<p> BEFORE THE PENNSYLVANIA PUBLIC UTILITY COMMISSION</p><p>Pennsylvania Public Utility : Commission, et al. : Docket Nos. : R-00994914 v. : R-00994914C0001 et seq. : Mountain Spring Water Company : </p><p>RECOMMENDED DECISION</p><p>Before GEORGE M. KASHI Administrative Law Judge</p><p>On October 21, 1999, Mountain Spring Water Company, Inc. (the Company) filed Supplement No. 20 to Tariff Water-Pa P.U.C. No. 1 to become effective on December 23, 1999. The Company proposed an increase in rates calculated to produce an overall rate increase of $5,731.00 per year in additional revenues based on a historic test year ended December 31, 1999. The Pennsylvania Public Utility Commission (Commission) by Order entered January 12, 2000, assigned the matter for investigation and directed the Office of Administrative Law Judge (OALJ) to assign the matter to an administrative law judge for Alternative Dispute Resolution, if possible, or to schedule hearings as necessary. The Company first voluntarily postponed the effective date of proposed rates until January 14, 2000 and it was then later suspended by the Commission, until August 14, 2000.1</p><p>1 As a result of both these extensions, the rates proposed by this settlement will become effective considerably later than normal for a small water company rate case proposed to be resolved by a mediated agreement. 2 The Commission received several formal complaints against the Company's proposed rate increase. Timely Answers were filed to the complaints.</p><p>The Company consented to alternative dispute resolution of the above proceeding pursuant to 52 Pa. Code § 69.392. An initial mediation conference was held before this administrative law judge on February 25, 2000. The matter was then converted into a mediation session presided over by Mediator Charles Hilmer on February 25, 2000.</p><p>A second mediation conference was subsequently held and presided over by Mediator Charles Hilmer on March 21, 2000.</p><p>On May 16, 2000 OTS and the Company submitted a Joint Petition For Settlement. On May 18, Mediator Charles Hilmer submitted a mediation report together with the Joint Petition For Settlement for our consideration (Attached hereto and made part hereof). </p><p>The Office of Trial Staff (OTS) and the Company agreed that the Company would file compliance tariffs upon entry of a Commission Order approving a recommendation by the undersigned to adopt this Settlement. The compliance tariff for the Company shall be designed to produce an increase in the amount of the original request. Terms and Conditions</p><p>The specific salient terms of the Settlement are as follows:2</p><p>A. The Company shall reclassify the Leiby's Restaurant from a </p><p>2 We refer the reader to pages 3 and 4 of the Joint Petition for various procedural terms and conditions</p><p>3 residential user to a large commercial user.</p><p>B. The Company shall change three other commercial users from a residential user classification to a small commercial user classification.</p><p>C. The Company shall enforce rate paying from Stonehedge Originals who will also be classified as a small commercial user.</p><p>D. Under the terms of this settlement, a typical residential customer using 13,511 gallons per quarter, will also be paying a $156 per year surcharge for Pennvest loan repayments ($39 x 4) and a higher $83.40 per year customer charge ($20.85 x4), representing a total annual cost of $445.72, as reflected below:</p><p>Current Settlement</p><p>Quarterly $ 37.16 $ 51.58 [13,511 gals*$2.75=$37.16] [13,511 gals $3.8175=51.58]</p><p>Customer Charge $ 15 $ 20.85</p><p>Total Quarterly Cost $ 52.16 $ 72.43</p><p>[times four quarters]</p><p>Annual Cost $208.64 $289.72 Consumption</p><p>Annual Surcharge $156 $156 For Pennvest</p><p>Total annual $364.64 $445.72</p><p>[increase] $ 81.08</p><p>E. The Company shall implement the agreed upon rate change for the residential, small commercial, and large commercial customers as set forth in Appendix 1</p><p>4 attached hereto as part of the settlement agreement.</p><p>F. With regard to utility plant-in-service assets as of December 31, 1999, Parties agree to the original cost values, depreciation rates, accumulated reserves for depreciation and not book values as set forth in Appendix 2, page 1 of 2 attached hereto. The Parties also agree to the utility plant-in-service assets to be recognized as assets to be removed from rate base values associated with the Company's Pennvest surcharge rates. The original cost values, depreciation rates, accumulate reserves for depreciation and net booknumber are set forth in Appendix 2, page 2 of 2.</p><p>DISCUSSION </p><p>We refer the reader to the discussion of the mediator, and the statements in support of the joint petition filed by OTS and the company attached to this recommended decision.</p><p>For our purposes we find that the terms and conditions of the foregoing Joint Petition are in the public interest and represent a fair, just, reasonable and equitable balance of the interest of ("Company") and its customers for the following reasons. The parties to this Joint Petition conducted a number of settlement discussions which had the Company agreed to not one, but two extensions of the effective date for new rates to allow for the protracted settlement discussions that ensued. As a result of both these extensions, the rates proposed by this settlement will become effective considerably later than normal for a small water company rate case proposed to be resolved by a mediated agreement. The Company, upon OTS's recommendation, acquired the services of a professional utility rate consultant who developed a rate structure proposal that was acceptable to OTS. OTS submits and we agree that the final rate structure proposal embodied in the instant settlement provides contributions to revenues by rate class that are more equitable and reasonable.