20210804Comments.pdf

::rj -\
DAYN HARDIE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 9917
IN THE MATTER OF FALLS WATER CO.,
INC'S. APPLICATION FOR APPROVAL OF
THREE CAPITAL PROJECTS: (1) CREATION
OF A NEw WATER SOURCE; (2)
CONSTRUCTION OF A STORAGE TANK; AND
(3) CONSTRUCTION OF A WELLHOUSE
' ,-r - 1 Pii tr: 08
Street Address for Express Mail:
I 1331 W. CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, IDAHO 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
)
)
)
)
)
)
)
CASE NO. FLS.W-2I.01
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the ldaho Public Utilities Commission, by and through its
attorney of record, Dayn Hardie, Deputy Attorney General, submits the following comments.
BACKGROUND
On May 7,2021, Falls Water Company Inc. ("Falls Water" or "Company") applied to the
Commission for approval to construct three capital projects: (l) a new water source identified as
Well #l l; (2) a new water-storage tank including other related facilities; and (3) a wellhouse
with other improvements associated with the Taylor Mountain Water System. The Company
also requests authority to fund all or part of these projects through the Company's Special Plant
Reserve Fund ("Reserve Fund").
Previously in Order No. 33863, the Commission approved the Company's request to
construct Well #10 (Case No. FLS-W-17-01). In the Order, the Commission recognized Staff s
concerns that the Company would remain unable to "meet pressure requirements for firewater
ISTAFF COMMENTS AUGUST 4,2021
flow" even with the addition of Well #10, and recommended the Company complete a hydraulic
model to identifu and list priorities for future needed system improvements.
In 2019, the Company commissioned an engineering study and Drinking Water Capital
Facilities Plan ("Plan") to identiff system water needs for the Falls Water system. The Plan
included a system hydraulic model and identified two altemative solutions to address system
diumal pressure swings and the need to meet fire flow: (1) build two new wells, Wells #11 and
#12 ("Alternative l"); or (2) build Well #ll, a two-million-gallon water storage tank, and a
booster pump station ("Altemative 2").
According to the Company, Alternative 2 would have the following benefits: (l) address
pressure-swing issues; (2) increase the combined peak capacity of existing Wells #5 and #9; (3)
reduce the water right's peak diversion rate avoiding the need to acquire more water rights; (4)
improve system stability; and (5) provide a means for filtering sand. The Company has proposed
to pursue Altemative 2 requesting the Commission pre-approve its plan prior to moving forward
with its proposal.
The estimated total cost of Alternative 2 is $5.I5 million-Well #11 is estimated at $l.05
million and the two-million-gallon water storage tank and related facilities at $4.1 million.
The Commission approved the Company's acquisition of assets for the Taylor Mountain
Water and Sewer District ("Taylor Mountain"l.t The Company assumed operation in August
2020. The Taylor Mountain system is not connected to the Falls Water system and has its own
tariff rate schedules. Currently, the Taylor Mountain Well #2 lacks a wellhouse and fencing,
creating an unsafe working environment and security issues. The Company requests
authorization to build a wellhouse, a fence, and a water runoff system at Taylor Mountain Well
#2. The Company estimates the cost of this project at about $300,000.
STAFF ANALYSIS
Staff reviewed the Company's Application, including the attached exhibits, and
subsequent responses to production requests. Staff recommends the Commission approve the
Company's requests to:
1. Construct a new water source, identified as Well #l l;
2. Construct a new two-million-gallon water storage tank, including related facilities;
I Case No. FLS-W-19-01; Order No. 34486
2STAFF COMMENTS AUGUST 4,2021
3. Construct a new wellhouse and other related improvements specific to Well #2 within
the Taylor Mountain Water System; and
4. Use the Special Plant Reserve Fund as a funding source for part of Well #l 1 and/or
the two-million-gallon water storage tank, as funds allow.
Actual costs will be verified in the next general rate case. Staff s recommendations are
supported by the Plan and prior Commission orders for use of the Special Plant Reserve Fund.
Falls Water Svstem Issues Identified in the Plan
Staff believes the Plan provides a comprehensive engineering review of the Company's
existing water supply and distribution system. The Plan detailed existing system conditions and
deficiencies. It also projected future system requirements over the next 20 years. Specific
recommendations within the Plan were made to correct known system deficiencies as well as
provide recommendations to meet future growth.
