20241024Staff Comments .pdf

RECEIVED
Thursday, October 24, 2024 12:22:02 PM
IDAHO PUBLIC
UTILITIES COMMISSION
ADAM TRIPLETT
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 10221
Street Address for Express Mail:
11331 W CHINDEN BLVD, BLDG 8, SUITE 201-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF CAPITOL WATER )
CORPORATION'S APPLICATION TO ) CASE NO. CAP-W-24-01
INCREASE ITS RATES AND CHARGES FOR )
WATER SERVICE IN THE STATE OF )
IDAHO ) COMMENTS OF THE
COMMISSION STAFF
COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission, by and
through its Attorney of record, Adam Triplett, Deputy Attorney General, submits the following
comments.
BACKGROUND
On March 1, 2024, Capitol Water Corporation("Company") applied to increase its rates
and charges for water service. The Company requested an April 1, 2024, effective date for the
new rates.
On March 22, 2024, the Commission issued a Notice of Application,Notice of
Intervention Deadline, and Notice of Suspension of Proposed Effective date, setting a deadline
for interested parties to petition to intervene and suspending the Company's proposed effective
date for thirty days plus five months. Order No. 36118. Only the City of Boise intervened.
STAFF COMMENTS 1 October 24, 2024

On August 20, 2024, the Commission issued Order No. 36295, vacating the comment
deadlines and customer hearing set in this case and indefinitely suspended the effective date of
Company's proposed rate increase in this case. The Commission did this to provide Staff with
additional time to review the Company's financial records.
During the Commission's October 1, 2024, decision meeting, Staff presented a decision
memorandum notifying the Commission that it was prepared for this case to proceed and
recommending issuance of an order establishing an October 24, 2024, public comment deadline,
a November 7, 2024, company reply deadline, and scheduling a customer hearing for November
1, 2024.
STAFF ANALYSIS
Staff reviewed the Company's Application, exhibits, workpapers, and responses to
production requests. Staff also conducted numerous on-site audits to review the Company's
financial records,processes, and internal controls. Based on its review, Staff recommends that
the Commission establish a revenue requirement of$821,545, as shown on Attachment A. This
revenue requirement is $59,851 less than the Company's request, and results in an increase of
16.15%to the Company's annual revenues based on a return on equity("ROE") of 10.5%.
System Description
Capitol Water's service area is located in Ada County, Idaho and provides service to
approximately 2521 residential customers, 279 commercial customers, and 35 private fire
customers in the Boise west bench area. Application at 2. The Company's water system consists
of four primary wells that operate year-round and discharge into its distribution system. Water
from these wells is treated using polyphosphate to sequester high iron content. The Company
has an additional aquifer supply return well that is filled from the primary wells during the
offseason and used to discharge into the distribution system during the irrigation season. Capitol
Water Corp 2024 Sanitary Survey Report at 2.
System Reliability
Staff reviewed the Company's latest Idaho Department of Environmental Quality
("IDEQ") Sanitary Survey and recent existing customer complaints to identify any issues that
STAFF COMMENTS 2 October 24, 2024

could impact the Company's ability to provide reliable service to customers. Staff believes there
are no current significant deficiencies that affect the reliability of the water system. Some
significant deficiencies were identified in the Company's latest IDEQ Sanitary Survey,but the
Company has corrected them based on the Corrective Action Plan submitted to IDEQ. Response
to Staff Production Request No. 52. Based on a review of customer complaints from 2019
through 2024, Staff identified no existing consumer complaints related to water pressure or
reliability issues.
Revenue Requirement
The Company requested an increase in annual revenues of$174,069, or 24.61%. Staff
reviewed all components of the revenue requirement and recommends an increase of$114,219 or
16.15% as outlined in Attachment B.
Return on Equity &Rate of Return
The Company requested an ROE of 12%because this is the ROE that the Company was
issued in its last general rate case, Case No. CAP-W-08-02, Order No. 30762. Since this case,
awarded ROE's have trended downward, as illustrated in Order Nos. 33658, 33910, and 35978.
In these cases, much smaller water companies were authorized an ROE of 11%. Smaller
companies generally need a higher ROE to receive enough return on their capital investments to
continue safe and reliable operating practices. Furthermore, unlike the other companies
referenced, the Company has a Purchased Power Cost Adjustment("PPCA")which is a revenue
recovery mechanism that reduces the risk of undereaming. Because electric costs for well
pumping are highly variable and generally the greatest expense the company incurs each year,
the PPCA greatly mitigates risk from a cost recovery standpoint. Staff recommends that the
Company be authorized an ROE of 10.5%. This results in a decrease to the Company's
requested rate of return from 11.52%to 10.08%. as shown in Table No. 1 below.
STAFF COMMENTS 3 October 24, 2024

