20241129Final Order No. 36407.pdf

Office of the Secretary
Service Date
November 29,2024
BEFORE THE IDAHO PUBLIC UTILITIES CONMUSSION
IN THE MATTER OF CDS STONERIDGE ) CASE NO. SWS-W-24-01
UTILITIES, LLC'S APPLICATION FOR )
AUTHORITY TO INCREASE ITS RATES ) ORDER NO. 36407
AND CHARGES FOR WATER SERVICE IN )
THE STATE OF IDAHO )
On February 28, 2024, CDS Stoneridge Utilities, LLC ("Company" or "Stoneridge")
applied for authorization to increase its rates and charges for water service ("Application"). The
Company made a separate supplemental filing requesting an April 1, 2024, effective date.I
On March 13,2024,the Commission issued a Notice of Application,Notice of Intervention
Deadline, and Notice of Suspension of Proposed Effective Date. Order No. 36116. The Stoneridge
Property Owners Association, Inc. ("SPOA"), the Stoneridge Recreational Club Condominium
Owners Association, Inc. ("SRCCOA"), and an individual, Randolph Garrison,pro se, petitioned
to intervene (collectively the "Intervenors"). Order Nos. 36144 and 36163.
On May 28, 2024, the Commission issued a Notice of Modified Procedure establishing
public comment and Company reply deadlines and Notice of Public Workshops. Order No. 36192.
The Commission Staff("Staff')held two public workshops on June 4, 2024, in Blanchard, Idaho.
On July 2,2024,the Commission issued an order suspending the case for sixty days, setting
a new effective date of November 30, 2024, ordering the Company to retain counsel within 30
days,and vacating the comment deadlines established in Order No. 36192. Order No. 36247.Jason
Piskel filed a Notice of Appearance on July 1, 2024, noting that he was retained to represent the
Company before the Commission.
On September 13, 2024, the Commission issued an order establishing an October 1, 2024,
Staff comment deadline, an October 16, 2024, Intervenor comment deadline, and an October 30,
2024, Company reply deadline. Order No. 36323.
On October 1, 2024, Staff filed comments recommending that the Commission approve a
revenue requirement of$292,795-a 27% increase in customers' rates.2 Staff proposed revenue
' In its Application the Company requested a July 1,2024,effective date.See Application Attachment G.
2 After Staff filed comments, an error was discovered in the model it used which when corrected reduced, Staff s
proposed revenue requirement by $21,682 to $271,113-effectively reducing Staffs 27.1% proposed increase to
17.6%. This error and the efforts to correct it on the record are discussed in greater detail below.
ORDER NO. 36407 1

requirement was determined by using a 10% return on equity ("ROE") with a $264,252 net rate
base.
Two customer hearings were held in Blanchard, Idaho, on October 9 and 10, 2024.
On October 16, 2024, the Intervenors filed joint comments.
On October 30, 2024, the Company filed reply comments disagreeing with Staff s overall
recommendation. The Company argued if the Commission adopted Staff s position it would be
exceeding its authority. The Company alternatively recommended that the Commission approve a
revenue requirement of$477,193—a 124.4%increase.3 This was determined by using a 11%ROE
with a $282,549 net rate base. The Company discussed its debt to Esprit Enterprises, LLC,
("Esprit") and noted that its last rate case was in 2004. The Company stated that over the years it
had observed an inherent bias toward customers at its long-term viability. The Company discussed
its previous and current deficits. The Company also argued that the Commission's previous
hookup fee case did not sufficiently cover the Company's expenses and was lower than the
amounts approved for neighboring systems that had better access to contractors. The Company
argued that the Commission's approach was shortsighted and would leave the Company deficient
in revenue. The Company stated that Staff s position did not outpace inflation when compared to
the last rate case 17 years ago.
On November 6, 2024, Staff filed a motion requesting that the Commission accept the
correction of a calculation error in the record and allow the Company time to comment on the
calculation error. The Commission approved Staff s request noting that the Company's comments
on the record needed to be tailored to the issue of the error in question. Order No. 36389.
On November 13, 2024, the Company filed comments discussing its position on the error
corrected by Staff. The Company also stated that it had discovered another error in the data that
the Company used as input into its calculations.
Having reviewed the record in this case, the Commission issues this Order authorizing the
Company to increase its rates as discussed below.
3 By correcting the same error found in Staff s model,the Company's proposed revenue requirement would be reduced
by $26,646 to $450,546—effectively reducing the Company's proposed increase from 124.3% to 111.7%. This is
discussed in greater detail,below.
ORDER NO. 36407 2

BACKGROUND
The Company serves about 384 residential and commercial customers near Blanchard,
Idaho, under Certificate of Public Convenience and Necessity No. 395. The Company provides
water to homes, condominiums,RV spaces, and a golf course. The system features two wells with
high-capacity pumps, three storage tanks holding 340,000 gallons, and automated controls.
Infrastructure includes pipes, 31 fire hydrants, backflow prevention devices, and chlorination
treatment. The Company offers 3/4-inch meters to 6-inch meters with 93% of customers using 3/4-
inch meters.There is potential for 112 new connections on the system and the Company anticipates
50 additional hookups within five years.
THE APPLICATION
The Company represented that it had invested more than $900,000 in the system since
2018. To recover its investment,the Company proposed to increase rates by an average of 261%
which represents an overall increase in the Company's revenues of$555,190. The increases would
apply to residential customers in Stoneridge and Happy Valley Ranchos subdivision, commercial
customers at SR Resort/Timeshare and MCV&Golf Course,Irrigation,and Golf Course Irrigation
customers. See Application Attachment D.
The Company proposed to increase both monthly user fees and non-recurring fees. The
proposed commodity charge would increase from $0.79/1,000 gallons to $2.94/1,000 gallons. See
Application Attachments E and F.
The Company included financial statements and other documents relevant to its request.
The Company did not include a redlined or clean copy of its proposed tariff. See Application
Attachments P and Q. The Company indicated it was working with Staff on this and would file
this when complete.
The Company included copies of its customer notification and publication notice with its
Application. See Application Attachments E and F.
4 Some of the Company's customers are condominiums and other entities wherein one individual customer connection
serves many residences. Therefore,the Company serves approximately 384 customers but 569 equivalent residential
units.
ORDER NO. 36407 3

COMMENTS AND DECISIONS
System Reliability
Staff Comments
Staff noted the system shows no significant safety or reliability issues based on Idaho
Department of Environmental Quality ("IDEQ") surveys and complaint records. Pressure
monitoring began in April 2024,with previous surveys indicating adequate pressure levels and no
concerning events during 2019-2023. No customer complaints about pressure or reliability were
reported with IDEQ during 2019-2023.
The system operates efficiently, with water rights of 2,814 gallons per minute ("GPM")
and a maximum capacity of 1,732 GPM. Staff noted though that the Company leases water rights.
While current capacity meets demands, Staff could not evaluate future capacity needs due to the
Company's outdated Facility Plan.
Staff recommended updating the 2006 Facility Plan within one-year of the issuance of the
final order in this case (and prior to its next general rate case) to analyze current and future
demands, including peak usage scenarios. This update is crucial since the Company is required to
maintain peak demands even with major components offline. While average demands are met,
proper assessment of peak capacity needs requires an updated plan.
Company Reply
In its final requests, the Company asked that the Commission require that the updated
Facility Plan be due by December 30, 2030.
Commission Decision
Rather than a Facility Plan as recommended by Staff,the Commission directs the Company
to submit a less intensive capital plan outlining the needs of the system and how the Company will
address them. The Company should work with Staff to develop the requirements of a capital plan
that will help ensure the Company is adequately planning for the growth and maintenance of the
system. This plan must be submitted within one-year of the issuance of this Order and before the
Company's next general rate case. The Commission notes that the Company needs to ensure that
it can maintain sufficient service during a fire to ensure and promote the safety of the community
and comply with the rules governing fire water flow.
ORDER NO. 36407 4

