20230215Johnson Direct with Exhibits.pdf

BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSlON St N
IN THE MATTER OF THE APPLICATION )OF VEOLIA WATER IDAHO,INC.FOR A )CASE NO.VEO-W-22-02GENERALRATECASE)
DIRECT TESTIMONY OF TY JOHNSON
IDAHO PUBLIC UTILITIES COMMISSION
FEBRUARY 15,2023
1 Q.Please state your name and business address for
2 the record.
4 A.My name is Ty Johnson.My business address is
5 11331 W.Chinden Blvd.,Building 8,Suite 201-A,Boise,
6 Idaho 83714.
7 Q.By whom are you employed and in what capacity?
8 A.I am employed by the Idaho Public Utilities
9 Commission ("Commission")as an Auditor.
10 Q.What is your educational and professional
11 background?
12 A.I graduated from Western Governors University with
13 a Bachelor of Science in Accounting in October of 2022.
14 Prior to graduation I was hired as an Accounting Intern for
15 the Commission.In November of 2022,I accepted a full-time
16 position with the Commission.
17 Q.What is the purpose of your testimony in this
18 proceeding?
19 A.The purpose of my testimony is to present several
21 adjustments to Veolia Water Idaho,Inc.("Veolia"or
22 "Company")Operating Expenses.These adjustments were
23 provided to Staff witness Culbertson to incorporate into his
24 calculation of Staff's proposed revenue requirement.
25 Q.Are you sponsoring any exhibits in this
proceeding?
A.Yes.I am sponsoring Exhibit Nos.104-117.
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)102/15/23 STAFF
1 Payroll and Related Operating Expense Adiustments
2 Q.What Operating Expense adjustments are you
4 proposing to the Company's payroll?
5 A.I am proposing adjustments to the Company's
6 Payroll Expense for the following payroll-related items:
7 Payroll -Exhibit No.104;
8 Workers'Compensation -Exhibit No.105;
9
Post-retirement Benefits Other than Pension ("PBOP")-
10 Exhibit No.106;
11
Employee Healthcare Insurance -Exhibit No.107;12
13 Employee 401(k)Matching -Exhibit No.108;
14 Other Employee Benefits -Tuition -Exhibit No.109;
15 Payroll Overheads (Fringe Benefits Transferred to
16 Capital Allocation)-Exhibit No.110;and
17 Payroll Taxes -combined Federal Insurance
18 Contributions Act ("FICA"),Federal Unemployment
19 Insurance Tax ("FUI"),and State Unemployment Insurance
21 Tax ("SUI")-Exhibit No.111.
22 Q.Please explain your Exhibit No.104 for the
23 Company's Payroll Expense.
24 A.Exhibit No.104 reflects all the adjustments I am
25 recommending to the Company's proposed Payroll Expense.It
starts with the calculation of the pro forma payroll amount
the Company requested for recovery in rates and follows the
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)202/15/23 STAFF
1 same format as Company Exhibit No.10,Schedule 1,Page 1.
2 Q.Please explain the components of your adjustment
4 to payroll.
5 A.I have adjusted the Company's Pro Forma Payroll
6 Expense as follows:
7 Removed the unfilled positions to reflect the
8 actual Payroll Expense for employee levels as of
December 31,2022.
10 Removed the 2023 pay increases.
11
Removed the 2023 pay increases for Stand-by Pay.
12
Removed Incentive Pay.13
14 Removed the 2023 Overtime Pay.
15 Q.Please explain your adjustment to the Company's
16 Wages and Salaries Expense for unfilled positions?
17 A.The Company included 15 pro forma positions to its
18 Wages and Salaries Expense.During its investigation,Staff
19 discovered that four of the 15 positions had not been filled
21 by Staff's established cut-off date of December 31,2022.
22 These positions include Operator 1,Cross Conn Control
23 Specialist,Utility Person,and Environmental Health &
24 Safety Specialist.The Company provided the estimated wage
25 and salary amounts for these four unfilled positions,which
I used to adjust the Company's pro forma Payroll Expense.
Line 12 reflects the removal of $304,854 for these
positions.
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)302/15/23 STAFF
1 I am not proposing to remove any of the payroll
2 expense related to the 11 new employees hired prior to
4 December 31,2022.However,it should be noted that the
5 Company has maintained its water quality without the
6 addition of the new employees.Staff has concerns with
7 increasing the Company's workforce because outside metrics
8 indicate the Company has fewer employees per customer than
9 its industry peers.See Thompson Direct.
10 Q.Please explain the Company's adjustment to
11 increase its payroll expense for 2023 wage increases.
12 A.In its payroll adjustment,the Company adjusted
13 its historical test year payroll to include a 4%wage
14 increase for non-bargaining unit employees and a 2.75%wage
15 increase for bargaining unit employees expected to occur on
16 April 1,2023.
17 Q.Please explain why you have proposed removing the
18 pay increases for 2023.
19 A.In keeping with a December 31,2022,cut-off date,
21 I have removed the Company's pro forma 2023 pay increases on
22 Line 13.It would be difficult to determine future payroll
23 expenses given employee turnover,and therefore the precise
24 amount is not known and measurable,but rather estimated.
25 Additionally,as the Company experiences employee turnover,
there could be savings because new employees might be paid
less than the employees they are replacing.
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)402/15/23 STAFF
1 Q.Please explain why Staff has removed the proposed
2 pay increase included for the Stand-By Pay.
4 A.In keeping with a December 31,2022,cut-off date,
5 on Line 15,I have removed the proposed pro forma 2023
6 increase in the Company's calculation of Stand-By Pay.This
7 adjustment decreases the expenses by $1,176.
