Agenda Date: April 28, 1999
Item Number:

Docket:   UW-990518
   
Company Name: American Water Resources, Inc.

Staff:   Jim Ward, Revenue Requirements Specialist
   Penny Hansen, Public Involvement Coordinator
 
Recommendation:

Permit Tariff Revision in Docket UW-990518 filed March 31, 1999, to become 
effective May 1, 1999.

Discussion:

On March 31, 1999, American Water Resources, Inc., (American Water) filed for a 
general rate increase of $102,106 (17%) annually, in the form of a surcharge 
under RCW 80.28.022.  The company received its last general rate change 
effective 
January 21, 1999.  American Water serves approximately 1,873 active customers 
in six counties.

The company requested this surcharge to cover the cost of the Department of 
Health (DOH) critical items.  The critical item list consists of upgrades to 13 
water systems as contained in the company’s capital improvement plan.   The 
surcharge collections will be used to repay a bank loan.  (The DOH critical 
item list is attached.)

The annual per customer revenue impact of this filing will be approximately 
$54.50. The surcharge is to apply to all water customers served by the 
company.  The surcharge will expire May 1, 2004, or upon recovery of the loan 
principle ($380,350), plus interest and taxes, whichever comes first.

The Commission received seven letters opposed to the DOH compliance surcharge. 
Customers believe the company made bad investments in buying water systems in 
need of repair.  The customers believe they should not be responsible for 
paying the company to fix the problems associated with those water systems.  
The Commission does encourage consolidation of water systems under common 
ownership to accomplish economies of scale and to spread the risk of individual 
system failures/upgrades.  Typically, all water systems require some upgrade or 
maintenance that may be beyond the individual water system capacity.  Customers 
are concerned that the company will continue to raise rates.  In the notice the 
company explained that the $4.54 per month is only to fix 13 water systems when 
the company's water system plan calls for an additional 77 repair projects to 
come in the future.



Monthly Rate Schedule    Current Proposed

1999 DOH Critical Item List Surcharge    --  $ 4.54

The funds received as a result of the 1999 DOH Critical Item List Surcharge 
will be deposited into a separate reserve account exclu-sively for the purpose 
of making capital improvements identified as part of the company's capital 
improvement plan approved by the Department of Health. This separate reserve 
account will be listed on all company financial records and will be considered 
a cash account asset (NARUC account #127). Expenditures from the reserve 
account will be treated as customer contri-butions (for ratemaking purposes.)  
American Water has agreed to provide quarterly reports as shown in attachments.

The company will seek competitive bids on all projects more than $20,000 or 
projects involving V.R. Fox Company (an affiliated interest), except projects 
costing less than $5,000 total for the water system involved.

An accounting investigation of the surcharge information has been completed.  
The company has demonstrated the proposed rates filed in Docket UW-990518 to be 
fair, just, reasonable, and sufficient. 

Staff recommends the Commission permit the tariff revisions in Docket 
UW-990518, to become effective May 1, 1999.

Attachments