20230920Comments of the Commission Staff.pdf

RECEIVED
2023 September 20 11:43 AM
IDAHO PUBLIC
UTILITIES COMMISSIONMICHAEL DUY AL
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 11714
Street Address for Express Mail:
11331 W CHINDEN BLVD, BLDG 8, SUITE 201-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF KOOTENAI HEIGHTS
WATER SYSYEMS' APPLICATION FOR
AUTHORITY TO INCREASE ITS RA TES
AND CHARGES FOR WATER SERVICE IN
THE STATE OF IDAHO
)
) CASE NO. KHW-W-23-01
)
)
) COMMENTS OF THE
) COMMISSION STAFF __________________ )
COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission, by and
through its Attorney of record, Michael Duval, Deputy Attorney General, submits the following
comments.
BACKGROUND
On March 28, 2023, Kootenai Heights Water System, Inc. ("Company") applied for
authorization to increase its rates and charges for water service. The Company requested a May
1, 2023, effective date. This was suspended for 30 days plus five months per Order No. 35741.
The Company is a Commission-regulated water corporation serving 11 residential
customers in and around Kootenai in Bonner County, Idaho.
The Company requested "a general 49.74% increase in water rates" by increasing the
"residential flat rate from $38.50 per month to $57.65 per month." Application at 1.
STAFF COMMENTS SEPTEMBER 20, 2023
The Company argued the rate increase "is justified to cover expenses, such as, power,
water testing, maintenance, and other expenses to maintain and operate the water system, and to
continue to provide safe and reliable water." Id. The Company stated it has not increased its
rates since 2007.
The Company's Application included a Rate Case spreadsheet with Exhibits 1-4.
STAFF ANALYSIS
Staff reviewed the Application, exhibits, and additional information provided by the
Company. Based on its review, Staff recommends a total revenue requirement of $7,600, which
is an increase of $2,442 or 47.35% in the Company's annual revenue. This revenue requirement
is based on an 11 % Return on Equity ("ROE") applied to net rate base of $851.
System Description
The Kootenai Heights Water System serves 11 customers in the Kootenai Heights
Subdivision located in the City of Kootenai, Idaho. The system includes an 8-inch well equipped
with a five-horsepower submersible pump, three pressure tanks, and 2-inch PVC distribution
lines. The most recent Sanitary Survey found the system to have no significant deficiencies and
found the system to be in compliance with the Idaho Rules for Public Drinking Water Systems.
Revenue Requirement
Staff recommends a total annual revenue requirement of $7,600, which is a 47.35%
increase in billed revenue, and a total expense allowance of $7,506. The Company's test year
revenue consists of unmetered residential revenue billed at a monthly flat rate for all customers.
Staff does not propose any adjustments to the Company's test year revenues (Attachment 2).
Operating Expenses
The Company's operating expenses consist of three accounts: Contract Services
Professional, Purchased Power, and Miscellaneous Expenses. Staff reviewed all three accounts
within the 2022 test year and believes the expenses incurred were necessary for providing service
to customers.
STAFF COMMENTS 2 SEPTEMBER 20, 2023
Contract Services Professional
The Company contracts with Water Systems MOT, INC. ("The Management Company")
to manage its water system. The Management Company bills Kootenai Heights on a quarterly
basis for various Operation & Maintenance ("O&M") expenses incurred during the quarter. The
Company recorded $5,819 in total Contract Services Professional Expenses for the test year 2022
(Attachment 1, Line No. 11). Staff reviewed each quarterly invoice from the Management
Company which includes system operator compensation, property taxes, water testing, repair
expenses, and other O&M expenses. Staff believes the Contract Services Professional Expenses
were prudently incurred and necessary for providing service to customers. Other O&M
Expenses included in the Company's Application include Purchase Power Expenses of $788 and
Miscellaneous Expenses of $200 (See Attachment 1 ).
Purchase Power
The Company receives monthly invoices from A vista Utilities for electric service. Staff
reviewed all electric utility invoices for 2020, 2021 , and 2022 and confirmed that all Purchased
Power expenses for test year 2022 were accurate.
Miscellaneous Expenses
The Company uses the Miscellaneous expense account to book various O&M expenses
which consists primarily of office supplies. Staff reviewed the account and associated invoices,
and believes the expenses were appropriate and should be recoverable.
RATE BASE
Since its last general rate case in 2007, the Company has not included any new Plant in
Service to its Rate Base. In the Application, the Company included Net Plant in Service of
$26,327 and Working Capital of $851 (See Attachment 1).
