20230526Answer to Petition for Reconsideration.pdf

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ANSWER TO PETITION FOR RECONSIDERATION
CASE NO. VEO-W-22-02

Austin Rueschhoff, ISB No. 10592
Thorvald A. Nelson
Austin W. Jensen, ISB No. 11947
HOLLAND & HART LLP
555 17th Street, Suite 3200
Denver, CO 80202
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
[e-mail]
[e-mail]

Attorneys for Micron Technology, Inc.

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION ) CASE NO. VEO-W-22-02
OF VEOLIA WATER IDAHO INC. FOR )
AUTHORITY TO INCREASE ITS RATES ) ANSWER TO PETITION FOR
AND CHARGES FOR WATER SERVICE IN ) RECONSIDERATION AND
THE STATE OF IDAHO ) CLARIFICATION
)

Pursuant to Idaho Public Utilities Commission (“Commission”) Rule of Procedure 331
(IDAPA 31.01.01.331), Micron Technology, Inc. (“Micron”) hereby submits this Answer to
Veolia Water Idaho, Inc.’s (“Veolia”) Petition for Reconsideration and Clarification (“Petition”),
which was filed on May 19, 2023.
ANSWER TO PETITION
LEGAL STANDARD
1. Reconsideration
“Reconsideration allows the petitioner to bring to the Commission’s attention any question
previously determined and thereby affords the Commission an opportunity to rectify any mistake
RECEIVED
2023 May 26, 2:22PM
IDAHO PUBLIC
UTILITIES COMMISSION

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ANSWER TO PETITION FOR RECONSIDERATION
CASE NO. VEO-W-22-02

or omission.”1 Specifically, Rule 331.01 requires that petitions for reconsideration “must specify
why the order or any issue decided in it is unreasonable, unlawful, erroneous or not in conformity
with the law.” The Commission may deny reconsideration without further proceedings.2
Alternatively, the Commission may grant reconsideration by reviewing the existing record, by
written briefs, or by evidentiary hearing.3
2. Commission Action
Commission action will be upheld “unless it appears that the clear weight of the evidence
is against its conclusions or that the evidence is strong and persuasive that the Commission abused
its discretion.”4 A court “will not displace the Commission's findings of fact when faced with
conflicting evidence, ‘even though the [c]ourt would have made a different choice had the matter
been before it de novo.’”5 The burden is squarely on the challenging party to demonstrate that the
Commission’s conclusions are unsupported by the evidence in the record.6
ARGUMENT
Veolia seeks clarification on its final approved revenue requirement and reconsideration
on two points: its awarded return on equity (“ROE”) and general notions of regulatory lag. Micron
does not oppose Veolia’s request for clarification regarding the revenue increase figure and agrees
with Veolia that Order No. 35762 likely contains a transcription error on that point. However, the
Commission should deny Veolia’s Petition for Reconsideration regarding ROE and regulatory lag.

1 In the Matter of the Application of Idaho Power Company for Authority to Establish New Schedules for Residential
and Small General Service Customers with On-Site Generation, Case No. IPC-E-17-13; Order No. 34147, *29-30
(Sep. 21, 2018) (citing Washington Water Power Co. v. Kootenai Environmental Alliance, 99 Idaho 875, 879 (1979))
2 I.C. § 61-626.
3 IDAPA 31.01.01.332.
4 Hulet v. Idaho PUC, 138 Idaho 476, 478 (2003).
5 Id. (quoting Rosebud Enterprises, Inc. v. Idaho PUC, 128 Idaho 609, 618 (1996)).
6 Id.

