20131112final_order_no_32924.pdf

Office of the Secretary
Service Date
November 12.2013
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF HAPPY VALLEY WATER SYSTEM,INC.)CASE NO.HVW-W-13-O1
SEEKING COMMISSION APPROVAL TO )
TRANSFER ITS CERTIFICATE OF PUBLIC )ORDER NO.32924
CONVENIENCE AND NECESSITY )
On June 11,2013,the Commission received correspondence from Happy Valley
Water System Inc.(“Happy Valley”or “Company”)seeking Commission approval to transfer
the Company’s existing Certificate of Public Convenience and Necessity (CPCN)No.364’from
its previous owners to its current owners.
In its letter to the Commission,Happy Valley provided the following documentation:
copy of purchase/sales agreement;copy of the warranty deed;signed resignation of previous
corporate officers;form of Organization with Articles of Incorporation:property description and
map;unaudited financial statements (five years)for the Happy Valley Water System Inc.;copy
of the 2010 IPUC Annual Report;change of registered agent with Idaho Secretary of State;
buyer’s qualifications;Drinking Water Distribution Operator Licenses for Ken Rickel;unaudited
statement of net worth for Ken and Cathy Rickel (“Rickels”);business plan;and customer
notice.
On October 8,2013,the Commission issued a Notice of Application and Modified
Procedure with a corresponding 21-day comment period.See Order No.32903.
STAFF COMMENTS
Sale Agreement and Warranty Deed
Staff confirmed that Brett C.and Nora L.McCarty (“McCartys”)sold all their
outstanding and issued stock in Happy Valley to the Rickels on October 1,2010.A filing for
approval from the Idaho Public Utilities Commission (“Commission”)should have been made
prior to the completion of the sale of all stock and the transfer of property.Under the terms of
the sale agreement,the system was sold for $8,000.Staff also confirms that the McCartys
executed a warranty deed on September 21,2010,transferring the real estate property belonging
to Happy Valley.
‘IPUC records indicate that Happy Valley was awarded CPCN No.390,see infra.p.3.
ORDER NO.32924 1
Company Management
Happy Valley’s president and general manager is Kenneth Rickel and the secretary is
Cathy Rickel.The Applicant says that the Rickels are owners of two other water companies
(Rickel Water Company and Bitterroot Water Company).According to the Application,the
Rickels are very familiar with the Commission’s regulatory authority,Utility Customer Relations
Rules and Customer Information Rules,and are prepared to abide by them.Their involvement in
the water utility industry has given them the requisite business expertise,financial ability and
water system experience to operate and maintain Happy Valley.
Mr.Rickel is familiar with the water system testing requirements of the Idaho
Department of Environmental Quality.Staff verified with the Idaho Bureau of Occupational
Licenses that Mr.Rickel is licensed as a Drinking Water Distribution Operator for Very Small
System in the State of Idaho.Staff believes that the Applicant has the capability to operate and
maintain the public water system in a manner that will provide safe and adequate service to its
customers.The Rickels have been managing and operating the Company since the sale of the
Company was finalized on October 1,2010.
IDEQ Compliance
Staff contacted the Idaho Department of Environmental Quality (IDEQ)to ensure that
Happy Valley is in compliance with applicable IDEQ regulations.IDEQ informed Staff that a
sanitary survey of Happy Valley’s water facility was conducted on May 16,2013.IDEQ’s
survey indicated that the Happy Valley water system was mainly in compliance with Idaho Rules
for Public Drinking Water Systems.IDEQ identified a few system deficiencies and offered
some recommendations in operating the water system.Staff contacted the Company concerning
the status of complying with these deficiencies.The Company informed Staff that it is working
with IDEQ to correct the various deficiencies.
Water Rights Review
Staff also reviewed the Applicant’s water right to ensure that the previous owner
transferred the water right to Happy Valley.Staff was apprised by the Idaho Department of
Water Resources (IDWR)that an application for water permit was filed by the previous owners
of Happy Valley on September 10,2010,shortly before the final sales agreement was finalized.
IDWR records indicate that Happy Valley was purchased by Mr.Rickel and requested to file a
ORDER NO.32924 2
change of address form on February 28,2011.To date,the Applicant is working with IDWR to
complete the process of obtaining a water right.
Certificate ofPublic Convenience and Necessity
The Company’s Application requests that CPCN No.364 be transferred to the new
owners,the Rickels.During its review,Staff found that CPCN No.390 is currently held by the
Happy Valley Water System,Inc.,not CPCN No.364 as indicated by the Company in its
Application.The Commission issued CPCN No.390 to Happy Valley Water System,Inc.on
August 2,2001,Case No.HVW-W-0 1-01,Order No.28816.Because all the outstanding shares
of Happy Valley Water System,Inc.were essentially purchased by the Rickels and the corporate
identity did not change,Staff believes it is not necessary to transfer ownership of the CPCN to
the Rickels.Staff believes that this scenario is similar to previous cases of ownership transfer
processed by the Commission,including the transfer of ownership of Troy Hoffman Water
Company (Case No.TRH-W-09-0 1,Order No.30992)and Algoma Water Company (Case No.
