20230519Petition for Reconsideration_Attachments.pdf

PETITION FOR RECONSIDERATION PAGE 1 OF 16
Preston N. Carter, ISB No. 8462
Morgan D. Goodin, ISB No. 11184
GIVENS PURSLEY LLP
601 West Bannock Street
Boise, Idaho 83702
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]
16741504_15.docx[30.235]

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

PETITION FOR RECONSIDERATION AND
CLARIFICATION

Pursuant to the Commission’s Rule of Procedure 331, IDAPA 31.01.01.331, Idaho Code
§ 61-626, and the inherent authority of the Commission, Veolia Water Idaho, Inc. (“Veolia,”
“Veolia Water Idaho” or “Company”) files this Petition for Reconsideration and Clarification of
Order No. 35762, entered on April 28, 2023.
BASES FOR RECONSIDERATION/CLARIFICATION
1. Legal standard
Rates set by the Commission must afford a public utility the opportunity to earn a
reasonable return on the value of property that is used and useful in providing service to
customers. See, e.g., Intermountain Gas Co. v. Idaho Pub. Utils. Comm'n, 97 Idaho 113, 125,
RECEIVED
Friday, May 19, 2023 11:24:34 AM
IDAHO PUBLIC
UTILITIES COMMISSION
PETITION FOR RECONSIDERATION PAGE 2 OF 16
(1975) (quoting Bluefield Waterworks & Improvement Co. v. Pub. Serv. Comm’n of W. Va., 262
U.S. 679, 690 (1923)).
The Commission has broad discretion to set rates. But that discretion is not boundless.
The Commission must make factual findings, sufficient to enable judicial review, that are
supported by evidence in the record. Wash. Water Power Co. v. Idaho Pub. Utils. Comm’n, 101
Idaho 567, 575-76 (1980) (overturning Commission decision that lacked sufficient factual
findings).
The Commission must acknowledge and address issues that impact a utility’s opportunity
to earn a fair rate of return, including regulatory lag in environments of high inflation and large
capital expenditures. Utah Power & Light Co. v. Idaho Public Utils. Comm’n, 102 Idaho 282,
284-85 (1981) (overturning Commission’s decision to remove an attrition adjustment to account
for regulatory lag, despite evidence of excessive regulatory lag due to high inflation and large
capital expenditures).
And the Commission must adjust test year data “where the changes are shown to be
reliable and certain” and include within rate base “all items which are proven with reasonable
certainty to be justifiably used by the utility in providing service to its customers.” Utah Power
& Light Co., 102 Idaho at 284.
2. Amount of revenue increase
The first paragraph of Order No. 35762 states, in relevant part,
This Order establishes the revenue requirement and rates for Veolia
Water Idaho, Inc. (“Company” or “Veolia”). The Commission
establishes a rate base for the Company of $255,162,220, and a
revenue requirement of $56,157,933. Attachment A. The
Commission approves a 9.25% return on equity, and an overall
6.91% rate of return. This $2,756,227 revenue increase will increase
customer rates by 7.06%, to be implemented equally across the
board . . . .”
PETITION FOR RECONSIDERATION PAGE 3 OF 16

Order No. 35762 at 1 (emphasis added).