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ANSWER TO PETITION FOR RECONSIDERATION
CASE NO. VEO-W-22-02

The Commission’s decision on these points was supported by substantial evidence in the record
after consideration of all party positions. Veolia fails to carry is burden to demonstrate that the
order is “unreasonable, unlawful, erroneous or not in conformity with the law.”
Therefore, the Petition as to ROE and regulatory lag should be denied.
1. The Commission’s final order setting a 9.25 percent awarded ROE is
supported by substantial evidence and should be affirmed.
“Questions of rate of return are matters which raise extremely complicated issues. These
issues are within the area of expertise, and their resolution a function of the Commission.”7 In
setting a rate of return, the Constitution permits a “broad zone of reasonableness.”8 A court will
uphold the Commission’s decision so long as the awarded ROE “may reasonably be expected to
maintain financial integrity, attract necessary capital, and fairly compensate investors for the risks
they have assumed, and yet provide appropriate protection to the relevant public interests.”9
Here, Veolia makes two arguments in support of its request to reconsider the Commission’s
9.25 percent ROE award: (1) the Commission referenced Veolia’s wholly owned subsidiary status
and (2) Veolia’s assertion that 9.25 percent is not in line with other water utilities in Idaho or the
region. The Commission should reject both arguments on their individual merit and as a basis to
reconsider the Commission’s otherwise thorough ROE analysis. By isolating two points of the
Commission’s decision, Veolia forgets that “the Constitution does not bind rate-making bodies to

7 Indus. Customers of Idaho Power v. Idaho PUC, 134 Idaho 285, 291 (2000).
8 Intermountain Gas Co. v. Idaho Pub. Utils. Comm’n, 97 Idaho 113, 128 (1975).
9 Id. at 127.

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ANSWER TO PETITION FOR RECONSIDERATION
CASE NO. VEO-W-22-02

the service of any single formula or combination of formulas.”10 When the Commission’s order
and the record are considered as a whole, only one result remains: denying reconsideration.
a. The Commission’s consideration of Veolia’s corporate structure was
neither error nor the only evidence supporting a 9.25 percent awarded
ROE.
The Commission should reject Veolia’s assertion that the Commission’s final order erred
in considering Veolia’s corporate structure. First, the Commission’s consideration of Veolia’s
corporate structure was not the only basis for the Commission’s decision; substantial evidence
exists to support a 9.25 percent awarded ROE.
The relevant portion of the Commission’s decision reads:
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 693.11

10 Indus. Customers of Idaho Power v. Idaho PUC, 134 Idaho 285, 290 (2000) (quoting City of Los Angeles v. Public
Utilities Comm’n, 542 P.2d 1371, 1383 (Cal. 1975)); Intermountain Gas Co. v. Idaho Pub. Utils. Comm’n, 97 Idaho
113, 128 (1975) (“[T]he Commission is not constitutionally bound to base its decision solely on the ‘comparable
earnings’ and ‘capital attraction’ tests.”); see also In the Matter of the Application of PacifiCorp dba Rocky Mountain
Power for Approval of Changes to its Electric Service Schedules, Case No. PAC-E-10-07; Order No. 32224, *40-41
(Apr. 18, 2011).
11 Order No. 35762, p. 9.

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ANSWER TO PETITION FOR RECONSIDERATION
CASE NO. VEO-W-22-02

Dissecting these important paragraphs, the Commission set an awarded ROE of 9.25 percent
because (1) 9.25 percent was within the reasonable ranges of all parties to present cost of capital
testimony after adjustment to remove adders, (2) Veolia’s use of the Hamada model was
unconvincing, (3) Veolia’s ROE adjustments were unpersuasive, (4) Veolia’s risk analysis was
uncredible, and (5) Veolia’s size comparison to the proxy group failed to consider its corporate
structure. All of the above individually and collectively represent substantial evidence to support
the Commission’s awarded ROE recommendation in this case and leads to the conclusion that a
9.25 percent ROE satisfies constitutional requirements. Importantly, Veolia does not take issue
with the first four bases supporting the Commission’s decision.
Second, the Commission can and, in this case, should consider Veolia’s corporate structure
in setting a reasonable return. In attacking the last reason supporting the Commission’s decision,
Veolia asserts—without support—that the Commission improperly considered Veolia’s corporate
structure in evaluating its risk compared to other utilities.12 However, a brief survey of regulatory
decisions reveals that commissions regularly consider corporate structure in evaluating a
reasonable return. For example, in a water rate case for Illinois-American Water Company
(“IAWC”), the Illinois Commerce Commission considered facts markedly similar to those
presented in Veolia’s Petition. Specifically, IAWC requested a risk adjustment to reflect risk
associated with IAWC’s small size.13 Illinois Commerce Commission Staff argued that “IAWC
is a wholly-owned subsidiary within a much larger organization and, therefore, [IWAC’s]
inclusion of business risk adjustment based on the size of IAWC is unwarranted.”14 The Illinois

12 Petition, p. 4.
13 Illinois-American Water Company; Proposed General Increase in Water and Sewer Rates, Docket No. 07-0507,
*182 (Ill. Commerce Comm. July 30, 2008).
14 Id. at *183.