AWS-W-07-01,Order No.30567).
Accounting Issues
Staff reviewed the annual reports,unaudited statement of net worth and the stock
purchase agreement.Plant in Service,Account No.101,is shown at a cost of $14,634 on the
2010 balance sheet submitted by the Company.The supporting schedule for plant in service
reflects $3,070 in organizational costs.Staff’s analysis of the balance sheet accounts show this
$3,070 was properly reported in 2009 as Utility Plant Acquisition Adjustment,Account No.114.
This $3,070 amount resulted from a previous owner paying more for the plant in service than its
regulatory net book value.
In 2010,the acquisition adjustment was reclassified as Plant in Service,Account No.
101.This $3,070 should not be included in regulatory plant in service and the 2010
reclassification should be reversed so it is properly reflected as an acquisition adjustment.
Account No.114,Utility Plant Acquisition Adjustment,is not included in rate base and does not
earn a return.Account No.114 may be amortized but any reported depreciation or amortization
expense of the $3,070 should be excluded from regulatory expenses used to determine rates.
Based on the annual reports,net book value at December 31,2010 for Happy Valley should be
$3,343 ($11,565 plant less $8,221 accumulated depreciation).
ORDER NO.32924 3
The Application and documentation characterizes the transaction transferring the
operation and ownership of the Company to the Rickels as a stock purchase.The issuance value
of the outstanding stock is $10,000.Although the well lot was transferred as part of the
transaction it is not listed in the plant in service.Further,the documentation shows no cost for it.
As a result of the stock sale and transfer there is no increase in rate base,no purchase premium
recorded,and no change in rates.
Customer Relations
Following the transfer of ownership to the Rickels in 2010,the Company sent
customers a flier in their November bills announcing the change of ownership.The Company
sent customers a notice regarding its Application to transfer the CPCN on June 7,2013.A copy
of the June 2013 notice was filed with the Company’s Application.As of November 1,2013,the
Commission has not received any comments from customers.
In summary,Staff made the following recommendations:
1.Approve the sale of Happy Valley’s common stock to Ken and Cathy
Rickel.
2.Prohibit Happy Valley from including any costs of this transaction on the
regulatory books of the corporation.
3.Direct the Company to achieve full compliance with all the system
deficiencies and recommendations identified in the May 16,2013 IDEQ
sanitary survey.
4.Direct Happy Valley to file new tariff sheets,signed by an authorized
representative,and reflecting that the Applicant now owns the system.
COMMISSION FINDINGS
Based upon our review of Happy Valley’s Application and Staff comments,the
Commission finds that it is fair,just and reasonable to transfer the Company’s existing CPCN to
its current owners,Ken and Cathy Rickel.The Commission approves the sale of the Company’s
common stock to the Rickels and notes that the Rickels have been operating the Company
competently and without incident for several years.Happy Valley shall submit new tariff sheets
signed by current ownership within 21 days of the service date of this Order.
Happy Valley is prohibited from including any costs associated with this 2010 sale of
Happy Valley’s common stock on the Company’s regulatory accounts.Further,the Commission
ORDER NO.32924 4
directs the Company to continue to work cooperatively with IDEQ and comply with all
applicable recommendations contained in the IDEQ sanitary survey.
ORDER
IT IS HEREBY ORDERED that the Application of Happy Valley Water System Inc.
seeking Commission approval to transfer the Company’s existing Certificate of Public
Convenience and Necessity (CPCN)No.390 from its previous owners to its current owners,Ken
and Cathy Rickel,is granted.Accordingly,CPCN No.390 shall be modified to reflect current
ownership of the Company.
IT IS FURTHER ORDERED that Happy Valley shall submit new tariff sheets
reflecting the change in ownership within 21 days of the service date of this Order.
IT IS FURTHER ORDERED that Happy Valley is prohibited from including any
costs associated with 2010 sale of the Happy Valley’s common stock on the Company’s
regulatory accounts.
IT IS FURTHER ORDERED that the Company shall continue to work cooperatively
with IDEQ and comply fully with all applicable recommendations contained in the 2013 IDEQ
sanitary survey.
THIS IS A FINAL ORDER.Any person interested in the 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.
ORDER NO.32924 5
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of November 2013
ATTEST:
PAUL KJELI.ANDFR.PRESIDFNT
MARSHA H.SMITH,COMMISSIONER
/17/
Jn D.Jewell(!
Commission Secretary
O:HVW-W-1 3-Olnp2
MACK
ORDER NO.32924 6