20230428Final_Order_No_35762.pdf

ORDER NO. 35762 1
Office of the Secretary
Service Date
April 28, 2023
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

ORDER NO. 35762

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 to all
rate components and customer classes, Residential, Commercial, Public Authority, and Private
Fire Service. The Commission denies the Company’s request to implement a Distribution System
Improvement Charge.
PROCEDURAL HISTORY
On September 30, 2022, the Company filed an Application with the Idaho Public Utilities
Commission (“Commission”) requesting authorization to raise the rates it charges for water
service. The Company requested an October 31, 2022, effective date.
On October 20, 2022, the Commission issued a Notice of Application, Notice of
Suspension of Proposed Effective Date, and Notice of Intervention Deadline. Order No. 35569.
Subsequently, the Commission granted intervention to Ada County; Sharon Ullman, pro se;
Micron Technology, Inc.; and the city of Boise City (collectively “Intervenors”). Order Nos. 35589
and 35604.
On December 15, 2022, the Commission issued a Notice of Schedule setting forth
submission deadlines for Commission Staff (“Staff”)1, Intervenor, and Company written
testimony. Order No. 35628. On February 21, 2023, the Commission issued a Notice of Schedule,
Notice of Customer Hearing, and Notice of Technical Hearing. Order No. 35683.
On March 27, 2023, the Commission held a Customer Hearing. On April 4, 2023, the
Commission held a Technical Hearing at which all Intervenors participated.

1 Pursuant to Commission Rule of Procedure 37 the “Commission Staff may appear in any Commission proceeding
as an impartial representative of the public interest[.]” IDAPA 31.01.01.037.
ORDER NO. 35762 2
APPLICATION
Veolia is a Commission-regulated water corporation that provides service to Boise City
and surrounding areas and currently serves approximately 105,000 customers in Ada County,
Idaho. See Idaho Code §§ 61-125 and 61-129. The Company provides service under Amended
Certificate of Public Convenience No. 143. Veolia’s most recent general rate case was filed in
2020, Case No. SUZ-W-20-02.
Veolia has submitted proposed Schedule Numbers 1, 1B, 2, 3, and 4 setting forth the
proposed changes to be made to customers’ rates. Application at 2. Veolia represents that if the
Commission approves the request in full, customer bills would be adjusted by 24.1% and Company
revenues would increase by 23.4% or $12.1 million per year. Id. Veolia represents that the
proposed rate of return under the revised rates and charges will be 7.77%. Id.
Veolia represents that the revenue realized under its presently authorized rates produces a
rate of return of 4.59% based on a historical year ending June 30, 2022. Id. at 3. Veolia states that
it seeks additional revenues to recover increased operating expenses and costs associated with
plant additions, and to produce a fair rate of return. Id.
Veolia is proposing a revision to its Rules and Regulations Governing the Rendering of
Water Service to reflect the name change from Suez Water Idaho Inc. to Veolia Water Idaho, Inc.;
to eliminate 1¼-inch meters reference from the tariff; to revise the service line connection from
one-inch or smaller to two-inch or smaller according to NFPA 13D standards; and to implement a
Distribution System Improvement Charge (“DSIC”). Id.
Veolia proposes to implement the requested increase in revenue by a uniform percentage
increase to all rate elements, except for Private Fire Service rates which would see no increase. Id.
Veolia represents that the average residential bill would increase by $0.25 a day or $7.59 per
month, the average commercial bill by $0.93 a day or $27.92 a month, and the average public
authority bill by $0.85 a day or $25.46 a month. Legacy Eagle Water Company area customer rates
will continue to phase-in over time. Press Release at 1; see also Order No. 35247. The existing
Eagle average residential bill would increase by $0.15 a day or $4.43 per month, the average
commercial bill by $0.54 a day or $16.29 a month, and the average public authority bill by $0.50
a day or $14.85 a month. Press Release at 1.

ORDER NO. 35762 3
PUBLIC COMMENTS AND TESTIMONY
I. Public Comments
The Commission received and reviewed one hundred and seventy-nine (179) written
comments from the public. The vast majority of the written comments oppose the Company’s
proposed 24.1% rate increase. These generally asserted that the proposed rate increase was
unreasonable citing the present state of the economy, inflation, and the Company’s recent
acquisition and transition from Suez Water Idaho Inc. to Veolia Water Idaho Inc.
II. Customer Hearing
On March 27, 2023, the Commission held a Customer Hearing. During the hearing seven
members of the public testified. Members of the public who testified voiced many of the same
concerns found in the written public comments including issues with fixed income, and hardships
that would result if the Company’s proposed rate increase was approved.
COMMISSION FINDINGS AND DECISIONS
Veolia is a water corporation and a public utility, as defined under Title 61 of the Idaho
Code, and provides water service to the public in Idaho. Idaho Code §§ 61-125, and -129. The
Commission has jurisdiction over the Company and this matter under Idaho Code §§ 61-501, -
502, -503, -507, -520, -523, and -622.
In a general rates case, the Company’s intrastate revenue requirement, and every
component of it, both rate base and expense, are at issue. IDAPA 31.01.01.124.01. The
Commission may grant, deny, or modify the revenue requirement requested and may find a
revenue requirement different from that proposed by any party is just, fair, and reasonable. Id.
The Company’s retail rates and charges, both recurring and non-recurring, including those
of special contract customers, are at issue, and every component of every existing and proposed
rate and charge is at issue. IDAPA 31.01.01.124.02. The Commission may approve, reject, or
modify the rates and charges proposed and may find that rates and charges different from those
proposed by any party are just, fair, and reasonable. Id.
Test Year, Capital Structure, and Rate of Return
A. Test Year
In ratemaking, the purpose of a test year is to “develop representative operating data that
will provide a meaningful comparison and guide for developing future revenue requirements, and
allow the parties to work with actual data, while still recognizing projected changes which are
reasonably certain to occur.” Order No. 33757 at 4 (internal citations omitted).
ORDER NO. 35762 4
The Company requests a test year consisting of a 12-month historic period beginning July
1, 2021, ending on June 30, 2022, and a nine-month adjustment period ending on March 31, 2023.
Tr. vol. II, 532. Staff initially proposed using the Company’s test year, with a cut-off date of
December 31, 2022, for pro forma adjustments. Tr. vol. III, 927. However, as the 2022 actual
amounts became available, Staff adjusted the Company’s test year of July 1, 2021, through June
30, 2022, to a calendar year test year ending December 31, 2022, with no pro forma adjustments
Id. at 928.
The Company disagrees with Staff’s recommendation and argues that known and
measurable adjustments should be included in the Company’s operating expenses for recovery
after Staff’s proposed December 31, 2022, test year end period. Tr. vol. II, 163. The Company
argues that costs that have already been incurred or that can be reasonably measured before the
conclusion of a rate proceeding should be included for the Commission’s consideration. Id. No
Intervenor proposed an alternative test year.
The Commission finds it fair, just, and reasonable to adopt a calendar year test year ending
December 31, 2022, with limited pro forma adjustments. The Commission has previously
explained that “[i]t simply is not possible to carefully review investment cost figures and
information that are provided close to or at the time of hearing.” Order No. 29838 at 6. Company
data should be provided with sufficient time so that Staff and other parties may incorporate the
information in prefiled testimony. This will facilitate the technical hearing process and eliminate
the need to argue over forecasts or pro forma adjustments outside of an established test year. “Not
only will data be known and measurable by the time other parties prefile testimony and for the
hearing, it will be more convenient and administratively easier for all parties.” Id. at 7. We continue
to believe that partial projections should be limited and accepted only when Staff and parties have
the opportunity to verify any projected data prior to presentations of their cases.
B. Capital Structure
The Company proposes to use the capital structure of its parent company Veolia Water
Resources, which maintains capitalization percentages of 44.43% debt and 55.57% equity. Tr. vol.
II, 271. Nether Staff nor any Intervenors object to the Company’s proposed capital structure.
The Commission finds it fair, just, and reasonable to adopt a capital structure of 44.43%
debt and 55.57% equity for ratemaking purposes.

