20240507Decision Memo.pdf

DECISION MEMORANDUM
TO: COMMISSIONER ANDERSON
COMMISSIONER HAMMOND
COMMISSIONER LODGE
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM: TRAVIS CULBERTSON
ADAM TRIPLETT,DEPUTY ATTORNEY GENERAL
DATE: MAY 7, 2024
SUBJECT: INVESTIGATION INTO DRY CREEK WATER COMPANY, LLC,
OWNER OF A WATER SUPPLY AND DISTRIBUTION SYSTEM
Dry Creek Water Company, LLC("Company"),is a private water utility located north-
west of Boise. The Company provides water to the Dry Creek Ranch Homeowners Association
("HOA")that in turn distributes water to the homes that have been constructed at Dry Creek Ranch.
As of December 2023, 381 connections are being served. When fully built out, the system is
projected to serve approximately 1,800 connections. The Company is not currently regulated by
the Idaho Public Utilities Commission("Commission")and does not possess a Certificate of Public
Convenience and Necessity. Based on Commission Staff s ("Staff') review of complaints filed
informally, and information provided by the Company, Staff believes that a formal investigation
is necessary to review whether the Company is operating as a public utility that should be regulated
by the Commission. Staff recommends that the Commission open a docket initiating a formal
investigation to review if the Company should be regulated, and if so, recommend further action
to comply with applicable laws.
BACKGROUND
The Company owns and operates a water system that serves residents in the Dry Creek
Ranch development. Dry Creek Ranch plans to expand via additional phases of development,
thereby connecting additional users to the system. The Company claims to serve only one
DECISION MEMORANDUM 1 MAY 7, 2024

customer—the HOA.1 There is an existing contractual agreement between the two entities. The
Company provides water to the HOA for a fee and the HOA in turn delivers water to homes in the
HOA and charges each connection for its usage.
PROCEDURAL BACKGROUND
In 2021, Staff received complaints from members of the HOA regarding their water
bills increasing. While reviewing these complaints, Staff conducted an informal investigation into
the Company.
On November 17, 2022, Staff sent a letter to the Company requesting additional
information about its ownership and structure. Over the course of 16 months, Staff and Company
exchanged information and Staff reviewed the Company's financial information.
On April 11, 2024, Staff sent a letter to the Company stating that Staff may request the
Commission to open a formal docket to review if the Company is subject to the Commission's
regulatory jurisdiction.
STAFF RECOMMENDATION
Based on the available information, Staff believes there is evidence to merit a formal
investigation seeking to review whether the Company is operating as a public utility subject to the
Commission's regulatory jurisdiction. An investigation would include data requests to the
Company, and requests to examine Company records, concluding in a recommendation to the
Commission for further action, if any, when the investigation is complete.
COMMISSION DECISION
Does the Commission wish to open an investigation to review if Dry Creek Water
Company, LLC should be regulated by the Commission and direct Staff to submit a
recommendation after the review is complete?
Adam Triplett
Deputy Attorney General
' In a letter to Staff dated December 5,2022,the Company,stated that it;"provides water to a single customer,Dry
Creek Ranch Homeowner's Association(HOA)."
DECISION MEMORANDUM 2 MAY 7, 2024

Idaho Public Utilities Commission Brad Little,Governor
P.O. Box 83720, Boise, ID 83720-0074 Eric Anderson,President
John R.Hammond,Jr.,Commissioner
Edward Lodge.,Commissioner
April 11, 2024
Dry Creek Water Company
923 S Bridgeway Place
Eagle Idaho 83616
Dear Dry Creek Water Company,
This letter is in response to Mr. Hunter's letter dated March 14, 2024, inquiring about the Idaho
Public Utilities Commission Staff's review of Dry Creek Water Company, LLC("Dry Creek" or
"Company")regulatory status. I would like to thank you for providing the necessary financial
information to assist in the review. In its letter to Staff dated November 20,2023, Dry Creek
asserts that it should not be regulated because it is a public utility that is organized and operated
for service at cost. To support this assertion, Dry Creek provided financial information
indicating that it currently operates at a loss.
During staff review,they learned that the company elects to use a different depreciation method
than the Commission uses for every other regulated entity. The Company uses bonus
depreciation, which is a tax benefit that should be returned to customers over the depreciable life
of the asset. The use of bonus depreciation does not mean that the Company is truly operating at
a loss.
Instead,the Company is taking the full benefit in the first year. Under regulatory accounting,the
cost of a fixed asset(less its salvage value and any removal costs) is capitalized and
systematically depreciated over its useful life. Any difference between GAAP depreciation
expense and bonus depreciation expense is recorded on the Company's Balance Sheet as a
liability and is used to offset the value of the asset,which in turn reduces the value of the asset
for ratemaking purposes.
Having completed its review, staff will request the Commission open a formal docket to
determine if the Company is subject to the Commission's regulatory jurisdiction; if the rates Dry
Creek charges for water are fair,just, and reasonable; and to direct the Company to file for a
Certificate of Public Convenience and Necessity.
Information for small water companies, including how to apply for a Certificate of Public
Convenience and Necessity can be found at: httpsJ/r)uc.idaho.pov/Page/Standard/25
11331 W.Chinden Blvd.,Building 8 Suite 201-A,Boise ID 83714
Telephone:[phone] Facsimile:[phone]

And information on the Commission's Rules of Procedure can be found at:
https://adminrules.idaho gov/ruies/current/31/310101 pdf
Please reach out to the Commission Secretary if you have any questions at
[e-mail].
Thank you again for your assistance in this matter.
Maria Barratt-Riley
Executive Director,Idaho Public Utilities Commission
11331 W. Chinden Blvd. Ste 201-A
Boise,Idaho 83714
208-334-0337
[e-mail]