Case No. FLS-W-07-01, Order No. 30484

January 15, 2008

Contact: Gene Fadness (208) 334-0339, 890-2712




Commission approves increase for Falls Water


The Idaho Public Utilities Commission has approved an increase in the monthly bills for metered water customers of Falls Water Company from $11.53 to $14. Falls Water, which serves 3,200 households northeast of Idaho Falls, had requested an increase to $16.47 per month.


That monthly rate, which became effective Monday, is for the first 12,000 gallons of use. A commodity charge of 66.7 cents for every 1,000 gallons above 12,000 gallons was also approved. The company requested a commodity charge of 73 cents per 1,000 gallons. The previous commodity charge was 48 cents.


Last July, Falls Water sought authorization to increase its annual revenue by $330,705, a 46.2 percent increase. Following an examination of the company’s application and an audit by commission staff, the commission approved an annual revenue increase of $200,060, or 27.9 percent. Commission staff conducted a workshop in Idaho Falls for customers and a public hearing was also held in December.


Falls Water said the increase was needed to pay for new meters and other system improvements including four line-looping projects to improve system reliability, pressure and service quality.


The commission removed $272,500 from Falls Water’s requested rate base. (Rate base is the dollar value of the utility’s physical facilities and operating capital used to serve its customers.) The $272,500 represents costs associated with a new well that was intended to be in service in 2007, but will not be in service until later this year. Of that total, $160,000 is the cost of purchasing property for the site of the new well and $112,500 was for the down payment on water rights for the well.


The commission said the cost for the new well and water rights could not yet be included in rate base because the well is not yet benefiting customers and the company has not yet demonstrated that the price for the property was reasonable. Further, the well was purchased from Rockwell Development, an affiliate of Falls Water. The water rights were purchased from a company whose former vice president is also vice president of Falls Water.


“For affiliate expenses to be justified, the utility needs to provide compelling evidence of arm’s length bargaining when incurring costs between the utility and an affiliate,” the commission said.


The commission also removed $24,000 in consulting fees paid to RDI West, a subsidiary of Frontier Property Group, the previous owner of Falls Water Company. An officer of Frontier Group is also a director for Falls Water Company. “Our Supreme Court has ruled that transactions between affiliated companies are to be subject to close scrutiny and the utility has the burden of proving the reasonableness of its affiliated transactions,” the commission said.


The commission further denied about $24,650 in expenses for renting new office space. The office is not yet under construction, which, the commission said, makes the rental expense too speculative to yet be included in rates.


The commission approved the company’s proposed increases in connection charges for a 1.5-inch meter from $825 to $930 and from $900 to $1,205 for a 2-inch meter.


The company last requested an increase of 48.2 percent in 2005. It was ultimately granted an average 14.4 percent increase. At that time, commissioners expressed concern about excessive water use and/or leakage particularly in the company’s un-metered service area including Mobile Home Estates Subdivision, Monte Vista Estates and First Street Mobile Park. It was at that time that the commission urged the company to install meters. The company is in the final stages of converting about 350 remaining flat-rate customers to metered service.


A full text of the commission’s order, along with other documents related to this case, are available on the commission’s Web site at Click on “File Room” and then on “Water Cases” and scroll down to Case No. FLS-W-07-01.


Interested parties may petition the commission for reconsideration by no later than Feb. 1. Petitions for reconsideration must set forth specifically why the petitioner contends that the order is unreasonable, unlawful or erroneous. Petitions should include a statement of the nature and quantity of evidence the petitioner will offer if reconsideration is granted.


Petitions can be delivered to the commission at 472 W. Washington St. in Boise, mailed to P.O. Box 83720, Boise, ID, 83720-0074, or faxed to 208-334-3762.