20241107Reply Comments_Attachments.pdf

RECEIVED
Thursday, November 7, 2024
IDAHO PUBLIC
UTILITIES COMMISSION
H. ROBERT PRICE
PRESIDENT
CAPITOL WATER CORPORATION
2626 ELDORADO ST.
BOISE,IDAHO 83704-5926
208-375-0931
infon,capitolwatercorp.com
www.capitolwatercorp.com
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
CAPITOL WATER CORPORATION )
FOR AUTHORITY TO ) CASE NO. CAP-W-24-01
INCREASE ITS RATES AND CHARGES FOR )
WATER SERVICE IN THE STATE OF IDAHO. ) REPLY COMMENTS
OF CAPITOL WATER
CORPORATION
Comes now Capitol Water Corporation("Company") and files the following Reply to the
Comments of the Staff of the Idaho Public Utilities Commission("Staff'), filed October 24,
2024.
With these Reply Comments,the Company requests that the Commission establish a
revenue requirement of$825,490, as shown in Company Reply Comments Attachment A. This
results in an increase of$16.71%to the Company's annual revenues based on the Staff s
proposed return on equity of 10.5%. The Company accepts the Staff adjustments to Rate Base,
Net Income to Gross Revenue Multiplier,Rate Base, and Rate Design. The Company
respectfully disagrees with seven expense adjustments contained in the Staff Comments.
1 These Reply Comments adjust the Rate Base for the working capital adjustment due to
adjustments to expenses.
REPLY COMMENTS OF
CAPITOL WATER CORPORATION 1 NOVEMBER 7, 2024

Specifically,the Company disagrees with the following Staff Adjustments, as identified
in Staff Comments Attachment B, Summary of Adjustments:
• Adjustment 2, Remove Interest from Debt,
• Adjustment 12, Working Capital,
• Adjustment 21, Meals/Snacks,
• Adjustment 22, Dental Procedures, and
• Adjustment 24, Remove Rate Case Exp.
These Reply Comments address each of these Staff adjustments separately.
Adjustment 2, Remove Interest from Debt
The Company erroneously listed returned check fees and other bank charges on its 2022
Annual Report and in the Application as Account 427.3 Interest Exp. on Long-Term Debt. The
Company's General Ledger for 2022 records return check fees and customer-reimbursed return
check fees to Account 42740. When preparing the annual reports sent to the Idaho Public
Utilities Commission,the Company's outside accountant reported these costs as being in the
incorrect category. These costs are more appropriately recorded in the Annual Report in
Account 620.7-8, Materials& Supplies—Administrative and General, as this is where the
Company records its Customer Accounting & Collection and General Office Supplies in the
Annual Report. Reversing this Staff Adjustment increases the Revenue Requirement by $156, as
shown in Company Attachment B.
Adjustment 12, Working Capital
Due to the calculation of working capital, any adjustment to expenses will affect the
working capital calculation. Based on the Company's proposed operating expenses,the working
capital revenue requirement increases by $49, as shown in Company Attachment B.
Adjustment 21, Meals/Snacks
The Company asserts that the meals and snacks paid for by the Company for employees,
its contractor, and construction crew benefit customers. The Company pays for after-hours
meals when its Operation Employee works late into the night for necessary water line repairs. In
REPLY COMMENTS OF
CAPITOL WATER CORPORATION 2 NOVEMBER 7, 2024

February 2022,the Operations Employee worked late with the contractor and crew, repairing a
water line near Wal-Mart. The Company, when its employee and the contractor work after hours
for the benefit of the water customers, asserts that providing drinks, snacks, and inexpensive
meals is not solely for the employee's benefit. A dinner break would require Company personnel
and the contractor to leave the job site; instead, the Company furnished snacks, drinks, and
meals at the job site,thus minimizing the time customers were without water service during the
repairs. In August of 2022, the Company purchased drinks for the contractor and crew working
on a repair. The Company asserts that providing cold drinks for the contractor and crew to
facilitate the timely repair of the water system benefits customers.
Providing meals after hours is a standard business practice. Companies that often
provide meals for employees working late or after hours include tech giants like Google,
Facebook, Amazon, Microsoft, as well as many startups in the tech industry, where long work
hours are typical; additionally, companies with demanding operational schedules like hospitals,
news organizations, and financial institutions include Wells Fargo also offer late-night meal
options for staff on duty. The Company finds that meals provided to its employees, contractors,
and crew during repair operations are reasonable business expenses that benefit customers.
The Company occasionally provides sandwiches during working lunches with its outside
accountant. Working lunches have many benefits, including increased productivity, better
meetings, and improved collaboration. On the two occasions this occurred in the test year,
providing lunch was a reasonable business expense for the Company and benefited
customers. Providing sandwiches so that the work with the outside accountant may continue
without a break for lunch allows for a more productive meeting with the accountant.
It is standard business practice for businesses to provide meals for meetings and other
working lunches. For example,the State of Idaho, per its State Travel Policy and Procedures as
last amended November 21, 2023, "recognizes the importance of sponsoring meetings and
training sessions for specific purposes, and that refreshments and meals may be provided to
ensure the best utilization of attendee time..." (State Travel Policy and Procedures, Item 10,page
8.)
Reversing this Staff Adjustment increases the Revenue Requirement by $206, as shown
in Company Attachment B.
REPLY COMMENTS OF
CAPITOL WATER CORPORATION 3 NOVEMBER 7, 2024

