BEFORE THE
INDIANA UTILITY REGULATORY COMMISSION
IN THE MATTER OF THE PETITION OFGIBSON WATER, INC., A NONPROFITCORPORATION, FOR AUTHORITY TOISSUE LONG-TERM DEBT AND FORAPPROVAL OF A CHANGE IN RATES AND )CHARGES )
CAUSE NO.: 45080
AGREED MOTION TO ESTABLISH A SUBDOCKET
Petitioner, Gibson Water, Inc. ("Gibson Water"), and the Indiana Office of Utility
Consumer Counselor ("OUCC") (the "Parties"), by counsel, respectfully request, pursuant to
Indiana Code § 8-1-2-72, that the Commission open a subdocket in this Cause for the purpose
receiving evidence regarding the need to increase the amount of Gibson Water's authorized
borrowing due to higher than anticipated bids for the projects originally approved in this Cause.
In support of its request, the Parties state:
1. On April 24, 2018, Gibson Water filed a Verified Petition ("Petition") with the
Commission seeking authority to issue long-term debt and increase its rates and charges. In the
Petition (and attached prefilings), Gibson Water proposed to use the proceeds from long-term
debt ("Debt") issued to the United States Department of Agriculture Rural Development
("RD") and Indiana State Revolving Fund ("SRF") Loan Program to fund the construction of
certain water system improvements ("System Improvements").
2. On November 21, 2018, the Commission issued its Final Order authorizing
Gibson Water to borrow $3,581,000 to complete the System Improvements. In the Final Order,
the Commission specifically authorized Gibson Water to issue debt to RD in the amount of
$2,43 8,000 and the SRF Program in the amount of $1,143,000. A copy of the Final Order is
attached hereto as Attachment 1.
3. After the closing of evidence in this Cause, Gibson Water's largest customer,
Toyota Motor Manufacturing Indiana, Inc. ("Toyota"), informed Gibson Water that Toyota
required additional water to facilitate an increase in production and to operate new chiller or
cooling units.
4. To meet Toyota's increased demand for water, Gibson Water expedited the
bidding, financing, and construction of a portion of the proposed System Improvements.
Specifically, Gibson Water expedited the installation of a new master meter, meter vault, and
appurtenances and improvements to the existing booster station (collectively, "Expedited
Improvements"). (See Petitioner's Exhibit 4, Preliminary Engineering Report ("PER"),
Appendix F, Alternative 8, Items 5-6). In the PER, Gibson Water's professional engineer
estimated that the actual construction costs for the Expedited Improvements would be $247,500.
5. On November 15, 2018, Gibson Water received bids for the Expedited
Improvements in the amount of $750,850, which was $503,350 more than the engineer's original
estimate (in the PER).
6. On December 21, 2018, Gibson Water issued a portion of the Debt to the SRF
Program in the amount of $994,000 to fund construction of the Expedited Improvements. Gibson
Water estimates that the Expedited Improvements will be completed and operational in the next
week.
7. Based on the higher than anticipated construction costs for the Expedited
Improvements and the current bidding environment, Gibson Water anticipates receiving bids that
are higher than the original estimates for the remaining System Improvements. Consequently, the
borrowing authority of $3,581,000 as set forth in the original November 21, 2018 Order will not
be sufficient to cover the total anticipated cost of the System Improvements.
2
8. Gibson Water now believes that the total cost of the System Improvements (along
with associated soft costs) will be $4,649,000 (as compared to its original estimate of
$3,581,000).
9. In order to reduce issuance costs, Gibson Water would propose to fund the
remaining System Improvements by issuing debt to a single lender, RD, in the amount of
$3,655,000 (rather than in the original estimated amount of $2,438,000).
10. Gibson Water estimates that the additional amount of borrowing will require an
increase of $67,086 to its annual revenue requirement. This increase to the annual revenue
requirement would increase the 16.6% increase to an average residential customer bill approved
in the Commission's November 21, 2018 Order to approximately a 20.2% increase.
11. On August 14, 2019, Gibson Water filed a Motion to Amend Final Order in this
Cause, in which Gibson Water requested that the Commission exercise its authority under Ind.
Code § 8-1-2-72 to amend its final order to reflect the updated borrowing authority and revenue
requirement amounts. On August 23, 2019, Gibson Water filed an Agreed Motion to Establish
Procedural Schedule with a proposed procedural schedule for the Commission to receive
additional evidence in this Cause.
12. On August 27, 2019, the Presiding Officers denied the Motion to Amend Final
Order. In their Docket Entry, the Presiding Officers stated: "Consideration of the relief described
in the Motion requires a new petition to be filed or that a request be made to establish a
subdocket to present and hear the merits of such relief and issue a new order."
13. The Parties agree that the interests of administrative efficiency will best be served
by creating a subdocket in this Cause rather than filing an entirely new petition. The creation of a
subdocket will allow the Commission to expeditiously receive evidence, hold an evidentiary
hearing, and issue a new order. This will allow Gibson Water to obtain the funding it requires to
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complete the necessary projects outlined in its prior testimony in this Cause and to continue
providing safe, adequate, and affordable water to its customers, including serving the additional
needs of Toyota.
14. In order to expedite this process, the Parties have attached to this Motion an
agreed procedural schedule (Attachment 2) and a proposed order creating the subdocket
(Attachment 3).
15. Gibson Water anticipates filing prefiled testimony and exhibits that are
substantively identical to the prefiled testimony and exhibits filed with its Motion to Amend
Final Order on August 14, 2019.
16. Undersigned counsel has also contacted (and shared a draft of this Motion with)
counsel for the Indiana Office of Utility Consumer Counselor ("OUCC") and the OUCC agrees
with the relief requested in this Motion.
THEREFORE, the Parties respectfully request that Commission create a subdocket in
this Cause to consider and approve Gibson Water's request to increase its total borrowing to an
amount not to exceed $4,649,000. Specifically, Gibson Water requests authority to issue long-
term debt in the amount of $994,000 to the SRF Program and $3,655,000 to RD so that it can
complete all of the previously approved System Improvements.
Respectfully Sub fitted
hristophe tty. No. 18499-49BOSE McKI & EVANS LLP111 Monument Circle, Suite 2700Indianapolis, IN 46204(317) 684-5000(317) 684-5173 Fax
Counsel for Petitioner, Gibson Water, Inc.