Basic deficiencies identified within the Plan include: (l) a lack of well water source
redundancy resulting in low system pressures during certain demand scenarios; (2) inadequate
firewater flow within the system in several locations; and (3) insufficient transmission capacity
for certain pipelines. Other concems include aging asbestos-cement piping and a lack of a cross-
connection control program.
The Plan provides specific recommendations for capital projects to address both current
deficiencies and future system needs. Of the 2l projects identified as existing system
deficiencies, the Company has completed four projects; has three projects in progress; and has
plans to complete the remaining l4 projects over the next five years.2
Well #11 - New Source Well
The Plan's list of recommended improvements includes the construction of a new well
now identified as Well #l 1.3 Well #l I is already drilled; however, the Company has not
mechanically completed this well for system use. Well #l I is included in both Alternatives I
and 2 and is necessary to address system water pressure and firewater flow deficiencies
identified in the Plan.
2 Response Production Request No. 22.
3 Referred to as the Ryan Anderson Development Well in the Plan.
aJSTAFF COMMENTS AUGUST 4,2021
Starting early June of this year, the Company became concerned with increased peak
flow demand due to high temperatures and dry weather conditions. In a conference call with
Staff on June 16, 2021, the Company indicated they were experiencing low pressure conditions
related to peak demand use in the early morning hours when customers irrigate. Staff believes
the Company made reasonable effort to inform customers of their need to limit water use, and for
limiting water use through an alternate day watering schedule. Even though customer
participation was about 50 percent, the Company indicated that the low-pressure issues
continued to persist.
In the call, Staff made it clear that only the Commissioners can provide authorization for
recovery for the cost of the well, but it was ultimately the Company's obligation to provide
reliable service to customers. Given Staff s review of the information provided, Staff believes it
is reasonable for the Company to complete Well #11 as requested. Additionally, Staff believes
the Company should be able to recover prudently incurred actual costs for completing Well #11
in the Company's next general rate case.
Alternative I - Well #12 and Future Water Rishts
The Company currently has limited water rights, which is a major roadblock to
implementing Alternative l. If the Company were to pursue Alternative l, and not pursue
Alternative 2, additional water rights would be required. On May 28,2021, the Company
acquired 208 acre-feet of water rights, at a cost of $387,950-sufficient capacity for the addition
of Well #11 only.a
Acquisition of water rights is a long and expensive process, with uncertain outcomes.
The Plan stated:
Combined, the projected costs for improvements during the coming 2}-year
period is $25,271,800. Of that total, the single largest contributor is water right
purchases. Between existing and future recommendations, the projected cost to
obtain water rights through approximately 2040 is $9,510,500. Due to the
outsized contribution of water rights to the total cost, it is apparent that Falls
Water Company should be particularly diligent in planning and managing their
water right portfolio. Exhibit I at 40.
Staff believes that the Company is following the Plan recommendations
a Response Production Request No. I
4STAFF COMMENTS AUGUST 4,2021
Staff submitted several Production Requests for additional information regarding the
status of water rights and potential ways to reduce the need for incremental water right
acquisitions. At this point, the Company has no additional water right acquisition leads, but
continues to work with a broker to remain aware of potential water right availability.
A potential source of water rights would be to acquire water systems located adjacent to
the Company's service area that hold excess water rights. In Production Request No. 9, Staff
asked if acquisition of any or all these systems would help resolve water rights issues. The
Company indicated that these systems would not resolve water rights issues. The Company
explained that in most cases these systems only have water rights to satisff their own needs.
Alternative 2 - Two-Million Gallon Water Storaee Tank
There is a substantial cost difference between Alternatives I and 2. Altemative 2 will
cost about $5.15 million whereas completing Well #11 and adding Well #12 in Altemative 1
would cost about $2.95 million. However, as stated above, the major impediment to adding Well
#12 is the availability and ability to acquire additional water rights.