Table No. 1: Rate of Return
A divided by A4 B multiplied by C
(A) (B) (C) (D)
Amount %of Total Cost Weighted Cost
Line
1 Total Common Equity 1,001,321 95.58% 10.5% 10.04%
2 Debtenture Bonds 5,000 0.48% 10.0% 0.05%
3 Note Payable 41,301 3.94% 0.00% 0.00%
4 Total 1,047,622 100% 10.08%
Staff calculated an adjustment to return on rate base by using the Company's filed rate
base and multiplying by Staff s calculated rate of return of 10.08%. This was subtracted from
the return on rate base the Company calculated using the rate base provided in the Application,
multiplying it by the rate of return requested by the Company of 11.52%. This adjustment
reduces the Company's revenue requirement by $22,136, as shown on Attachment B, Line 3.
Interest on Debt
The Company included interest on long-term debt in its Application. Because interest on
long term debt is included as a factor in the gross-up multiplier, Staff recommends removal of
the expense to avoid double-counting. Staff recommends a revenue requirement decrease of
$156 as shown in Attachment B, Line 4.
Net to Gross Multiplier
The Company calculated a net-to-gross multiplier of 135.04%. The multiplier is the
amount the net operating income deficiency must be multiplied by in order to account for
revenue contingent items, such as taxes, assessment fees, and bad debt expenses. The Company
used a 6% Idaho state income tax rate. Staff used the actual Idaho state income tax rate of 5.8%
in its multiplier calculation. The Company also used a previous Public Utilities Commission
("PUC") assessment rate of 0.19820%. Staff used to the most current PUC assessment rate of
0.21270% in its multiplier calculation. With the updated inputs, Staff calculates a multiplier of
134.77% as illustrated in Attachment C. Staffs adjustment to the gross-up multiplier is a
reduction of$301 to the Company's request as shown in Attachment B, Line 5.
STAFF COMMENTS 4 October 24, 2024

Summary of Rate Base Components
Staff calculated a net rate base on which the Company should earn a return of$963,760,
which is a reduction of$179,611 from the Company's proposed net rate base of$1,143,371.
Staff s calculations are shown in Attachment D, and the adjustments are discussed in greater
detail below.
Plant Investment Review
Staff recommends the Company start maintaining additional documentation that includes
project plans, alternatives considered, and quotes from multiple sources on large plant
investment. Staff reviewed the Company's plant investments that have occurred since the
Company's last general rate case and the proforma investments proposed in the Application to
determine the prudence of these investments.
During Staff s review of plant investments, the Company was to only able to provide
limited documentation of these investments. Generally, the documentation included invoices
and a written explanation on the need for the investment. For most of the large investments, the
Company was not able to provide project plans or quotes from multiple sources.
The project plans should include items such as: project need/justification, alternatives
considered,proposed budgets,proposed schedules, budget-to-actual expenses, and cost/benefit
analyses. Quotes from multiple sources are important to ensure the investments are being made
at a low cost for customers. The Company has responded, when asked for multiple quotes, that
they do not conduct formal request for quotes and often collaborates with its preferred
contractors for a cost estimate. Response to Staff Production Request No. 34. Staff understands
working with a preferred contractor, but at a minimum, the Company should periodically obtain
quotes/estimates from other sources for the same work to ensure that investments are being made
at a low cost for customers. For example, for a vehicle purchased in 2020 in the amount of
$75,731, the Company provided the journal entry for this vehicle and a copy of the check used to
purchase the vehicle. In the future, for vehicle purchases, Staff expects at a minimum for the
Company to provide: (1) written justification for the Company's need; (2) documentation of
quotes received for alternatives and from other vendors; and(3) an invoice for the vehicle
purchased including documents identifying make, model, and trim.
STAFF COMMENTS 5 October 24, 2024