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CERTIFICATE OF SERVICE
I hereby certify that a copy of the foregoing has been served upon the following counsel
44,of record via electronic mail this day of September, 2019:
Indiana Office of the Utility Consumer CounselorPNC Center, Suite 1500 South115 West Washington StreetIndianapolis, IN 46204infonmapticain.gov
BOSE MCKINNEY & EVANS LLP111 Monument Circle, Suite 2700Indianapolis, IN 46204(317) 684-5000 Telephone(317) 684-5173 Facsimile
3710005_1
5
ATTACHMENT 1
t .4 ,
re 4
t! 4414 •
77-
STATE OF INDIANA
INDIANA UTILITY REGULATORY COMMISSION
IN THE MATTER OF THE PETITION OF )
GIBSON WATER, INC., -A NONPROFIT ) CAUSE N0.45080
CORPORATION, FOR AUTHORITY TO )
ISSUE LONG-TERM DEBT AND FOR )
APPROVAL OF A CHANGE IN RATES ) APPROVED: NOV 21 2018AND CHARGES
ORDER OF THE COMMISSION
Presiding Officers:David L. Ober, CommissionerCarol Sparks Drake, Administrative Law Judge
'DoVc1
On April 24, 2018, Gibson Water, Inc. ("Gibson Water" or "Petitioner") filed a Verified
Petition with the Indiana Utility Regulatory Commission ("Commission") in the above-captioned
Cause seeking authority to increase its rates and charges and issue long-term debt. That same day,
Gibson Water prefiled_the direct testimony and exhibits of the following witnesses:
• John W. Wetzel, P.R, President of Midwestern Engineers, Inc. ("Midwestern") and
a Senior Project Engineer with Midwestern;• Steveienldns,-Manager for Gibson Water; and• Scott A. Miller, C.P.A., Partner in H.J. Umbaugh & Associates, Certified Public
Accountants, LLP ("Umbaugh").
On August 24, 2018, the Indiana Office of Utility Consumer Counselor ("OUCC") prefiled
the testimony and exhibits of the following witnesses:
• Richard J. Corey, Utility-Analyst in the OUCC's Water/Wastewater Division;
• Carl N. Seals, Utility Analyst in the OUCC's Water/Wastewater Division; and
• Edward R. Kaufman, Assistant Director of the OUCC's Water/Wastewater
Division.
On September 14, 2018, Gibson- Water filed a notice confirming Petitioner's intent to not
file rebuttal testimony and its acceptance of certain adjustments and reporting requirements the
OUCC proposed in its prefiled testimony. These include adjustments for the normalization of
residential and- commercial customer growth, eliminating expenses for various celebrations during
the test year, and reporting requirements related to Petitioner's debt service reserve.
An evidentiary hearing was held in this Cause on October 5, 2018, at 9:30 a.m. in Hearing
Room 222 of the PNC Center, 101 West Washington Street, Indianapolis, Indiana. Gibson Water
and the OUCC were present, by counsel, and their respective evidence was admitted without
objection.
Based upon the applicable law and the evidence, the Commission finds:
1. Statutory Notice and Commission Jurisdiction. Notice of the public hearing inthis Cause was given and published by the Commission as required by law. Petitioner is a publicutility as defined in hid. Code § 8-1-2-1(a), and as such, the Commission has authority under Ind.Code § 8-1-2-125 to approve Gibson Water's rates and charges for water service and under hid.Code §§ 8-1-2-78, -79, and -83 to authorize Petitioner to issue long-term indebtedness. TheCommission, therefore, has jurisdiction over Petitioner and the subject matter of this Cause.
2. Petitioner's Characteristics. Gibson Water is a nonprofit utility supplying treatedwater within rural and urban areas in Gibson County, Indiana. Petitioner serves approximately1,750 retail customers and also provides wholesale water service to the Town of Haubstadt,Indiana, ("Haubstadt") and retail service to the Toyota Manufacturing Facility ("Toyota") nearPrinceton, Indiana. Gibson Water purchases its entire supply of water from the City of Evansville,Indiana, ("Evansville") pursuant to a Water Purchase Agreement ("WP Agreement") dated July13, 1977. Petitioner uses transmission facilities, elevated storage tanks, land, land rights,equipment, distribution mains, and other property to provide water service. Gibson Water's
existing base rates and charges were established by the Commission's February 26, 1986 Order in
Cause No. 37829 (the "37829 Order"). Since the 37829 Order, 11 wholesale tracking factor
adjustments have been approved corresponding to increases in the wholesale rate from Evansville.
The most recent tracking factor a dj astadjustment wag approved on February 2R, 2018.
3. Relief Requested. Gibson Water requests approval in this Cause to adjust its rates
and charges for water service on an across-the-board basis. Petitioner proposes to increase its
annual revenue requirement by 17.2% or $318,866, for a total net annual revenue requirement of
$2,172,473. Petitioner also requests authority to issue long-term- debt in order to make needed
capital improvements.
4. Test Year. The test year for determining Gibson Water's actual and pro forma
operating revenues, expenses, and operating income under present and proposed rates is the 12
months ended August 31, 2017, adjusted for changes that are fixed, known, and measurable for
ratemaking purposes and that occur within the 12 months following the end of the test year.
5. Gibson Water's Direct Evidence.
A. John W. Wetzel, P.E. Mr. Wetzel testified concerning Gibson Water's
current water supply, distribution system, and Petitioner's anticipated capital and periodic
maintenance needs. Mr. Wetzel stated that Midwestern has provided engineering services for
Gibson Water since the 1970's when the initial Gibson Water construction project brought potable
water to many Gibson County rural_ areas. He testified that Gibson Water's service area covers
approximately 150 square miles and includes-approximately 1,750 retail customers. Gibson Water
also provides wholesale water service to Haubstadt and retail service to Toyota pursuant to-two-
separate water service agreements. Mr. Wetzel-testified that Haubstadt is served through a master
meter located near the intersection of U.S. Route 41 and County Road 925 South, and Haubstadt
uses an average of approximately 124,000 gallons per day ("GPD") and is Gibson Water's second
largest user. He testified the Commission approved the wholesale Water Supply Contract between
Gibson Water and Haubstadt on November 4, 2010, in Cause No. 43918.
Mr. Wetzel also discussed Gibson Water's service to Toyota. He testified that Toyota'sfacility is located on the east side of U.S. Highway 41 between Fort Branch and Princeton, and
Toyota is Gibson Water's largest customer, consuming an average of 0.7 million gallons per day
("MGD"). Mr. Wetzel stated the Water Supply Service Contract between Gibson Water and
Toyota was approved by the Commission on March 26, 1997, in Cause No. 40755.
Mr. Wetzel testified that Gibson Water purchases its entire supply of potable water from
Evansville. Under the WP Agreement, Evansville will supply Gibson Water with a volume not to
exceed 2.5 MGD of potable water. The term of the WP Agreement is 50 years from the date of
Evansville's initial delivery of water to Gibson Water. Mr. Wetzel testified that Gibson Water also
has emergency interconnections with the Towns of Fort Branch and Owensville, Indiana.
According to Mr. Wetzel, Fort Branch and Owensville each operate groundwater wells and a
treatment plant to serve their respective communities. Petitioner's interconnections with Fort
Branch and Owensville are only to be used in an emergency, and no water was sold or received
via these emergency interconnections in 2016 or 2017.
