DR 97-243
Indian Mound Water Corporation
Petition to Increase Rates
Order Approving Settlement Agreement
O R D E R N O. 22,974
July 7, 1998
APPEARANCES: Mary Ellen Goggin, Esq. On behalf of
Indian Mound Water Corporation; and Eugene F. Sullivan, III,
Esq. for the Staff of the New Hampshire Public Utilities
Commission.
I. PROCEDURAL HISTORY
On December 18, 1997, the Indian Mound Water
Corporation (Company) filed revised with the New Hampshire
Public Utilities Commission (Commission) permanent tariff
pages designed to increase its annual revenues by $15,294,
an increase of 145% over its current authorized level of
rates. The Company provides service to 77 customers in a
limited area of the Town of Ossipee. Operation, maintenance
and management services are provided pursuant to a contract
with Consolidated Water Company, an affiliate of the
Company.
By Order 22,837 (January 19, 1998) the Commission
suspended the proposed revisions to the Company's permanent
rate tariffs pursuant to RSA 378:6, pending investigation
and decision thereon. By Order 22,837 the Commission also
scheduled a prehearing conference to address procedural
matters regarding the proposed permanent rate increases, and
ordered the Company to mail a copy of the Order to all of
its customers by first class mail postmarked no later than
January 30, 1998.
The Company duly noticed the hearing and filed an
Affidavit of Notice with the Commission on January 30, 1998.
In accordance with the Commission's Order of Notice, a
prehearing conference was held on February 17, 1998. No
petitions for intervention were filed prior to the hearing
nor made orally at the prehearing conference.
Following a period of discovery in which the
Company responded to data requests and Staff audited the
books of the Company, the Company and Staff entered into a
Settlement Agreement which they presented to the Commission
at a hearing on May 19, 1998.
II. SETTLEMENT AGREEMENT
A. Revenue Requirement
Based on Staff's audit of the books and records of
the Company, the Settlement Agreement provides for a revenue
requirement of $21,843, which reflects an overall increase
in revenues of 196%. This results in an increase of a
residential customer's annual bill from $101 to $283.68.
B. Rate Design
Although Order No. 22,203 (June 19, 1996), which
approved the acquisition of this water utility by its
current principals, required the metering of the system,
Staff and the Company agreed to retain the current flat rate
for billing purposes. The Company agreed to file a request
pursuant to N.H. Admin. R., Puc 603.03 to request a
modification of Order No. 22,203 to remove the metering
requirement for this particular system because of the
seasonal nature of the residents.
The Staff and the Company also agreed to modify
the Company's tariff to remove an availability charge on
unbuilt lots in the service territory. Staff and the
Company based this recommendation on the fact that a number
of residences occupy two lots, some lots are unbuildable and
because the owners of those lots that are buildable refused
to pay bills rendered.
C. Management Contract
The Staff and the Company agreed to allocate 10%
of the overhead costs of Consolidated Water Company to IWS,
Inc. an unregulated affiliate, for the purposes of this case
with the understanding that this issue will be revisited in
subsequent cases.
III. COMMISSION ANALYSIS
Based on the testimony of Staff and the Company,
and the Staff's audit of the books and records of the
Company we find the proposed increase in revenues just and
reasonable based on the assets of the company used and
useful in service to customers.
With regard to rate design issues, we will allow
the Company to continue to bill on a flat rate basis pending
its request for exemption from our general requirement that
utility services be metered, and we will accept the proposed
revision to the tariff to remove the availability fee.
The next issue for our consideration is the
management contract and the proposed allocation of overhead
to the unregulated affiliate for the purposes of this
proceeding. Our records do no indicate any explicit review
or approval of management contract between and among all of
the affiliates owned or operated by the principals of the
Company. Thus, we believe our Staff and the principals
should confer regarding the inter-relationships among the
affiliates and ultimately initiate a proceeding under RSA
366 for our review.
Finally, subsequent to the hearing, our Staff
audited the expenses of the Company incurred in the
prosecution of the rate case. Staff has concluded, and the
Company agreed, that the Company reasonably incurred rate
case expenses of $7339 which should be recovered from
ratepayers via a surcharge over a two year period. The
resultant surcharge amounts to a $11.91 charge per quarterly
bill, or $47.64 per year. The recovery of those expenses
through a surcharge over eight quarters balances the
interests of the Company and its customers.
Although we cannot affirmatively establish that
the rate cases expenses incurred to prosecute this
proceeding are unreasonable, we are concerned with the
amount of money that was expended by the Company in this
proceeding which was ultimately resolved through settlement.
We believe the Company should make every effort in future
proceedings to avoid such expenses where possible or to
institute appropriate measures to keep these expenses in
check.
Based upon the foregoing, it is hereby
ORDERED, that the Settlement between Commission
Staff and Indian Mound Water Corporation is approved in
accordance with the foregoing report; and it is
FURTHER ORDERED, that the revenues approved
therein may be collected on a bills rendered basis on or
after the date of this order; and it is
FURTHER ORDERED, that rate case expenses in the
amount of $7339, may be collected by surcharge over a two
year period.
By order of the Public Utilities Commission of New
Hampshire this seventh day of July, 1998.
Douglas L. Patch Bruce B. Ellsworth Susan S. Geiger
Chairman Commissioner Commissioner
Attested by:
Thomas B. Getz
Executive Director and Secretary