20230620Reconsideration_Order_No_35821.pdf

ORDER NO. 35821 1
Office of the Secretary
Service Date
June 20, 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. 35821

INTRODUCTION
On September 30, 2022, Veolia Water Idaho, Inc. (“Company” or “Veolia”) 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 Staff, 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.
On April 28, 2023, the Commission entered Final Order No. 35762, which provides in
summary:
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 [(“ROE”)], 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.
Order No. 35762 at 1.
ORDER NO. 35821 2
PETITION FOR RECONSIDERATION
On May 19, 2023, the Company filed a Petition for Reconsideration and Clarification
(“Petition”). The Company requests: (1) clarification on the authorized revenue increase of
$2,756,277; (2) reconsideration on the awarded 9.25% ROE; and (3) reconsideration on the issue
of regulatory lag. Petition at 16.
ANSWER TO PETITION FOR RECONSIDERATION
On May 26, Micron filed an Answer to Petition for Reconsideration and Clarification
(“Answer”). Micron does not oppose the Company’s request for clarification on the authorized
revenue increase of $2,756,277; however, Micron argues that the Commission should deny the
Company’s request for reconsideration regarding ROE and regulatory lag. Answer at 2.
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. 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.
The Commission has the authority to grant or deny reconsideration pursuant to Idaho Code
section 61-626(2). Reconsideration allows any interested person to bring to the Commission’s
attention any question previously determined, and it affords the Commission an opportunity to
rectify any mistakes or omissions. Washington Water Power Co., v. Kootenai Environmental
Alliance, 99 Idaho 875, 879, 591 P.2d 122, 126 (1979). Commission Rule of Procedure 331.01
provides:
Petitions for reconsideration must set forth specifically the ground or grounds why
the petitioner contends that the order or any issue decided in the order is
unreasonable, unlawful, erroneous or not in conformity with the law, and a
ORDER NO. 35821 3
statement of the nature and quantity of evidence or argument the petitioner will
offer if reconsideration is granted.
IDAPA 31.01.01.331.01 (emphasis added). Any person may petition the Commission to clarify an
order under Rule 325, IDAPA 31.01.01.325. A petition for clarification may be combined with a
petition for reconsideration. Id.
I. Commission Authorized $2,756,277 Revenue Increase.
The Company argues that the $2,756,227 revenue increase identified in the first paragraph
of Order No. 35762 is a mathematical or transcription error, and the Company contends that the
correct number is $3,701,726. Petition at 3. The Company argues that this is confirmed by
calculations using the other amounts contained within Order No. 35762, and the Company requests
that the Commission clarify that Order No. 35762 authorizes a revenue increase of $3,701,726. Id.
In its answer, Micron agrees with the Company’s position. Answer at 2.
Having reviewed the record and the arguments on reconsideration, the Commission finds
that the Company is correct. $2,756,227 represents the revenue deficiency prior to grossing up for
taxes, and the correct number is $3,701,726. The Commission grants the Petition on this issue.
II. Commission Authorized 9.25% ROE.
The Company presents two arguments on reconsideration with respect to the Commission
authorized 9.25% ROE.
First, the Company argues that the Commission authorized 9.25% ROE was driven by the
Company’s status as a subsidiary within the larger Veolia company structure. Petition at 3. The
Company contends that authorizing an ROE based upon the size and geographical footprint of the
Company’s parent companies, rather than the Company, is problematic. Petition at 4.
Second, the Company argues that the Commission authorized ROE is significantly lower
than other water utilities in Idaho and the Pacific Northwest; therefore, the Commission authorized
ROE is inconsistent with the standards set forth in the United States Supreme Court case of
Bluefield Waterworks & Imp. Co. v. Pub. Serv. Comm’n of W. Va., 262 U.S. 679, 43 S. Ct. 675,
67 L. Ed. 1176 (1923), under which the Company is entitled to receive a return similar to other
businesses: (1) at the same time; (2) in the same geographic area; and (3) with similar risks and
uncertainties. Id.
A. The Company’s Status as a Subsidiary as a factor in ROE.