Mr. Wetzel explained that the water Evansville supplies comes through a master meter pit
located near 1-64 and U.S. Highway 41 and then flows through a 16-inch main to a booster station
located along County Road 1250 South. This 16-inch main is the sole feeder main from Evansville
into Gibson Water's system. The booster station then pumps the water north, primarily through a
20-inch transmission main to two elevated storage tanks located on the Toyota site. These two
tanks have a total capacity of 1.8 million gallons-("MG"). Mr. Wetzel stated-the-distribution system
also- contains a third- storage-tank, which is a 03 MG standpipe. The third tank is located north of
the other two tanks, approximately three miles east of Princeton. All three tanks have the same
overflow elevation (approximately 669 feet).
Mr. Wetzel stated that Petitioner's distribution system contains approximately 190 miles
of 2-inch through 20-inch water mains. The entire system operates on one pressure zone due to all
the tanks having the same overflow elevation, but according to Mr. Wetzel, system operating
pressure varies dramatically throughout Gibson Water's service area due to the large amount of
small diameter piping and significant variations in ground elevation. The smaller diameter_ piping
causes reduced pressure during peak demand periods. Mr. Wetzel testified that inadequate
operating pressures have been observed at a number of locations within the distribution system
network during high demand periods. He stated that most of the areas experiencing low pressure
are remote locations relative to existing storage, pumping, or large transmission main facilities and
are plagued by undersized and/or unlooped mains that are incapable of sustaining adequate
pressure during peak demand. periods. From his perspective, the pressure issues require attention.
Mr: Wetzel testified that much of Petitioner's pipe is 40- year old ductile iron or PVC
piping. He testified the typical useful life expectancy of ductile iron or PVC main piping is
estimated at 70 to 80 years; therefore, Petitioner's existing distribution system network is suitable
for continued • operation, assuming normal maintenance activities, with significant useful life
remaining.
Mr. Wetzel testified there have been no significant improvements to the booster pumping
station since its renovation in 1996. He stated that 20 years of growth in the customer base, plus
increasing flow demands from Toyota and other industrial and commercial users, have taxed the
station. Mr. Wetzel testified that Petitioner's pump station building and the pumps have been well
3
maintained, but the pumps are now beyond their useful life of 15 to 20 years and need to be
replaced. The pump station building, however, is suitable for continued service. Accordingly, Mr.
Wetzel recommended replacing the booster station pumps.
Mr. Wetzel testified the three elevated water storage tanks are generally in good condition
and provide storage approximately equal to one and a half (1.5) days based upon the current
average daily demand for Gibson Water's system. He stated that with proper maintenance and
regular inspection, the tanks should provide many more years of continued service.
Mr. Wetzel testified that Gibson Water expects significant growth in the demand for water
due to a combination of moderate population growth (3.6% growth in Gibson County over the 20
year planning period) and a significant Toyota future plant expansion that is now in the planning
stage. He testified that .with the associated production and labor force expansion, an increase of
8% was added to the current industrial demand, resulting in a projected peak day water demand
for plan year 2037 of approximately 2.924 MG (a 14% increase over 2017 peak day demands).
Based on the system's current pressure issues and the projected future demand, Mr. Wetzel
recommended making the improvements outlined in a Preliminary Engineering Report ("PER").
Mr. Wetzel described the PER (i.e., Petitioner's Exhibit 4) in some detail. The PER includes
recommendations and probable costs for system enhancements which will, according to witness
Wetzel, enable Gibson Water to meet regulatory requirements under all operating conditions. Mr.
Wetzel testified that the PER serves two purposes: (1) provides a planning document required by
many federal and state agencies to obtain financial assistance to construct -drinking water projects;
and (2) justifies why the Commission should-authorize Gibson Water to incur debt and adjust its
rates and charges as requested in this Cause.
Mr. Wetzel-testified about the capital improvements recommended in the PER. He stated
the PER was used to identify the distribution system improvements needed to eliminate low
residual pressure conditions in portions of Petitioner's system during periods of high demand. Mr.
Wetzel testified that improvement and reinforcement of the system is essential to improve carrying
capacity and hydraulic gradients, particularly in high elevation areas. Also, a single 16-inch
transmission main currently carries all the water from the meter pit connection with Evansville.
This is the sole feed from Evansville into Gibson Water's system, so if there is a problem with the
main, Petitioner has no supply source after exhausting its storage facilities. Mr. Wetzel reviewed
the engineering analyses that went into the PER and identified the recommended capital project
alternatives. These include water main extensions to ensure Gibson Water's ability to adequately
meet projected maximum daily and peak hourly demands and installation of a parallel transmission
main from the interconnection with Evansville to improve system capacity and redundancy. Mr.
Wetzel testified the additional 16-inch main is essential for service to be provided if the- existing
main-has a problem and also includes upgrades to Gibson Water's high service pumping equipment
withinthe booster station. He opined that in-his professional opinion, each of the proposed capital
improvements identified in the PER is reasonable and necessary to Gibson Water to provide safe,
efficient service and ensure the system's ability to meet projected maximum day_demand for plan
year 2037.
Mr. Wetzel testified that Gibson Water is also seeking authority to incur long-term debt
in an amount sufficient to cover the cost of constructing the proposed improvements identified in
the PER. Gibson Water, therefore, seeks authority to issue approximately $3,581,000 in long-term
debt to cover the probable construction costs of the PER recommendations as well as a 10%4
construction-contingency and estimated non-construction costs. Mr. Wetzel testified that GibsonWater plans to borrow from the United States Department of Agriculture Rural Development
("RD") and the Indiana State Revolving Loan Fund ("SRF") Program to finance these
improvements. Specifically, Gibson Water is requesting authority to issue a 40-year note in an
estimated amount of $2,438,000 to RD and a 35-year note in an estimated amount of $1,143,000
to SRF to cover the probable construction cost of the PER recommended alternatives along with
the construction contingency and estimated non-construction costs. According to Mr. Wetzel, RD
has approved the PER and funding for the improvements identified with similar approval
anticipated from the SRF Program.
Mr. Wetzel testified that Gibson Water also seeks amounts for periodic maintenance as
discussed in the pre-filed testimony of Mr. Miller. Mr. Wetzel stated the items and amounts
contained in Mr. Miller's accounting report for periodic maintenance are consistent with the
expenses Gibson Water will incur. Mr. Wetzel described the review process Gibson Water engaged
in to determine the appropriate amount for periodic maintenance. He testified the items and
amounts detailed in the Umbaugh Accounting Report are appropriate, reasonable, and accurately
reflect the type and amount of expenses Gibson Water will experience for periodic maintenance.
B. Steve Jenkins. Steve Jenkins testified in support of Gibson Water's
proposed rate adjustment and request for authority to issue. long-term debt. As Petitioner's
manager, Mr. Jenkins stated he is familiar with the utility's day-to-day operations and its system.
