28206.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF APPLICATION OF
STONERIDGE UTILITIES COMPANY FOR A
CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY AND RELATED RATES. )
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CASE NO. GNR-W-98-1

ORDER NO. 28206
On July 22, 1998, Stoneridge Utilities Company (Stoneridge), a combined water/sewer company, filed an Application with the Idaho Public Utilities Commission (Commission) for a Certificate of Convenience and Necessity to provide water service to a golf resort community near the town of Blanchard in Bonner County, Idaho. Reference Idaho Code §§ 61-526, 61-528; Commission Rules of Procedure, IDAPA 31.01.01.111. The Company’s initial filing was incomplete. Proceedings were informally stayed pending further investigation.
The Commission by this Order finds that Stoneridge is operating as a public utility subject to Commission jurisdiction, issues a related Certificate of Public Convenience and Necessity, requires the Company to separate its water and sewer operations, establishes approved rates and charges, and requires adoption of general service provisions.
The Stoneridge project (real estate development, golf course, water system, sewer system, etc.) is owned and operated as a sole proprietorship by Mr. Keith Garner of Salt Lake City Utah. The project is composed of an eighteen-hole golf course, approximately 200 home sites, a complex of time-share condominiums and several commercial establishments associated with the golf course. The time-share condominiums have all been sold and there are currently 29 residences constructed on the 200 building lots.
On August 25, 1999 following completion of its investigation into Stoneridge’s filing, the Commission Staff filed a Report with the Commission Secretary containing its analysis and recommendation in Case No. GNR-W-98-1. Staff’s Report incorporates an audit report setting forth the results of Staff’s analysis, a description of the water supply system, an analysis of customer water consumption, a revenue requirement analysis, recommendations regarding customer relations, and suggested rate design. Also filed with the Commission was related correspondence from Stoneridge regarding the content of the report. Staff notes that nothing in Stoneridge’s comments has persuaded it to alter its recommendations.

STAFF RECOMMENDATIONS
Staff’s report recommends that Mr. Garner be granted a certificate to operate as a public water utility to serve the Stoneridge project.
The Application did not specify the level of rates desired. During its investigation, Staff was informally provided a document that indicated Stoneridge desired to increase rates as follows:
Time-Share Complex $2,750 per month (increase from $883.50)
Residential Unspecified (currently $8.00 per month)
Golf Course Irrigation $700 per month (currently –0-)
Golf Pro Shop/Restaurant $90 per month (currently –0-)
Golf Course Recreation Center $500 per month (currently –0-)
Project Maintenance Bldg. $30 per month (currently –0-)
Sales Office Bldg. $30 per month (currently –0-)
Rental Condominiums $100 per month (currently –0-)

Staff recommends a gross annual revenue requirement for the Stoneridge water system of $37,062 with metered rates as follows:
Residential customers
Customer Charge $14 per month per meter
Commodity Charge $0.30/1,000 gallons for all consumption.
Time Share Complex
Customer Charge $200 per month (for five meters @ $40 per
month per meter)

Commodity Charge $0.30/1,000 gallons for all consumption.
Commercial Customers
Customer Charge $20 per month per meter
Commodity Charge $0.30/1,000 gallons for all consumption.
Golf Course Irrigation
Customer Charge $1,200 per month
Commodity Charge $0.30/1,000 gallons for all consumption.

Staff notes that up to this time many meters on the Stoneridge water system were either inoperable, absent or unread. Staff has used data from what recent meter data was available together with old data from a 1994 engineering report provided by Stoneridge to develop its proposed rate design. Stoneridge, in informal comments to Staff’s Draft Report, does not agree with Staff’s recommendations, but has offered no alternative. Stoneridge does indicate that meters are being installed and repaired, and that consumption figures will be available in the future.
Staff, in developing its revenue requirement, assumed that Stoneridge has no rate base. Staff bases this assumption on the Commission’s Rule No. 103 for Small Water Companies. Reference IDAPA 31.36.01.103. Under Rule 103 a developer-installed system and related capital investment in plant is considered contributed property. It is presumed that the developer of a real estate project recovers the cost of the water system through the increased value of lots when sold. Stoneridge believes that capital recovery of the investment in the water system ($355,063 — unverified by Staff) is appropriate. The history of ownership of the development includes several sales, foreclosures and bankruptcy repossessions. Mr. Garner, the current owner, has been involved off and on since 1978 when he purchased the development out of foreclosure from Chicago Title Company. Stoneridge’s comments to Staff’s Draft Report have not convinced Staff that Stoneridge does not stand in the shoes of the developer.
As set forth in Staff’s Report, Staff recommends the following:
Staff recommends that the Commission process the case under Modified Procedure without hearing. Reference Commission Rules of Procedure, IDAPA 31.01.01.201-204.

