HomeMy WebLinkAbout20210714Final_Order_No_35108.pdfORDER NO. 35108 1
Office of the Secretary
Service Date
July 14, 2021
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
On March 1, 2021, Gem State Water Company, LLC requested the Commission
approve its purchase of Troy Hoffman Water Corporation, Inc.’s system assets and the transfer of
Certificate of Public Convenience and Necessity (“CPCN”) No. 280 from Troy Hoffman Water to
Gem State Water.
On March 26, 2021, the Commission issued a Notice of Application and Modified
Procedure, setting a June 15, 2021 comment deadline and a June 29, 2021 reply comment deadline.
Order No. 34977. Commission Staff filed written comments, and Gem State Water filed reply
comments. No customer comments were filed.
Having reviewed the record, we approve the acquisition of Troy Hoffman Water’s
system assets by Gem State Water and approve the transfer of the purchased water system’s CPCN.
THE APPLICATION
Troy Hoffman Water is a regulated water utility that serves approximately 147
residential customers in Kootenai County, Idaho under CPCN No. 280. Gem State Water serves
customers near Troy Hoffman Water’s service territory. Gem State Water and Troy Hoffman
Water entered into an Asset Purchase Agreement on December 18, 2020. The Asset Purchase
Agreement will transfer all of Troy Hoffman Water’s real property and personal property,
including water rights, to Gem State Water.
Gem State Water does not seek to change rates, rate structure, or other charges with
this Application. Gem State Water stated that any future changes would be based on prudently
incurred capital expenditures and other accepted ratemaking principles. Gem State Water stated it
intends to work with Staff before and during future rate proceedings to consider consolidating the
rates, rate structure, and other charges for Gem State Water and Troy Hoffman Water customers.
Gem State Water noted its employees will assume the roles previously undertaken by Troy
Hoffman Water’s contractors.
IN THE MATTER OF GEM STATE WATER
COMPANY’S APPLICATION FOR
APPROVAL OF ACQUISITION OF THE
ASSETS OF THE WATER BUSINESS OF
TROY HOFFMAN WATER CORPORATION
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CASE NO. GSW-W-21-01
ORDER NO. 35108
ORDER NO. 35108 2
THE COMMENTS
1. Staff Comments
Staff recommended the Commission approve the sale of Troy Hoffman Water’s assets
and the transfer of its CPCN to Gem State Water. Staff noted Idaho law does not specifically
address the acquisition of water companies, but that it would rely on the statute governing sales of
electric utilities—Idaho Code § 61-328—to analyze the transaction. Idaho Code § 61-328 requires
the Commission to find a) the transaction is consistent with the public interest, b) the cost of the
rates for supplying service will not be increased by reason of such transaction, and c) the applicant
for such acquisition or transfer has the bona fide intent and financial ability to operate and maintain
the system in the public interest.
Staff believes the sale of Troy Hoffman Water’s system assets to Gem State Water is
consistent with the public interest. Northwest Natural Holding Company is Gem State Water’s
parent company. Staff noted Northwest Natural Holding Company’s continued acquisition of
water companies in Idaho may provide benefits through operational efficiencies and economies of
scale.
Staff noted that Gem State Water has asserted it will maintain Troy Hoffman Water’s
existing rates and charges post-acquisition. Staff asserted that when “Gem State Water eventually
files a general rate case, Staff will ensure that the requested rate increase was not driven by the
transaction, and that rates will not be higher than they would have been absent the transaction.”
Staff Comments at 4.
Finally, Staff believes Gem State Water has the bona fide intent and financial ability to
operate and maintain Troy Hoffman Water’s system in the public interest. Staff noted Gem State
Water’s licensed water system operator will run the Troy Hoffman Water system if the Application
is approved, and Gem State Water has committed “to provide safe and reliable service and to meet
the infrastructure needs of Troy Hoffman Water [customers].” Staff Comments at 4. Staff also
observed that Gem State Water, through its parent companies, has access to capital that will likely
lower financing costs for system repairs and upgrades—ultimately benefiting customers.
