29117.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF ASPEN CREEK WATER CO., INC. FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY. )
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CASE NO. GNR-W-02-2

ORDER NO. 29117

On March 27, 2002, Aspen Creek Water Co., Inc. (Aspen Creek; Company) filed an Application with the Idaho Public Utilities Commission (Commission) requesting a Certificate of Public Convenience and Necessity to serve an existing small water system located in Bear Lake County, Idaho. Reference Idaho Code § 61-526; IDAPA 31.01.01.111.
The Commission in this Order approves Aspen Creek’s Certificate Application, approves continuation of existing rates as tariffed rates and authorizes a reconnection charge based on the period of disconnect. The Commission also requires the Company to adopt the Commission’s Customer Relations Rules, Customer Information Rules, and Small Water Policies.
APPLICATION
Aspen Creek presently has 29 part-time customers (summer homes) located in the Fish Haven, Idaho area in a subdivision that has 65 lots. Additional development, the Company states, could grow the water system to more than 200 customers.
Aspen Creek’s present water rates are $25 per month for the first 15,000 gallons and $1 per 1,000 gallons after that. No one, the Company states, presently uses more than the monthly minimum. All customers are required to have water meters.
Included with the Company’s Application is a balance sheet and income statement. Also included is a detailed legal description of the area along with a subdivision plat map, and a piping map. The piping map is “as built” except for a booster station that is not needed at this time and a well house that is not entirely complete yet.
On June 4, 2002, the Commission issued a Notice of Application and Modified Procedure in Case No. GNR-W-02-2. A copy of the Commission’s Notice was mailed to each customer currently taking service. The deadline for filing written comments was August 1, 2002. Commission Staff was the only party to file comments.
Staff Analysis and Recommendations:
Staff has reviewed the Company’s filing, visited the Company’s offices, reviewed its financial position and toured the service area. Staff’s comments can be summarized as follows:
Service Area:
Regarding the proposed service area, Staff found the legal description contained in the Company’s filing to be inadequate and requested more precise information. Aspen Creek complied with Staff’s request. The legal description for the service area should read as follows:
The service area of the Aspen Creek Water Company is located in Township 16 South, Range 43 East, Boise-Meridian, Bear Lake County, Idaho. More specifically as follows, portions of the Southwest One-Quarter and West One-Half of Section 15, also including portions of the North One-Half of the Northwest One-Quarter and the West One-Half of the Northeast One-Quarter of Section 22.