Veolia believes that the identified revenue increase—stated as $2,756,227—reflects an
error in calculation or in transcription.
Attachment A to the Order, entitled Commission Ordered Revenue Requirement
Summary, contains detailed calculations of each component of the approved revenue
requirement. The calculations result in a deficiency in operating revenues of $3,701,726. See
Attachment 1.
The accuracy of the $3,701,726 revenue increase is confirmed by the other figures
identified in the first paragraph of Order No. 35762, as well as Attachment A. The Order
approves an increase to customer rates of 7.06%. This 7.06% increase is accurate only if the
revenue increase amounts to $3,701,726. Similarly, the total authorized revenue requirement of
$56,157,933 reflects an increase of $3,701,726.
In summary, Attachment A directly indicates that the Order authorizes a revenue increase
of $3,701,726. This is confirmed by calculations using the other amounts contained within the
Order. The revenue increase identified in the first paragraph of the Order—$2,756,227—appears
to be a mathematical or transcription error. Veolia respectfully requests that the Commission
clarify that the Order authorizes a revenue increase of $3,701,726.
3. Return on Equity
The Commission authorizes a Return on Equity of 9.25%. See Order No. 35762 at 1, 9.
This ROE appears to be driven to some degree by Veolia Water Idaho’s status as a subsidiary
within the larger Veolia company structure. See Order No. 35762 at 9 (“Similarly, the
Commission is not persuaded by the Company’s risk analysis and size comparison to the proxy
group that ignores the Company’s status as wholly owned subsidiary.” (emphasis added)).
PETITION FOR RECONSIDERATION PAGE 4 OF 16
Authorizing a Return on Equity based upon the size and geographical footprint of Veolia’s
parent companies, rather than that of Veolia Water Idaho, raises a host of problems. Simply
stated, the benefits of Veolia Water Idaho’s subsidiary status are passed on to Idaho customers.
Just not through a depressed Return on Equity.
In addition, the authorized Return on Equity is significantly lower than other water
utilities in Idaho and the Pacific Northwest. This is inconsistent with the standards set forth in
Bluefield, adopted by Idaho caselaw, under which Veolia is entitled to receive a return similar to
other businesses (1) at the same time (2) in the same geographic area (3) with similar risks and
uncertainties. See Bluefield, 262 U.S. at 692. Accordingly, Veolia requests that the Commission
reconsider the authorized Return on Equity.
A. The 9.25% ROE is based on an erroneous premise: that the Idaho utility’s status as a
subsidiary dictates the ROE for the Idaho utility.
The Commission’s Order rejected Veolia’s risk analysis and size comparison to the proxy
group, characterizing it as “ignor[ing] the Company’s status as wholly owned subsidiary.” See
Order No. 35762 at 9. While Veolia’s status as a wholly-owned subsidiary should not be ignored,
neither should Veolia’s size and risk as a 105,000-customer utility operating in Idaho. And that is
precisely what Staff advocated: in evaluating risk, Mr. Terry testified that to “include any
adjustment or bias due to the small size of the Company denies these benefits of the larger entity
to the ratepayers.” Tr. Vol. III, 804–05 (emphasis added).
Veolia respectfully submits that the ROE authorized to an Idaho utility must account for
that utility’s size when evaluating risk and comparing to a proxy group, even when that utility is
a wholly-owned subsidiary, and accordingly requests that the Commission reconsider the
authorized ROE on this basis.
PETITION FOR RECONSIDERATION PAGE 5 OF 16
Staff’s position—that Veolia Water Idaho’s size should not be taken into account when
assessing risk—presumes cross-subsidization. Staff’s witness on this issue, Mr. Terry, asserts
that the customer base of Veolia North America decreases, and the customer base of Veolia
Environnement eliminates, risks associated with Veolia Water Idaho’s small size. Tr. Vol. III,
804-05.1 The only way this could be true is if the customers of Veolia entities in other
jurisdictions subsidized Veolia Water Idaho’s customers. See Tr. Vol. II, 392 (Mr. Walker’s
rebuttal testimony). Cross-subsidization between subsidiaries in different jurisdictions is
prohibited. And rightfully so—Veolia Water Idaho customers should not subsidize, for example,
the customers of Veolia Water New Jersey, Inc. if Veolia Water New Jersey, Inc.’s service
territory experienced drought, catastrophic infrastructure failure, or other problems associated
with that utility’s geographic footprint. The costs of Veolia Water New Jersey, Inc.’s operations
should be borne by its customers. So it is here. The fact that Veolia’s parent companies own
other utilities with customers in other states does not offset the risk inherent in Veolia Water
Idaho’s 105,000-customer footprint in the Treasure Valley.
Mr. Terry argues that failing to consider the corporate structure would deny customers
the benefit of being within a big company. Tr. Vol. III, 805; id. at 835. That is not the case.
Veolia Water Idaho customers benefit from its status as a subsidiary in various ways: Veolia
Water Idaho does not need its own separate executive team, accounting team, HR team, and
computer systems; Veolia Water Idaho uses the imputed capital structure of its parent company
rather than 100% equity; Veolia Water Idaho has access to debt at lower rates; and so forth. But
the benefit to customers does not include a depressed Return on Equity. Return on Equity is