ORDER NO. 35762 5
C. Rate of Return
For utility purposes, the rate of return (“ROR”) is determined by calculating the weighted
average cost of capital (“WACC”). WACC is calculated by multiplying the cost of each capital
source, debt and equity, by its relevant weight and then adding the products together.
To determine a fair and adequate rate of return, the Commission is guided by United States
Supreme Court decisions. In Bluefield Water Works & Improvement Company v. West Virginia
Public Service Commission, the Supreme Court stated:
A public utility is entitled to such rates as will permit it to earn a return on the value
of the property which it employs for the convenience of the public equal to that
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; but it has no constitutional right to profits
such as are realized or anticipated in highly profitable enterprises or speculative
ventures. The return should be reasonably sufficient to assure confidence in the
financial soundness of the utility and should be adequate, under efficient and
economical management, to maintain and support its credit and enable it to raise
the money necessary for the proper discharge of its public duties. A rate of return
may be reasonable at one time and become too high or too low by changes affecting
opportunities for investment, the money market and business conditions generally.
Bluefield Waterworks & Imp. Co. v. Pub. Serv. Comm’n of W. Va., 262 U.S. 679, 692–93, 43 S.
Ct. 675, 679, 67 L. Ed. 1176 (1923).
From the investor or company point of view it is important that there be enough
revenue not only for operating expenses but also for the capital costs of the
business. These include service on the debt and dividends on the stock. By that
standard the return to the equity owner should be commensurate with returns on
investments in other enterprises having corresponding risks. That return, moreover,
should be sufficient to assure confidence in the financial integrity of the enterprise,
so as to maintain its credit and to attract capital.
Fed. Power Comm’n v. Hope Nat. Gas Co., 320 U.S. 591, 603, 64 S. Ct. 281, 288, 88 L. Ed. 333
(1944) (internal citation omitted). As a result of these Supreme Court decisions, three primary
standards have evolved for determining a fair and reasonable rate of return: (1) the financial
integrity or credit maintenance standard; (2) the capital attraction standard; and (3) the comparable
earnings standard. Order No. 30722 at 29.
1. Requested Rate of Return
The Company requests an overall ROR of 7.77%, including a 10.80% return on common
equity (“ROE”), a 3.99% cost of debt, and based on a capital structure of 44.43% debt and 55.57%
equity. Tr. vol. II, 271; Walker Ex. 1, Sched. 1.

ORDER NO. 35762 6
Company Proposal
Line
No.
Capital
Structure
Component Amount Percentage
Cost of
Source
Weighted
Avg. Cost of
Capital
1 Debt $1,222,046,487 44.43% 3.99% 1.77%
2 Equity $1,528,664,904 55.57% 10.80% 6.00%
3 Total $2,750,711,391 100.00% 7.77%

Staff proposes an overall ROR of 6.77%, including a 9.00% ROE, a 3.99% cost of debt,
and based on a capital structure of 44.43% debt and 55.57% equity. Tr. vol. III, 814; Terry Ex.
119, Sched. 5.
Staff Proposal
Line
No.
Capital
Structure
Component Amount Percentage
Cost of
Source
Weighted
Avg. Cost of
Capital
1 Debt $1,222,046,487 44.43% 3.99% 1.77%
2 Equity $1,528,664,904 55.57% 9.00% 5.00%
3 Total $2,750,711,391 100.00% 6.77%

Micron proposes an overall ROR of 6.97%, including a 9.35% ROE, a 3.99% cost of debt,
and based on a capital structure of 44.43% debt and 55.57% equity. Tr. vol. III, 978; Gorman Ex.
401.
Micron Proposal
Line
No.
Capital
Structure
Component Amount Percentage
Cost of
Source
Weighted
Avg. Cost of
Capital
1 Debt $1,222,046,487 44.43% 3.99% 1.77%
2 Equity $1,528,664,904 55.57% 9.35% 5.20%
3 Total $2,750,711,391 100.00% 6.97%

