BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION


In the Matter of the Application   )
for Sale and Transfer of Assets,   ) DOCKET UW-961070
from       )
Sound Water Company, Incorporated  )
to       )
Rainier View Water Co., Inc.   )    ORDER GRANTING
       )     APPLICATION
.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . )


MEMORANDUM


  On August 28, 1996, Sound Water Company, Incorporated, (Sound Water) and 
Rainier View Water Company, (Rainier View) filed a joint application, in Docket 
UW-961070, for approval to transfer the assets of Sound Water to Rainier View.  
Sound Water’s assets include, but are not limited to, the list of systems and 
assets shown in exhibits 1 and 8 of this application which are now used to 
serve the system’s customers.  Both companies are Washington corporations that 
own and operate water systems in Washington and are regulated by the Washington 
Utilities and Transportation Commission (Commission).  Sound Water serves 
approximately 1,500 customers in Pierce county.  Rainier View serves 
approximately 7,500 custom- ers in Pierce county.

  This matter comes before the Commission after a long, tortuous journey. In 
1986, Rainier View (then Mr. Neil Richardson) bought an option to purchase 
Sound Water’s assets.  Because of disputes in a related matter, Sound Water 
disputed the validity of the option.  In 1995, the Washington Court of Appeals 
ruled the option valid.  In March 1996, an arbitration panel determined Rainier 
View breached a 1986 management contract with Sound Water.  However, the award 
was contingent upon Rainier View closing the option to purchase Sound Water’s 
assets.  If that happened, Rainier View would pay Sound Water $436,842 and 
indemnify Sound Water share- holders against any reimbursement claims brought 
by Mr. Pettit, the Sound Water manager who also contracted to purchase Sound 
Water stock.  On August 28, 1996, Sound Water and Rainier View filed a joint 
application to transfer Sound Water’s assets to Rainier View.  The Commission 
first considered this matter October 9, 1996, but took no action because of 
unresolved issues.  On December 18, 1996, staff held a public meeting in Graham 
for Sound Water customers.  On July 18, 1997, an arbitration panel considered 
Mr. Pettit’s reimbursement claim and awarded Mr. Pettit $181,472.  The 
Commission again considered this matter at its August 13, 1997 Open Meeting.



Docket UW-961070        Page 2


  At the August 13, 1997, Open Meeting, Douglas Kaukl, attorney representing 
Mr. Pettit, argued that there was a requirement for a formal adjudicatory 
hearing on the transfer application.  The Administrative Procedures Act 
provides no right to such a hearing unless one is required by statute or by the 
constitution.  There is no such right, nor is a hearing required by the United 
States or Washington constitutions.  Mr. Kaukl’s argument appears to be that 
because a Commission staff person (a non-attorney) stated at the December 18, 
1996, public meeting that such an adjudicative hearing would be held, the 
Commission is obligated to follow through on the informal commitment.  However, 
that staff statement did not bind the Commis- sion, and Mr. Kaukl provided us 
with no legal reason why it should.  Indeed, given the evidence of the 
operations of Sound Water which came out of the arbitration proceed- ing since 
that December 18, 1996, customer meeting, it seems desirable that the 
Commission move ahead on this application now.  That evidence revealed 
troubling management practices of Sound Water.  It seems doubtful whether a 
more formal hearing would produce any evidence different in kind or scope than 
has been presented to the Commission to date.

  Mr. Kaukl also suggested that Rainier View could not accommodate the 
financial burden of the purchase of Sound Water.  Given the evidence presented 
at the Open Meeting by counsel for Rainier View about the terms of the 
financing and the presentation by staff on the financial capabilities of 
Rainier View, Mr. Kaukl’s argument appears without merit.

  Customers also appeared at the August 13, 1997, Open Meeting, as they did at 
the October 9, 1996, Open Meeting and the December 18, 1996, customer meeting.  
They expressed their fear of having Mr. Richardson once again manage their 
water system and believed that Mr. Pettit was a competent manager. However, the 
Commission’s records reveal that Rainier View’s service quality has improved. 
Expressed in number of complaints per 1,000 customers, the Commission received 
fewer complaints from Rainier View customers than it received from Sound Water 
customers.  Should there be complaints after the change in management, the 
Commission will follow up on those complaints and take any necessary action to 
remedy any problems.  

  The Commission has before it a joint application.  The proposed transfer will 
consolidate two water companies.  Rainier View, the acquiring utility, is well 
established as a large water purveyor.  This transfer should benefit all 
customers by creating economies of scale and distributing risk.  The Commission 
sets rates using net rate base, not purchase price.  If the purchase price 
exceeds net rate base, Rainier View may petition the Commission to make a 
positive acquisition adjustment.  However, the Commission will approve a 
positive acquisition adjustment only if Rainier View convinces the Commission 
that Rainier View customers received commensurate 


Docket UW-961070         Page 3


benefit.  Also, this transfer may allow for intertie of water systems, 
increasing water reliability, and may reduce water treatment requirements.

  We conclude the asset transfer is in the public interest.

THE COMMISSION FINDS AND CONCLUDES AS FOLLOWS:

 1. Sound Water Company, Incorporated, a Washington utility-, is a public 
service company subject to the jurisdiction of this Commission under the 
provisions of chapter 80.12 RCW.

 2. Rainier View Water Company, a Washington corpora-tion, is a public service 
company subject to the jurisdiction of this Commission under the provisions of 
chapter 80.12 RCW.

 3. As to form, the application herein, meets the require-ments of chapter 
80.12 RCW and the rules and regulations of the Commission adopted pursuant 
thereto.

 4. There is no requirement to hold a formal adjudicative hearing in the 
application, nor is it desirable to do so.

 5. The sale and transfer of the proposed assets by Sound Water to Rainier View 
is reason-able and consistent with the public interest and should therefore be 
approved.

O R D E R

 THE COMMISSION ORDERS:

 1. After the effective date of this order and subject to the provisions 
hereof, Sound Water Company, Incorporated, is hereby autho-rized to sell assets 
and Rainier View Water Co., Inc., is hereby authorized to purchase and accept 
the assets of Sound Water Company, Incorporated, under the terms and conditions 
of the proposed bill of sale filed as an exhibit in the application herein.

 2. Within 30 days after the above-authorized sale and transfer of assets has 
been executed, a true copy of sale and transfer document actually executed and 
delivered shall be filed with the Commission, together with a report of the 
date of delivery.

 3. This order shall in no way affect the authority of this Commission over 
rates, service, accounts, valuations, estimates, or determination of costs, or 
any 

Docket UW-961070        Page 4


matters whatsoever that may come before it, nor shall anything herein be 
construed as an acquies-cence in any estimate or determination of costs or any 
valuation of property claimed or asserted.

 4. Any Federal Income Tax consequences from this transaction will be the 
respon-sibility of the company stockholders and not company ratepayers.

  DATED at Olympia, Washington, and effective this 13th
day of August, 1997.

 WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION





      RICHARD HEMSTAD, Commissioner




      WILLIAM R. GILLIS, Commissioner