28110.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF GROUSE POINT WATER COMPANY LLC FOR A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY AND RATES.
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) CASE NO. GNRW971

ORDER NO. 28110

On July 23, 1997, Walt Wanner, President of Statewide Construction, Inc. filed an Application on behalf of Grouse Point Water Company LLC (Company; Grouse Point) for a Certificate of Public Convenience and Necessity to serve the Grouse Point Subdivision in Ada County, Idaho. Reference Application, Attachment 1, Legal Description and Maps of Subdivision and Service area; Idaho Code 61-526; Commission Rules of Procedure, IDAPA 31.01.01.111.
The Commission by this Order finds that Grouse Point is operating as a public utility subject to Commission jurisdiction, issues a related Certificate of Public Convenience and Necessity, establishes approved rates and charges, and requires adoption of general service provisions.
The Grouse Point Subdivision, consisting of 24 lots in varied states of development, is located within the West ½, Section 15, T.2N., R.1E., B.M., Ada County, Idaho on the east side of Cloverdale Road about one-quarter mile south of Hubbard Road and just north of the New York Canal. Presently, domestic water service, which commenced November 1996, is provided to Grouse Point customers at a flat rate of $20 per month. No connection fees are collected. Operation and maintenance services are provided under contract by EM, a United Water Idaho Inc. affiliate. All system costs have been paid and there are no liens or encumbrances.
Regulatory proceedings in Case No. GNR-W-97-1 were informally suspended at the request of Grouse Point to provide the Company with the opportunity to negotiate for the sale of the system. Negotiations did not result in a sale. The Company requested that the Commission proceed with processing its Certificate Application contending that issuance of the requested Certificate was required by and consistent with the Public Convenience and Necessity.
On December 1, 1998, a Notice of Application in Case No. GNR-W-97-1 was issued by the Commission. On April 26, 1999, the Commission Staff filed a report with the Commission setting forth the results of its investigation and recommendations. In its report Staff discusses the service area, the water supply system, the operation of the system, accounting, financial condition, and rate design.
Staff Recommendation
Staff recommends issuance of a Certificate to Grouse Point with the service territory limited to currently developed property and adjoining well sites. Staff notes that the existing water supply has present excess capacity, which may be used to support the Company’s plans for future expansion. Staff recommends approval of the requested $20/month flat rate, but indicates that budget estimates and operating expense for 24 customers would support a higher $28 per month rate. Mr. Walt Wanner, the owner of the Grouse Point Water Company, has reviewed Staff’s report and concurs with its assessment and recommendations.

Staff Analysis
The Grouse Point well system, Staff contends, may be considered a state of the art system. The Company had assistance from United Water Idaho Inc. technical personnel in the design of the system. The system has 2 wells equipped with a soft-start variable speed pump and electronic controllers to continually match pumping capacity with system demands. The No. 1 well has a 15 horsepower pump and is rated at 138 gallons per minute (gpm). The No. 2 well has a 100 horsepower pump rated at 958 gpm, which is used as a backup for high demand periods as well as providing required fire flows.
The distribution system is looped through the subdivision using 6-inch and 8-inch mains. The main lines are looped and are valved adequately to isolate any potential problem areas without interrupting service to the entire system while repairs are being made. Adequate hydrants are in place and the wells have adequate capacity to provide fire flow requirements. Meter bases are in place but no meters are installed at this time. Each lot has a 1-inch service line with a meter box in place.
A separate irrigation system is in place and uses water from the New York Canal located along the southern border of the subdivision. The irrigation system is operated by the homeowners association, independent from the potable water system.
The only deficiency noted by Staff is the lack of any elevated storage or back-up power source to provide water supply and pressurization in the event of an electrical interruption to the pumps.
The Company, Staff notes, has made arrangements with EM2, a subsidiary of United Water, to provide routine operation and maintenance service including pump lubrication, maintenance of the electrical controls, recording water pumped and collecting and submitting water samples for testing as required by the Idaho Department of Health and Welfare — Division of Environmental Quality (DEQ).
The developer-installed system and related capital investment in plant is considered contributed property under Commission Rule 103. Reference IDAPA 31.36.01.103. Accordingly, Staff recommends that the Commission grant no rate base consideration in establishing water service rates for the Company.
Staff notes that separate accounting records have not been kept for the Grouse Point water system, but states that the Company is in the process of creating a set of accounting records for the water company and will establish a separate checking account for the Company. The Company has no employees. All management and administrative services including customer billing and accounting services are provided by the owner and an independent accounting service. As mentioned above, routine operation and maintenance services are provided by EM2.
Since separate accounting records were not available, certain budgeting assumptions were made by Staff to determine a reasonable revenue requirement for the Company. A“budget” was developed by Staff in cooperation with the Company’s accounting service and Mr. Wanner. The budget is based upon actual costs incurred during the year 1998 where possible and estimates for other reasonable costs where the detail was not readily available. The estimates for water testing expenses are distributed over the frequency period for each of the required water quality tests. The budget estimate indicates that an annual operating revenue requirement of $8,050.81 is required to cover operating expenses and provide reasonable compensation for management and administrative services. Based upon 24 customers, recovery of these costs would require a monthly flat rate per customer of approximately $28.00 per month.