2. Cost of Debt
The Company presented evidence that its embedded cost of debt is 3.99%. Staff accepts
this cost as reasonable and no Intervenor challenges the Company’s calculation of its cost of debt.
The Commission finds it fair, just, and reasonable to adopt a cost of debt is 3.99% for
ratemaking purposes.
3. Cost of Common Equity or Return on Equity
The Company requests a ROE of 10.80%. Tr. vol. II, 246. The Company argues that a ROE
of 10.80% reflects the Company’s unique risk characteristics. Id. The Company presented
ORDER NO. 35762 7
testimony discussing the present state of the utility industry, analyzing the Company’s selection
and application of a comparable group, discussing capital cost rates, conducting a financial
analysis, and conducting a risk analysis.
The Company used several models to help formulate its requested ROE, the Discounted
Cash Flow (“DCF”), Capital Asset Pricing Model (“CAPM”), and Risk Premium (“RP”). Id. at
247. The Company states that the current range of its ROE calculations is 9.60% calculated by the
DCF method to 11.60% calculated under CAPM. The Company’s RP analysis elicited an 11.3%
ROE. Id. The Company then used a comparable group of seven publicly traded companies to
estimate the requested ROE. Id.
Staff does not agree with the Company’s inclusion of an adder based on applying the
Hamada Formula to the Company’s calculation that would increase the Company’s ROE by 110
basis points or 1.1%. Tr. vol. III, 805. Staff argues: (1) the Hamada formula is not designed for a
company that follows a constant leverage policy; (2) the Hamada formula is usually recommended
for a company that has a high level of debt that is far above optimal; and (3) the Hamada formula
does not take into account default risk. Id. at 805-07.
Micron also does not agree with the Company’s risk adjustments as applied to the
Company’s DCF, CAPM, and Risk Premium. Tr. vol. III, 1114. Specifically, Micron argues that
the Company’s Hamada adjustment is a market-to-book ratio or leverage adjustment that is not
applicable in this case and produces results that are unjust and unreasonable. Id. at 1114-15.
Staff proposes a ROE of 9.00%. Tr. vol. III, 814; Terry Ex. 119, Sched. 5. Staff provided
testimony concerning the state of the economy, the Company’s status as a wholly owned
subsidiary, the application of the Hamada Formula in the calculation of a ROE, and Staff’s
selection of a proxy group for its analysis. Tr. vol. III, 801. Staff utilized the Comparable Earnings
Model, the DCF model, and CAPM methods to calculate a proposed ROE. Id. Staff used a proxy
group consisting of the same seven publicly traded companies selected by the Company in its
comparable group, with the addition of Veolia Environnement S.A. to estimate Staff’s proposed
ROE. Id. at 807-08; Terry Ex. 119, Sched. 1.
For the Comparable Earnings Model, Staff used the last three years of ROE as a
comparison. The 2021 ROE results ranged from 3.51% to 17.31% with an average of 9.78%. The
2020 ROE results ranged from 1.23% to 13.42% with an average of 8.94%. The 2019 ROE results
ranged from 2.63% to 13.99% with an average of 9.02%. The average of all the results together is
a ROE of 9.25% with a median of 10.26%. Id. at 809; Terry Ex. 119, Sched. 1.
ORDER NO. 35762 8
For the DCF model, Staff’s ROE results ranged from 3.50% to 11.39% with an average of
7.91% and median of 9.04%. Id. at 810; Terry Ex. 119, Sched. 2.
For the CAPM analysis, Staff’s ROE results ranged from 6.32% to 13.11% with an average
of 9.33% and a median of 8.98%. Id. at 813; Ex. 119, Sched. 3.
Micron recommends that the Commission award a ROE within a recommended range of
9.00% to 9.70%, with a midpoint of 9.35%. Tr. vol. III, 978. Micron provided testimony
concerning observable market evidence, the impact of Federal Reserve policies on current and
expected long-term capital market costs, an assessment of the current risk premium built into
current market securities, and a general assessment of the current investment risk characteristics
of the regulated utility industry and the market’s demand for utility securities. Id at 1105.
Micron conducted a Constant Growth DCF Model with Analysts’ Growth, a Constant
Growth DCF Model with Sustainable Growth, and a Multi-Stage Growth DCF Model. Id. at 1075.
Based on the current market conditions, Micron represents that its DCF studies indicate a fair ROE
in the range of 8.60% to 9.50%, with an approximate midpoint of 9.00%. Id.
Micron conducted a Risk Premium analysis and recommends high-end equity risk premium
in forming a proposed ROE. Id. at 1085. Micron’s Treasury bond risk premium and utility bond
risk premium analysis indicates a ROE in the range of 9.41% to 9.73%, with an approximate
midpoint of 9.60%. Id. at 1087.
Micron conducted a CAPM study using a normalized utility beta, which produced a ROE
of approximately 9.70%. Id. at 1104.
The Company does not agree with Staff and Micron’s proposed ROE calculations. Among
its objections, the Company does not agree with Staff’s inclusion of Veolia Environnement S.A.
in Staff’s proxy group. Tr. vol. II, 371. The Company does not agree with Micron’s inclusion of a
Gas proxy group. Id. at 371-77. The Company also argues that Staff and Micron did not conduct
a proper risk analysis of the Company as compared to the proxy group. Id. at 371.
Having reviewed the record, the arguments of the parties, and all submitted materials, the
Commission finds a ROE of 9.25% is fair, just, and reasonable in this case. To determine a fair
ROE, the Commission is guided by the standards set forth in the above Supreme Court decision:
(1) the financial integrity or credit maintenance standard; (2) the capital attraction standard; and
(3) the comparable earnings standard. Order No. 33757 at 7-8. The Commission has previously
explained that there are:
ORDER NO. 35762 9
various methods for determining a fair ROE, including DCF analyses, the
Comparable Earnings method, Risk Premium analyses, and the Capital Asset
Pricing Model. Each method attempts to estimate a sufficient ROE to attract free
market investors into buying the Company’s stock. In summary:
• A DCF method assumes an investor buys stock at a price reflecting the
present value of the future cash the investor expects to receive from
dividends and the ultimate sale of the stock. Since future dollars are worth
less than present dollars, the future cash flow is discounted back to the
present at the investor’s required ROR;
• A Comparable Earnings method evaluates returns earned by other
companies, including utilities, to quantify an investor’s expected return,
taking into account the risks associated with a particular investment;
• A Risk Premium method starts with the ROR for a low-risk investment—
such as government or utility bonds—and adds a premium based on the
relative risk associated with a utility’s stock; and
• A Capital Asset Pricing Model, measures risk in relation to the market as a
whole. As markets change new concerns develop in disparate financial
circles related to the calculations used to determine the cost of equity.
While each of these methods can be useful in estimating a utility’s ROE, as with
other analytical tools used in ratemaking, these methods only imperfectly predict
the Company’s future requirements and performance. Further, the ROE allowed by
a regulatory agency is but one factor that a prudent investor might consider when
deciding whether to buy the Company’s stock.
Id. at 8.
In reaching its decision, the Commission notes that a ROE of 9.25% falls within the ranges
determined by Staff, Micron, and the Company’s own ROE calculations when not adjusted by the
Company’s adders. The Commission is not persuaded by Company’s arguments regarding the
application of the Hamada Formula, and the associated adjustments to its ROE calculations, to
resolve alleged financial risk difference between market value cost rates and book value cost rates.
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 a wholly owned subsidiary.
The Commission finds that a ROE of 9.25% will allow the Company to earn 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.”
Bluefield, 262 U.S. at 692. The Commission also finds that the associated rate of return will be
“reasonably sufficient to assure confidence in the financial soundness of the utility” and adequate,
“to maintain and support its credit and enable it to raise the money necessary for the proper
discharge of its public duties.” Id. at 693.
ORDER NO. 35762 10
II. Adjustments to Test Year Revenues, Expenses
Once a test year is selected, the test year revenue and expense accounts and rate base are
adjusted to reflect known and measurable changes so the test year totals will accurately reflect
anticipated amounts for the future period when rates will be in effect. There are generally three
types of adjustments: (1) normalizing adjustments made for unusual occurrences, like one-time
events or extreme weather conditions, so they do not unduly affect the test year; (2) annualizing
adjustments made for events that occurred at some point in the test year to average their effect as
if they had been in existence during the entire year; and (3) known and measurable adjustments
made to include events that are certain to occur outside the test year but will continue in the future,
provided that the effect on the Company’s income and expenses can be measured with reasonable
certainty.
In this case some of the Company’s proposed adjustments to test year revenues and
expenses are uncontested including Post-Retirement Benefits other than Pension (“PBOP”),
Employee Tuition Benefits, Customer Billing, Safety Expenses, unadjusted Operation and
Maintenance expense, and the Gross Revenue Conversion Factor (“GRCF”). The Commission
considers the contested adjustments below.
A. Revenue Adjustment
1. Weather Usage Adjustment
Staff proposes a revenue adjustment based on the Company’s calculation of weather usage
and the predicted normal residential consumption for the year 2022. Tr. vol. III, 859. Staff argues
that the Company erred in its calculations by predicting normal residential consumption for the
year 2023 instead of 2022. Id. at 862. Staff contends that the Company’s approach extrapolates
outside the actual data set and uses a year that does not match Staff’s test year. Id.
Micron also testified that the Company’s residential sales forecast underestimates
normalized sales and results in an understated and unreasonable projection of residential sales in
the test year. Id. at 984-86. The Company argues that its calculations are correct. Tr. vol. II, 625-
26.
Having reviewed the record, the Commission finds it fair, just, and reasonable to adopt
Staff’s calculation of the predicted normal residential consumption for the year 2022, and the
resulting adjustment of $738,348 (including the meter error rebilling adjustment below) to the
Company’s test year revenues at present rates.

