20241122Direct James Cagle_Exhibits.pdf

RECEIVED
Friday, November 22, 2024
IDAHO PUBLIC
UTILITIES COMMISSION
Preston N. Carter, ISB No. 8462
Morgan D. Goodin, ISB No. 11184
Megann E. Meier, ISB No. 11948
GIVENS PURSLEY LLP
601 West Bannock Street
P.O. Box 2720
Boise, Idaho 83701-2720
Office: [phone]
Fax: [phone]
[e-mail]
[e-mail]
[e-mail]
18557810.2[30.264]
Attorneys for Veolia Water Idaho, Inc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION Case No. VEO-W-24-01
OF VEOLIA WATER IDAHO, INC. FOR A
GENERAL RATE CASE
DIRECT TESTIMONY OF JAMES CAGLE
FOR VEOLIA WATER IDAHO,INC.
NOVEMBER 22,2024

I INTRODUCTION
2 Q. Please state your name, occupation and business address.
3 A. I am James C. Cagle. My business address is 461 From Road, Paramus, NJ
4 07652.
5 Q. By whom are you employed and in what capacity?
6 A. I am the Vice President, Rates and Regulatory Affairs for Veolia Water
7 M&S (Paramus), Inc. ("VWM&S"). I am primarily responsible for the oversight
8 of rate case filings for Veolia Water Idaho, Inc. ("Veolia Water Idaho" or the
9 "Company"). I am also responsible for oversight of certain rate related
10 compliance and reporting requirements as prescribed by the various regulatory
11 commissions having jurisdiction over the Veolia companies.
12 Q. Please summarize your educational background and professional experience.
13 A. I received a Bachelor of Accountancy degree from the University of Oklahoma in
14 1987 and am a Certified Public Accountant licensed in the State of Texas. I was
15 initially employed by United Water M&S as Director, Regulatory Business in
16 October of 2007 and have held my current position since March 2010.
17 Previous to that, I was employed by Atmos Energy Corporation, a natural gas
18 utility operating in twelve states, as Manager, Rates and Revenue Requirements.
19 Q. Have you previously testified before the Idaho Public Utilities Commission?
20 A. Yes. I provided testimony in Case No. SUZ-W-20-02 as well as in the
21 Company's last rate case filing (Case No. VEO-W-22-02). I have also provided
22 testimony in rate case and other filings before several other state commissions on
23 various regulatory issues.
PAGE I OF 4
J. CAGLE,DI
VEOLIA WATER IDAHO,INC.

I Q. What is the purpose of your testimony?
2 A. The purpose of my testimony in this case is to present support for the
3 following:
4 • The appropriate level of amortization of the protected portion of the
5 liability balance created by the Tax Cuts and Jobs Act("TCJA").
6 • A change in accounting and regulatory treatment related to the income tax
7 gross-up of the Allowance for Funds Used During Construction
8 ("AFUDC").
9 TCJA LIABILITY AMORTIZATION
10 Q. Please describe the Company's understanding of"protected" and
11 "unprotected" Excess Accumulated Deferred Income Taxes ("EADIT").
12 A. Per the normalization rules in the Internal Revenue Code, Section 168(i)(9), the
13 amortization period for regulatory liability, which arose from temporary
14 differences between book and tax methods used for plant-related"protected"
15 amounts, may not be shorter than the period in which Accumulated Deferred
16 Income Tax ("ADIT") would have otherwise reversed over the remaining book
17 lives of its' assets. The Average Rate Assumption Method("ARAM") of
18 amortization must be utilized for as much of the regulatory liability as possible, if
19 the requisite data is available to the utility. ARAM calculates a specific amount by
20 year, rather than a period, of amortization and, if amortized faster, could result in
21 a normalization violation which would prohibit the Company from utilizing
22 accelerated depreciation for income tax purposes.
PAGE 2 OF 4
J. CAGLE,DI
VEOLIA WATER IDAHO,INC.

