Agenda Date: March 10, 2000 Item Numbers: Dockets: UW-992026, UW-000164 Company Name: Guemes Island Water Company, Inc. Staff: Jim Ward, Revenue Requirements Specialist Penny Hansen, Public Involvement Coordinator Recommendations: Dismiss Complaint and Order Suspending the tariff revisions in Docket UW-992026. Allow the tariff revisions in Docket UW-000164 to become effective March 15, 2000. Discussion: On December 29, 1999, Guemes Island Water Company, Inc., (Company) filed for general rates in the amount of approximately $38,900 (75%) of additional revenue per year. The filing proposed to increase the average monthly bill by approximately $32.62. On February 9, 2000, the Company refiled for rates in Docket UW-000164. The revised filing will split the increase into the basic rates and a capital improvement surcharge. The revised filing is in the amount of approximately $20,751 (44%). The Company serves approximately 117 residential metered customers and 106 ready-to-serve connections on Guemes Island in Skagit County. The Company has requested the increase to recover the cost of water system capital improvements that they are currently incurring. These costs are listed as additional wells, aquifer tests on wells and construction of an iron/magnesium water treatment plant. Additionally, the Company will be constructing a 105,000 gallon water reservoir. New telemetry equipment will be installed along with upgrades to the existing booster pump station. In the original filing the Commission received 69 letters and one petition with 80 signatures opposed. The customers believed the proposed rates were exorbitant. Customers stated that they have not seen any new construction on the Island for a 105,000 gallon-reservoir and a water treatment plant and believe the Company should not be able to recover those expenses until the improvements are completed. On January 26, 2000, Commission staff met with Company representatives and its customers to discuss the rate increase filing. The customers stated they were opposed to the requested rate increase although they were not opposed to a smaller increase. The Company representative explained why the capital improvements had not been done with a previous rate increase. The customers expressed their concerns regarding communication problems with the Company. The Company representative and the customers discussed ways to improve communication. The commission has received 22 consumer complaints regarding water quality issues. These complaints are still under investigation. Part of this rate filing includes capital plant cost incurred for both replacement wells and water treatment plant. These reasonable costs of construction work in progress are based on actual historical cost paid by the Company and will not be recovered by the proposed surcharge. The proposed surcharge will allow the Company to fund a reserve account exclusively for the purpose of making capital improvements to water sources and water quality. This surcharge would apply to metered and ready to serve customers of the Company. These funds and account shall be subject to Commission quarterly reporting and shall be treated for rate-making purposes as customer contributions in aid of construction (CIAC). The surcharge funds received and all future facilities charge funds received will be deposited in a separate account. This separate account will only be used to make annual payments to the State Revolving Fund loan (SRF) program. Any interest or accumulated funds will remain with this separate account. The proposed surcharge amount will be reviewed and may be subject to change based on SRF payment schedules and accumulated reserve funds. The Company is proposing to remove the base allowance of 500 cubic feet from its metered rate. Zero allowance rate design encourages conservation and ensures low end users pay for only what they use. The usage blocks relate charges to the cost of service provided. The current, withdrawn, and revised rates are provided below: Monthly Rate Current Withdrawn Base Charge with 500 Cu. Ft. Allowance $ 22.00 N/A 500 to 1,000 Cu. Ft., per 100 Cu. Ft. 7.00 N/A Base Charge with Zero Allowance N/A $ 32.00 0 to 1,000 Cu. Ft. per 100 Cu. Ft. N/A 8.00 1,000 to 1,500 Cu. Ft., per 100 Cu. Ft. 10.00 12.00 1,500 to 2,500 Cu. Ft., per 100 Cu. Ft. 15.00 16.00 > 2,500 Cu. Ft., per 100 Cu. Ft. 25.00 25.00 Current Withdrawn Revised Base Charge with Zero Allowance N/A $ 32.00 $ 22.00 0 to 500 Cu. Ft. per 100 Cu. Ft. N/A N/A 3.00 500 to 1,500 Cu. Ft. per 100 Cu. Ft. N/A N/A 7.00 > 1,500 Cu. Ft., per 100 Cu. Ft. N/A N/A 10.00 2000 Capital Improvement Surcharge N/A N/A 5.00 Ready to Serve $ 10.00 $ 13.00 $ 10.00 ½ lot Ready to Serve $ 5.00 $ 6.50 $ 5.00 Regulatory services staff has completed its review of the financial records and information to support the filing. Staff has found the rates in UW-000164 to be appropriate and therefore staff recommends that the Commission Dismiss Complaint and Order Suspending the tariff revisions in Docket UW-992026 and allow the tariff revisions in Docket UW-000164 to become effective March 15, 2000. Attachment