DR 97-121
Wildwood Water Company
Petition for General Rate Increase
Order Approving Permanent Rates
O R D E R N O. 22,881
March 24, 1998
APPEARANCES: Stephen P. St. Cyr for Wildwood Water
Company, Inc.; Representative Richard T. Cooney, pro se; Amy L.
Ignatius, Esq. for the Staff of the New Hampshire Public
Utilities Commission.
I. PROCEDURAL HISTORY
On July 18, 1997, Wildwood Water Company (Wildwood)
filed with the New Hampshire Public Utilities Commission
(Commission) a petition for an increase in annual revenue of
$8,930. This annual increase would result in an increase in
permanent rates of approximately 67.31% to the 42 customers
served by Wildwood in the town of Albany, New Hampshire.
On August 8, 1997, the Commission by Order No. 22,680
suspended the proposed increase in rates. By Order of Notice
issued November 6, 1997, the Commission scheduled a prehearing
conference to address procedural matters and to seek intervention
by interested parties in the permanent rate proceeding.
On November 19, 1997, a duly noticed prehearing
conference was held at the Commission offices in Concord.
Richard T. Cooney, a customer of Wildwood and a New Hampshire
State Representative from Salem, New Hampshire, made a motion for
intervention which was granted at the prehearing conference.
By Order No. 22,802, (December 9, 1997) the Commission
approved the procedural schedule. A Commission Secretarial
letter rescheduled the hearing on the merits to February 9, 1998.
Commission Staff prefiled testimony of Douglas W.
Brogan and Thomas M. Sculley on December 31, 1997 and January 7,
1998, respectively. On February 6, 1998, Staff and Wildwood
filed a Settlement Agreement (Settlement) resolving all issues in
the permanent rate proceeding. The Commission heard testimony on
the Settlement on February 9, 1998. Finally, on February 20,
1998, Staff submitted a memo addressing Wildwood's request for
rate case expenses.
II. SETTLEMENT AGREEMENT
The Settlement details all terms agreed to between
Wildwood and Staff, which are summarized herein.
Wildwood and Staff agreed to: (1) rate base of $26,358;
(2) rate of return, for a company that is 100% equity, of 9.85%;
which, applied to rate base, results in annual net operating
income of $2,596; (3) total expenses of $19,313, the components
of which are itemized in Schedule 3 of the prefiled testimony of
Thomas M. Sculley; (4) total annual revenue requirement of
$21,929; (5) a flat billing rate of $130.53 per customer per
quarter; (6) the rate increase will be effective for bills
rendered on and after the date of issuance of this order; (7) to
address deficiencies in the system and NH Department of
Environmental Services mandates regarding system deficiencies,
Wildwood shall comply with the following schedule: (a) by April
30, 1998 Wildwood shall: meet with the CVFD Commissioners to
discuss possible interconnection; attempt to meet with
Representative Cooney and/or other homeowner representatives to
discuss possible sale of the system to the homeowners; hire an
engineer to assess long term remedies to the system deficiencies,
intermediate measures which could partially address major
deficiencies while limiting capital investment, and cost
estimates; and submit to the Commission and DES the engineer's
recommendations and a status update on discussions with CVFD and
the homeowners; (b) by June 15, 1998, Wildwood shall implement
intermediate remedial measures to address water quality and
pressure deficiencies; (c) by June 30, 1998, and quarterly
thereafter through June, 1999, report to the Commission and DES
on the status of negotiations with CVFD and the homeowners and on
progress in addressing system deficiencies; and (d) absent
interconnection with CVFD, apply for SRF funds as early as
possible, and implement all long-term solutions as soon as funds
are available; and (8) barring the feasibility of interconnection
with CVFD, Wildwood shall be permitted, without filing a new rate
case, two step increases in 1999 which shall be limited to a
return of 9.85% on equity capital or actual interest on any debt,
and which shall include annual depreciation, tax effect, and
operation and maintenance expenses, all specifically associated
with treatment, pressure, flushing, pump station ladder, air
compressor and air tubes, and provided that any adjustment to
operation and maintenance expenses shall specifically consider
the reduction in flushing time resulting from the improvements.
