20230327Direct A. Jacob Exhibits.pdf

Preston N. Carter (ISB No. 8462)
Morgan D. Goodin (ISB No. 11184)
Givens Pursley LLP
601 W. Bannock St.
Boise, ID 83702
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]

Attorneys for Veolia Water Idaho, Inc.

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION
OF VEOLIA WATER IDAHO, INC. FOR
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR WATER SERVICE
IN THE STATE OF IDAHO

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Case No. VEO-W-22-02

SUPPLEMENTAL DIRECT TESTIMONY OF ANUPA JACOB
FOR VEOLIA WATER IDAHO, INC.

March 2023

RECEIVED
2023 March, 27 12:09PM
IDAHO PUBLIC
UTILITIES COMMISSION

Jacob, DI - Supplemental
Page 1 of 8
Veolia Water Idaho, Inc.

Q. Please state your name, position, responsibility and business address. 1
A. My name is Anupa Jacob. Since November 2022, I have been the VP/Controller & 2
Chief Accounting Officer at Veolia Water M&S (Paramus), Inc. (“M&S”) 3
(formerly SUEZ Water Management & Services Inc.) with the overall 4
responsibility of the company’s financial accounting records of the regulated 5
companies. I am authorized to testify on behalf of Veolia Water Idaho, Inc. 6
(“VWID” or “Company”) in this case. My business address is Veolia Water M&S 7
(Paramus), Inc., 461 From Road, Suite 400, Paramus, NJ 07652. 8
Q. Why are you providing this Supplemental Direct Testimony? 9
A. On or around March 24, 2023, I learned that Matthew Kahn, who had previously 10
submitted direct testimony on behalf of the Company, had taken a position with 11
another company and would be unable to serve as a witness in this proceeding. In 12
my position with the Company, I am familiar with the contents of Mr. Kahn’s 13
testimony and, through this Supplemental Direct Testimony, will adopt that 14
testimony as my own. 15
Q. What is the subject matter of your Supplemental Direct Testimony? 16
A. The purpose of my testimony is to present ratemaking considerations in regard to 17
various tax topics including the reversal of protected excess deferred income taxes 18
that resulted from the 2017 Tax Cuts and Jobs Acts (“TCJA”), Idaho’s state income 19
tax rate changes that have occurred since the Company’s last rate filing, along with 20
the refund of Employee Retention Credits that the Company derived from the 21
Federal government during the COVID-19 pandemic. Additionally, my testimony 22

Jacob, DI - Supplemental
Page 2 of 8
Veolia Water Idaho, Inc.

will discuss an update in the income tax accounting for Allowance for Funds Used 1
During Construction (“AFUDC”). 2
Q. Have you prepared or had prepared under your direction any exhibits to your 3
testimony? 4
A. Yes, I am sponsoring Exhibit No. 12, which provides support for the balance of the 5
Company’s TCJA regulatory liability and the related deferred income taxes at the 6
historic test year ended June 30, 2022 (“Historic Test Year”) and projected through 7
March 31, 2023 (“Test Year”). The recommended annual amortization amount of 8
the TCJA regulatory liability, to maintain compliance with the Internal Revenue 9
Service’s normalization rules, is included on Exhibit No. 10, Adjustments to 10
Operating and Maintenance Expenses at Present Rates. 11
Q. Please describe the TCJA and its effects on the Company’s books and records. 12
A. In the Company’s 2020 general rate case, the Commission reviewed and approved 13
the regulatory liability for the refund of excess deferred income taxes that resulted 14
from the federal income tax (“FIT”) rate reduction. This regulatory liability amount 15
is also commonly referred to as excess accumulated deferred income taxes 16
(“EADIT”) and was addressed by the Commission in Order No. 34074, Case No. 17
GNR-U-18-01. 18
Q. Has the IPUC addressed the treatment of the EADIT regulatory liability? 19
A. Yes. The Commission, in Order No. 34074, reduced the Company’s rates to reflect 20
the reduction in the FIT rate and ordered the Company to file an update to its 21
deferred income tax records and to work with Staff on determining the amount and 22

Jacob, DI - Supplemental
Page 3 of 8
Veolia Water Idaho, Inc.

manner in which to return to customers the remaining benefits from the TCJA. The 1
Company’s base rates were changed effective June 1, 2018, as ordered. 2
Q. What are the current annual amortization and remaining balances of the 3
EADIT regulatory liability? 4
A. The remaining balance of $4.2 million represents the balance of protected EADIT 5
credit to be refunded to customers over the remaining lives of the Company’s 6
investment in plant assets. The annual amortization of the balance, as required in 7
the previous rate filing, is $227,000 and reflected on Exhibit No. 12. 8
Q. Please describe the Company’s understanding of “protected” and 9
“unprotected” EADIT. 10
A. Per the normalization rules in the Internal Revenue Code, Section 168(i)(9), the 11
amortization period for regulatory liability, which arose from temporary differences 12
between book and tax methods used for plant-related “protected” amounts, may not 13
be shorter than the period in which ADIT would have otherwise reversed over the 14
remaining book lives of its’ assets. The Average Rate Assumption Method 15
(“ARAM”) of amortization must be utilized for as much of the regulatory liability 16
as possible, if the requisite data is available to the utility. ARAM calculates a 17
specific amount by year, rather than a period, of amortization and, if amortized 18
faster, could result in a normalization violation which would prohibit the Company 19
from utilizing accelerated depreciation for income tax purposes. The updated 20
projected results of the Company’s ARAM calculations for tax years 2022 through 21
2025 are as follows: 22

Jacob, DI - Supplemental
Page 4 of 8
Veolia Water Idaho, Inc.

