20240903Final_Order_No_36313.pdf

ORDER NO. 36313 1

Office of the Secretary
Service Date
September 3, 2024
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

On January 11, 2024, VP Inc. (“VP” or “Company”) applied for a Certificate of Public
Convenience and Necessity (“CPCN”) to provide water service near Sandpoint, Idaho
(“Application”). The Commission directed VP to apply after finding it was a water corporation
subject to the Commission’s regulation as a public utility in Case No. GNR-W-17-01. See Order
No. 35998 at 4.
On February 20, 2024, VP amended its Application to include a request to increase its
monthly rate for water service.
On March 12, 2024, the Commission issued a Notice of Application and Notice of
Intervention Deadline. Order No. 36117. No parties petitioned to intervene.
On April 23, 2024, the Commission issued a Notice of Modified Procedure setting
comment deadlines and suspended the Company’s proposed effective date. Order No. 36156. The
Commission Staff (“Staff”) filed comments along with two customers of the Company. The
Company did not reply.
On June 6, 2024, Staff conducted a Virtual Public Workshop. None of the Company’s
customers attended, and no questions or comments were received.
On June 24, 2024, the Commission held a customer hearing in Sandpoint, Idaho. No
members of the public testified or otherwise participated in the hearing. Although representatives
from the Company attended, they did not testify.
Having reviewed the record, the Commission issues this final Order granting the
Company a CPCN and setting rates and terms for the water services the Company will provide to
its customers.

IN THE MATTER OF VP INC.’S
APPLICATION FOR A CERTIFICATE OF
PUBLIC CONVENIENCE AND NECESSITY
AND TO INCREASE ITS RATES AND
CHARGES FOR WATER SERVICE IN THE
STATE OF IDAHO

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CASE NO. VPI-W-24-01

ORDER NO. 36313
ORDER NO. 36313 2

THE AMENDED APPLICATION
The Company requests that the Commission issue a CPCN authorizing it to provide
water service to domestic customers. The Company currently services 74 water customers in the
Hidden Lakes subdivision in Bonner County, Idaho. The Company currently charges three
different monthly flat rates: $35, $40, and $45. When a lot was purchased or connected to the water
system determines which rate the lot owner is charged. The Company also seeks authority to raise
its rates to a single monthly flat rate of $55, which will generate a revenue of $46,860. The
Company is not currently regulated by the Commission and does not possess a CPCN.
STAFF COMMENTS
After reviewing the Application, attached exhibits, the Company’s responses to
production requests, and additional information provided by the Company, Staff recommended
that the Commission issue the Company a CPCN. Additionally, Staff recommended approval of a
$55 flat monthly rate for customers using water; a $40 flat-rate for non-flowing customers; and an
11 percent Return on Equity (“ROE”) on a net rate base of $26,995.
According to Staff, the Company currently serves 71 paying customers with a water
system consisting of two wells, two non-pressurized storage tanks, one booster pump, and two
distribution systems. The most recent Idaho Department of Environmental Quality (“IDEQ”)
Sanitary Survey, which was conducted in 2018, identified no significant deficiencies in the water
system. Staff believed the Company’s water rights (494 gallons per minute of total diversion) are
sufficient to satisfy near-term system growth.
Staff recommended that the CPCN issued to the Company describe its service territory
consistent with two attachments to the Application. Attachment A is an index of various plats and
parcels the Company serves. Attachment B is a map of the Company’s overall service territo ry.
Staff confirmed that the attachments accurately describe the area the Company currently serves
without encroaching upon areas served by other water systems nor exceeding the Company’s water
rights.
Staff noted that the Application did not identify a revenue requirement for the
Company. The $55 monthly flat rate the Company proposed would generate $46,860. As stated,
Staff recommended the Commission establish a flat $55 monthly rate for flowing customers and
maintain the $40 flat rate for non-flowing customers. Although the Company’s 24 non-flowing
customers do not consume water, the Company must maintain the system and be prepared to serve
ORDER NO. 36313 3