Plant-in-Service
The Company filed its case March 2, 2024,using a plant-in-service test year ending
December 31, 2022. The Company proposed adjustments to plant through year end 2023 and
proforma for 2024 for a total requested plant in service of$4,352,382. Staff believes updating to
actuals allows the Company to earn a fair return on its investments. The Company reported on
its Annual Report, filed April 2024, a 2023 balance of$4,199,968, which is greater than the
proposed a 2022 year-end balance of$4,178,281. Staff recommends using a plant balance
ending December 31, 2023, which is an increase of$21,689. Staff recommends an increase to
revenue requirement of$2,947 as shown in Attachment B, Line 6.
Accumulated Depreciation
With the adjustment to plant-in-service to actuals as of December 31, 2023, Staff also
adjusted accumulated depreciation. Accumulated depreciation is the accumulation of annual
depreciation expense of the useful life of an asset and is used to offset Plant-in-Service. Moving
the Company's plant to the actuals it reported for year-end 2023, Staff recommends an
accumulated depreciation value ending December 31, 2023, of$3,000,583, or an increase of
$68,712. Staffs recommendation is a decrease to revenue requirement of$9,338 a shown in
Attachment B, Line 7.
Well No. 4 Fence
The Company included a proforma investment of$30,400 for safety fencing at Well No.
4 based on a quote received for the project. Work for this project was completed in June of 2024
and the total project cost was $24,543. Staff used the actual cost of the fencing and reduced rate
base by $5,857, which reduces revenue requirement by $1,112 as shown in Attachment B, Line
8.
Well No. 4 Repair
In June of 2024, the Company had emergency repair work completed on Well No. 4 that
was not originally included in the Application. This work included repairing a well pump motor
that had water leaking in a bearing. Staff reviewed the work performed and believes the total for
the repair of$10,201 should be included in this case because this work was necessary to continue
STAFF COMMENTS 6 October 24, 2024

to provide safe and reliable service to customers. Staff increased the Company's rate base by
$10,201, which increases revenue requirement by $1,936 as shown in Attachment B, Line 9.
Well No. 7 Fence and Rehab
The Company included proforma investments of$7,110 for safety fencing and$91,593
for well rehabilitation at Well No. 7 based on quotes received for the projects. Neither project
has been completed nor do they have signed contracts to complete the work as of September 30,
2024. Staff recommends an adjustment removing these projects because they have not been
completed and final costs are unknown and unable to be evaluated. In total, these two projects
decrease rate base by $98,703, which reduces revenue requirement by$18,734 as shown in
Attachment B, Lines 10 and 11.
Billing Software
The Company included a proforma capital addition estimating $45,000 for the cost of a
new billing software. Staff agrees that the updated billing software is necessary and allows for
the Company to calculate precise bills for customers. The Company has signed a binding
contract which includes an implementation cost of$21,250. Additionally, the software has a
monthly expense of$1,564 resulting in an annual expense of$18,768. The Company included a
depreciation of$5,000 which equates to a 9-year life. Staff adjusted the depreciation expense to
match that of the recommended National Association of Regulatory Commissioners ("NARUC")
useful life guideline of 7 years. Staff's adjustment reduces rate base by $23,750, depreciation
expense by$1,964, and increases Operating Expense by$18,768. Staff recommends a revenue
requirement increase of$19,419 as shown in Attachment B, Line 12.
Lincoln Aviator
In January of 2020, the Company purchased a 2020 Lincoln Aviator for$76,414. Staff
does not believe including the full purchase price of the Lincoln Aviator is reasonable or prudent.
In its response to Staff Production Request No. 57, the Company stated that this vehicle was
purchased for the President of Capitol Water to use for Company business because the Company
President is on call at all times, including evenings and weekends. In addition, the Company
STAFF COMMENTS 7 October 24, 2024

