Agenda Date:  June 27, 2001
Item Number:  2I

Docket:  UW-010417
Company Names:  American Water Resources, Inc., and Peninsula Light Company.

Staff:   Jim Ward, Revenue Requirements Specialist
 Chris Vernon, Public Involvement Coordinator

Recommendation:

Enter an order approving the application of American Water Resources, Inc., and 
Peninsula Light Company, for sale and transfer of assets (21 water systems) in 
Docket UW-010417, to become effective June 28, 2001, subject to restrictions on 
the use of sale proceeds as discussed in the Staff presentation.

Discussion:

On March 28, 2001, American Water Resources, Inc., (American Water Resources) 
and Peninsula Light Company, (Peninsula Light) filed an application pursuant to 
the provisions of chapter 80.12 RCW for sale and transfer of assets of American 
Water Resources.  American Water Resources is located in Onalaska and serves 
approximately 1,938 customers in Lewis, Thurston, Mason, Kitsap, Pierce, and 
Grays Harbor Counties.   This application will affect 21 water systems with 
approximately 153 customers located in Mason, Kitsap and Pierce Counties.

The water systems being transferred are:

 Pierce County; Carney Lake #322, Groff #323, SR 302 #2, 302 #3, Zimmerman 
#324,  Key Ridge #306, Lackey #327, Campbell #326, & Jackson Lake #325.

 Kitsap County; Edquist S. Kitsap #331, Cozy Lane #332, Moore Oak #333, 
Forest   Creek #368, Strawberry #361, & Old Sawmill #352.

 Mason County; Razor 1 #336, Razor 2 #337, Razor 3 #338, Razor 4 #339, Razor 
Place  #335, & Dream Lane #340.

Peninsula Light is a Washington mutual corporation formed to act as a utility 
company.  It currently provides both electric and water services primarily in 
the Gig Harbor area of Pierce County.  Peninsula Light is not subject to 
Commission jurisdiction.

The Commission received no comments from customers on this transfer of assets.

The companies state the benefits of this acquisition of water system assets 
include Peninsula Light’s status as a member-owned, non-profit, rural electric 
cooperative.  Peninsula Light has been providing water service since 1995 and 
employs a certified Water Distribution Manger and other certified staff to 
provide all aspects of water system repair and operations.  Peninsula Light 
notified customers of American Water Resources of the sale and transfer in a 
mailing on April 27, 2001.  Staff calculates the current rate base for the 21 
water systems to be approximately $36,014.  Peninsula Light Company will 
acquire water system assets (21 water systems) of American Water Resources for 
$150,000, payable at closing. 

As a result of this sale and transfer of water system assets, American Water 
Resources will recognize a gain on sale.  American Water Resources and Staff 
agree that this $113,986 in gain on sale should be allocated between 
shareholders and customers.   $110,856 shall be deposited into a Capital 
Improvement, Contribution in Aid of Construction Account and only be used to 
fund capital improvements that are approved or required in writing by 
Department of Health under the Safe Drinking Water Act or other appropriate 
expense all of which must be agreed to by a letter from Commission Secretary 
before any disbursement of funds.

Staff has reviewed the proposed sale and transfer of assets and believes this 
transaction to be in the public interest only if  Staff’s conditions and 
settlement are imposed.  Staff recommends that the Commission enter an order 
approving the application by American Water Resources, Inc., and Peninsula 
Light Company, for sale and transfer of assets (21 water systems) in Docket 
UW-010417, to become effective June 28, 2001, subject to restrictions on the 
use of sale proceeds.