8 Q.Please explain your adjustment to the Company's
9 Incentive Pay on Line 18.
10 A.I propose to remove the Incentive Pay in customer
11 rates for four reasons:
12 1.Veolia compensates its employees with a base
13 salary and additional benefits.These benefits include
14 401K matching contributions,medical,dental,vision,
15 life insurance,paid vacation time and holidays.This
16 is the amount that should be included in the revenue
17 requirement to be recovered from customers.
18 2.Short-term incentive plans ("STIP")vary from
19 year to year and may not be paid if objectives are not
21 met.It is impossible to predict with accuracy which
22 employees will meet their individual objectives.The
23 STIP rewards employees for doing a job they are already
24 being compensated for.
25 3.Incentive plans are self-funding.The
incentive plan only makes sense if the savings achieved
are greater than the amount of incentive payments made.
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)502/15/23 STAFF
1 Any additional savings would self-fund the incentive
2 plan.
4 4.The STIP contains targets that are based on
5 metrics that benefit the Company's shareholders rather
6 than customers.
7 Q.Why do you believe that the base compensation
8 level for Veolia employees is the appropriate amount to
9 include in the revenue requirement to be recovered from
10 customers?
11 A.The U.S.Bureau of Labor Statistics website
12 provides wage information for job positions of which I
13 believe to be representative of Veolia Water Idaho.The
14 chart below represents different positions within the water
15 utility industry in Idaho and their average hourly wages.I
16 Average Hourly
17 OCC CODE OCC TITLE Wage
19-2043 Hydrologists $34.621819-4044 Hydrologic Technicians $_'Œ.17
19 47-2151 Pipelayers $21.37
47-2152 Plumbers,Pipefitters,and Steamfitters $23.55
21 47-3015 Helpers--Pipelayers,Plumbers,Pipefitters,and Steamfitters $15.36
Control and Valve Installers and Repairers,Except2249-9012 Mechanical Door $27.19
23 51-1011 First-Line Supervisors of Production and Operating Workers $30.02
Water and Wastewater Treatment Plant and System
2 4 51-8031 Operators $23.62
Overall Average $25.4925
1 https://www.bls.gov/oes/current/oes id.htm
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)602/15/23 STAFF
1 The average hourly base wage received by Veolia
2 employees for 2022 was $29.39,before any included benefits.
4 Because Veolia employees,on average,earn 15%more than the
5 average of the positions listed above,it is not appropriate
6 that customers pay additional amounts through rates to
7 provide bonuses to Veolia employees based on targets that
8 may or may not be met,and may or may not actually benefit
9 customers.
10 Q.How does the Company's STIP benefit shareholders?
11 A.The Company's STIP is based on two different
12 measures of performance,financial and performance.If
13 incentive payouts are made when financial performance is
14 met,the STIP should be self-funding.It would not be
15 prudent for incentive payouts to be greater than the
16 financial benefit received by the Company.Furthermore,if
17 there is a financial benefit to the Company,it benefits the
18 Company's shareholders,and the incentive payout should be
19 booked below the line.
21 Q.Please explain your adjustment to Overtime Pay on
22 Line 19?
23 A.The Company adjusted the historic test year level
24 of overtime pay by 2.75%to coincide with the bargaining
25 unit employees'2023 pay increase.The Company's pro forma
adjustment results in an increase in overtime pay of
$14,514.I propose to remove the Company's increase in
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)702/15/23 STAFF
1 overtime pay for two main reasons:
2 1.The adjustment is an estimate and is not
4 known and measurable.The Company cannot predict with
5 any level of certainty the amount of overtime pay that
6 will be incurred during any year.
7 2.The proposed addition of 15 new employees
8 should decrease the amount of overtime hours incurred
9 during the year and thus decrease total overtime
10 expense.
11 In Order No.29838,the Commission agreed with Staff's
12 recommendation and stated:"actual test year expenses should
13 be used for overtime pay,as pro forma adjustments to test
14 year data are only proper where the numbers and known and
15 measurable.The projected amount is not known and
16 measurable and thus overtime pay will be included at the
17 actual test year level."Order No.29838 at 17.
18 Q.What did the Company propose for its Workers'
19 Compensation adjustment,and how is it calculated?
21 A.Workers'Compensation is based on a percentage of
22 payroll.As its payroll increases,so does workers'
23 compensation insurance.The Company's pro forma amount is
24 based upon the three-year average of workers'compensation
25 percentage as a ratio of gross payroll.The average for the
last three calendar years (2019 through 2021)produces a
ratio of 1.004%of workers'compensation to gross payroll.
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)802/15/23 STAFF
1 The Company applied this ratio to its pro forma level of
2 gross payroll to calculate its pro forma Workers'
4 Compensation Expense of $116,207.
5 Q.Please explain your adjustment to Workers'
6 Compensation in Exhibit No.105.
7 A.I believe the ratio of 1.004%calculated by the
8 Company is reasonable and I have applied it to the Gross
9 Payroll of $9,674,378 that I am recommending for a Workers'
10 Compensation Expense of $97,097.My adjustment decreases
11 the expense by $19,110.
12 Q.What did the Company propose to recover for its
13 PBOP?
14 A.The Company decreased the historic test year PBOP
15 by $42,509 to bring the expense to the pro forma PBOP level
16 based on the Towers Watson actuarial valuation for 2022,
17 which consisted of the Service Cost of $163,925 and PBOP
18 expense -all other PBOP Costs of $(687,681).The Company's
19 original pro forma PBOP expense level is $(523,756).