stated it is not unreasonable for the president of a Company to drive a vehicle that provides
comfort and safety and also that it meets the Company's safety criteria.
Staff believes the entire cost of the 2020 Lincoln Aviator should not be included in rates
because it is a luxury vehicle that does not benefit customers when compared to other standard
vehicle brands. Many comparable standard vehicle brands and models have similar safety
features as the Lincoln Aviator at a lower cost. In addition, the Lincoln Aviator is not the best
equipped vehicle to respond to after hour calls based on its stated purpose.
To determine a reasonable amount that should be included in rates for this vehicle, Staff
identified four comparable standard vehicle makes and models from model year 2020 and
determined the average manufacturer's suggested retail price ("MSRP") price for these models.
The comparable vehicles included were a Ford Explorer, Chevrolet Traverse, Toyota Highlander,
and Honda Pilot. Each vehicle compared included mid-level trim with similar options as a
Lincoln Aviator. Staff believes an average MSRP of$46,29 for the four vehicles is reasonable.
Additionally, Staff adjusted accumulated depreciation and depreciation expense to reflect a 10-
year depreciable life, based on the Company's relatively small service territory resulting in
yearly milage totals. Staff recommends reducing plant in service by$30,118 for the excessive
vehicle purchase. Staff also recommends depreciation expense be adjusted by $6,287 to account
for the reduced vehicle value depreciating over ten years instead of seven, and accumulated
depreciation should be adjusted by $16,241. Staff recommends a revenue requirement decrease
of$10,358 as shown in Attachment B, Line 13.
Working Capital
The Company used the one-eighth method to determine working capital. The one-eighth
method is calculated by dividing the annual operating expenses by eight. This value is then
included in rate base, which will allow for a return on working capital. Staff agrees that the one-
eight method is an appropriate way to determine working capital based upon the Company's
size. Since Staff has adjusted the Company's operating expenses, working capital must be
adjusted accordingly. Based on Staff s proposed operating expenses for recovery, working
capital must be reduced by $603, which reduces revenue requirement by $82, as shown in
Attachment B, Line 14.
STAFF COMMENTS 8 October 24, 2024

Revenue
Overview of Company Revenue
Staff reviewed the Company's meter and flat rate books which determine the amount of
revenue produced in the test year for revenue requirement purposes. Staff believes that flat rate
revenue has been correctly determined by the Company, while metered revenue has been
miscalculated, which is described below.
Metered Revenue
The Company calculated metered revenue of$132,409 in the test year. Staff identified
errors in the Company's billing practices that caused revenue billed and collected to differ from
the amount that should have been billed and collected based upon the approved tariff. In its
response to Production Request No. 64, the Company calculated, and Staff verified a net
overbilling for metered customers in 2022 of$9,162. Staff recommends a revenue requirement
increase of$12,348 as shown below in Attachment B, Line 15.
Expenses
Staff conducted a thorough review of all expenses the Company is requesting to be
included for recovery. Staff describes its analysis of expenses below.
Depreciation Expense
In its Application, the Company included a depreciation expense of$102,564. After
evaluating the Company's depreciable assets, Staff adjusted the depreciable life of each plant
account to better align rates with NARUC Depreciation Manual for Small Water Utilities.
Consistent with Staff s test year adjustments to plant-in-service, Staff re-calculated Company's
annual depreciation expense for all plant as of December 31, 2023, and Staffs recommended
2024 plant proforma. Staff recommends a depreciation expense of$88,691, or a decrease of
$13,873. Staff made adjustments to proforma additions totaling $12,024. This amount must be
removed from the calculation to avoid double counting, which results in a reduction of$1,848 to
depreciation expense. Staff recommends a decrease of$2,491 to revenue requirement as shown
in Attachment B, Line 16.
STAFF COMMENTS 9 October 24, 2024

Employee Salaries
The Company included a 10% increase for its employees in the Application. An increase
of 3%was implemented and the Company states that they plan to increase salaries by an
additional 7% after this case. Because the 7% increase has not been awarded yet, it is not known
and measurable. Staff contends that only the implemented 3% employee increase should be
included in the revenue requirement. This results in a Staff calculated salary expense which is
$15,956 less than that of the Company's. Staff recommends a revenue requirement decrease of
$21,504 as shown in Attachment B, Line 17.
401k
The Company updated 401k contributions to reflect a 3%match to the requested salary,
which includes the 10% increase. Because employee 401k contributions can change at any time,
Staff does not agree to apply a 3%match to an updated salary calculation. As has been the
Commission's practice in multiple orders spanning more than two decades, 401k matching
expenses should be based on test year levels, or the most recent calendar year. During audit of
the Company, Staff discovered that the Company overcontributed to employee 401k in calendar
year 2023. Staff and the Company were unable to reconcile the overcontribution. Because of
this, Staff used the 2022 calendar year, which is also the test year. Staff recommends a revenue
requirement decrease of$596 as shown in Attachment B, Line 18.
FICA &Medicare
The Company calculated its FICA& Medicare expenses by applying the current tax
percentage of 7.65%to their total salary calculation. Staff calculated FICA & Medicare expense
using its salary expense calculation. Staff calculated an adjustment based upon the difference of
its and the Company's FICA & Medicare expense calculations. Staff recommends a revenue
requirement decrease of$1,950 shown in Attachment B, Line 19.
Employee Life Insurance
The Company records life insurance premiums paid in the salary accounts. Staff
recommends that the Company record life insurance expenses to Account 604 "Employee
STAFF COMMENTS 10 October 24, 2024