them. Staff believed that establishing a non-flowing customer class will help the Company meet
this need. Because most customers already pay $40 per month for service, those transitioning to
the non-flowing customer class will experience minimal change to their monthly bill. Accordingly,
Staff believed charging non-flowing customers $40 per month is reasonable. Staff’s two proposed
rates (flowing and non-flowing) would generate $42,540 in revenues annually.
In addition to these flat rates, Staff made several recommendations relevant to
revenues, expenses, and rate base for the Company. First, Staff recommended the Company notify
customers with a past due balance exceeding 120 days their service will be terminated if their
accounts are not made current. Staff believed this may encourage customers to pay outstanding
bills, thereby reducing the Company’s significant accounts receivable balance and mitigating
increases to future rates.1
Staff also recommended reducing the Company’s reported Operations and
Maintenance (“O&M”) expenses from $44,901 to $41,456. Staff calculated this reduced O&M
after excluding certain repairs paid for by customers and one-time expenses and including
adjustments for electrical bills, depreciation, and amortized expenses for this case.
Staff further recommended that the Commission authorize a rate base of $26,995,
consisting of $22,210 of plant-in-service (“PIS”) and $4,785 of working capital. In calculating this
amount, Staff acknowledged that most of the water system is contributed capital that contributes
nothing to rate base. However, Staff identified two system investments the Company made in 2019
and 2020, respectively, that it recommends be recognized as prudently incurred expenses,
providing $27,051 in PIS. Staff also indicated that the Company did not report any accumulated
depreciation. Based on each asset’s annual depreciation expense, Staff recommends an annual
accumulated depreciation expense of $4,841. Using the one-eighth method, Staff recommended a
working capital allowance of $4,785.
Consistent with cases involving similar water utilities, Staff recommended the
Commission authorize a ROE of 11 percent. Because the Company has no authorized debt, this
ROE is the same as the overall rate of return.
The Application included a proposed tariff. Additional charges were also detailed in
Exhibit No. 7 to the Application. Staff recommended approval of a $20 return check charge in

1 Staff indicated that, at the end of 2023, the Company had an accounts receivable balance equal to nearly half the
Company’s total 2023 revenue. If the Company cannot collect the outstanding bills, it can write them off as bad debt
to be collected through rates charged to all customers.
ORDER NO. 36313 4

addition to the non-recurring charges listed in Exhibit No. 7. Staff has committed to working with
the Company to ensure its tariff reflects the charges the Commission approves.
Staff further indicated that the notice of the requested rate increase the Company
provided to customers in February 2024 and published in the Bonner County Daily Bee in March
2024 complies with Commission rules.
PUBLIC COMMENTS
Two public comments were filed. One comment articulates a non-flowing customer’s
concern over being charged despite not receiving water service. The other comment referenced
lead contamination in the water system.2
DISCUSSION AND FINDINGS
Based on our review of the record and the nature and manner of control exercised by
the Company in the operation and management of the water system servicing those within the
Hidden Springs subdivision, we find it reasonable to assert formal regulatory jurisdiction over VP
and its water system. Accordingly, we have jurisdiction over VP, a water corporation under Idaho
Code § 61-125, and the issues presented in Case No. VPI-W-24-01 pursuant to Idaho Public
Utilities Law Idaho Code, Title 61, and the Commission’s Rules of Procedure, IDAPA
31.01.01.000, et seq.
1. CPCN
We find it reasonable to grant the Company’s request for issuance of a CPCN to provide
water services within the Hidden Springs subdivision near Sandpoint, Idaho, as present and future
public convenience and necessity requires issuance of such a certificate. The Company’s service
area shall include the area described in Attachment A to Staff’s Comments and the map contained
in Attachment B.
As a regulated utility, the Company is required to adopt the Commission’s Utility
Customer Relations Rules (UCRR; IDAPA 31.21.01 et seq.) and Utility Customer Information
Rules (UCIR; IDAPA 31.21.02 et seq.). These Rules provide a guide for just, reasonable, and
nondiscriminatory treatment of customers. The Commission also requires the Company to adopt
an accounting system consistent with the information required by the Commission’s Annual
Report for Small Water Companies.