The Company argues that the Commission authorized ROE must account for a utility’s size
when evaluating risk and comparing to a proxy group, even when that utility is a wholly owned
ORDER NO. 35821 4
subsidiary. Petition at 4. The Company contends that the fact that the Company’s parent companies
own other utilities with customers in other states does not offset the risk inherent in the Company’s
105,000-customer footprint in the Treasure Valley. Id. at 5.
The Company argues that the proxy group of water utilities should properly compare
utilities of similar sizes with similar risks; however, Staff’s witness incorrectly included the
Company’s great-great grandparent, Veolia Environnement S.A., within the proxy group for the
comparable earnings analysis. Id. at 6.
The Company argues that the question at hand is what return on equity an investor in the
Company would require to invest in the Company, not to invest in the Company’s great-great
grandparent, Veolia Environnement S.A. Id. at 7. The Company contends that the relevant business
unit, the relevant customer base, the relevant product line, and the relevant geographical footprint
is that of the Company, not the parent company or companies. Id.
The Company argues that Staff’s inclusion of the Company’s parent companies in Staff’s
analysis is flawed, and that the Company’s analysis properly applies precedent and financial
principles and does not ignore the Company’s status as a subsidiary. Id. at 7-8.
The Company requests that the Commission reconsider the authorized ROE as requested
in the 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. Id.
In its Answer, Micron notes that the Commission authorized a 9.25% ROE because: (1)
9.25% was within the reasonable ranges of all parties to present cost of capital testimony after
adjustment to remove adders; (2) the Company’s use of the Hamada model was unconvincing; (3)
the Company’s ROE adjustments were unpersuasive; (4) the Company’s risk analysis was
uncredible; and (5) the Company’s size comparison to the proxy group failed to consider its
corporate structure. Answer at 5.
Micron argues that the Company does not take issue with the first four bases supporting
the Commission’s decision, and that all of the bases individually, and collectively, represent
substantial evidence to support the Commission’s awarded ROE. Id. Specifically, Micron argues
that the Commission can, and should, consider the Company’s corporate structure in setting a
reasonable return, and Micron contends that the Company fails to support its assertion that the
Commission improperly considered the Company’s corporate structure in evaluating its risk
compared to other utilities. Id.
ORDER NO. 35821 5
Micron argues that customers pay costs associated with the Company’s association with
its parent company and are therefore entitled to the benefits of such affiliation. Answer at 6. Micron
argues that the Commission’s consideration of the Company’s corporate structure was reasonable.
Answer at 7. Micron concludes that even if the Company’s corporate structure was set aside,
substantial evidence exists to support a 9.25% ROE, and the Commission should deny the
Company’s Petition. Id. at 7.
Having reviewed the record and the arguments on reconsideration, the Company’s
argument is without merit.
First, Staff’s testimony and recommended ROE was based on more than just the
Company’s status as a subsidiary. Commission Final Order No. 35762 provides:
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.
Order No. 35762 at 7. The Company’s status as a subsidiary, and the inclusion of Veolia
Environment S.A. in Staff’s calculations were only two of the many factors presented by Staff in
its recommendation. Additionally, Staff’s recommendation was only one of three full
recommendations, including the Company and Micron, that the Commission considered in its
Final Order.1
Second, the Company has not presented any argument or authority to show that the
Commission authorized 9.25% ROE and resulting rate of return is unjust, unreasonable, or
confiscatory. As stated previously the Commission considered many factors when setting the ROE
at 9.25% and the Commission’s determination was based upon the calculation of a reasonable and
fair rate of return.
[T]he questions of cost of equity and rate of return are matters which raise
extremely complicated issues. Deciding these questions is a function of the Idaho
Public Utilities Commission and these questions are within the Commission’s area