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ANSWER TO PETITION FOR RECONSIDERATION
CASE NO. VEO-W-22-02

Commerce Commission considered IWAC’s corporate structure in setting a reasonable return,
concluding:
In this case, however, the common stock of IAWC is owned by American Water
and American Water raises any necessary common equity for IAWC. In the
Commission's view, the proposition that ratepayers should pay a “premium” due to
IAWC's small size when there has been no showing, or even suggestion, that the
shareholders of American Water, who essentially own the assets of IAWC, require
a premium is unjustifiable.15

Accordingly, the Illinois Commerce Commission considered the overall corporate structure in
setting a reasonable return for IWAC, just like the Commission did in this case for Veolia. While
Veolia argues that the Commission should ignore the corporate structure of Veolia in setting an
awarded ROE, the weight of authority—which goes back decades16—and common sense dictate
otherwise.
Finally, customers pay costs associated with Veolia’s association with its parent company
and are therefore entitled to the benefits of such affiliation. Veolia alleges that “Veolia customers
benefit from its status as a subsidiary in various ways: Veolia Water Idaho does not need its own
separate executive team, accounting team, HR team, and computer systems.”17 However, Veolia
neglects to mention that Veolia customers pay for these benefits. Veolia includes approximately
$4.4 million of parent company services and charges in its cost of service.18 These affiliate services
mitigate Veolia’s standalone operating risks and in turn, its investment risk. Therefore, the 9.25

15 Id. at *244.
16 See e.g., Application of Mid-State Telephone Company for a Rate Increase, Docket No. 2323, *23 (Tex. PUC June
12, 1979) (“Because a parent has complete control over a wholly owned subsidiary, an investment in the subsidiary is
less risky than an outside investment.”); Application of D.C. Transit System, Inc., for Authority to Increase Fares,
Application No. 396, Docket No. 131, Order No. 684, p. 33 (WMATC Mar. 13, 1967) (“We conclude that the company
faces less risk than most transit companies because of its size, its position in the holding company corporate structure
of which it is a part, its prospects for future growth in its transit operations, and, finally, the cushion provided by the
increasing value of its real estate.”) (emphasis added).
17 Petition, p. 5.
18 See Petition, Attachment 1, Line 21.

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ANSWER TO PETITION FOR RECONSIDERATION
CASE NO. VEO-W-22-02

percent awarded ROE is fair and reasonable given the actual investment risk of Veolia which
operates as an affiliate of its parent company.
Accordingly, the Commission’s consideration of Veolia’s corporate structure was
reasonable, and even if set aside, substantial evidence exists to support a 9.25 percent awarded
ROE. Therefore, the Commission should deny Veolia’s Petition.
b. That Veolia’s awarded ROE may be below other utilities is not a sufficient
basis to categorically reject the Commission’s final order.
Veolia mistakenly asserts that its awarded ROE must match that of other utilities in Idaho
or the region. However, the Idaho Supreme Court has rejected this argument. Specifically, the
Idaho Supreme Court has stated:
Our examination of the rates of return earned by the comparable companies (which,
of course, were deemed comparable to Intermountain by application of criteria
which is necessarily inexact and arbitrary to some degree) shows that their rates of
return vary over a broad spectrum. The Constitution permits a “broad zone of
reasonableness” in rates of return, and we will not hold that any rate of return lower
than the precise average rate of return of comparable companies or beneath the
rate of return that expert witnesses testify is necessary under the “capital attraction”
or “comparable earnings” test is necessarily beyond the “broad zone of
reasonableness” permitted by the Constitution.19
While comparison to other utilities may be a helpful data point in setting a reasonable
return, Idaho does not mandate strict adherence. But even setting this precedent aside, Veolia’s
argument fails for two reasons. First, Veolia attempts to add evidence to an evidentiary record that
is closed. Particularly, Veolia supports its argument that it would have the lowest awarded ROE
in the area with reference to an attachment to its Petition. Veolia does not cite where in the record
this information is found, and it should not now be permitted to inject new evidence without
opportunity for parties to fully respond.

