1 STATUTORY OR OTHER AUTHORITY: The Washington Utilities and Transportation Commission takes this action under Notice No. WSR 05-04-063, filed with the code reviser on January 31, 2005. The commission brings this proceeding pursuant to RCW 80.01.040, 80.04.160, and 80.04.010.

     2 STATEMENT OF COMPLIANCE: This proceeding complies with the Open Public Meetings Act (chapter 42.30 RCW), the Administrative Procedure Act (chapter 34.05 RCW), the State Register Act (chapter 34.08 RCW), the State Environmental Policy Act of 1971 (chapter 43.21C RCW), and the Regulatory Fairness Act (chapter 19.85 RCW).

     3 DATE OF ADOPTION: The commission adopts this rule on the date that this order is entered.

     4 CONCISE STATEMENT OF PURPOSE AND EFFECT OF THE RULE: RCW 34.05.325 requires that the commission prepare and provide to commenters a concise explanatory statement about an adopted rule. The statement must include the identification of the reasons for adopting the rule, a summary of the comments received regarding the proposed rule, and responses reflecting the commission's consideration of the comments.

     5 The commission often includes a discussion of those matters in its rule adoption order. In addition, most rule-making proceedings involve extensive work by commission staff that includes summaries in memoranda of stakeholder comments, commission decisions, and staff recommendations in each of those areas.

     6 In this docket, to avoid unnecessary duplication, the commission designates the discussion in this order as its concise explanatory statement, supplemented where not inconsistent by the staff memoranda presented at the adoption hearing, and at the open meetings where the commission considered whether to begin a rule making, and whether to propose adoption of specific language. Together, the documents provide a complete and concise explanation of the agency actions and its reasons for taking those actions.

     7 REFERENCE TO AFFECTED RULES: This rule making amends the following sections of the Washington Administrative Code:

     WAC 480-110-205 Application of rules, consistent with the amendments to WAC 480-110-255, amendments to this section increase the jurisdictional threshold related to revenue for water companies to $471.

     WAC 480-110-255 Jurisdiction, increases the maximum average annual revenue per customer jurisdictional threshold for water companies to reflect the latest final implicit price deflator of the U.S. Department of Commerce at the time of adoption. The amendment raises the revenue threshold from $429 to $471, pursuant to RCW 80.04.010.

     Clarifies that the accounting methodology for computing the revenue threshold is based on billed revenues, rather than paid revenues.

     8 PREPROPOSAL STATEMENT OF INQUIRY AND ACTIONS THEREUNDER: The commission filed a preproposal statement of inquiry (CR-101) on April 7, 2004, at WSR 04-08-132.

     9 ADDITIONAL NOTICE AND ACTIVITY PURSUANT TO PREPROPOSAL STATEMENT: The statement advised interested persons that the commission was considering entering a rule making to consider amendment of rules relating to the maximum average annual revenue per customer jurisdictional threshold for water companies in WAC 480-110-255. The commission also informed persons of the inquiry into this matter by providing notice of the subject and the CR-101 to all persons on the commission's list of persons requesting such information pursuant to RCW 34.05.320(3) and by submitting an article describing the rule making that was published in the Department of Health, Office of Drinking Water, June 2004 newsletter. The commission posted the relevant rule-making information on its internet web site at http://www.wutc.wa.gov.

     10 WRITTEN COMMENTS: Pursuant to the notice, the commission invited written comments. The commission received written comments from Patrick C. Roe of MacKaye Harbor Water Company, Gary Hall of Hall Engineering Associates, and Richard Finnigan, attorney.

     11 NOTICE OF PROPOSED RULE MAKING: The commission filed a notice of proposed rule making (CR-102) on January 31, 2005, at WSR 05-04-063. The commission scheduled this matter for oral comment and adoption under Notice No. WSR 05-04-063 at 9:30 a.m., Wednesday, March 16, 2005, in the Commission's Hearing Room, Second Floor, Chandler Plaza Building, 1300 South Evergreen Park Drive S.W., Olympia, WA. The notice provided interested persons the opportunity to submit written comments to the commission.