1 Even if the Commission considered the Company’s status as a subsidiary in reaching its decision, the Idaho Supreme
Court has already determined that the distinction between a wholly owned subsidiary and a non-subsidiary is a valid
consideration for rate setting purposes. Gen. Tel. Co. of The Nw. v. Idaho Pub. Utilities Comm’n, 109 Idaho 942, 945,
712 P.2d 643, 646 (1986).
ORDER NO. 35821 6
of expertise. The Commission has the power and the duty to set rates of return
within a broad zone of reasonableness.
Utah Power & Light Co. v. Idaho Pub. Utilities Comm’n, 102 Idaho 282, 285, 629 P.2d 678, 681
(1981) (internal citations and quotations omitted). “The Constitution does not bind rate-making
bodies to the service of any single formula or combination of formulas.” Fed. Power Comm’n v.
Nat. Gas Pipeline Co. of Am., 315 U.S. 575, 586, 62 S. Ct. 736, 743, 86 L. Ed. 1037 (1942).
“By long standing usage in the field of rate regulation the ‘lowest reasonable rate’ is one
which is not confiscatory in the constitutional sense.” Id. at 585, 62 S. Ct. at 742, 86 L. Ed. 1037.
“The guiding principle has been that the Constitution protects utilities from being limited to a
charge for their property serving the public which is so ‘unjust’ as to be confiscatory.” Duquesne
Light Co. v. Barasch, 488 U.S. 299, 299, 109 S. Ct. 609, 615, 102 L. Ed. 2d 646 (1989).
The “Court’s scope of review on appeal in cases of this type is to determine only if the
Commission regularly pursued its authority and whether the constitutional rights of the utility were
violated by the fixing of rates which were unjust, unreasonable and thus confiscatory.” Utah Power
& Light Co. v. Idaho Pub. Utilities Comm’n, 102 Idaho 282, 284, 629 P.2d 678, 680 (1981). The
Court’s “purpose is not to analyze each step of the rate-setting process to determine whether the
regulatory agency was correct in its decision, but to look at the overall effect of the rate fixed to
determine whether the return to the utility is reasonable and just.” Intermountain Gas Co. v. Idaho
Pub. Utilities Comm’n, 97 Idaho 113, 120, 540 P.2d 775, 782 (1975).
It is not theory but the impact of the rate order which counts. If the total effect of
the rate order cannot be said to be unjust and unreasonable, judicial inquiry under
the Act is at an end. The fact that the method employed to reach that result may
contain infirmities is not then important. Moreover, the Commission’s order does
not become suspect by reason of the fact that it is challenged. It is the product of
expert judgment which carries a presumption of validity. And he who would upset
the rate order under the Act carries the heavy burden of making a convincing
showing that it is invalid because it is unjust and unreasonable in its consequences.
Fed. Power Comm’n v. Hope Nat. Gas Co., 320 U.S. 591, 602, 64 S. Ct. 281, 288, 88 L. Ed. 333
(1944).
The Company has failed to carry its burden to show that the authorized 9.25% ROE and
resulting rate of return is unjust, unreasonable, or confiscatory. The Commission denies the
Petition on this issue.
B. Comparable ROEs in Idaho, the Pacific Northwest, and the Country.
The Company argues that the Commission’s findings on the authorized ROE are
inconsistent with the standards set forth in the United States Supreme Court case of Bluefield,
ORDER NO. 35821 7
under which the Company is entitled to receive a return similar to other businesses: (1) at the same
time; (2) in the same geographic area; and (3) with similar risks and uncertainties. Petition at 4.
Specifically, the Company argues that the Commission did not make factual findings 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%. Id. at 8. The Company contends that the
Commission must make factual findings that are both supported by evidence in the record and
sufficient to enable judicial review, and that the evidence in this record does not support the
Commission’s conclusion. Id.
First, The Company argues that a 9.25% ROE is not generally being made in the same
general part of the country as Veolia. Id. The Company contends that 9.25% appears to be the
lowest authorized ROE in Idaho; the lowest ROE in the Pacific Northwest; and on the very low
end of authorized ROE in the entire country for water companies in jurisdictions with comparable
ratemaking regimes. Id. at 10. The Company submitted an Attachment to the Petition summarizing
ROEs for utilities in Idaho, the Pacific Northwest, and around the country. Id.
Second, the Company argues that at this point in time, economic conditions include high
inflation and high interest rates, and that this economic environment supports a higher ROE than
ROEs granted in lower-interest-rate, lower-inflation environment. Id. at 10-11. The Company
contends that 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 the Company is greater than companies with larger footprints. Id. at 11.
The Company argues that this supports an ROE greater than 9.25%. Id. at 12.
In conclusion, the Company argues that the evidence in the record does not support a
finding that the Commission authorized 9.25% ROE 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. Id. The Company requests that the Commission reconsider the authorized ROE,
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. Id.
In its answer, Micron argues that the Company is mistaken when it asserts that its awarded
ROE must match that of other utilities in Idaho or the region. Answer at 7. Micron contends that