A full legal description of each parcel within the service area is on file with the Commission.
Financial Position:
Attached to Staff’s comments is a pro forma income statement and a pro forma balance sheet for Aspen Creek. Staff believes that it is reasonable to recognize certain anticipated operating costs of the Company that were not incurred during the first partial year of operation. Among these costs are: Idaho Department of Environmental Quality Annual Assessment Costs; Idaho Public Utilities Commission Annual Regulatory Fees; required annual water testing expenses; and reasonable travel expenses. Staff also adjusted the reported revenues to eliminate homeowner association charges not related to the water service operation and annualized the revenues that would have been collected for the year at the $25 per month rate requested by the Company. Staff has also adjusted the reported revenue to treat customer hook-up charges ($1,000 per hook-up) as contributions in aid of construction rather than revenue. Coincident with the adjustment for hook-up charges, Staff has eliminated the actual cost of making the hook-ups from the Company’s expenses and has capitalized these costs to the plant in service accounts. This approach, Staff contends, is a more appropriate method of accounting for such costs and charges.
The pro forma income statement developed by Staff produces a net pro forma loss for the partial year 2001 of $1,986.96. To overcome this loss, the rates for this Company would have to be increased to an average of $36.83 per month for each of the 14 customers connected to the system during the 2001 partial year. Staff notes that this Company is a young company just beginning to develop its customer base. The water company is owned and operated by the developers of the subdivision. The water company has no investment in the initial backbone system. Reference Commission Rule 103 for Small Water Companies. The existing subdivision is platted for a total of 65 building lots. Staff believes that the development company should bear some of the water system operating costs until such time as a reasonable customer base is established.
Staff notes that the Idaho Department of Environmental Quality requested that the owners of this water system establish a reserve account to ensure that there are funds available to pay for future repair and replacement costs. The Company complied and set up an escrow account at their bank for this purpose. As of December 31, 2001, this account had a balance of $4,598, which includes interest earned on the original amount of $4,559. Staff supports and encourages the use of such a reserve account for small under-capitalized water companies. To be most effective, Staff recommends that the account should only be used for major repairs and replacement costs rather than day-to-day operation and maintenance costs.
Revenue Requirement and Rate Design:
Based upon the limited financial data available at this time, Staff recommends that the rates proposed by the Company be approved. Even though the rates today result in a loss, Staff contends that to increase the rates at this time would likely result in over-collection. All of the development lots are ready for hook-ups and many connections are planned in the future.
Staff notes that the rates proposed by the Company are a $25 per month minimum charge that includes the first 15,000 gallons of water consumed per month plus $1 per 1,000 gallons in excess of 15,000 gallons consumed per month. Staff has been informed that, because of the part-time use of the vacation homes connected to the system, no customer has ever exceeded the 15,000 gallons per month included in the minimum charge. The rates of the Company, Staff contends, are more like a flat rate (unmetered) system but with the conservation incentive of meters to discourage unnecessary waste of water.
Reconnection Charges:
In its Application, Staff notes that the Company was silent regarding charges to be imposed when and if a customer is disconnected from the system. It is normal practice, Staff contends, for a utility to impose a reconnection charge to help defray the cost of actually performing the disconnection and reconnection. The imposition of these charges is intended to avoid passing these costs onto other customers through basic water rates.
Staff notes that it recently filed comments on this issue in Case No. SWSW-02-1 for the Stoneridge Water System in Blanchard, Idaho. Stoneridge, like Aspen Creek, Staff contends, is primarily a vacation or second home type community. Such water systems can and should expect to receive requests from customers for seasonal water disconnections. When this occurs, the Company will realize a reduction in its revenues during the period of disconnection. This revenue reduction will lead to upward pressure on the basic water rates of the Company. In recognition of this problem, Staff in the Stoneridge case recommended two separate and distinct reconnection charges. The first would be assessed for customers who for any reason were temporarily disconnected for a period of less than thirty (30) days. The second reconnection charge (seasonal disconnection) would be imposed on customers who at their own request were disconnected for a period of more than 30 days. Staff believes this approach is appropriate for Aspen Creek as well, and proposes a normal reconnection charge (30 days or less) of $15 during normal business hours and $25 for after hours or weekend reconnections. Reconnection charges for seasonal disconnections (more than 30 days), Staff contends, should be set at three (3 x) times the monthly minimum charges, in this case that would be $75 during normal business hours with an additional $10 charge for after hours or weekend reconnections. Staff believes this approach is fair and equitable to all of the customers in the Aspen Creek system as well as to the Company. With such a policy, Staff contends, the Company’s rates are stabilized, full-time customers who did not disconnect from the system are not required to pay the short-fall in revenues created by the seasonal customers, the seasonal customers make their decision to disconnect based upon factors other than avoiding water bills, and seasonal customers pay a more proportional share of the fixed costs required to operate and maintain the system for their benefit.
Consumer Relations:
The Consumer Staff is working with Aspen Creek Water Company, Inc. to ensure that billing information and customer notices provided to customers in the future will comply with the requirements set forth in the Commission’s Utility Customer Relations Rule (UCRR), and Utility Customer Information Rules (UCIR).