In describing Gibson Water's existing facilities, Mr. Jenkins stated much of the system
dates back to the 1970's when Gibson Water began providing service. He testified there have been
a number of improvements over the past 30 years including, most notably, the installation of new
facilities-in 1996 to -serve Toyota. According to Mr. Jenkins, many portions of Petitioner's system
are to the point where capacity and reliability are jeopardized, especially during peak usage. Given
the aging water infrastructure and the capacity and reliability issues, Mr. Jenkins opined that
Gibson Water needs to make a series of improvements to ensure it has sufficient capacity and
reliability for retail customers and, in particular, for its wholesale customer, Haubstadt, and for
Toyota.
Mr. Jenkins testified that Mr. Wetzel's testimony and the PER accurately describe the
improvements Gibson Water needs_ to make to ensure safe and adequate service. Specifically, he
noted the system experiences low pressure, especially during the summer peak usage months, and
operational issues because dead-end lines need to be looped. He testified that with the looping of
lines, Gibson Water will have the ability to isolate and fix main breaks while maintaining service
on either side of a break. Mr. Jenkins also stated that he believes it is extremely important for
Gibson Water to _install a parallel transmission main from its- Evansville interconnection. Re
expressed concerned that because the sole main is- under -Interstate 64 it could require days, if not
weeks, to repair a break given the difficulty of accessing the line. Mr. Jenkins testified that
considering the age of this transmission main, Gibson Water's need for more water across its
system, and the redundancy the parallel main will provide, it is critical for Petitioner to complete
this parallel main project.
Based on his familiarity with Gibson Water's finances, Mr. Jenkins testified that Gibson
Water needs an adjustment to its rates and charges to maintain its existing infrastructure and ensure
safe, adequate, and reliable service. Mr. Jenkins testified that Gibson Water will also need a rate
5
adjustment to cover the anticipated principal and interest payments on its long-term debt from RD
and the SIG Program.
C. Scott A. Miller. Mr. Miller testified that Umbaugh was retained to
determine the rates necessary to support Petitioner's pro forma revenue requirements, make
recommendations regarding changes in Petitioner's schedule of rates and charges, and assist with
structuring the long-term indebtedness to be used to fund Gibson Water's proposed improvement
projects. Mr. Miller sponsored a March 23, 2018 Accounting Report on Proposed Rates and
Charges ("Accounting Report") his firm prepared for Gibson Water.
Mr. Miller testified that Gibson Water last adjusted its rates in 1986. Since then, 11
wholesale tracking factor adjustments have been approved corresponding to increases in
Evansville's wholesale rate, with the most recent approval being on February 28, 2018. Mr. Miller
testified that the primary driver for the rate adjustment being proposed is the need to upgrade
Petitioner's distribution system as Mr. Wetzel describes. Mr. Miller stated Petitioner lacks
sufficient funds to cover the cost of the projects Mr. Wetzel identifies and that incurring long-term
indebtedness will provide the necessary funds and also spread the cost of the improvements over
the useful life of the assets.
Mr. Miller testified that. Gibson Water currently has no outstanding debt, but Petitioner is
seeking authority in this Cause to effect financings with RD and the SRF Program. He testified the
issuance of long-term_notes via the RD program will provide Gibson Water with customer and
territory protection in accordance with 7 U.S.C. § 1926(b). According to Mr. Miller, because
Gibson Water has a concentration and reliance on industrial water sales, this results in some
exposure to its non-industrial customer base should the industrial sales dramatically diminish. Mr.
Miller testified the protection afforded-by the RD program will lessen this exposure by preventing
portions of Petitioner's system from being forcibly annexed or cherry picked by another utility or
municipality.
Mr. Miller reviewed the Accounting Report (Petitioner's Ex. 7), stating the test year used
in- support of the requested adjustment to Petitioner's rates and charges was the 12 months ended
August 31, 2017. Based on his analysis, Mr. Miller testified an overall increase of 17.2% is
justified.
Mr. Miller testified the estimated project costs for the proposed capital improvements are
based on the PER engineering estimates. He generally described the projects as main extensions
and upgrades, an upgrade to the existing booster station, and installation of a parallel transmission
main. Mr. Miller testified that Gibson Water intends to fund the projects-using a two-pronged
approach_that includes a 40-year loan through RD-in the estimated amount of $2,438,000 and a
35-year loan through the SRF Program in the estimated amount of $1,143,000. Mr.. Miller stated
the estimated amortization schedules for the proposed notes are included in the Accounting Report.
He testified that Gibson Water originally intended to fund the entire loan through RD, but during
the pre-approval process RD informed Gibson Water that Petitioner needs to borrow
approximately one million dollars of the loan funds from a third-party lender to which RD will
provide a federal loan guarantee. In lieu of a third-party bank or similar lender, Mr. Miller testified
Petitioner has received an indication from the SRF that it is willing to fund the balance of the
project not funded by RD, and RD has consented to this arrangement.
6
Mr. Miller stated that to allow for a 3-5-year amortization period for project components,
Gibson Water allocated the entirety of Mr. Wetzel's PER Alternatives 2 and 3, representing
complete segments of water main (including construction and non-construction costs), to SRF for
funding. He anticipates Alternatives 2 and 3 will qualify for the 35-year amortization period under
the- SRF Program. The balance of the PER projects are allocated to RD for funding.
Mr. Miller testified that the proposed RD note is expected to be paid monthly over 40 years
beginning one month after closing, which is assumed to be December 1, 2019. Interest for the RD
loan was assumed at 3.50%, resulting in an annual debt service payment of approximately
$113,400. Principal and interest related to the proposed SRF note is expected to be paid
semiannually over 35 years beginning January 1, 2019. Interest on the SRF note was assumed at
2.75%, resulting in an annual debt service payment of approximately $51,200.
Mr. Miller described how he arrived at the estimated interest rates. He stated the RD
interest rate will be the lower of the interest rate contained in the Letter of Conditions or the
program interest rate in effect at closing. Petitioner received the Letter of Conditions on March 19,
2018, and it contains an interest rate of 3.50%. Because of the current increasing interest rate
environment, Mr. Miller stated it is unlikely, but possible, the actual RD interest rate may be lower
at the time of closing. Mr. Miller testified the SRF Program's interest rate will not be known until
closing occurs. Using the SRF Program's traditional criteria, he estimated the interest rate will be
approximately 2.75%.
Mr. Miller acknowledged the project costs used in the Accounting Report are based on-
engineering _estimates, not actual construction bids. Given the uncertainty of the actual
construction- costs and actual interest rates, Mr. Miller stated the total cost of the proposed
financing is unknown. Mr. Miller testified that Gibson-Water, therefore, anticipates that once the
actual construction bids are received, Petitioner will be able to appropriately size the proposed
borrowings. In addition, upon closing with RD and the SRF the actual interest rates and annual
debt service requirements will be known; consequently, Mr. Miller testified it will be appropriate
at that time to perform a true-up calculation on Petitioner's rates and charges.