1 Mr. Walker explains the corporate structure: Veolia Water Idaho is a wholly-owned subsidiary of Veolia Utility
Resources, which is a subsidiary of Veolia Utility Parent, Inc.; which is a wholly-owned subsidiary of Veolia North
America, Inc.; which is a wholly-owned subsidiary of Veolia Environnement S.A. Tr. Vol. II, 372 n.2.
PETITION FOR RECONSIDERATION PAGE 6 OF 16
properly set for the business unit in Idaho, independent from customers of other affiliates that
cannot cross-subsidize Idaho customers. See Tr. Vol. II, 392-93 (Mr. Walker rebuttal testimony:
“The precepts of a fair rate of return . . . relate to business enterprises, or VWID, not its
investors. . . . [A] fair rate of return for a business enterprise should not change based on the
composition of its investors, either.”).
Similarly, the proxy group of water utilities should properly compare utilities of similar
sizes with similar risks. But Staff’s witness on this issue, Mr. Terry, included Veolia Water
Idaho’s great-great grandparent, Veolia Environnement S.A., within the proxy group for the
comparable earnings analysis. Tr. Vol. III, 807-08. This skewed results downward—excluding
Veolia Environnement S.A. results in an average ROE for the proxy group of approximately
10.67% with a median ROE of 9.85%. See Tr. Vol. III, 833–34.
Veolia respectfully submits that this comparison is misplaced. First and foremost, Mr.
Terry does not adequately justify inclusion of Veolia Environnement within the proxy group. Mr.
Terry does not cite any finance literature, legal authority, or other source to support inclusion of
Veolia Environnement within the proxy group. He simply asserts: “I feel it is always appropriate
to include Veolia Water Idaho’s parent company in the proxy group, should the data be available
and somewhat comparable to the proxy group.” Tr. Vol. III at 807-08 (emphasis added).
The lack of support for including Veolia Environnement S.A. in the proxy group was
confirmed on cross-examination. See Tr. Vol. III, 836-37 (“Q: Okay, So Mr. Terry, in including
Veolia Environment in your comparable earnings group, did you cite Commission precedent as
authority for that? A: No. Q: Did you cite an academic source for that? A: No. Q: Did you cite
any authority for that? A: It seemed logical. I walked through the process and said that if this is
the one investor in Veolia Water Idaho, Inc., then we should be at least including this into the
PETITION FOR RECONSIDERATION PAGE 7 OF 16
sample, even if at some points in other places I remove it, because it got too far out of hand. It
was too far out from the center.”).
Second, the facts belie Mr. Terry’s assertion that Veolia Environnement is “somewhat
comparable” to Veolia Water Idaho. Veolia Environnement is a multinational company with
176,488 employees as of 2021. See Tr. Vol. III, 832; id. at Exh. 25. Veolia Water Idaho has 137
employees. Tr. Vol. II, 136. Based on 2021 financial information, 4% of Veolia
Environnement’s employees are within North America. See Tr. Vol. III, 832; id. at Exh. 25.
100% of Veolia Water Idaho’s employees are in Idaho. Veolia Environnement is engaged in
multiple business segments in its nationwide footprint—in 2021, 62.2% of its revenue came from
waste and energy projects. Veolia Water Idaho is engaged in a single business: providing water
service in the Treasure Valley. Veolia submits that Veolia Environnement is not comparable—or
even somewhat comparable—to Veolia Water Idaho. Veolia Water Idaho’s ROE should not be
set with reference to Veolia Environnement, S.A.
Finally, authorizing Veolia Water Idaho’s Return on Equity based on its status as a
subsidiary reflects fundamentally the wrong question. An investor in Veolia Environnement may
view Veolia Environnement’s diverse footprint and sources of income as requiring a lower rate
of return for an investment in Veolia Environnement. But the question at hand is what return on
equity an investor in Veolia Water Idaho would require to invest in Veolia Water Idaho. The
relevant business unit, the relevant customer base, the relevant product line, and the relevant
geographical footprint is that of Veolia Water Idaho, not that of its parent company or
companies. See Tr. Vol. II, 391-92.
To summarize: the Commission concludes that the authorized ROE of 9.25% is
necessary, at least in part, because the Company’s risk analysis and size comparison “ignores the
PETITION FOR RECONSIDERATION PAGE 8 OF 16
Company’s status as a wholly owned subsidiary.” Order No. 35762 at 9. Veolia respectfully
disagrees. Veolia’s analysis does not ignore the Company’s status as a subsidiary; it properly
applies precedent and financial principles. Veolia submits that Staff’s inclusion of Veolia’s
parent companies is flawed. Veolia requests that the Commission reconsider the authorized ROE
as requested in this Petition, whether through issuing a revised order, additional proceedings to
allow presentation of additional evidence on this issue, or as the Commission otherwise sees fit.
B. The 9.25% ROE is the lowest of any utility in Idaho, in the Pacific Northwest, and
among the lowest in the country for a water company.
As the Commission acknowledged, a utility is entitled to a return “generally being made
at the same time and in the same general part of the country on investments in other business
undertakings which are attended by corresponding risks and uncertainties.” Order No. 35762 at 9
(emphasis added) (quoting Bluefield, 262 U.S. at 692).
The Commission did not make the factual findings contained within this legal standard:
that other companies “in the same part of the country” are earning an ROE of 9.25%; that other
companies “at the same time” are earning an ROE of 9.25%; and that companies with similar
“risks and uncertainties” are earning an ROE of 9.25%. The Commission must make factual
findings that are both supported by evidence in the record and sufficient to enable judicial
review. See Wash. Water Power Co., 101 Idaho at 575–76 (overturning Commission decision
that lacked sufficient factual findings to permit judicial review). Veolia respectfully submits that
the evidence in this record does not support the Commission’s conclusion.
First, the record demonstrates that the 9.25% return on equity is not “generally being
made . . . in the same general part of the country” as Veolia. See Order No. 35762 at 9. As Staff
Witness Joe Terry admits, the return on equity he recommends—9.0%—would be the lowest
return of any utility in the State of Idaho. Tr. Vol. III, 824 (“Q: Mr. Terry, if the Commission
PETITION FOR RECONSIDERATION PAGE 9 OF 16
were to accept your recommended 9.0 percent return on equity, Veolia Water Idaho would have
the lowest authorized rate of return on equity of any utility that operates in Idaho, correct? A: I
believe so, but I would have to subject that to check. Q: So you aren’t aware of any other utility
in Idaho that has an authorized return on equity of 9.0 percent or lower, correct? A: That is
correct.”).
Mr. Terry did not review the returns of other utilities in the Pacific Northwest. But he was
not aware of any utility in the region with an authorized return on equity less than his
recommendation. Id. at 824-25 (“Q: Mr. Terry, if the Commission were to accept your
recommended 9.0 percent return on equity, Veolia Water Idaho would have the lowest
authorized return on equity of any utility in the Pacific Northwest; is that correct? A: I don’t
know. I don’t have that information. Q: But you’re not aware of any authorized return on equity
for any utility in the Pacific Northwest that’s 9.0 percent or lower? A: I’m not aware, but I also
have not researched all the utilities, so I don’t know.”).
Indeed, Mr. Terry was unable to identify any water utility in the entire country with an
ROE lower than his recommendation. Id. at 825–26. The lowest ROE Mr. Terry was able to
identify was a utility in Arizona that was purportedly awarded an ROE of 8.0%, with significant
consequences to the utility’s value.2 Id. at 825-827 (“Q: Mr. Terry, can you identify any utility in
the country that has an authorized return on equity lower than 9.0 percent? A: I don’t know if it