21 Company witness Cary notes that the adjustment is subject to
22 change for actuarial valuations anticipated in October 2022.
23 Q.Did the Company update its pro forma PBOP expense
24 amount after receiving the new actuarial valuations that
25 were anticipated in October?
A.Yes.In response to Staff Production Request Nos.
63 and 74,the Company updated its pro forma PBOP expense to
CASE NO.VEO-W-22-02 JOHNSON,T.(Di).902/15/23 STAFF
1 $(577,900),with the PBOP Service Cost of $180,883 and the
2 PBOP Expense -all other PBOP costs of $(758,783).The
4 Company updated the adjustment to $96,653 to bring the PBOP
5 expense to $(577,900).
6 Q.What level of PBOP expense do you propose to
7 include for recovery in this case?
8 A.After reviewing the Company's responses to Staff
9 Production Requests,I agree that the appropriate amount to
10 include in expense is $(577,900).Therefore,in Exhibit No.
11 106,I have decreased the Company's PBOP Expense by $54,144
12 to get to the actual 2022 expense.
13 Q.What did the Company propose for its Employee
14 Healthcare pro forma amount and how is it calculated?
15 A.The Company based its calculation on its test year
16 expense and previous employee elections,then adjusted the
17 amount to the pro forma employee count of 137.The
18 Company's proposed pro forma expense is $2,103,710.
19 Q.Please explain your adjustment to Employee
21 Healthcare.
22 A.I calculated the benefits based on 133 employees
23 as of the end of 2022 instead of the 137 employees included
24 in the Company's case.The Company updated its projected
25 benefit costs to the actual rates for 2023 in its response
to Production Request No.63.The Company further updated
its response with the information from the insurance broker
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)1002/15/23 STAFF
1 and actuary supporting the increase in rates.I have
2 recalculated the Employee Healthcare costs with the latest
4 information available at the time of my testimony.I
5 recommend the Company recover $2,414,650 based on the
6 updated insurance rates and the actual employee count as of
7 December 31,2022.This adjustment increases the Company's
8 expense by $240,439 as shown in Exhibit No.107.
9 Q.What did the Company propose for its Employee
10 401(k)Match amount,and how is it calculated?
11 A.The Company calculated the average contribution
12 rate of its 401(k)Match expense for all employees based on
13 its gross payroll for the 12 months ended June 30,2022.
14 The contribution rate of 4.16%is then applied to the
15 Company's pro forma gross payroll for a 401(k)Match expense
16 of $456,431.
17 Q.Is the Company's proposal reasonable?
18 A.No.The Company takes an estimated amount and
19 multiplies it by another estimated amount,and claims the
21 result is known and measurable.The 401(k)matching
22 contributions amount is neither known nor measurable.
23 The 401(k)Plan allows employees to cease their
24 salary deferrals at any time,thus ending the responsibility
25 of the Company to contribute a matching contribution.
Furthermore,the 401(k)Plan allows all eligible employees
who are not currently contributing to commence payroll
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)1102/15/23 STAFF
1 deductions for the 401(k)at any time.With vacant
2 positions and employee turnover,it is not possible to
4 determine a precise amount for the Company's 401(k)Matching
5 Contribution expense.I propose the Company recover its
6 actual 401(k)Match expense incurred in 2022,which is
7 $411,540.This adjustment in Exhibit No.108 reduces the
8 Company's expense by $44,890.
9 Q.Has the Commission previously issued an Order on
10 pro forma 401(k)matching contributions?
11 A.Yes.In Case No.UWI-W-04-04,United Water Idaho
12 proposed the same methodology to calculate its pro forma
13 401(k)matching contributions.In Order No.29838,the
14 Commission affirmed Staff's position in that case stating:
15 We find that the actual test year
contributions should be used for the Thrift16Planexpense.United Water's 401(k)plan
allows employees to cease or commence17payrolldeductionsatanytime,eitherendingorcreatingtheCompany's18responsibilitytomakeamatching
contribution.With vacant positions,19 employee turnover,and the unknown elections
of each employee to commence or cease21deductions,pro forma adjustments to test
year data are not known and measurable.22 Consequently,we include the test year
expense in the actual test year amount.23
Order No.29838 at 17.24
Q.Please explain your adjustment to Tuition Benefits25
in Exhibit No.109.
A.I remove $5,361 from the Company's Other Employee
Benefit-Tuition Account.In its Application,the Company
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)1202/15/23 STAFF
1 included $14,634 in tuitions benefits by taking the average
2 amount of tuition benefits paid per employee during the test
4 year,$106.82,and multiplying it by the Company's pro forma
5 employee count of 137 employees.Similar to the 401(k)
6 matching contributions,this amount is neither known nor
7 measurable.The Company cannot predict with any certainty
8 the actual amount of tuition benefits it will pay during a
9 year and simply relies on a method to produce an estimate.
10 During 2022,the Company's actual employee tuition benefit
11 was $9,274.My adjustment establishes the Company's
12 recovery at the 2022 actual levels.
13 Q.Please explain the Company's Fringe Benefits
14 Allocation adjustment,the components that are used in the
15 calculation,and Staff's Adjustment to the Fringe Benefits
16 Allocation.
17 A.The Company uses a fringe benefit allocation
18 method to ensure employee benefits follow labor charges.