Pensions &Benefits" instead of labor Accounts 601, 601.7, 601.8, and 603. This results in a net
zero impact and does not affect revenue requirement as shown in Attachment B, Lines 20 and 21.
YellowPages & WhitePages
The Company included expenses for YellowPages and WhitePages advertising. The
Company has indicated that they no longer use either company for advertising. Because these
expenses are no longer occurring, Staff contends they should be removed from revenue
requirement. Staff recommends a revenue requirement decrease of$1,182 as shown in
Attachment B, Line 22.
Snacks and Meals
During the on-site review of the Company's test year expenses, Staff discovered
expenses for snacks and meals. Staff contends that purchases of snacks and meals for employees
are not essential for providing service. Furthermore,providing snacks and meals for employees
are an employee-only benefit, which does not benefit customers in any fashion. Staff
recommends a revenue requirement decrease of$206 as shown in Attachment B, Line 23.
Dental Procedures
During the on-site review of the Company's test year expenses, Staff discovered
expenses for dental procedures. Historically, companies have been able to include health, dental,
and vision coverage in their rates. This is a benefit to the customers, as employee health and
wellbeing allows the Company to function effectively. Also, a competitive benefit package
allows for higher rates of employee retention. However, Staff contends that customers should
not pay for procedures that were not a direct result of an on-the-job injury and should be the
responsibility of the employee to pay for these expenses. Staff recommends a revenue
requirement decrease of$3,082 as shown in Attachment B, Line 24.
Rate Case Expenses
In Response to Production Request No. 2, the Company submitted$6,435 in additional
expenses associated with the costs for preparing and processing the entire rate case.
Subsequently, the Company issued a supplemental response in which it included additional
STAFF COMMENTS 11 October 24, 2024

expenses of$6,750 and$3,000 respectively. Staff disagrees with including the additional
expense of$6,750, since the invoice did not provide a description of services to be performed.
Furthermore, Staff understands the main duty of this contracted work was to rectify billing
errors. Because the errors were a Company mistake and would not have been incurred under
proper billing practices, Staff disagrees with including the expense in revenue requirement. Staff
calculates rate case expenses of$6,435 and $3,000 to be $9,435. However, since this expense is
not a yearly occurrence, Staff recommends this expense to be amortized over a three-year period,
which results in a revenue requirement increase of$4,238 as shown in Attachment B, Line 25.
During its review of the Company's test year expenses, Staff also discovered expenses
paid to a company to analyze the Company's financial records in preparation for a rate case. The
Company elected not to use this vendor, as future costs were most likely going to be higher than
anticipated. Staff contends that this expense should not be included, as the expense is a one-time
expense that proved to not be used and useful. Staff recommends a revenue requirement
decrease of$1,669 as shown in Attachment B, Line 26.
Water Testing
Water testing requirements vary from year to year with the least frequent test required
every nine years. It has been standard practice to calculate expenses using a nine-year rotation
schedule, which essentially averages the annual recovery over the nine-year period. Staff
believes it is reasonable to include an annualized amount to allow collection of the total amount
over the nine-years. The Company reported$17,944 in water testing expenses during the test
year. Staff calculated the annual amount to be recovered over a nine-year period to be $13,608,
therefore, Staff proposes an adjustment to decrease the Company's water testing expenses by
$5,844 as shown in Attachment B, Line 27.
Chemical Expense
Staff believes the Company's proposed chemical expense included in the revenue
requirement to be reasonable. The Company calculated chemical expenses to be $33,358, which
Staff believes to be reasonable based on its analysis
Staff examined the Company's actual chemical cost and chemical consumption over
three years to determine the unit cost of chemicals over that same period. As illustrated in Table
STAFF COMMENTS 12 October 24, 2024

