ORDER NO. 97-291

ENTERED AUG 04 1997

This is an electronic copy. Appendices not included.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UW 55

DISPOSITION: STIPULATION ADOPTED; STAFF’S PROPOSED RATES APPROVED

INTRODUCTION

In October 1996, Commission Staff received information from customers of Seventh Mountain Golf Village Water, Inc. (Seventh Mountain), indicating that the company was charging over the authorized threshold of $18 established by the Commission for average monthly residential rates. Staff requested that the company lower its rates to the authorized level. Staff also required the company to provide its customers with a 60 day written notice of its intent to raise rates above the threshold and the customers’ right to petition the Commission for rate regulation. After the company complied with Staff’s request, over 20 percent of the customers petitioned the Commission requesting rate regulation of Seventh Mountain.

On February 13, 1997, Seventh Mountain filed rate schedules to be effective April 14, 1997. The company also requested interim rates equal to those requested in the rate proposal. The company requested an increase of $11,275, or 94.1 percent, over test year revenue. The company’s request would have increased total annual revenues to $23,256 and a 10 percent rate of return on a rate base of $53,065. The company’s proposed increase would raise the monthly average residential rate from $18 to $57.

At its April 1, 1997, public meeting, the Public Utility Commission of Oregon found good and sufficient cause to investigate the propriety and reasonableness of the rates pursuant to ORS 757.210 and 757.215. The Commission ordered suspension of the tariffs pending that investigation. The Commission also determined that interim rates were not warranted. Order No. 97-124 suspended the tariffs filed by Seventh Mountain until October 14, 1997, and denied the company’s request for interim rates.

On March 26, 1997, an Administrative Law Judge convened a prehearing conference in this matter in Bend, Oregon. A schedule was adopted. On May 22, 1997, Commission Staff and Seventh Mountain held a settlement conference in Bend. A second settlement conference was held in Bend on June 10, 1997.

On July 17, 1997, a public comment and information hearing was held in Bend. On July 18, an evidentiary hearing was held, also in Bend, before Ruth Crowley, an Administrative Law Judge. Dale Bernards, authorized representative, appeared for the company. Kimberly Cobrain, Assistant Attorney General, represented Commission Staff.

Staff testified that after reviewing the company’s filing, Staff recommends a total net revenue increase of $23,281. Prior to this case, Seventh Mountain provided water to Widgi Creek Golf Course but did not bill for that service. Staff recommends that the company enter into a special contract with the golf course for the irrigation services it provides. A special contract with the Widgi Creek Golf Course would generate $25,919, bringing the total revenue requirement to $31,921. Staff’s recommendation produces a decrease of 29 percent in monthly residential rates, from $18 to $12.77. The total decrease in revenue requirement for residential and commercial customers is $2,638. Commercial rates for the single commercial customer would decrease from $90 to $53.02 per month, or 41 percent. The higher commercial rate reflects higher usage by that customer. The company bills quarterly, so the recommended revenue requirement would result in a quarterly flat rate of $38.33 for residential customers and a commercial quarterly flat rate of $159.06.

Staff also recommends a refund to the residential customers based on the cost of their past subsidy of the golf course water supply. The total amount of the refund proposed is $21,081, which includes a 10 percent interest rate applied to the actual amount of the electric costs for the period from March 1995 to January 1997, to compensate customers for what is effectively the use of their funds. March 1995 was the time when the customers began subsidizing the golf course. Staff also proposed three adjustments to the total amount of the refund. After the three adjustments, the refund totals $10,550. The parties have agreed to amortize the refund over a five year period as credits to the customers’ monthly bills.

Staff recommends that the company bill its customers at a flat rate even though the company is installing meters. The company must accumulate consumption data before applying for metered rates.

The company stipulated to Staff’s analysis of the results of operations and the refund obligation for Seventh Mountain.

APPLICABLE LAW

Commission Jurisdiction

The Public Utility Commission has jurisdiction over the rates of public utilities. ORS 757.005(1) defines "public utility" in part as any "corporation . . . that owns, operates, manages or controls all or a part of any plant . . . in this state for the production, transmission, delivery or furnishing of . . . water . . . directly or indirectly to or for the public . . . ." Under ORS 757.005(1)(b)(E), water companies serving fewer than 300 customers at an average annual residential rate of $18 per month or less, which provide adequate and nondiscriminatory service, are not included in the definition of public utility. Seventh Mountain’s rates exceeded the average residential rate threshold of $18 per month and hence came under the definition of "public utility."

However, even water companies that meet the definition of "public utility" are not necessarily subject to full regulation. ORS 757.061 provides:

(1) ORS 757.105 to 757.110, 757.135, 757.140, 757.205 to 757.220 [requiring rate schedule filing and approval], 757.400 to 757.450 and 757.480 to 757.495 do not apply to a water utility serving fewer than 500 customers unless:

(a) Twenty percent of more of the customers of the water utility file a petition with the commission requesting that the water utility not be exempt from regulation under the statutes set forth in this subsection; and

(b) a rate charged by the water utility for water service exceeds maximum rates established by the commission under subsection (2) of this section.

Based on the preponderance of evidence in the record, we make the following

FINDINGS OF FACT

Seventh Mountain is a public utility subject to the Commission’s jurisdiction. Seventh Mountain and Commission Staff have entered into a stipulation reflecting the provisions set out in the Introduction.

CONCLUSION

We have reviewed Staff’s exhibits in support of its proposals (Staff/3, Hathhorn 1 through 10, attached to this order as Appendix A and incorporated herein by reference). We have also reviewed the stipulation submitted in this case and find it reasonable. We adopt the stipulation, attached as Appendix B and incorporated herein by reference.

ORDER

IT IS ORDERED that:

1. The Stipulation between Seventh Mountain and Staff, attached as Appendix B and incorporated herein by reference, is adopted.

2. The average quarterly residential and commercial rates set forth in the Stipulation shall go into effect as of the date of this order.

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 the requirements in OAR 860-014-0095. A copy of any such request must also be served on each party to the proceeding as provided by OAR 860-013-0070(2). A party may appeal this order to a court pursuant to ORS 756.580.