Mr. Miller reviewed the mechanics of the proposed financings. He stated that RD now
requires borrowers to obtain a short-term construction loan through the Indiana Bond Bank. He
testified the proceeds from this short-term loan are used to pay all the costs associated with closing
on the loan and constructing the proposed facilities. Once construction is completed and final costs
are known, RD will then close on the permanent loan in an amount sufficient to pay off the Indiana
Bond Bank loan and any associated issuance costs. Petitioner will, therefore, use the funds from
. the Indiana Bond Bank to complete construction of the facilities, and when_ construction is
complete, RD will close -on the permanent loan. Mr. Miller stated that Petitioner anticipates a
November 2018 closing on the interim construction loan with the Indiana Bond -Bank and the
permanent SRF Program loan. Petitioner anticipates completion of the proposed improvements by
December 1, 2019, at which time it will close on the permanent loan with RD.
Mr. Miller discussed the adjustment for pro forma expenses and revenues- contained in the
Accounting Report. These include adjustments to payroll expense, employee benefits, purchased
water, insurance, consulting services, periodic maintenance, and operating expenses for capital or
non-recurring items. He explained the calculation of normalized annual- operating revenues to
account for additional revenues from new customers during the test year as well as additional
7
revenues from the most recent Evansville tracker. Mr. Miller -testified that Gibson Water's total
annual net revenue requirements are estimated at $2,172,473, after deducting test year
miscellaneous income and interest earnings. To provide sufficient revenues to meet the annual
revenue_requirements, Mr. Miller stated Gibson Water needs to increase its rates by approximately
17.2% across-the-board which will result in an increase of $318,866 to its pro forma revenues.
Mr. Miller testified ,the revenue requirements include an amount for replacements and
improvements based on annual expenditures for capital additions during 2014, 2015, and 2016. He
believes this amount is sufficient to allow Petitioner to effectively address the capital needs within
its system after completing the proposed improvement projects. Mr. Miller also testified as to the
mechanics of incorporating the most recently approved Evansville tracking factor into Gibson
Water's rates and charges.
Mr. Miller testified that Petitioner cannot obtain the funding necessary to complete the
proposed capital improvements without changing its current rates and charge because the net
revenues at pro forma present rates are insufficient to make the estimated debt service payments.
In his opinion, the proposed financing plan using both RD and the SRF Program funding provides
reasonable and cost-effective funding to construct the capital improvements. He testified the rates
proposed in the Accounting Report are fair, just, non-discriminatory, reasonable, and necessary
for Gibson Water to-meet its projected revenue requirements.
6. OUCC's Direct Evidence.
A. Richard J. Corey. Mr. Corey testified regarding the OUCC's proposed
adjustments to Gibson Water's revenue requirement. Generally, he recommended adjustments to
Petitioner's test year customer growth and that certain non-allowed expenses -be removed. Based
on these adjustments, Mr. Corey recommended the Commission approve an across-the-board rate
increase for Gibson Water of 16.6% which he testified will produce an annual increase in
Petitioner's water revenues of $308,420.
Mr. Corey testified that he_ did not accept Petitioner's normalization methodology for
customer growth during and subsequent to the test-year, particularly Petitioner's normalization of
industrial and agricultural revenues. He testified it is not appropriate to normalize industrial and
agricultural revenues in the manner Petitioner proposed because these customers' consumption
varies widely from customer to customer; therefore, Petitioner's growth should not be calculated
based simply on total customer billings and consumption. Mr. Corey testified the appropriate
method for adjusting for industrial an& agricultural customer growth is to identify specific
customers gained or lost during and after the test year and make specific-adjustments related to
that customer's actual or expected usage. He stated there has been no change in the- number of
Petitioner's industrial, public authority, educational, and resale customers during the test year,
eliminating the need to perform customer growth analysis on these groups. Mr. -Corey also
disagreed with Petitioner assuming a typical residential usage of 4,300 gallons. From his
perspective 4,300 gallons is not representative of the various customer classes included in
Petitioner's residential customer count analysis.
Mr. Corey testified that he accepted Petitioner's proposed Evansville tracking factor
normalization adjustment; consequently, he recommended a net increase of $168,458 to test year
operating revenues of $1,700,780 for the revenue normalization adjustment which yields pro forma
8
operating revenues of $1,869,238. He testified these adjustments reflect residential and
commercial customer growth during the test year as well as post-test year and are calculated-based
on the data in Petitioner's workpapers and information obtained during the OUCC' s site visit.
Mr. Corey recommended an increase to test year residential operating revenues of $2,737
per year and proposed a post-test year residential growth adjustment increase of $7,870 per year.
Mr. Corey testified that Petitioner proposed several operating expense adjustments totaling an
increase of $370,423. He stated the OUCC accepted all of Petitioner's expense adjustments except
$3,185 that Petitioner paid for various celebrations during the test year. Mr. Corey testified that
while the OUCC does not wish to discourage such activities, these costs provide no benefit to
ratepayers and should be disallowed as an operating expense.
Mr. Corey testified that Gibson Water requested $126,143 for extensions and
replacements based on Petitioner's average annual capital additions for 2014 through 2016. He
testified the OUCC accepts Petitioner's requested amount for extensions and replacements. Mr.
Corey testified the OUCC also accepts Petitioner's proposed debt service of $164,618 and debt
service reserve of $16,535. With all of this taken together, Mr. Corey recommended the
Commission authorize a L6.6% increase in operating revenues on an across-the-board basis to
provide Gibson Water the opportunity to collect $2,177,283 in net revenues. Based on Mr. Corey's
Schedule 1, this results in a monthly rate for a customer using 5,000 gallons increasing from $-38.98
to $45.43.
B. Carl N. Seals. Mr. Seals testified regarding Gibson Water's proposed
capital improvement projects and periodic maintenance adjustment. He recommended the
Commission approve the projects described in the PER, as well as Gibson Water's- requested
authorization for financing. He also recommended the Commission accept Gibson Water's
proposed periodic maintenance adjustment.
Mr. Seals provided an overview of Gibson Water's system and its characteristics. He
testified that Petitioner operates as a distribution system only and does not produce its own water.
Mr. Seals stated Gibson's system includes one meter pit interconnecting it to Evansville, -one
pumping station, three storage tanks, 120 hydrants, and approximately 187.5 miles of main, with
diameters- ranging from 2-inch to 20 inch. He testified that- Gibson Water sells an average of 1.3
MGD and has total storage capacity of 2.1 MG. Mr. Seals testified that Gibson Water easily meets
the Ten State Standard recommendation that total water storage meet average day demands. He
testified that based on Petitioner's Monthly Report of Operations to the Indiana Department of
Environmental Management,- Gibson Water showed a peak day on June_14, 201-6, of 2.98 MG. Mr:
Seals stated this is significant in that the WP Agreement with Evansville is for a maximum of 2.5
MGD, causing Petitioner to rely upon its storage under such scenarios.
