20211108Reply Comments.pdf

...: :l i' -l i \ / f.{'l.\i-l-.,.-i i i-U
:n3i r{,lY -E PH 2r 0?Michael C. Creamer (ISB No. 4030)
Preston N. Carter (ISB No. 8462)
Givens Pursley LLP
601 W. Bannock St.
Boise,ID 83702
Telephone: [phone]
Facsimile: [phone]
mcc@givenspursley. com
prestoncarter@ givenspursley. com
Attorneysfor SUEZ Water ldaho Inc.
BEFORE THE IDAHO PUBLIC U-TILITIES COMMISSION
IN THE MATTER OF THE JOINT
APPLICATION OF SUEZ WATER
IDAHO AND EAGLE WATER
COMPANY FOR THE ACQUISITION
OF EAGLE WATER COMPANY
Case Nos. SUZ-W-18-02/
EAG-W-18-01
SLjEZ wATER Ioeso INC.'s Rsplv
CouuENrs
SUEZ Water Idaho lnc. ("SUEZ" oT "SIJEZ Water Idaho") respectfully submits these
reply comments pursuant to Commission Order No. 35198.
IxtRooucttox
Eagle Water Company's current circumstances are not sustainable. Robert DeShazo is
over 80 years old and does not wish to shoulder the increasingly complex burden of operating a
rapidly growing, modern water utility. Direct Testimony of Robert DeShazo ("DeShazo
Testimony'') at2-3. Eagle Water Company's rates have not meaningfully increased since 1972,
and commenting parties note that an average residential customer pays$12.32 per month. ,Id. at
Z;Eagle Water Customer Group Comments at l.
Eagle Water Company's system is currently deficient in several respects. Comments of
the Commission Staff ("Staff Comments") at 5 (identifring system deficiencies). Both short- and
long-term investments are needed to address these deficiencies.
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The transaction proposed in this case ("Transaction"), carried out in accordance with the
Stipulation and Settlement ("Settlement Agreement"), provides a path forward for Mr. DeShazo
and for Eagle Water Company customers.
By acquiring Eagle Water Company's assets, SUEZ will avoid over $l I million in
investments to its own system. Staff Comments at 5 (concluding that, by purchasing Eagle Water
Company's assets, SUEZ would avoid approximately $l1.2 million in investments); Direct
Testimony of Catherine Cooper ("Cooper Testimony'') at 8 (concluding that, by purchasing
Eagle Water Company's assets, SUEZ would avoid approximate $l 1.2 million).
The Transaction will address several of the existing deficiencies in Eagle Water
Company's system. Staff Comments at 5-6. And SUEZ will provide the continuity in ownership,
financial resources, and technical expertise required to address the remaining deficiencies and to
provide high-quality water service into the future. Id. at6.
Eagle Water Company has been a topic of considerable controversy over the years. A
remarkable consensus has coalesced around the Settlement Agreement currently before the
Commission. SUEZ, Eagle Water Company, and Commission Staffare signatories to the
Agreement. The City of Eagle fully supports the Agreement. The City of Boise supports the key
terms of the Agreement.l
SUEZ respectfully submits that the Settlement Agreement provides the Commission with
an opportunity to permanently resolve issues regarding Eagle Water Company that have plagued
these parties, and the Commission, for decades.
' The City of Boise states its support for the key terms in the Agreement, but requests that the Commission impose
obligations upon SUEZ related to public input and other issues that, in SUEZ's view, do not directly relate to the
Settlement Agreement. In any case the City of Boise does not request that the Commission disapprove the
Settlement Agreement or the Transaction.
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Two parties to this case, and some members of the public, have voiced opposition to the
Settlement Agreement. But the objecting parties do not identiff a viable altemative path forward.
lnstead, they urge the Commission to reject the Settlement Agreement (and, indeed, the
Transaction as a whole) in favor of an untenable status quo without substantively addressing any
of the concerns raised by Mr. DeShazo or Eagle Water Company's current system deficiencies.
SUEZ respectfully submits that the Settlement Agreement is fair, just, and reasonable,
and is in the public interest. Accordingly, SUEZ respectfully requests that the Commission
approve the Settlement Agreement without change or modification.
Roply CouuBxrs
1. The Settlement Agreement reflects a fair, just, and reasonable resolution of the
issues presented in the Application.
SUEZ recognizes and appreciates the comments of the Commission Staff, which
thoroughly describe the Settlement Agreement and the benefits it will provide. Staff Comments
at 4-5 . For the sake of brevity, SUEZ highlights aspects of the Settlement Agreement without
repeating Staff s comments.
Acquisition adjustment. If approved, the Settlement Agreement would result in an
acquisition adjustment of $10.475 million. Absent the Settlement Agreement, SUEZ would seek
recovery of the entire purchase price of $10.5 million plus costs associated with the Transaction,
for a total of over $11 million.
No party disputes or opposes the amount of the proposed acquisition adjustment.
As noted in Staffs comments, the amount of this acquisition adjustment is justified.
SUEZ will avoid at least $l1.2 million dollars by acquiring Eagle Water's assets as opposed to
investing in its own infrastructure. Staff Comments at 5-6; see also Cooper Testimony at 8
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(noting approximately $11.2 million in avoided costs). This provides a definite and concrete
benefit to current and future SUEZ customers.
The Settlement Agreement and Transaction also benefit Eagle Water Customers. [n
addition to the benefits identified by Staff2 the Transaction provides a path towards long-term
viability of the system. Mr. DeShazo is over 80 years old, and he no longer has the desire to run
the system. DeShazo Testimony at2-3.If he cannot sell the system, Mr. DeShazo anticipates
difficulties maintaining the system and obtaining financing for needed improvements. Id. at2.
Providing a long-term path forward is a recognized and substantial benefit of water utility
acquisitions, even when the acquisitions result in higher rates. As the Commission noted in the
South County Case: "The regulatory, operational and personal reasons expressed by South
County as prompting the decision to sell by its stockholders cannot be casually dismissed." Case
No. UWI-W-9802, Order No. 27798 at 3. The same holds true here.
SUEZ respectfully submits that the acquisition adjustment amount set forth in the
Settlement Agreement reflects a fair, just, and reasonable compromise of the parties' positions
on this matter. Approving the agreed-upon acquisition adjustment will provide significant
benefits to both SUEZ customers and Eagle Water Company customers.
7-Year Rate implementation. The Settlement Agreement proposes to implement SUEZ
rates to existing Eagle Water Customers over a seven-year period. SUEZ originally proposed to
implement rates over a three-year period, then five years after settling the City of Eagle's
lawsuit, and has now agreed to seven years.
2 See StaffComments at 4-5 (listing benefits to Eagle Water Company customers).
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This seven-year period appears to be the longest transition period that the Commission
has ever required or approved. The first-year increase will be further mitigated by the surcharge
account refund to Eagle Water Company customers described below.
SUEZ recognizes that two of the parties to this case, and some members of the public,
object to increased rates. However, there is no scenario in which Eagle Water Company's
remarkably low rates--$ 12.93 per month on average-remain the same. As Mr. DeShazo notes,
Eagle Water Company's rates have remained largely unchanged since 1972. DeShazo Testimony
at 2. As Staff notes, substantial investments are needed to address existing system deficiencies.
StaffComments at 6-7. A rate increase is inevitable. The seven-year implementation period
reflects a fair, just, and reasonable manner in which to transition Eagle Water Company
customers from their historically low rates to SUEZ's Commission-approved rates.
Surcharge account refund. As described by Staff, under the Settlement Agreement,
Eagle Water Company will refund to existing customers the full amount that should have been
set aside in a surcharge account. StaffComments at 8-9. This amounts to approximately $144 per
customer. This refund will, among other things, mitigate the impacts of the frst-year rate
increase.
SUEZ submits that the existence and manner of providing a surcharge account refund is
an important, tangible benefit of the Settlement Agreement.
One party objects to this process, arguing that it is inequitable because "[d]istribution
based on customer status on the date of approval appears to be based only on convenience." See
Community Allied for lntegrity and Accountability ("CAIA") Comments at 5. This argument is
not persuasive.
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Distinguishing between customers based on the date of approval is commonplace in
utility proceedings. For example, increased rates imposed through a general rate case are often
effective either upon approval or shortly after approval, even when those increased rates are
based on investments made during prior time periods.
Using CAIA's reasoning, it would be unjust to charge higher rates to a customer that
joined a system right before a rate increase, since a prior customer received the benefits of the
investments without paylng higher rates. Conversely, under CAIA's argument, it would be
inequitable not to charge higher rates to a customer that disconnected from the system just before
the new rates were implemented, since that customer enjoyed the benefits of the investment but
never paid higher rates for them.
CAIA does not provide an actual alternative proposal, but it seems to suggest that
someone should track down former Eagle Water Company customers, no matter their current
place of residence, and provide some portion of refund while denying some portion of the refund
to recently connected customers. SUEZ submits that any proposal that would respond to CAIA's
objections is unworkable. lndeed, CAIA's objections would lead towards a refund that would
itself discriminate between customers based on the date they connected to the system.
SUEZ submits that the surcharge account refund is a reasonable compromise of positions
that provides an immediate, quantifiable benefit to existing Eagle Water Company customers.