19 These fringe benefits are allocated to Operation and
21 Maintenance expenses and to Capital Expenses.When these
22 benefit components change,the amount transferred to capital
23 projects will also change.The Fringe Benefits allocation
24 incorporates payroll taxes,workers'compensation,pension
25 service cost,PBOP service cost,Group Health &Life,401k,
and Other Employee benefits to calculate the percentage of
labor charged to capital projects.Because some of these
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)1302/15/23 STAFF
1 amounts have decreased with my adjustments,the Fringe
2 Allocation adjustment needs to increase expenses by
4 $203,700.My calculations are shown in Exhibit No.110.
5 Q.Please explain the Company's adjustment to payroll
6 taxes,FICA,FUI,and SUI.
7 A.The Company calculates these payroll taxes based
8 on its pro forma payroll for FICA,and by the number of
9 employees for federal and state unemployment insurance.The
10 Company's pro forma amount for payroll taxes is $898,783,
11 based on Company Test Year Payroll of $11,578,450 and 137
12 employees.
13 Q.Are these amounts still reasonable,given your
14 adjustments to the Company's payroll amount and employee
15 count?
16 A.These amounts need to be updated to reflect my
17 proposed payroll and employee count.
18 Q.Please explain your adjustment to Payroll Taxes in
19 Exhibit No.111.
21 A.My adjustment calculates the level of the payroll
22 taxes based on my proposed level payroll of $10,257,680 and
23 the number of employees of 133 as of December 31,2022.
24 This adjustment decreases FICA by $101,039 (Schedule 2),FUI
25 by $168 (Schedule 3),and SUI by $699 (Schedule 4)for a
total payroll tax adjustment $101,906.
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)1402/15/23 STAFF
1 Other Operating Expense Adjustments
2 Q.Please explain the Company's Customer Billing
4 Expenses Adjustment.
5 A.The Company's adjustment to Customer Billing
6 Expenses considers customer growth,postage increases,and
7 bill generation cost increases.The Company escalated its
8 2021 expenses by including a 1%customer growth factor for
9 all customer classes.The Company annualized the 7.55%
10 postage increase that took place on July 10,2022.Finally,
11 the Company annualized the increase in costs for its bill-
12 generation vendor.
13 Q.Do you agree with the Company's adjustment?
14 A.I agree with the annualization of cost increases
15 for the postage and the bill-generation vendor,but I do not
16 support the 1%customer growth amount.I have included the
17 actual Customer Billing Expenses for 2022 because the amount
18 is now available.This adjustment in Exhibit No.112,
19 increases the Company's expense by $611.
21 Q.Please explain your adjustments to the Company's
22 pro forma vehicle expense in Exhibit No.113.
23 A.I have decreased the Company's Vehicle Allocation
24 by $166,799.The first adjustment is reflected on Line 2
25 and removes the 2023 pay increase for the Company's
mechanic,consistent with my payroll adjustment.
A.The next adjustment is reflected on Line 3 and
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)1502/15/23 STAFF
1 removes the pro forma lease expense of $198,000 associated
2 with the 22 new vehicles included in the Company's case.
4 In the Company's Adjustment No.16 for Vehicle
5 Allocation,the Company reported a Lease Expense of
6 $736,412,which included 22 pro forma vehicles.During the
7 onsite audit in January of 2023,Staff discovered that none
8 of the 22 vehicles had been delivered to the Company because
9 of supply chain issues.Because the vehicles have yet to be
10 delivered and are not currently used and useful,I have
11 removed these pro forma leases from the Company's Lease
12 Expense.
13 Q.Why does Staff object to the Company's method for
14 calculating fuel cost?
15 A.The Company calculated its fuel cost by
16 multiplying the estimated gallons of fuel to be used by the
17 average AAA prices for regular and diesel fuel on September
18 1,2022.Because fuel prices peaked in August and September
19 of 2022,the Company's fuel cost estimates may be overstated
21 and not reflective of the entire test year.I have updated
22 the Company's proposed fuel costs using the average AAA
23 prices for regular and diesel fuel on January 30,2023.
24 This adjustment reduces the Company's fuel expense by
25 $68,328.
Q.Please explain the adjustment made to the
Company's pro forma gallons of fuel consumed.
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)1602/15/23 STAFF
1 A.In its Application,the Company projected that
2 fuel consumption would increase from the historical test
4 year amount of 69,756 gallons to 73,593 gallons,an
5 estimated 5.5%increase in fuel consumption.The Company
6 provided little supporting evidence as to the reason behind
7 the increase in fuel consumption.The projected fuel
8 consumption is not a known and measurable,as fuel
9 consumption can vary from year to year,and it would be
10 impossible to predict the number of gallons of fuel consumed
11 in any given year.Therefore,I have removed the additional
12 estimated 5.5%increase in fuel consumption and adjusted
13 fuel expense by an additional $18,324.
14 Q.What is the total of these two adjustments?
15 A.As shown in Exhibit No.113,Line 4,the total
16 reduction is $86,652.
17 Q.Please explain your adjustment to the inflation
18 estimate the Company included in its vehicle materials and
19 maintenance costs.
21 A.In its Vehicle Allocation adjustment,the Company
22 escalated its historical test year materials and maintenance
23 costs for vehicles by 3%to account for inflation.The
24 Commission and Staff have historically opposed inflation
25 adjustments because they are not known and measurable;
therefore,I have removed the inflation estimate.If
inflation adjustments were allowed to be included in rate
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)1702/15/23 STAFF
1 cases,utilities could simply escalate all the expense
2 accounts by an arbitrary percentage,and the escalated
4 amounts would be passed through to customers without any
5 review of actual expenses.I removed $6,293 from the
6 Company's Materials and Maintenance Expense for vehicles.
7 Q.What adjustments did the Company make to Office
8 Expenses?
9 A.Company witness Cary increased office expenses
10 based on an increase in licensing cost per the contract with
11 Cityworks,as well as the cost of additional licenses needed
12 for new employees.The Company included an adjustment of
13 $20,000 for expected postage costs for mailing the Customer
14 Confidence Report.Also included in the adjustment is an
15 increase in the first-class postage cost of 3.45%effective
16 July 10,2022.The final adjustment proposed by the Company
17 is the addition of support fees for the Company's UPS costs.