Mr. Seals testified th-at over the last five years, Petitioner's water loss values ranged from
-4.9% to 0.6%. Mr. Seals stated-the negative values -of water loss- suggest Evansville's point of
connection may be under-registering actual sales volumes to Gibson Water. If so, this would
obscure water loss and impede Petitioner's ability to respond appropriately. Mr. Seals further
testified that Petitioner's-distribution system is fairly young, so losses due to leaks (excluding those
caused by poor installation) may be expected to be small.
9
Mr. Seals testified that-Gibson Water is proposing the following five capital improvement
projects to its distribution system:
(1) County Road 225 West Water Main Extension (Alternative 2);
(2) State Route 68 Water Main (Alternative 3);
(3) County Roads 200 South and 350 West Water Mains (Alternative 6);
(4) State Road 64 Water Main Extension (Alternative 7); and
(5) Parallel Booster Station Supply Main plus Booster Pump Replacement
(Alternative 8).
Mr. Seals described each of these capital improvement projects and the costs associated with each
as presented in the PER. He testified the total cost of the proposed capital improvement projects,
including 10% construction contingencies and non-construction costs, is $3,581,000. Mr. Seals
testified that Gibson Water intends to fund- these projects with loans from the SRF Program and
RD. Mr. Seals opined that the proposed capital improvement projects are reasonable and necessary
for Petitioner's continued provision of reliable service.
Mr. Seals also reviewed Gibson Water's proposed adjustment for periodic maintenance.
He stated the proposed adjustment encompasses supervisory control and data acquisition systems,
pump maintenance, tank maintenance, and replacement of large meters. Mr. Seals testified the
proposed periodic maintenance expenses appear to be reasonable for continued maintenance and
operation of these critical assets, and he accepted the pro forma maintenance expense amounts.
Mr. Seals commented that it appears-Gibson Water is not reporting any system usage in its Annual
Report on page W-6, particularly with respect to flushing. He testified that while Petitioner reports
having flushed 36 hydrants -in 2017, no volumes are reported in-the- Annual Report. He noted that
reporting flushing-amounts may exacerbate Petitioner's negative water loss, but this may be
addressed by requesting recalibration of Evansville's meter serving Petitioner.
Mr. Seals recommended the Commission accept Gibson Water's capital improvement plan
for purposes of approving Gibson Water's requested authorization for financing. He also
recommended the Commission accept Gibson Water's proposed periodic maintenance
adjustments.
C. Edward R. Kaufman. Mr. -Kaufman testified regarding -Gibson Water's
request to issue long-term debt. He recommended the Commission approve this request, subject to
certain reporting requirements. Mr. Kaufman also recommended restrictions be placed on
Petitioner's debt service reserve to ensure the funds are available, if needed.
Mr, Kaufman provided an overview of Petitioner's requested authorization to issue a 40-
year loan through RD for $2,438,000 and a 35-year loan through the SRF Program for $1,143,000.
Mr. Kaufman testified that Petitioner has established the reasonableness of its proposed
borrowings from RD and the SRF, but Petitioner has not established that the borrowing_terms from
any other lender are appropriate or reasonable; consequently, he testified the OUCC's position is
that financing approval in this Cause should only extend to the borrowings Gibson Water proposes
from RD and the SRF. In the event of a proposed debt issuance by another entity, Mr. Kaufman
testified Petitioner should secure the Commission's approval through filing a new Cause or a
modification of the final order in this proceeding. He opined that before any such alternative debt
10
issuance, the OUCC should have an opportunity to review the terms of the proposed debt issuance
to ensure they are reasonable.
Mr. Kaufman testified there will be a gap between the time Petitioner receives an order in
this Cause and when its proposed debt is issued. He proposed that in the event of such a gap,
Petitioner use the funds collected in rates for its 2018 debt issuances to offset the amount Petitioner
needs to borrow or apply these funds to its debt service reserve. He recognized, however, that if
Petitioner closes on its debt within two months after an order is issued in this Cause, any funds
collected for debt could be considered immaterial, so Petitioner need not apply such funds as
otherwise recommended.
Mr. Kaufman also recommended that Petitioner be required to true-up its proposed annual
debt service once the interest rates on its proposed debt are known. Mr. Kaufman stated the precise
interest rates and annual debt service will not be known until the debt is issued. Accordingly, he
recommended Petitioner's rates be trued-up to reflect the actual cost of the debt. He also
recommended Petitioner file a report within 30 days of closing on each of its long-term debt
issuances explaining the teams of the new loan, the amount of debt service reserve, and an itemized
account of all issuance costs. Mr. Kaufman testified this 'true-up report should include a revised
tariff, amortization schedule, and also calculate the rate impact in a manner similar to the OUCC's
schedules. He proposed the OUCC have 14 days after service of the true-up report to challenge
Petitioner's proposed true-up and that Petitioner-then have an additional 14 days to file a response
to the OUCC's challenge. Thereafter, Mr. Kaufman testified-the Commission should resolve the
issue through a process the Commission deems appropriate. Mr. Kaufman also recommended that
any unused financing authority expire 360 days after the final order is issued in this-Cause. .
Mr. Kaufman testified that he agreed with Petitioner's debt service reserve. While
Petitioner did not propose conditions on debt service reserve, Mr. Kaufman recommended: (i) the
debt service reserve be placed in a restricted account; and (ii) Gibson Water notify the Commission
and the OUCC within five business days if Petitioner spends any funds from its debt service
reserves for any reason other than to make the last payment on its current or proposed debt
issuances. He testified this notification or report should_ state how much Petitioner spent-from its
debt service reserve, explain why Petitioner spent funds from its debt service reserve, provide the
cite to any applicable loan documents that allows Gibson Water to spend funds from its debt
service reserve, describe Petitioner's plans to replenish its debt service reserve, and explain any
cost-cutting activities Petitioner has implemented to forestall spending funds from its debt service
reserve.