Process. The case has been pending for nearly three years. The amended Application has
been pending for over four months. Members of the public have been provided with trvo separate
opportunities to intervene. A wide number of parties, representing a wide range of interests, have
intervened and participated in the case. All parties, including Commission Staffand Intervenors,
have had the opportunity to engage in discovery. The parties participated in three settlement
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conferences and an accounting workshop. The Commission has provided at least five notices to
the public. The Commission convened a customer workshop, a customer hearing, and a comment
period.
This case has been conducted in full compliance with the Commission's rules and
procedures, and has provided a robust and transparent forum to analyze the issues raised in the
Application. The process by which this case has proceeded does not provide a basis for
disapproving the Settlement Agteement.
2. Reply to specific comments.
SUEZ provides the following additional replies to specific comments provided by parties
and the public.
Commission Staff. SUEZ fully agrees with Staff s comments. SUEZ submits that Staffs
comments provide a strong basis for the Commission to approve the Settlement Agreement.
City of Eagle. SUEZ recognizes and appreciates the City of Eagle's comments, which
support approval of the Settlement Agreement.
The City of Eagle's support for the Sefflement Agreement is particularly important given
the City's prior opposition to the Transaction. The proposal currently before the Commission-
which has the support of Commission Staff, SUEZ, Eagle Water Company, the City of Eagle,
and the City of Boise-provides the Commission with an opportunity to resolve a number of
disputed issues regarding Eagle Water Company that have spanned decades. SUEZ respectfully
submits that it is reasonable, and in the public interest, to adopt this agreed-upon resolution
rather than rejecting it in favor of an untenable status quo.
City of Boise. The City of Boise expressly supports the key components of the
Settlement Agreement. City of Boise City's Formal Comments ("City of Boise Comments") at2
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("It should be noted that Boise City generally supports the terms of the proposed Stipulation and
Settlement . . . filed on October 8,2021."). The City of Boise does not request that the
Commission deny the proposed Settlement Agreement or the Transaction. SUEZ recognizes and
appreciates the City's support for the key terms of the Agreement.
The City of Boise does, however, pose some questions and requests that the Commission
impose upon SUEZ certain planning and reporting obligations. City of Boise Comments at 3-5.
SUEZ respectfully submits that the City of Boise's requests are outside the scope of this
proceeding. A thorough response to each of the City's questions and calls for additional
information would consume undue amount of resources in the context of considering the
S ettlement Agreement. 3
As for the City's request that the Commission impose planning and reporting obligations
upon SUEZ, the Commission recently approved a settlement agreement-which the City of
Boise joined-in which SUEZ agreed to broaden public outreach by providing community
project updates, conducting in-person and virtual town hall listening sessions, expanded
customer notifications on operational initiatives, and providing a water quality mailer to all
customers regarding key projects and initiatives. Case No. SUZ-W-20-02, Stipulation and
Settlement atfll2.
3 The City ofBoise had the power to engage in discovery throughout this proceeding but did not propound any
discovery requests. SUEZ respectfully submits that a party cannot disregard the tools available to it and then, at the
end of the process, call for more information when that very information would have been available to the party
during the proceeding itself. In any case, the City's questions and calls for more information appear to be posed in a
manner-and in a forum-such that responses are not expected or even necessarily desired.
SUEZ also notes it has been engaged in ongoing, substantive, good faith discussions with the City of Boise
regarding these matters for a number ofyears. One ofthe several letters exchanged on this topic is attached as
Exhibit l. SUEZ submits that the Commission should let the parties carry out these discussions without intervention
in the context ofthis proceeding.
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SUEZ also agreed to host annual workshops for all interested parties, including
Commission Staff and stafffrom the Idaho Departrnent of Environmental Quality and the Idaho
Department of Water Resources, on a range of topics related to water conservation and resource
planning. Id. atfil3.
In addition, in conjunction with that case, Commission Staffestablished a task force to
monitor water quality issues on the Boise Bench.
The parties are in the process of implementing these components of the general rate case
settlement. The conditions that the City of Boise requests in this case appear to replace,
duplicate, or potentially conflict with, the processes the Cify itself agreed to. It would be
premature for the Commission to impose additional conditions before these processes run their
course.
SUEZ also notes that some of the requested reports-such as reporting diversions from
SUEZ's wells-are already provided to the Commission in SUEZ's annual reports.
ln any case, the City does not actually argue that the Commission should disapprove the
Settlement Agreement. The City also does not provide any legal basis for, and no compelling
policy rationale for, imposing additional conditions upon SUEZ's general operations in the
context of this proceeding.
SUEZ respectfully submits that the Commission should decline to alter the terms of the
Settlement Agreement to impose the additional obligations suggested by the City of Boise.
Eagle Water Customer Group ("EWCG'). EWCG objects to the settlement on two
bases. SUEZ respectfully submits that neither is persuasive.a
4 EWCQ objects not so much to the terms of the Settlement Agreement as to the Transaction itself.
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Idaho Code $ 6I-328. As EWCG recognizes, Idaho Code $ 6l-328 does not directly
apply to this proceeding. Eagle Water Customer Group's Comments on Proposed Settlement
("EWCG Comments") at 2 (quoting the Commission's recognition that "ldaho statutes do not
specifically address the acquisition of water companies").
EWCG, and the Commission, are correct: Idaho Code $ 61-328 applies to the transfer of
ownership of certain electrical equipment, not to transfer of ownership of equipment owned by
water companies. Idaho Code $ 6l-328 (requiring Commission approval of changes in
ownership or control of "any property located in this state which is used in the generation,
transmission, distribution or supply of electric power and energy to the public or any portion
thereof').
The Commission has, as a matter of discretion, applied the factors set forth in Idaho Code
$ 6l-328 to some water utility acquisitions. ln others, the Commission has applied the overall
public-interest standard set forth in Idaho Code $ 6l-528. See South County Case, Case No.
UWI-W-98-02, Order No. 27798; Barber Water Case, Case No. IJWI-W-99-4, Order No. 28205;
Case No. UWI-W-14-01, Order No. 33195, In re: United lhatur ldaho Inc.'s and Brian Water
Users As sociation's Application.
The South County case is particularly instructive. There, United Water proposed to
acquire a water system owned and operated by South County Water Company, Inc. ("South
County"). The owners of South County operated a low-cost water system and its customers were
generally satisfied with their water service. See Order No. 27798 at 2. However, the owners were
"reluctant to undertake the risks of continued operations arising from increasingly stringent water
quality regulations, increasingly complex utility regulations, and increasingly complex
operational and technical requirements." Id. at l.
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The transaction provided benefits to South County and United Water customers:
operational efficiencies through shared water supply and storage; improved technical ability to
operate the South County system in the future, to make needed system improvements, plan for
growth, to replace aging facilities and comply with regulatory requirements; and a revenue
benefit to then-existing United Water customers. Id. at2. The water would be chlorinated "to
safeguard and improve water quality," and South County customers would also have access to
emergency backup systems, SCADA systems, and UWI resource experts. ,Id.
The Commission recognized that, while the fansaction would increase rates for South
County customers, "the mere difference in rates is insufficient to deny the transaction-" Id. at3.
Supporting this conclusion, the Commission recognized that South County customers
were likely to pay increased rates in the fufure, given "substantial required improvements."
Perhaps more importantly, the Commission recognized that "[t]he regulatory, operational and
personal reasons expressed by South County as prompting the decision to sell by its stockholders
cannot casually be dismissed." Id. "South County customers have had the benefit for 24 years of
continuous system management and ownership. The present ownership, many advanced in age,
desire to sell and bring an end to their venture. The fact that their water system is a regulated
entity should not preclude them from selling." 1d. (emphasis added).
The Commission reached a similar decision, using similar reasoning, in the Barber Water
Case. ,See Order No. 28205 at 3-5.
The parallels between the South County case and this one are obvious and compelling.
As in South County, here the current system operator is unwilling and unable to continue
operating the water system. As in South County, here the ffansaction will provide benefits to
customers of both the acquired and the acquiring utility. As in South County, here "the mere
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difference in rates is insufficient to deny the transaction." Order No. 27798 at 3. And as in South
County, here Eagle Water customers have had the benefit for 47 years of continuous system
management and ownership. The present owner, advanced in age, desires to sell and bring an end
to his venture. The fact that the water system is a regulated entity should not preclude him from
selling. See id.
SUEZ respectfully submits that, in light of all the circumstances, approval of the
Settlement Agreement is in the public interest. Neither Idaho Code $ 6l-328 nor the decisions
that have applied those factors, as a matter of discretion, to other water utility acquisitions
prevent the approval of the Settlement Agreement.
ln addition, SUEZ notes EWCG objects to the Settlement Agreement, and indeed to the
Transaction, without proposing an alternate path forward. Mr. DeShazo's testimony makes clear
that, after forty-seven years of managing Eagle Water Company, he is no longer willing to
continue. Mr. DeShazo Testimony at2-3. Commission Staff has identified a number of
deficiencies in Eagle Water Company's system that need to be addressed. Staff Comments at 5.
The Commission is currently presented with a Settlement Agreement that enjoys the
support of Commission Staff, SUEZ, Eagle Water Company, the City of Eagle, and the City of
Boise. SUEZ respectfully submits that it is in the public interest to accept the Settlement
Agreement, rather than reject the Agreement in favor of an untenable status quo.
