20191030Comments.pdf

MATTHUNTER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-03 r 8
IDAHO BAR NO. I0655
RECEIVED
l,iig OCT 30 Pl{ 2: l9
ON
ic
ISS
Street Address for Express Mail:
I I331 W CHINDEN BLVD, BLDG 8, SUITE 201.A
BOISE. ID 837I4
Attorney for the Commission StalT
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
FALLS WATER CO,, INC. FOR APPROVAL OF
ACQUISITION OF THE ASSETS OF THE
WATER BUSINESS OF TAYLOR MOUNTAIN
WATER AND SEWER DISTRICT COMMF:,NTS OF THE
COMMISSION STAFF
The StafTof the Idaho Public Utilities Commission comments as follows on Falls Water
Co., Inc.'s Application.
BACKGROUND
On August 5, 2019, Falls Water Co., Inc. ("Falls Water" or "Company") filed an
Application seeking approval of the Company's acquisition of Taylor Mountain Water and
Sewer District'sr assets ("Taylor Mountain" or "District"), and amendment of the Company's
Certilicate of Public Convenience and Necessity C'CPCN') to include the area served by the
District.
Northwest Natural Gas Company is a 160-year old natural gas utility that serves
customers in the Pacifrc Northwest. As part of a recent reorganization, Northwest Natual Gas
Company formed the Northwest Natural Holding Company, which holds companies including
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CASE NO. FLS-W-l9-OI
STAFF COMMEN'I'S OCTOBER 30,20I9
I An affiliate ofFalls Water, Gem State Infiastructure, LLC, is acquiring the assets ofthe District's sewer system.
As the Commission does not have regulatory authority ovcr sewer systcms, Falls Water's Application covers only
the proposed acquisition ofthe water business assets.
NW Natural Water Company, LLC and its subsidiary, NW Natural Water of Idaho, LLC. In
2018, the Commission approved NW Natural Water Company, LLC's acquisition of Falls Water.
OrderNo.34103.
Falls Water is a wholly owned subsidiary of NW Natural Water Company, LLC., and
seeks to acquire the District's assets. The Company also seeks to amend its CPCN to add the
area served by the District to the Company's service area. The District is a special purpose water
and sewer district under Chapter 32. Title 42 ofldaho Codc, and serves about 158 residential
customers and one commercial customer.
Falls Water is not requesting any changes to rates, rate structure, or other charges in this
Application, and states that any future changes would be based on prudently incurred capital
expenditures and other accepted ratemaking principles.
STAFF REVIEW
As it has done in previous''a'ater company acquisition cases, Staffrelied on the standards
outlined in ldaho Code $ 6l-328 related to the sale of electric utilities. Those standards require
thc Commission to determine that:
a) The transaction is consistent with the public intercst;
b) The cost ofand rates fbr supplying service u'ill not be increased by reason ofsuch
transaction; and
c) The applicant lbr such acquisition or transf'er has the bona fide intent and financial
ability to operate and maintain the system in the public service.
Having considered these requirements in its analysis, Staff recommends approval ofthe
acquisition of the District's assets. Staff also recommends the Company's CPCN be amended to
include the area served by the District.
For its investigation. Staffrelied on DEQ survcys, infbrmation provided in the
Application, and production request responses. Staff lbund Exhibit 6's service area description
did not match descriptions of tl.re service territory provided elsewhere in the Application. StafT
workcd with the Company to determine the [ega[ description of the new tenitory to be added to
the Company's CPCN, and verit'ied that the description corresponds to the actual territory
currently being served by Taylor Mountain. The Company subsequently submittcd a corrected
description of the certificated service territory as Revised Exhibit 6 on October 15,2019. Sutf
determined that this territory is similar to but does not exactly correspond wilh the tenitory
2STAFF COMMEN IS ocToBER 30.2019
served by Taylor Mountain's predecessor, the regulated public utility Country Club Hills
Utilities, Inc. (CPCN No. 312). 'l'he primary ditlerence is a small strip ol'land along the wesr
edge ofthe SE % of SW % of Section 21.
A. The Transaction is Consistcnt with the Public Intercst.
StalTnotes that NW Natural Water Company, LLC, in conjr.rnction with its parent
companies, is actively seeking to expand its operations in Idaho. NW Natural Water Company,
LLC and associated companies have show-n commitment to their growth plan through the
acquisition of Falls Water (FLS-W- I 8-0 I ). Spirit Lake East/Lynnwood Water (SPL-W- I 9-01).
Diamond Bar Estates (DIA-W-19-01). Bar Circle S Water (BCS-W-l9-01), and the submission
of this Application. The acquisition of the District by NW Natural Water Company, LLC may
provide benefits through operational efficiencies and economies oiscale as it acquires more
$,ater systems. In addition, Falls Water Company's professional and licensed employees u'ill be
running the system. Currently, Taylor Mountain is operated by volunteers liom the District.
