29123.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE INVESTIGATION INTO WHETHER PONDEROSA TERRACE ESTATES WATER SYSTEM, INC. IS A PUBLIC UTILITY SUBJECT TO REGULATION BY THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. GNR-W-01-1

ORDER NO. 29123

In final Order No. 29086 issued on August 8, 2002, the Commission established an annual revenue requirement for Ponderosa Terrace Estates Water System in the amount of $26,604. Order No. 29086. To collect this amount, the Commission authorized Ponderosa to collect monthly rates in the amount of $48 for Full-Time and Part-Time customers and $25 for Active Service customers. These rates became effective for service rendered on or after August 1, 2002. Following issuance of Order No. 29086, the Commission received a Petition for Reconsideration filed by Mr. Lyle Peterson, to which Ponderosa filed a Cross-Petition. Having fully reviewed the Petitions and the record in this matter, the Commission denies the Petitions as set out in greater detail below.
PETITIONS FOR RECONSIDERATION
A. Petition from Lyle Peterson
1. Excessive Rates: On August 28 and 29, 2002, Mr. Lyle Peterson submitted several e-mails that were intended to collectively constitute a Petition for Reconsideration. Mr. Peterson requested that the Commission reconsider the flat monthly rates it set for Ponderosa. According to his Petition, Mr. Peterson believes that a rate in excess of $40.00 per month for Full- and Part-Time customers “will cause the customer to either move to another location or put in a well.” Moreover, he stated his belief that “the $25.00 rate for active customers will also cause customer dilution.” Mr. Peterson stated that he would like Ponderosa “to survive,” but setting “excessive rates that owners cannot afford to pay” will “hurt the utility and cause customers to leave the system.” In short, Ponderosa “needs to be more cost effective and show water service stability.”
On the issue of rates, Mr. Peterson further stated that the Full-Time and Part-Time rates have “already caused at least 5 lots to go to wells & by the 1st of 2003, another 5 & maybe another 3 by early 2003.” He argued that it is “not in the interest of the citizens of Idaho to have the IPUC provide excessive customer rates for a questionable utility operation.”
2. Lot Classification: Mr. Peterson also took issue with the classification of 14 lots owned by Ponderosa owner Robaer Cobott and his family. His Petition advocated adding these 14 inactive lots to the ratebase for active service customers. Since these lots are controlled by the utility, Mr. Peterson argued that they should be treated as active service customers rather than inactive. According to the Petition, the cost to change these lots from inactive to active service would be approximately $100 or less for the cost of 4 feet of pipe, a spigot, and an hour of excavation work.
3. Hook-up Fee: The Petition also found fault with the $2,500 hook-up fee authorized in Order No. 29086. Mr. Peterson argued the $2,500 fee is unreasonable because the Commission made no provision for this money to go into an account for future water sources. Furthermore, Mr. Peterson questioned whether this fee would ever be a factor on the inactive lots when Robaer Cobott and his family own half of them. He believes that the fee to hook-up an inactive customer should be the actual cost – approximately $100 – unless the fee is ordered to be placed in a future water source account because Mr. Cobott controls most of the inactive lots. Mr. Peterson does not believe that hook-ups will occur with “excessive rates” and high hook-up fees that “will not keep customers in the system.”
In regards to the method of Reconsideration he seeks, Mr. Peterson stated that Reconsideration by “comments or any other method would be fine.”
B. Ponderosa’s Cross-Petition
On September 6, 2002, Ponderosa responded to Mr. Peterson’s Petition for Reconsideration by filing a Cross-Petition.
1. Lot Classification: Mr. Cobott stated that he and his family own 11 inactive lots, not 14 lots as alleged by Mr. Peterson. In any event, Mr. Cobott argued that his lots fall under the same rules as any other landowner with regard to the hook-up fee. While stating that it is his right to keep his lots inactive like any other inactive landowner, Mr. Cobott recognized that he will also have to pay the $2,500 hook-up fee per lot when service is needed in the future.
2. Hook-up Fee: Ponderosa’s Cross-Petition took issue with Mr. Peterson’s assessment that a new connection would require only one hour of labor. The Company estimated that the minimum amount of time to escavate, shut off the water, make repairs, acquire parts, and monitor the system for leaks once the water was turned on was four hours. This estimate did not include the cost of the parts, the time necessary to go to town to purchase them, or any unforeseen difficulties. Ponderosa stated that the $2,500 hook-up fee is necessary to enable “the water system to make future well sites and whatever else it needs to provide water to Ponderosa customers.”
3. Inadequate Revenues: Mr. Cobott also requested that the Commission reconsider the rate schedule because the number of customers on the Ponderosa system has changed greatly since the Commission established the revenue requirement. His Cross-Petition indicated that eight dwellings and three active service customers are no longer connected to the Ponderosa system because of wells being put in. Mr. Cobott stated “this amounts to a loss of revenue of $459.00 per month or $5,508.00 per year.”
COMMISSION DISCUSSION AND FINDINGS
The Commission has reviewed and considered final Order No. 29086, the Petitions filed by Mr. Peterson and Ponderosa, and the record in this case.
A. Standards for Reconsideration
Reconsideration provides an opportunity for a party to bring to the Commission’s attention any issue previously determined and thereby provides the Commission with an opportunity to rectify any mistake or omission. Washington Water Power Co. v. Kootenai Environmental Alliance, 99 Idaho 875, 591 P.2d 122 (1979). In those instances where an aggrieved party asks the Commission to reconsider its decision based upon the record, it may simply do so. The Commission may also grant reconsideration by rehearing if it intends to take additional evidence or argument. If reconsideration is granted, the Commission must complete its reconsideration within 13 weeks after the date for filing petitions for reconsideration. Idaho Code § 61-626(2). If the Commission grants reconsideration, it “must issue its order upon reconsideration within twenty-eight (28) days after the matter is finally submitted for reconsideration.” Id.
The Commission’s Rules of Procedure set out the requirements to which petitions for reconsideration must conform. To allow parties to timely respond to reconsideration filings, Rule 63 provides that all documents must be served upon the representatives of every party of record. IDAPA 31.01.01.063. Rule 331 requires petitions and cross-petitions for reconsideration to “set forth specifically the ground or grounds why the [cross-] petitioner contends that the order or any issue decided in the order is unreasonable, unlawful, erroneous or not in conformity with the law, and a statement of the nature and quantity of evidence or argument the [cross-] petitioner will offer if reconsideration is granted.” IDAPA 31.01.01.331.01. To allow the Commission to consider the relief requested by the petitioner, Rule 331.03 requires that a petition or cross-petition for reconsideration “must state whether the [cross-] petitioner. . .requests reconsideration by evidentiary hearing, written briefs, comments, or interrogatories. . . .” IDAPA 31.01.01.331.03.
Although Idaho Code § 61-626(1) and Commission Procedural Rule 331 allow a party to cross-petition for reconsideration in response to any issues raised in a petition for reconsideration within seven days, they also state that a petition for reconsideration must be filed within 21 days after the date of the Order from which reconsideration is sought. Idaho Code § 61-626(1) also provides:
Cross-petitions for reconsideration may be granted if any petition for reconsideration to which they respond is granted on the issues to which the cross-petition is directed, but cross-petitions for reconsideration will be denied when the petitions for reconsideration to which they are directed are denied.

