Agenda Date:  January 13, 1999
Item Numbers:       

Dockets:   UW-981359, UW-990013
Company Name:  Thomas Water Service, Inc.

Staff:    Jim Ward, Revenue Requirements Specialist
    Diana Otto, Consumer Program Specialist
Penny Hansen, Public Involvement Coordinator

Recommendations:

Dismiss Complaint and Order Suspending the Tariff Revisions in Docket UW-981359.

Approve the proposed tariff revisions in Docket UW-990013 and grant the request 
for less than statutory notice to become effective January 15, 1999.

Discussion:

On October 26, 1998, Thomas Water Service, Inc., (Thomas Water) filed tariff 
revisions with the Commission.  Thomas Water serves approximately 78 customers 
near Arlington, in Snohomish County.  Thomas Water consists of two water 
systems named Meadow Ridge (64 customers) and Meadowbrook (14 customers).  Both 
water systems provide unmetered water service, standby storage, and fire flow 
with Meadow Ridge having five fire hydrants and Meadowbrook having two fire 
hydrants.

On December 30, 1998, the Commission suspended the filing at the current rates. 
The company has now provided additional information at staff’s request.

Thomas Water has filed for (a) a general rate increase of $42,120 (346%); (b) a 
returned check (NSF) charge; (c) an increase in the reconnection charge; and 
the company will also be changing its billing cycle from bi-monthly to monthly 
in arrears. Thomas Water is filing for general rates due to increased cost of 
labor contracts and additional plant to serve Meadow Ridge.

Staff has completed a review of Thomas Water’s books and records for the test 
period ended October 31, 1998.  The revised rates will generate approximately 
$42,120 of additional revenue.  Staff has determined that the revised rates are 
fair, just, and reasonable.  The results of staff’s investigation are shown on 
Attachment A.  Current, withdrawn, and proposed rates are shown below on a 
monthly basis:

   Current Withdrawn Proposed
Flat Rate Service:        Rates   Rates   Rates 
Per Month      $ 13.00 $ 58.00 $ 58.00

Returned Check Charge   $  N/A  $ 20.00 $ 10.00
Reconnection Charge   $    0  $ 45.00 $ 30.00

Customer Meetings
The company held public meetings on November 2, 1998, and on November 5, 1998, 
in Arlington to discuss the proposed filing with its customers.  Commission 
staff attended the November 5, 1998, meeting.  Approximately 30 people were 
present from the Meadow Ridge water system.  The company explained in detail 
the history of the company’s ownership, who the company is indebted to and why, 
as well as the company’s relationships to the development known as Ironwood 
Ranch.  The company further informed the customers that in addition to this 
proposal to increase rates to $58 a month, that it will come back to the 
Commission again in July 1999 to propose another rate increase of $58 a month 
which the company believes it can justify.  If approved, the second increase 
would bring monthly rates to approximately $116.00 a month.  Finally, the 
customers were informed that Thomas Water is for sale, but at this time a 
selling price has not been determined.  The customers stated concerns about the 
same issues as the company discussed, but especially about the level of the 
rate proposals.  They also expressed an interest in the possibility of 
purchasing the system. In addition, a few customers said that there were water 
quality problems.  DOH considers those problems to be caused by secondary 
contaminants, which are not considered health hazards by DOH.

Summary of current customer comments received by the Commission
The Commission has received 15 letters and one petition with 71 signatures 
opposed. Those opposed believe that the increase is outrageous and believe that 
the customers should not have to pay for the poor business management of the 
company. Customers believe that the development of Ironwood Ranch subdivision 
is the purpose for this increase.  Most customers said that an increase is 
warranted, but, not at the levels currently proposed. 

The Commission received one complaint concerning water quality which could not 
be substantiated.  The customer was notified and the complaint closed.