     12 COMMENTERS (WRITTEN COMMENTS): The commission received no written comments on the CR-102 proposal.

     13 RULE-MAKING HEARING: The rule proposal was considered for adoption, pursuant to the notice, at a rule-making hearing scheduled during the commission's regularly scheduled open public meeting on March 16, 2005, before Chairman Mark Sidran, Commissioner Patrick Oshie, and Commissioner Philip Jones. Danny Kermode of commission staff, Patrick Roe of MacKaye Harbor Water Company, and Drew Noble, an operator of water systems, presented oral comments at the rule-making hearing.

     14 ORAL COMMENTS: Mr. Patrick Roe of MacKaye Harbor Water Company voiced his support for the rule proposal. Mr. Drew Noble, a water system operator for fifteen years, commented in opposition to the proposed amendment of WAC 480-110-255 that would raise the jurisdictional threshold for water companies.

     15 SUGGESTIONS FOR CHANGE THAT ARE ACCEPTED OR REJECTED: In this section the commission responds to comments made on the proposed rules. In each response we indicate whether we made a change in the adopted rules based upon the comment, or whether we adhered to the language in the proposed rule.

     16 Mr. Drew Noble expressed concern that the public interest would be better served if all water systems were regulated. He related his experience as an operator of systems that fall under the threshold. He mentioned that without commission oversight, some smaller unregulated water companies do not provide needed maintenance and improvements to their water systems. He stressed that customers would be better served if the commission regulated these water systems.

     17 The commission is bound by statute to regulate only those water systems that exceed the jurisdictional revenue threshold set forth in RCW 80.04.010, as adjusted for inflation. The commission recognizes that there may be circumstances where it is not in the public interest to raise the revenue threshold. Such circumstances appear to have been contemplated by the legislature in RCW 80.04.010, when it gave the commission the discretion to increase the revenue figure annually by rule. Based on the rule-making record before us, we find an increase in the revenue threshold appropriate.

     18 COMMISSION ACTION: After considering all of the information regarding this proposal, the commission finds and concludes that it should amend the rules as proposed in the CR-102 notice at WSR 05-04-063, with the changes described below.

     19 CHANGES FROM PROPOSAL: After reviewing the entire record, the commission adopts the CR-102 proposal with the following changes from the text notices at WSR 05-04-063.

     WAC 480-110-205 Application of rules.

     20 The commission stated in its notice of proposed rule making (CR-102), that the proposed threshold amount of $468 may change at the time of adoption based on the latest final implicit price deflator of the Department of Commerce. Accordingly, the threshold revenue amount is changed from four hundred sixty-eight dollars to four hundred seventy-one dollars to reflect the March 30, 2005, release of the fourth quarter 2004 final implicit price deflator index.

     21 The word receive is deleted from the last sentence of this section to clarify that the accounting methodology is based on accrual basis revenues.

     WAC 480-110-255 Jurisdiction.

     22 The commission stated in its notice of proposed rule making (CR-102), that the proposed threshold amount of $468 may change at the time of adoption based on the latest final implicit price deflator of the Department of Commerce. Accordingly, the threshold revenue amount is changed from four hundred sixty-eight dollars to four hundred seventy-one dollars to reflect the March 30, 2005, release of the fourth quarter 2004 final implicit price deflator index.

     23 STATEMENT OF ACTION; STATEMENT OF EFFECTIVE DATE: In reviewing the entire record, the commission determines that WAC 480-110-205 Application of rules, and 480-110-255 Jurisdiction, should be amended to read as set forth in Appendix A, as rules of the Washington Utilities and Transportation Commission, to take effect pursuant to RCW 34.05.380(2) on the thirty-first day after filing with the code reviser.

     Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 2, Repealed 0.

     Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0;      Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 0, Repealed 0.

THE COMMISSION ORDERS:

     24 WAC 480-110-205 Application of rules, and 480-110-255 Jurisdiction, are amended to read as set forth in Appendix A, as rules of the Washington Utilities and Transportation Commission, to take effect on the thirty-first day after the date of filing with the code reviser pursuant to RCW 34.05.380(2).

     25 This order and the rules set out below, after being recorded in the register of the Washington Utilities and Transportation Commission, shall be forwarded to the code reviser for filing pursuant to chapters 80.01 and 34.05 RCW and chapter 1-21 WAC.

     DATED at Olympia, Washington, this 1st day of April, 2005.

