customer notice when NW Natural
Water filed its Application.However,Staff acknowledged that NW Natural Water provided
customers with notice by press release in the local newspaper on May 16 and 20,2018.Regardless,
Staff concluded that the notice is not required because NW Natural Water is not proposing any
changes to rates.IDAPA 31.01.01.125.
NW Natural Water filed a brief reply supporting Staff's assessment of the transaction.
It further emphasized its intent "to continue providing high-quality,safe and reliable water service
to Falls Water Company's customers."Reply at 1.
I Staff noted that NW Natural Water received investment-grade ratings of "Al"from Moody's,and "AA+"fromStandardandPoor's in 2016 and 2017.
ORDER NO.34103 2
DISCUSSIONAND FINDINGS
The Commission has jurisdictionover this matter and the issues in this case under Title
61 of the Idaho Code.Specifically,the Commission regulates "public utilities,"including"water
corporations"that serve the public or some portion thereof for compensation.See Idaho Code §§
61-125 and -129.Falls Water is a privatelyheld water company and public utility as defined in
these laws.It has been issued CPCN No.236 and serves the public within its certificated service
area.
Idaho statutes do not specifically address the acquisition of water companies.However,
the Commission generally looks to the standards outlined in Idaho Code §61-328 related to the
sale of electric utilities.Those standards dictate that:(a)The transaction is consistent with the
public interest;(b)The cost of and rates for supplying service will not be increased by reason of
such transaction;and (c)The applicant for such acquisition or transfer has the bona fide intent and
financial ability to operate and maintain said property in the public service.
After reviewing the record,we find it reasonable to approve NW Natural Water's
proposed acquisition of Falls Water.We find the acquisition is consistent with the public interest.
NW Natural Water's stated intent is that the customer experience through payments,service,and
operations will not change.NW Natural Water has demonstrated it can operate the system,and
has taken steps to maintain or improve operations through and beyond the transitional period.We
expect that NW Natural Water will continue to employ persons with sufficient expertise to safely
and reliably operate the system.We also find that the sale will not cause rates to increase.
Under the circumstances,we find NW Natural Water has taken reasonable steps to
ensure its Falls Water customers will continue to receive safe and reliable water service.We thus
find it reasonable and in the public interest to approve NW Natural Water's proposed acquisition
of Falls Water.
We note that NW Natural Water will now own all shares in Falls Water but will
continue to operate Falls Water in its current corporate form.Thus,we find it unnecessary to
change the Falls Water CPCN.The Commission will continue to oversee Falls Water as a regulated
public utility under new ownership.
ORDER NO.34103 3
ORDER
IT IS HEREBY ORDERED Uw Nu Naunal M ater acquisition of Falls Water is
approved.
THIS IS A FINAL ORDER.Any person interested in this Order (or in issues finally
decided by 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.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this /Ê
day of July 2018.
PAUL KJ LA ,PRESIDENT
KRI ÌIÑE RAPER,C MMIŠSIONER
ER C ANDERSON,COMMISSIONER
Diane M.Hanian
Commission Secretary
I:\LeganWATER\FLS-W-18-01\Orders\IT SWISGI bk linaLdocx
ORDER NO.34103 4