Because a cross-petition for reconsideration will be granted only as to those issues that respond to an issue initially raised in a petition for reconsideration, the scope of as cross-petition for reconsideration is limited to those issues raised in a petition for reconsideration. Eagle Water Company, Inc. v. Idaho Public Utilities Commission, 130 Idaho 314, 940 P.2d 1133 (1997). Thus, new reconsideration issues cannot be raised outside of the 21 day reconsideration period.
While Mr. Peterson requested reconsideration by “comments or any other method,” Ponderosa’s reconsideration request did not specify the method of reconsideration the Company sought. Furthermore, neither Petition specified “the nature and quantity of evidence or argument the petitioner will offer if reconsideration is granted.” IDAPA 31.01.01.331.01. We took extensive testimony during the evidentiary public hearings (totaling 318 pages) held in Sandpoint on June 20, 2002. Thus, the Commission finds that another comment period is not required. Mr. Peterson’s Petition for Reconsideration offers to produce no new evidence of a nature relevant to the issues raised in Order No. 29086. For these reasons plus those identified below, we find it reasonable to deny Mr. Peterson’s Petition for Reconsideration and consequently the Company’s Cross-Petition as well. Idaho Code § 61-626(2).
B. Disputed Issues
1. Excessive Rates: As we recognized in Order No. 29086, the Ponderosa Terrace Estates Water Company is a small system with limited resources. It has approximately 29 customers, 2 supply wells with a combined capacity of only 25 gallons per minute, and a 30-year old infrastructure. While we understand that customers would like less costly water service, the Commission cannot alter these physical system characteristics when setting rates.
In establishing a revenue requirement and the rates required to recover this amount, we considered the financial needs of the Company and the ability of customers to pay. As we stated in Order No. 29086, our goal is to maintain Ponderosa’s financial viability without setting rates so high that customers are forced to seek alternate water supply sources. After conducting evidentiary and public hearings on these issues, the Commission determined that Ponderosa needed to recover $26,604 in annual revenue from its ratepayers to meet its prudent and reasonable operating costs, fairly compensate the Company for its labor expenses, and allow Ponderosa to earn a fair rate of return on the capital invested in the water system.
Mr. Peterson’s Petition identifies the need for lower rates. However, he does not offer any cost evidence justifying a reduced revenue requirement and lower rates. Although we understand Mr. Peterson’s argument, we are compelled to set rates that are reasonable to both the Company and the customers. Idaho Code §§ 61-502, 61-623. We also note that the $48 monthly rate for Full- and Part-Time customers approved in Order No. 29086 is significantly less than the $60 rate being charged by the Company last autumn. Based upon the evidence before us, we affirm the revenue requirement and monthly rates established in Order No. 29086.
2. Lot Classification: Mr. Peterson’s Petition advocated that the inactive lots owned by Mr. Cobott be included as active service customers. This would result in additional monthly income to the Company. While it is true that classifying the lots owned by Mr. Cobott and his family as “active service” rather than “inactive” would allow rates to be spread over a greater number of customers, neither Ponderosa nor the Commission can force a potential customer to take service. Idaho Code § 61-315 states: “No public utility shall, as to rates, charges, service, facilities or in any other respect . . . subject any corporation or person to any prejudice or disadvantage.” This statute also empowers the Commission to determine any question of fact arising under this section. If Ponderosa or the Commission were to require the Cobott family lots to change classification merely because of their relationship to the Company’s owner, the owners of the lots would clearly be disadvantaged or penalized in a manner that unrelated customers are not. Moreover, these inactive lots will be subject to the $2,500 hook-up fee when service is connected at a future date – just as would any other Ponderosa customer.