ORDER NO. 35762 11
2. Meter Error Rebilling
Staff proposes a revenue adjustment related to rebilling that occurred after the 2022 test
year but is a result of inaccurate meter readings that occurred from July 2022 through January
2023. Tr. vol. III, 856. The adjustment represents rebilled revenue that was not included in the
2022 Test Year Booked Values. Id. The Company agrees that the Commission should use the most
up-to-date information concerning the meter error rebilling in calculating the revenue at present
rates. Tr. vol. II, 638.
The Commission finds the most up-to-date number of rebills due to meter reading errors
to be 1,810. Therefore, the Commission applies an associate adjustment to the calculation of test
year revenues at present rates.
B. Expense Adjustments
1. Payroll Expense Adjustments
The Commission finds it fair, just, and reasonable to reduce the Company’s payroll expense
by a total of $635,883 as set forth below.
a. Unfilled Positions, Stand-By Pay, and Overtime
Staff proposes an adjustment to remove four employee positions that had not been filled
by Staff’s test year cut-off date of December 31, 2022. Tr. vol. III, 731. Similarly, Staff proposes
to remove the Company’s proposed pro forma 2023 increase in the Company’s calculation of
Stand-By Pay. Id. at 734. Staff also proposes to remove the Company’s Overtime adjustment
arguing that it is an estimate and is not known and measurable, and the Company’s proposed
addition of 15 new employees should decrease the amount of overtime hours incurred during the
year and thus decrease total overtime expense. Id at 740.
Micron proposes removing all unfilled positions because the Company has not justified the
additional employees or explained why they are required. Id. at 981.
The Company argues that all employee positions will be filled, and the last employee start
date will be in April 2023, before the conclusion of this case and the effective date of new tariff
rates. Tr. vol. II, 168. The Company also contends that Overtime and Stand-By pay rates are
identified in the collective bargaining unit agreement and follow the established rates of pay. Tr.
vol. II, 171.
Having reviewed the record, the Commission notes the rapid growth in the Company’s
employee count and the uncertainty that the added positions will remain filled. While Micron’s
contention that the Company has not justified the new positions has merit, we decline to disallow
ORDER NO. 35762 12
the positions that have been filled by December 31, 2022. We do have concern with the Company
adding numerous positions in a test year prior to filing a general rate case, and generally believe
that new positions should be added gradually. In this case, the Commission finds it fair, just, and
reasonable to exclude the four unfilled positions corresponding to the test year cut-off date of
December 31, 2022. We note that the wages and associated payroll expense for each new employee
added in 2022 has been captured in the revenue requirement at an annualized amount, ensuring the
Company with adequate funds to cover payroll expenses for all employees of the Company on
December 31, 2022. The Commission also excludes the Company’s pro forma adjustments to
Stand-By and Overtime pay in this case as not known and measurable.
b. Incentive Pay
Staff proposes to remove the Company’s incentive pay from the revenue requirement. Staff
argues that the Company: (1) already compensates its employees with a base salary and additional
benefits; (2) that short-term incentive plans (“STEP”) vary from year to year and are speculative;
and (3) that Incentive Plans are self-funding. Tr. vol. III, 734-36.
The Company represents that the Incentive Programs are based on employee performance
as it relates to achievement of specific objectives, as well as Company performance, both in terms
of safety and financial results. Tr. vol. II, 172. The Company argues that the 2022 objectives and
achievements have been evaluated for non-bargaining employees and the Incentive Plan payments
based on achieving those employee goals and Company results are paid in March 2023. Id. The
Company represents that for non-bargaining employees performance ratings consist of 25%
individual objective performance and 75% Veolia Values performance (Respect, Customer Focus,
Solidarity, and Innovation). Id. at 171.
Based upon the record before it, the Commission cannot find that the amount the Company
expended on employee incentive pay in this case is reasonable. The Commission has no basis to
quantify how Veolia Values directly translates to customer benefits, nor the extent to which an
employee’s personal goals and objectives improve the service provided to customers. When Veolia
can demonstrate that the metrics and criteria of its Incentive Program are transparent and readily
able to be reviewed, and provide a discernible customer benefit, the Commission will consider
including incentive payments for recovery in rates. Portions of incentive plans that provide benefits
to shareholders will continue to be funded by shareholders. The Company retains the burden to
show that the wages it pays are fair and reasonable for the territory in which is serves. Thus, the
Commission finds it fair, just, and reasonable to exclude the Company’s incentive payments.
ORDER NO. 35762 13
c. 2023 Pay Increases
In its Application, the Company adjusted its historical test year payroll to include a 4%
wage increase for non-bargaining unit employees and a 2.75% wage increase for bargaining unit
employees expected to occur on April 1, 2023. Tr. vol. II, 168-71. Staff proposes to remove the
Company’s pro forma 2023 pay increases in keeping with a December 31, 2022, test year cut-off
date. Tr. vol. II, 733-34.
In response, the Company argues that bargaining unit employees contract reflects a 2.75%
increase in bargaining unit wages effective April 1, 2023, and that the overall non-bargaining unit
2022 performance rating completed in March 2023 resulted in a wage increase of 3.6% with an
effective date of April 1, 2023. Tr. vol. II, 168-70.
The Commission finds it fair, just, and reasonable to approve the Company’s requested
adjustment for a wage increase of 3.6% for non-bargaining unit employees and a 2.75% increase
to bargaining unit employees, as adjusted by the Commission’s above approved adjustment
removing the four unfilled positions.
2. Workers’ Compensation
Workers’ compensation is based on a percentage of payroll. As the payroll increases, so
does workers’ compensation insurance. Staff and the Company agree on a percentage amount of
1.004%. The Commission finds it fair, just, and reasonable to reduce workers’ compensation by
$9,645 in conformity with the Commission’s payroll decisions above and the calculation of the
total gross payroll amount.
3. Healthcare Insurance
The Commission finds it fair, just, and reasonable to increase Healthcare Insurance by
$240,439 in conformity with the Commission’s adjustments to payroll expenses to include the
additional positions filled during 2022.
4. Employee 401k
Staff proposes that the Company recover its actual 401(k) Match expense incurred in 2022.
Tr. Vol. III, 747. The Company argues that the 401(k) amount should be based on the Company’s
rebuttal gross payroll amount, less incentives. Tr. Vol. II, 232-33.
Consistent with our prior Orders, the Commission finds it fair, just, and reasonable to use
actual test year contributions to calculate the 401k contribution adjustment. The Company’s 401(k)
plan allows employees to cease or commence payroll deductions at any time, either ending or
creating the Company’s responsibility to make a matching contribution. With vacant positions,
ORDER NO. 35762 14
employee turnover, and the unknown elections of each employee to commence or cease
deductions, pro forma adjustments to the test year data are not known and measurable. Thus, the
Company’s 401k expense is reduced by $44,890 in conformity with the Commission’s above
decisions using a calendar year 2022 test year.
5. Fringe Benefits
The Fringe Benefits allocation incorporates payroll taxes, workers’ compensation, pension
service cost, PBOP service cost, Group Health & Life, 401k, and Other Employee benefits to
calculate the percentage of labor charged to capital projects. Staff and the intervening parties do
not object to the formulaic method used by the Company to calculate the Fringe Benefit allocation.
The Commission finds it fair, just, and reasonable to reduce the Company’s Fringe Benefits by
$41,646 in conformity with the Commission’s decisions on the previously discussed payroll
adjustments.
6. Payroll Taxes
The Commission finds it fair, just, and reasonable to reduce the Company’s Payroll Taxes
by $74,381 in conformity with the Commission’s decisions herein.
7. Vehicle Allocation
The Commission finds it fair, just, and reasonable to reduce the Company’s Vehicle
Allocation expense by a total of $167,893 as set forth below.
a. Mechanic Pay Increase
The Commission finds it fair, just, and reasonable to allow an adjustment for 2023 pay
increase for the Company Mechanic in conformity with the Commission’s decision to include a
3.6% wage increase for non-bargaining unit employees in 2023.
b. Vehicle Lease Expense
Staff proposes excluding the vehicle lease expense for 22 vehicles that were included in
the Company’s case that had not been delivered to the Company prior the test year cut-off date of
December 31, 2022. Tr. Vol. III, 754. Staff contends that it is not appropriate for the Company to
include the lease expense in customer rates when no party had the opportunity to review the terms
of the lease and need for the additional vehicles. Id.
The Company argues that since Staff’s onsite audit in January of 2023, the Company has
received 15 of the new leased vehicles, and the Company has worked with local Kendall Ford of
Meridian dealership to secure the other 7 vehicles, four of which have arrived, and the other three
are confirmed by the dealership to arrive in mid-April. Tr. vol. II, 236-37.
ORDER NO. 35762 15
In keeping with the chosen test year and our preference that the parties have the opportunity
to review and evaluate expenses prior to presenting their case, the Commission finds it fair, just,
and reasonable to adopt Staff’s adjustment to vehicle allocation expense with respect to leased
vehicles that were not in the Company’s possession within the selected test year.
c. Fuel
i. Fuel Cost
Staff argues that the Company’s fuel cost estimates may be overstated and not reflective of
the entire test year. Staff proposes fuel costs using the average AAA prices for regular and diesel
fuel on January 30, 2023. Tr. Vol. III, 754-55. In rebuttal, the Company argues that given the
volatility in fuel prices the Company proposes to use an updated average price of regular fuel of
$3.792 and $4.513 for diesel fuel as of March 6, 2023, per AAA “Boise City” prices. Tr. Vol. II,
237-38.
The Commission finds it fair, just, and reasonable to calculate the Company’s fuel cost
adjustment using an updated average price of regular fuel of $3.72 and $4 for diesel fuel as of
April 17, 2023.
ii. Fuel Consumption
Staff proposes removing the additional estimated 5.5% increase in fuel consumption from
the Company’s fuel consumption adjustment. Tr. Vol. III, 754-55. Staff argues that the Company’s
projected fuel consumption is not a known and measurable, as fuel consumption can vary from
year to year, and it would be impossible to predict the number of gallons of fuel consumed in any
given year. Id. The Company proposes to use actual fuel consumed for the 12-month period ending
February 28, 2023. Tr. Vol. II, 238.
The Commission finds it fair, just, and reasonable to calculate the Company’s fuel
consumption adjustment without pro forma adjustments using actual fuel consumed for calendar
year test year ending December 31, 2022. These amounts were provided to Staff and parties to
review prior to the presentation of their cases in direct testimony.
d. Vehicle Materials, Maintenance, 3% Inflation
Staff proposes removing the Company’s inflation adjustment to its vehicle materials and
maintenance adjustment. Tr. Vol. III, 755-57. Staff argues that it has historically opposed inflation
adjustments because they are not known and measurable. Id. The Company argues that the impact
of inflation during 2022 was known and measurable as 2022 year-end material and maintenance
costs totaled $258,557. Tr. Vol. II, 239-40. The Company represents that this is an increase of
ORDER NO. 35762 16
$42,487 over the as-filed historic test year amount of $216,070 which included the 3% inflation
projection. Id. The Company does not propose to increase vehicle expenses by the actual 2022
year-end amount but stands by its as filed position of $216,070 which includes a 3% inflation
increase. Id.
The Commission continues to find that inflation adjustments or other escalation
adjustments based on estimates are not known and measurable. Therefore, we find it fair, just, and
reasonable to exclude the Company’s 3% inflation adjustment to its vehicle materials and
maintenance adjustment.
8. Advertising Expense
Staff proposes removing the Company’s pro forma cost adjustment for printing Consumer
Confidence Reports (“CCRs”) that the Company physically mails to its customers. Tr. Vol. III,
747-61. Staff argues that the Company is not required to provide a physical copy, rather, the
Company is only required to make the CCRs available to customers. Id.
The Company argues that important and regulatory required information should be mailed
to all customers. Tr. Vol. II, 234-35. The Company represents that it will continue to provide
notification via our Facebook and Twitter pages, a digital banner ad on IdahoStatesman.com with
a link to a sponsored news article about the CCR, and a bill message for customers who receive
their statement on paper or electronically. Id. The Company testified that all forms of notification
let customers know how to find the CCR on its website; however, the printed mailer is the version
the Company feels is the most effective. Id.
The Commission is not persuaded by the Company’s arguments that customers are more
likely to read the CCRs when a copy is received by mail. The Company provides several methods
of notification to customers regarding the whereabouts of the report, and we encourage the
Company to continue to notify customers of the report in a cost-efficient manner. The Commission
finds it fair, just, and reasonable to remove the unnecessary expense for printing CCRs as the
Company is not required to provide physical copies to its customers. This reduces the Company’s
advertising expenses by $30,000.
9. Office Expense-Cityworks License and CCR Postage
Staff proposes removing the cost of four Cityworks licenses corresponding to the four
unfilled employee positions at Staff’s calendar year test year ending December 31, 2022. Tr. Vol.
III, 757-59. Staff also proposes removing the costs associated with physically mailing CCRs to
customers. Id.
ORDER NO. 35762 17
As the Commission has already excluded the unfilled employee positions from the
Company’s payroll adjustments, and the Commission has also removed the costs to physically
print the CCRs, the Commission finds it fair, just, and reasonable to removing the cost of four
Cityworks licenses and the costs associated with physically mailing CCRs to customers. This
adjustment reduces the Company’s office expenses by $27,544.
10. Shared Management & Services (“M&S”) Fees
The Commission finds it fair, just, and reasonable to reduce the Company’s Shared M&S
fees by a total of $161,101 as set forth below.
a. Return on Shared IT Assets
Staff proposes removing the return on shared IT assets because the Company is including
a return on the shared M&S IT assets at the Company’s requested pre-tax rate of return of 9.85%.
Tr. Vol. III, 776-79. Staff is concerned that the parent company is attempting to include additional
profits from its allocated charges to its subsidiary. Id.
The Company argues that for ratemaking purposes, the Company is requesting that a return
be allowed on the overall investment made to serve its utilities customers including Idaho. Tr. Vol.
II, 686-89. The Company states that the intention is that the return be consistent with that ultimately
allowed by the Commission in this proceeding. Id. If the Commission allows a return different
than that proposed by the Company, an adjustment should be made to the return amount consistent
with that decision. Id.
The Commission finds it fair, just, and reasonable to include a return on shared IT assets
at a rate consistent with this Order.
b. Depreciation Expenses
Staff proposes adjusting the shared M&S IT assets depreciation expenses because the
Company uses depreciation rates that are not approved by the Commission, and the Company adds
a pro forma adjustment to the depreciation expenses out to March 2023. Tr. Vol. III, 777-78.
The Company argues that under its current methodology, capital expenditures, generally
related to information technology are recorded on the VWM&S balance sheet and the depreciation
expense on these assets is allocated to the operating companies based upon the three-factor formula
as a part of VWM&S charges. Tr. Vol. II, 686-89. The Company represents that the carrying costs
associated with assets are calculated and recovered from the utility customers who receive the
benefit of the assets, and the carrying costs are calculated utilizing the capital structure, debt and
equity rates included in the rate case filing. Id.
ORDER NO. 35762 18
The Commission finds that all depreciation expenses must be calculated using rates
approved by this Commission. It is unreasonable to allow recovery of depreciation expense that is
based on rates that have not been reviewed by Staff and the parties nor approved by the
Commission. The Commission finds it fair, just, and reasonable to include depreciation expenses
at a rate approved by the Commission and without pro forma adjustments.
c. Legal and HR Wages
Staff proposes removing the wages for four VWM&S attorneys that do not work in Idaho’s
jurisdiction. Tr. Vol. III, 780-81. Staff also recommends decreasing M&S fees to account for four
HR employees that are not doing work on the regulated side of the parent company. Id.
The Company argues that there are 10 VWM&S employees in the legal department that
provide services that benefit Idaho. Tr. Vol. II, 697-98. Three provide services to the utilities while
7 provide services to the utilities as well as other Veolia business units. Id. The Company contends
that there are 12 VWM&S employees in the HR department that provide services benefiting the
Company. Id. at 703. Two provide services to the utilities while 10 provide services to the utilities
as well as other VWM&S business units. Id.
The Company represents that approximately 9.5% of the costs of the “utility only”
employees are allocated to Idaho while approximately 7.7% of the employee costs that provide
services to all business units to which VWM&S provides services, including the utilities, are
allocated to Idaho. Id.
Having reviewed the record, the Commission cannot find sufficient evidence to allocate
the expenses associated with the Company’s representation of work done for the benefit of Idaho
customers. The Commission finds it fair, just, and reasonable to adopt Staff’s calculations and
adjustments with respect to Legal and HR wages.
d. COO Wages, 2023 Corporate Salary Increase, Executive
Training, Pro forma Insurance Premium, and Board of
Directors’ Compensation
Staff proposes removing the Company’s wage adjustment for the COO. Tr. Vol. III, 781.
Staff argues that the COO does not benefit Idaho ratepayers but supports the board of directors
and helps the parent company earn a profit for shareholders. Id. Similarly, Staff proposes removing
the 2023 salary increase for corporate employees, the expenses associated with executive training
and travel, pro forma Insurance Premium, and Board of Directors’ compensation. Id. at 781-83.