ARAM
2022 221,000
2023 228,000
2024 218,000
2025 204,000
The amortization period for the amount of the regulatory liability which arose from 1
amounts not considered normalized are “unprotected” and may be amortized by the 2
utility over a period different from the protected amount. The unprotected EADIT 3
have been fully refunded to customers as of April, 2022 and no longer require 4
consideration in the Company’s rates. 5
Q. What amount is the Company utilizing for the ARAM amortization in this 6
case? 7
A. As shown above, the amount of ARAM reversals can vary year to year. The current 8
approved annual amortization is $227,000. It can be noted that for 2022 the current 9
projected calculation indicates that the actual ARAM reversals will be less than the 10
annual amortization. 11
Q. Does the Company have a proposal to change the amount of amortization of 12
the EADIT regulatory liability balance? 13
A. Yes. As previously described, the Company is required to use the ARAM for 14
returning the remaining protected portion of the EADIT balance. As a result, the 15
Company continues to track and monitor the amount of EADIT reversing over 16
ARAM in comparison to the approved amortization amounts provided in its rate 17
agreements. As a result of the projected ARAM calculation results and because the 18

Jacob, DI - Supplemental
Page 5 of 8
Veolia Water Idaho, Inc.

ARAM amount is updated annually and could change either up or down because of 1
the retirement of fixed assets, an amortization amount of $200,000 for this case is 2
prudent in order to allow for potential changes in the ARAM amount for 2022 and 3
following once the recalculation is performed. As this case will likely set rates for 4
more than one year, if the amount of the amortization of the protected portion of 5
the EADIT set in this case is greater than the ARAM amount in a future period, the 6
Company would need to file for a change in tariff rates to reduce the amortization 7
to the amount allowed in that future period. The ARAM amount is a maximum 8
amount or “speed limit” if you will. Therefore, an amortization amount of $200,000 9
for the protected EADIT is included on Exhibit No. 10, Schedule 1, line 26. 10
Q. Does the Company have additional tax benefits that it is proposing to refund 11
to customers in this rate proceeding? 12
A. Yes. In addition to the benefits being amortized to customers for the remaining 13
EADIT, the Company has deferred certain tax benefits that it has derived for the 14
benefit of its customers from its Federal and State jurisdictions since the last rate 15
filing. These benefits are the result of Idaho’s state income tax rate reduction, as 16
well as the Federal Employee Retention Credit. 17
Q. Please provide the amounts of benefits to be refunded as a result of these 18
changes? 19
A. As a result of the reduction to Idaho’s state income tax, the Company has deferred 20
approximately $35,000 in state income taxes, and the Federal Employee Retention 21
Credit resulted in an additional deferral of approximately $12,000. The Company 22
proposes to refund these amounts as a reduction to the amortization of rate case 23

Jacob, DI - Supplemental
Page 6 of 8
Veolia Water Idaho, Inc.

expenses as shown on Exhibit No. 10, Schedule 1, Adjustment No. 23. 1
Q. Has the Company made any changes to its method of accounting for AFUDC? 2
A. No. The Company continues to account for the timing difference between financial 3
accounting and its accounting for income tax purposes and record deferred income 4
tax purposes as required under GAAP and specified under ASC 780. However, in 5
its annual review of the Company’s cumulative timing differences as part of the 6
Tax Basis Balance Sheet (“TBBS”) Study, the Company’s Tax Department 7
determined that a true-up adjustment was required to the regulatory balance 8
attributable to the cumulative flow through timing difference associated with the 9
equity component of its AFUDC timing difference. 10
Q. What are TBBS adjustments and why are they necessary? 11
A. TBBS adjustments reflect a review of overall timing differences which support the 12
accumulated deferred income tax balances for any specific item giving rise to 13
differences between financial accounting and the accounting for income tax 14
purposes. As those timing differences reverse, the accumulated deferred tax 15
obligations will reverse and become currently payable to the Company. 16
A timing difference that is flowed through in the calculation of income tax 17
expenses results in a change to the per book effective rate that will either increase 18
or decrease total tax expense. Any increase to income tax expense that is caused by 19
a flow through timing difference will result in a regulatory asset balance for 20
consideration of recovery in future rates. Conversely, any reduction to income tax 21
expense that is caused by a flow through timing difference will result in a regulatory 22

Jacob, DI - Supplemental
Page 7 of 8
Veolia Water Idaho, Inc.

