Idaho Public Utilities Commission

Case No. UWI-W-11-02, Order No. 32416

December 20, 2011

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

Settlement proposed in United Water case; hearing is Jan. 5

Staff from the Idaho Public Utilities Commission, United Water Idaho and an organization representing residential customers have reached a tentative agreement in the United Water rate increase that reduces the company’s original request by about half.

A proposed stipulation, if adopted by the commission, would result in an average 8 percent increase in rates in February 2012 followed by a 2.5 percent increase in February 2013. For an average residential customer, the monthly increase would be about $2.28 per month in 2012 and another 72 cents per month in 2013.[1] The company’s original request would have increased an average residential bill by about $5.82 per month.

United Water originally sought a near 20 percent one-time increase, or about $7.6 million in additional yearly revenue. The stipulation would allow $3 million in 2012 and $950,000 in 2013 or about 52 percent of the original request. Further, the agreement precludes any other rate increases until 2014 at the earliest.

The commissioners who will decide the case will hear public testimony regarding the proposed stipulation during a public hearing on Thursday, Jan. 5, at 7 p.m. in the commission hearing room at 472 W. Washington St. in Boise.

The commission’s staff, whose auditors, engineers and attorneys have been reviewing the request since last August, believes the stipulation is a better outcome for customers than had the case proceeded to full hearing. “Absent the stipulation, the company could realistically be awarded an increase in excess of 10.44 percent in this case and then file another rate case next year,” said Randy Lobb, utilities division administrator, in written testimony supporting the settlement.

The Community Action Partnership Association of Idaho, which represents customers on low and fixed incomes, also supports the stipulation.

“Though no customer wishes any rate increase, United Water, like any utility, experiences increases in the costs of providing water service to its customers, must finance projects necessary to accommodate growth, and must maintain and occasionally replace existing infrastructure ... ” said Terri Ottens, in testimony filed for CAPAI. “United Water obviously made significant concessions in agreeing to reduce its requested increase by roughly 50 percent and to spread that out over two years.”

The determination of Return on Equity (ROE) and normal yearly water consumption were major issues on which the parties could not agree.

About 38 percent of United Water’s original request was based on lost revenue due to what it reported as declining consumption. Commission staff did not believe United Water’s forecast of declining annual water consumption was valid and removed much of the company’s proposed increase due to reduced water consumption. The stipulation provides for future meetings between staff and the company to discuss revenue and earnings instability associated with declining per capita water consumption.

The stipulation provides for future meetings between staff and the company to discuss revenue and earnings instability associated with declining per capita water consumption.

Regarding return on equity, commission staff’s recommended ROE was significantly below anything approved by the commission for an Idaho utility in the last 20 years. Disagreement among the parties over appropriate ROE is the reason ROE is not specified in the stipulation. Staff’s agreement to not specify ROE in the stipulation is one reason why a lower overall revenue requirement could be achieved.

While the commission staff had some flexibility in reducing the company’s requested revenue requirement in some areas, there are some costs that did justify an increase, according to staff testimony. “Some expense increases for things like power supply, property taxes, chemicals and cash contributions to pensions are direct pass-through revenue requirement that are subject to limited adjustment,” Lobb said. “Some new investments for things such as pipelines, filtration and pumping are clearly required for providing adequate service.”

A $5.5 million expense for a new customer information system was spread over 10 years rather than the company’s requested seven years.

United Water agreed to increase the cap on the amount of annual benefits it will make available to assist customers on low- and fixed-incomes 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.

United Water serves about 84,000 customers in the Boise metropolitan area.

Copies of the proposed stipulation, along with other documents related to this case, 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.

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[1][1] 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.