Corporate Structure and Ownership and Related party Issues
Staff Comments
Staff stated Stoneridge is owned by Esprit which is in turn owned by J.D. Resort, Inc. ("JD
Resort"). JD Resort is owned by Chan and Teresa Karupiah (the "Karupiahs"). As a result, Staff
alleged that all transactions between these three companies are related party transactions that
should be subject to greater scrutiny when making prudency determinations. Staff argued that the
general rule is that the utility has "the burden of proving the reasonableness of its operating
expenses paid to an affiliate . . . ."See Boise Water Corp. v.Idaho Pub. Utilities Comm'n, 97 Idaho
832, 837-38, 555 P. 2d 163, 168-69 (1976). Staff noted that the Idaho Supreme Court in this case
found that "if there is an absence of date and information from which the reasonableness and
propriety of services rendered and the reasonable cost of rendering such service can be ascertained
by the commission, allowance is property refused."Id. at 837.
Commission Decision
The Commission finds that related parry entity transactions must receive additional
scrutiny to ensure the reasonableness and propriety of the costs incurred.
Management Issues
Staff Comments
Staff expressed concerns about Stoneridge's management practices,particularly regarding
asset control and related entity transactions. Staff noted that after acquiring Stoneridge, Esprit
moved crucial assets (e.g. land, easements, and water rights) from Stoneridge's ownership, then
leased those assets back to Stoneridge at a monthly rate. Staff was concerned that customers are
now paying lease payments for assets that belonged to the Company and were counted as
contributed capital as the system was being developed.
A July 2024 well pump failure highlighted additional issues. Instead of promptly replacing
the equipment,the Company inappropriately asked customers to reduce water use and lobbied the
Commission for expedited recovery potentially delaying the purchase of a replacement pump.
When Staff requested documentation for the purchase,the Company revealed a lease arrangement
with Esprit rather than a direct purchase. Staff believed that this was inappropriate for several
reasons including that it violates Idaho Code § 61-610's requirements for transparency from a
parent company.
ORDER NO. 36407 5

Staff also noted that the lease terms appear excessive, charging 12.5% interest over five
years—which exceeds the Company's requested ROE. Importantly, when dealing with related
entities, Staff asserted the standard for recovery is the lower of actual cost or market. Moreover,
customers were charged before the pump was functional—as it still lacks essential components
required to operate. Staff recommended excluding these costs until the pump works properly and
Stoneridge has complete ownership.
The current arrangement of vital assets being held by a related entity and then leased to
Stoneridge puts basic service at risk;hypothetically if Esprit's assets were ever frozen in unrelated
litigation, Stoneridge might lose access to essential infrastructure necessary to provide basic
services to its customers. Staff recommended the Commission direct the Company to return all
assets that were included in the original purchase of Stoneridge.
Additionally, Staff noted the Company shows preferential treatment in collections, failing
to enforce payment policies against the owner's golf course which was routinely in arrears to the
Company. Staff asserted that the Company cannot discriminately apply its collection policy and
disregard the Commission-approved tariff.
Company Reply
The Company stated that Staff s assessment was not based upon accurate information and
used unnecessarily inflammatory language. The Company also stated that, based upon tax returns
and other documentation, Stoneridge has never owned real property, so Staffs assertion that these
assets were transferred to Esprit is mistaken. The Company also stated that Esprit bought the
relevant infrastructure in 2018 and that it has never therefore been paid for by the Company's
customers. The Company stated that some of its interests may be sold to independent parties in the
future. The Company also took issue with Staffs depreciation treatment—arguing that Staffs
assessment wrongly attributed certain categories as contributed capital and that Staff s
recommendation would not depreciate more than $1,200,000 in an appropriate manner.
The Company explained that in 2023, water rights were consolidated under Esprit, with
only one right transferred from Company ownership. The Company argued this transfer was
legitimate and market-based lease rates apply. The current lease charges $23/acre foot, increasing
to $33/acre foot in 2025, plus ground rent for five locations.
The Company disputed Staff s claims of mismanagement,requesting restoration of an 11%
ROE and allowance of lease expenses. The Company contended lease amounts reflected fair
ORDER NO. 36407 6

market rates and stated that Staff overlooked escalator clauses when comparing 2023 expenses to
2020 baseline. The Company emphasized that most water rights were never Company-owned—
making lease arrangements appropriate and market-based. The Company argued Staff s
recommendations lacked factual support and failed to consider annual lease adjustments.
The Company also disputed Staff s claim about pump replacement delays—stating that it
acted immediately. The Company stated that it sometimes relied on Staff for guidance; however,
this did not slow the Company's response. The Company stated that later delays stemmed from
attempting to reuse equipment and supply chain issues rather than management decisions.
The Company argued Staff inconsistently viewed related-party transactions—favoring
only those benefiting customers. The Company explained the golf course payment issues reflected
accounting delays—not true delinquency. Moreover, the Company's debts to Mr. Karupiah
exceeded golf course arrears. The Company stated that the issue will become moot as the golf
course transitions to its own water supply.
Commission Decision
The Commission is concerned that assets essential to the operation of the Company are
held by a related party. As a result, the Company's operations could be impacted by matters
completely outside of its control which could put safe and reliable service to customers at risk. In
regard, to whom owned certain assets prior to the 2018 transaction the issue becomes whether
those assets should be considered contributed capital now. It is the Company's burden to
demonstrate that these assets,including but not necessarily limited to,water rights,easements, and
real property should not receive this treatment. To extent certain assets may not be considered
contributed capital if demonstrated by the Company it still must demonstrate that expenses it incurs
from related parties employing these assets are fair, just, and reasonable. These matters are
discussed further below. The Commission also finds that the Company must apply its collection
practices in a non-preferential manner.
Proforma Plant in Service
Staff Comments
Staff noted that it was not recommending recovery for several proforma projects and
equipment because they were not yet used and useful. This "reduce[d] the Company's proposed
Plant in Service by $730,457, accumulated depreciation by $117,603 and associated depreciation
expense by$114,315." Staff Comments at 7.
ORDER NO. 36407 7