2 Mr. Terry’s testimony on this topic was based on notice from an acquaintance. See Tr. Vol. III, 825–26. Mr. Terry
appears to be referring to the case of Arizona Public Service Company, an electrical corporation in the State of
Arizona. APS was originally awarded a Return on Equity of 8.7%, increased to 8.9% on appeal. See Ariz. Pub. Serv.
Co. v. Ariz. Corp. Comm’n, 526 P.3d 914, Case No. 1 CA-cc21-0002 at ¶ 31 (Ariz. Ct. App. Mar. 7, 2023). Arizona
calculates a rate of return based on a “fair value” rate base, making it not comparable to Idaho’s ratemaking regime.
See id. ¶ 9 (“In the Decision, the Commission determined APS’s return on equity, FVI, and fair value base rate. . . .
The Commission then used this data to calculate APS’s ‘fair value rate of return.’” (emphasis added)).
PETITION FOR RECONSIDERATION PAGE 10 OF 16
has been restated, but a few years ago there was a utility in Arizona that was awarded an
8.0 . . . .”).
Granted, this line of questions related to Mr. Terry’s recommended ROE of 9.0% rather
than the 9.25% authorized by the Commission. But the implications are the same. 9.25% appears
to be the lowest authorized Return on Equity in Idaho; the lowest Return on Equity in the Pacific
Northwest; and on the very low end of authorized Returns on Equity in the entire country for
water companies in jurisdictions with comparable ratemaking regimes. See Attachment 2 to
Request for Reconsideration (summarizing ROEs for utilities in Idaho, in the Pacific Northwest,
and references to ROEs around the country);3 see also Tr. Vol. II, 390 (Mr. Walker discussing
average ROEs for electrical and natural gas companies, which are above 9.25% even though
ROEs for these industries are typically lower than for water utilities).
The Commission does not acknowledge or address what evidence supports the statement
that 9.25% is the same as generally being made in the “same general part of the country” as
Veolia; nor is there any evidence in the record to support such a finding. See Order No. 35762 at
9. While the Commission has broad discretion in setting rates, it must present facts necessary to
reasonably support its conclusion. See Boise Water Corp. v. Idaho Pub. Utils. Comm’n, 97 Idaho
832, 840 (1976).
And this is only one of the three components of the Bluefield standard. The other two
components—ROEs at the same time, of businesses with the same attendant risks—are likewise