</p><p>5 The Company will be permitted to file a tariff establishing new water rates, on one (1) day’s notice, following entry of a Commission Order approving our Recommended Decision to approve the Joint Petition. Said tariff is designed to produce an increase in total annual base rate operating revenues of no more than $5,731, an amount that represents the Company's original request but alters the originally proposed rate structure as described therein. </p><p>Per the provisions of the settlement, the annual consumption-related cost to a typical residential customer will move from $208.64 to $289.72, which includes the new $20.85 per quarter customer charge, but excludes the flat PENNVEST Loan surcharge of $39 per quarter.</p><p>This settlement includes a provision requiring the Company to begin charging an existing customer of water service who previously paid no monies whatsoever to the Company.3 </p><p>One of the most notable components of the instant settlement is the level of rates to be charged the Company's largest water user, Leiby's Restaurant, the sole customer in the large commercial rate block. The provisions of the foregoing settlement for the first time properly require this large commercial customer to contribute its fair share to the overall financial requirements of the Company.4 OTS submits and we agree </p><p>3The commercial customer, Stonehedge Originals maintains that it is entitled to free water service in perpetuity as a result of a property easement. Despite this claim, the settlement requires the Company to bill this customer under the proposed small commercial rate block and the submitted rate structure proposal properly attributes these revenues to the Company. 4The effect of the settlement is to raise this large commercial customer's annual rates by approximately 50%. This percentage increase to the large commercial customer is consistent with the notice of proposed changes in rates that was sent to customers back </p><p>6 that the increased monies to be received by the Company from this large commercial customer under the rate structure proposed in the settlement is appropriate for the large volumes of water provided to said customer.</p><p>This proposed settlement is also in the public interest because resolution of this case by settlement rather than litigation will avoid the substantial time and expense involved in continuing litigation of all issues in this proceeding. We are quick to point out that the fact that the settlement proposes that the full amount of the initial rate request be granted should not serve to otherwise obscure the considerable efforts of both the Company and OTS to remedy the flaws in the initial filing, construct a fair and impartial rate structure, and ensure that the Company has properly metered, billed and counted all customers.</p><p>We note as pointed out by the mediator that specific provision has been made to ensure that the three formal complainants have been served with the Joint Petition and have been given the opportunity to join in the Joint Petition, not oppose it, or to file an answer and/or comments to it within ten (10 ) days of service of the document. To date we have had no response from any of the complainants.</p><p>CONCLUSIONS OF LAW</p><p>1. The Commission has jurisdiction over the subject matter and the parties. 2. The matter is properly before the Commission</p><p>3. The Joint Petition For Settlement is in the public interest in October, 1999, around the time of the original rate case filing.</p><p>7 ORDER</p><p>THEREFORE,</p><p>IT IS ORDERED: (subject to Commission approval ) </p><p>1. That the Joint Petition For Settlement be and is hereby approved as being in the public interest.</p><p>2. That the Company shall reclassify the Leiby's Restaurant from a residential user to a large commercial user. </p><p>3. That the Company shall change three other commercial users from a residential user classification to a small commercial user classification. </p><p>4. That the Company shall enforce rate paying from Stonehedge Originals who will also be classified as a small commercial user.</p><p>5. That a typical residential customer using 13,511 gallons per quarter, will also be paying a $156 per year surcharge for Pennvest loan repayments ($39 x 4) and a higher $83.40 per year customer charge ($20.85 x4), representing a total annual cost of $445.72. </p><p>6. That the Company shall implement the agreed upon rate change for the residential, small commercial, and large commercial customers as set forth in Appendix 1 of the settlement agreement, to be effective on one days notice. </p><p>7. That with regard to utility plant-in-service assets as of December </p><p>8 31, 1999, Parties shall agree to the original cost values, depreciation rates, accumulated reserves for depreciation and net book values as set forth in Appendix 2, page 1 of the settlement agreement. </p><p>8. That the Parties shall also agree to the utility plant-in-service assets to be recognized as assets to be removed from rate base values associated with the Company's Pennvest surcharge rates. The original cost values, depreciation rates, accumulate reserves for depreciation and net booknumber are set forth in Appendix 2, page 2 of the settlement agreement. </p><p>9. That the Secretary is directed to mark the investigation and docket at R-00994914 closed. </p><p>10. That the Complaints of Thomas & Barbara Versailles, et al., James & Rosemary Barron, et al., and Harry & Shirley Barron et al. at R-00994914C0001, R-00994914C0002 and R-00994914C0003 respectively are hereby dismissed and the Secretary is directed to mark the dockets closed. </p><p>Date: ______GEORGE M. KASHI Administrative Law Judge</p><p>9</p>