liability balance for similar consideration to be refunded to customers in future 1
rates. 2
Q. When accumulating the regulatory balance in the future, will such 3
considerations be made in the accounting for the balances? 4
A. Yes, the Company performs the TBBS study annually to support the tax return 5
filing and incorporates any flow through impacts to the regulatory balances. The 6
regulatory balances are trued-up in conjunction with the deferred tax balances. 7
Q. How will this change the calculation of the amounts for the AFUDC Equity 8
Gross-up going forward? 9
A. The AFUDC Equity Gross-Up calculation is based on the AFUDC Equity balance. 10
The actual calculation of the Gross-Up does not change. 11
Q. Did the adjustment result in a change in rate base? 12
A. There is no change to rate base, as the deferred tax balances agree with the 13
remaining timing difference in support of the cumulative timing difference and the 14
adjusted regulatory balance for future recovery. As a result, there is no adjustment 15
required to the deferred taxes that reduce rate base. 16
Q. What adjustments were required to the regulatory balances associated with 17
the timing difference for AFUDC? 18
A. The Company’s TBBS study resulted in a reduction to the regulatory asset balance 19
as of 12/31/2020. As a result, the per book balance of approximately $1.3 million 20
was reduced to about $800,000, in order to reflect the remaining timing difference. 21

Jacob, DI - Supplemental
Page 8 of 8
Veolia Water Idaho, Inc.

Q. What impact does the reduction have on the current amortization of AFUDC 1
in rates? 2
A. The amortization of the regulatory balances attributable to AFUDC will not change. 3
The current amortization provides a 30-year amortization of the balance, such that 4
the benefits associated with AFUDC are provided to customers over the lives of the 5
underlying investment from which they were derived. The reduction to the 6
regulatory balance will be reflected in the ongoing amortization as an overall 7
reduction to the balance being recovered over the 30-year amortization schedule. 8
By doing so, the Company is reducing the regulatory asset balance by 9
approximately $500,000, which will reduce the overall amortization amount. 10
Q. Does this conclude your Supplemental Direct Testimony at this time? 11
A. Yes. 12

Preston N. Carter (ISB No. 8462)
Morgan D. Goodin (ISB No. 11184)
Givens Pursley LLP
601 W. Bannock St.
Boise, ID 83702
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]

Attorneys for Veolia Water Idaho, Inc.

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION
OF VEOLIA WATER IDAHO, INC. FOR
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR WATER SERVICE
IN THE STATE OF IDAHO

)
)
)
)
)
)
)
)
Case No. VEO-W-22-02

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
EXHIBIT 12 TO ACCOMPANY THE
SUPPLEMENTAL DIRECT TESTIMONY OF ANUPA JACOB

Veolia Water Idaho, Inc.
Accumulated Deferred Income Tax and Excess Deferred Income Tax Regulatory Liability Balances
As of June 30, 2022
ADIT Adjusted Rate Base
Line Balance at Balance at Related
No. Account Description 6/30/2022 Adjustments [3]6/30/2022 ADIT
(a)(b)[c][d]
1 19010 Def. Federal Inc Taxes- Other ($113,058)$661 (112,397)
2 19017 Def Fed NOL Tax Benefit (3,866)0 (3,866)
3 28203 Def. FIT-MACRS 2,799,649 2,950,719 5,750,368 5,750,368
4 28203 Def. FIT-MACRS - Unprotected (2,930,986)(2,930,986)(2,930,986)
5 28207 Def FIT Pens Reg Asset FAS158 1,805,433 (9,162)1,796,271
6 28208 Def FIT PBOP Reg Asset FAS158 (556,392)1,325 (555,067)
7 28221 Def FIT - COR 239,336 0 239,336
8 28300 Def. FIT-Other 238,570 3,823 242,393
9 28301 Def. FIT-Tank Painting 462,817 0 462,818 462,818
10 28302 Def. FIT-Rate Expenses 18,700 (0)18,700
11 28303 Def. FIT-Deferred Charges 159,859 1 159,860
12 28304 Def. FIT-Relocation Expense (0)0 0
13 28306 Def. FIT-Pensions (929,096)9,161 (919,935)
14 28307 Def. FIT-PEBOP (80,317)29,373 (50,944)
15 28308 Def. FIT-Cost of Removal 848,354 (0)848,353 848,353
16 28311 Def. FIT-Injuries and Damages (217,038)0 (217,038)
17 28312 Def. FIT - AFUDC Equity 486,719 0 486,719 486,719
18 28313 Def. FIT - AFUDC Equity GU [1]160,762 (3,820)156,942
19
20 Total Deferred Tax [2]5,320,432 51,097 5,371,529 4,617,273 0 0
21
22 25316 Regulatory Liab-Tax New Federal Rate $4,246,184 $4,246,184 Unprotected amortization completed 4/30/2022; Protected balance amortization of $227,004 per year
23 25317 Reg Liab-NewFedRate2018portion ($2,570)($2,570)Amortization ended 4/30/2022
[1] Change in balance is offset by the change in balance of the associated regulatory asset.
[2] Sum of Lines 1 through 19.
[3] Adjustments include Tax Return to Provision, TBBS adjustments, and reclassification of unprotected MACRS deferred taxes.
Case No: VEO-W-22-02
Exhibit No. 12
A. Jacob
Page 1 of 1