In addition, the two-million-gallon water storage tank will provide significant benefits to
the system over adding Well #12. As noted in the Plan, the water storage tank altemative, which
includes a new booster station and pipeline upgrades, will provide the following additional
advantages:
o Reduced pressure swings to the system;
o Increased combined peak hour capacity of other system wells;
o Reduced peak water right diversion rate;
o Additional capacity for firewater flows;
o Improved system reliability by providing a redundant system booster pump capacity;
o Increased system operating pressure stability; and
o Elimination of sand filtering costs.
Based on the planned location, the water storage tank would be on Company-owned
property and adjacent to an existing well. Being adjacent to the well source is more efficient,
allowing the pumping of well water directly into the tank, rather than pumping water to full
system pressure multiple times when the tank is not co-located with a well.
5STAFF COMMENTS AUGUST 4,2021
The location of the proposed water storage tank is centrally located within the Falls
Water system's distribution network, and significant piping transmission capacity already exists
in the location planned for the tank.
Significant amounts of sand from its wells enter the system requiring sand filters, given
the location and geology of the system. Pumping directly into the tank from the well allows sand
from the well to settle into the storage tank, which reduces the amount of sand introduced into
the system, thus eliminating the need for sand filters at the well.
Given the nature of the storage tank as a reservoir, the tank would provide better pressure
control for the system. The water storage tank would also provide a reservoir to dampen the
constraints in meeting system peak flows while also maintaining system pressure requirements
using booster pumps. Booster pumps, generally provide more reliable service, require less
maintenance, and would provide redundancy in the system when compared to another well.
As noted in the Plan, it is difficult to assess the monetary value derived from adding a
water storage tank and booster station, but Staff believes these benefits outweigh the increased
expense compared to Alternative 1. Staff believes these benefits, in addition to the ability of the
water storage tank to use existing water rights more efficiently, especially when the availability
of incremental water rights is a constraint, make this the most reasonable alternative.
Asbestos-Cement Pipe
The Company has approximately 7,790 feet of asbestos-cement pipe in its system. The
Plan states that deteriorating asbestos-cement pipes can allow asbestos fibers into the drinking
water. Additionally, the aging pipes are brittle and prone to breakage. For these reasons the Plan
recommended that the remaining asbestos cement pipes in the Company's system be replaced.
The Company provided an estimated timeline of three years, 2025-2027, to replace the asbestos-
cement pipe.5 Staff believes the Company's acceptance of the Plan's recommendation and
schedule for the removal of asbestos-cement pipe is reasonable.
Cross-Connection Control
The Company does not have an active cross-connection control program. A program,
once implemented, would eliminate backflow that could occur from the customer's service lines
s Response Production Request No. 8
6STAFF COMMENTS AUGUST 4,2021
back into the Company's system. The Plan recommended the Company create a database to
identif,, possible cross connection problems, and to use this data to be prepared to design a cross
connection control plan that fits their needs. The Company will begin to collect data to
determine the extent to which a cross-connection plan can be created.6 Staffbelieves the
initiation of a data collection process supports the Plan's recommendation and is a reasonable
course of action.
Taylor Mountain Caoital Proiects
The capital projects for the Taylor Mountain Water System include building a wellhouse
for Well #2,fencing off the wellhouse, and installing a surface water collection system to
address water system runoff from Company property into other areas within the subdivision.
Staff believes that these projects are necessary and recommends that the Commission allow
prudently incurred actual costs to implement these projects be evaluated for recovery in the next
general rate case.
Taylor Mountain Well #2 lacks a wellhouse and fencing, which creates an unsafe
working environment and security issues for the system. Public water system wells are typically
enclosed in wellhouses and surrounded by fences to prevent unauthorized access, which can
create liability issue for the Company. In addition, without a wellhouse, Falls Water employees
must enter a cramped space to access this well creating an unsafe work environment.
The Application explains there is a surface water runoff problem at the site of the Taylor
Mountain Well #2. As a part of the Taylor Mountain system projects, the Company proposes to
install a surface water collection system. In a Production Request, Staff questioned why the
developer did not address water runoff during construction of the subdivision. In response, the
Company explained that they did not own the water system when the subdivision was
constructed and that installing a runoff system will minimize potential liability to itself and
customers.T To reduce the potential liability from storm runoff, the project would grade the site
to provide proper channeling of stormwater flow away from adjacent lots.