In closing, Mr. Kaufman-testified Petitioner should be authorized to issue up to $2,438,000
of long-term debt from RD and up to $1,143,000 from. the SRF Program. He recommended the
following be included in the Commission's findings-in this-Cause:
(i) For each of Petitioner's two prop-osed-debt issuances, Petitioner should
temporarily reserve the funds collected in rates for its 2018 debt issuance and use
these funds to offset/reduce the amount Gibson Water borrows; provided, however,
that if the approved debt is issued within two months after Gibson Water files a
revised tariff with the Commission reflecting the rates approved in this Cause, the
funds collected will be considered immaterial and need not be applied to
Petitioner's proposed debt issuance or debt service reserve; •
11
ii) Within 30 days of closing on an approved long-term debt issuance,
Petitioner shall file a report with the Commission and serve a copy-of the-report on
the OUCC explaining the terms of the new loan, including an amortization
schedule, the amount of debt service reserve, and detailing all issuance costs. The
report should also include a revised tariff and calculate the rate impact in a manner
similar to the OUCC's schedules. Petitioner's rates shall be trued-up, if necessary,
to match its actual cost of debt service; and
(iii) If Petitioner spends any funds from its debt service reserves other
than to make the last payment on its approved debt issuance, Gibson Water shall
provide a report (as described above) to the Commission and the OUCC within five
business days.
7. Gibson Water's Rebuttal Evidence. In lieu of rebuttal evidence, Gibson Water
filed a Notice of Intent to Not File Rebuttal Testimony ("Notice"). In the Notice, Gibson Water
accepted the following_ OUCC proposals: (1) adjustments for the normalization of residential and
commercial customer growth; (2) elimination of certain expenses for various celebrations during
the test year; and (3) reporting requirements with respect to Gibson Water's debt service reserve.
Gibson Water did not file rebuttal testimony.
R. Commission Discussion and Findings. The evidence Gibson Water and the
OUCC presented, as discussed above, along with Petitioner's Notice of Intent to Not File Rebuttal
Testimony in which Gibson Water accepted certain adjustments and reporting requirements the
OUCC proposed, provide the Commission with sufficient information and facts from which to
find that the public interest will be served by approving Gibson Water's petition, subject to the
OUCC's modifications- and _proposed reporting requfrements. The evidence demonstrates that
Gibson Water's requested relief, as amended by the OUCC' s adjustments and recommendations,
is reasonable and in the public interest; therefore, the Commission approves Petitioner's request
to adjust its rates and charges and incur long-term debt from RD and the SRF Program consistent
with our findings below.
A. Rates and Revenue Requirement. The Commission finds that based upon
the evidence, Gibson Water's current rates and charges, which provide annual adjusted revenues
of $1,861,243, are insufficient to satisfy Gibson Water's annual pro forma net revenue requirement
of $2,177,283 and that Gibson Water should be authorized to increase its rates and charges for
water service on an across-the-board basis to produce annual revenues of $2,177,283, which
represents an overall- increase of $308,420 in annual revenues and -a 16.6% increase to current
rates, consistent with the OUCC's recommendation.
Gibson Water's net revenue requirements are itemized below:
12
Revenue RequirementsOperating Expenses $ 1,870,216Extensions and Replacements 126,143Working CapitalDebt Service 164,618-Debt Service Reserve 16,535
Total Revenue Requirements $2,177,512Less: Revenue Requirement Offsets
Interest Income (229)
Total Net Revenue Requirements $2,177,283
Less: Revenues at Current Rates subject to increase (1,861,243)Other revenues at current rates (7,995)
Net Revenue Increased Required $308,045
Add: Additional IURC Fee 375
Recommended Increase $308,420
Recommended Percentage Increase 16.6%
B. Debt and Conditions on Debt/Debt Service Reserve. Based upon Gibson
Water and the OUCC's testimony, Petitioner is also authorized to issue, long-tenu debt of up to
$2,438,000 through RD and long-term debt of up to $1,143,000 through the SRF Program for-the
projects identified in the PER, subject to the following conditions:
(i) For each of its approved debt issuances, Petitioner will temporarily reserve the
funds collected in rates for its 2018 issuances and use those funds to offset/reduce
the amount Gibson Water borrows (or debt service reserve). If the proposed debt is
issued within two months after Petitioner files a revised tariff with the Commission
reflecting the rates approved in this Cause, the funds collected will be considered
immaterial and need not be applied to Petitioner's-proposed debt issuance (or debt
service reserve).
(ii) Within 30 days of closing on an approved long-term debt issuance with RD or the
SRF Program, Petitioner shall-file a report with the Commission under this Cause
and serve the OUCC with a copy explaining the terns of the new loan,_ including
an amortization schedule, the amount of debt service reserve, and itemizing all
issuance costs. The report shall include a revised tariff, and Petitioner shall also
calculate the rate impact in a manner similar to the OUCC's schedules. Petitioner's
rates shall be trued-up, if necessary, to match its actual cost of debt service.
(iii) If Petitioner spends any funds from its debt service reserves for any reason other
than to make the last payment on its approved debt issuances, Petitioner shall
13
provide a report (as described in Mr. Kaufman's testimony and Paragraph No. 6.C.
above) to the Commission and the OUCC within five business days.
C. Alternative Regulatory Program ("ART'"). If Petitioner elects to
participate in the Small Utility ARP in accordance with the procedures the Commission approved
in Cause No. 44203, the eligible operating expenses to which the Annual Cost Index will be applied
are $1,562,530. This amount excludes $308,061 approved for purchased water. Extensions and
replacements of $126,143 are also eligible expenses to which the Annual Cost Index will be
applied. All other components of Petitioner's revenue requirement will remain unchanged.
IT IS THEREFORE ORDERED BY THE INDIANA UTILITY REGULATORY
COMMISSION that:
1. Gibson Water is authorized to increase its rates and charges for water service as
provided in Finding No. 8.A. of this Order.
2. Prior to implementing the rates approved, Gibson Water shall file the tariff and
applicable rate schedules under this Cause for approval by the Commission's Water/Wastewater
Division. Such rates and charges shall be effective on or after the Order date subject to Division
review and agreement with the amounts reflected.
3. Gibson Water is authorized to issue-long4erm debt of up to $2,438,000 through RD
and Fong-term debt of up to $1,143,000 through the SRF Program as provided in Finding No. 8.B.
in order to perform the capital improvement projects identified in the PER.
4. With the issuance of the approved-long-term debt, Petitioner is subject to all the
reporting and other conditions set forth in Finding No. 8.B.
5. This Order shall be effective on and after the date of its approval.
HUSTON, KREVDA, OBER, AND ZIEGNER CONCUR; FREEMAN ABSENT.:
WOV MBAPPROVED:
I hereby certified that the above is a true
and correct copy of the Order as approved.
Secretary of the Commission
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ATTACHMENT 2
PROPOSED SUBDOCKET PROCEDURAL SCHEDULE
1. Gibson Water will immediately file its prefiled testimony and exhibits after the creationof a subdocket and/or Cause Number for consideration of the relief requested in theattached Motion.
2. The OUCC will file its prefiled testimony and exhibits on September 18, 2019.
3. Gibson Water will file any rebuttal testimony and exhibits on September 25, 2019
4. The Parties would request that the Commission set an evidentiary hearing on or aboutNovember 1, 2019. The parties anticipate an evidentiary hearing of no more than two (2)hours.