I The amortization period for the amount of the regulatory liability which
2 arose from amounts not considered normalized are "unprotected" and may be
3 amortized by the utility over a period different from the protected amount. The
4 unprotected EADIT have been fully refunded to customers as of April, 2022 and
5 no longer require consideration in the Company's rates.
6 Q. What are the current annual amortization and remaining balances of the
7 EADIT regulatory liability?
8 A. The remaining balance as of December 31, 2024 will be $3.7 million and
9 represents the balance of protected EADIT credit to be refunded to customers
10 over the remaining lives of the Company's investment in plant assets. The annual
11 amortization of the balance, as required in the previous rate filing, is $200,004
12 and reflected on Exhibit No. 12.
13 Q. Is the Company proposing to change the amortization amount of the
14 protected Excess Deferred Income Taxes ("EDIT") in this filing?
15 A. No. At this time, no change in the level of amortization is warranted.
16 AFUDC GRoss-up
17 Q. Please describe the current accounting and regulatory treatment for the
18 AFUDC Gross-up regulatory asset.
19 A. Since the outcome of the Company's 2015 rate case filing (UWI-W-15-01) the
20 AFUDC gross-up amount is being amortized over a 35 year period. The balance
21 of the unamortized amount is offset by an equivalent and offsetting accumulated
22 deferred income tax amount and has no impact on rate-base. However, due to the
23 amortization of the gross-up, it is difficult to reconcile and track the proper ADIT
PAGE 3 OF 4
J. CAGLE,DI
VEOLIA WATER IDAHO,INC.

I for AFUDC Equity. The amortization of the gross-up creates an additional
2 temporary difference in addition to the temporary difference related to book
3 AFUDC Equity within the Company's fixed asset accounting system. As a result,
4 this constitutes improper income tax accounting and ratemaking.
5 Q. Is the Company proposing different treatment?
6 A. Yes. Under the Company's proposal,before 2020, the balances related to the
7 AFUDC Gross-up will be accounted for as a component of income tax expense
8 and activity after 2020 will be accounted for such that the activity will be treated
9 as a flow-through for income tax purposes instead of on a normalized basis as it is
10 now. The Company is proposing to eliminate the amortization and instead recover
11 the income tax impacts of AFUDC as a component of income tax expense.
12 Q. Has the Company reflected this accounting in its current filing?
13 A. Yes. No amortization of the AFUDC gross-up is included in the filing, the
14 adjustment for which is included in the Summary of O&M Expenses, Exhibit 10,
15 Schedule 1. The recovery of the income tax impacts of AFUDC is included in the
16 calculation of income taxes, Exhibit 10, Schedule 4.
17 Q. Why does the Company believe the proposed treatment is appropriate?
18 A. As the Company understands it, the proposed treatment is consistent with the
19 accounting and ratemaking treatment utilized by other companies, is much easier
20 to administer, and provides more accurate accounting and rate making treatment.
21 Q. Does this conclude your direct testimony?
22 A. Yes.
PAGE 4 OF 4
J. CAGLE,DI
VEOLIA WATER IDAHO,INC.

Preston N. Carter, ISB No. 8462
Morgan D. Goodin, ISB No. 11184
Megann E. Meier, ISB No. 11948
GIVENS PURSLEY LLP
601 West Bannock Street
P.O. Box 2720
Boise, Idaho 83701-2720
Office: [phone]
Fax: [phone]
[e-mail]
[e-mail]
[e-mail]
18557695.1 [30-264]
Attorneys for Veolia Water Idaho, Inc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION Case No. VEO-W-24-01
OF VEOLIA WATER IDAHO, INC. FOR A
GENERAL RATE CASE
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
EXHIBIT TO ACCOMPANY THE
DIRECT TESTIMONY OF JAMES CAGLE