6 Response Production Request No. 7.
7 Response Production Request No. 4.
7STAFF COMMENTS AUGUST 4,2021
Curtailment Plans for Falls Water and Taylor Mountain Systems
The Company is currently working on a Curtailment Plan applicable to both Falls Water
and Taylor Mountain with an expected implementation occurring in early 2022. If curtailment is
necessary before implementation of the plan, the customers will be notified using the Company's
mass notification system and local TV news media, with additional information mailed to the
customers to provide details about the water restrictions.s Staffappreciates the Company's
willingness to develop a curtailment plan and looks forward to seeing the document.
Proiect Funding
Fundine of the Capital Proiects
The Company proposes to finance the three capital projects through its parent company,
NW Natural Water of Idaho, LLC ("NW Natural"). NW Natural will use a combination of debt
and cash to pay for the projects. Staff notes that a security issuance request for the debt has not
been filed with the Commission. The Company must verifu if debt funding for the three capital
projects requires Commission approval under ldaho Code $$ 6l-901 et seq.
Usase of the Special Plant Reserve Fund
Another source of funding the Company proposes to use for the three capital projects is
the Reserve Fund, which was established by Order No. 32663.e The Company seeks authority to
fund all or-as funds allow-part of the capital projects using the Reserve Fund funds. The
Reserve Fund accrued approximately $27,000 per year in depreciation expenses, and as of
December 37,2020, had a balance of $l10,029.93.
Staff verified that the Company has properly funded the account since its last rate case
and confirmed that this balance is accurate. Staff supports the use of the Reserve Fund for
financing the construction of the improvements identified in Alternative 2. Staff does not
believe it is appropriate to use these funds for the improvements at the Taylor Mountain water
system, since it was not part of Falls Water when the fund was established, and it continues to
have a separate tariff. The recovery of the Taylor Mountain portion of capital improvement-
$289,623-will be evaluated separately from Falls Water capital improvements.
8 Response Production Request No. 10.
e See Case No. FLS-W-12-01.
8STAFF COMMENTS AUGUST 4,2021
Customer Notification and Customer Comments
Rule 125 of the Commission's Rules of Procedure does not require direct customer
notification unless the Company is requesting a rate change. IDAPA 31.01.01.125.
On July 15,2021, the Commission issued a press release announcing an informational
public workshop to be held Tuesday, July 27,2021, at 7:00 pm online and by telephone. There
were no customers in attendance.
On July 30,2021, the Commission issued a press release announcing a telephonic hearing
for customers to be held Monday, August 9,2021, at 7:00 pm.
As of August2,202l, no customer comments have been received.
STAFF RECOMMENDATION
Staff recommends that the Commission approve the Company's request to implement the
following capital projects and that the Company be alloweil to submit prudently incurred actual
costs for evaluation and recovery in the next general rate case.
1. The construction of Well #l I as a new water source;
2. The construction of a two-million-gallon water storage tank, including a related
booster pump station adjacent the tank; and
3. The construction of a wellhouse, security fencing, and a surface water collection
system at the Taylor Mountain Well #2.
In addition, Staff recommends that the Commission authorize the Company's request to
use the Special Plant Reserve Fund to fund the capital improvements identified as Alternative 2.
U rl:-
Respectfully submitted this -7 v day of August 2021.
Dayn
Deputy Attomey General
Technical Staff: Rick Keller
Kevin Keyt
Johan Kalala-Kasanda
Chris Hecht
9STAFF COMMENTS AUGUST 4,2021
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 4TH DAY oF AUGUST 202I,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF IN
CASE NO. FLS.W-21-01, BY E-MAILING A COPY THEREOF, TO TIIE
FOLLOWING:
PRESTON CARTER
601 W BANNOCK ST
BOISE ID 83702
E-MAIL: [e-mail]
harmonywri eht@ givensoursley. com
K SCOTT BRUCE
FALLS WATER CO INC
2I8O N DEBORAH DR
IDAHO FALLS ID 83401
E-MAIL: scottl @fallswater.com
ERIC W NELSEN
SR REGULATORY ATTORNEY
NWNATURAL
220 NW 2ND AVE
PORTLAND OR972O9
E-MAIL : [e-mail]
SECRET
CERTIFICATE OF SERVICE