Rate implementation. EWCG also asserts that new rates for existing Eagle Water
Company customers should be implemented differently. EWCG Comments at 5-6. SUEZ
disagrees. As noted above, an implementation period of seven years will be the longest period of
rate implementation in Commission history. The surcharge refund will largely----or, for some
customers, fully--offset the first-year implementation of new rates.
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SUEZ respectfully submits that EWCG does not provide a persuasive legal or policy
basis for altering the agreed-upon implementation schedule. EWCG refers to the South County
case, arguing that an equivalent rate implementation here would result in a first-year increase of
30o/o,rather than the 53o/o ageed upon in the Settlement Agreement. Id. at 6. However, this
comparison ignores the surcharge refund amount, which was not present in South County and
which will largely or completely offset the first-year rate increase proposed here. EWCG's
suggestion of a modest reduction in the first-year rate increase does not provide a sufficient basis
to reject the Settlement Agreement and jeopardize the Transaction.
CAIA and public comments. Citizens Allied for lntegrity and Accountability ("CAIA")
provides comments that are substantially similar to those provided by members of the public.
SUEZ responds to both here.
Rate increase and rate implementation. Similar to EWCG, CAIA argues that the
Commission should deny the Sefflement Agreement due to the increased rates to Eagle Water
Company customers, and that the rate implementation period is inadequate. CAIA Comments at
3-4. SUEZ disagrees, for the same reasons discussed above. SUEZ incorporates its response to
EWCG's comments as its response to CAIA'S comments on rate implementation.
Water quality. CAIA argues that the acquisition may lead to decreased water quality for
Eagle Water Company customers. CAIA Comments at 2. IDEQ regulates water quality in ldaho.
SUEZ is in compliance with DEQ standards. CAIA provides no evidence to the contrary.
CALA attempts to argue that SUEZ might lead to decreased water quality because SUEZ
uses chlorine. CALA Comments at 3. But chlorine is a well-recognized method of complying
with IDEQ's water quality regulations. See IDAPA 58.01.08.300.04 (setting chlorination
requirements for disinfecting certain water sources); Order No. 27798 at 2 (approving United
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Water's acquisition of South County Water System, recognizing that chlorination would
"safeguard and improve water quality"). The methods SUEZ uses to ensure compliance with
drinking water criteria does not present a "water quality issue." And the Commission will retain
jurisdiction over SUEZ to address any complaints regarding chlorination. SUEZ's use of
chlorine to disinfect drinking water does not provide a basis to disapprove the Settlement
Agreement.
Local control. CAIA .rgues that "[a]llowing a multinational, for-profit entity to exercise
full control over a precious, ineplaceable resource is not in the best interest of the public." CAIA
Comments at 8. These concerns are off-base and overstated.
SUEZ Water Idaho, an tdaho company with Idaho-based personnel, operates the water
system. Its offrces are in Boise. SUEZ's water rights are regulated by the Idaho Department of
Water Resources ("IDWR"). The terms and quality of service, rates, customer relations, and
other matters are regulated by the Commission. Water quality is regulated by the ldaho
Department of Environmental Quality ("IDEQ"). If it approves the Settlement Agreement, the
Commission will not be granting "full control over a precious, irreplaceable resource." The
Commission will instead be allowing one highly regulated, for-profit utility to assume operation
of a water system when the current owner of the highly regulated, for-profit utility states that he
no longer has the desire or ability to do so.
Transparenqt. CAIA argues that "[t]his transaction has been far from transparent and
many important details remain obscure." CAIA Comments at 8. This is simply untrue. Indeed,
CAIA itself sets forth the details of the transaction that it contends are "obscure." CA[A at 9
(describing the transaction).
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CAIA has been a participant to this proceeding for nearly three years. CAIA has had the
ability to utilizrand has utilized-the mechanism of discovery, which provides access to
information and documents that would not have otherwise been available. CAIA's recitation of
the details of the transaction presumably flowed from information learned during CAIA's
participation in this case.
ln any case, to the extent CAIA raises transparency concerns, those concerns relate to the
Commission and its rules rather than this particular proceeding. This proceeding was conducted
in accordance with the Commission's rules, orders, and procedures. CAIA does not contend
otherwise. SUEZ respectfully submits that CAIA's stated concerns regarding transparency do not
and cannot provide a basis to disapprove the Settlement Agreement.
Veolia. CAIA argues that, due to the proposed acquisition of SUEZ SA, SUEZ's
upstream, France-based parent company, by Veolia Environnement SA, another France-based
entity, the acquisition of Eagle Water Company's assets is "not a simple fwo-party ffansaction"
but, rather, a "four party transaction or a dual, dual transfer." CAIA Comments at 10. SUEZ
submits that the acquisition by Veolia does not provide a basis to disapprove of the Settlement
Agreement.
First and foremost, the proposed transaction between SUEZ's upstream parent
company-SuEz SA and Veolia Environnement SA, both of which are based in France-is not
properly before the Commission. CAIA's comments regarding this proposed ffansaction are
therefore not relevant.
Second, the Commission has recognized that the modern marketplace is increasingly
international and, consequently, concerns about foreign companies' involvement with Idaho
utilities do not and cannot govern the Commission's decisions:
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With the increased globalization of economies and cultures, the
concept of an "American" company is becoming more obscure.
Today's increasingly competitive markets require business to search
far and wide for materials, labor, and business opportunities. Large
businesses whose stock is publicly traded in this country are often
owned, at least in part, by foreign interests. Similarly, U.S.
corporations and individuals often engage in the acquisition of or
partnership with foreign businesses. ln short, corporate mergers
make the news almost daily.
Case No. PAC-E-99-1, Order No. 28213 at 41. SUEZ respectfully submits that this statement by
the Commission is correct: upstream ownership interests of utilities are in a near-constant state of
flux to some degree or other. SUEZ Water ldaho is, and will remain, an Idaho-based water utility
subject to the jurisdiction of the Commission and other Idaho agencies.
Third, CAIA does not identifu any substantive issue with the proposed Veolia transaction
that affects any of the on-the-ground facts of the case. CAIA does not-and cannot-dispute the
benefits of the Settlement Agreement identified by Commission Staff. CAIA invites the
Commission to reject the Settlement Agreement and its concrete benefits out of unsubstantiated
fears or "concerns" about the future, related to a proposed transaction that it outside the
Commission's jurisdiction.
Finally, CAIA completely ignores Mr. DeShazo's stated unwillingness and inability to
operate Eagle Water Company on an ongoing basis. "The regulatory, operational, and personal
reasons expressed by [a water company operator] as prompting the decision to sell by its
stockholders cannot be casually dismissed." Order No. 2798 at 3.
No matter how much CAIA--or any other party-wishes that Mr. DeShazo could
continue to operate Eagle Water Company at the current rates for an indefinite period of time,
that is simply not realistic. The status quo is not tenable. CAIA has expressed objections to the
current proposal, but does not suggest any viable alternative path forward. SUEZ respectfully
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submits that the Settlement Agreement provides a reasonable resolution to the iszues prese,nted in
the Application and provides a path forward that will provide be,nefits to all parties.
Cotrcl,usrox
For these reasons, SUEZ respecfily submits that the Commission should
approve the Settlement Agreement without change or modification.
DATED this 8tr day of November, 2021.
SUEZ Water Idaho Inc.
,2 e---*-
Mchael C. Creamer
PrestonN. Carter
Givens Pursley LLP
Attornqtsfor SUEZ Water ldaho Inc.
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CERTIFICATE OF SERVICE
I certiff that on 8ft day of November,Z}Zl, a true and correct copy of the foregoing was
served upon all parties of record in this proceeding via electonic mail as indicated below:
Jan Noriyuki
Commission Secretary
Idaho Public Utilities Commission
P.O. Box 83720
Boise, Idaho 83720 -007 4
IPUC
Dayn Hardie
Erick Shaner
Deputy Attorneys General
Idaho Public Utilities Commission
P.O. Box 83720
Boise, Idaho 83720-007 4
Attorneys for IPUC
Marshall Thompson
SUEZ Water Idaho Inc
8248 W. Victory Road
Boise,Idaho 83709
SUEZ Water ldaho Inc
MollyO'Leary
BizCounsel or@l-aw, PLLC
1775W. State St. #150
Boise, D 83702
Counsel for Eagle Water Company
Robert V. DeShazo, Jr.
Eagle Water Company, Inc.
P.O. Box 455
Eagle, ID 83616-0455
Petitioner
N. L. Bangle
H2O Eagle Acquisition, LLC
188 W. State Street
Eagle,ID 83616
Jason Pierce, Mayor
City of Eagle
660 E. Civil Lane
Eagle,ID 83616
Intervenor City of Eagle
SUEZ Wersn IDAHo, INC.'s REpLy CouurNrs - l 8
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B. Newal Squyres
Murray D. Feldman
Holland & Hart LLP
800 W. Main Street, Suite 1750
P.O.Box2527
Boise, D 83702-2527
Auomeysfor Intervenor City of Eagle
Norman M. Semanko
Parsons Behle & Latimer
800 West Main Street, Suite 1300
Boise, Idaho 83702
Auomeys for Intervenor Eagle V[/ater
Customer Group
MaryGrant
Scott B. Muir
Deputy City Attorney
Boise City Attorney's Office
150 N. Capitol Blvd.
P.O. Box 500
Boise, Idaho 83701 -0500
Auorneys for Intervenor, City of Boise
James M. Piotrowski
Marty Durand
PIOTROWSKI DURAND, PLLC
P.O. Box 2864
1020 W. Main Street, Suite 440
Boise,ID 83701
Attorneys for Intervenor Citizens Alliedfor
Integrity and Accountability
SUEZ Weren IDAHo, Ittc.'s REpLv CouueNrs - l9
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Preston N. Carter
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EXHIBIT 1
GTvBNS PunsLEY,,,.
