20200930Zerhouni Direct.pdf

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Michael C. Creamer (lSB No. 4030)
Preston N. Carter (lSB No. 8462\
Givens Pursley LLP
601 W. Bannock St.
Boise, lD 83702
Telephone: [phone]
Facsimile: (208) 388-1 300
[e-mail]
prestoncarter@qivensDu rslev.com
Attorneys for SUEZ Water ldaho lnc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
!N THE MATTER OF THE APPLICATION
OF SUEZ WATER IDAHO INC. FOR
AUTHORIry TO INCREASE ITS RATES
AND CHARGES FOR WATER SERVICE
IN THE STATE OF IDAHO
Case No. SUZ-W-20-02
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
DIRECT TESTIMONY OF MOHAMMED ZERHOUNI
SEPTEMBER 2O2O
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Please state your name, position, responsibility and business address.
My name is Mohammed G. Zerhouni. Since December 2018,1 have been
the Controller & Chief Accounting Officer at SUEZ Water Management &
Services Company with the overall responsibility of the company's financial
accounting records of the regulated companies. I am authorized to testify on
behalf of SUEZWater ldaho lnc. ("SWlD") in this case. My business address
is SUEZ Water Management & Services, 461 From Road, Suite 400,
Paramus, NJ 07652.
Please summarize your educational background and professional
experience.
I received a Bachelor Degree in Accounting and a Master of Business
Administration from Franklin University. I am a Certified Public Accountiant
and member of the American lnstitute of Certified Public Accountants. I have
over twenty years' experience in accounting and auditing regulated utilities,
publicly traded companies, and private companies. I also taught as an
Adjunct Faculty for severa! years accounting courses at Franklin University.
This is my first time testifying in front of this commission on accounting
matters.
What is the purpose of your testimony?
The purpose of my testimony is to support the request of SWID to reflect the
updated presentation of the additional debt costs in Exhibit No. 10, Schedule
4 to address the technical accounting implications of the historical
presentation of these costs.
Zerhouni, Di
SUEZ Water Idaho lnc.
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1Q.What is the current presentation of the additional debt costs?
The additional debt costs included in Exhibit No. 10, Schedule 4 are currently
presented as regulatory assets in the accounting records of SUEZ Water
Resources LLC ("SWR"), the parent company of SWID. The current
accounting presentation reflects the economics of the historic ratemaking
process, which provides recovery of the prudently incurred costs related to
the debt component of SWR's capital structure. Amortization of the debt
costs are included in the monthly interest allocation made from SWR to its
utility subsidiaries. lt is my understianding the interest rate utilized in
conjunction with SWR capital structure represents the basis to set rates in
each of SWR's utility subsidiaries and have historically and are currently
included in the utility's cost of service as indicated in Exhibit No.1 0, Schedule
4.
What is the technical accounting issue of the current presentation of
the additional debt costs?
Generally accepted accounting principles ("GAAP') require the reporting
entity to meet three specified criteria in order to apply regulatory accounting
guidance. First, rates are established by an independent regulator, second,
rates are designed to recover costs of service, third, rates designed to
recover costs can be charged to and collected from customers. SWR is a
limited liability company and the parent company of SUEZ's utility regulated
and non-regulated subsidiaries in the United States of America. As such, it
is not specifically regulated by an independent third party regulator; and the
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Zerhouni, Di
SUEZ Water ldaho lnc.
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costs for its services are not recovered "directly" from ratepayers. Therefore,
from a technical GAAP accounting perspective rather than an economic
perspective, SWR should not apply regulatory accounting in its standalone
accounting records, and, as a result, should not continue to record these
additional debt costs as a regulatory asset for GAAP accounting.
O. What is the source of the additional debt costs?
A. The additional debt costs represent the remaining amortization of debt costs
on debt not immediately refinanced with the same lender or has different
cash flows of the existing debt.
O. What is the impact to the ratepayers of the proposed presentation of
debt costs?
A. The proposed presentation of debt costs is not expected to have an impact
on the ratepayers. For ratemaking purposes, these costs have always been
included as a component of the interest expense and will continue to be
included as described above in SWID and other SWR's utility subsidiaries
rate case filings in the same manner. The proposed presentation of debt
costs will allow SWR and its utility subsidiaries, including SWID, to address
the technical accounting issue of presenting these costs within the regulated
utility deferred debits instead of within SWR standalone accounting records.
O. Does this conclude your direct testimony?
A. Yes, it does.
Zerhouni, Di
SUEZ Water ldaho lnc.
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