Case No. SPL-W-06-01, Order No. 30279

April 2, 2007

Contact: Gene Fadness (208) 334-0339




Commission: Water company failing to provide adequate service


The Idaho Public Utilities Commission today approved a modest increase for the customers of the Spirit Lake East Water Company. However, the commission also found that the company is failing its statutory obligation to provide “adequate, efficient just and reasonable service.”


Spirit Lake East, which serves about 287 households in Kootenai and Bonner counties, requested that the fee on the first 9,000 gallons of use increase from $12 per month to $24. The commission approved an increase to $12.50. The company also wanted to increase its charge for use of more than 9,000 gallons per month from 10 cents for every 100 gallons used to 20 cents. The commission approved an increase to 12 cents for every 100 gallons used beyond 9,000 gallons per month.


Spirit Lake East, a wholly owned subsidiary of Spokane-based Hanson Industries, Inc., sought a 12 percent return on equity, the amount typically granted water companies. The commission approved a 6 percent return. “If Spirit Lake were providing an adequate, reliable water supply to its customers, the commission would approve a return on equity of 12 percent,” the commission said.


In public workshops and hearings before the commission and its staff, customers requested that no increase be allowed until after repairs are made to stop severe leaking and after a faulty generator is replaced. The commission said it does not have the authority to entirely deny the company’s application because the request was based on higher operating costs and improvements already made. Denying the application outright “could be a legally impermissible taking of property from the company,” the commission said.


The commission ordered the company to file a report within 14 days explaining the steps it will take to install a new generator and address system leaks.


Due to the failure of a backup diesel generator to operate during power outages, customers were without water, sometimes for several days.


Commission staff calculated that leakage in the system is more than one gallon for every gallon used by customers, well beyond the 10 to 15 percent considered acceptable for small-water systems. The commission declined to allow the company to recover that portion of its power costs attributable to compensating for the leaks in the system. As a result, 55 percent of the company’s overall power costs are not allowed to be recovered from customers.


“A water company that has water outages as often as yearly, and leaves customers without water for up to 10 days, is not providing service that is adequate or efficient or reasonable,” the commission said. “Water delivered at insufficient pressure to allow showering or lawn watering for many customers in not adequate or reasonable.” 


If Spirit Lake East responds promptly to the leakage and generator problems, the commission said it might not require another rate case (which can take up to eight months) for the company to recover its proven repair costs from customers. Once service improves to an acceptable level, the commission may also consider a return on equity of 12 percent.


The commission did grant the company’s request to increase its new customer connection fee to $2,500 from $1,200.


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 number SPL-W-06-01.


Interested parties may petition the commission for reconsideration by no later than April 23. 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.