B. 'f he Cost of and Rates for Supplyin Sen'icc n'ill Not Increase Due to the
'l'ransaction.
The Company states it will maintain the cxisting ratcs and charges post-acquisition, and
will not seek to include the transaction expenses related to the acquisition in rates. See
Palfreyman Direct at 8: Application at 8.
Sl AFF COMM[,NTS ocToBER 30.2019
Basic Service Chargcs and Usage Rales
Staff supports maintaining the current basic rate charge o1'$20.00, and commodity
charges of $0.71 per 1000 gallons for usage over 15,000 gallons fbr customers ofTaylor
Mountain, consistent u'ith Falls Water's request in the Application. See Application at 8. These
rates were determined by the District and have not been approved by the Commission; hou'ever.
an abbreviated audit performed for this proceeding indicates the Company is not overearning.
Current rates are similar to those granted to the predccessor company, Country Club Ililts
Utilities, in OrderNo.33384, CaseNo. CCH-W-12-01. At that time, the basic service charge fbr
metered residential customers was set at $17.00, \'ith the usage set at $0.71 per 1,000 gallons for
usage over 15,000 gallons. Falls Watcr intends to keep the existing tariff structure until a new
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ratc case is completed. 'fhc Company statcd that thc cost ofcapital and structure are assumed to
be similar to that of Falls Water.
Non-Recurring Charges
The Non-Recurring Charges seen below are listed in the Application, proposed Schedule
No. 3 (Exhibit 5), and include charges previously not allowed by the Cornmission:
Non-Recurring Charges:
Water Shutoffl $25
Restoration of Water Services: $25
Monthly Late Fee: $ 10
Water Shutoff Late Fee: $50
I{ookup Fee: $1,400
The Company has provided no description ol'either the Watcr Shutoff Fee or the
Restoration of Water Services Fee. Such f'ees tbr the purpose of allou,ing the customer to
perform maintenance have been previously considered by the Commission in other small water
company cascs. Such I'ees havc also been allou'ed when a customer wishes to terminate service
on a seasonal basis.
The Restoration of Water Service appears similar 1o a reconnection charge allowed after
disconnection lbr nonpayment and Staffrecognizes thc need for such a charge. The Crrmmission
previously approved a Reconnect f'ce of$20 for Country Club Hills il'the reconnect was
requested during normal business hours and a $40 I'ee outside of normal business hours. These
rate levels have also been approved lor other water companies.
The Monthly Late Fee has bccn allor,"ed by the Commission, but only as a percentage of
the past due balance. The Commission has previously allowed Country Club Hills a Late
Payment Fee ol l% (one percent) ofthe unpaid balance at thc time of the next billing statemcnt.
It is unclear how the Company would apply a Water Shut-off Late Fee ol$50, and it has
not presented any justihcation for the charge.
The Hookup Fee is higher than the amount previously allowed when the system was
operated as Country Club Hills, and the Company has provided no support fbr the increase. Stafl
verified that the actual hookup l'ee charged to new customers by Taylor Mountain is $1,400, and
Falls Water in its Application is not proposing any changes to Taylor Mountain's Hookup Fee.
4STAIF COMMENTS ocToBER 30.2019
Staff recommends that the Commission disapprove the Schedule 3 Non-Recurring
Charges submitted in the Application because several charges have previously not been allowed
and others have been increased from the charges allowed when this system was operated as
Country Club Flills Utilities.
Before 2015, the District existed as Country Club Hills under Certificatc No. 312. In
Case No. CCH-W-12-01, the Commission set the follou'ing non-recurring charges for Country
Club Hills. Order No. 32662. Staff recommends setting the non-recurring charges as copied
from the most recently approved Country Club Hills'l'ariff and shown below:
RATE SCHEDULE NO.2 NON RECURRING CHARGES
I. RECONNECTFEES
Reconnection Charge: A rcconnection charge will bc assessed to any
customer who has been involuntarily disconnected by the Company
for any reason allowed by the [JCRR. Charges do not apply when a
customer was involuntarily disconnected for the convcnience ofthe
Company. Charge is per occurrence.
During normal business hours $20.00
Other than normal business hours $40.00
2. HOOKUP OR CONNECTION FEE - 51,179.00 - 1'his charge is
applioable when a new scrvice is connected to the system for the flrst
time.
3. LATE PAYMENT CHARGE - One percent (l %) per month of the
unpaid balance at the time of the next monthly billing statement.
As stated above. somc ofthe non-recurring charges existing under the District are not
allowed by the Commission; therefore Staff recommends the Company adopt the Non-Recurring
Chargcs previously approved for Country Club Hills.
C. F-alls Water has the llona Fidc Intent and !'inancial Ability to Orrcrate :rnd
Maintain the Sl'stcm in the Public Scn'ice.
