Idaho Public Utilities Commission

Case No. TTS-W-08-01, Order No. 30718

January 29, 2009

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

Website: www.puc.idaho.gov

 

Water rates approved for Teton Springs; case addresses unique issues

 

The Idaho Public Utilities Commission has approved rates for about 272 customers of the Teton Springs Water and Sewer Company. This case was unique because of Teton Springs’ request to establish a fund for emergency repairs and also to assess an “availability charge” on undeveloped lots in the resort.

 

The water company serves single-family home, multi-residential units and commercial customers within the Teton Springs Golf and Casting Club planned resort development near Victor. The development has 581 single-family lots, 14 commercial lots and two multi-family dwellings that will contain 143 residential units at build-out. Currently, the company serves 194 residential customers, 73 multi-family unit customers and five commercial customers.

 

The commission approved an annual revenue requirement for the utility of $146,309. Teton Springs requested $259,256. The commission approved a rate base of $57,763, while the company proposed $75,350. The rate base is the dollar value of a utility’s physical facilities and operating capital used to serve its customers. From this total capital investment (less depreciation) the utility is authorized to earn a rate of return. The commission approved a 12 percent rate of return.

 

The commission approved total annual expenses of $137,483, against the company’s proposal of $285,166. As part of its annual expense, Teton Springs proposed that $89,140 be recovered from customers for a fund to allow the company to quickly make emergency repairs to the system. The $89,140 is the annual depreciation of the total water system investment of $3.1 million. But the commission said collecting that money from customers would be asking them to pay a second time for plant-in-service already contributed by customers and recovered by the developer in the sale of the resort lots.  

 

However, the commission said the company raised an issue common to many of Idaho’s small water companies: When small water systems are developed using lot sales to recover infrastructure costs (contributed capital), they have no plant-in-service investment that can be included in rate base from which the company can earn a rate of return. When emergency repairs are required, small water utilities typically must borrow the money and then apply to the commission for a temporary surcharge.

 

“We find this situation presents challenges to a small water utility’s economic viability and often compromises its capability to satisfy its statutory duty to maintain adequate service,” the commission said.

 

Consequently, the commission is allowing the company to establish an emergency reserve fund of nearly $7,000 per year to be used only for emergencies and major unplanned capital expenditures that add up to greater than 10 percent of the company’s annual revenue requirement. The company must provide an auditable paper trail of the expenses and provide the commission with written notice when it uses the fund. The amount of the fund is 5 percent of the company’s revenue requirement, not including operations and maintenance expense. It may accumulate over the years, but cannot exceed the company’s authorized annual revenue requirement.

 

Teton Springs also sought an “availability charge” on customers owning undeveloped lots. Teton Springs is only at one-third of expected build-out. In declining the request, the commission cited a 1982 order it issued after the Hayden Pines water utility sought to assess a charge on all billable lots with water available to them. While hook-up fees can be charged, the commission said, customers cannot be billed for water service they are not receiving. Such a charge would amount to a tax and a public utility does not have the constitutional right to levy a tax. “The economic consequences of developing a water service infrastructure for a resort community initially must remain with the developer,” the commission said. “This risk cannot be passed on to the universe of potential future customers or owners of undeveloped lots.”

 

To address revenue loss because of the resort community’s seasonal disconnects, the commission granted Teton Springs authority to charge a reconnection fee to customers who re-connect after more than a 30-day absence.

 

The rates approved by the commission are as follows:

 

-- Single-family residential, $240 per quarter. The company requested $150 per quarter and a $75 per quarter “availability charge” for undeveloped lots.

 

--Multi-family residential, $80 per quarter. The company requested $150 per quarter.

 

--Commercial, $240 per quarter for properties served by a one-inch service line. The amount increases as the size of the service line increases. The company requested $450 and an availability charge of $225 on undeveloped commercial lots.

 

The commission also directed the company to submit a plan to meter all customers. The flat rates will likely be eliminated once meters are installed and customers billed based primarily on consumption.

 

The order also approves a number of other charges related to connection and re-connection, after-hours service, returned checks and field collection.

 

A full text of the commission’s order, along with other documents related to this case, is available on the commission’s Web site at www.puc.idaho.gov. Click on “File Room” and then on “Water Cases” and scroll down to case number TTS-W-08-01.

 

Interested parties may petition the commission for reconsideration by no later than Feb. 11. 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.