Attorneys and Counselors at Law
601 w. Bonnock Slreet
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Bobe. lD 83701
Telephone: 20&38&1200
Focsimie: 20&38&l300
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Chfttopher H. Meyer
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Gory G. Allen
Chorlie S. Boser
Chririopher J. Beeson
Joson J. Blokley
Clint R. Eolindel
Jeff W. Bower
Preslon N. Corler
Jeremy C. Chou
MichoelC. Creomer
Amber N. Oino
Brodley J. Dixon
Ihomos E. Dvorok
Deboro Krblensen Groshom
Donold Z. Groy
Alex J. Gro$
Btion J. Holleron
Kedi H. Kennedy
NeolA. Koskello
Michoel P. Lowrence
ftonklin G. Lee
Dovk, R. Lombordi
Kimbetly D. Moloney
Kennelh R. McCIre
Kelly Greene Mcconnel
Alex P. McLoughlin
Melodie A. McQuode
Chrilopher H. Meyet
L. Edword Mller
Judson B. Monlgomery
Deboroh E. Nelson
w. Hugh O'Riordon, LL.M.
Somuel F. Porry
Rondoll A. Pelemon
Jock W. Relf
Eloke W. Ringer
Michoel O. Roe
Robert B. white
Wlliom C. Cole (O, Counsel)
Michoel P. Lowence
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Kennelh [. Pu]dey (l91c2ots)
Jomes A. Mcclure (192+2orl
Roymond D. Givens (t9t7-2008)
mpl@giv€nspur{ey.com
July 8,2021
Via email and U.S. Mail
Mary Grant, Esq.
Deputy City Attorney
Boise City Attomey's Office
PO Box 500
Boise, ID 83701-0500
mr gr ant@c ityo fbo i s e. org
Re: SUEZ's response to City's leffer of 413012021
Dear Ms. Grant:
Thank you for your letter of 413012021.r We provide this response on behalf of
SUEZ Water Idaho.
This dialog demonstrates that the City of Boise and SUEZ remain committed to
building a strong relationship based on trust and ffanspilency. Even where we have
differing perspectives, our relationship is strengthened by honest dialog. That requires
asking hard questions and providing direct answers. This is an iterative process requiring
patience and perseverance. SUEZ believes it is already paying off.
Your letter and other communications have identified or implied a number of
concerns. In this letter, we have attempted to compile them into a list of what we
perceive to be the City's primary concerns. We set them out below, and provide a
I Prior communications in this ongoing discussion include our letter to Mr. Burgos of
912512020, Mr. Pardy's letter of 21912021, and our letter to Mr. Pardy of 31512021.
Mary Grant, Esq.
ldy 8,2021
Page2 of2l
response to each concern. We hope this is a helpful approach. If we have misunderstood
or failed to address your concerns, this correspondence may help us sort that out. And we
will keep trying.
LIST OF CONCERNS:
Concern #l
Concern #2
Concern #3
Concern #4
Concem #5
Concern #6
Concern #7
Concern #8
Concern #9
Concern #10
Concern #l I
Concem #12
Concern #13
Concern #14
Concern #15
SUEZ's status as a private company is at odds with the long-term
best interests of the City and the customers it serves...
The City would be better offif it owned and operated the water
,...3
system.4
By allowing a private company to provide municipal water, the
City is missing an opportunity to contol growth outside the City............. 5
Because expansion of SUEZ's service territory increases its
revenue, SUEZ inherently promotes suburban growth. ........... 5
SUEZ will use its APODs to facilitate suburban growth............................ 6
ln times of shortage, APODs will enable SUEZ to send Boise
water to suburbs rather than saving it for Boise citizens. ........7
SUEZ is not motivated to protect water quality and cannot be
trusted to deliver safe drinking water to its customers. .............................. 8
SUEZ might sell its water rights to others for its own profit...................... 9
The risk of SUEZ selling its water rights is enhanced because it is
a foreign company l0
Although SUEZ holds an ample supply of paper water rights
sufficient to meet long-term need, the physical water supply may
be inadequate. ............... ................... l0
SUEZ's acquisition of surface water rights reflects the Company's
concern that its ground water supply is unsafe or unreIiable.................... 11
SUEZ should not buy new water rights, but lease them from Boise. .......12
SUEZ and the City should work more closely on their respective
conservation efforts.
SUEZ should provide more ground water data to the City
SUEZ needs to provide more community outreach
t2
l3
l3
Mary Grant, Esq
July 8, 2021
Page 3 of2l
DISCUSSION
Concern #1 SUEZ's status as a private company is at odds with the
long-term best interests of the City and the customers it
serves.
We begin by addressing what appears to be the elephant in the room. SUEZ is a
for-profit company, and the City is not. That is a fundamental difference that no one can
change, short of purchase or condemnation of SUEZ's assets. But SUEZ is not just any
private company. It is a regulated public utility, and that should provide a large degree of
assurance to the City.
For well over a century, people across the country have relied on public utilities,
operated as regulated monopolies, to provide essential public services. Allowing
monopolies to operate is an intentional and important departure from the anti-monopoly
underpinnings of our country's system of business regulation. It is compelled by the
need for the enormous investment in infrastrucfure required to provide public services.
On the other hand, monopolies are inherently dangerous, because they are not constrained
by competitive market forces. The solution is to substitute intense regulatory control for
market control. Accordingly, all states oversee, control, and constrain public utilities'
business through their respective public utilities commissions. This trade-off (swapping
market forces for PUC regulation) has enabled America to be served at low cost by some
of the best public service infrastructure in the world.
It has achieved this not by eliminating the profit motive, but by regulating it.
Because the company owns its infrastructure and its water rights, and derives revenue
from it, SUEZ is highly motivated to keep that system in top form. Moreover, it can
afford to do so, because it is allowed a return on its investment.
We also draw attention to the differing roles played by profit and risk in different
sectors of the economy. From time to time, private companies are operated or even
looted for short term investor gain. Fortunately, that model does not find a home in the
highly regulated utility sector. Utilities are valued by a specific set of investors - those
seeking the reliability of steady, moderate returns over the long term. Achieving such
returns requires deliberate, risk-averse, and consistent planning, as well as provision of
high-quality services to customers over the long run.
In sum, the expectations of the marketplace align SUEZ's interests with those of its
customers, unlike other sectors, which may encourage speculation, incentivize isk-
taking, and prioritize short-term growth over long-term value.
Mary Grant, Esq.
July 8, 2021
Page 4 of2l
Concern #2 The City would be better off if it owned and operated the
water system.
When a city controls the water system, it too operates as a monopoly with all the
inherent risks. The difference is that the practical business decision-making structure and
the regulatory oversight applicable to private utilities are replaced by political oversight
and control. Outcomes vary.
Some cities own and operate excellent public water systems. Under a best-case
scenario, a well-run city might operate a water system as efficiently as SUEZ. But it is
hard to imagine a city running it any better, or at lower cost, than SUEZ.
But many city systems are failures. Among other things, private utilities are
incentivized by profit to invest in their systems. When they seek arate increase to
recover a return on that investment, the company takes the heat and everyone benefits
from the investment. In contrast, when a city is required to raise fees or taxes to pay for
maintaining and improving city-owned water supply infrastructure, elected officials
sometimes find it more appealing to postpone or do things on the cheap. The recent crisis
in the City of Flint, Michigan, is an extreme example of what can go wrong.
Even successful city utilities are not necessarily more cost effective than private
utilities. We note, without comment, that Boise's Water Renewal Utility has experienced
annual rate increases ofabout five percent per year since 1979, in addition to increased
connection fees.2 By comparison, the average annual increase for SUEZ Water Idaho's
rates is 3.29 percent from 1981 througbz02l. Those figures are not meant to say that
one utility is better or more efficient than the other. By all accounts, both are well and
efficiently run. We offer this simply to say that SUEZ's track record on rates is good and
one should not assume that a takeover by the City would result in lower operating costs
or better service.
In sum, the City and its citizens are well served by SUEZ's fficiently run water
system. The City should have no heartburn over the modest rate of return SUEZ is
allowed on its investment. The City, in contrast, takes its cutfrom the ratepayers in the
form offranchise fees without having made any investment.
2 Memo from Public Works Director to Mayor and Council dated 811912020 at page 3.
Mary Grant, Esq.
July 8,2021
Page 5 of21
Concern #3 By allowing a private company to provide municipal water,
the City is missing an opportunity to control growth outside
the City.
Another motivation for city-operated water systems could be that the city would
be able to leverage control of the water supply to serve extra-territorial policy goals. The
City and County of Denver is an example of this. It has quite effectively used its control
of water transported across the Continental Divide as leverage over the suburbs. It has
not sought to stop or control suburban growth. But it has used its water supply to ensure
that suburbs pay their fair share of the city-provided infrastructure and services (from art
museums to stadiums) that benefit of the entire region.