Commission Decision
The Commission notes that the Company did not dispute Staff s assertions. Therefore, the
Commission finds that Staffs proposed reduction,due to the proforma projects not being in service
yet and therefore not being used and useful,is appropriate.Relatedly,the reductions for associated
depreciation expenses are also appropriate.
Depreciation Expense
Staff Comments
As shown in Table No. 1, the Company's assessment for its recovery of depreciation
expense differed from the recommended depreciation rates established in the National Association
of Regulatory Utility Commissioners ("NARUC") Depreciation Manual for Small Water
Companies. Using rates established in the NARUC Depreciation Manual, Staff recommended
$8,007 less than the Company requested.
Table No. 1:Depreciable Livess or Company Assets
Company
Plant Life NARUC
Account ears Life
309 Supply Mains 23.92 50
311 Power Pumping Equipment 20
320 Purification Systems 14.98 20
331 Trans.& Distribution Mains 50
333 Services 20.00 30
334 Meters and Meter Installations 13.99 35
335 Hydrants 31.70 40
339 Other Plant& Misc. Equipment 58.67 10
Id. at 8. Staff also recommended reclassifying certain specific expenses detailed in Attachment D
to Staffs Comments.
Company Reply
After acquiring Stoneridge, the Company filed six annual reports using depreciation
schedules recommended by a former Commission Staff member. The Company never received
feedback from Staff regarding its annual reports. In reviewing Staff s Comments, the Company
learned Staff prefers NARUC schedules—which reduced depreciation expense by using longer
ORDER NO. 36407 8

depreciation lives. The Company questioned why NARUC rates became mandatory without prior
notification.
Commission Decision
Absent a system-specific depreciation study,which can be cost prohibitive for small water
companies, using the depreciation rates in the NARUC Depreciation Manual is industry standard
and provides this Commission an objective tool to determine depreciation rates. Therefore, the
Commission finds Staff s reliance on NARUC Depreciation Manual appropriate in this case.
Capitalizing Repairs and Rebuilds
Staff Comments
Staff recommended that three expenses incurred in 2023 be removed as expenses and
instead be placed into plant in service. Two of the expenses were for water main repairs and the
third was for pump repairs. This would lower the maintenance expense by $17,451 and increase
plant in service by the same amount. The result of this reclassification would increase the
depreciation expense by $534 in the test year.
Company Reply
The Company argued against capitalizing repairs in an aging system—comparing it to
"putting makeup on a dying pig." Reply Comments at 22. The Company contended these minor
fixes (less than 1.5% of total plant value for 2023) would be discarded during eventual system
replacement. The Company preferred treating repairs as operating expenses to track system health
and guide planning. The Company thus requested that $17,451 continue to be classified as
expenses.
Commission Decision
The Commission finds that costs for repairs and maintenance that extend the life of a
system are appropriately capitalized and eligible to earn a return as part of the Company's rate
base. The Company's argument that the entire system will have to be replaced at the same time is
at this time uncertain based on the record. Water systems routinely replace leaking pipes,which in
turn extends the life of the system as a whole. Staffs recommendation was well-reasoned in this
case and followed established accounting principles. After the system, or sections of the system,
is/are replaced,the Commission will review the associated expenses for prudency,but such actions
are not before the Commission at this time. As it stands, booking the expenses to plant in service
is reasonable and consistent with our past decisions.
ORDER NO. 36407 9

Golf*Course Revenue
Staff Comments
Staff disagreed with excluding golf course revenue from rate calculations. Despite the
course installing its own well in October 2023, the golf course's usage remains significant. The
golf course used approximately 27 million gallons through August 2024, exceeding Company's
estimates of 20 million gallons.Based on July-August consumption patterns compared to previous
years, Staff projected the course will use 81.7% of historical consumption—approximately 34.9
million gallons annually.
Staff calculated expected revenue using this consumption estimate plus monthly charges
for a 1.5-inch meter operating seven months yearly. The total projected revenue was $25,457,
which Staff recommended including in rate calculations. This reflects actual usage patterns and
changes in meter size from 6-inch to 1.5-inch in 2024.
Company Reply
The Company disputed Staff s projection of golf course water usage at 81% of historical
levels—arguing it failed to account for significant changes.While Staff based calculations on July-
August data showing an 18.3% reduction from previous years, the Company cited two major
factors affecting future usage.
First, the golf course invested $175,000 in new irrigation controllers expected to reduce
water consumption by 20%. Second, the Company's new well, initially planned for 600 GPM
output, operated at only 60 GPM due to installation issues with the well casing. The Company was
negotiating repairs or replacement of the well.
Relying on these factors, the Company projected much lower usage than Staffs estimate
of 34.9 million gallons annually. The Company removed both the new well's production capacity
and irrigation controller efficiency gains, forecasting approximately 9.8 million gallons yearly.
This would reduce annual revenue by $24,374 compared to Staffs projection.
Stoneridge emphasized the golf course's commitment to eventually eliminate dependence
on the Company's water system. The Company argued that requiring another rate case instead of
accepting these adjustments would be unreasonable and requested the Commission approve their
lower revenue projection as more accurate.
ORDER NO. 36407 10

Commission Decision
The Commission understands the Company's desire to exclude the golf course revenue
from rate calculations due to the fact that the golf course is transitioning to providing its own water.
However, based upon the record before us, the golf course still heavily relies on the Company to
meet its water demands. Therefore, the Commission finds Staff s recommended 81.7%
apportionment of the expenses—based on the golf course's draw on the Company's water—to be
both reasonable, appropriate, and tailored to the record before us. In a future rate proceeding, if
the actual golf course consumption is materially different than what the record provided in this
case, the Commission can revisit the calculation of revenues received from the golf course.
Treatment of Golf Course
Staff Comments
Staff noted that the golf course represents a major water customer under common
ownership with Stoneridge. The golf course currently receives a 10% discount based on it having
interruptible service—allowing shutoffs during capacity issues. Case No. SWS-W-06-01, Order
30342. This discount was not in the original application in Case No. SWS-W-06-01; it was added
later due to concerns about losing the golf course as a customer.
The situation has changed since October 2023 when the golf course began using its own
well and Staff does not support the 10%interruptible service discount since the golf course has its
own well and will rely less on Stoneridge for its water. As this well already reduces Company
water usage, the rationale for the interruptible service discount has been mitigated. Staff analyzed
consumption patterns to calculate future revenue—considering both historical use and expected
reductions as the course transitions to its own water supply. Staff s calculation of the golf course's
consumption is discussed above.
Company Reply
The Company stated that it has already responded to the Commodity Usage issue. The
Company agreed to the removal of the rate differential.
Commission Decision
The Commission finds that it is not prudent for the golf course to receive an interruptible
rate at this time as noted above, the Company has expressed its concerns that Staff s proposals are
inconsistent—but always in the customers' favor—when it comes to the Company's relationship
with it's the related entities in this case. The Commission notes that prudence remains the
ORDER NO. 36407 11

consistent throughline through Staffs recommendations. After reviewing the record, the
Commission finds that it is not appropriate for the golf course to receive a discounted rate.
Interruptible rates are provided so that all customers—not just one—can benefit from the
interpretability of larger customers when necessary for the cumulative benefits of all customers.
The record does not adequately demonstrate how the golf course's interruptible rate benefits the
system or the wider customer base in a sufficient manner to justify the discount.
Annual Electricity and Chemical Expenses
Staff Comments
Staff determined normalized expenses for 2023 by analyzing costs per gallon and
consumption patterns over 2022-2023.For electricity,they calculated$28,798 in annual expenses,
exceeding the Company's estimate by $7,889. This figure uses weighted averages of power costs
and accounts for reduced golf course usage as it transitions to its own well.
For chemical expenses, Staff recommended $8,557 annually, slightly above the
Company's projection. Despite higher chlorine costs in 2023, Staff averaged two years of data to
determine reasonable expenses. Both calculations consider the golf course's planned reduction in
water usage and its impact on overall system production. Staff also discussed and illustrated its
methodology and calculations for these numbers. Staff believed that its figures reflect operational
costs on a normalized basis.
Company Reply
The Company believed that Staff s calculations were appropriate. The Company noted that
once the determination was made regarding the golf course's water use, Staff s electricity and
chemical expenses would need to be updated.
Commission Decision
The Commission finds that the recommendations on annual electricity and chemical
expenses are reasonable.
Water Testing
Staff Comments
Staff applied the Commission's preferred practices and methodology to the Company's
request for costs associated with water testing. This increased the Company's water testing
expenses by $1,328—increasing the total to $1,358.
ORDER NO. 36407 12