No. 2,below, the amount of chemical consumption has gone down,but the total cost of
chemicals has increased year-to-year, which is reflected in the unit price of chemicals. Using the
average unit price multiplied by the average chemical consumption results in an average total
annual cost of$30,529. However, as the data shows, the unit price of chemicals have escalated
and will likely continue to escalate. Using the 2023 unit price multiplied by the average
chemical consumption results in an annual chemical expense of$36,322. Since the Company's
proposed chemical cost is approximately halfway between the cost using the average unit price
and the cost using the 2023 unit price, Staff believes the Company's proposed chemical cost is
reasonable.
Table No. 2: Chemical Costs
Year Chemical Cost ($) Chemical Consumption (lb) Unit Price ($/Ib)
2021 27,616 21,090 1.31
2022 28,366 16,979 1.67
2023 34,400 17,556 1.96
Average 30,127 18,542 1.65
Cost using average unit price ($) 30,529
Cost using 2023 unit price ($) 36,322
Power Expense
Staff believes the Company's proposed power expense of$105,652 to be reasonable
based on its analysis of power costs over the past three years. Staff examined the Company's
actual power costs and power consumption from 2021 through 2023 to determine the unit cost of
power, as reflected in Table No. 3 below. As can be seen in the table, the average annual power
cost over the three-year period is $100,336, which is approximately the same at $100,728, when
using the average consumption multiplied by the average unit price. However, even though
power consumption remains relatively stable within normal levels of variability, the unit price of
power is shown to be escalating from year-to-year. If the highest unit price of power that
occurred in 2023 is multiplied by the average power consumption, it could justify an annual
power cost of$111,910. Given that Staffs analysis only spanned three years and because the
STAFF COMMENTS 13 October 24, 2024

Company has a power cost true-up mechanism that will ensure customers pay the Company's
actual cost of power, Staff believes the Company's proposed power expense of$105,652 is
reasonable.
Table No. 3: Power Costs
Year Power Cost($) Power Consumption (KWh) Unit Price ($/KWh)
2021 93,212 1,285,277 0.073
2022 104,877 1,357,326 0.077
2023 102,919 1,168,220 0.088
Average 100,336 1,270,274 0.079
Cost using average unit price($) 100,728
Cost using 2023 unit price($) 111,910
Rate Design
The Company proposes to collect its incremental revenue requirement by adding a
monthly service charge of$5.12 for all residential, commercial, and private fire protection
customers. Application at 1. The charge would be uniform for all customers, regardless of
connection size or water consumption. Further, the Company reasoned that the service charge
will allow the Company to recover fixed costs that do not vary with consumption levels.
Application at 9. The Company did not propose any change to the sprinkling charge or
commodity rates.
Staff disagrees with the Company's proposal of a fixed dollar amount service charge and
believes a uniform percentage increase to all billing components results in more equitable cost
recovery between all customers. Staff considered differences among non-metered customers and
differences between metered and non-metered customers to shape its proposal. After
considering these differences, Staff examined the Company's customer counts and consumption
data to calculate proposed rates that meet Staffs revenue requirement of$821,546.
Non-metered customers pay a monthly flat rate for service depending on connection size.
During the five-month period from May 1 through September 30, there is an additional monthly
sprinkling charge. See Tariff Schedule No.1. This charge collects additional revenue when
customers typically consume additional water to irrigate their properties. Customers that do not
own land, such as residents of multi-unit properties, are not assessed the sprinkling charge.
STAFF COMMENTS 14 October 24, 2024

There is a clear distinction between a landowning customer that waters a yard and one that does
not have a yard. Because of this difference among non-metered customers, Staff believes the
Company's proposal lacks reasonable cost recovery from customers that consume water to
irrigate their property. Thus, Staff recommends a 16.35% increase to the monthly base rate and
sprinkling charge, which represents a more equitable distribution of cost recovery among non-
metered customers.
Staff also analyzed the consumption data between metered and non-metered customers
during the Company's test year. Staff used well log data provided in Company responses to
Production Request Nos. 28-29 in its calculation. A comparison of consumption and revenue
recovery is shown in Table No. 4 below. The revenue recovery percentages shown are based on
Staff s proposed revenue requirement. A uniform percentage increase to billing components
aligns revenue recovery more closely with class consumption.
Table No. 4: Revenue Recovery Between Customer Classes with Different Rate Design
Proposals
Customer Class Estimated Share of Staff Proposed Share of Share of Revenue Recovery
Total Consumption Revenue Recovery with Flat Service Charge
Metered 22% 17.70% 16.60%
Non-Metered 78% 82.30% 83.40%
Looking further at effects on individual customers, Table No. 5 shows different
percentage changes in average bill amounts resulting from the Company's and Staff s different
rate designs. Billing impacts are compared using three different scenarios: 1) Company
proposed fixed service charge using Company's revenue requirement; 2) Fixed service charge
using Staffs revenue requirement; and 3) Staffs proposed uniform percentage increase using
Staffs revenue requirement. On a percentage basis, Staffs proposal results in more even billing
increases for individual customers. Staffs percentage changes among service sizes are not
identical due to rounding of monthly fixed charges and commodity rates.
STAFF COMMENTS 15 October 24, 2024

