991102_sw.doc

DECISION MEMORANDUM

TO: COMMISSIONER HANSEN
COMMISSIONER SMITH
COMMISSIONER KJELLANDER
MYRNA WALTERS
DON HOWELL
STEPHANIE MILLER
TONYA CLARK
RON LAW
BOB SMITH
GEORGE FINK
MARGE MAXWELL
WORKING FILE

FROM:

DATE: November 2, 1999

RE: CASE NO. GNR-W-98-1 (Stoneridge Water)
CERTIFICATE APPLICATION

On July 22, 1998 Stoneridge Utilities Company (Stoneridge; 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 entire 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 the Company’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. Staff recommends a gross annual revenue requirement for the system of $37,062 with rates as follows:
Residential customers
Customer Charge $14 per month
Commodity Charge $0.30/1,000 gallons for all consumption.
Time Share Complex
Customer Charge $200 per month
Commodity Charge $0.30/1,000 gallons for all consumption.
Commercial Customers
Customer Charge $20 per month
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.

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 notes that up to this time many meters on the 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 not offered an 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. That rule states a presumption, by the Commission, 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 presumed by Commission Rule 103.
As set forth in Staff’s Report, Staff recommends the following:
Staff recommends that the Commission process the case under Modified Procedure without hearing.
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 Company.
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 were the only parties to file comments (attached).
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 recommendations.

Commission Decision
Does the Commission wish to issue a Certificate and approve rates as previously reflected in its Notice?

vld/M:GNR-W-98-1_sw

DECISION MEMORANDUM 2