Company Reply
The Company did not object to Staff s recommendation on this matter.
Commission Decision
The Commission finds that the Staffs uncontested recommendation on this issue is
reasonable.
Management Administration & General("A&G")
Sta,ff Comments
The Company does not have any employees and instead relies on contracts with Esprit.
Because Esprit is a related party, Staff recommended that costs be reduced by the Commission's
standard of the lower of cost or market. For A&G Labor expense, Staff recommended using the
actual costs of the one employee performing management duties. This reduces A&G labor by
$31,395. In addition, Staff discovered that one of the payments for this employee was misclassified
in Contract Services—Professional, and therefore Staff recommended that an additional $3,168 be
removed from Contract Services.
Company Reply
The Company said that Staff did not include costs related to paying the Company's
accountant in this category. The Company thus proposed that Labor expense be reduced by
$15,750 instead of$31,395to reflect the accountant's compensation.
Commission Decision
The Commission has repeatedly asked the Company to better support its assertions on labor
expenses. Case No. SWS-W-23-02, Order No. 36816 at 7. With the record before us, the
Commission does not have enough information to find in the Company's favor currently. The
Commission finds Staffs recommendation is reasonable. We implore the Company and its related
entities to clearly identify, and separate costs associated with employees who work for multiple
related entities as part of their employment.
Customer Accounts Labor Expense
Staff Comments
Staff recommended using the actual costs for employee wages and then grossing up that
amount for payroll taxes. Then Staff recommended that 20% of that amount be allocated to the
sewer company because this employee also provides services for that related company. Therefore,
Staff recommends that Labor Customer Accounts should be reduced by $18,966.
ORDER NO. 36407 13

Company Reply
The Company challenged Staff s calculation of hourly wages, stating the position typically
worked 50-55 hours on a biweekly basis at $26/hour—with 80% allocated to water operations.
Including payroll taxes at $6.50/hour, the Company calculated annual costs at $35,490, which is
significantly higher than Staff s $18,966 estimate. The Company also noted the conflict with
Staff s request for extended office hours and after-hours coverage. The Company stated that if
after-hours coverage be approved that associated funding should be returned.
Commission Decision
The Commission finds that Staffs apportionment recommendation is appropriate.
However, the Commission does not believe that there is a conflict with this decision or a need to
allocate additional labor expenses to the Company. The Commission is not ordering the Company
staff the office for 40 hours a week—rather the Commission simply finds that charging customers
extra for services performed during what generally are typical business hours is unreasonable. The
Commission has concerns that an extra charge for calls made during typical business hours will
disincentivize customers to promptly report problems due to the punitive nature of extra charges
being applied to all non-office hours.Therefore,the Commission directs the Commission to charge
standard response rates for traditional office hours,even if it does not have the office staffed during
all typical business hours.
Operations &Maintenance ("O&M'9 Expense to Actuals
StaffComments
The Company contracts with a water operator for its O&M. To account for this change,
Staff recommended decreasing O&M by $68,335 and increasing the Contract Services —
Professional category by $24,430.
Company Reply
The Company's water operator retired in 2023. The Company hired Integrity Management
with initial monthly costs being estimated at $2,036. However, actual monthly costs averaged
$4,243. Therefore,the Company requested approval to raise O&M expenses for contract operators
by$26,486 yearly for contracted services based upon these actuals.
Commission Decision
We acknowledge that small water utilities often contract with a water operator for O&M
and those costs, when determined reasonable, are allowed for recovery. We agree with Staff that
ORDER NO. 36407 14

costs related to contracted O&M are properly accounted for in Contract Services. The Company
did not provide sufficient evidence to support the increased costs. For example, the Company
did not submit invoices justifying the increase in cost from Staff s position. The Company is
directed to book $24,430 in Contract Services — Professional category for the contracted O&M
expenses.
Tax Preparation,Miscellaneous, 7B Engineering, and Securities Issuance Application Fee
Staff Comments
Staff recommended that the Company remove the following from its proposed revenue
requirement: 1) $875 for an unintentionally included duplicate tax preparation expense; 2) $1,049
for interest on a loan that was required to be categorized as equity; 3) $5,800 for an expense that
was accidentally attributed to the related Sewer Company rather than Stoneridge; and 4) $320 for
a one-time securities issuance application fee.
Company Reply
The Company agreed with Staffs recommendation on these matters.
Commission Decision
The Commission finds Staff and the Company's recommendation on this matter is
reasonable.
Water Rights, Rights of Way, and Easement Leases
Staff Comments
As noted above, Stoneridge included $30,233 to lease water rights, rights-of-way, and
easements—assets that were previously considered contributed capital but were transferred to a
related entity. Staff opposed charging customers again for assets they have already funded. Staff
recommended returning these assets to Stoneridge and removing the lease expense from rates.
Staffs proposed adjustment would decrease rental expenses by $30,233.
Company Reply
The Company stated that the Commission does not have authority to order Esprit to transfer
property to Stoneridge and believed that Staff overlooked yearly lease increases. The Company
noted that the original $2,000 lease from 2020 increased 8% annually. The Company requested
reinstatement of$30,233 annual expenses.
ORDER NO. 36407 15

Commission Decision
The Commission cannot approve the Company's proposed expenses for leasing the water
rights while that transaction appears to be structured in a manner designed to deliver returns to
related entities at the expense of customers.
Stoneridge challenged the Commission's jurisdiction related to Esprit leasing these
necessary assets to the Company. The Company is required to ensure that it can offer and maintain
adequate service and the Commission is vested with the authority to regulate utilities to carry out
the "spirit and intent" of Idaho Code Title 61. Idaho Code §§ 61-302 and -501. The Commission
has serious concerns about the Company's access to water being compromised because it does not
own the necessary water rights, rights-of-way, and easements to meet its statutory requirements.
Further, the Idaho Code requires that all charges for public utility services be just and reasonable.
Idaho Code § 61-301.
Additionally, the Commission has a statutory duty to ensure utilities provide safe and
reliable service at fair,just, and reasonable rates.Idaho Code §§ 61-301 and-302. Contrary to the
Company's assertion regarding this adjustment, the Commission does have authority to deny
recovery for costs that the Commission finds to be unreasonable. It is the Company's burden to
demonstrate that these assets should not be treated as contributed capital under the Commission's
Policies and Presumptions for Small Water Companies, IDAPA 31.36.01.102. Even, if the
Company could demonstrate that these assets should not be considered as contributed capital,
which it has not in this record, it further has not demonstrated that the lease rate it is charging for
these assets is the lesser of market or actual cost. The Commission does not believe that costs for
leasing these assets back to the Company are fair,just, or reasonable or prudent. Therefore, the
Commission rejects the Company's proposed rental expense.
Replacement Pump and for Well No. 3
Staff Comments
Staff recommended that the Commission disallow recovery of the replacement well pump
for Well No. 3 because the pump did not work as intended. Staff also objected to the Company
leasing the pump from Esprit—particularly for $1,200 per month for five years (equivalent to
approximately 12.5%interest per year). Staff also objected to the Company's refusal to allow Staff
access to Esprit's records pursuant to Idaho Code § 61-610. Staff advocated for the lower of actual
ORDER NO. 36407 16

