ORDER NO. 96-049

ENTERED FEB 23 1996

THIS IS AN ELECTRONIC COPY

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UF 4136

DISPOSITION: APPLICATION GRANTED WITH CONDITIONS

On February 5, 1996, Salmon Valley Water Company (SVWC or Company) filed a facsimile copy of their Disbursement Request and Authorization and Promissory Note (Note) with Clackamas County Bank for a $40,000 loan pursuant to ORS 757.415.

At its February 20, 1996, public meeting, the Commission reviewed the staff report and approved the application with reporting requirements.

Based on the application and the Commission's records, the Commission makes the following:

FINDINGS OF FACT

Jurisdiction

Salmon Valley Water Company provides water service to the public in Oregon.

At its October 17, 1995, public meeting, the Commission opened an investigation on its own motion (Docket No. UM 774) concerning SVWC's capacity to serve new development. As agreed in the UM 774 investigation, the company filed the current financing application (Docket No. UF 4136) which is, in part, to attain new water sources.

This 10-year variable interest rate (2 percent over prime) Note has an initial rate of 10.5 percent per annum. The variable interest rate or rates provided for in the Note will not be less than 1.000 percent per annum or more than the lesser of 18.000 percent per annum or the maximum rate allowed by applicable law. Loan fees total $400.

Pursuant to meeting the requirements for access and water right permits under ORS 537, SVWC shall use the proceeds for drilling the Routlege Well, $12,000; developing an additional well, $17,000; repairing a generator engine, $5,000, and purchasing a portable generator and trailer, $6,000.

Following the filing of this application, SVWC incurred major storm damage from flooding and landslides. Currently, SVWC is operational and has sufficient water. The company is trying to obtain two 10,000 gallon pressure tanks to regulate the pressure to higher elevations. SVWC indicates it is making application to the Federal Emergency Management Agency for funds to rectify the recent storm damage and that it may also be necessary to file a financing application of about $250,000 with the Commission.

Notwithstanding those circumstances, it is essential that SVWC continue its plan to address the capacity problem. The size of the needed storage tanks will be known when the UM 774 investigation is completed. Thus, it is premature for the Commission to approve loans for that purpose. The use of the proceeds of the current application shall be limited to the purposes stated in this order.

There is no indication that the proposal will impair the company's ability to provide its public utility service.

OPINION

Jurisdiction

ORS 757.005 defines a "public utility" as anyone providing heat, light, water or power service to the public in Oregon. Salmon Valley Water Company is a public utility subject to the Commission's jurisdiction.

Applicable Law

ORS 757.415(1) provides that:

A public utility may issue stocks and bonds, notes and other evidences of indebtedness, and securities for the following purposes and no others . . .:

(a) The acquisition of property, or the construction, completion, extension, or improvement of its facilities.

(b) The improvement or maintenance of its service.

(c) The discharge or lawful refunding of its obligations.

(d) The reimbursement of money actually expended from income or from any other money in the treasury of the public utility not secured by or obtained from the issue of stocks or bonds, notes or other evidences of indebtedness, or securities of such public utility, for any of the purposes listed in paragraphs (a) to (c) of this subsection except the maintenance of service and replacements, in cases where the applicant has kept its accounts and vouchers for such expenditures in such manner as to enable the Public Utility Commission of Oregon to ascertain the amount of money so expended and the purposes for which such expenditures were made.

(e) The compliance with terms and conditions of options granted to its employees to purchase its stock, if the commission first finds that such terms and conditions are reasonable and in the public interest.

When an application involves refunding of obligations, the applicant also must show that the original borrowings were made for a permissible purpose. Avion Water Company, Inc., UF 3903, Order No. 83-244 at 3; Pacific Power & Light Co., UF 3749, Order No. 81-745 at 5.

ORS 757.415(2) provides that:

[The applicant] shall secure from the commission . . . an order . . . stating:

(a) The amount of the issue and the purposes to which the . . . proceeds . . . are to be applied; and

(b) In the opinion of the commission the [proceeds] reasonably [are] required for the purposes specified in the order and compatible with the public interest, which is necessary or appropriate for or consistent with the proper performance by the applicant of service as a public utility, and will not impair its ability to perform that service; and

(c) Except as otherwise permitted in the order in the case of bonds, notes, or other evidences of indebtedness, such purposes are not, in whole or in part, reasonably chargeable to operating expenses or to income.

The amount of the Note shall not exceed $40,000. SVWC will use the proceeds for purposes consistent with ORS 757.415(1)(a) and (1)(b). The Company keeps its accounts in a manner which enables the Commission to ascertain the amount of money expended and the purposes for which the expenditures were made.

The Commission believes that the proposed transaction is reasonably required for the purposes stated. The Company's proposed action is compatible with the public interest, is consistent with the proper performance of its public utility service, and will not impair SVWC's ability to perform that service.

CONCLUSIONS

1. Salmon Valley Water Company is a public utility subject to the Commission's jurisdiction.
   
2. The application meets the requirements of ORS 757.415.
   
3. The application should be granted.

ORDER

IT IS ORDERED that:

1. The application of Salmon Valley Water Company, for approval of its Disbursement Request and Authorization and Promissory Note with Clackamas County Bank for a $40,000 loan is granted.

2. The proceeds are to be used for specific purposes as stated in this order and as authorized by ORS 757.415(1)(a) and (1)(b).

Made, entered, and effective .

A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. A request for rehearing or reconsideration must be filed with the Commission within 60 days of the date of service of this order. The request must comply with OAR 860-14-095. A copy of any such request must also be served on each party to the proceeding as provided by OAR 860-13-070. A party may appeal this order pursuant to ORS 756.580.