ORDER NO. 35762 19
The Commission has already determined an appropriate adjustment for the Company’s
2023 wage increases, and the Commission finds that 2023 M&S corporate salary increases should
be similarly treated. With respect to COO wages, executive training, pro forma Insurance
Premium, and Board of Directors’ compensation, the Commission once again cannot find
sufficient evidence to fully allocate the Company’s claimed expenses to work done for the benefit
of Idaho customers. However, the Commission believes that in this case some portion of the
expenses should be allocated to Idaho. Therefore, the Commission finds it fair, just, and reasonable
to apply a 50% reduction to the amounts requested by the Company.
11. General Insurance, and Injuries and Damages
Staff proposes using a three-year average of $206,119 compared to the Company’s two-
year average of $242,524 in calculating general insurance. Tr. Vol. III, 783-84. This adjustment
provides the Company an additional $72,810 over the actual amounts incurred during 2022 to
account for year-to-year volatility. Id. Staff proposes removing $28,947 from Injuries and
Damages caused by employees errantly leaving valves open and vehicle crashes where the
employee was at fault. Id. Staff argues that customers should not pay for injuries and damages that
are due to negligence of the Company’s employees. Id.
The Company accepts Staff’s proposal for a three-year average calculation for general
insurance; however, the Company disagrees with the exclusion of injuries and damages associated
with Company negligence. Tr. Vol. II, 184-87. The Company argues that insurance is a valid
expense regardless of the cause. Id.
The Commission finds it fair, just, and reasonable to approve using a three-year average in
calculating general insurance; however, the Commission excludes those expense for injuries and
damages associated with the Company’s own actions and employees as identified by Staff.
Customers should not bear the responsibility of paying for injuries and damages caused by agents
of the Company. To do so would erode the Company’s accountability for the actions of its
employees.
12. Cost of Service Study (“COSS”) and Load Study
Staff proposes removing the expense associated with the COSS and Load Study. Tr. Vol.
III, 870-73. Staff argues that the Load Study did not perform a robust analysis to verify that the
current classes or any other potential classes are the appropriate classes. Id. Staff contends that the
purpose of determining appropriate classes was identified in the Stipulation authorized in Case No.
SUZ-W-20-02 through Commission Order No. 35030. Id.
ORDER NO. 35762 20
Order No. 35030 provides in relevant part:
3. Future load study
The Company agreed to complete a load study to “provide calculated max-day and
max-hour factors for the total system as well as by appropriate customer class.”
Id. at 6. The Company will work with interested parties to take input on load study
components including “customer class definitions, sampling methodologies
from those classes, and data sources.” Id. The Company would commence these
discussions soon after the final decision in this docket and will finish within 12
months.
Order No. 35030 at 4 (emphasis added).
Staff argues that the Load Study was not performed in a manner that makes it used and
useful to inform the COSS. Tr. Vol. III, 870-73. Staff testified that to make it useful, the Load
Study should have identified the appropriate classes based on data collected during the Load Study.
Id. Because the Load Study did not identify potential classes prior to data collection, differences
in demand and consumption patterns of potential customer classes could not be determined. Id. As
a result, the values used from the Load Study and the results of the COSS are not useful. Id.
The Company argues that the Company’s COSS and Load Study was used and useful
because using AMI data, the Load Study identifies how typical water utility customer classes use
the system; therefore, if customers are “grouped” incorrectly, their pattern of behavior will create
outliers in the data. Tr. Vol. II, 468-69. Further, the Company argues that collecting the data that
Staff is requesting would likely require significant costs. Id. at 472-73.
Having reviewed the record, the arguments of the parties, and all submitted materials, the
Commission finds it fair, just, and reasonable to remove the Company’s COSS and Load Study
expenses. Specifically, the Commission notes its previous Order No. 35030 authorizing a
stipulation in which the Company agreed to conduct a Load Study to collect data “by appropriate
customer class” and to take input from interested parties on Load Study components including
“customer class definitions, sampling methodologies from those classes, and data sources.” Order
No. 35030 at 4. However, the record shows that the Company did not consider new sampling
methodologies, customer class definitions, nor data sources in its analysis. Rather, the Company
collected and analyzed its data only in comparison to “typical water utility customer classes” and
relied upon its preconceived assumptions as to the correctness of those typical classes.