19 Intermountain Gas Co. v. Idaho Pub. Utils. Comm’n, 97 Idaho 113, 128 (1975) (emphasis added).

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ANSWER TO PETITION FOR RECONSIDERATION
CASE NO. VEO-W-22-02

Second, while Veolia argues that the Commission did not make factual findings comparing
a 9.25 percent ROE to other utilities, the Commission did include facts relevant to Staff’s
comparable earnings model supporting a 9.25 percent awarded ROE. Specifically, the
Commission relied on Staff’s comparable earnings model, stating:
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%.20
Veolia’s Petition glosses over the fact that the Commission’s awarded ROE determination in this
case matches precisely the average ROE under Staff’s comparable earnings test.
Moreover, key components of an awarded ROE analysis include whether the awarded ROE
will allow the utility to maintain financial integrity and attract capital.21 “So long as the IPUC did
not exceed its jurisdiction and provided that the end result of the methods used by the IPUC to
compute a utility’s rate of return produce a ‘fair, reasonable or sufficient’ result, the court’s inquiry
is at an end.”22 While Veolia complains about the methods the Commission used (i.e.,
consideration of corporate structure and purported non-consideration of ROE’s of entities in the
region), Veolia does not allege, much less mention, that the Commission’s end result would
produce an unfair, unreasonable, or insufficient return by risking Veolia’s financial integrity or
precluding it from raising capital.

20 Order No. 35762, p. 7.
21 Intermountain Gas Co. v. Idaho Pub. Utils. Comm’n, 97 Idaho 113, 128 (1975).
22 Idaho Power Co. v. Idaho Pub. Utils. Comm'n, 99 Idaho 374, 379 (1978) (emphasis added); see also Panhandle
Eastern Pipe Line Co. v. Federal Power Com., 324 U.S. 635, 649 (1945) (affirming an awarded ROE of 6.5 percent
and holding: “The question on review is not the method of valuation which was used but the end result obtained since
the issue is whether the rate fixed is ‘just and reasonable.’”) (emphasis added).

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ANSWER TO PETITION FOR RECONSIDERATION
CASE NO. VEO-W-22-02

In sum, Veolia has the burden to demonstrate that the Commission’s decision was
unreasonable, unlawful, erroneous or not in conformity with the law. Veolia has failed this
standard, ignoring the substantial evidence in the record that supports the Commission’s decision
in this case. Therefore, the Petition should be denied.
2. Veolia’s general concerns over regulatory lag do not justify reconsideration.
Veolia argues that the Commission did not adequately consider regulatory lag in (1) setting
a historical test year ended December 31, 2022, (2) employing average of period rate base, (3)
disallowing an amount for cash working capital, and (4) rejecting Veolia’s proposed DSIC
mechanism. Veolia’s Petition on these matters amounts to nothing more than disagreement with
the Commission’s decision and precedent on these issues.
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. “In performing such a function within its area of expertise, the Commission
may draw its own conclusions from the facts without the aid of expert testimony and may make
determinations contrary to the uncontradicted opinions of the experts.”23 In other words these are
policy determinations that set foundational ratemaking principles. And the Commission’s policy
determinations have been consistent on these points across multiple utility proceedings over the
years. Indeed, Veolia recognizes that “year-end cutoff for rate base, use of the average of monthly
averages, and similar decisions find some support in Commission precedent.” 24 As described by
Staff witnesses Donn English and Travis Culbertson, the Commission has (1) employed a fairly
strict view to making adjustments to historical test year values,25 (2) approved or mandated the use

23 Intermountain Gas Co. v. Idaho Pub. Utils. Comm’n, 97 Idaho 113, 126 (1975) (internal quotations omitted).
24 Petition, p. 15.
25 Direct Testimony of Donn English, p. 8 (citing Order No. 25880).