Staff notes that the Company has been provided a set of tariffs outlining general rules and regulations for small water companies that Aspen Creek Water Company has reviewed and has agreed to adopt. It will sign those tariff pages and return them to the Commission for its approval.
Staff notes also that the Company submitted a copy of its bill statement, a seven-day disconnect notice, a 24-hour disconnect notice and a summary of rules. The Company, Staff states, has willingly agreed to make minor changes to bring its forms into compliance with the Commission requirements. Of particular note, the out-of-state telephone number provided on bill statements is a local number for Fish Haven residents.
Management and Operations:
Staff contends that the Company’s management and operations appear to meet or exceed the Commission’s minimum requirements. The management of the Company, Staff states, has experience managing similar activities. The system-certified operator has an in depth knowledge of the system and previous experience operating similar systems in and around the Bear Lake area.
Staff Recommendations:
Staff recommends that the Company be granted a Certificate of Convenience and Necessity for the geographic area identified in Staff’s comments. Staff recommends that the Company’s rates be approved as requested in the Application with periodic Staff audits to assure that rates remain at an appropriate level. Staff also recommends that the Company establish a reconnection charge of $15 for customers disconnected from the system for thirty days or less and a reconnection charge of $75 for customers disconnected from the system for a period of more than thirty days, with an additional $10 charge for after hours or weekend reconnections.
COMMISSION FINDINGS
The Commission has reviewed and considered the filings of record in Case No. GNRW02-2, including Staff’s comments and recommendations. The Commission has also reviewed the pro forma income statement and balance sheet prepared by Staff.
Based on the established record, our review of Idaho Code § 61-526 and Rule 111 of the Commission’s Rules of Procedure, we find it reasonable and in the public interest to issue Certificate of Convenience and Necessity No. 403 to Aspen Creek Water Co, Inc. to provide water to the service area described above and located within Bear Lake County, Idaho. In so doing, we require that Aspen Creek operate the public water utility as a separate business entity, separate and distinct from all other business activities.
As a regulated water utility, Aspen Creek is required to adopt the Commission’s Utility Customer Relations Rules, Utility Customer Information Rules, and an accounting system consistent with the information required by the Commission’s annual report for small water companies. A separate accounting system is to be established for water system activities and detailed receipts and time records are to be maintained.
Aspen Creek’s present water rates are $25 per month for the first 15,000 gallons and $1 for each additional 1,000 gallons. On the facts presented, the Commission finds it just and reasonable to authorize the continuation of these rates. The Commission further finds it reasonable to approve a reconnection charge of $15 for customers disconnected from the system for 30 days or less and a reconnection charge of $75 for customers disconnected from the system for a period of more than 30 days, with an additional $10 charge for after-hours or weekend connections. In so doing, the Commission notes that Aspen Creek is primarily a vacation or second home type community. Setting a reconnection fee for seasonal disconnections reasonably related to the cost of service, we find, supports a portion of the Company’s ongoing fixed costs and protects those remaining connected customers from carrying an unfair share of those fixed costs. Aspen Creek is directed to file tariff sheets with the Commission reflecting authorized rates, non-recurring charges and general service provisions.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction and authority over Aspen Creek Water Co, Inc., a water utility, and the issues raised in this Application, pursuant to Title 61 of the Idaho Code and the Commission’s Rules of Procedure, IDAPA 31.01.01.000 et seq.
O R D E R
In consideration of the foregoing and as more particularly described above, IT IS HEREBY ORDERED and the Commission does hereby issue Certificate of Public Convenience and Necessity No. 403 to Aspen Creek Water Co, Inc. for the providing of water service to that area located in Township 16 South, Range 43 East, Boise-Meridian, Bear Lake County, Idaho and more particularly described as portions of the Southwest one-quarter and West one-half of Section 15, also including portions of the North one-half of the Northwest one-quarter and the West one-half of the Northeast one-quarter of Section 22.
IT IS FURTHER ORDERED and the Commission does hereby authorize water rates for Aspen Creek customers of $25 per month for the first 15,000 gallons and $1 for each additional 1,000 gallons per month. The Company is directed to file a rate tariff conforming with this Order.
IT IS FURTHER ORDERED and Aspen Creek is authorized to assess a reconnection charge of $15 for customers disconnected from the system for 30 days or less and a reconnection charge of $75 for customers disconnected from the system for a period of more than 30 days, with an additional $10 charge for after hours and weekend reconnections. The Company is directed to file a conforming tariff with the Commission.
IT IS FURTHER ORDERED and Aspen Creek is required to adopt and implement the Commission’s Customer Relations Rules (IDAPA 31.21.01), Customer Information Rules (IDAPA 31.21.02), and Small Water Policies (IDAPA 31.36.01) including an accounting system consistent with the information required by the Commission’s annual report for small water companies.
IT IS FURTHER ORDERED and Aspen Creek is required to inform its customers of the Commission approved rates and policies.
IT IS FURTHER ORDERED and Aspen Creek is required to make written Petition or Application to the Commission prior to any proposed change in ownership of the Aspen Creek water system.
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 with regard to any matter decided in 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
day of September 2002.

PAUL KJELLANDER, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

DENNIS S. HANSEN, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

vld/O:GNRW0202_sw

ORDER NO. 29117 1

Office of the Secretary
Service Date
September 25, 2002