Staff response to issues identified by customers: 

Water Rights: Thomas Water did not sell or transfer any of its water rights to 
another company.  The company did transfer the location of the un-used and 
active water rights to a new location (Ironwood).  This allowed the company to 
develop a new well, Well #1, to serve the Meadow Ridge System and come into 
compliance with DOH water standards.  The location of Thomas Water’s existing 
water rights (2) were transferred in February 1997.  This transfer gave the 
company the ability to withdraw water at a new well location and is now capable 
of supplying full water capacity to Meadow Ridge.  The water now meets the DOH 
water quality standards.  A new well, pumphouse and transmission line recently 
installed, has brought the water system into compliance with DOH standards.


Well #1: Thomas Water owns Well #1, located in Ironwood.  Well #1 provides 
sufficient quantity and quality of water so that Meadow Ridge is in compliance 
with DOH standards.  Only those costs associated with Well #1, the pumphouse, 
and the transmission line have been included as costs in this rate case.  

Water System Plan:  Thomas Water has an approved comprehensive water system 
plan as required by DOH.  The plan includes the Ironwood Development.  However, 
only those costs associated with Meadow Ridge and Meadowbrook systems have been 
included as costs in this rate case.  The water system plan cost approximately 
$64,350 for the Meadow Ridge and Meadowbrook water systems and will be 
amortized over its useful life of six years and result in an annual expense of 
$10,725.  The complete water system plan, which includes the Ironwood 
Development, is $113,574.  The additional amount for Ironwood was not included 
in this rate case.

Company History
Thomas Water came under Commission jurisdiction in 1991.  At that time, the 
company served more than 100 customers.  The company’s initial tariff was 
effective October 1, 1991, and included five water systems.  The initial flat 
rate service was established at $13.00 per month billed bi-monthly and remains 
at that level today.

Since 1991, the company has reduced its number of water systems to two (Meadow 
Ridge and Meadowbrook).  The company attempted to change its flat rate service 
to $34.00 monthly with a one-time assessment of $19,500 in December 1996.  This 
request for an increase and assessment was withdrawn after discussions with 
Commission staff.   The company petitioned the Commission for deregulation in 
January of 1997, which was withdrawn April 1997.  A stock transfer of ownership 
occurred in June 1997, from Myron Thomas to Buckskin Ranch, Inc.  A change of 
managers occurred in January 1998 to the current manager who represents a major 
creditor of the water company.  Under new management the company now meets DOH 
standards.

The Meadow Ridge system originally started with five wells located on pasture 
land. The wells have been determined to be out of compliance with DOH testing 
and three of the wells were permanently abandoned.  Today, two wells remain as 
a backup water source to the Well #1 located in Ironwood.

Water Quality
Meadowbrook water system has had minor problems with water testing in the past, 
however, it is also now in compliance with DOH standards.

The manager has retained the services (at $23.44 per customer per month) of 
Snohomish County PUD to perform operations and maintenance of the Meadow Ridge 
system and retained an independent operator (at $64.29 per customer per month) 
to perform operations and maintenance on the Meadowbrook system.  Limiting the 
rate recovery to the cost of $23.44 on both systems, would not change staff's 
recommendation in this case.
 
Ironwood Development

Ironwood is a proposed 143 lot plat located west of Meadow Ridge.  Recently the 
un-used and active water rights of Meadow Ridge were transferred to the new 
location in the development of Ironwood.  The parent company of Thomas Water 
(Buckskin Ranch) and the major creditor of Thomas Water, paid for the drilling 
of four wells within the plat of Ironwood.  Well #1 was completed and solely 
piped to Meadow Ridge to replace the well capacities of the Meadow Ridge 
pasture wells.  With operational changes, new well #1, and modifications 
performed to the water system, Meadow Ridge now meets DOH standards.  The 
remaining three wells located in Ironwood are not completed and are incapable 
of supplying any water to any system at this time. Staff has reviewed the cost 
for drilling these four wells and confirmed that only those costs associated 
with the completed Well #1 that supplies water to Meadow Ridge has been 
attributed to this rate case.

Staff recommends that the Commission (1) Dismiss Complaint and Order Suspending 
the Tariff Revisions in Docket UW-981359; (2) Approve the revised tariff 
revisions in Docket UW-990013 and grant the request for less than statutory 
notice to become effective January 15, 1999.

Attachment