     Washington Utilities and Transportation Commission

Mark H. Sidran, Chairman

Patrick J. Oshie, Commissioner

Philip B. Jones, Commissioner

OTS-7773.2

AMENDATORY SECTION(Amending Order R-467, Docket No. UW-980082, filed 11/30/99, effective 12/31/99)

WAC 480-110-205   Application of rules.   The rules in this chapter apply to any water company that distributes, sells, or supplies water, and that meets requirements for commission regulation or jurisdiction under RCW 80.04.010 and WAC 480-110-255. This includes investor-owned water companies that meet the jurisdictional threshold of serving one hundred or more customers or ((receive)) have average revenue of more than four hundred ((twenty-nine)) seventy-one dollars ((or more)) per customer per year.

[Statutory Authority: RCW 80.01.040. 99-24-100 (Order R-467, Docket No. UW-980082), § 480-110-205, filed 11/30/99, effective 12/31/99.]

     (a) Own, operate, control, or manage one or more water systems; except that control or management does not include management by a satellite management agency as defined in chapter 70.116 RCW if the satellite management agency is not an owner of the water company.

     (b) Meet jurisdictional thresholds of one hundred or more customers, or ((receive)) have average revenue of more than four hundred ((twenty-nine)) seventy-one dollars per customer per year.

If a water company serves customers	and ((receives)) has average annual revenue per customer	commission regulation
99 or less	$471 or less ((than $429))	No
99 or less	(($429 or)) more than $471	Yes
100 or more	$471 or less ((than $429))	Yes
100 or more	(($429 or)) more than $471	Yes

     (2) The commission does not regulate the following providers of water service:

     (a) Cities, towns, or counties.

     (b) Public utility districts.

     (c) Water districts.

     (d) Local improvement districts.

     (e) Homeowner associations, cooperatives and mutual corporations, or similar entities that provide service only to their owners or members.

     (f) Homeowner associations, cooperatives and mutual corporations, or similar entities that provide service to nonmembers unless they serve one hundred or more nonmembers, or charge nonmembers more than four hundred ((twenty-nine)) seventy-one dollars average annual revenue per nonmember.

     (g) Entities or persons that provide water only to their tenants as part of the business of renting or leasing.

     This may include:

     (i) Apartment buildings.

     (ii) Mobile home parks.

     (iii) Manufactured home rental communities.

     (iv) Office complexes.

     (v) Commercial or industrial parks.

     (3) To determine jurisdiction, the commission considers only those customers receiving water. The commission does not consider customers who do not receive water, such as customers who have paid:

     (a) Water-availability letter fees.

     (b) Standby charges.

     (c) System-readiness fees.

     (d) Ready-to-serve charges.

     (4) To calculate the average annual revenue per customer, the commission considers only the charges that water-receiving customers ((pay on a monthly)) are billed on a recurring basis, other than contributions in aid of construction. For example, this includes money ((paid)) billed for flat-rate service or the metered base-charge and all usage charges.

     (a) The commission does not include charges ((paid by)) billed to customers who do not receive water, such as:

     (i) Water availability letter fees.

     (ii) Standby charges.

     (iii) System-readiness fees.

     (iv) Ready-to-serve charges.

     (b) The commission does not consider contributions in aid of construction in determining jurisdiction. These contributions can be money, services or property. Payments can be made in a lump sum or financed over time. Examples of contributions in aid of construction include payments for:

     (i) Connection to system.

     (ii) Meter installation.

     (iii) System buy-in.

     (iv) Facilities charges.

     (v) Assessments for capital plant and equipment.

     (5) The following example shows how to calculate the average annual revenue per customer for two hypothetical customers. The data for each customer are provided at the end of the example:

     (a) Select the most recent twelve consecutive months.

Example:

February ((1999)) 2004 through January ((2000)) 2005.

     (b) For each customer who received water service during the twelve-month period, add the amount the customer ((paid to)) was billed by the water company for items other than contribution in aid of construction items.

Example:	Customer A ((paid)) billed $340.
	Customer B ((paid)) billed $283.

     (c) For each customer who received water service during the twelve-month period, add the number of months the customer received water service.

Example:	Customer A received water service for twelve months.
	Customer B received water service for nine months.

     (d) Total the amount ((paid by)) billed the customers during the twelve-month period.