If the Application is approved and Gem State Water wishes to create a single, combined
tariff for Gem State Water, Staff recommended Gem State Water work with Staff to create separate
rate schedules for Troy Hoffman Water customers. Likewise, Staff recommended the Commission
ORDER NO. 35108 3
direct Gem State Water to work with Staff to make any necessary revisions to its billing and
collection documents within three months of issuance of the final order.
Staff noted Gem State Water provided direct notice to each Troy Hoffman Water
customer of the proposed acquisition and the Application. If the Application is approved, Staff
recommends the Commission direct Gem State Water to provide direct notice of the acquisition to
Troy Hoffman Water’s customers, and that the notice include Gem State Water’s contact
information.
2. Gem State Water Reply Comments
Gem State Water filed timely reply comments, noting that it “agrees with comments
and recommendations provided in the Staff Comments, and looks forward to continuing to work
with the Staff and the Commission to serve its growing customer base in Idaho.” Gem State Water
Reply Comments at 1.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over this matter and the issues in this case under Title
61 of Idaho Code. Specifically, the Commission regulates “public utilities,” including “water
corporations” that serve the public or some portion thereof for compensation. See Idaho Code §§
61-125, -129, and -501. The Commission has an established practice of evaluating the transfer of
water systems under the criteria found in Idaho Code § 61-328. Gem State Water and Troy
Hoffman Water are privately held water companies and public utilities as defined in these laws.
Having reviewed the record, we find the acquisition fair, just, reasonable, and in the public interest.
Consequently, we approve the Application.
Gem State Water will provide organizational support, access to capital, and economies
of scale for the Troy Hoffman Water system. It is in the public interest for an experienced owner
and operator of public utility infrastructure to acquire this system. Gem State Water has
demonstrated the financial ability and bona fide intent to operate the system in the public service.
Northwest Natural Holding Company, of which Gem State Water is a wholly-owned subsidiary,
has a $400 million revolving line of credit, a net income of $70.3 million from continuing
operations, cash flow from operations of $143 million, an A2 credit rating from Moody’s, and an
AA- credit rating from Standard and Poor’s. See Staff Comments at 4. The bona fide intent to
operate the system in the public interest is demonstrated by Gem State Water’s commendable
operation of its existing systems, and the Company’s strategic plan to purchase and operate
ORDER NO. 35108 4
multiple small water companies in the region. Finally, customer rates will not increase because of
the transaction. Any future rate increases will be the result of prudent expenditures to improve the
respective systems.
We direct Gem State Water to notify Troy Hoffman Water’s customers directly of the
acquisition. This notice may be a separate mailing, a message on bills, or a bill insert. We direct
Gem State to work with Staff to make any necessary revisions to its customer documents within
three months of the service date of this Order. If Gem State Water chooses to create a single
combined tariff for water systems owned and operated by Gem State Water, we encourage Gem
State Water to work with Staff to file a conforming combined tariff.
O R D E R
IT IS HEREBY ORDERED that Gem State Water’s Application is approved.
IT IS FURTHER ORDERED that CPCN No. 280 is transferred to Gem State Water.
IT IS FURTHER ORDERED that Gem State Water notify Troy Hoffman Water
customers of the sale of the Troy Hoffman Water system—either through a separate mailing, a
message on bills, or as a bill insert.
IT IS FURTHER ORDERED that Gem State Water work with Staff to make any
necessary revisions to its customer documents within three months of the service date of this Order.
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.
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ORDER NO. 35108 5
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 14th day
of July 2021.
PAUL KJELLANDER, PRESIDENT
KRISTINE RAPER, COMMISSIONER
ERIC ANDERSON, COMMISSIONER
ATTEST:
Jan Noriyuki
Commission Secretary
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