Hook-up Fee: Next, Mr. Peterson asserted that the hook-up fee is too high. The $2,500 hook-up fee is designed to cover not only the physical installation costs of extending service above the ground, but also to fund ongoing maintenance and new supply sources for the aging Ponderosa system. Absent such a fee, the Commission does not believe it is fair for long-term customers to fund a system from which new customers could acquire service without a similar investment. The $2,500 hook-up fee is an attempt to quantify the long-term investment made by existing Ponderosa customers in addition to the actual cost to hook-up a new customer.
While the Commission understands Mr. Peterson’s concern that the $2,500 fee could get lost in the financial books absent placement in a separate account, we are confident that such funds will be properly booked. Prior to approving any rate increase or authorizing additional debt for new capital investment, the Commission and Staff reviews the financial records of the utility. After reconciling the previous customer inventory with the current number of customers in each class, the Commission will be able to determine how much money Ponderosa has received in hook-up fees. The Commission expects Ponderosa to utilize hook-up fees to provide system improvements and to account for any maintenance expenditures.
4. Ponderosa Cross-Petition: Having denied the Petition for Reconsideration, the responding Cross-Petition is deemed denied. However, one issue in the Cross-Petition should be addressed.
In opposition to Mr. Peterson’s contention, the Cross-Petition argued that the rates should be reconsidered because they were too low. For this argument to be properly considered by the Commission, the Company would have had to file within the 21-day reconsideration period, not during the 7-day cross-petition period that followed. Because Ponderosa’s Cross-Petition for Reconsideration was not filed within 21 days of Order No. 29086, it was not timely as a petition for reconsideration. “[C]ross-petitions for reconsideration will be denied when the petitions for reconsideration to which they are directed are denied.” Idaho Code §61-626(1).
Although the Idaho Code and case law does not permit us to grant Ponderosa’s requested reconsideration of its declining revenues in this context, the Commission continues to be concerned about the financial viability of Ponderosa. In Order No. 29086, we set a grace period for customers to change customer classes without being subject to the $2,500 hook-up fee until October 15, 2002. To allow the Commission to monitor Ponderosa’s changing customer base, we direct Ponderosa Terrace Estates Water System and Commission Staff to submit a report to the Commission no later than November 25, 2002 detailing changes to the number of customers in each class and the impact these changes will have on Ponderosa’s revenues.
In sum, we deny Mr. Peterson’s Petition for Reconsideration. Consequently, Ponderosa’s Cross-Petition is denied because the Commission has denied Mr. Peterson’s Petition. As to the additional issue of inadequate revenues raised by Ponderosa, we deny reconsideration because it was not timely filed within the 21-day reconsideration period. Of course, Ponderosa may choose to file a formal Application in a separate proceeding to modify customer rates at any time.
O R D E R
IT IS HEREBY ORDERED that the Petition for Reconsideration filed by Lyle Peterson is denied. Having denied Mr. Peterson’s Petition, Ponderosa Terrace Estates Water System’s Cross-Petition is consequently also denied.
IT IS FURTHER ORDERED that Ponderosa Terrace Estates Water System and Commission Staff submit a report to the Commission no later than November 25, 2002 detailing changes to the number of customers in each class and the impact these changes will have on Ponderosa’s revenues.
THIS IS A FINAL ORDER ON RECONSIDERATION. Any party aggrieved by this Order or other final or interlocutory Orders previously issued in Case No. GNR-W-01-1 may appeal to the Supreme Court of Idaho pursuant to the Public Utilities Law and the Idaho Appellate Rules. See Idaho Code § 61-627.

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of September 2002.

PAUL KJELLANDER, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

DENNIS S. HANSEN, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

O:GNRW0101_ln3_recon

“Active Service” customers have service extended to the lot and have above-ground access to water.

ORDER NO. 29123 1

Office of the Secretary
Service Date
September 25, 2002