or market since this was a related parry transaction and stated none of the interest on the lease with
Esprit should be recoverable in rates.
Company Rely
The Company explained why the pump/motor was not functional for the timeframe in
question and proposed and proposed leasing the pump/motor from Esprit at $1,040 per month—
or equivalent to approximately 11% interest per year.
Commission Decision
The Commission denies any recovery under the lease agreement with Esprit for the same
rationale the Commission has repeatedly discussed in this Order regarding the Company's other
lease agreements with Esprit. We must also remind the Company that Staff has a statutory right to
review the records of any parent company related party that engages in a direct transaction with
the Company under Idaho Code § 61-610. The Company's refusal to be transparent in this regard
is a sufficient reason to deny recovery for any costs that have any material connection to Esprit
because the Company has not provided sufficient evidence demonstrating the costs is the lower of
market or actual cost. Further,the Commission denies the Company's request for recovery for this
equipment which does not yet appear to be used and useful.
Truck/UTV Lease
Staff Comments
Stoneridge leases various vehicles from Esprit. Customers are being charged for
Stoneridge's use of a Ford F-150, Ford Ranger, Kubota UTV, backhoe, and associated licensing
and fuel costs for each of these vehicles. Because the Company only has one employee, Staff
believed that the lease agreement for the second truck was imprudent. Further, Staff noted the
Company does not have a qualified employee for the backhoe; therefore, Staff suggested it should
only be rented as necessary and not leased.5 Staff recommended that the Rentals — Property &
Equipment be reduced by $14,663 accordingly.
Company Reply
The Company defended including the backhoe and Ford Ranger expenses in its operating
expenses. The Company stated that it has operators and that daily backhoe rentals would cost$340
plus tax per occurrence. The Company stated that such charges would occur frequently—largely
5 Regarding potential rentals from Esprit,as noted above,the standard when dealing with a related entity is the lower
of market or actual cost.
ORDER NO. 36407 17

due to snow removal—and thus removing the costs from rates could be imprudent for customers.
The Company requested reinstatement of the $7,200 annual lease,including licenses and fuel. The
Company argued that having equipment on-site enabled faster response times.
Commission Decision
The record is does not justify raising customers' rates on this issue. Before recovery of
costs related to the backhoe can be approved, the Commission would require more robust
documentation in the record, including whether the Company had a licensed backhoe operator or
someone willing to become certified and that the desired recovery was the most reasonable and
cost-effective way to accomplish the work a backhoe is needed for. To adequately determine this,
it would also be helpful to know the number of rental days that the Company expects each year.
Without the necessary documentation in the record, we are required to disallow this expense by
reducing Rentals—Property & Equipment by $14,663.
Rental of Property
Staff Comments
Stoneridge shares office space with the Sewer Company but covers the entire cost of
renting that space. Staff recommended that the cost be shared equally, and that Stoneridge's rental
expenses be reduced by$13,614 accordingly.
Company Reply
The Company stated that Staff misinterpreted the office lease terms. The Company uses
parts of two spaces: an event center and sales office. The lease, starting January 2020, increased
8% annually. According to the Company, Staff incorrectly assumed the amount covered both
Stoneridge Water and the sewer company. However, the $27,228 expense solely belonged to
Stoneridge's operations. Stoneridge stated that the division of rent for the shared spaces was based
on revenue proportions.Accordingly,the Company requested the office lease amount be increased
to $27,228.
Commission Decision
The Commission finds Staff s recommendation is reasonable because the record does not
justify raising the customers' rates on this issue.Before recovery for costs related to property rental
are approved the Commission needs sufficient documentation to support the reasonableness of the
Company's position. Accordingly, the Company's rental expenses are reduced by $13,614.
ORDER NO. 36407 18

Insurance Expense
Staff Comments
Stoneridge requested its own$9,000 policy instead of being included in the umbrella policy
that covers several related entities. Currently, Stoneridge pays $7,000 of a $29,839 umbrella
policy. Staff disagrees with the Company's request to have its own more expensive policy and the
amount it is paying on the umbrella policy. Staff also believes that the insurance expense listed in
the Company's filing of$432 (as derived by the test year expense) is too low.
Staff suggested that the most reasonable option is splitting the umbrella policy cost equally
among six covered entities—raising Stoneridge's share of the umbrella policy from the test year's
$432 to one sixth of the cost of the umbrella policy—or $4,973. This adjustment increases
insurance expenses by $4,973.
Company Reply
The Company stated that Staff confused the monthly insurance fee of$432 with the yearly
insurance fee—which is $5,184($432 multiplied by 12 months). The Company also explained that
workers' compensation remained under Idaho's state program. The Company also stated that Staff
divided Esprit's premium among six entities without considering the water supplier's higher risks
and that some of the companies covered under the umbrella policy are inactive shell companies.
The Company was provided with a standalone insurance policy of $9,000 to cover Stoneridge
alone. The Company explained that Esprit's previous insurer is withdrawing from the market and
Esprit will need new coverage. The Company stated that it was reluctant to have the Company
"take advantage of Esprit's resources without adequate compensation." Reply Comments at 43.
The Company stated that, in accordance with its broker's advice, it planned on adopting the
standalone policy in 2025 for Stoneridge at a cost of$9,000.
Commission Decision
The record does not justify raising the customers' rates due to the Company wanting to
seek independent insurance for Stoneridge. Like with many other adjustments discussed in this
Order,the Commission finds it imprudent to charge customers extra for insurance when the record
does not sufficiently support the need for the Company to a standalone policy. If the Company
believes that it should pay a higher percentage of the umbrella policy, it should also support that
claim with sufficient documentation on the record. The Company shall increase insurance
expenses by $4,973 to account for its fair share of the umbrella policy.
ORDER NO. 36407 19

As noted previously,when dealing with related party transactions,the standard is the lower
of the actual cost or the market rate. Boise Water Corp., 97 Idaho at 837-38. The fact that the
Company(i.e. Stoneridge) itself is complaining that Stoneridge is not providing enough money to
Esprit suggests that the Company's duties to its customers have been compromised.
Rate Case Expenses
Company Position
The Company proposed several categories of general rate case expenses including
attorneys' fees and years' worth of preparation for this rate case.
Commission Decision
The Commission approves the Company's request for $12,665 in attorney's fees. The
recovery for these attorney's fees shall be amortized over a three-year period. The Commission
does not approve the Company's other rate case expenses. Recovery for expenses due to
employees' labor has already been accounted for in other adjustments.
Working Capital
StaffComments
Using the 1/8th method(dividing annual operating expenses by eight), Staff recommended
a working capital allowance of$32,107 for the Company.
Company Reply
The Company believed that this recommendation was appropriate providing that it
incorporated the Company's updated income and expense ratio.
Commission Decision
The Commission finds the 1/8th method for working capital is reasonable.
The Gross Up and Associated Error Correction
Staff 's November 6, 2024, Motion and Accompanying Decision Memorandum
On November 6, 2024, Staff filed the motion described above informing the Commission
of a calculation error in the record, correcting the error, and requesting a deadline for the Company
to comment on the calculation error. Staff stated that correcting this error, and the underlying
categories affected by it, would reduce Staffs proposed revenue requirement by $21,682 to
$271,113—effectively reducing Staff s 27.1% proposed increase to 17.6%. Staff stated that this
correction did not include any new adjustments, but instead corrects the gross calculation. Staff
stated that the Intervenors were supportive of Staffs proposed path forward.
ORDER NO. 36407 20