3 Jurisdictions with lower ROEs often have mechanisms to mitigate the effect of the low ROE on the utility. For
example, New Hampshire has a surcharge that allows for rate relief between general rate cases. See Case No. DW
20-184, Order No. 26,659 at *4 (N.H. Pub. Utils. Comm’n July 29, 2022) (approving permanent Water
Infrastructure and Adjustment Mechanism Adjustment). In addition, New Hampshire uses a year-end rate base,
without averaging, which is moved forward to account for the time it takes to process a rate case; a surcharge that
accounts for differences in property tax; and a process that allows utilities to implement interim rates while a general
rate case is pending. As discussed below, the combination of a low Return on Equity, backward looking rate base,
average rate base, denial of the proposed DSIC, and complete denial of working capital does not provide a
reasonable opportunity for Veolia Water Idaho to recover the authorized rate of return.
PETITION FOR RECONSIDERATION PAGE 11 OF 16
not supported in the record. Mr. Walker and Mr. Terry disagree on many things. But they both
agree that, at this point in time, economic conditions include high inflation and high interest
rates. This economic environment supports a higher Return on Equity than ROEs granted in
lower-interest-rate, lower-inflation environment. See Tr. Vol. III, 802 (Mr. Terry Direct
Testimony: “A: Many methods to estimate a proper ROE use interest rates as a base line. As
these rates increase it will also increase the ROE range recommend[ed].”); id. at 827 (confirming
this on cross-examination); Tr. Vol. II, 390 (Mr. Walker’s rebuttal testimony: “A: Since the
current yield on A rated public utility bonds is 75-basis points higher than it was in 2022 and
237-basis points higher than it was in 2021, the required return on equity for water utilities today
exceeds the returns authorized in 2021 and 2022.” (emphasis omitted)).
This undisputed testimony supports a higher Return on Equity for Veolia than for the
ROEs authorized in prior years. Yet the Commission authorized a lower Return on Equity,
without addressing the undisputed evidence supporting a higher ROE at this time.
Regarding the third standard—a utility should earn an ROE equivalent to companies at
the same time, in the same general area of the country, with the same attendant risk—the record
indicates that water companies are considered by investors to be more risky than electrical or
natural-gas utilities; that the risk to water utilities has increased in recent years; and that the risk
to a company of Veolia Water Idaho’s customer footprint is greater than companies with larger
footprints. Tr. Vol. II, 373-77 (Mr. Walker’s rebuttal testimony, explaining the differences in
how investors evaluate natural gas versus water companies); id. at 384 (noting that water utility’s
betas indicate a risk that is 20% higher than 2019 and 11% higher than 2018); id. at 384 (“The
finance literature supports the fact that, as the size of a firm decreases, its risk and, hence, its
required return increases.”).
PETITION FOR RECONSIDERATION PAGE 12 OF 16
Mr. Terry argues that the size of Veolia Water Idaho’s parent companies “moots” issues
related to size and diversity, as discussed more thoroughly above. However, Mr. Terry does not
dispute Mr. Walker’s testimony that water utilities are generally more risky than electrical or
natural-gas utilities, or that the risks to water utilities have increased in recent years. See Tr. Vol.
III, 807-09 (adopting Mr. Walker’s Water Proxy Group, with addition of Veolia Environnement,
S.A.). This undisputed evidence supports ROE greater than 9.25%.
To summarize: the Commission concluded that the authorized ROE of 9.25% is the same
as the ROE being made at the same time, in the same general part of the country, as investments
in other business undertakings of similar risk. The evidence in the record does not support those
findings. Veolia requests that the Commission reconsider the authorized ROE as requested in this
Petition, whether through issuing a revised order, holding additional proceedings to allow
presentation of additional evidence on this issue, or as the Commission otherwise sees fit.
4. Regulatory lag
Regulatory lag decreases a utility’s opportunity to earn a reasonable rate of return on its
investments. The Idaho Supreme Court has recognized the importance of this concept; the
Commission’s failure to acknowledge and address regulatory lag while setting rates can provide,
and has provided, a basis to overturn the decisions of the Commission. See Utah Power & Light
Co., 102 Idaho at 284-85 (1981) (overturning Commission’s decision to remove attrition
adjustment to account for regulatory lag).
Concerns with regulatory lag are particularly acute in times of inflation and increasing
capital investment. See id. at 285 (“The impact of inflation is great on all public utilities because
their endeavors are normally capital intensive and involve assets with relatively long useful
lives.”). In these circumstances, the Commission must acknowledge and address regulatory lag;
PETITION FOR RECONSIDERATION PAGE 13 OF 16
the issue cannot simply be ignored. See id. (“It also appears undisputed that the factors of
inflation and an expansionistic construction program continue to exist and apparently were not
considered by the Commission.”).
The Commission made a number of decisions that contribute to excessive regulatory lag.
First, the Commission established a test year ending December 31, 2022. Order No. 35762 at 4.
Accordingly, the Commission did not include within rate base investments that the Company
made during the first four months of 2023.
Second, the Commission did not accept the value of rate base as of December 31, 2022,
but instead averaged the value of the rate base, resulting in a value of rate base that approximates
the value of rate base in the middle of June, 2022. Id. at 23.
Third, the Commission entirely disallowed working capital, which (if allowed) would be