On June 7, 1999, the Commission issued a further Notice in Case No. GNR-W-97-1 apprising the public of Staff’s report, analysis and recommendation, and the Commission’s proposed findings regarding Certificate issuance and rates. The Commission’s Notice included the following language:
YOU ARE FURTHER NOTIFIED that the Commission has reviewed and considered the Company’s Application in Case No. GNR-W-97-1 and Commission Staff’s report, analysis and recommendation. The Commission preliminarily finds that the public interest may require issuance of a Certificate of Public Convenience and Necessity to Grouse Point Water Company LLC for service to currently developed property (approximately 24 lots) in the Grouse Point Subdivision. The Commission notes that Staff’s proposed revenue requirement and rate design is based on a proposed budget. The Company has requested $20.00 per month flat-fee for customers. The Commission Staff indicates that a flat-fee of $28.00 per month could be supported. The Commission in reviewing the budget notes that it is just that, a budget, and is not fully supported by actual auditable expenses. Without particularly adjusting any specific item, the Commission finds an adjusted annual revenue requirement of $7,200.00 and a related flat-rate of $25.00 per month per customer to be fair, just and reasonable and proposes to adopt same.

The Commission also preliminarily found that the public interest regarding issuance of the proposed certificate and implementation of the proposed revenue requirement and rate design might not require a hearing to consider the issues presented and that the Application could be processed under Modified Procedure, i.e., by written submission rather than by hearing. Reference Commission Rules of Procedure, IDAPA 31.01.01.201-204. Commission Staff was directed to provide a separate summary of this Notice to all Grouse Point customers.
The deadline for filing written comments was June 30, 1997, comments were filed by Commission Staff and one of the Grouse Point customers. Staff adopts its prior report and recommendations. The Grouse Point customer objects to the Commission’s proposal to increase the present $20 per month flat fee to $25 per month. The customer notes that while their personal domestic consumption has been constant and while they use the available separate irrigation waters for sprinkling, many of their neighbors apparently are using domestic potable water for irrigation and sprinkler use. If their neighbors install other items that require large quantities of water, such as swimming pools, the customer queries whether their rates will raise once again.

COMMISSION FINDINGS
The Commission has reviewed and considered the filings of record including Staff’s investigative report and recommendations and the comments of the Company’s customer.
Based on the established record, a review of Idaho Code Title 61, and the nature and manner of control exercised by Grouse Point in the operation management of the Grouse Point Water System, we find it necessary to assert formal regulatory jurisdiction over the water system operated by Grouse Point Water Company LLC and to issue Certificate of Public Convenience and Necessity No. 360 to Grouse Point Water Company LLC, a public water utility, for the following described existing service territory:
The Grouse Point Subdivision in Ada County located on the East side of Cloverdale Road about one-quarter mile South of Hubbard Road and just North of the New York Canal within the West ½, Section 15, T.24., R.1E., B.M., Ada County, Idaho. Reference Idaho Code §§ 61-526, 61-528; IDAPA 31.01.01.111.

The Certificate that we approve is for currently developed property and adjoining well sites. We further find that the present and/or future public convenience and necessity requires issuance
of said Certificate.
As a regulated utility the Company 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.
We also find it fair and reasonable based on Staff accounting, engineering and related financial data to approve an annual revenue requirement for Grouse Point of $7,200.00 and to establish tariff rates for unmetered service for the Grouse Point water system at $25 per month customer charge for all potable water consumption. The Company is directed to file tariff sheets reflecting authorized rates, including non-recurring charges and general service provisions.
Given the dual water system in the Grouse Point Subdivision, we find it reasonable to note that the rates we approve are for potable domestic water consumption and not irrigation waters. We note the concerns raised by the customer regarding the use of potable water for irrigation by their neighbors. We apprise the Company’s other customers that unrestrained use of the water will cause the Company’s expenses to increase and will cause this Commission to consider the appropriateness of metering.

CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction and authority over Grouse Point Water Company LLC, a water utility, and the issues raised in this case, 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. 360 to Grouse Point Water Company LLC, Ada County, Idaho. The Company is directed to furnish a more precise legal description for the Certificate file limiting the certificated area to currently developed property and adjoining well sites.
IT IS FURTHER ORDERED and the Commission does hereby establish rates and charges as set out above. The Company is required to file tariff sheets consistent with this Order.
IT IS FURTHER ORDERED and the Company is required to adopt and implement the Commission’s Consumer Relations Rules, the Commission’s Utility Customer Information Rules and an accounting system consistent with the information required by the Commission’s annual report for small water companies.
IT IS FURTHER ORDERED and the Company is required to inform its customers of the Commission approved rates and policies.
THIS IS A FINAL ORDER. Any person interested in 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 _______ day of July 1999.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Myrna J. Walters
Commission Secretary

vld/O:GNR-W-97-1_sw

ORDER NO. 28110 1

Office of the Secretary
Service Date
August 5, 1999