18 Q.What adjustment to Office Expenses are you
19 proposing?
21 A.My adjustment removes the Cityworks License costs
22 for the 4 vacant positions that were not filled by December
23 31,2022.This adjustment decreases the Cityworks license
24 expenses by $7,544 for the vacant positions as of December
25 31,2022.Additionally,this adjustment removes the
expected postage costs for mailing the Consumer Confidence
Report.This report is required by the Department of
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)1802/15/23 STAFF
1 Environmental Quality ("DEQ");however,the DEQ does not
2 require that the report be mailed,only that it be made
4 available to customers.DEQ on its website,states,"Idaho
5 now allows all sizes of community public water systems the
6 option to deliver Consumer Confidence Reports electronically
7 ...."The Environmental Protection Agency ("EPA")
8 interprets the requirement to "mail or otherwise directly
9 deliver"to include electronic delivery."2 Therefore,I
10 have removed the cost of postage.In addition,the pro
11 forma postage costs that the Company includes in its filing
12 pertains to the 2022 CCR that will be sent in 2023,outside
13 of Staff's test year ended December 31,2022.In total,I
14 have decreased the Company's Office Expense by $27,544 as
15 shown in Exhibit No.114.
16 Q.What adjustments did the Company make to
17 Advertising Expenses?
18 A.The Company adjusted advertising expenses to
19 eliminate historic test year costs that were duplicated due
21 to the timing of the various outreach campaigns and added in
22 the pro forma cost to print the Consumer Confidence Report.
23 Q.What adjustment to Advertising Expenses do you
24 propose?
25 A.I propose removing the $30,000 Company pro forma
printing cost of the Consumer Confidence Report.As stated
2 The EPA's interpretation is based on 40 CFR §141.155(a).
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)1902/15/23 STAFF
1 above,the Consumer Confidence Report is not required to be
2 printed or mailed,only made available.This adjustment,
4 reflected in Exhibit No.115,removes these projected costs,
5 and decreases expenses by $30,000.
6 Q.Please explain your adjustments in Exhibit No.116
7 made to the Safety Expense Account.
8 A.In its Application,the Company included several
9 pro forma safety expense adjustments.During the onsite
10 audit,Staff discovered that two of these safety trainings
11 will no longer take place and one training has not happened
12 as of the filing of this testimony but is expected to take
13 place in the spring of 2023.The two courses included are
14 an OSHA 10-Hr Construction Safety course and classroom
15 training for Air Purifying &Respirator Fit Test.Together
16 these courses account for $9,000 in pro forma safety
17 expense.The safety training expected to take place in the
18 spring of 2023 is for Industrial Hygienist Training &
19 Exposure Monitoring.This adjustment accounts for $20,250
21 in pro forma Safety Expenses.Safety training is necessary
22 for providing safe and reliable service and the Company
23 should be commended for its efforts to provide a safe
24 working environment.However,I propose removing the Safety
25 Expense for these three items for two reasons:
1.Two of the safety training events are no
longer planned and therefore the associated expenses
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)2002/15/23 STAFF
1 should be removed from the Company's revenue
2 requirement.
4 2.The third safety event has not yet happened
5 as of the writing of this testimony and is not expected
6 to happen until spring of 2023,with no specific date
7 planned.Additionally,the amount the Company included
8 for this training is nearly twice what the Company paid
9 in prior years.
10 Q.Please explain the Miscellaneous Expense adjustments
11 in Exhibit No.117.
12 A.The Company's Miscellaneous Account includes a
13 list of credit card transactions made by the Company during
14 2022.Staff removed several expenses related to advertising
15 which are not typically recoverable expenses.Staff also
16 removed expenses related to chamber of commerce and support
17 for political candidates.Together the removal of these
18 Expenses results in a reduction to the Company's
19 Miscellaneous Account of $4,585.
21 Q.Does this conclude your direct testimony in this
22 proceeding?
23 A.Yes,it does.
24
25
CASE NO.VEO-W-22-02 JOHNSON,T.(Di)2102/15/23 STAFF
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Veolia Water Idaho,Inc.
Case No.VEO-22-02
Post-retirement Benefits Other than Pension (PBOP)
Staff
Line Adjustment AdjustmentDescriptionAmountAmount
1 To adjust employee PBOP (post-retirement benefits other than pension)amount based on $(42,509)|$(54,144)
Amount T
2 Projected PBOP expense $(523,756)
3 PBOP Expense Service cost -based on ratio below $163,925 $180,883
4 PBOP Expense -all other PBOP costs -based on ratio below $(687,681)$(758,783)
5 Test Year PBOP expense $(523,756)$(577,900)
6 Historic Test Year Expense (481,247)
7 PBOP Expense Service cost -based on ratio below -31.30%150,630
8 PBOP Expense -all other PBOP costs -based on ratio below 131.30%(631,877)
9 Historic Test Year Expense 6/30/2022 $(481,247)$(481,247)
10 Adjustment $(42,509)$(96,653)
11 Staff Adjustment |$(54,144)
Exhibit No.106
Case No.VEO-W-22-02
T.Johnson,Staff
02/15/23
Veolia Water Idaho,Inc.