calculated using one of three standard methods and included in rate base. Id. at 24.
Fourth and finally, the Commission disallowed the proposed DSIC mechanism, which
would allow certain rate adjustments between rate cases, alleviating regulatory lag to some
degree. Id. at 27.
There is undisputed testimony in the record regarding regulatory lag. David Njuguna
testified that calculating rate base using a historical test year or average rate base “creates
significant regulatory lag” due to the mismatch between the Company’s costs and the value of
the rate base in service at the time new rates are implemented. Tr. Vol. II, 540-42.
Jim Cagle testified that use of Staff’s proposed average rate base methodology, which
was adopted by the Commission, would preclude recovery on “approximately $14 million of rate
base in service as of December 31, 2022, creating significant regulatory lag.” Tr. Vol. II, 673.
PETITION FOR RECONSIDERATION PAGE 14 OF 16
Mr. Cagle further explained that, under Staff’s proposed methodology, “the Company
will be unable to recover approximately $1.4 million in revenue requirement during this rate
case,” which “creates a lag in recovery that, in turn, can result in under-recovery and more
frequent rate cases.” Id. at 673-74; see also id. at 675.
Mr. English acknowledged, in his direct testimony and confirmed on cross-examination,
that using a test-year cutoff closer to the time rates are implemented would reduce regulatory lag,
albeit at the expense of additional time to review information related to the investments. Tr. Vol.
III, 928 (direct testimony); id. at 946-47 (cross-examination).
There is also undisputed testimony in the record that the current economic environment is
characterized by high inflation and rapid capital investments, as needed to meet rapid growth in
Veolia’s service territory. Tr. Vol. II, 675 (Mr. Cagle testimony); Tr. Vol. III, 826 (“Q: And you
testified that the economy is in a period of significant inflation; correct? A: Yes.”); Tr. Vol. III,
942-43 (“Q: Would you agree with Mr. Terry’s testimony that we are in an environment of
significant inflation:? A: Yes, I would agree with that.”).
The combination of the Commission’s decisions on rate base, when applied to the
economic circumstances, preclude the opportunity to actually recover the authorized rate of
return. To illustrate: the Commission states in its Order that Veolia is authorized an overall rate
of return of 6.91%. Order No. 35762 at 1. However, by using a test year ending December 31,
2022 and the average of monthly average rate-base methodology, the value of the rate base
included in the Commission’s Order is effectively the value of rate base as of June 15, 2022.
Between June 15, 2022 and March 31, 2023, Veolia had invested approximately $14 million in
rate base. See Attachment 4; Tr. Vol. II at 673.
PETITION FOR RECONSIDERATION PAGE 15 OF 16
Accordingly, on the very first day the new rates went into effect, evidence in the record
indicates that Veolia was already approximately $1.4 million in revenue below the revenue that
would be collected using the authorized of return. Tr. Vol. II at 673. Veolia’s most recent
calculations reveal that the rate base in the Order does not account for $21.5 million, with an
additional $309,000 of related additional depreciation expense. This produces a significant
regulatory lag: almost $2.2 million.
Stated another way, while the Commission says that Veolia is authorized to earn an
overall rate of return of 6.91%, Veolia has no realistic opportunity to actually earn that return due
to the pace of capital investments and inflation. Veolia is so far behind at the start that it does not
have the opportunity to actually earn the authorized return.
Veolia recognizes that the individual decisions with respect to the year-end cutoff for rate
base, use of the average of monthly averages, and similar decisions find some support in
Commission precedent. But, the individual issues cannot be evaluated in isolation. When taken
as a whole and applied to these economic circumstances, Veolia submits that the Commission
should not simply cite prior decisions and move forward. Veolia submits that the Commission
can, should, and arguably must address and account for the regulatory lag demonstrated in the
record, taking into account the facts and evidence in the record, including current rates of
inflation and high levels of capital investment. See Utah Power & Light Co., 102 Idaho at 285
(setting aside Commission decision when the Commission did not address regulatory lag in light
of the “factors of inflation and an expansionistic construction program”).
REQUEST FOR RELIEF
For the reasons set forth above, Veolia respectfully requests that the Commission enter an
order:
PETITION FOR RECONSIDERATION PAGE 16 OF 16
1. Clarifying, or otherwise indicating, that Order No. 35762 authorizes a revenue
increase of $3,701,726, rather than $2,756,277 as currently stated in the first paragraph of the
Order;
2. Granting reconsideration on the issue of Return on Equity, in the form of (1) a
revised or new order authorizing a Return on Equity as requested by the Company, (2) an order
scheduling additional proceedings to obtain and consider additional evidence regarding the
proper Return on Equity, or (3) other relief related to Return on Equity that the Commission
deems appropriate;
3. Granting reconsideration on the issue of regulatory lag, in the form of (1) a
revised or new order that reduces regulatory lag such that the Company is afforded the
opportunity to earn a reasonable return on used and useful assets, (2) an order scheduling
additional proceedings to obtain and consider additional evidence regarding regulatory lag, or
(3) other relief related to regulatory lag that the Commission deems appropriate;
4. Any other relief that the Commission deems appropriate under the circumstances.
DATED: May 19, 2023.
VEOLIA WATER IDAHO, INC.
By
Preston N. Carter
Morgan D. Goodin
Attorneys for Veolia Water Idaho, Inc.

