Agenda Date:                     September 13, 2000
Item Number:                  
Docket:                            UW-000510
Company Name:                    Timberline Village Water Company Inc.
Staff:                                      Jim Ward, Revenue Requirements 
Specialist
                                     Penny Hansen, Public Involvement 
Coordinator
                                     Tani Thurston, Consumer Affairs Specialist
Recommendation: 
Approve the joint application by Stephen L. Harrington and Andrew Royce and Far 
West Industries, Inc., for the stock sale of Timberline Village Water Company, 
Inc., in Docket UW-000510 with an effective date of September 15, 2000.
Discussion:
On April 4, 2000, Stephen L. Harrington and Andrew Royce and Far West 
Industries, Inc., filed a joint application pursuant to the provisions of 
chapter 80.12 RCW for a sale and transfer of stock for the Timberline Village 
Water Company, Inc., (Timberline Village). Timberline Village water system 
serves approximately 193 customers east of Packwood and is located in east 
Lewis County. 
Timberline Village Water Company, Inc., is a Washington corporation formed to 
act as a utility company. Mr. Robert Mitchell is Vice President of Far West 
Industries, Inc. which currently owns the stock of Timberline Village. The 
joint application states that Stephen L. Harrington and Andrew Royce 
(prospective buyers) own and manage several water companies with experience in 
the water business. 
The customers of Timberline Village were notified of this proposed sale and 
transfer of stock of the water system on April 4, 2000. The Commission received 
thirty-four letters opposed to or concerned about the Sale and Transfer of the 
Timberline Village to the prospective buyers. The customers, many of which are 
vacation property owners or on fixed incomes, believe that doubling the present 
rate is unjustified. The customers also believe that Mr. Harrington is 
proposing to make system improvements that were supposed to be made by Mr. 
Mitchell when the rates were raised in 1994 (UW-940934). Since the customers 
have not seen any significant improvements from the previous rate increase, 
they think that Mr. Harrington could also raise rates continually with no 
assurance of system improvements. Many customers prefer that Mr. Mitchell sell 
the water system to the Timberline Village Homeowners Association. The 
Commission also received two letters encouraging the sale and transfer. Both 
customers expressed a need for the community and themselves to have a reliable, 
safe regulated company to operate the water system. Both believe that the 
prospective buyers have the expertise and capability necessary to serve the 
community.
On September 2, 2000, Jim Ward, Penny Hansen and Tani Thurston met with 
Timberline Village customers, in Packwood, to discuss the sale and transfer 
filing and provide information on the Commission process. Part of the 
discussion was prompted by the prospective buyers informing customers of a 
doubling of rates after the sale and transfer. Customers questioned capital 
improvements proposed in the last rate case (1994) and were unaware that these 
improvements had been completed. 
Many part time customers were concerned about increased capital and operating 
cost for meter installations to help promote conservation. They explained they 
do not live there all year and therefore are not overusing their water. Another 
issue was future capital improvements and fire flow, which is not yet available 
to all users. The prospective buyer alienated customers at a recent meeting 
when he discussed his purchase of the system and advised the customer's their 
rates would double in the near future. Several customers noted that another 
water system owned by the prospective buyers has been under a boil water notice 
since December 1999, and if this action reflected on their management ability 
to run their water system.
Current rate base of this water system is calculated to be approximately 
$77,000. Prospective buyers will acquire all outstanding stock of Timberline 
Village for $72,000, payable at closing. In addition to the plant and 
equipment, the seller shall transfer title to real estate known as Lot 33 of 
the Plat of Timberline Village Summit. The prospective buyers state that the 
benefits of this sale include expanded financial resources and water staff 
experienced in water system repairs and operations. Timberline Village water 
system rates will not change as a result of this sale and any future rate 
changes will be reviewed by this Commission
Staff has reviewed the application and accompanying exhibits. The prospective 
buyers provided information that shows they will lose approximately $22,000 in 
the first year of operations. This loss is based in part on compensation cost 
and does not include any capital plant cost. Staff has no opinion at this time 
whether or not the proposed costs are appropriate. However, if the costs are 
appropriate, Staff believes this large loss would require a rate increase in 
the amount of approximately $22,000 or the prospective buyers may be unable to 
continue operations.
Therefore, Staff recommends that the Commission approve the joint application 
by Stephen L Harrington and Andrew Royce and Far West Industries, Inc., for the 
stock sale of Timberline Village Water Company Inc., in Docket UW-000510, 
effective September 15, 2000.