2 Staff could not find an indication on IDEQ’s website that the water system had experienced lead contamination.
ORDER NO. 36313 5

2. Revenue Requirement
Although the Company requests an increase in rates to generate $46,860 in annual
revenue, the Staff recommends rates that supports only a revenue requirement of $42,540. We find
Staff’s recommended annual revenue requirement to be fair, just, and reasonable. Furthermore, we
find the reduction in the Company’s reported O&M expenses reasonable. Repairs customers paid
for and the Company reported as revenue should not be included in O&M expenses. Accordingly,
we find it reasonably to reduce the Company’s reported O&M to $41,456.
3. Rate Base
Rate base is the asset base from which a utility provides service (i.e., the sum of its net
plant-in-service and working capital). Commission Rule 103 for small water companies (Policies
& Presumptions for Small Water Companies, IDAPA 31.36.01.103) establishes a presumption that
capital invested in the water system by the developer is considered contributed capital and is
excluded from rate base. Rule 103 states:
In issuing certificates for a small water company or in setting rates for a small water
company, it will be presumed that the capital investment in plant associated with
the system is contributed capital, i.e., that this capital investment will be excluded
from rate base.

Contributed capital funded much of the Company’s water system. However, we find it reasonable
to recognize the two investments the Company made in 2019 and 2020 (rehabilitation of its second
well and the purchase of a pump, respectively) as prudently incurred expenditures, providing
$27,051 in PIS. Further, we find it reasonable to recognize an accumulated depreciation expense
of $4,841. Additionally, the Company’s daily operations require some working capital. We find
Staff’s recommended working capital allowance of $4,785 is reasonable. This provides the
Company with a rate base of $26,995. Consistent with similar small water companies, we find a
return on equity of 11.0 percent to be reasonable.
4. Rate Design
The Company proposes charging a flat rate of $55 for 74 customers. However, only
those receiving services from the water system should pay for its operation pursuant to past
Commission decisions. Consequently, the Company cannot charge “non-flowing” customers.
Accordingly, we find it reasonable to authorize the Company to charge only those customers for
water service that consuming water. Accordingly, based on Staff’s proposed revenue requirement
ORDER NO. 36313 6

of $42,540, we find that a flat monthly rate of $75.43 per customer receiving water service is
reasonable and will allow the Company to meet its revenue requirement.
5. Non-Recurring Charges
The Idaho Code grants the Commission authority to set rates (which includes fees) that
are fair, just, and reasonable. See Idaho Code §§ 61-501 and -502. We have reviewed the
documents submitted by Staff and the Company and find that the Company’s proposed
reconnection fee of $50 is fair, just, and reasonable. Similarly, we find the Company’s proposed 1
percent monthly late payment charge to be a reasonable way to encourage prompt payment.
Additionally, we find it reasonable to authorize the Company to impose a $20 returned check
charge, consistent with Idaho Code § 28-22-105. To promote the collection of the large
outstanding accounts receivable balance, we encourage the Company to notify customers with
past-due balances exceeding 120 days that their water service may be disconnected for failure to
pay consistent with the UCRRs.
6. Tariff and Customer Notices
The Company submitted copies of its proposed tariff, including a schedule of non-
recurring charges. Similarly, the Company submitted copies of other required documents such as
a disconnection notices and the annual rules summary. However, we did not authorize the
Company to impose all the non-recurring charges contained in the proposed tariff. Staff reviewed
the documents and is willing to work with the Company to ensure these documents meet
Commission requirements. We direct the Company to work directly with Staff to update its tariff
following issuance of this order.
O R D E R
IT IS HEREBY ORDERED that the Company’s Application for a CPCN authorizing
it to operate as a water utility with in the State of Idaho, as described herein, is approved. The
Company is authorized to collect a total revenue requirement of $42,540 from its customers, with
expenses, rate base, return on equity, rate design, and fees as approved and described more fully
in this Order.
IT IS FURTHER ORDERED that the fees, rates, and charges for water service
approved herein shall become effective upon the service date of this Order.
IT IS FURTHER ORDERED that the Company shall work in a cooperative manner
with Staff to revise its existing billing statement and rate schedules in order that they comply with
ORDER NO. 36313 7

the General Rules and Regulations for Small Water Utilities, the Uniform Main Extension Rules,
and the Commission’s rules and procedures.
IT IS FURTHER ORDERED that the Company shall submit tariffs in compliance with
the rates and charges set forth and approved by this Order no later than 30 days from the service
date of this Order.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross -petition for
reconsideration. See Idaho Code §§ 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 3rd day
of September 2024.

ERIC ANDERSON, PRESIDENT

JOHN R. HAMMOND JR., COMMISSIONER

EDWARD LODGE, COMMISSIONER

ATTEST:

Monica Barrios-Sanchez
Commission Secretary

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