VEOLIA WATER IDAHO, INC.
Details of Adjustments to Operating and Maintenance Expenses At Present Rates
SUMMARY- Exhibit 10, Schedule 1
Historic Test Year ended August 31, 2024, as Adjusted
(1) (2) (3) (4) (5)
Schedule Historic Test Year Adjusted Historic Test Year
Line Adjustment Account Ended Normalizing Test Year Ended Ending
Witness No. Description No. Reference 08/31/2024 Per Books Adjustments 08/31/2024 Adjustments 12/31/2024
EXHIBIT 10, Schedule 1
M. Wilson 1 Payroll 1 50100 to 50125 $ 7,806,288 $ 7,806,288 $ 135,265 $ 7,941,553
M. Wilson 2 Workers Compensation (excludes reserves, adds claims 2 91460 $ 68,115 1/ $ 17,684 $ 85,799 $ 32,028 $ 117,827
L. Bucci 3 Pension Cash Contributions 3 91500, 71257 & $ 873,877 $ 873,877 $ (193,268) $ 680,609
L. Bucci 4 Post-retirement Benefits Other than Pension (PBOP) 4 91550 &71258 $ (448,642) $ (448,642) $ (38,286) $ (486,928)
L. Bucci 5 Employee Healthcare (excludes reserves) 5 91700 $ 1,694,602 2/ $ (127,885) $ 1,566,717 $ 395,374 $ 1,962,090
L. Bucci 6 Employee 401k 6 91800 $ 511,836 $ 511,836 $ 25,033 $ 536,868
L. Bucci 7 Other Employee Benefits -Tuition &Other Awards 7 91850 &91860 $ 142,878 $ 142,878 $ (85,244) $ 57,634
M. Wilson 8 Payroll Overheads (Fringe Benefit Allocation) 8 90950 &90953 $ (1,307,201) $ (1,307,201) $ (132,253) $ (1,439,454)
L. Bucci 9 Purchased Water 9 50605 $ 433,064 $ 433,064 $ - $ 433,064
M. Wilson 10 Energy- Purchased Power and Other Utilities 10 50610 &50620 $ 2,869,189 $ 2,869,189 $ 317,512 $ 3,186,702
M. Wilson 11 Chemicals (reclass of prior year correction) 11 50635 $ 758,808 3/ $ 9,511 $ 768,319 $ (27,601) $ 740,718
M. Wilson 12 Subcontractors 12 50400 $ 1,066,558 $ 1,066,558 $ 46,117 $ 1,112,675
L. Bucci 13 Customer Billing Expenses 13 50405 $ 323,460 $ 323,460 $ 17,175 $ 340,635
L. Bucci 14 Bad Debts (reserves booked in separate 90405 account) 14 90400 &90405 $ 352,668 4/ (2,097) $ 350,571 $ (18,215) $ 332,356
L. Bucci 15 Materials (reclassification amount in Adjusted Test Year 15 50300 $ 276,106 5/ $ 276,106 $ (0) $ 276,106
M. Wilson 16 Vehicle Allocation (excludes reserves, adds claims 16 50645 &50646 $ 754,934 6/ $ 334,483 $ 1,089,417 $ (174,871) $ 914,546
M. Wilson 17 Office Expenses 17 50650 $ 726,981 $ 726,981 $ 42,551 $ 769,532
L. Bucci 18 Advertising Expense 18 50651 $ 116,722 $ 116,722 $ 19,286 $ 136,008
A. Jacob 19 Management&Service Fees 19 90850 $ 4,554,245 $ 4,554,245 $ 251,013 $ 4,805,258
L. Bucci 20 General Insurance (excludes reserves, adds claims 20 91400 &91450 $ (28,071) 7/ $ 127,589 $ 99,518 $ 154,558 $ 254,076
L. Bucci 21 IPUC Fees 21 91900 $ 111,595 $ 111,595 $ 8,017 $ 119,612
M. Wilson 22 Safety 22 92200 $ 212,503 $ 212,503 $ (0) $ 212,503
A. Jacob 23 Amortization Expense- Deferred Rate Case 23 92000 $ 55,308 8/ $ 55,308 $ 36,753 $ 92,061
A. Jacob 24 Amortization Expense- Deferred Pension 24 92056 $ 23,220 $ 23,220 $ (98,264) $ (75,044)
A. Jacob 25 Amortization Expense- Deferred Tank Painting 25 92053 $ 154,781 $ 154,781 $ 179,306 $ 334,086
A. Jacob 26 Amortization of Excess Deferred Income Taxes 26 92059 $ (200,004) $ (200,004) $ - $ (200,004)
A. Jacob 27 Amortization Expense- Deferred Power 27 92061 $ 264,072 $ 264,072 $ 142,212 $ 406,284
J. Cagle 28 AFUDC Equity Gross Up Amortization 28 92064 $ 46,036 $ 46,036 $ (46,036) $ -
M. Wilson 29 Adjustment to Variable Expenses Due to Volume 29 $ - $ - $ (290,315) $ (290,315)
30 Total Adjusted Operating & Maintenance Expenses $ 22,213,928 $ 359,284 $ 22,573,213 $ 697,848 $ 23,271,060
M. Wilson 31 Total Unadjusted Operating & Maintenance Expenses $ 265,210 $ - $ - $ - $ 265,210
32 Total Operating and Maintenance Adjustments $ 22,479,138 $ 359,284 $ 22,573,213 $ 697,848 $ 23,536,270
EXHIBIT 10, Schedule 2
K. Arp 33 Adjustment to Depreciation Expense 1 70100 &70101 $ 11,273,623 988,168 $ 12,261,791
A. Jacob 34 Amortization of Utility Plant Acquisition Adjustments 2 71255 282,588 (0) $ 282,588
35 Total Depreciation and Amortization $ 11,556,211 $ - $ - $ 988,168 $ 12,544,379
EXHIBIT 10, Schedule 3
M. Wilson 36 Other Tax 1 70200 $ 25,879 $ (25,879) $ -
M. Wilson 37 Property Taxes 2 70203 $ 1,388,498 $ 340,754 $ 1,729,252
M. Wilson 38 Payroll Taxes (combined FICA, FUI, SUI) Pages 3, 4 & 5 70250 $ 977,609 $ 23,310 $ 1,000,920
39 Total Taxes Other $ 2,391,986 $ - $ - $ 338,185 $ 2,730,171
40 Total Operating Expenses $ 36,427,336 $ 359,284 $ 22,573,213 $ 2,024,200 $ 38,810,820
Normalizing Adjustments: To exclude Reserves and adjust Historic Test Year Case No.VEO-W-24-01
1/ Workers Compensation (excludes reserves, adds claims payments GL account 26200) Exhibit No. 10
2/ Employee Healthcare (excludes reserves) Schedule 1-2-3
3/ Chemicals (reclassification amount in Adjusted Test Year to Materials or capitalized) Summary
4/ Bad Debts (reserves booked in separate 90405 account) Bucci/Wilson
5/ Materials (reclassification amount in Adjusted Test Year) Jacob/Cagle/Arp
6/ Vehicle Allocation (excludes reserves, adds claims payments GL account 26200) Page 1 of 1
7/ General Insurance (excludes reserves, adds claims payments GL account 26200, does not include premiums captured in M&S Fees)
8/ Rate Case Expense Amortization (excludes Intervenor funding)