Adjustment 22, Dental Procedures
Over ten years ago, the Company found that the premiums paid for dental insurance for
the owners were expensive compared with the benefits provided by the insurance. The Company
determined that the cost of the insurance outweighed the benefits received. Therefore, the
Company decided that rather than continue to pay for dental insurance, it would instead provide
an allowance of$1,500 each per year for the President and the Office Manager at the time. The
Company continues to pay for dental insurance for its employees. The Company asserts that
$1,500 of the test year dental expenses is reasonable. Recalculating this Staff Adjustment
increases the Revenue Requirement by $2,021, as shown in Company Attachment B.
Adjustment 24, Remove Rate Case Expenses
Staff removed expenses "paid to a company to analyze the Company's financial records
in preparation for a rate case." Because the Company did not select this vendor, Staff has
removed this"as the expense is a one-time expense that proved to not to be used and
useful." Staff Comments,page 12. The Company strongly disagrees with this characterization
of the expense as being "not used and useful". It was useful in providing the company with an
understanding of what it could expect when putting together a general rate case. It prompted it to
find a less expensive alternative. Just as the current consultant's expenses are reasonable, so are
the preliminary costs reasonable. The Company saw the minimal preparatory work that the
vendor did to be costly. As the Company is keenly aware of how its decisions affect its
customers, in light of those expenses, the Company decided to look elsewhere for help with its
general rate case. Reversing this Staff Adjustment increases the Revenue Requirement by
$1,669, as shown in Company Reply Comments Attachment A.
REPLY COMMENTS OF
CAPITOL WATER CORPORATION 4 NOVEMBER 7, 2024

DATED at Boise, Idaho, this 71h day of November 2024.
4z/-Aw /°�
H. Robert Price
President, Capitol Water Corporation
REPLY COMMENTS OF
CAPITOL WATER CORPORATION 5 NOVEMBER 7, 2024

Capitol Water Corporation
Company Reply Comments Attachment A
Case No.Cap-W-24-01
Line No. Company Staff Company Reply Coments
1 Rate Base 1,143,371 963,759 964,121
2 Required Return on Rate Base 11.52% 10.08% 10.08%
3 Required Net Operating Income 131,686 97,182 97,219 Line 1 multipLied by Line 2
4 Net Operating Income Realized 2,782 12,432 9,541
5 Net Operating Income Deficiency 128,905 84,750 87,678 Line Less Line
6 Net to Gross Multiplier 135.036% 134.769% 134.769%
7 Gross Revenue Deficiency 174,068 114,217 118,163 Line 5 multiplied by Line 6
8 Test Year Revenue 707,328 707,328 707,328
9 Revenue Increase Percentage Required 24,61% 16.15% 16.71% Line 7 divided by Line 8
10 Revenue Requirement 881,396 821,545 825,490 SumLine7&8

Capitol Water Corporation
Company Reply Comments Attachment B
Case No.Cap-W-24-01
(A) (B) (C) (D)
Line No. Amount Adjustment Total Total Increase Percentage
1 Company Request 174,069 24.61%
2 Adjustment No. Adjustment Description
3 Total of Commission Staff Adjustments $ (59,851)
4 Commission Staff Total Increase 114,218
5 Commission Staff Percentage Increase 16.15%
6
7 Company Reply Comments Adjustments
8 1 Include Bank Fees mischaracterized as Interest on Debt 156
9 2 Adjust Working Capital for Company Reply Adjustments 49
10 3 Include Meals and Snacks 206
11 4 Include a Portion of Dental Procedures 2,021
12 5 Include Preliminary Rate Case Expenses 1,669
13 Total of Reply Comments Adjustments 4,101
14
15 Reply Comments Total Increase 118,319
16
17 Reply Comments Percentage Increase 16.73%
Difference due to rounding 156