Table No. 5: Billing Impacts of Company and Staff Proposals'
Customer Current Service Charge using Alternate: Service Staff:Uniform
Rates Company Revenue Charge using Staff Percentage Increase to all
Requirement($5.12) Revenue Requirement Billing Components
($3.44)
Non- Monthly Monthly Percent Monthly Percent Monthly Percent
Metered Bill Bill Increase Bill Increase Bill Increase
0.75" $12.65 $17.77 40% $16.09 27.2% $14.70 16.2%
1" $15.10 $20.22 34% $18.54 22.8% $17.60 16.6%
1.25" $16.90 $22.02 30% $20.34 20.4% $19.70 16.6%
Sprinkling $16.05 $16.05 0 $16.05 0% $18.70 16.5%
Charge
Metered Average Average Percent Average Percent Average Percent
Monthly Monthly Increase Monthly Increase Monthly Increase
Bill Bill Bill Bill
0.75" $11.62 $16.74 44% $15.06 29.6% $13.56 16.7%
1" $26.81 $31.93 19% $30.25 12.8% $31.20 16.4%
1.5" $32.47 $37.59 16% $35.91 10.6% $37.81 16.4%
2" $67.39 $72.51 8% $70.83 5.1% $78.44 16.4%
3" $487.20 $492.32 1% $490.64 0.7% $569.14 16.8%
1. Bill amounts shown exclude the PPCA,Franchise Fee,and DEQ Fee.
Staff reviewed customer counts and consumption data, also known as billing
determinants, in setting rates that meet the Company's needed revenue requirement. The
purpose of this analysis is to assess what Company revenue would be under present conditions at
present rates. As its proposed service charge to all customers did not depend on consumption,
connection size, or meter size, the Company did not perform an analysis of these elements in its
Application. Through discovery', the Company provided thorough billing and consumption data
from January 2022 through July 2024 that Staff analyzed to calculate billing determinants in this
case.
' See Company responses to Production Request Nos.29,50,62,63,and 64.
STAFF COMMENTS 16 October 24, 2024

Staff supports using adjusted customer counts and consumption amounts as they
represent a present-day count of current customers and a levelized amount of consumption,
compared to using a 2022 calendar test year. The result is that Staff s adjusted revenue at current
rates is slightly below the Company's test year revenue. This was primarily due to the Company
overbilling its customers in 2022 and offset by an increase in 1-inch non-metered customers and
2-inch metered customers. Table No. 6 shows the differences in test year revenue and differing
increases needed between the Company's Application and Staff s adjusted test year.
Table No. 6: Revenue Changes Needed to Meet Staff Revenue Requirement
Proposal Test Year Revenue Revenue Requirement Dollar Increase PercentInerease
Needed Needed
Company $707,328 $821,546 $114,219 16.15%
Staff $706,003 $821,546 $115,543 16.35%
Finally, a rate proof showing how Staffs calculated billing determinants and proposed
rates meet Staff s revenue requirement is provided as Attachment E.
Customer Relations
Customer Notice and Press Release
The Company's application included a copy of the customer notice and a separate press
release. The customer notice was included in the customer bills sent February 29, 2024, and the
press release was sent to local news outlets on March 1, 2024. The customer notice and the press
release satisfy Rule 125 of the Commission's Rules of Procedure, (IDAPA 31.01.01).
Customer Workshop
The Commission provided public notification for a customer workshop through a May
22, 2024, news release. A virtual public workshop was held for customers on Wednesday, July
10, 2024,beginning at 6:00 pm MDT. There was one intervenor in attendance and no customers.
STAFF COMMENTS 17 October 24, 2024