If the City of Boise took over SUEZ, it might try to leverage its control of the
water supply to exert some influence over suburban growth. But that would not likely
succeed. The political climate in Idaho is far different from that in Colorado. Any
attempt by Boise to exercise land use control beyond its borders would likely be met by a
stern legislative response.
Moreover, the City could not just buy the "Boise portion" of SUEZ. There is no
Boise portion. The entire system is integrated and can only operate in an integrated
fashion. If the City bought SUEZ, it would necessarily become the water provider to
areas of unincorporated Ada County and portions of other municipalities (Eagle and
Meridian). The political implications are staggering. As is the cost of such a venture.
In sum, a City take-over of the municipal water system would not provide a viable
opportunityfor extending the City's influence beyond its borders.
Concern l#4 Because expansion of SUEZ's service territory increases its
revenue, STIEZ inherently promotes suburban growth.
It is undeniable that SUEZ is in the water business, and is going to provide water
to new customers who ask to be served. SUEZ cannot use its regulated monopoly status
to control or influence land use decisions made by cities and counties. Attempting to do
so would be profoundly at odds with its duties as a public utility. SUEZ does not view
this reality as a bad thing. Land use decisions are best made by governmental entities.
In any event, even if SUEZ (or a city taking over SUEZ) tried to control land use,
it would fail. If SLJEZ (or a city) declined to serve a proposed new development, the
developer would obtain water elsewhere. SUEZ owns water rights, but it does not
control other people's access to the public water resource. Growth will continue, and if
not served by SUEZ it will be served by someone else, including smaller, disconnected
Mary Grant, Esq.
July 8, 2021
Page 6 ofZl
water systems using their own wells. That is not a recipe for a stable, safe, and reliable
regional water system. To the contrary, the inefficiencies and water quality dangers
associated with numerous small and often less regulated water systems is widely
recognized as a problem in the United States.
In sum, SUEZ does not and cannot use its water system to inJluence growth in the
suburbs. SUEZ does not lead, butfollows local planning and zoning decisions.
Concern #5 SLIEZ will use its APODs to facilitate suburban growth.
Traditionally, the Idaho Department
of Water Resources (IDWR) issued a new
water right for every new municipal well
throughout Idaho. SUEZ and its
predecessors operated that way for a
cenfury. But this is an arcane practice no
longer allowed by IDWR, which will no
longer issue new municipal water rights
absent a showing of need on a system-wide
APOD is an acronym for "alternate point of
diversion." Every water right has at least one
point of diversion (or POD). For a ground water
right, the POD is location of the well. lf a ground
water right is authorized to divert from more than
one well, those wells are called APODS.
See the aftachment on page 17 (an excerpt from
lhe ldaho Water Law Handbook) for a more
complete discussion of APODS.
basis. Most notably, the old approach of having a separate water right for each well
ignores the physical reality that the wells divert from a connected aquifer system.
System-wide APODs (a network of wells serving the entire municipal delivery
system) simplify daily administration by eliminating the administrative burden of tracing
each diversion to an individual water right. And they provide needed flexibility in times
of shortage. For example, APODs would enable SUEZ to lawfully rotate its senior rights
to different wells to help the City facilitate lawn watering restrictions.
At the same time, SUEZ recognizes that IDWR must place conditions on water
rights when new APODs are added. This is appropriate to ensure other water rights are
not injured by local well pumping interference and that APODs are not used to
circumvent localized administration (such as ground water management areas). We will
not go into those intricacies here, but suffice to say the subject is well developed. (See
the attachment on page 17.)
The key point is that APOD authority is not necessary for or intended to promote
gowth. SUEZ can expand service to new customers within or nearby its current service
area with or without system-wide APODs. SUEZ already has water rights associated
with every well it owns. If SUEZ were denied system-wide APOD authority, it would
continue to operate just as it has before and file one-off transfer applications when it
needs to "paper up" water rights for a new well. But that process is inefficient and a
Mary Grant, Esq.
July 8, 2021
PageT of2l
burden to SUEZ (and its ratepayers) and to IDWR (which presumably would like to
avoid having to process multiple applications for transfer when it could simply approve
APODs in one fell swoop).
In your letter at page 2 you asked for "a detailed summary of how the APOD
provisions will be used if granted by IDWR, including which wells and water rights are
currently anticipated to use the APOD provisions . . . ." The answer is SUEZ will use the
flexibility provided by APODs on all of its wells and water rights. The whole point of
APODs is to get away from worrying about which water rights are associated with which
wells. At any given time, SUEZ can simply total up quantity of water available under all
of its water rights then in priority, and divert that water from any well it wishes. Thus,
operational decisions will be based on system-wide operational needs, not on the basis of
which wells have water rights.
In short, APODs are not toolsfor growth. Instead, they provideflexibility,
efficiency, and resiliency to areas that will be served in any event. Today, municipalities
across the entire State are moving to bring system-wide APODs to their water right
portfolios. There is no downside to this.
Concern #6 In times of shortage, APODs will enable SLIEZ to send
Boise water to suburbs rather than saving it for Boise
citizens.
Jim Pardy's letter of 21912021 asked: "In the event of drought and potential water
right calls, will all existing and future customers be curtailed equally?" Similarly, you
leffer of 413012021 asked "how SUEZ intends to use the APODs to move water to other
areas.t'
The answer is simple. As described above, APODs allow water to be pumped
where it is needed, without regard to which well is oldest or which water right is
associated with it. In doing so, SUEZ will always treat all of its customers equally. For
example, SUEZ could not sequester senior water rights historically associated with older
Boise wells and use those rights to serve only Boise customers.
FAst, it would be physically impossible in SUEZ's integrated delivery system.
Second, it would be illegal. As a public utility, SUEZ may no more favor Boise
customers to the disadvantage of its Eagle customers than the other way around.
This, of course, is a two-way street. For example, instead of a region-wide,
drought-based curtailment, suppose there were a localized curtailment in a southeast
Boise ground water management area. If that happened, APODs would allow SUEZ to
Mary Grant, Esq.
July 8,2021
Page 8 of2l
use non-curtailed water rights from outlying areas to serve Boise customers in the
curtailment area.3 APODs improve flexibility and resiliency.
The bottom line is APODs will help all SUEZ custorners, all of whom will be
treated equally.
Concern #7 SLIEZ is not motivated to protect water quality and cannot
be trusted to deliver safe drinking water to its customers.
Before we delve into any economic motivators, it is important to remember that
the main motivation for SUEZ to protect water quality and deliver safe drinking water is
deeply personal. Just as those who work for the City care about what the City does, those
who work for SUEZ care about its mission of bringing clean water to the people.
SUEZ is staffed by 130 Idahoans who live in the Valley. Treasure Valley
residents maintain the system, answer customer calls, read meters, and plan for the future.
Most of SUEZ's staff are SUEZ customers. Ensuring the water is safe is their number
one priority, because it is personal. They and their families drink the water; their kids
affend schools within SUEZ's service area; they are known in the community as the
people responsible for the community's water. This commitment to the Valley's water
services is far and away the greatest motivator in what SUEZ does.
That personal commitment goes hand in glove with the economic and the
regulatory environment. For reasons discussed under Concern #2 onpage 4, SUEZ has
considerable financial incentive to maintain a safe and healthy water supply. Aside from
the risk of lawsuits, SUEZ is subject to considerable and very effective oversight by both
the Idaho Department of Environmental Quality (IDEQ) and the Idaho Public Utilities
Commission (IPUC). The City's public servants share with SUEZ's employees the same
high level of commitment to provide the highest water quality possible. Delivering safe
drinking water and reliable fire protection are core missions of SUEZ's dedicated staff.
The trust the community places in SUEZ is validated by state regulators who routinely
give SUEZ high marks.
3 It would not do so by pumping "Eagle water rights" out of wells in the curtailment area.
That would undermine IDWR's curtailment order and is prohibited by the so-called APOD
condition. Instead, it would pump water under other water rights outside the curtailment area
and deliver the water via pipes to customers within the curtailment area. See discussion under
the heading "Context 2: Geographically isolated curtatlmenf'on the attachment on page 17.
Mary Grant, Esq.
July 8,2021
Page9 of?l
At the end of the day, SUEZ's corporate motivation and the regulatory regime in
which it operates are both in sync with the deeply held motivation of its employees to
assure that safe, clean drinking water is always provided to SUEZ customers.
Concern #8 SUEZ might sell its water rights to others for its own profit.
In your letter of 413012021, you express concern that SUEZ'S water rights might
be "bought and sold on the international market." That is not possible for a variety of
reasons. Aside from the fact that there is no international market for water rights, there
are ample regulatory constraints on such sales.
RAFN water rights are essentially
unsalable. If SUEZ were interested in selling
its water rights, it would not have subjected
them to RAFN constraints imposed through
the IMAP. Nor would SUEZ's predecessor
have worked with IDWR to draft and enact
the Municipal Water Rights Act of 1996 that
imposed these constraints. The 1996 Act
removed the incentive for hoarding future
needs water rights by making them literally
unsalable. To our knowledge, Idaho is the
only state in the nation to have enacted such a provision. Specifically, the Act prohibits
the ffansfer of RAFN water rights by a municipal provider to a place of use outside its
service area or to a new nature ofuse. Idaho Code $$ 42-219(l),42-222(l).