Case No.VEO-22-02
Healthcare Insurance
Company
Line Adjustment StaffNo.Description Change Amount Amount Adjustment
1 To adjust employee healthcare expense (medical &dental),to expected costs and to the test year number $(353,303)|$240,439
2 Gross Historic Test Year Healthcare Expense $2,903,152
3 Employee Offsetting Contributions $(420,245)
4 Net Historic Test Year Healthcare Costs account 91700 $2,482,907
5 Exclude Historic Test Year IBNR -Incurred But Not Reported claims reserves $(25,894)
6 Adjusted Net Historic Test Year Healthcare Costs $2,457,013 $2,457,013
7 Test Year Employees 137 133
8 Projected Employer Healthcare costs $2,103,710 $2,348,883
9 Projected Life Insurance,Long Term Disability Costs and Other Benefits based on Historic Test Year $-$65,767
10 Test Year Total Healthcare Costs $2,103,710 $2,414,650
11 $(70,501)
12 $2,344,149
14 Adjustment $(353,303)$(112,864)
$240,439 |
Exhibit No.107
Case No.VEO-W-22-02
T.Johnson,Staff
02/15/23
Veolia Water Idaho,INC.
Case No.VEO-22-02
Employee 401k
CompanyLineAdjustment Staff
N Description Amount Adjustment
1 To adjust 401k matching expense to Test Year based on Historic Test Year ratio expense amount of $71,977 $(44,890)
Gross Payroll
401k Expense less Incentives M
2 Historic Test Year 12 months ending June 30,2022 $384,454 $9,249,359 4.16%
3 Test Year Gross Payroll less Incentives $10,981,000
4 Ratio based on Historic Test Year 4.16%
5 Test Year Employee 401K $456,431 $411,540
6 12 months ended June 30,2022 Account 91800 $384,454 $384,454
7 Adjustment $71,977 $27,086
$(44,890)
Exhibit No.108
Case No.VEO-W-22-02
T.Johnson,Staff
02/15/23
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Case No.VEO-22-02
Payroll Overheads (Fringe Benefits Allocation)
Company StaffLineAdjustmentAdjustmentDescriptionAccountBenefitsAmountW/PR Inc
To normalize the fringe benefit allocation charged to non-operations and maintenance accounts
1 based on historic test year %of labor.*Subject to change when 2023 benefit costs are available.$81,157 $203,700
Test Year Benefit Costs
2 Payroll Taxes 70250 $898,783 $796,877
3 Workers Compensation 91460 $116,207 $97,097
not 91500 expense per
books but projected
4 Pension (Cash Contribution -service cost only)Cash Contribution $581,118 $581,118
not 91550 expense per
books but projected
PEBOP Post retirement health care -projected service PBOP service cost &
5 cost)amort (if any)$163,925 $(577,900)
6 Group Health &Life 91700 $2,103,710 $2,414,650
7 401k 91800 $456,431 $411,540
8 Other Employee Benefits 91850 $14,634 $9,274
9 Subtotal Test Year Benefit Costs $4,334,808 $3,732,656
10 Historic Test Year Percentage of Non-Operations &Maintenance payroll (account 33.83%33.83%
11 Test Year fringe benefit clearing costs allocated $(1,466,410)$(1,262,710)
12 12 months ended December 31,2022 Account 90950 &90953 $(1,547,567)$(1,547,567)
13 Adjustment $81,157 $284,857
$203,700 |
Exhibit No.110
Case No.VEO-W-22-02
T.Johnson,Staff
02/15/23
Veolia Water Idaho,INC.
Case No.VEO-22-02
Payroll Tax -Summary
Comopany's Staff'sPayrollTaxSummaryAdjustmentAdjustments
FICA Adjustment $871,275 $(101,039)
FUI Adjustment $5,754 $(168)
SUI Adjustment $21,754 $(699)
Total Payroll Tax Adjustment $898,783 $(101,906)
Exhibit No.111
Case No.VEO-W-22-02
T.Johnson,Staff
02/15/23 Page 1 of 4
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Veolia Water Idaho,INC.
Case No.VEO-22-02
Payroll Taxes -FUI
Company
Line Adjustment StaffDescriptionAmountAdjustment
1 To adjustFederal UnemploymentInsurance Tax $(378)$(168)
Details Amount
2 Federal Taxable Base limit $7,000 $7,000
3 Federal Tax Rate 0.60%0.60%
4 Employees covered by Federal UnemploymentTax
(137 Test Year Employees@ $7,000 limit)137 133
5 Taxable Wages $959,000 $931,000
6 Tax Rate 0.60%
7 Test Year Federal Unemployment Tax $5,754 $5,586
8 June 30,2022 Account 70250 CE 523028 $6,132 $6,132
9 Adjustment $(378)$(546)
$(168)
Exhibit No.lll
Case No.VEO-W-22-02
T.Johnson,Staff
02/15/23 Page 3 of 4
Veolia Water Idaho,INC.
Case No.VEO-22-02
Payroll Taxes -SUI
Company
Line Adjustment StaffNADescriptionAmountAdjustment
1 To adjust State Unemployment insurance Tax $213 $(699)
Details Amount
2 Projected 2023 Idaho Taxable Base -based on change in prior year $50,500 $50,500
3 2022 Idaho SUTA Tax Rate Class 2 Positive 0.346%0.346%
4 Employees covered by State Unemployment Tax 133 Employees
(137 Test Year Employees)
5 TaxableBase $50,500 $50,500
6 Test Year TaxableWages $6,287,273 $6,085,273
7 Tax Rate 0.346%
8 Test Year Idaho Unemployment Tax $21,754 $21,055
9 June 30,2022 Account 70250 CE 523029 $21,541 $21,541
10 Adjustment $213 $(486)
$(699)
Exhibit No.111
Case No.VEO-W-22-02
T.Johnson,Staff
02/15/23 Page 4 of 4
Veolia Water Idaho,INC.