StafTbelieves the Company has demonstratcd its bona fide intent and financial ability to
provide continued operation of the system and reliable serv'ice. Falls Water has committed in its
STAFF COMMEN'IS 5 OCTOBER 3O,2OI9
Application to provide safe and reliable service and to mcet the iniiastructure needs of District
customers. See Application at 8.
The District currently has no employees. II'the transaction is approved, Falls Water
employees will assume the roles previously undertaken by volunteer members of the District's
Board. The licensed water system operator tbr Falls Water will serve as the licensed water
system operator for the assets ofthe District's watcr opcration. Application at 7.
Water systems routinely require repair, rcplaccmcnt, and extcnsion of infrastructure to
provide reliable and ample water service to custon'rers. Financing this infrastructure at a
reasonable cost is a challenge for smaller water systems. Falls Water, through its parcnt
company, Northwest Natural Holdings, has the necessary access to capital markets to proactively
address Taylor Mountain's infrastructure needs in a timely manner at a competitive cost. See
Application at 8. Northwest Natural Holdings has an Al credit rating lrom Moody's and an AA-
credit rating from Standard and Poor's. Northu'est Natural Holdings' markct capitalization
exceeds $2 billion. Improved access to capital markets usually helps lower financing costs that
ultimately are passed on to customers.
COMPANY TARIFF
Staf is willing to work with the Cornpany to create recurring and non-recuming rate
schedules for District customers following issuance of the final order in this case. Staff
recommends thal the customers be governed under the General Rules and Regulations prcviously
approved by thc Commission for Falls Water in Case No. FLS-W-09-01. See Order No. 31022.
Staffrecommends that the Company creatc scparate rate schedules for the recurring charges and
non-recurring charges for'Former Customers of Taylor Mountain Water and Sewcr District' to
be included in the Falls Water Tariff-.
CUSTOMER NOTIFICATION AND PRESS RELEASE,
Rules 125 of the Commission's Rules ol'Procedurc do not rcquire customer notification
unless the Company is requesting a rate changc. IDAPA 31.01.01.125. In its Application, the
Company stated its intention to publish a Customer Notice in the local newspaper regarding its
agreemenl to purchase the District. It is unclear whether the Conrpany has already published this
notice. Regardless ofwhether the Company publishcd this notice. ifthe Commission approves
the sale of the system. Staff recommends that the Company provide direct notice to cuslomers of
6STAIF COMMENTS oc-foBER 30. 2019
the purchase, approved rates, and Company contact information eithcr through a separate
mailing, a message on bills, or as an insert sent with bills.
COMPANY DOCUMENTS
The Company will need to update customer documents to reflect any changes brought
about by the acquisition of the District's assets. Staff is willing to work with Falls Waterlo
update its billing and collection documents as well as its lixplanation ofRates and Annual Rules
Summary. Staff recommends the Company work with Staff to make any necessary revisions
within three months of issuance of the final order in this case.
STAFF RECOMMENDATIONS
Staff recommends the Commission:
. Approve the sale of the District to l'alls Water.
r Amend Falls Water Co. Inc.'s CPCN to include the District's service territory
r Order Falls Water to notify thc customcrs directly of the salc of 'faylor Mountain to
Falls Water, provide approved rates, and Company contact information either through
a separate mailing, a message on bills. or as a bill insert.
. Order Falls Water to work with Stalf to create separate ratc schedules following
issuance ofthe final order in this casc.
. Order Falls Water to work w'ith Staff to make any necessary revisions to its billing
and collection documents and its Explanation of Rates and Annual Rules Summary
within three months of issuance of the Commission's final order in this case.
. Order Falls Water to adopt the previously approved Non-Recurring Charges tbr
Country Club Hills, as discussed abovc.
lSTAFF COMMENTS ocToBER 30.2019
nl1Respectfully submitted this 3 o day ol'October 20 I 9.
Matl Hunter
Deputy Attomey Gencral
itl
Technical Staff: Kathy Stockton
Bentley Erdlrumr
Chris Hecht
Michael Morrison
iiumisc/comnrents/fls$, I 9. I rhklsc\rhbemm commenls
IJSTAFI COMMENTS ocToBER 30, 2019
4 4
.U /
CERTIFICATE OF SERVICB
I HEREBY CERTIFY THAT I HAVE'IHIS 3OTII DAY OF OCTOBER 2019,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF IN
CASE NO. FLS-W-Ig.OI, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
PRESTON N CARTER
CHARLIE S BASER
GIVENS PURSLEY LLP
60I W BANNOCK ST
BOISE ID 83702
E-MAIL : Drestoncarterfr,s ivensDurslev.com
charlicbaser@gi vensourslev.com
kendrah(@eivenspurslev.com
SECREI'N R
CERTIFICAl'E OIJ SE,RVICE
ERIC W NELSEN
SR REGULATORY ATTORNEY
NWNATURAL
220 NW 2ND AVE
PORTLAND OR 97209
E-MAIL: eric.nelsen(n)nwnatural.com
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