Moreover, SUEZ is constrained by the Idaho Water Export Act, Idaho Code
$$ 42-401 to 42-408. This act, which has limited out-of-state water sales since 1915,
gives the Director of IDWR broad discretion to prohibit the transfer of water rights to
out-of-state uses based on a six-factor test. Idaho Code $ 42-401(3). The act would
clearly protect existing Boise water users from an out-of-state water transaction aimed at
SUEZ's water.
Such a transaction would also be blocked by Idaho's basin-of-origin legislation.
That statute provides that when water is moved from one basin to another (even within
the State), the Director must determine that the move "will not adversely affect the local
economy of the watershed or local area in which the source of water originates" (i.e., the
basin of origin). Idaho Code 5 42-222(l). The movement of SUEZ's water to another
basin would hardly pass that test.
RAFN is short for "reasonably anticipated
future needs." Under ldaho law, only
municipal water providers like SUEZ may hold
RAFN rights. These rights are protected from
forfeiture to allow municipal providers to
secure a long-term water supply. But they are
also subject to strict anti-speculative
provisions that prohibit their sale to others.
SUEZ voluntarily subjected itself to these
constraints by seeking RAFN rights in its
lntegrated Municipal Application Package
(rMAP).
Mary Grant, Esq.
July 8,2021
Page l0 of21
All in-state and out-of-state hansfers are also subject to local public interest
review, which gives broad discretion to the Director of IDWR to reject a transfer based
on "the interests of the people directly affected by a proposed water use . . . ." Idaho
Code $$ 42-2028(3),42-222(1). In sum, Idaho's water statutes provide ample assurance
that neither SUEZ nor any successor would ever be allowed to sell its water rights on the
intemational market or any other water market.
If these IDWR-based constraints were not enough, the IPUC would also have to
approve such a sale of SUEZ's assets. Idaho law requires that utilities-including water
utilities-receive from the IPUC a Certificate of Public Convenience and Necessity
(CPClt). See Idaho Code $$ 6l-526, 6l-527. Utilities must provide satisfactory water
service to customers within the boundaries of its CPCN. Actions that require amendment
to a utility's CPCN-such as conveyance of all or substantially all of its assets or
amendment of its service area-requires IPUC approval. And actions that interfere with
a utilities' ability to serve its customers are prohibited. The PUC's oversight of these
areas provides yet another layer of protection.
The bottom line is the City need notfear that the water rights now serving Boise or
those held for its future use will be sold off to the highest bidder.
Concern #o The risk of SLIEZ selling its water rights is enhanced
because it is a foreign company.
The protections outlined in Concern #8 above are applicable to all public utilities
in Idaho, including foreign corporations.
Thefact that SUEZ is a subsidiary of aforeign corporation does not change or
reduce that level of protection.
Concern #10 Although SUEZ holds an ample supply of paper water
rights sufficient to meet long-term need, the physical water
supply may be inadequate.
In your letter at page l, you say that "the City is unable to agree that future water
supply is not a concern." SUEZ agrees. Future water supply must always be a concern.
Challenges faced by cities across the West are real and serious. As we write this, parts of
Idaho are heading into serious drought conditions, and IDWR is taking steps toward
administration of water in certain areas, such as the Wood River Valley. And for years,
communities in the Magic Valley faced requirements to mitigate for their ground water
depletions.
Mary Grant, Esq.
Jaly 8,2021
Page 1 | of2l
The good news is that the Treasure Valley is uniquely situated and largely
protected from these vicissitudes. Both ground and surface water supplies are more
stable and reliable than found elsewhere in Idaho and far better than faced by cities in
places like Nevada, California, and elsewhere that face chronic shortages.
That is no reason to be complacent. SUEZ has initiated steps to fund independent
research to explore these questions. We hope that such work will confirm the optimism
reflected in this letter. But, whatever the result, it will produce information that will
shape the discussion and provide the basis for sound planning. We commend the City for
asking these important questions. SUEZ will follow up with more detail on this effort.
In sum, SUEZ believes that the Treasure Valley is blessed with an unusually
abundant water supply that is capable of meeting the longlerm needs of its growing
comrnunities. But that assumption should be explored. Accordingly, SUEZ is moving
forward to fund an independent evaluation of the character and circumstances of the
Treasure Yalley's water supply and its ability to reliably meet the current andfuture
needs of all its people.
Concern #11 SUEZ's acquisition of surface water rights reflects the
Company's concern that its ground water supply is unsafe
or unreliable.
Your leffer suggests on page I that SUEZ's acquisition of surface water supplies
reflects the Company's concern that its existing portfolio is inadequate to meet long-term
needs or is vulnerable to curtailment. This assumption is incorrect.
For reasons explored in response to Concern #10 above, we believe that the risk of
ground water curtailment or a shortage of surface supply in the Treasure Valley is low.
Nevertheless, acquisition of additional surface water rights will provide protection
against risks that might exist. Diversity and redundancy in sources of supply provides
protection against uncertainties.
Another driver for surface water acquisition is efficiency. SUEZ currently
maintains and operates over 80 wells. Each well has different water chemistry, requiring
differing approaches to ensure water quality. Surface water, in contrast, is treated on a
centralized basis at either the Marden or Columbia Treatment Plants. The efficiencies of
scale are significant.
In a tlpical year, SUEZ relies on a 70:30 split of ground and surface water to meet
local demands. While ground water is widely available and backed by a strong portfolio
of rights, surface water is typically preferred by customers for qualities of aesthetics and
Mary Grant, Esq
July 8,2021
Page 12 of2l
hardness, and can be centrally produced at a far lower cost per unit. Surface water also
requires considerably less energy to treat and deliver per unit. These benefits are passed
along directly to customers.
In sum, SUEZ's ongoing sudace water acquisition program is not driven by
concern that it is running out of water. Its pimary purpose is to capitalize on
opportunities that maximize fficiency, reduce cost, and improve resiliency.
Concern #12 SLIEZ should not buy new water rights, but lease them
from Boise.
In your recent letter at page2, you suggest that future acquisitions of surface water
supplies could be made by the City, which would then lease them to SUEZ. SUEZ does
not view this approach as beneficial or feasible.
First, for the reasons discussed in Concern #8 on page 9, the City's control over
SUEZ's water rights is not necessary to protect those rights from a sale that would
disadvantage SUEZ's customers. Second, water rights used in SUEZ's system do not
serve just the citizens of Boise, but also serve portions of unincorporated Ada County and
municipalities such as Meridian and Eagle. Undoubtedly, the City of Boise would not be
comfortable if SUEZ entered into an agreement with one of those otherjurisdictions by
which they became the water right owner and lessor to SUEZ. SUEZ has a duty to
manage, control, and protect its core water assets for the benefit of all of its customers
regardless of political boundaries. Relinquishing confrol of some core assets to third
parties does not enhance SUEZ's ability to perform that duty.
In sum, SUEZ has a responsibility to control and protect its own water supply to
the extent possible. SUEZ's acquisitions of surface water rights are aimed at
strengthening its portfolio and saving money. The City of Boise should support these
efforts.
Concern #13 STIEZ and the City should work more closely on their
respective conservation efforts.
Your letter reflects on page 3 the City's support for SUEZ's water conservation
efforts, and suggests that we should be working more cooperatively toward that goal.
SUEZ shares the City's enthusiasmfor greater cooperation onwater
conservation. SUEZ looks forward to further discussions of both its efforts and the
City's.
Mary Grant, Esq
JuJy 8,2021
Page l3 of2l
Concern #14 SLIEZ should provide more ground water data to the City
On page 2 of your letter, you welcome SUEZ's offer to provide ground water data.
We believe much of what the City is seeking is already publicly available.
For instance, SUEZ provides a comprehensive annual report to the IPUC that
includes withdrawal volumes per well and surface water output per plant. All water
quality information is publicly available through IDEQ.
SUEZ recently entered into an agreement with the City of Eagle under which it
agreed as follows: "Both Parties agree to maintain in perpetuity records of monthly
withdrawal volumes and semi-annual (December and March) water levels for their
respective wells within Eagle City limits and north of the Boise River, and to produce
such records (including raw data) to the other Party upon request." 2001 City of Eagle -
SUEZ Water ldaho Inc. - Water Management Agreement,fl lO(a) at page 5.
In sum, in addition to publicly available information, SUEZ has entered into
mutual cooperation agreements with other cities in which each agrees to share data
concerning their respective wells and other diversions. SUEZ would welcome an
opportunity to explore such a two-way agreementwith the City of Boise.
Concern #15 St EZ needs to provide more community outreach.
On pages 3-4 of your letter, you suggest that SUEZ's approach to outreach is
mostly "one-directional information sharing. "
SUEZ is committed to increasing and improving its citizen oufreach. For the past
two years, SUEZ has been steadily building its outreach program, starting with an
intensive effort on the Bench. The pandemic necessarily paused some aspects of
outreach in2020, but now that restrictions are lifting, the efforts have resumed in earnest.
Recognizing the scope of the work ahead, SUEZ split offand elevated customer
outreach into a new role within the company in March and hired a Capital Project and
Consumer Engagement Manager. New outreach efforts include a monthly stakeholder
email and numerous community meetings across SUEZ's service area. At these
meetings, topics are proposed by the community, and ample time is included to hear from
customers and answer questions.