Staff noted that the Company also adopted the error in its model which it relied on in
creating its reply comments. Staff stated that fixing this same error in the Company's model would
reduce its proposed revenue requirement by $26,646 to $450,546effectively reducing the
Company's proposed increase from 124.3%to 111.7%.
The Company's November 13, 2024, Supplemental Comments
The Company did not assert that the overall model was incorrect. However, the Company
did state that,with the correction of the error incorporated, Staff s proposed increase was even less
than inflation since the last rate case—only 1%per year. The Company estimated that$2,000,000
to $3,000,000 needs to be invested in the system over the next 10-15 years and argued that this,
coupled with regulatory lag, placed the Company in a predicament that rate cases are meant to
avoid.
The Company also stated that it had discovered an additional error in the data relied upon
by Staff and the Company. This error arose from the information provided in the Company's
Application. The Company stated that correcting this error would reduce the Company's request
to a 79.7%increase. The Company provided a table with certain adjustments. The Company asked
that the Commission consider the general length of rate cases. The Company also asked the
Commission to consider that the approved rate would need to be sufficient to attract capital so that
sufficient investments could be made to ensure the delivery of quality water to its customers. The
Company requested that its proposed changes be implemented.
Commission Decision
The Commission previously authorized Staff and the Company to update their positions on
the record based on the error discovered in the model. The Commission now clarifies that the
method on that issue is hereby approved. While the mathematical error has been fixed, no party
has argued that the previous error presents a continuing problem in the method used in this case.
The Commission notes that the Company's argument regarding inflation is misplaced in
that we only sought the Company's response to the discovery of a calculation error in the model.
There is no law or other requirement that rates need to outpace inflation and neither the Idaho
Legislature nor the Idaho Supreme Court has directed that inflation is a metric we must consider
in setting rates. We are charged with ensuring rates are fair,just, and reasonable so that utilities
can operate safely and reliably. The Company can recover its prudently incurred expenses that it
tenders to provide safe and reliable service. It is incumbent upon the utility seeking recovery of
ORDER NO. 36407 21

such expenses to present its case in such a manner that demonstrates the expenses were incurred
prudently.
The Company also discussed another potential error. The Commission appreciates the
Company noting this matter—particularly given the potential for such an error to reduce the
Company's request. However, the record does not contain sufficient evidence about this matter.
The Commission limits its decision on this matter to those comments that are "narrowly tailored
to addressing the correction" at issue in Order No. 36389. Order No. 36389 at 3.
Return On Equity and Capital Structure
Staff Comments
Staff noted that an 11% ROE is typical for small water rate cases, and that the Company
has asked for a 12% ROE. However, due to management issues discussed above, Staff
recommended that the Commission approve a 10%ROE until the Company's management issues
have been addressed. Staff noted that, in the past, the Commission ordered a lower interim ROE
for a different company until their management issues were addressed. See Order No. 30279, Case
No. SPL-W-06-01. Staff discussed the components of the Company's capital structure.Based upon
Staffs recommended 10% ROE applied to the Company's 2% cost of debt, Staff recommended
an 8.21% overall rate of return.
Company Reply
The Company stated that Staff s proposed reduction, from the typical 11% ROE to a 10%
ROE, was based on a flawed understanding of the facts. The Company therefore requested a 11%
ROE. The Company also supported Staffs calculation of its capital structure if it included an
additional $194,326 of equity and an 11% ROE.
Commission Decision
The Commission shares Staffs concerns about the management of this Company and the
lack of documentation and justification for related parry transactions amongst other issues. The
Commission hereby finds that Staff s proposed capital structure and a 10% ROE with a
commensurate rate of return and revenue requirement is reasonable.
Rate Design
Staff Comments
Staff considered the Company's proposed alternative rate structures—such as higher
commodity charges to promote conservation. However, Staff believed that this could destabilize
ORDER NO. 36407 22

revenue—especially given uncertainty about golf course usage going forward. Staff discussed
tiered pricing (with rates increasing at higher consumption levels) with the Company. While
supporting conservation goals, Staff did not believe that this approach was feasible since winter
meter readings are not collected. Staff suggested revisiting the idea of tiered rates once year-round
consumption data becomes available or alternatively establishing seasonal rates to account for the
months when meters are not read. Staff proposed using the Company's rate design but applying
Staff s revenue requirement. This would lead to an increase for most meter sizes of about 24%.
Company Reply
The Company stated that it had reviewed Staffs rate design and intended "to wait until
Staff has an opportunity to review the proposed changes from the Company to Revenue and
Expenses to update the proposed prices for service." Reply Comments at 49. For the time being,
the Company proposed a 124.27% increase in commodity charges and rate base.
Commission Decision
The Commission finds that using the Company's rate design with Staff s proposed revenue
requirement (updated to fix the mathematical error discussed above) is reasonable. Tiered rates
may be brought before the Commission in a later case with a record that can support a Commission
finding on the matter.
Treatment of Service Connections with 1-inch meters
Staff Comments
Currently, customers with 3/4-inch and 1-inch meters pay identical monthly charges of
$24.00. Previous Commission orders authorized this approach when 1-inch meters were less
expensive to install. The Company now wants to charge higher fixed rates for new 1-inch meter
customers. Staff opposed this change; it would charge a premium to customers who would likely
have been provided with 3/4-inch meters but for the Company's request to instead install 1-inch
meters. Staff is also concerned that this proposal could increase charges for all 1-inch meter
customers due to the Commission's prohibition of discriminatory rates for similarly situated
customers. Additionally, Staff found one customer is paying $82.44 monthly for a 1-inch meter
violating the Company's tariff. Staff recommended maintaining uniform charges for both 3/4-inch
and 1-inch meter sizes and correcting the individual customer's overcharge.
ORDER NO. 36407 23

Company RW1
The Company stated that Staff has become obsessive over this issue and has repeated
concerns about 1-inch meter billing practices. The Company stated that due to supply chain issues
and economics, the Company installed 1-inch meters for some connections but billed them at 3/4-
inch rates. The Company requested permission to offer 1-inch service at its own 1-inch service
rate for only those properties with the 1-inch meter who had associated additional demand
(including ADUs and larger irrigation needs)—not those customers who would have properly been
served by a 3/4-inch meter who had a less expensive 1-inch meter installed. The Company stated
that Staff was concerned that certain customers (those with a 1-inch meter who are currently being
charged at 3/4-inch meter rates) would be charged the higher 1-inch meter price. The Company
stated that this was an unsubstantiated and harmful assumption that was not feasible with the
Company's billing software. The Company maintained its request to charge higher rates for 1-inch
meters based on capacity needs.
The Company noted that one uniquely situated customer paid $82.44 monthly through a
special and individualized agreement with that customer. The Company stated that Staff
recommended changing this rate. The Company defended maintaining the rate because it stated
the rate was based on an individually established arrangement that had been reviewed by the
HOA/customer and accepted by all parties.
Commission Decision
The Commission finds that Staff s recommendation is the most reasonable and appropriate
given the circumstances. The Company desired to install 1-inch meters because it was more cost
effective. Customers should not pay a premium for the Company's convenience. The Commission
here finds that the Company may only charge 1-inch customers the approved 1-inch rate if the
customer requested or required that meter size for service. In the abstract, the Commission
understands the Company's desire to charge customers who would need a separate 1-inch meter
charge. However, the Commission does not have objective and sufficient documentation in the
record to support a separate 1-inch meter charge that is higher than the 3/4-inch meter charge.
The Company does not have the authority to make agreements that are not in accordance
with its Commission-approved tariff.6
6 See Idaho Code §§ 61-315 and 501. Specifically, Idaho Code § 61-315 states: "No public utility shall, as to
[classifications]make or grant any preference or advantage to any corporation or person or subject any corporation or
ORDER NO. 36407 24