in Intermountain Gas Co. v. Idaho Pub. Utils. Comm’n, 97 Idaho 113, 128 (1975), the Idaho
Supreme Court rejected this argument. Answer at 7. Micron argues that while comparison to other
ORDER NO. 35821 8
utilities may be a helpful data point in setting a reasonable return, Idaho does not mandate strict
adherence. Id.
Micron argues that the Commission did include facts relevant to Staff’s comparable
earnings model supporting a 9.25% awarded ROE; specifically, the Commission relied on Staff’s
comparable earnings model. Id. at 8. Further, Micron contends that key components of an awarded
ROE analysis include whether the awarded ROE will allow the utility to maintain financial
integrity and attract capital. Id.
Micron argues that the Company does not allege that the result of the authorized ROE
would produce an unfair, unreasonable, or insufficient return by risking the Company’s financial
integrity, nor preclude the Company from raising capital. Id. Micron concludes that the Company
has the burden to demonstrate that the Commission’s decision was unreasonable, unlawful,
erroneous or not in conformity with the law, and the Company has failed to do so by ignoring the
substantial evidence in the record that supports the Commission’s decision. Id. at 9.
Having reviewed the record and the arguments on reconsideration, the Company’s
argument is without merit. As an initial matter, as explained above, the Company has failed to
carry its burden to show that the authorized 9.25% ROE and resulting rate of return is unjust,
unreasonable, or confiscatory. The Company argues that the Commission’s findings on the
authorized 9.25% ROE are inconsistent with the standards set forth in the United States Supreme
Court case of Bluefield, under which the Company is entitled to receive a return similar to other
businesses: (1) at the same time; (2) in the same geographic area; and (3) with similar risks and
uncertainties. Petition at 4. The Commission disagrees.
In reaching its decision on the authorized ROE and rate of return, the Commission
explained:
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
ORDER NO. 35821 9
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.
Order No. 35762 at 5. The Commission acknowledged the foundation set by Bluefield and the
resulting evolution of the analysis for determining a fair rate of return. The Commission reasoned:
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:
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
ORDER NO. 35821 10
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.
Order No. 35762 at 8-9. On April 4, 2023, the Commission presided over a Technical Hearing in
which the Commission heard and considered approximately four hundred (400) pages of expert
witness testimony from Staff, the Company, and Micron specifically on the issue of ROE and fair
rate of return. After considering the record before it, the Commission stated in its Final Order:
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.
Id. at 9.
On reconsideration, the Company now argues that the Commission must consider newly
submitted evidence concerning ROEs authorized for other Idaho Utilities, ROEs for Utilities in
the Pacific Northwest, and ROEs for Nationwide Water Utilities. Attachment 2 to the Petition.
The Company’s argument is without merit, and there is no clearer evidence of this than the
Company’s own Application and testimony in this case. During the Technical Hearing on April 4,
2023, the Company presented expert testimony on the issue of ROE and fair rate of return. Tr. vol.
II, 244-363. The Company’s own expert specifically testified as to Bluefield’s principles and
application in the context of determining ROE and fair rate of return. Tr. vol. II, 253. Noticeably
ORDER NO. 35821 11
absent from the Company’s own expert testimony is any mention of the utilities the Company now
claims are necessary under Bluefield for the Commission to consider when making a finding
establishing a fair ROE and fair rate of return.2
Bluefield and its progeny provide the history, foundation, and guiding principles that have
formed the modern-day analysis of a fair rate of return. The Commission considered all testimony
provided by three independent experts and the various methods they used for determining a
proposed ROE and fair rate of return including, among other things, DCF analyses, the
Comparable Earnings method, Risk Premium analyses, and the Capital Asset Pricing Model. After
considering the record, the Commission issued a Final Order authorizing a 9.25% ROE and finding
that ROE satisfies the guiding principles established in the Bluefield decision.
The Company disagrees with the Commission’s decision and has now chosen to ignore the
history and accepted application of the guiding principles contained in Bluefield and adopted into
Idaho case law3, ignore the record showing the Commission’s analysis of the relevant methods for
determining ROE and fair rate of return as presented by all experts during the Technical Hearing,
and the Company now presents a meritless argument on reconsideration that is singularly focused
on the technical wording of the Bluefield decision, and inconsistent with the Company’s own
position and expert testimony.4
The Commission denies the Petition on this issue.
III. Regulatory Lag
The Company argues that 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. Petition at 12. The Company cites to Utah Power & Light Co. v. Idaho Pub. Utilities
Comm’n, 102 Idaho 282, 629 P.2d 678 (1981).