ORDER NO. 35762 21
13. Rate Case Amortization Expense, Intervenor Funding
Staff proposes removing the Company’s expense adjustment for the current rate case
intervenor funding, and to change the amortization timeframe for rate case expenses from two
years to four years. Tr. Vol. III, 817-20.
The Company agrees with removing intervenor funding; however, the Company argues
that using a 2-year amortization period will ensure that the costs are recovered without adding the
burden of unamortized expenses on the rates in the following rate case. Tr. Vol. II, 604-06.
Based on the particular facts of this case, including the frequency of rate case filings the
contested issues the amounts in controversy, the proportional differences in recommendations
from the Company, Staff, and our review of the record and evidence presented on the issue, we
find that a proper amortization period for the recovery of the Company’s rate case expense is four
years, which will provide the Company with timely recovery of the expenses incurred to process
this case.
14. Tank Painting Amortization Expense
Staff proposes removing the Hidden Hollow tank painting deferral and amortization
because the Hidden Hollow tank was not scheduled to be finished until March of 2023, after Staff’s
proposed test year. Tr. vol. III, 821-22.
The Company agrees with removing the costs related to the painting of Hidden Hollow
tank interior; however, the Company argues that it will complete the painting of the interior of the
Ustick tank prior to the end of March 31, 2023, and proposes adding $430,100 of tank painting
costs as part of rate base and therefore within the proposed amortization expense. Tr. vol. II, 604.
In keeping with the chosen test year, the Commission finds it fair, just, and reasonable to
adopt Staff’s adjustment and exclude the Hidden Hollow tank painting deferral and amortization
as outside of the selected test year.
15. Deferred Power Expense
Staff proposes using the actual expenses the Company has incurred through the year ended
December 31, 2022, along with interest at the customer deposit rate. Tr. vol. III, 815-17. Staff also
proposes a 4-year amortization period based on the average time between rate cases. Id.
The Company argues that its original proposal includes the actual deferred power expenses
through June 30, 2022, including the related interest and a projected amount for the expected
deferral of power expenses and accrued interest through March 31, 2023. Tr. vol. II, 600-04. The
Company proposes using the actual deferred power expenses and accrued interest through
ORDER NO. 35762 22
February 28, 2023, of $695,112 in its calculation of the test year deferred power amortization
expense. Id. The Company believes that using a 2-year amortization period will ensure that the
costs are recovered without adding the burden of unamortized expenses on the rates in the
following rate case. Id.
In keeping with the chosen test year, the Commission finds it fair, just, and reasonable to
adopt Staff’s adjustment to deferred power expense. The Commission also finds that a proper
amortization period for the recovery of the Company’s deferred power expense is four years, which
is consistent with the amortization period allowed for rate case expenses.
16. Miscellaneous Expenses
Staff proposes an adjustment to the Company’s Miscellaneous Account to remove several
expenses related to advertising, the chamber of commerce, and support for political candidates.
Tr. vol. III, 762. The Company argues that Staff’s proposal excludes $3,592 of costs for events
such as the Company’s Water Summit event and two Company open house events for engaging
and educating customers. Tr. vol. II, 187-92. The Company contends that those types of expenses
should be recoverable. Id.
The Commission finds it fair, just, and reasonable to adopt most of Staff’s adjustments;
however, the Commission finds that the Company should recover the costs and expenses
associated with the Company’s three engagement and education events.
17. Variable Expense due to Volume
The Commission finds it fair, just, and reasonable to calculate Power and Chemical
expenses in conformity with the Commission’s other determinations and decisions to normalize
the Company’s sales revenue.
18. Depreciation Adjustment for Test Year
Because Staff proposes removing all 2023 plant additions from rate base, Staff argues it is
necessary to remove the depreciation expense associated with those capital projects, which reduces
the Company’s proposed depreciation expense by $546,459. Tr. vol. III, 935.
The Company argues that it is committed to completing projects as planned and should be
allowed to include these projects in its rate base and depreciation expense calculated based on the
plant projected to be in service as at the end of March 31, 2023. Tr. vol. II, 560-61.
In keeping with the chosen test year, the Commission finds it fair, just, and reasonable to
remove the depreciation expense associated with those capital projects not completed by
ORDER NO. 35762 23
December 31, 2022. The Company shall not recover depreciation expense associated with new
plant investment that has not been reviewed and evaluated by Staff and the parties.
III. Rate Base
A. End of Year v. Average Monthly Average (“AMA”)
Generally, there are two ways to value a Company’s rate base: (1) using a terminal rate
base which is the value of plant, net of any offsets, at a single point in time at the end of the year;
or (2) calculating an average value of plant, net of any offsets, throughout the year.
Staff proposes to establish a revenue requirement for the Company using rate base levels
based on the AMA from December 31, 2021, through December 31, 2022. Tr. vol. III, 923-24.
The Company argues that it uses a historical test period adjusted for known and measurable
changes to coincide with when rates will be in effect. Tr. vol. II, 673-77. The Company contends
that in an environment where the Company is making large capital investments, using the
averaging of historical rate base method omits capital additions in-service when new rates will be
in effect, and may decrease or deny the Company the opportunity to recover the value of
investments made during this period. Id. The Company recommends that the Commission
reconsider the old Orders relied on by Staff and consider the regulatory lag created, the mismatch
in revenues to rate base, rate base growth, inflation, from a holistic standpoint and utilize a test
year end rate base in this case. Id.
The Commission finds it fair, just, and reasonable to establish a revenue requirement for
the Company using rate base levels based on the AMA from December 31, 2021, through
December 31, 2022. The Commission continues to believe that including plant investment in the
calculation of rate base as if it were in service the entire year creates a mismatch between test year
revenue and expenses, and it is unreasonable to expect the Commission to allow full recovery of
plant investment as if the plant has been in operation the full year without a corresponding
adjustment to revenues and expenses.
B. Rate Base Adjustments
1. Working Capital
Staff proposes to remove working capital from the Company’s rate base calculation. Tr.
vol. III, 938-41. Staff notes that the Company used the 1/8 Method to calculate its working capital,
and Staff contends that a utility the size of the Company should not be recovering its estimated
working capital using such an elementary calculation. Id. Further, Staff argues that without an