The Happy Valley Rancho Loan Surcharge
Company Position
The Company requested that Staff provide an updated accounting specifying when the
Company needs to stop collecting the surcharge discussed in Exhibit N under Staff s proposed
tariff.
Commission Decision
The Commission notes that the Company is right to seek a solution on this issue and comply
with the Commission's mandates. However, the Commission does not currently have enough data
in the record to make a finding. The Commission also notes that it is the Company's responsibility
to maintain sufficient records on the matter and perform its own reconciliations of customer
accounts and loan balances. The Commission encourages the Company to continue to work with
Staff on the resolution of this matter.
The Proposed Tariff
StaffComments
Staff objected to adding or increasing charges for services provided outside of the
Company's limited office hours (10:00 a.m. to 2:00 p.m., Monday through Thursday) rather than
more standard business hours (8:00 a.m. to 5:00 p.m., Monday through Friday). Staff
recommended adopting standard business hours relative to service charges.7
The Company submitted a supplemental tariff with inconsistencies and duplicated
language from other utilities' documents. After discussion, the Company allowed Staff to revise
the proposed tariff using a standard template. This proposed tariff included portions of the
Company's proposed tariff but was updated with Staff s recommendations. Although it is atypical
for Staff to propose a tariff, Staff believed that it was appropriate in this case and recommended
that the Commission order the Company to submit a compliance filing that incorporated Staffs
suggestions. Some key differences between the Company's original tariff and Staffs proposed
tariff are highlighted in the table below.
person to any prejudice or disadvantage.No public utility shall establish or maintain any unreasonable difference. . .
as between localities or as between classes of service.The commission shall have the power to determine any question
of fact arising under this section."
The Commission is not mandating the Company staff its office outside of the hours it already does, only that the
nonrecurring charges be based on standard hours opposed to the Company's office hours.
ORDER NO. 36407 25

Company Reel
The Company revised its proposals in its reply comments which are highlighted in the table
below. Overall, the Company's requested proposals are more aligned with Staff s
recommendations than its original recommendations. However, the Company and Staff still differ
on the proposed Reconnection Charge for 31 days or more, the Call Out Charge, and the Field
Collection Trip Charge as emphasized below.
Non-Recurring ChaLes
Proposed Charges Company Staff Company Revised
Account Transfer $65 $0 NA
Account Initiation $0 $0 $0
Out of Cycle Meter $0 $0 $0
Read
Reconnection—30 days $50 during office hours $18.50 during business hours $18.50 during office
or less $80 after office hours $33.50 after business hours hours
$33.50 after office hours
Reconnection—31 days $50 during office hours 3 times the monthly customer 7 times the Monthly
or more $80 after office hours charge customer charge
Return Check $25 $20 $20
Late Payment 10% or$5 minimum 1%per month 1%per month
Certified Mail $20 $0 $0
Paper Statement Fee $10 $0 $0
Call Out $50/hour during office $0 $501hour during office
hours hours
$80/hour after office $80/hour after office
hours hours
Field Collection Trip $40 $0 $40
Bulk Water Sold to $100 $26.77 meter rental charge $26.77 meter rental
Contractors and consumption billed a charge and consumption
Schedule 1 usage charge billed a Schedule 1
usage charge
Construction Water Minimum monthly rate Schedule 1 minimum monthly Schedule 1 minimum
and commodity charges rate and commodity charges monthly rate and
during time of use. during time of use. commodity charges
during time of use.
Staff Comments at 26;Reply Comments at 59-60 (emphasis added).
Commission Decision
The Commission notes that the Staff and the Company now agree on all the Non-Recurring
Charges except the Reconnection — 31 days or more, Call Out, and the Field Collection Trip
ORDER NO. 36407 26

charges. The Commission finds that allowing the Company to charge a customer triple its monthly
charge for reconnections after 31 days is sufficient compensation for the Company. This
reconnection charge will also be appropriate deterrence for customers and should discourage them
from sporadically disconnecting and reconnecting without providing adequate compensation to
the Company. The Commission finds that payment for the Call Out Charge and Field Trip
Collection Charge are sufficiently embedded in rates to avoid the need for an additional charge.
The Commission also orders the Company to submit a compliance filing with Staff s
recommendations found in Staff s Attachment J, with the approved rates, within 30 days of the
issuance of this order. The Commission approves the following charges as seen in the table below.
We also note that the business hours for standard charges should be from 8 a.m. to 5 p.m. Monday
through Friday.
Non-Recurring Charges Commission Approval
Account Transfer $0
Account Initiation $0
Out of Cycle Meter Read $0
Reconnection—30 days or less $18.50 during business hours
$33.50 after business hours
Reconnection—31 days or more 3 times the monthly customer charge
Return Check $20
Late Payment 1% per month
Certified Mail $0
Paper Statement Fee $0
Call Out $0
Field Collection Trip $0
Bulk Water Sold to Contractors $26.77 meter rental charge and consumption
billed a Schedule 1 usage charge
Construction Water Schedule 1 minimum monthly rate and
commodity charges during time of use.
Compliance with Order No. 34391
Staff Comments
When Esprit acquired Stoneridge, the Commission required quarterly financial
statements, complaint reports, and monthly account balance updates. Though the Company was
initially slow in providing these items, the Company now files timely reports. Therefore, Staff
recommended ending these special reporting requirements, as these requirements have served
their purpose of monitoring post-acquisition stability.
ORDER NO. 36407 27

Commission Decision
The Commission finds that Staff and the Company's recommendation on this matter is
reasonable.
Intervenors' Joint Comments
The Intervenors submitted joint comments in this case. The Intervenors' stated that they
had reviewed Staffs Comments, and the discovery submitted in this case, and found Staffs
Comments to be thorough. The Intervenors' stated that, while a lower rate than the one proposed
by Staff would have been more beneficial, they thought that Staff s recommendation was "fair,
and reasonable." Intervenor Comments at 3 quoting Idaho Code § 61-502. The Intervenors
suggested that the Company also accept Staffs recommendation. The Intervenors also stated
incurring additional attorney's fees in this case was not justified and should be avoided.
Customer Comments
Written
Approximately 236 public customer comments have been filed in this case. The most
common topic was a general, but universal, sentiment against the Company's proposed increase.
Some of these comments noted that some increase was justifiable, but the Company's proposed
increase was unreasonably high. Nearly half requested that a forensic audit be performed on the
Company. There were also many comments expressing concerns over the Company's allegedly
questionable business practices, mismanagement, and the relationship between the Company and
related entities owned or controlled by the owner of the Company. Many of these concerns were
centered on the related entities getting preferential treatment. Specifically, many comments had
concerns related to the golf course in the area and how, with the recent construction of its own
well, its service would be incorporated into rate base with its decreased consumption.
Many of the comments were concerned about how the Company's proposed increase
would affect those on a fixed income—which represents a large portion of the community. Some
of the comments asked that an increase be phased in overtime to avoid rate shock. Concerns were
expressed over the infrastructure of the system,the systems' lack of back-up power in the event of
an outage, and the inability to fight fires during an outage. Some comments addressed the quality
of the water and requested testing.
ORDER NO. 36407 28

