Idaho Public Utilities Commission
Case No. UWI-W-11-02, Order No. 32443
January 24, 2012
Contact: Gene Fadness (208) 334-0339, 890-2712
Commission adopts settlement of United Water rate case
The Idaho Public Utilities Commission today approved a settlement to the United Water Idaho rate case that will increase rates for Boise area water customers by an average 8 percent effective Feb. 1 followed by a 2.5 percent increase on Feb. 1, 2013.
For an average residential customer, the monthly increase will be about $2.28 per month in 2012 and another 72 cents per month in 2013.
United Water, which serves about 84,000 customers in the Boise metro area, filed last August for a near 20 percent one-time increase of about $5.82 per month, or about $7.6 million in additional yearly revenue. The settlement allows a $3 million revenue increase in 2012 and $950,000 in 2013 or about 52 percent of United Water’s original request. Further, the agreement precludes any other rate increases until 2014 at the earliest.
Parties proposing the settlement to the commission included commission staff, United Water and the Community Action Partnership Association of Idaho (CAPAI), which represents low-income customers.
The commission acknowledged the more than 250 comments filed by concerned customers, none favorable to the request. Most of the comments expressed concern about United Water seeking more revenue because declining water use resulted in less revenue. About 38 percent of United Water’s $7.6 million request in new revenue was attributed to declining water sales. The settlement approved by the commission removed nearly all the revenue increase requested attributable to reduced water use. The agreement calls for future meetings between staff and United Water to discuss revenue and earnings instability associated with reduced water use.
Parties to the settlement also did not agree on an appropriate return on equity (ROE). United Water requested an overall rate of return of 8.43 percent (it is currently earning 5.64 percent) and an ROE of 10.5 percent. Commission staff’s recommended ROE was significantly below anything approved by the commission for an Idaho utility in the last 20 years. A specified level of return is not included in the stipulation, one reason why a lower overall revenue requirement could be achieved.
Commission staff thoroughly reviewed United Water’s expenses and investments. The staff adjustments approved by the commission totaled a nearly $4 million reduction in the company’s
revenue request. “The stipulation we approve is for a significantly reduced amount and spreads recovery of that reduced amount over two years,” the commission said.
However, further reductions were difficult to find because much of the company’s request was driven by additional investment for pipelines, filtration and pumping, which are required to provide adequate service. United Water claims it has invested more than $20 million in its system since its last rate case. Improvements include a new supply treatment facility, a 600,000-gallon water storage tank, 1.7 miles of new 24-inch water main and replaced water mains, service lines and meters. The company is also investing $5.5 million in a new customer information system. “There is no dispute that the company has made capital improvements that are properly recovered in rates, and that its costs have increased since its last rate increase, while its revenues have declined,” the commission said.
Customers also objected to an increase in the fixed customer charge from $9.05 per month to $10.05. United Water’s customer charge is notably higher than customer charges for other electric and gas utilities operating in Idaho.
Cost-of-service studies for water companies typically show a higher degree of fixed costs to deliver water than is necessary to deliver electricity or natural gas. Much of United Water’s cost is in the infrastructure it operates and maintains, and those costs exist independent of the amount of water used. Revenue not collected in the customer charge must be recovered in the charge for water used (commodity charge), which, for many customers, would dramatically increase billing, particularly in the summer.
Both commission staff and CAPAI supported the increase to the customer charge over shifting those costs to the commodity charge. CAPAI said it generally prefers to place the bulk of any rate increase on the actual water used to enhance a customer’s ability to control his or her bill.
United Water agreed to increase the cap on the amount of annual benefits it will make available to assist low-income customers from $50 to $65. Further, the company agreed to remove the upper limit of matching funds it will contribute to the “UW Cares.” The company currently will match up to $20,000 of customer contributions to UW Cares. Under the proposed stipulation, the company has agreed to match whatever customers contribute, even beyond $20,000. That means funds will be available to meet the needs of all United Water customers who apply for the UW Cares program.
Copies of the commission’s order, along with other documents, are on the commission’s Web site at www.puc.idaho.gov Click on the water icon, then on “Open Water Cases,” and scroll down to Case No. UWI-W-11-02.
Interested parties may petition the commission for reconsideration by no later than Feb. 14. Petitions must specify why 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.
 For the average customer who uses a 5/8” to ¾”-inch meter, the fixed customer charge would increase from $18.10 every two months to $20.10 in 2012 and $20.80 in 2013. The commodity charge, which varies according to consumption, would increase from $1.35 per hundred cubic feet (ccf) in the winter months to $1.44 per ccf in 2012 and $1.464 in 2013. During the months of May through September, all use above 3 ccf would be billed at $1.80 per ccf in 2012 (up from $1.69) and to $1.83 in 2013.