ORDER NO. 35762 24

explicit showing that working capital was provided by shareholders rather than customers, utilities
should not include working capital in rate base. Id.
The Company argues that it used an acceptable methodology to calculate working capital.
Tr. vol. II, 673-77. However, the Company contends that if the Commission agrees with Staff
regarding Cash Working Capital, the balance of Materials and Supplies and Prepayments
$1,583,204 at December 31, 2022 or $1,555,760 as projected at March 31, 2023, should be
included in rate base because if the Company had performed a lead/lag study to calculate working
capital, these items would have been included as separate line items in rate base. Id.
Having reviewed the record, the arguments of the parties, and all submitted materials, the
Commission finds it fair, just, and reasonable to remove working capital from the Company’s rate
base calculation. The Commission cannot find sufficient evidence in the record showing that
working capital was provided by shareholders rather than customers.
2. Deferred Debits
When calculating the AMA rate base, Staff removed the short-term deferred debits that the
Company included. Tr. vol. III, 934-35. The deferred debits consist of the Company’s power cost
deferrals, rate case expense deferrals, and deferrals for the payment of convenience fees. Id. Staff
argues that because they are relatively short-term regulatory asset, the Commission has historically
stated that the opportunity to recover expenses is sufficient and a return is unnecessary. Id. at 815-
22.
The Company argues that the inclusion of the unamortized balance of the deferred power
costs, deferred rate case expense, and deferred convenience fees in rate base should be similar to
the rate base treatment that has been allowed for deferred Tank Painting Expenses and given an
amortization period of 2 years. Tr. vol. II, 563.
Having reviewed the record, the arguments of the parties, and all submitted materials, the
Commission finds it fair, just, and reasonable to adopt Staff’s calculation of rate base adjustments
and to exclude deferred debits. The Commission has not authorized the Company to include the
deferred debits in rate base to earn a return. When authorization to defer expenses is granted, and
no return is authorized, we direct the Company to exclude the regulatory assets from its net rate
base calculations.

ORDER NO. 35762 25
3. Tax Cuts and Jobs Acts (“TCJA”) Federal Tax error
The Company and Staff agree on the application of the regulatory liability created by the
TCJA which reduces rate base in this case, and the Commission finds that rate base shall be
adjusted accordingly.
IV. Cost-Of-Service Study
A cost-of-service study is an imperfect tool for assigning system and service costs to
customer classes. The Commission has previously recognized that cost-of-service modeling is not
an exact science, and that while most generally accepted cost-of-service methods are based on
similar principles, they may lead to disparate results and recommendations for class revenue
allocation. Thus, the Commission has repeatedly emphasized that a cost-of-service study is not a
perfect tool for assigning system and service costs to customer classes. Order No. 33757 at 27.
A. Company COSS and Load Study Results
The Company represents that for the test year ending March 31, 2023, the total revenue
requirement reflects a 23.4% revenue increase. The Company argues that the COSS suggests that
the overall average revenue increase by customer class would be:
● Residential – an increase of 27.5%
● Commercial – an increase of 21.8%
● Public Authority – an increase of 2.5%
● Private Fire – a decrease of 62.9%
Tr. vol. II, 463; Bui Ex. 14-1. With respect to the Load Study, the Company argues that the Load
Study results indicate that the System maximum day ratios are consistent with the Company’s
ratios based on correlating the highest annual maximum water production day for the last ten years.
Tr. vol. II, 461.
B. Staff Response
As noted above, Staff argues that the Load Study did not perform a robust analysis to verify
that the current classes or any other potential classes are the appropriate classes. Tr. vol. III, 870-
73. Staff argues that the purpose of determining appropriate classes was identified in the
Stipulation authorized in Case No. SUZ-W-20-02 through Commission Order No. 35030.
Staff contends that the Load Study was not performed in a manner that makes it used and
useful to inform the COSS, and to make it useful, the Load Study should have identified the
appropriate classes based on data collected during the load study. Tr. vol. III, 870-73. Staff argues
that because the Load Study did not identify potential classes prior to data collection, differences
ORDER NO. 35762 26
in demand and consumption patterns of potential customer classes could not be determined. Id. As
a result, the values used from the Load Study and the results of the COSS are not useful. Id.
C. Micron Response
Micron argues that the Company’s COSS follows the generally accepted Base-Extra
Capacity cost allocation method, which is a reasonable approach. Tr. vol. III, 1150. However,
Micron contends that the COSS needs to be modified to improve the accuracy of the measurement
of its cost of providing service to each customer class. Id. Specifically, Micron argues that the
Company’s proposed revenue apportionment should be rejected, as it does not make a meaningful
movement toward cost of service for each customer class and continues the interclass subsidies
that have existed for years. Id.
V. Rate Design
Based upon its COSS, Load Study, and accompanying analysis, the Company’s rate design
reflects an across-the-board increase of 24.1% to Residential, Commercial, and Public Authority
customers. The Company does not request any increase for Private Fire Service. Bui Ex. 14.1.
Based upon the lack of a useful COSS and Load Study, Staff proposes a uniform percentage
increase across all rate components and customer classes. Tr. vol. III, 875-77. Staff argues that
without the establishment of consumptive classes and a valid COSS study, it is impossible to fairly
allocate the increase based on traditional cost causation principles. Id.
Micron proposes rates be established that account for a revenue apportionment where all
classes are brought to cost of service in this case, subject to the limitation that no class receives an
increase greater than 1.25x the system average increase, with any remaining revenue deficiency
spread to classes that would receive a rate change below the system average, in proportion to each
of the noncapped class’s total cost of service. Tr. vol. III, 1150.
Having reviewed the record, the arguments of the parties, and all submitted materials, the
Commission finds it fair, just, and reasonable to adopt Staff’s rate design including an across-the-
board increase for all customer classes including Private Fire Service. The Commission does not
find the COSS and Load Study useful, and while the Commission agrees with Micron regarding
the need for meaningful movement toward cost of service for each customer class, such movement
shall have to wait until the Commission is given adequate information upon which to make such
meaningful changes.