Example:
		((Paid to)) Billed by the Water Company During the Twelve-Month Period
	Customer A		$340
	Customer B	+	$283
	Total ((Paid)) Billed During Twelve- Month Period		$623

     (e) Total the number of months each customer received water service.

Example:
		Number of Months Received Water Service During the Twelve-Month Period
	Customer A		12
	Customer B	+	9
	Total Months Received Water Service During the Twelve-Month Period		21

     (f) Calculate the "Average Monthly Revenue Per Customer": Divide the "Total ((Paid)) Billed During the Twelve-Month Period" by the "Total Months Received Water Service During the Twelve-Month Period."

Example:
	Total ((Paid)) Billed During the Twelve-Month Period			$623
	Total Months Received Water Service During the Twelve-Month Period		÷	21
	Average Monthly Revenue Per Customer			$29.67

     (g) Calculate the "Average Annual Revenue Per Customer": Multiply the "Average Monthly Revenue Per Customer" times 12 months.

(A)	Average Monthly Revenue Per Customer		$29.67
	Months in a Year	x	12
(B)	Average Annual Revenue Per Customer		$356.04

DATA USED IN THE EXAMPLE TO CALCULATE AVERAGE ANNUAL REVENUE PER CUSTOMER
Example -- Customer A
		Standby Charge	Ready-to- Serve Charge	Connection Charge	Facilities Charge	Meter Base Charge	Meter Usage Charge
Receive Water Service		No	No	Yes	Yes	Yes	Yes
Contribution in Aid of Construction		No	No	Yes	Yes	No	No
									Total
Year	Month								((Paid)) Billed
((1997)) 2004	February					$20	$4		$24
((1997)) 2004	March					$20	$5		$25
((1997)) 2004	April					$20	$2		$22
((1997)) 2004	May					$25	$5		$30
((1997)) 2004	June					$25	$6		$31
((1997)) 2004	July					$25	$12		$37
((1997)) 2004	August					$25	$6		$31
((1997)) 2004	September					$25	$4		$29
((1997)) 2004	October					$25	$4		$29
((1997)) 2004	November					$25	$3		$28
((1997)) 2004	December					$25	$2		$27
((1998)) 2005	January					$25	$2		$27
		$0	$0	$0	$0	$285	$55		$340
	Number of months service					12
Not Receiving Water									$0
Receiving Water - Contribution in Aid of Construction									$0
Receiving Water - Other than Contribution in Aid of Construction									$340
Total customer ((paid)) billed during period									$340

DATA USED IN THE EXAMPLE TO CALCULATE AVERAGE ANNUAL REVENUE PER CUSTOMER
Example -- Customer B
		Standby Charge	Ready-to- Serve Charge	Connection Charge	Facilities Charge	Meter Base Charge	Meter Usage Charge
Receive Water Service		No	No	Yes	Yes	Yes	Yes
Contribution in Aid of Construction		No	No	Yes	Yes	No	No
									Total
Year	Month								((Paid)) Billed
((1997)) 2004	February	$7							$7
((1997)) 2004	March	$7							$7
((1997)) 2004	April		$12						$12
((1997)) 2004	May			$300	$4,500	$25	$5		$4,830
((1997)) 2004	June					$25	$4		$29
((1997)) 2004	July					$25	$3		$28
((1997)) 2004	August					$25	$12		$37
((1997)) 2004	September					$25	$10		$35
((1997)) 2004	October					$25	$15		$40
((1997)) 2004	November					$25	$5		$30
((1997)) 2004	December					$25	$2		$27
((1998)) 2005	January					$25	$2		$27
		$14	$12	$300	$4,500	$225	$58		$5,109
	Number of months service					9
Not Receiving Water									$26
Receiving Water - Contributions in Aid of Construction									$4,800
Receiving Water - Other than Contribution in Aid of Construction									$283
Total customer ((paid)) billed during period									$5,109

     (h) To ensure that all customers are treated equitably, the commission will impute the same rates to any customers receiving free or reduced service that apply to other customers receiving comparable service on the same system.

[Statutory Authority: RCW 80.01.040. 00-17-135 (General Order No. R-473, Docket No. UW-991634), § 480-110-255, filed 8/21/00, effective 9/21/00; 99-24-100 (Order R-467, Docket No. UW-980082), § 480-110-255, filed 11/30/99, effective 12/31/99.]

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