Customer Hearing
The Commission had originally scheduled a customer hearing for Thursday, August 22,
2024, at 5:00 pm MDT in the Commission hearing room at 11331 W. Chinden Blvd., Building 8,
Suite 201-A, Boise. Public notification for the hearing was provided through a May 22, 2024,
news release. On August 20, 2024, the Commission issued an interlocutory order, Order No.
36295, vacating the August 22, 2024, customer hearing in this case. A new customer hearing
date has been set for November 1, 2024.
Customer Comments
The Commission had originally scheduled an August 21, 2024, deadline for customer
comments. On August 20, 2024, the Commission issued an interlocutory order, Order No.
36295, vacating the August 21, 2024, public comment deadline. A new public comment
deadline has been set for November 7, 2024. As of October 2, 2024, three customers have filed
comments. Two customers are in favor of the Company's request and one customer objects to
the requested 37% increase.
Company Tariff
The current Company tariff dates to the last rate case in 2009. Minor changes have been
made to the Commission's Model Tariff utilized by small water companies since then, and Staff
recommends that the Company submit a revised tariff reflecting these changes within 30 days of
the final order. Staff is willing to assist the Company in updating its tariff.
Over/Under Billing
As previously discussed, Staff discovered that the Company was incorrectly billing its
metered customers. The error occurs when customer consumption exceeded the minimum
charge commodity allowance due to incorrect inputs in its billing software. The Company
acknowledged the billing errors,2 and subsequently met with Staff to discuss the proper
calculation of customer bills. The Company determined that because of errors in the billing
process some customers have been overbilled and are entitled to a refund and other customers
have been underbilled and could be rebilled.
2 See Company response to Production Request No. 61.
STAFF COMMENTS 18 October 24, 2024

The Company provided a review of all metered customer bills from January 2022
through July 2024 with a recalculated amount for every bill according to the approved tariff. See
Company response to Production Request No. 64. Staff reviewed the Company's calculations
and agreed that customers were overbilled by a total of$30,150.35 from January 2022 through
July 2024. The Company also updated its billing software prior to sending customer bills for
July 2024 service and verified with Staff that customers would not be overbilled from July 2024
going forward.
Customers who were overbilled are entitled to a refund of up to three years of the
overbilled amount. The Company requests that it be allowed to credit the customers who were
overbilled on their monthly bills if the amount overbilled is less than $100.00. The Company
also requested that customers who were overbilled more than $100.00 could request a refund for
the amount more than$100.00. The Company has chosen not to rebill the customers who were
underbilled.
While the Company's request is outside of the UCRR's requirements for refunds, Staff
believes that a strict interpretation of the rules could induce a financial hardship on the Company.
The Commission's Utility Customer Relations Rules, IDAPA 31.01.21, Rule 203.04 states:
04. Refunds. The utility will promptly recalculate the refund amounts
overpaid by the customer and issue a credit within two (2) billing cycles. Any
remaining credit balance will be credited against future bills unless the
customer, after notice from the utility, requests a refund. The utility will
advise the customer of the option to have any remaining credit balance
exceeding twenty-five dollars ($25) refunded. (7-1-24)
Staff recommends that the Commission approve the Company's request and that any
refunds requested by the customer under the proposed settlement be handled in an expeditious
manner. Furthermore, Staff recommends that the Company submit quarterly reports on the
status of all accounts affected by the over/underbilling, and a final report once all rebilling is
complete.
STAFF COMMENTS 19 October 24, 2024

STAFF RECOMMENDATION
Staff recommends the Commission:
• Establish an annual revenue requirement of$821,546, which is an increase of
$114,218 calculated using an ROE of 10.5%;
• Approve the Company's proposal to refund overbilled customers;
• Require the Company to file quarterly reports regarding overbilled customer refunds
until all funds have been returned;
• Approve Staff-proposed rate design based on a uniform percentage increase to all
billing components; and
• Approve Staff-proposed rates provided in Attachment E that meet Staff s revenue
requirement.
Respectfully submitted this 24th day of October 2024.
Adam Triplett
Deputy Attorney General
Technical Staff: James Chandler
Michael Ott
Michael Eldred
Seungjae Lee
Travis Culbertson
Chris Hecht
I:\Utility\UMISC\COMMENTS\CAP-W-24-01 Comments.docx
STAFF COMMENTS 20 October 24, 2024

CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 2 DAY OF OCTOBER 2024,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF(WITHOUT
CONFIDENTIAL ATTACHMENT), IN CASE NO. CAP-W-24-01, BY E-MAILING A
COPY THEREOF, TO THE FOLLOWING:
H. ROBERT PRICE KATHY STOCKTON
PRESIDENT 2310 W LEMHI ST
CAPITOL WATER CORP BOISE ID 83705
2626 ELDORADO E-MAIL: kantwwkrev&gmail.com
BOISE ID 83704
E-MAIL: infogcapitolwatercorp.com
MARY GRANT
DEPUTY CITY ATTORNEY
BOISE CITY ATTORNEY'S OFFICE
PO BOX 500
BOISE ID 83701-0500
E-MAIL: mgrantkcityofboise.org
BoiseCityAttorneygcityofboise.org
PATRICIA JORDAN, SJ1RYTA
CERTIFICATE OF SERVICE