2 We note a possible exception. The Company’s expert selected SJW Corp. as part of the Company’s Comparable
Group. Tr. vol. II, 267. On reconsideration, the Company now requests that the Commission consider San Jose Water
Co. Attachment 2 to the Petition at 3. It appears that San Jose Water Co. may be a subsidiary of SJW Corp. If so, the
Company initially requested the Commission consider the parent company, and now requests the Commission
consider the subsidiary. 3 See Intermountain Gas Co. v. Idaho Pub. Utilities Comm’n, 97 Idaho 113, 540 P.2d 775 (1975); Agric. Prod. Corp.
v. Utah Power & Light Co., 98 Idaho 23, 557 P.2d 617 (1976); Idaho Power Co. v. Idaho Pub. Utilities Comm’n, 99
Idaho 374, 582 P.2d 720 (1978); Utah Power & Light Co. v. Idaho Pub. Utilities Comm’n, 105 Idaho 822, 673 P.2d
422 (1983); Application of Citizens Utilities Co., 112 Idaho 1061, 739 P.2d 360 (1987).
4 Even if the Commission inartfully articulated its findings with respect to the principles in Bluefield, as explained
above, “[t]he Constitution does not bind rate-making bodies to the service of any single formula or combination of
formulas.” Fed. Power Comm’n v. Nat. Gas Pipeline Co. of Am., 315 U.S. 575, 586, 62 S. Ct. 736, 743, 86 L. Ed.
1037 (1942).
ORDER NO. 35821 12
The Company contends that the Commission made a number of decisions that contribute
to excessive regulatory lag including: (1) establishing a test year ending December 31, 2022, which
did not include within rate base investments that the Company made during the first four months
of 2023; (2) not accepting the value of rate base as of December 31, 2022, but instead averaging
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; (3) entirely disallowing working capital, which would be calculated
using one of three standard methods and included in rate base; and (4) disallowing the proposed
Distribution System Improvement Charge mechanism. Petition at 13.
The Company argues that the combination of the Commission’s decisions on rate base,
when applied to the economic circumstances, precludes the Company from having an opportunity
to actually recover the authorized rate of return due to the pace of capital investments and inflation.
Id. at 14-15.
The Company admits that the Commission’s individual decisions with respect to the year-
end cutoff for rate base, use of the average of monthly averages, and similar decisions are
supported by Commission precedent; however, the Company argues that the individual issues
cannot be evaluated in isolation. Id. at 16. The Company argues that when taken as a whole, and
applied to these economic circumstances, the Commission must address and account for regulatory
lag taking into account current rates of inflation and high levels of capital investment. Id.
In its answer, Micron argues that historical versus future test periods, average versus year
end rate base, basis and amount of cash working capital, and propriety of rider recovery are all
things within the Commission’s legislative function, and that the Commission’s policy
determinations have been consistent on these points across multiple utility proceedings over the
years. Answer at 9.
Micron contends that the record shows that the Commission reasonably considered the
Company’s concerns regarding regulatory lag when issuing its decision consistent with past
Commission precedent. Id. at 10.
Micron concludes that the record does not support reconsideration of the Final Order due
to the Company’s policy disagreements with the Commission’s decisions, and the Commission’s
Final Order reasonably considered all parties’ positions on the issue of regulatory lag and
consistent with the record. Id.
Having reviewed the record and the arguments on reconsideration, the Company’s
argument is without merit. The Commission once again notes that as an initial matter the Company
ORDER NO. 35821 13
has failed to carry its burden to show that the authorized 9.25% ROE and resulting rate of return
is unjust, unreasonable, or confiscatory.
The Company argues that the Commission is required to specifically make findings that
acknowledge and address regulatory lag while setting rates. The Company is incorrect. The