PETITION FOR RECONSIDERATION
CERTIFICATE OF SERVICE

I certify that on May 19, 2023, a true and correct copy of the foregoing was served upon
all parties of record in this proceeding via electronic mail as indicated below:

Commission Staff Via Electronic Mail
Jan Noriyuki, Commission Secretary
Idaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg. 8, Suite 201-A
Boise, ID 83714

[e-mail]
Dayn Hardie
Deputy Attorney General
Idaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg. 8, Suite 201-A
Boise, ID 83714
[e-mail]

Lorna K. Jorgensen
Meg Waddel
Ada County Prosecuting Attorney’s Office
Civil Division
200 W. Front Street, Room 3191
Boise, ID 83702
[e-mail]

Sharon M. Ullman, pro se
5991 E. Black Gold St.
Boise, ID 83716
[e-mail]

Austin Rueschhoff
Thorvald A. Nelson
Austin W. Jensen
Holland & Hart, LLP
555 17th Street, Suite 3200
Denver, CO 80202
[e-mail]
[e-mail]
[e-mail]
[e-mail]
[e-mail]

Jim Swier
Micron Technology , Inc.
8000 South Federal Way
Boise, ID 83707
[e-mail]

PETITION FOR RECONSIDERATION

Mary Grant
Deputy City Attorney
Boise, City Attorney’s Office
150 N. Capitol Blvd.
PO Box 500
Boise, ID 83701-0500

[e-mail]
[e-mail]

Preston N. Carter

ATTACHMENT 1
ATTACHMENT 1
Commission Ordered Revenue Requirement Summary
LineNo.Description Company Direct Commission Order
1 Operating Revenues 51,717,859$ 52,456,207$
2 Operation & Maintenance Expenses:
3 Payroll 7,661,608$ 7,025,725$
4 Workers Compensation 116,207$ 106,562$
5 Pension Cash Contributions 585,796$ 585,796$
6 Post-retirement Benefits Other than Pension (PBOP)(523,756)$ (577,900)$ 7 Employee Healthcare 2,103,710$ 2,344,149$ 8 Employee 401k 456,431$ 411,541$ 9 Other Employee Benefits - Tuition 14,634$ 9,273$ 10 Payroll Overheads (Fringe Benefits Allocation)(1,466,411)$ (1,508,057)$
11 Purchased Water 316,694$ 316,694$
12 Energy- Purchased Power and Other Utilities 2,595,630$ 2,595,630$
13 Chemicals 594,376$ 594,376$
14 Subcontractors 830,455$ 830,455$ 15 Customer Billing Expenses 323,463$ 324,074$ 16 Bad Debts 305,063$ 305,063$ 17 Materials 306,324$ 306,324$ 18 Vehicle Allocation 1,025,350$ 857,457$
19 Office Expenses 815,647$ 788,103$
20 Advertising Expense 227,683$ 197,683$
21 Management & Service Fees 4,566,635$ 4,405,534$
22 General Insurance 242,524$ 177,172$ 23 IPUC Fees 103,177$ 103,177$ 24 Safety 195,406$ 166,156$ 25 Amortization Expense - Deferred Rate Case 202,923$ 50,967$ 26 Amortization Expense - Deferred Pension 23,218$ 23,218$ 27 Amortization Expense - Deferred Tank Painting 177,283$ 154,783$
28 Amortization of Excess Deferred Income Taxes (200,000)$ (200,000)$
29 Amortization Expense - Deferred Power 534,778$ 264,073$
30 AFUDC Equity Gross Up Amortization 30,523$ 30,523$
31 (127,937)$ (136,841)$ 32 Total Unadjusted Operating & Maintenance Expenses 350,189$ 361,916$ 33 Total Depreciation and Amortization 10,929,675$ 10,383,216$ 34 Ad Valorem 2,145,032$ 2,145,032$ 35 Payroll Taxes 898,783$ 824,402$
36 Total Operating Expense
37 Before Income Taxes 36,361,115$ 34,266,277$
38 Income Taxes 2,475,051$ 3,304,448$
39 Total Operating Expenses 38,836,166$ 37,570,725$ 40 Net Operating Income 12,881,693$ 14,885,482$
41 Plant in Service:
42 Gross Utility Plant in Service 578,861,098$ 551,849,764$
43 Total Accumulated Depreciation and CIAC Amortization (191,267,542)$ (185,726,732)$
44 Net Utility Plant in Service 387,593,556$ 366,123,032$ 45 Customer Advances for Construction (3,797,814)$ (3,853,268)$ 46 Contributions in Aid of Construction (net of amortization)(112,913,720)$ (112,545,711)$ 47 Utility Plant Acquistion Adjustment Net 10,771,089$ 10,808,444$ 48 Accumulated Deferred Income Taxes (5,307,577)$ (4,398,563)$
49 Deferred Charges Included in Rate Base 4,933,851$ 3,363,566$
50 Working Capital Allowance 3,552,571$ -$
51 Regulatory Liability-New Federal Tax Law (TCJA)(4,075,931)$ (4,335,280)$ 52 Rate Base 280,756,025$ 255,162,220$
53 Operating Income at Present Rates 12,881,693$ 14,885,482$ 54 Cost of Capital 7.77%6.91%55 Operating Income at Proposed Rates 21,814,743$ 17,631,709$
56 Operating Income Deficiency 8,933,050$ 2,746,227$
57 Gross Revenue Conversion Factor 1.3573 1.35445
58 Deficiency in Operating Revenue less Intervenor Funding 12,107,227$ 3,701,726$
59 Percent Increase 23.41%7.06%
60 Total Revenue Requirement 63,825,085$ 56,157,933$
61 Capital Structure:
62 Total Debt 44.43%44.43%
63 Cost of Debt 3.99%1.77%3.99%1.77%
64 Total Equity 55.57%55.57%
65 Return on Equity 10.80%6.00%9.25%5.14%Total Cost of Capital 7.77%6.91%
Attachment AOrder No. 35762 Case No. VEO-W-22-02
ATTACHMENT 2
ATTACHMENT
2