Case No.VEO-22-02
Customer Billing Expenses
Test CompanyLineYearAdjustment StaffNo.Description Amount Amount Adjustment
i To adjust customer billing expense for customer growth,postage and bill generation cost increases $22,125 |$611 |
2 Historic Test Year Expense Customer Bill Generation &Postage Expense (50405)$301,338 $301,338
3 Customer growth %per historic test year (all customer classes)1.0%
4 Projected impact of customer growth on customer billing expenses $2,915
Postage increase July 10,2022 for metered mail 1-oz.from $0.53 to $0.57,a
5 7.55%increase (CE684001)applied to historic test year amount 7.55%$146,626
6 Postage increase impact $11,066
7 CSG (bill generation vendor)material cost increase 13.6%as of July 1,2022 $154,711
8 CSG bill generation cost increase impact amount $8,144
9 Test Year Customer Billing Expense 6/30/2022 $323,463 12/31/2022 $324,074
10 12 months ended June 30,2022 Account 50405 $301,338 $301,338
11 Adjustment $22,125 $22,736
|$611 |
Exhibit No.112
Case No.VEO-W-22-02
T.Johnson,Staff
02/15/23
Veolia Water Idaho,INC.
Case No.VEO-22-02
Vehicle Allocation
CompanyLineAdjustment StaffNo.Description Amount Adjustment
To adjust vehicle allocation expenses including all elements delineated below for fleet of Vehicles andiheavyequipmentbasedonprojectedexpense.$467,768 $(166,799)
Details Amount
Test Year Expense
2 Mechanic payroll and benefits $99,362 $95,540
3 Lease Cost $736,412 $538,412
4 Fuel (73,593 gallons @ $4.78)average of Regular &Diesel fuel as of Sept.1,2022 $351,490 $264,838
5 Materials,Maintenance (2021 cost plus 3%inflation estimate)$216,070 $209,777
6 Insurance $211,509 $211,509
7 Other Costs,Depreciation,Tax,Vehicle allowance,etc.$207,652 $207,652
8 Sub Total Test Year Gross Cos $1,822,495 $1,527,729
9 Less:Estimate of Proceeds from disposal or rebates based on 3 year average $(10,500)$(10,500)
10 Vehicle Allocation Gross $1,811,995 $1,517,229
11 Test Year O&M Vehicle Allocation ratio based on June 2022 Historic Test 56.587%56.587%
12 Total Test Year Expense $1,025,350 $858,550
13 Historic Test Year Expense 50645 &50646 before adjustments $832,494 $832,494
14 Exclude Historic Test Year IBNR -incurred But Not Reported claims reserves $(329,806)$(329,806)
15 Add Auto Insurance Claims payments -GL Account 26200 CE 682005 $54,893 $54,893
16 Adjusted Historic Test Year Vehicle Allocation Expense 6/30/2022 $557,581 $557,581
17 Total Test Year Expense $1,025,350 $858,550
18 12 months ended December 31,2022 Account 50645 &50646 before adjustment $814,871 $814,871
19 Exclude IBNR -Incurred But Not Reported claims reserves $(118,609)$(118,609)
20 Add Auto Insurance Claims payments -GL Account 26200 CE 682005 $19,732 $19,732
21 12 months ended December 31,2022 Account 50645 &50646 adjusted $715,994 $715,994
22 Adjustment $467,768 $300,969
23
|$(166,799)
Exhibit No.I 13
Case No.VEO-W-22-02
T.Johnson,Staff
02/15/23
Veolia Water Idaho,INC.,
Case No.VEO-22-02
Office Expenses
CompanyLineAdjustment StaffDescriptionAmountAdiustment
i Office Expenses -adjust for Citywork work management system 9%annual increase and additional licenses.$(2,424)$(27,544)
Cost Element Category Amount
2 701001 -Cellular Phone $39,402 $39,402
3 701002 -Telephone Equipment $213,316 $213,316
4 701003 -Communication Other $8,190 $8,190
5 701004 -Office Supplies $50,404 $50,404
6 701005 -Dues and Subscriptions $58,135 $58,135
7 701006 -Licenses and Fees $22,873 $22,873
8 701008 -Postage and Air Freight $23,815 $23,815
9 701009 -Staff Mtgs,Conf and Seminars $36,613 $36,61310701012-Air Transportation $13,859 $13,859
11 701013 -Ground Transportation $6,525 $6,525
12 701014 -Hotel and Lodging $7,335 $7,335
13 701015 -Meals $2,379 $2,379
14 701016 -Other Office Expense $259,071 $259,071
15 Historic Test Year Expense $741,917 $741,917
16 Cityworks License cost 9%contractual increase and additional licenses for new employees $42,776 $35,232
17 CCR Consumer Confidence Report postage costs $20,000 $
18 Postage Increase July 10,2022 from $0.58 to $0.60 for first class mail 3.45%$821 $821
19 Timing of Right Systems invoice maintenance support fee contract for UPS $10,133 $10,133
$46,18620TestYearExpense$73,730 $815,647 $788,103
21 12 months ended December 31,2022 Account 50650 $818,071 $818,071
22 Adjustment $(2,424)$(29,968)
$(27,544)
Exhibit No.114
Case No.VEO-W-22-02
T.Johnson,Staff
02/15/23
Veolia Water Idaho,INC.