As a regulated utility, SUEZ is also working with the IPUC to facilitate that
outreach across all the communities it serves. On3ll7l202l,SllEZ entered into a
Stipulation and Settlement (IPUC Stipulation) before the IPUC in which it made
Mary Grant, Esq.
July 8,2021
Page 14 of?l
extensive commitments to expand public ouffeach, some of which are set out in the
footnote.a
a ln the IPUC Stipulation, SUEZ made the following commitments, among others:
The Company agrees to undertake a load study to provide
calculated max-day and max-hour factors for the total system as
well as by appropriate customer class. The Company will convene
a discussion process with interested parties to take input on load
study components including but not limited to customer class
definitions, sampling methodologies for those classes, and data
sources (i.e. AMI, SCADA, meters). Such discussions will be
commenced by the Company soon after a decision in this rate case
and will be completed within twelve months of that start date.
After taking input from interested parties, the Company will make
the final determination on how the load study shall be performed.
The Company shall present the results of such load study to
the Commission in the first general rate case filing after the study's
conclusion.
IPUC Stipulation,fl I I at page 6.
Beginning lrl,2021, SUEZ Water agrees to broaden outreach efforts
to members of the public within its service area. Such efforts shall
include:
a. Community project updates similar to the Bench Bulletin
series.
b. In-person and virtual town hall listening sessions.
c. Expanded use of the Notify Reverse-9l l system for
customer notifi cation on operational initiatives.
d. A planned water quality mailer to all customers
regarding key projects and initiatives.
IPUC Stipulation,fl 12 at pages 6-7.
SUEZ Water agrees to host annual workshops for all interested
parties, with participation of the Commission Stafe the Idaho
Department of Environmental Quality ("[DEQ"), and the Idaho
Department of Water Resources ("IDWR") on a range of topics
related to water conservation and resource planning.
IPUC Stipulation, fl l3 at page7.
SUEZ Water agrees to meet with CAPAI to examine the current
status of SUEZ Water's low-income assistance program, the level
of participation and effectiveness of the program, and to consider
Mary Grant, Esq.
July 8, 2021
Page l5 of2l
In short, SUEZ will continue to strengthen its commitment to community outreach.
CONCLUSION
We conclude by underscoring SUEZ's appreciation for the initiative taken by the
City in pushing this discussion forward. SUEZ hopes that the approach taken in this
letter is received in the good spirit in which it is offered. By identifying and addressing
what SUEZ believes are the City's major concems, SUEZ is under no misimpression that
it has resolved those concerns. It may be that this letter shows that we do not yet fully
understand the City's concerns. [f so, we will appreciate your further feedback, and we
will learn from it. SUEZ firmly believes that the continuation of this exercise will
strengthen our relationship and allow SUEZ to better serve the community.
We look forward to hearing what next steps the City believes would be most
useful. SUEZ would welcome additional written comments and questions from the City
Likewise, SUEZ officials are ready to meet in person to continue the discussion.
Sincerely,
\
H.
Michael P. Lawrence
Enclosure: Excerpt From the ldaho Water Law Handbook dealtngwith APODs
opportunities to improve SUEZ Water's assistance program for
low-income customers.
IPUC Stipulation,lJ 14 at page7.
Mary Grant, Esq.
July 8,2021
Page 16 of2l
cc (via email):
Steve Burgos, City of Boise, Public Works Director
James Pardy, City Engineer, Public Works Departnent
Haley Falconer, City of Boise Environmental Division Senior Director
John Roldan" Strategic Water Resources Manager, Boise Public Works Deparhent
Chris Bromley, McHugh Bromley, PLLC
Marshall Thompson, Vice President and General Manager, SLJEZ Water Idatro Inc.
Cathy Cooper, Director of Engineering, SUEZ Water Idaho [nc.
Jane Kreller, Manager, Capital Projects and Consufiier Engagerrent, SUEZ Water
Idaho Inc.
30-199 I 15728522 ll.docx
Mary Grant, Esq
July 8,2021
PagelT of2l
E(CERPT FRofYI THE IDAHoWATER LAw HANDBooKDEALING wITx APODs
ALTERNATE porNTs oF DrvERsroN (APODS)
When a water right is allowed to divert from more than one point of diversion, it is said to have
"alternate points of diversion" or "APODs" (or "altemative points of diversion"). APODs are used most
commonly for a ground water right diverting from multiple wells. Surface rights also could have multiple
points of diversion (e.9., different pumps out of a lake).
Operational advantaoe s
The purpose of identifying APODs is to give the water user the flexibility to "move" its water rights
from one well to another as needed. This may be useful in the following circumstances:
lf a well is shut down (permanently or temporarily for any reason), water under the water
right associated with that well may be pumped from another well without seeking
approvalfrom IDWR.
a
APODs also may be used to add a new well to an existing water right in order to
authorize diversion from the new well without obtaining a new appropriation. This could
be important, for instance, if a moratorium on new appropriations were in place. Of
course, this approach would work only if there is sufficient authorized diversion authority
in the existing water right to support adding the new APOD.
Similarly, APODs coupled with a combined use limit may be employed at the time of
licensing a non-RAFN municipal water right where the municipal provider is unable to
demonstrate an additional increment of system capacity or beneficial use. The latter is
referred to informally as the Tuthill Compromise (after former Director David Tuthill). See
discussion in section 23.D(8)(e) on page 262.
Most importantly, however, APODs provide flexibility to municipal providers in the context
of future water right curtailments. lf a city's junior water rights were curtailed, APODs
would allow it to employ its remaining non-curtailed rights in the most effective manner to
provide some level of service under the circumstances. For instance, a city might restrict
lawn irrigation on a rotating basis, moving its non-curtailed rights accordingly. See
discussion below under scenarios 2 and 3 under the APOD condition.
Avoidance of iniurv
Any change in the point of diversion of a water right (including adding an APOD) requires a
transfer approved by IDWR. The conesponding mechanism to add an APOD to a permit is an application
for amendment of permit. ln a general adjudication of water rights such as the Snake River Basin
Adjudication (SRBA) or the North ldaho Adjudications (NlA), transfers that were never formally sought
nonetheless may be recognized under a statutory provision authorizing "accomplished transfers."
The transfer (or application for amendment of permit) will be approved only if the change injures
no other water users, including juniors. This may require the addition of limiting conditions that avoid
injury.
The Department will recognize alternate points of diversion for a water right only if the points of
diversion are from the same source. ln re SRBA, Case No. 39576, Subcase Nos. 2940271 et al. (ldaho,
a
a
Mary Grant, Esq
July 8, 2021
Page l8 of2l
Fifth Judicial Dist., Nov. 9, 2009 and April 12, 20'10) (Melanson, J.), aff'd, City of Pocatello v. ldaho, '152
ldaho 830, 275P.3d845(2012) (Eismann, J.).5
Historically, water rights (particularly for municipal supply systems) were often acquired one well
at a time as the system expands, with a new water right obtained as each well was added. The result is
that the municipal provider accumulates a portfolio of water rights with different priority dates, each
associated with a different well. lt is often desirable to integrate these points of diversion by making each
well an APOD for every water right. Thus, for example, if there were 16 water rights associated with 16
wells, the rights could be transfened so that all 16 APODs were listed as points of diversion for each
water right. This way, the water right holder may pump any water right from any well, as well as multiple
water rights from a single well.
Ordinarily, conversion of single-well water rights to water rights with APODs must be
accomplished through a formal transfer proceeding. ln a formal transfer, other water users are put on
notice and given an opportunity to protest on the basis of injury.
ln the SRBA, many municipal providers held multiple one-well water rights that were used in
integrated delivery systems in which water diverted from various wells was co-mingled. Thus, as a
practical matter, these providers had accomplished an APOD transfer. Accordingly, they claimed
"accomplished transfers" of their water rights (under ldaho Code S 42;1425) in which each ground water
right was authorized to divert from every well in the integrated delivery system.6
The APOD condition
These accomplished transfer APODs were recommended for approval by the Department and
ultimately decreed in virtually all cases, but with a condition. The condition recognized that, since there
was no formal transfer proceeding with notice to the public and an opportunity to protest, the rights should
be conditioned to allow senior users the right to allege well interference even after the APODs are
approved.
Accordingly, the following language became the standard APOD language for accomplished
transfers:
To the extent necessary for administration between points of diversion
for ground water, and between points of diversion for ground water and
hydraulically connected surface sources, ground water was first diverted
under this right from [name of well] located in [quarter-quarter
descriptionl.
This condition was developed in the context of accomplished transfers-that is transfers
accomplished by the water user simply putting them into effect on-the-ground without any review or
5 The synopsis to the published opinion inconectly refers to this as an appeal from a decision of
Judge Wildman.
6In the SRBA, APODs were limited to those rights shown to have been used in an integrated
delivery system. Otherwise, the municipal providers could not show an accomplished transfer. ln a new
appropriation or a formal transfer, however, APODs could be established at separate locations outside of
an integrated system, so long as they all diverted from the same source (i.e., the same aquifer).
Mary Grant, Esq.