Net Plant in Service
The Company's Net Plant in Service balance includes an offset for Contributions in Aid
of Construction ("CIAC") received from customer hookup fees. Staff reviewed the Company's
STAFF COMMENTS 3 SEPTEMBER 20, 2023
Net Plant in Service balance, hookup fees, and CIAC balance, and believes each was calculated
correctly.
Working Capital
The Company used the 1 /8 method to calculate working capital. This method is
commonly used by other small water utilities in Idaho. See Order No. 35692. Staff reviewed the
Company's working capital calculation and confirmed that it was accurately calculated.
RA TE OF RETURN
The Company is entitled to earn a reasonable return on its investments in rate base. If a
utility has no debt, then the rate ofreturn is determined based on capital attributable to its equity.
The Company is requesting a 12% ROE and has no outstanding debt. In Order No. 33658 and
Order No. 33910, similar water utilities were authorized an 11 % ROE. Staff proposes a ROE of
11 % and believes it is consistent with other small water utilities.
RATE DESIGN
In its Application, the Company proposed an unrnetered monthly flat rate of $57.65 for
its eleven residential customers. The monthly rate is calculated by dividing the revenue
requirement by the total number of customers to determine an annual amount necessary to charge
each customer. That result is then divided by 12 to achieve a monthly rate. (Company Exhibit 4
and Rates). Staff calculates a monthly flat rate of $57.58 to achieve its proposed annual revenue
requirement of $7,600 (See Attachment 4).
CUSTOMER RELATIONS
Customer notice and press release
The Company's Application did not include a copy of the customer notice or press
release. Staff contacted the Company and a copy of the customer notice and verification of
publication of the press release were sent June 6, 2023. The customer notice was dated April 18,
2023, and the press release was published April 18, 2023, in the Bonner County Daily Bee. The
customer notice and the press release satisfy Rule 125 of the Commission's Rules of Procedure
See IDAPA 31.01.01.
STAFF COMMENTS 4 SEPTEMBER 20, 2023
Customer workshop
The Commission provided public notification for a customer workshop through an
August 4, 2023, news release. A virtual public workshop was held for customers on Tuesday,
August 15, 2023, beginning at 6:30 pm. No customers attended.
Customer comments
As of September 13, 2023, there have been no customer complaints. There is one
comment in which the customer asked for justification regarding the increase and complained it
was too large an increase. The customer also questioned the Commission's authority to review
and approve an increase.
Company Tariff
The current Company tariff dates to the last rate case in 2007. Rate Schedule No. 1 states
a monthly charge of$38.50 to include the first 10,000 gallons, and a $3.10 charge for each 1,000
gallons over the first 10,000 gallons. Rate Schedule No. 2 lists a late payment charge of $10.00.
Staff recommends that Rate Schedule No. 1 be revised to reflect the new flat rate monthly
charge. Staff also recommend that Rate Schedule No. 2 be revised to reflect a Late Payment
Charge of one percent of the unpaid balance at the time of the new billing statement, to better
reflect the charge previously approved by the Commission for other utilities.
The Commission has released a Model Tariff for small water companies and Staff
recommends that the Company update its rate schedules and its general rules and regulations to
reflect the appropriate rates. Staff is willing to assist the Company in updating and submitting
the new tariff.
STAFF RECOMMENDATIONS
Based on its review of the Company's Application and response to discovery, Staff
recommends an annual revenue requirement of $7,600, consisting of a rate base of $851, and a
ROE of 11 %. Additionally, Staff recommends a monthly flat rate of $57.58 for all residential
customers.
STAFF COMMENTS 5 SEPTEMBER 20, 2023
Respectfully submitted this 20th day of September 2023.
Technical Staff: Ty Johnson
Travis Culbertson
Chris Hecht
Michael Eldred
i:umisc/comments/ khww23. l mdjk comments
STAFF COMMENTS
Michael Duval
Deputy Attorney General
6 SEPTEMBER 20, 2023
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 201h DAY OF SEPTEMBER 2023,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF TO
KOOTENAI HEIGHTS WATER SYSTEM, IN CASE NO. KHW-W-23-01 , BY
MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE FOLLOWING:
BOB HANSEN
KOOTENAI HEIGHTS WATER SYSTEM
67 WILD HOURSE TRAIL
SANDPOINT ID 83864
E-MAIL: [e-mail]
JEFF COWLEY
E-MAIL:
[e-mail]
SECRETARY
CERTIFICATE OF SERVICE