Company cites exclusively to Utah Power & Light Co. v. Idaho Pub. Utilities Comm’n, 102 Idaho
282, 629 P.2d 678 (1981); however, the Company omits the context of the Court’s decision in
Utah Power & Light Co.:
Here, however, the Commission eliminated from Utah Power’s allowable return on
equity a 1% attrition allowance. It is undisputed that a rate of return incorporating
such attrition or regulatory lag was within the zone of “reasonableness” in the prior
year and was so ordered by the Commission. 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. Hence, that portion of the
Commission's ruling eliminating the 1% previously allowed regulatory lag or
attrition is without foundation in the evidence and is set aside.
Utah Power & Light Co. v. Idaho Pub. Utilities Comm’n, 102 Idaho 282, 285, 629 P.2d 678, 681
(1981). The Court in Utah Power & Light Co. considered the issue of whether the Commission
had adequately supported its decision to remove a 1% attrition allowance in setting new rates. The
Court determined that the Commission had not provided adequate findings to support the removal
of the 1% attrition allowance, and the Court held that the Commission must support such a decision
with adequate findings.
The Court did not hold that the Commission must specifically acknowledge and address
regulatory lag in its findings while setting rates, nor did the Court hold that an attrition allowance
is mandatory in instances of high inflation or other economic factors. This was further supported
when the Court considered a similar case two years later wherein the Commission denied a request
for a 3% attrition allowance but failed to make adequate findings.
Albeit the commission stated certain conclusions regarding the attrition problem,
we discern that the commission likely was unwilling to consider such an allowance
for attrition or regulatory lag in any event. We do not state that an attrition
allowance will now be mandatory in every public utility rate order, but we hold
that the order at issue here is unclear as to the reason for the denial.
Utah Power & Light Co. v. Idaho Pub. Utilities Comm’n, 105 Idaho 822, 827, 673 P.2d 422, 427
(1983) (emphasis added).
In context, these two cases simply confirm the basic principle that the Commission must
support its specific decisions with adequate findings and consideration, not that the Commission
must specifically make findings that acknowledge and address regulatory lag while setting rates.
ORDER NO. 35821 14
In this case there was no preexisting attrition allowance that the Commission disallowed, nor did
the Company request a specific attrition allowance for the Commission to consider. The
Commission is not required to specifically acknowledge and address regulatory lag in its findings
while setting rates.
With respect to the Company’s invitation on reconsideration for the Commission to
reevaluate its precedent in support of its decisions on the year-end cutoff for rate base, use of the
average of monthly averages, and similar issues, the Commission declines to do so.
The Commission denies the Petition on this issue.
ORDER
IT IS HEREBY ORDERED that the Petition is granted in part and denied in part.
IT IS FURTHER ORDERED that the Company’s Petition is granted with respect to the
amount of authorized annual base revenues. The Company is authorized to recover an additional
$3,701,726 in annual base revenues. This Order hereby modifies Order No. 35762.
IT IS FURTHER ORDERED that the Company’s Petition is denied with respect to all
other issues.
THIS IS A FINAL ORDER DENYING RECONSIDERATION. Any party aggrieved by
this Order or other final or interlocutory Orders previously issued in this case may appeal to the
Supreme Court of Idaho within forty-two (42) days pursuant to the Public Utilities Law and the
Idaho Appellate Rules. Idaho Code § 61-627; I.A.R. 14.

ORDER NO. 35821 15

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 20th day of
June 2023.

ERIC ANDERSON, PRESIDENT

JOHN R. HAMMOND JR., COMMISSIONER

EDWARD LODGE, COMMISSIONER
ATTEST:

Jan Noriyuki
Commission Secretary

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