ATTACHMENT 2 TO VWID’S PETITION FOR RECONSIDERATION PAGE 1 OF 3
Attachment 2
Summary of Returns on Equity

ROEs for Idaho Utilities (arranged by type of utility, then date)

Utility - water Authorized ROE Citation
Gem State Water Company 9.5% GSW-W-22-01, Order No.
35692 at 14 (Mar. 1, 2023)
Falls Water Company 10.2% FLS-W-20-03, Order No.
34925 at 4 (Feb. 16, 2021)
Morning View Water
Company
11% MNV-W-19-01, Order No.
34542 (Feb. 3, 2020)
Grouse Point Water
Company, LLC
11% GPW-W-17-01, Order No.
33910 (Oct. 13, 2017)
Utility – natural gas
Avista 9.4% AVU-E/G-21-01, Order No.
35156 at 3 (Sept. 1, 2021)
Intermountain Gas 9.5% INT-G-16-02, Order No.
33757 at 1 (April 28, 2017)
Utility - electric
PacifiCorp 9.9% PAC-E-10-07, Order No.
Order No. 32196 at 1 (April
7, 2011)
Idaho Power 10.5% IPC-E-08-10, Order No.
30722 (Jan. 30, 2009)

ATTACHMENT 2 TO VWID’S PETITION FOR RECONSIDERATION PAGE 2 OF 3
ROEs for Utilities in the Pacific Northwest (arranged by type of utility, then date)

Utility - water Authorized ROE Citation
Great Basin Water Company
LLC (Washington)

12.0% Final Order 01, Docket UW-
220218 (July 1, 2022)
Gold Beach Water Company,
Inc. (Washington)

12.0% Final Order 01, Docket UW-
220206 (July 1, 2022)
Government Camp Water
Company (Oregon)
9.5% Order No. 18-488 (Dec. 21,
2018)
Illahe Estates Water System
(Oregon)
9.5% Order No. 18-235 (June 22,
2018)
Shadow Wood Water Service
(Oregon)
9.5% Order No. 16-334 (Sept. 6,
2016)
Utility – natural gas
Northwest Natural Gas
Company (Oregon)
9.4% Order No. 22-437 (Nov. 3,
2022)
Cascade Natural Gas
Corporation (Washington)

9.4% Final Order 09, Docket UG-
210755 (Aug. 23, 2022)
Avista (Oregon) 9.4% Order No 22-291 (Aug. 2,
2022)
Utility - electric
Puget Sound Energy
(Washington)

9.4% Final Order 10, Docket UG-
210918 (Dec. 22, 2022)
Pacificorp (Oregon) 9.5% Order No. 22-491 (Dec. 16,
2022)

ATTACHMENT 2 TO VWID’S PETITION FOR RECONSIDERATION PAGE 3 OF 3
Returns on Equity for Water Utilities, Nationwide

Source: S&P Global, https://www.spglobal.com/marketintelligence/en/news-
insights/research/water-roes-trend-higher-on-small-dataset