ATTACHMENT 3
STATE OF INDIANA
INDIANA UTILITY REGULATORY COMMISSION
IN THE MATTER OF THE PETITION OFGIBSON WATER, INC., A NONPROFITCORPORATION, FOR AUTHORITY TOISSUE LONG-TERM DEBT AND FORAPPROVAL OF A CHANGE IN RATES AND )CHARGES )
CAUSE NO.: 45080
PROPOSED ORDER CREATING SUBDOCKET
Presiding Officers:David L. Ober, CommissionerCarol Sparks Drake, Senior Administrative Law Judge
On April 24, 2018, Gibson Water, Inc. (Gibson Water) filed its Petition seeking authorityto issue long-term debt and for approval of a change in its rates and charges. Gibson Water alsofiled the testimony and exhibits constituting its case-in-chief on April 24, 2018.
August 24, 2018, the Indiana Office of Utility Consumer Counselor (OUCC) filed thetestimony and exhibits constituting its case-in-chief, which made certain minor adjustments toGibson Water's requested relief, but was otherwise supportive of the requested relief. OnSeptember 14, 2018, Gibson Water filed its Notice of Intent to not File Rebuttal Testimony, inwhich it indicated is acceptance of the OUCC's adjustments.
The Commission held an evidentiary hearing in this Cause on October 5, 2018, inHearing Room 222, 101 West Washington Street, Indianapolis, Indiana. Gibson Water and theOUCC both appeared by counsel and participated in the hearing. The prefiled testimony andexhibits of both parties were admitted into the record without objection.
On November 21, 2018, the Commission issued its Final Order approving GibsonWater's requested relief.
On August 14, 2019, Gibson Water filed a Motion to Amend Final Order, requesting anincrease to the amount of Gibson Water's authorized borrowing due to higher than anticipatedbids for the projects originally approved in this Cause. On August 23, 2019, Gibson Water filedan Agreed Motion to Establish Procedural Schedule.
On August 27, 2019, the Presiding Officer's denied Gibson Water's Motion to AmendFinal Order and instructed Gibson Water to file a new petition or the request the creation of a
subdocket in this Cause. On August 28, 2019, the Presiding Officers denied Gibson Water'sAgreed Motion to Establish Procedural Schedule as moot.
On September 3, 2019, Gibson Water and the OUCC filed a Joint Motion to EstablishSubdocket in this Cause. The Joint Motion included a proposed procedural schedule for thesubdocket.
Based on the applicable law and the evidence presented, the Commission finds:
1. Notice and Jurisdiction. Notice of the hearings in this Cause were given andpublished by the Commission as required by law. Gibson Water is a public utility as defined inInd. Code § 8-1-2-1(a). Under Ind. Code § 8-1-2-125 the Commission has authority to approveGibson Water's rates and charges for water service, and under Ind. Code §§ 8-1-2-78, -79, and -83, the Commission has authority to authorize Gibson Water to issue long-term indebtedness.Further, Ind. Code § 8-1-2-72 authorizes the Commission to alter or amend any order made bythe Commission, upon notice and after opportunity to be heard. (See, e.g., Cause No. 44317,Petition of Evansville, Indiana, Supplemental Order dated September 11, 2013; Commissionamended final Order issued seven months prior.) Therefore, the Commission has jurisdictionover Gibson Water and the subject matter of this Cause.
2. Petitioner's Characteristics. Gibson Water is a nonprofit utility supplyingtreated water within rural and urban areas in Gibson County, Indiana. Gibson Water servesapproximately 1,750 retail customers and also provides wholesale water service to the Town ofHaubstadt, Indiana, and retail service to the Toyota Manufacturing Facility near Princeton,Indiana. Gibson Water purchases its entire supply of water from the City of Evansville, Indiana,pursuant to a Water Purchase Agreement dated July 13, 1977. Gibson Water uses transmissionfacilities, elevated storage tanks, land, land rights, equipment, distribution mains, and otherproperty to provide water service.
3. Creation of a Subdocket. As alleged by Gibson Water in its Motion to AmendFinal Order and in the Joint Motion to Establish a Subdocket, subsequent to the close of evidencein this Cause, both just prior to and after we issued our Final Order approving Gibson Water'soriginal requested relief, a substantial change in circumstances occurred, which directly impactsthe relief approved in the Final Order. First, Toyota approached Gibson Water with a need foradditional water supply to facilitate an increase in production and to operate new chiller orcooling units. As a result of this request, Gibson Water expedited the bidding, financing, andconstruction of a portion of the system improvements that it proposed to complete in this Cause.Second, Gibson Water received bids for the expedited improvements that were substantiallyhigher that its engineer's original estimate in the preliminary engineering report prepared forGibson Water.
Based on the higher than anticipated construction costs and the current biddingenvironment, Gibson Water now believes that the borrowing authority approved in this Causewill not be sufficient to cover the total anticipated cost of its proposed system improvements.Gibson Water and the OUCC now seek to present additional evidence of the revised requiredborrowing amount and request that we approve the additional funding and coincident increase to
revenue requirement necessary to cover the debt service and reserve costs., and to that end haverequested that we amend our Final Order in this Cause to reflect the updated amounts.
Although Ind. Code § 8-1-2-72 allows the Commission to rescind, alter, or amend anyorder made by the Commission at any time, upon reviewing Gibson Water's Motion to AmendFinal Order, the Presiding Officers determined that it would be more appropriate for theCommission to consider the new requested relief through a new filing or the creation of asubdocket.
Having reviewed the Joint Motion to Establish a Subdocket, including the proposedprocedural schedule, we agree that the creation of a subdocket to address these new issues willpromote administrative efficiency and allow the Commission to expeditiously receive evidence,hold an evidentiary hearing, and issue a new order addressing Gibson Water's updated request.Therefore, Cause No. 45080 Si is created for the purpose of addressing Gibson Water's requestfor additional borrowing authority.
The Procedural Schedule for Cause No. 45080 Si shall be as follows:
• Gibson Water and the OUCC will file a settlement agreement addressing the requestedrelief in the subdocket and testimony and exhibits supporting the settlement on or beforeSeptember 13, 2019.
• The Parties request that the Commission set an evidentiary hearing for the subdocket onOctober 7 or 8, or November 1, 2019.
IT IS THEREFORE ORDERED BY THE INDIANA UTILITY REGULATORYCOMMISSION that:
1. A subdocket to this Cause, Cause No. 45080 51, is created for the purpose ofaddressing Gibson Water's request for additional borrowing authority.
2. The Procedural Schedule set forth above is hereby adopted for Cause No. 45080 Si.
3. This Order shall be effective on and after the date of its approval.
HUSTON, FREEMAN, KREVDA, OBER, AND ZIEGNER CONCUR:
APPROVED:
I hereby certify that the above is a trueand correct copy of the Order as approved.
Mary M. BecerraSecretary of the Commission