ORDER NO. 35762 27
VI. Distribution System Improvement Charge (“DSIC”)
A DSIC is a surcharge mechanism which allows for rate increases between general rate
case proceedings that specifically relate to non-revenue producing investments to replace aging
utility infrastructure.
The Company argues that the major benefits of these types of capital surcharges include
enhanced service quality, accelerated pace of system improvements, high level of customer
acceptance, smoothing of revenue increases to customers, reduction of water lost in the distribution
system through leaks, long term viability of the water system, and support of economic
development through increased investment and employment activity. Tr. vol. II, 658-60.
Staff recommends the Commission deny the Company’s request for a DSIC mechanism.
Tr. vol. III, 787-93. Staff supports the Company’s work to maintain safe and reliable service by
replacing or upgrading aging infrastructure; however, Staff argues that these costs are more
appropriately reviewed and recovered through traditional ratemaking in general rate cases rather
than through a bi-annual cost recovery mechanism as proposed by the Company. Id. Staff argues
that the types of expenses the Company wishes to recover through the DSIC are known and
predictable capital expenditures that can be planned well in advance, can be included for recovery
in a general rate case, and the Company has the financial ability and access to capital to fund these
projects between rate cases. Id. Micron also recommends the Commission reject the Company’s
proposed DSIC mechanism. Tr. vol. III, 1151.
Having reviewed the record, the arguments of the parties, and all submitted materials, the
Commission finds it fair, just, and reasonable to deny the Company request for a DSIC mechanism.
The Commission agrees with Staff in that the types of expenses the Company is trying to recover
are known and predictable expenditures that are better suited for recovery in a general rates case.
Further, the Commission is not persuaded by the Company’s arguments that the Commission
should provide incentives for the Company to make distribution system improvements that the
Company is already duty bound to make to provide safe and adequate service to its customers.
VII. Other Company requests
In addition to the general rates issues, the Company proposes a revision to its Rules and
Regulations Governing the Rendering of Water Service to reflect the name change from Suez
Water Idaho Inc. to Veolia Water Idaho, Inc.; to eliminate 1¼-inch meters reference from the tariff;
and to revise the service line connection from one-inch or smaller to two-inch or smaller according
to NFPA 13D standards.
ORDER NO. 35762 28
Having reviewed the record, the arguments of the parties, and all submitted materials, the
Commission finds it fair, just, and reasonable to grant the Company’s other requests.
ORDER
IT IS HEREBY ORDERED that the Company file tariffs and schedules in conformance
with this Order, to be effective on May 1, 2023, for service rendered on and after that date. The
authorized rates are set forth in Attachment B.
IT IS FURTHER ORDERED that the Company is authorized an overall ROR of 6.91%,
and to recover an additional $2,756,227 in annual base revenues.
IT IS FURTHER ORDERED that the Company’s request for a DSIC mechanism is denied.
IT IS FURTHER ORDERED that the Company may revise its Rules and Regulations
Governing the Rendering of Water Service to reflect the name change from Suez Water Idaho Inc.
to Veolia Water Idaho, Inc.
IT IS FURTHER ORDERED that the Company may eliminate the 1¼-inch meters
reference from the Company’s tariff; and may revise the service line connection from one-inch or
smaller to two-inch or smaller according to NFPA 13D standards.
IT IS FURTHER ORDERED that the Company take such other actions as may be set forth
in the body of this Order.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date upon this Order regarding any
matter decided in this Order. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. Idaho Code §§ 61-626
and 62-619.
///

ORDER NO. 35762 29
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 28th day of
April 2023.

__________________________________________
ERIC ANDERSON, PRESIDENT

__________________________________________
JOHN R. HAMMOND JR., COMMISSIONER

__________________________________________
EDWARD LODGE, COMMISSIONER

ATTEST:

_________________________________
Jan Noriyuki
Commission Secretary

I:\Legal\WATER\VEO-W-22-02 rates\Orders\VEOW2202_FO_cb.docx
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
Company Company Commission
Current Proposed % Increase Ordered % Increase
5/8 Inch 22.96 28.48 24.05%24.58 7.06%
3/4 Inch 22.96 28.48 24.05%24.58 7.06%
1 Inch 29.35 36.41 24.05%31.42 7.06%1 1/2 Inch 50.21 62.29 24.05%53.75 7.06%
2 Inch 77.92 96.66 24.05%83.42 7.06%
Winter Usage 1.5959 1.9797 24.05%1.7086 7.06%
Summer Usage
Up to 3 CCF 1.5959 1.9797 24.05%1.7086 7.06%
Over 3 CCF 2.0204 2.5063 24.05%2.1630 7.06%
5/8 Inch 22.96 28.48 24.05%24.58 7.06%
3/4 Inch 22.96 28.48 24.05%24.58 7.06%
1 Inch 29.35 36.41 24.05%31.42 7.06%
1 1/2 Inch 50.21 62.29 24.05%53.75 7.06%
2 Inch 77.92 96.66 24.05%83.42 7.06%
3 Inch 151.97 188.52 24.05%162.70 7.06%
4 Inch 283.52 351.71 24.05%303.54 7.06%
6 Inch 473.35 587.20 24.05%506.77 7.06%
25.00 31.01 24.05%26.77 7.06%
Winter Usage 1.5959 1.9797 24.05%1.7086 7.06%Summer Usage
Up to 3 CCF 1.5959 1.9797 24.05%1.7086 7.06%
Over 3 CCF 2.0204 2.5063 24.05%2.1630 7.06%
5/8 Inch 22.96 28.48 24.05%24.58 7.06%
3/4 Inch 22.96 28.48 24.05%24.58 7.06%
1 Inch 29.35 36.41 24.05%31.42 7.06%
1 1/2 Inch 50.21 62.29 24.05%53.75 7.06%
2 Inch 77.92 96.66 24.05%83.42 7.06%
3 Inch 151.97 188.52 24.05%162.70 7.06%
Street Sweeping #######4,565.61 24.05%3,940.24 7.06%
Winter Usage 1.5959 1.9797 24.05%1.7086 7.06%
Summer Usage
Up to 3 CCF 1.5959 1.9797 24.05%1.7086 7.06%
Over 3 CCF 2.0204 2.5063 24.05%2.1630 7.06%
3 Inch and smaller 40.48 40.48 0.00%43.34 7.06%
4 Inch 61.36 61.36 0.00%65.69 7.06%
6 Inch 152.39 152.39 0.00%163.15 7.06%
8 Inch 250.43 250.43 0.00%268.11 7.06%10 Inch 390.54 390.54 0.00%418.11 7.06%
12 Inch 584.98 584.98 0.00%626.28 7.06%
Private Fire Lines
VEOLIA WATER IDAHO, INC.
Public Authority
Commercial
Residential
Bi-Monthly
Attachment BOrder No.35762
Case No. VEO-W-22-02
Company Company
Current Proposed % Increase Ordered % Increase
5/8 Inch 6.70 8.31 24.05%7.17 7.06%
3/4 Inch 6.70 8.31 24.05%7.17 7.06%
1 Inch 8.56 10.62 24.05%9.16 7.06%
1 1/2 Inch 14.64 18.16 24.05%15.67 7.06%
2 Inch 22.73 28.20 24.05%24.33 7.06%
Winter Usage 0.9309 1.1548 24.05%0.9966 7.06%
Summer Usage
Up to 3 CCF 0.9309 1.1548 24.05%0.9966 7.06%
Over 3 CCF 1.1786 1.4621 24.05%1.2618 7.06%
5/8 Inch 6.70 8.31 24.05%7.17 7.06%
3/4 Inch 6.70 8.31 24.05%7.17 7.06%
1 Inch 8.56 10.62 24.05%9.16 7.06%
1 1/2 Inch 14.64 18.16 24.05%15.67 7.06%
2 Inch 22.73 28.20 24.05%24.33 7.06%
3 Inch 44.32 54.98 24.05%47.45 7.06%
4 Inch 82.69 102.58 24.05%88.53 7.06%
6 Inch 138.06 171.27 24.05%147.81 7.06%
Winter Usage 0.9309 1.1548 24.05%0.9966 7.06%
Summer Usage
Up to 3 CCF 0.9309 1.1548 24.05%0.9966 7.06%Over 3 CCF 1.1786 1.4621 24.05%1.2618 7.06%
5/8 Inch 6.70 8.31 24.05%7.17 7.06%
3/4 Inch 6.70 8.31 24.05%7.17 7.06%1 1/2 Inch 14.64 18.16 24.05%15.67 7.06%
2 Inch 22.73 28.20 24.05%24.33 7.06%
Winter Usage 0.9309 1.1548 24.05%0.9966 7.06%
Summer Usage
Up to 3 CCF 0.9309 1.1548 24.05%0.9966 7.06%Over 3 CCF 1.1786 1.4621 24.05%1.2618 7.06%
3 Inch and smaller 11.81 11.81 0.00%12.64 7.06%
4 Inch 17.90 17.90 0.00%19.16 7.06%
6 Inch 44.45 44.45 0.00%47.59 7.06%
Private Fire Lines
Existing Eagle Water Company CustomersVEOLIA WATER IDAHO, INC.
Residential
Commercial
Public Authority
Monthly
Attachment B
Order No.35762
Case No. VEO-W-22-02