Veolia Water Idaho, Inc.
Details of Adjustments to Operations and Maintenance Expense
Historic Test Year ending August 31, 2024, as Adjusted
Adjustment No. 28
AFUDC Equity Gross Up Amortization
Account 18623 and 18653, 92064 Amort
Line Adjustment
No. Description Amount
Adjustment of Amortization of AFUDC Equity Gross Up Expense - based on projected December 2024 Deferred
1 AFUDC Equity Gross Up balance $ (46,036)
2 Test Year annual amortization expense per Exhibit 11, Schedule 9 page 1 deferred debits $ -
3 Historic Test year expense -Amortization of deferred AFUDC equity gross up (Case No. VEO-W-22-02) $ 46,036
4 Adjustment (Test Year less Historic Test Year) $ (46,036)
Case No.VEO-W-24-01
Exhibit No. 10
Schedule 1
J. Cagle
Page 28

Veolia Water Idaho, Inc.
Excess Deferred Income Tax Regulatory Liability Balances
Account Number 25316
As of December 31, 2024 and 13 Month Average
Line
No. Description Amortization Balance
(a) (b) (c)
1 Balance of EDIT Regulatory Liability as of December 31, 2022 $4,132,682
2 Amortization for the 12 Months Ended 12/31/2023 $200,004 3,932,678
3 January 31, 2024 16,667 3,916,011
4 February 28, 2024 16,667 3,899,344
5 March 31, 2024 16,667 3,882,677
6 April 30, 2024 16,667 3,866,010
7 May 31, 2024 16,667 3,849,343
8 June 30, 2024 16,667 3,832,676
9 July 31, 2024 16,667 3,816,009
10 August 31, 2024 16,667 3,799,342
11 September 30, 2024 16,667 3,782,675
12 October 31, 2024 16,667 3,766,008
13 November 30, 2024 16,667 3,749,341
14 December 31, 2024 16,667 3,732,674
15 13 month average $3,832,676
Case No: VEO-W-24-01
Exhibit No. 12
J. Cagle
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