Case No.VEO-22-02
Advertising
Company
Line Adjustment StaffDescriptionAmountAdjustment
1 To normalize customer outreach advertising expense.Eliminate from Historic Test $33,209 |$(30,000)Year duplicated costs due to timing of various customer outreach campaigns.Add
CCR Consumer Confidence Report printed version Adjustments Amount
2 Historic Test Year Advertising Expense $217,084 $217,084
3 Remove one month of RedSky costs from Historic Test Period -13 months $(2,000)$(2,000)
Remove Donahoe Pace customer education Conservation 2021 costs -
4 doubled up in Historic Test Year due to timing of campaigns $(8,000)$(8,000)
5 Remove Eagle Water Company customer town hall costs,non-recurring $(2,687)$(2,687)
Remove Drapers Associates Rules &Regulations insert from February
2022,was reprinted in June to reflect May 1 rate change per SUZ-W-20-01
6 rate case $(6,715)$(6,715)
7 Add CCR Consumer Confidence Report mailer per projected cost.$30,000 $-
8 Test Year Advertising Expense $227,683 $197,683
9 12 months ended December 31,2022 Account 50651 $194,474 $194,474
10 Adjustment $33,209 $3,209
|$(30,000)
Exhibit No.115
Case No.VEO-W-22-02
T.Johnson,Staff
02/15/23
Veolia Water Idaho,INC.
Case No.VEO-22-02
Safety
Company
Line Adjustment StaffDescriptionAmountAdjustment
1 Safety Expense based on budget amounts or prior costs,shown as annual amounts $5,734 |$(29,250)
2 Uniform costs,per historic test year amount $20,477 $20,477
3 Hearing Tests $150 facility fee +$15 per person *75 bargaining Unit employees $1,275 $1,275
4 Arc Flash Training -October &November 2022 $11,100 $11,100
5 Arc Flash PPE rental costs per historic test year amount $12,943 $12,943
6 Confined Space OSHA Competent Person annual training -November 2022 $7,500 $7,500
7 Trenching &Excavation Construction Site Erosion -annual cost -October 2022 $7,500 $7,500
8 Construction Site Erosion Refresher -3 Year -shown as annual cost $400 $400
9 Crane and Lift Inspections $1,200 $1,200
10 EPAINESHAP/OSHA Asbestos Training -2 years -shown as annual cost $3,500 $3,500
Fire Suppression System Inspections (fire alarms,fire flow,extinguisher inspection &
11 maint.)and Alarm monitoring based on historic test year amount $18,874 $18,874
12 First Aid CPR/AED training $50 per person $3,600 $3,600
13 OSHA Standards based on historic test year amount $750 $750
14 OSHA 10 Hr Construction $4,000 $-
15 Pulmonary Respirator Training &Fit tests $5,000 $
Industrial Hygienist -Respirator/chemicallasbestos program assessments -exposure
16 monitoring -per historic test year and October 2022 anticipated costs $20,250 $
Safety Equipment (PPE,Signage,de-icer,Safety-toe Boots,Rubber Pacs,etc.)based
17 on historic test year amount $75,137 $75,137
18 Forklift/Manlift training $1,200 $1,200
19 Flagger training -3 year -shown as annual cost $700 $700
20 Test Year Safety Expense $195,406 $166,156
21 12 months ending December 31,2022 Account 92200 $189,672 $189,672
22 Adjustment $5,734 $(23,516)
$(29,250)|
Exhibit No.116
Case No.VEO-W-22-02
T.Johnson,Staff
02/15/23
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 15TH DAY OF FEBRUARY 2023,
SERVED THE FOREGOING DIRECT TESTIMONY OF TY JOHNSON,IN CASE
NO.VEO-W-22-02,BY E-MAILING A COPY THEREOF,TO THE FOLLOWING:
PRESTON N CARTER DAVID NJUGUNA
MORGAN GOODIN MGR-REGULATORY BUSINESS
GIVENS PURSLEY LLP VEOLIA WATER M&S INC
PO BOX 2720 461 FROM ROAD STE 400
BOISE ID 83701-2720 PARAMUA NJ 07052
E-MAIL:prestoncarter givenspurslev.com E-MAIL:David.njuguna veolia.com
moreangoodinReivenspursley.com
[e-mail]
LORNA K.JORGENSEN SHARON M.ULLMAN,PRO SE
MEG WADDEL 5991 E.BLACK GOLD STREET
ADA COUNTY PROSECUTING BOISE,ID 83716
ATTORNEY'S E-MAIL:[e-mail]
OFFICE /CIVIL DIVISION
200 W.FRONT STREET,ROOM 3191
BOISE,ID 83702
E-MAIL:[e-mail]
JIM SWIER AUSTIN RUESCHHOFF
MICRON TECHNOLOGY,INC.THORVALD A.NELSON
8000 SOUTH FEDERAL WAY AUSTIN W.JENSEN
BOISE,ID 83707 HOLLAND &HART,LLP
E-MAIL:iswier micron.co 555 17TH STREET SUITE 3200
DENVER,CO 80202
E-MAIL:[e-mail]
MARY R.GRANT [e-mail]
DEPUTY CITY ATTORNEY [e-mail]
BOISE CITY ATTORNEY'S OFFICE [e-mail]
105 N.CAPITOL BLVD.kdsprises hollandhart.com
PO BOX 500
BOISE,ID 83701-0500
E-MAIL:mrerantŒcitvofboise.ore
boisecitvattorney citvofboise.org
SECRETARY
CERTIFICATE OF SERVICE