July 8, 2021
Page 19 of21
approval from the Department. But for ldaho Code S 42-1425, accomplished transfers would be illegal (at
least since 1963 for ground waterT and since 1971 for surface waters). ln Fremont-Madison lnigation
Dist. v. ldaho Ground Water Appropriators, lnc. (Basin-Wide Issue 4), 129 ldaho 4il,457-58,926P.2d
1301, 1304-05 (1996), the ldaho Supreme Court found the accomplished transfer statute was
constitutional because it contained builhin protections that make it unavailable to transfers that result in
injury or enlargement. The APOD condition is intended to effectuate this obligation to avoid injury.
The APOD condition was challenged by the City of Pocatello in the SRBA, which claimed that, in
the absence of timely objections by other water users, the City's right to pump water from any well should
be decreed without any limitation. However, the APOD condition was upheld by the SRBA court and the
ldaho Supreme Court. ln re SRBA, Case No. 39576, Subcase Nos. 2940271 et al. (ldaho, Fifth Judicial
Dist., Nov. 9, 2009 and April 12,2010) (Melanson, J.), affd, City of Pocatello v. ldaho,152 ldaho 830,
275 P.3d 845 (2012) (Eismann, J.) (upholding position of amici curiae regarding alternate points of
diversion in City of Pocatello municipal water rights litigation).s
The effect of the APOD condition language is that, where necessary for administration, the
Department may look back to the original well location of the water right. Essentially, this allows the
Department to roll the clock back, as if the accomplished transfer had not yet been approved, and
evaluate whether injury would result if the transfer was sought now for the first time. This may arise in
three contexts, each of which is discussed below.
These discussions employ the following hypothetical. Suppose Little City had two water rights, a
1920 right for 1 cfs out of Well A and a 1985 right for 1 cfs out of well B. ln the SRBA these were decreed
listing both wells as APODs for both rights, subject to the condition quoted above.
Context 1 : Well inteierence
The first context in which the APOD condition might come into play is well interference. Let us
suppose that neighbor Bob owns a water right with a 1970 priority that pumps out of Well C, which is near
Little City's WellB. The 1 cfs pumped out of Well B has never interfered with Bob's water right. Then, in
the year 2015, Little City decides to abandon Well A and improve Well B to pump the full 2 cfs. Bob now
complains that the increased pumping from Well B is interfering with his water right. lf there were no
APOD condition, he would lose. But the APOD language allows the Department to take into account the
fact that the city's first water right was originally associated only with Well A. The Department would then
ask itself, in effect, will transferring the point of diversion to allow this water to be pumped of Well B result
in injury? Under these facts, the answer is "yes' and Bob would prevail.
The same would be true if, for many years Little City pumped its 1985 water right out of Well B for
eight hours a day without injury to Bob. Then the City began pumping the right 24 hours a day,10 thereby
7 The Ground Water Act was adopted in 1951 , 1951 ldaho Sess. Laws, ch. 200. However, the
application process for ground water rights did not become mandatory untilthe act was amended in 1963,
1963 ldaho Sess. Laws, ch.216 (codified at ldaho Code $ 42-229).
8 1971 ldaho Sess. Laws, ch. 177 (codified at ldaho Code $$ 42-'103,42-201).
e The synopsis to the published opinion inconectly refers to this as an appeal from a decision of
Judge Wildman.
10 Municipal water rights typically have no volume limitation. Thus, cities are allowed to grow into
their rights over time, pumping them more and more as needed.
Mary Grant, Esq
July 8,2021
Page 20 of2l
causing injury to Bob's right. ln a contest between Bob's 1970 right and the City's 1985 right, Bob would
win. But could the City, relying on its new APODs say that it was pumping its 1920 water out of the well
and thus prevail over Bob? The APOD condition prevents this. Again, APOD language allows the
Department to roll the clock back. lf the accomplished transfer results in injury to Bob, then the City may
not rely on the APOD.
Conbrt 2: Geooraphicallv isolated curtailment
The APOD language would also preclude Little City from using its newly acquired APODs to
circumvent the curtailment of ground water diversions within a defined geographic area by bringing in
water rights from outside the curtailment area. For example, suppose the Department curtailed pumping
of post-1980 junior wells in a Ground Water Management Area (GWMA) that included Little City's Well B.
Suppose Little City's Well A was located outside of that area. Could Little City, relying on the APODs
associated with its senior 1 920 right declare that it was now going to pump its 1920 water from Well B,
thereby defeating the effort to restrict pumping in the GWMA? lf there were no APOD condition, it could
do so. But, as in the well interference scenarios, the APOD condition allows the Department to roll the
clock back and "undo" an accomplished transfer that is causing this sort of injury. Thus, the city would
not be allowed to pump its 1920 water right from the well within the curtailment area because, at the time
the 1920 right was issued it was not authorized to be diverted out of that well.
Note, however, that Liftle City would be allowed to pump its 1985 right from Well A located
outside of the curtailment area. Pumping in that remote location does not stress the ground water in the
Ground Water Management Area. Thus, it is not undermining or circumventing the curtailment.
Consequently, the city would be allowed to take advantage of the APOD for the 1985 right by pumping it
from a remote welljust as if there were no curtailment.
Context 3: Broad reoional curtailment
While the examples discussed above are important considerations for application of the APOD
condition, those scenarios are not the driver for why municipal providers seek APODs. ln addition to the
other operational advantages listed in the bullet points above, the main advantage of APOD authority
arises in the context of a broad regional curtailment.
Take this hypothetical. Suppose there is a call by a downgradient senior surface user. As a
result, the Department curtails pumping ground water rights throughout the valley that are junior to 1980.
At this point, Little City can no longer pump its 1985 water right, but it can pump its 1920 right out of either
well due to the APODS. ln responding to the curtailment, the city's ability to move its most senior water
rights to its most critical well may be beneficial. Since it makes no difference to the senior surface user
whether the city pumps its water out of one well or the other, then the APOD condition does not restrict
pumping the senior right out of the junior well. The city, of course, will still have to find make-up or
mitigation water elsewhere, or just provide less water. But at least it is able to use those senior water
rights that remain in priority in the most efficient manner.
ln its approval of the APOD language, the ldaho Supreme Court did not include a detailed
explanation of how the condition works. City of Pocatello v. ldaho,152 ldaho 830,275 P.3d 845 (2012)
(Eismann, J.).1r However, the SRBA decision affirmed by the high court expressly discussed and
confirmed the understanding described above. The district court recited the three scenarios and
11 The synopsis to the published opinion inconectly refers to this as an appeal from a decision of
Judge Wildman.
Mary Grant, Esq
July 8,2021
Page2l of2l
concluded: "The Providers assert that the Special Maste/s determination could be read too broadly to
preclude under any circumstances the use of altemate points of diversion any time priority administration
is implicated. The court concurs that in a circumstance involving regional priority administration a
municipal provider may still be able to exercise altemate points of diversion within the region undergoing
administration so long as the well under which the original right was established is also located within the
region subject to the administration."l2 Memorandum Decision at 16-18, ln re SRBA, Case No. 39576,
Subcase Nos. 29-00271 et al. (ldaho, Fifth Judicial Dist., Nov. 9, 2009) (Melanson, J.) (reproduced in
Appendix S), affd, City of Pocatello v. ldaho,152 ldaho 830, 275 P.3d 845 (2012) (Eismann, J.)
(upholding the position of amici curiae regarding alternate points of diversion).13
Accomplished transfers vs. formal transfers
As noted above, the APOD language was developed in the context of accomplished transfers and
the need to protect against injury embodied in ldaho Code $ 42-1425. Whether similar APOD condition
language is appropriate in the context of a formal transfer or a new appropriation is a different question.
One could argue that that because the world is put on notice and all users have an opportunity to protest
a transfer, failure to protest should result in approval of APODs without condition. On the other hand, if
the Department had information showing that future injury was a real possibility, the Department might be
justified in imposing conditional language along the lines of the APOD condition developed in the SRBA
context.
Another question is which water users are intended to be protected by the APOD language?
Plainly, it protects water uses whose rights predate approval of the APODs. The condition gives these
users the ability to bide their time and complain later if and when they experience well interference.
However, if a new water user begins an appropriation after APODs are established (whether they are
established by decree recognizing an accomplished transfer, by a formal transfer, or by new
appropriation), it would seem that the new user is on notice of the APOD holder's right to use those
APODs. Consequently, the author contends that, even if an APOD condition is attached, it would not
have any effect as to post-APOD juniors. ln other words, looking back to the original points of diversion
would not be "necessary for administration" because, being junior, the new user suffers no legal injury
when a senior diverts water in accordance with the senior's water right.
tz The Providers referenced in the quotation by the district court were three municipal providers
(United Water ldaho, the City of Nampa, and the City of Blackfoot) who submitted an amicus curiae brief
and were allowed to argue this point. The district court quoted extensively from the Provide/s brief in
describing the three scenarios. ln re SRBA, Case No. 39576, Subcase Nos. 29-00271 et al. (ldaho, Fifth
Judicial Dist., Nov. 9,2009 and April 12,2010) (reproduced in Appendix S), affd, City of Pocatello v.
ldaho, 152 ldaho 830,275 P.3d 845 (20'12) (Eismann, J.) (upholding the position of amici curiae
regarding alternate points of diversion).
13 The synopsis to the published opinion inconectly refers to this as an appeal from a decision of
Judge Wildman.