Staff recommends that a company, separate and apart from all other activities of the developer, be established for the water system. Stoneridge objects to this recommendation.

Staff recommends that a Certificate of Public Convenience and Necessity be issued to Mr. Garner operating as Stoneridge Water System.

Staff recommends that the Commission direct Stoneridge to file a detailed metes and bounds legal description of the service area with the Commission.

Staff recommends that a separate accounting system be established for the water system activities and that detailed receipts of time records be maintained. Stoneridge believes that its existing accounting system for the Stoneridge development is adequate and indicates that it will begin maintaining adequate records.

Staff recommends that the Commission accept Staff’s recommended rate design.

Staff recommends that Stoneridge be directed to provide a copy of the Commission’s Notice to all customers.

Staff recommends that the Company provide customers with a schedule indicating the magnitude of the rate change at different levels of consumption.

Staff recommends that Stoneridge be directed to read all meters on a regular monthly basis.

Following its review and consideration of the Company’s Application and Commission Staff’s report, analysis and recommendations in Case No. GNR-W-98-1 the Commission in Notice issued September 21, 1999, found Staff’s proposed recommendations regarding issuance of Certificate, corporate structure, certificated area of service, accounting, operations, proposed revenue requirement and rate design to be fair, just and reasonable and proposed adopting same. The Commission further made a preliminary finding that Modified Procedure was appropriate and established an October 29, 1999, comment deadline. Notice of Modified Procedure and Staff’s recommendation in this case was mailed to all customers on October 6, 1999. Commission Staff and the Stoneridge Recreation Club Condominium Association, which was previously granted intervention, were the only parties to file comments.
Staff adopts its previously filed report. Staff further indicates that Stoneridge has supplied Staff with a copy of all forms and notices to be used in providing information or notice to customers. Staff suggested minor changes to meet Commission requirements that the Company has accepted. The Company, Staff states, has also agreed to adopt the General Rules and Regulations for Small Water Utilities in its entirety.
The Stoneridge Recreational Club Condominium Association in its comments agrees with Staff’s recommendations.

COMMISSION FINDINGS
The Commission has reviewed and considered the filings of record, including Staff’s investigative report and recommendations and the related comments of the Company and the Stoneridge Recreation Club Condominium Association.
Based on the established record, a review of Idaho Code Title 61, and the nature and manner of control exercised by Stoneridge in the operation and management of the Stoneridge water system, we find it necessary to assert formal regulatory jurisdiction over the water system operated by Stoneridge Utilities Company and to issue Certificate of Public Convenience and Necessity No. 365 to Keith Garner dba Stoneridge Water System, a public water utility, to provide water service to the Stoneridge golf resort community located near the town of Blanchard in Bonner County, Idaho. In so doing we require that a company, separate from and apart from all other activities of the developer, be established for the water system. We further require that Stoneridge file a detailed metes and bounds legal description of the service area with the Commission to be incorporated into its Certificate.
As a regulated utility, the Stoneridge Water System 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 the water system activities and detailed receipts of time records are to be maintained.
We also find it fair and reasonable, based on Staff accounting, engineering and related financial data, to approve an annual revenue requirement for the Stoneridge Water System of $37,062 and to establish tariff rates for metered service as recommended by Staff. The water utility is directed to file tariff sheets reflecting authorized rates, including non-recurring charges and general service provisions.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction and authority over Keith Garner dba Stoneridge Water System, 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. 365 to Mr. Keith Garner dba Stoneridge Water System, Bonner County, Idaho. Mr. Garner is directed to furnish a more precise legal description of the served area for the Certificate file.
IT IS FURTHER ORDERED and the Commission does hereby establish rates and charges as set out above. Mr. Keith Garner is required to file tariff sheets consistent with this Order.
IT IS FURTHER ORDERED and Mr. Keith Garner 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.
IT IS FURTHER ORDERED and Mr. Keith Garner is required to make written petition or application to the Commission prior to any proposed change in ownership of the Stoneridge Water System.
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 November 1999.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Myrna J. Walters
Commission Secretary

bls/O:gnrw981_sw
ORDER NO. 28206 1

Office of the Secretary
Service Date
November 16, 1999