Customer Hearings
Two public customer hearings were held in the service territory one the evening of October
9, 2024, and one the morning of October 10, 2024. These hearings were well attended by
customers. The customers were uniformly opposed to the Company's proposed increase. Of note,
many customers expressed concerns about the allegedly high levels of chlorine in their drinking
water. Many testified that the drinking water tasted strongly of chlorine, smelled of chlorine, or
killed their plants. Several testified that they needed to purchase water filters to combat what they
asserted was high chlorine content in their drinking water. Several customers also noted that they
were concerned about the allegedly high iron levels in the system.
Many customers were also concerned about the sufficiency of the Company's backup
system during an electrical outage. Customers noted that a recent fire in the area had resulted in
an electrical outage which also resulted in a water system failure. The customers were highly
concerned over the potential of fire hydrants, and other water fixtures, not being able to work in a
future potential fire—thus endangering the customer's property and safety. Many customers were
also concerned about the low water pressure due to the gravity fed system.
Many customers expressed concerns about the integrity of Mr. Karupiah and his business
practices. Specifically, several customers expressed concerns about the relationship between the
Company and the related entities. Some customers expressed concerns that the owner was using
unmetered water fire hydrants for personal use and/or the use and benefit of his related entities.
Certain public officials came and testified that they had received numerous complaints
regarding the Company and heard several concerns about this case and the proposed increase.
Commission Decision
The Commission has reviewed the customers' written comments and believes that the
Company's rate increase incorporates the customers concerns regarding the scale and cost of the
increase.The customers' concerns about system reliability during a fire in the area is also discussed
above. We appreciate the customer comments—both written and received through the customer
hearings. Regarding the specific issue of the water tasting of chlorine, the Commission directs
Staff to bring this issue to the attention of the IDEQif such a directive has not already been
carried out.
ORDER NO. 36407 29

COMMISSION DISCUSSION AND FINDINGS
The Commission has jurisdiction over the Company and the issues in this case under Title
61 of the Idaho Code. Specifically, the Commission regulates "public utilities," including "water
corporations" that serve the public or some portion thereof for compensation. See Idaho Code §§
61-125, -129, and -501. The Commission, upon finding that the rates charged by a public utility
are". . .are insufficient. . . shall determine the just,reasonable or sufficient rates . . .to be thereafter
observed and in force and shall fix the same by order . . . ."Idaho Code § 61-502.
In a general rate case,the Company's intrastate revenue requirement,and every component
of it, both rate base and expense, are at issue. IDAPA 31.01.01.124.01. The Commission may
grant, deny, or modify the revenue requirement requested and may find a revenue requirement
different from that proposed by any party is just, fair, and reasonable. Id. The Company's retail
rates and charges, both recurring and non-recurring, are at issue, and every component of every
existing and proposed rate and charge is at issue. IDAPA 31.01.01.124.02. The Commission may
approve, reject, or modify the rates and charges proposed and may find that rates and charges
different from those proposed by any party are just, fair, and reasonable.Id.
Based on the record before us, the Commission here approves an 18.6% increase in the
Company's general rates. This is based upon a total revenue requirement of$273,258, a rate base
of $264,515, a required rate of return at 8.21%, and a 10% ROE. Relatedly, the Commission
approves the adjustments that comprise these determinations as found in Exhibits 1, 2, and 3. The
Commission also affirms its decisions discussed above.
As a general matter the Commission will note that Staff, the Intervenors, and numerous
customers expressed serious concerns about the Company's business practices—particularly
around the Company's dealings with related entities. It should be noted that Commission had three
categories of concerns that had general applicability across several areas.
First, the Commission believes that it is necessary to reiterate what we stated in Case No.
SWS-W-23-02, Order No. 36816: "If the Company believes the [approved rate] is too low, we
remind the Company it is the Company's—not Staffs or the Commission's—responsibility to
support its proposed increases with accurate, itemized and verifiable cost information."Order No.
36816 at 7. In this case, the Company again failed to provide sufficient information to justify
several of the expenditures it may have otherwise been allowed to recover. The Commission must
ORDER NO. 36407 30

base its decision on the record before it and if the record does not support the Company's position,
we cannot grant the requested relief.
Second, the Commission notes that Staff, the Intervenors, and numerous customers
expressed concerns about the Company's relationship with related entities. The Company
suggested that Staff made recommendations outside of the Commission's jurisdiction and treated
the Company's relations with these related entities in an inconsistent matter. Specifically, the
Company argued Staff accepted the benefits available to the Company's customers from related
entities but rejected additional costs as imprudent. The Commission notes that rate making and
prudence determinations are a tenant of its statutory duties. Choosing to charge customers a
premium when the Company could seek market-based transactions which would benefit customers
is a choice made by the Company and its related entities. Absent supported documentation on the
record, we will not allow exaggerated costs to be passed to customers. Unsupported related entity
transactions are not prudent, and it is not beyond our decision-making authority to scrutinize them
or disallow recovery. While the Commission will make its own determinations,when determining
the prudence of related party transactions, it is routine for Staff to recommend that customers
should be able to utilize the benefits of such relationships where available but not be subject to
excessive charges. The Commission's standard for recovery for a related party transaction is the
lessor of the actual cost or the market rate. Boise Water Corp., 97 Idaho at 837. The Commission
believes that decisions in this case are consistent with the intent and spirit of the Boise Water
decision and our past decisions.
The Supreme Court also noted that "[c]harges arising out of intercompany relationships
between affiliated companies should be scrutinized with care . . . and if there is an absence of data
and information from which the reasonableness and propriety of the services rendered and the
reasonable cost of rendering such services can be ascertained by the commission, allowance is
properly refused."Boise Water Corp., 97 Idaho at 837, citing Solar Electric Co. v. Pennsylvania
PUC, 137 Pa.Super. 325, 9 A.2d 447, 473 (1939). Frankly, the Company's relationships with its
related entities have clearly demonstrated the need for this additional scrutiny. The Company's
argument that it is"[taking] advantage of Esprit's resources without adequate compensation"is an
illustration that Stoneridge does not understand its duties to serve customers at fair, just, and
reasonable rates over its relationship with related entities. Reply Comments at 43. We expect
Stoneridge to seek the best deals for its customers; its unsubstantiated complaint that it is not
ORDER NO. 36407 31

paying more illustrates the problems of these related party transactions. If the Company feels that
the Commission is not treating these related party transactions like regular arms-length
transactions, it is incumbent upon the Company to demonstrate that the transactions are fair,just,
and reasonable when compared to the broader market.
Third, it is the Company's burden to provide sufficient evidence to justify its request rate
increase. In many instances the Company has failed to provide sufficient evidence to justify the
expenses it seeks recovery of now. Can the Company remedy this looking forward? Possibly
depending upon the quality of evidence it submits. The decision made in this case relates to the
record before the Commission.
ORDER
IT IS HEREBY ORDERED that the Commission here approves an 18.6% increase in the
Company's general rate. This is based upon a total revenue requirement of 273,258, a rate base of
$264,515, a required rate of return at 8.21%, and a 10% ROE.
IT IS FURTHER ORDERED that the Commission here adopts all Endings and approvals
made in the "Comments and Decisions" section above. Exhibits containing the adjustments and
other matters will follow issuance of this Order.
IT IS FURTHER ORDERED that the Company must file a Facilities Plan as described
above, within one-year of the issuance of this Order.
IT IS FURTHER ORDERED that the Company shall submit a compliance filing with
Staffs recommendations found in Staffs Attachment J, with the approved rates, within 30 days
of the issuance 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 about any matter
decided in this Order. Within seven (7) days after any person has petitioned for reconsideration,
any other person may cross-petition for reconsideration.Idaho Code § 61-626.
ORDER NO. 36407 32

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 29th day of
November 2024.
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ERIC ANDERSON, PRESIDENT
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R. HAMMOND JR., COMMISSIONER
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EDWARD LODGE, COM SIONER
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I:\Legal\WATER\SWS-W-24-01_rates\orders\S W S W2401_Final_md.docx
ORDER NO. 36407 33