Case No. SPL-W-06-01, Order No. 30315

May 15, 2007

Contact: Gene Fadness (208) 334-0339




Commission denies Spirit Lake East petition


The Idaho Public Utilities Commission has denied a northern Idaho water company’s petition to reconsider and amend an earlier order that granted the company a modest increase, but decreased its return on equity from 12 percent to 6 percent.


Further, the commission ordered Spirit Lake East Water Company to complete an analysis by May 21 of how and when the company will address major leaking in its water system and provide for a new back-up generator. Failing to do so may result in the commission imposing other remedies authorized by state statute against the company, including the possibility of daily fines.


An April 3 order by the commission found the company, which has about 287 customers in Kootenai and Bonner counties, is failing its statutory obligation to provide “adequate, efficient just and reasonable service.” The commission sliced the company’s rate of return in half and disallowed the cost of a back-up generator, which failed to operate properly, from being included in rates paid by customers.


On April 14, Spirit Lake East filed a petition asking the commission to reconsider its decision to not include the cost of a back-up generator in rates and to amend the order to say that the return on equity be raised from 6 percent to 12 percent if a new owner buys the company. On Monday, the commission denied the company on both requests and noted that it had not complied with the commission’s earlier order to file an action plan within 14 days that included specific commitments, including dates for starting and completing projects to repair system leaks and provide a back-up generator.


Spirit Lake East said it acquired a back-up generator from its major shareholder, Spokane-based Hanson Industries. The company maintained it could not provide the commission an exact cost because Hanson acquired it and other items from Kaiser Aluminum as part of Kaiser’s Chapter 11 bankruptcy proceeding. Spirit Lake East said a value of $12,360 was assigned to the generator. The commission said business transactions with affiliate companies, such as Hanson Industries and Spirit Lake East, are carefully scrutinized to assure ratepayers that only necessary and reasonable expenses are included for recovery in rates. In this instance, there was “no evidence in the record demonstrating that Spirit Lake actually paid anything for the generator,” the commission said.


Regarding the return on equity, the commission said it should be clear to the company that a return on equity of 12 percent will be considered only when necessary improvements are made to the system “whether the improvements are made by Spirit Lake or a new owner of the system.”


A copy of the commission’s most recent order in this case, along with other documents related to the case, is available on the commission’s Website at Click on the water icon, then on “Open Water Cases,” and scroll down to Case No. SPL-W-06-01.