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ANSWER TO PETITION FOR RECONSIDERATION
CASE NO. VEO-W-22-02

of average rate base in every litigated rate case since 2003,26 (3) rejected inclusion of cash working
capital where, as here, the request is not sufficiently supported,27 and (4) declined to allow
alternative ratemaking treatment for capital investments.28
While regulatory lag is an important consideration in ratemaking, the record in this case
shows that the Commission reasonably considered Veolia’s concerns regarding regulatory lag
when issuing its decision consistent with past Commission precedent. Importantly, Veolia
proposed a test year period of the 12-month historic period ending June 30, 2022, and a nine-month
adjustment period ending on March 31, 2023 (i.e., the week before the evidentiary hearing in this
case). Although the Commission did not allow adjustments up until March 31, 2023, it did adopt
a test year with six months of adjustments through December 31, 2022, as recommended by
Commission Staff.
The record does not support reconsideration of the Final Order due to Veolia’s policy
disagreements with the Commission’s decisions. Indeed, utility ratemaking is not intended to be
an exercise in expense reimbursement. Rather, ratemaking requires a comprehensive examination
of test year revenues and expenses. The Commission’s Final Order reasonably considered all
parties’ positions on the issue of regulatory lag and issued a decision consistent with the record.
Therefore, the Commission should deny the Petition.

REQUEST FOR RELIEF

26 Id. at pp. 11-12 (citing Order No. 29505).
27 Id. at p. 18 (citing Order No. 33757).
28 Direct Testimony of Travis Culbertson, pp. 19-20 (citing Order No. 34090).

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ANSWER TO PETITION FOR RECONSIDERATION
CASE NO. VEO-W-22-02

WHEREFORE, Micron respectfully requests that the Commission deny Veolia’s Petition
for Reconsideration. In the alternative, if the Commission finds that Reconsideration is warranted,
it should establish additional procedures in this case to permit the parties to fully brief the issues
presented in Veolia’s Petition.
Respectfully submitted this May 26, 2023.

HOLLAND & HART LLP

By:
Austin Rueschhoff, ISB No. 10592
Thorvald A. Nelson
Austin W. Jensen, ISB No. 11947
555 17th Street, Suite 3200
Denver, CO 80202
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
[e-mail]
[e-mail]

Attorneys for Micron Technology, Inc.

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ANSWER TO PETITION FOR RECONSIDERATION
CASE NO. VEO-W-22-02

CERTIFICATE OF SERVICE
I hereby certify that on May 26, 2023, a true and correct copy of the within and foregoing
ANSWER TO PETITION FOR RECONSIDERATION AND CLARIFICATION was served in
the manner shown to:

Idaho Public Utilities Commission

Chris Burdin
Dayn Hardie
Jan Noriyuki
Commission Secretary
Idaho Public Utilities Commission
11331 W. Chinden Boulevard
Building 8, Suite 201-A
P.O. Box 83720
Boise ID 83720
[e-mail]
[e-mail]
[e-mail]
[e-mail]

Ada County

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

Veolia Water Idaho Inc.

Preston N. Carter
Morgan D. Gooding
Givens Pursley LLP
601 W. Bannock Street
Boise, ID 83702
[e-mail]
[e-mail]

Veolia Water M & S

David Njuguna
Veolia Water M & S
461 From Road, Suite 400
Paramus, NJ 07052
[e-mail]

Micron Technology, Inc.

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

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

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ANSWER TO PETITION FOR RECONSIDERATION
CASE NO. VEO-W-22-02

Sharon Ullman

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

City of Boise City

Mary R. Grant
Deputy City Attorney
Boise City Attorney’s Office
105 N. Capitol Blvd.
P.O. Box 500
Boise, ID 83701-0500
[e-mail]
[e-mail]

s/ Chelsey Moser
21519176_v2