Wildwood requested recovery from its customers of rate
case expenses of $4,538.48 for accounting services related to the
filing. After the hearing, Staff filed a memo to disallow
recovery of certain accounting services. Staff recommended
disallowance of a $661.00 fee for preparation of Wildwood's case
and $286.75 in audit expense. Staff recommended recovery of
$3,590.73 through a surcharge over a period of 3 years. With 42
customers, $3,590.73 collected over twelve quarters would result
in a surcharge of $7.12 per customer per quarter, beginning with
quarterly bills as of April 1, 1998.
III. COMMISSION ANALYSIS
After review of the evidence, we find that the terms
and conditions in the Settlement will result in just and
reasonable rates while providing Wildwood an opportunity to earn
a reasonable return on its investment. The average annual flat
rate bill, as a result of this increase, will be approximately
$522. Although the approximately 65% increase in annual rates is
a significant amount, we do note that it has been approximately 7
years since Wildwood petitioned for a rate increase. Further,
the rates set in the prior rate case were based on estimated
costs as there were no reliable records to work from. Wildwood's
representative testified at the hearing that actual expenditures
far exceeded the estimates and that the company has been
operating at a loss under those rates.
The Settlement requires Wildwood to contract for an
engineering study of the system and implement certain future
improvements to the system which we agree are necessary to
promote adequate and reliable service in the future. The
Settlement also provides for two prospective step adjustments in
1999. We will approve the use of the step adjustment mechanism
as a way to avoid significant rate case expenses in the near
term. Wildwood should understand, however, that no step increase
will take effect unless approved by the Commission. Though the
proceeding will not be a full rate case, Wildwood must petition
the Commission for approval, demonstrating that any improvements
are used and useful in the provision of utility service and the
investments undertaken were prudently incurred.
Further, Wildwood has agreed to provide to its
customers with its next billing a summary of this order and a
statement that the full text of the order is available upon
request.
We conclude that the Settlement is in the public
interest and therefore we will approve it, pursuant to RSA 378:7.
The record reveals that the plant included in rate base is used
and useful and the investment in that plant has been reasonably
and prudently incurred.
We agree with Wildwood and Staff in the value of
exploring the prospect of connecting the system with the Conway
Village Fire District or of a purchase of the system by the
homeowners and in applying for Revolving Loan Fund money. We
will instruct Staff to notify us if the discussions lead to a
transfer agreement.
Based upon the foregoing, it is hereby
ORDERED, that the Settlement entered into between
Wildwood and Staff is APPROVED; and it is
FURTHER ORDERED, that Wildwood may, as provided in the
Settlement, bill its 42 customers a quarterly flat rate of
$130.50 or $522.00 on an annual basis for bills rendered on or
after April 1, 1998; and it is
FURTHER ORDERED, that a rate case expense surcharge of
$7.12 per quarter per customer to be collected over 12 quarters
is hereby approved on bills rendered on or after April 1, 1998;
and it is
FURTHER ORDERED, that Wildwood submit to the Commission
for approval any step increase proposed under the Settlement and
obtain such approval prior to imposing any increase; and it is
FURTHER ORDERED, that Wildwood distribute to its
customers a summary of the contents of this order as an insert
accompanying its next billing; and it is
FURTHER ORDERED, that Wildwood submit a properly
annotated tariff with the Commission within 14 days of the date
of this order in accordance with N.H. Admin. Rules, Puc
1601.01(b).
By order of the Public Utilities Commission of New
Hampshire this twenty-fourth day of March, 1998.
Douglas L. Patch Bruce B. Ellsworth Susan S. Geiger
Chairman Commissioner Commissioner
Attested by:
Thomas B. Getz
Executive Director and Secretary