20241205Staff Comments .pdf

RECEIVED
Thursday, December 5, 2024 3.48.29 PM
IDAHO PUBLIC
UTILITIES COMMISSION
MICHAEL DUVAL
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 11714
Street Address for Express Mail:
11331 W CHINDEN BLVD, BLDG 8, SUITE 201-A
BOISE, ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF CAPITOL )
WATER CORPORATION'S ) CASE NO. CAP-W-24-02
APPLICATION TO CHANGE ITS )
SCHEDULE NO. 3 PURCHASED )
POWER COST ADJUSTMENT RATE ) COMMENTS OF THE
COMMISSION STAFF
COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission
("Commission"), by and through its Attorney of record, Michael Duval, Deputy Attorney
General, submits the following comments.
BACKGROUND
On October 9, 2024, Capitol Water Corporation("Company") applied for authority to
change its Schedule No. 3 -Purchased Power Cost Adjustment ("PPCA")rate to recover the
electricity costs that exceeded what it collected in rates ("Application"). The Company
requested that the Application be processed by Modified Procedure and that the tariff changes
become effective by December 1, 2024.1
1 Because a final order the Company's pending general rate case(Case No. CAP-W-24-01)will provide information
that is necessary for Staff s analysis, Staff does not believe that a December 1,2024,effective date is feasible. Staff
communicated these concerns to the Company. Staff s general timeline for comment deadlines was also discussed
STAFF COMMENTS 1 DECEMBER 5, 2024

The Company stated that its base rates were approved in Commission Order No. 30762,
which established power consumption at 1,454,401 kilowatt-hours with a 5.190 average cost.
This created a benchmark of$75,483.41 "for determining the incremental cost of power used to
calculate the PPCA rate." Application at 1. While initially approving a three-year average, in
Case No. CAP-W-17-01, the Commission later adopted twelve-month power costs. In 2023,
actual costs reached $102,919, exceeding the base rate by $27,436 but falling $1,957 below
current PPCA recovery.
In its Application, the Company stated that it intended to adjust its PPCA rate from
4.51%to 4.21%. However, with possible base rate changes that may occur in December 2024
due to the Company's general rate case, the Company initially requested implementing new
PPCA rates simultaneously with the effective date of its new base rates.
STAFF ANALYSIS
Staff reviewed the Company's Application and supporting documents and determined
that actual power cost in 2023 was $102,919 and was $27,436 more than the $75,483 power cost
embedded in the Company's base revenue that was set in Order No. 30762. Staff recommends
the Commission approve Staff s proposed 3.34% PPCA rate, which is a 1.17% decrease from the
current PPCA rate of 4.51%with an effective date of January 1, 2025. This rate is conditioned
on whether Staffs recommended revenue in Case No. CAP-W-24-01 will be authorized by the
Commission. If the Commission authorizes a different revenue, Staff recommends the
Commission order the Company to submit a compliance filing to update the PPCA rate using the
authorized base rate revenue, and regardless of the rate that is authorized, order the Company to
file a conforming tariff with the approved PPCA rate.
In addition, Staff recommends the following:
1. The Company maintain a set deferral period using the calendar year, and the
Company work with Staff to determine a consistent filing deadline and collection
period each year moving forward;
2. The Company track the amount of PPCA revenue that is collected each month
starting January 1, 2025, and reported in the Company's PPCA filings each year;
with the Company—who raised no objection. Therefore,the Company is no longer requesting that the final order in
this case be issued on or about December 1,2024.
STAFF COMMENTS 2 DECEMBER 5, 2024

3. The Company track the amount of PPCA revenue collected for November and
December 2024, to facilitate the calculation of an adjustment due to the delay in the
effective date of this year's PPCA and work with Staff to calculate the adjustment to
the actual power cost in next year's filing to adjust for over collections;
4. The Company focus on Well No. 4 for the next cleaning and rehabilitation if the
leakage repair in 2024 does not rectify poor pump efficiency; and
5. The Company review its customer notices with Staff prior to submitting future PPCA
applications and send them to customers with sufficient time to allow them to file
comments for the case.
PPCA Methodology
In Order No. 33876, Case No. CAP-W-17-01, the Commission approved modifications to
simplify the PPCA methodology. The Company takes the difference between its actual annual
power expense with the power cost embedded in the Company's base rates that are authorized
during the annual deferral period. The difference or"true-up" amount is the amount the
Company needs to credit or surcharge customers so that customers pay no more or no less than
actual power cost and is used to calculate the PPCA rate. The PPCA rate is represented as a
percentage of the true-up amount relative to the amount of revenue embedded in base rates
authorized during the collection period. This allows the Company to apply the PPCA rate to the
base rate revenue charged to customers during the collection period—thereby collecting or
refunding the difference in power costs that occurred during the deferral period. Costs related to
late payment fees, franchise fees, or fees not related to the cost of delivered water are excluded
from the calculation.
Staff believes the accuracy of the true-up amount collected using this simplified method
depends on two assumptions: (1) The service territory and each consumer count must not
experience significant change, and(2) The annual deferral and collection periods must be
consistent from year to year.
In addition, the simplified method does not allow Staff to determine the prudence of the
Company's power cost, which is remedied by performing a trend analysis on the efficiency of its
well pumps as described below.
STAFF COMMENTS 3 DECEMBER 5, 2024

Revenue Stability
To ensure customers pay no more or no less than actual power cost for the deferral
period, the actual amount of base rate revenue collected during the collection period should be
close to the revenue assumed in base rates. This is because the Company's method does not
reconcile the true-up amount during the deferral period to actual PPCA rate collections. Staff
illustrates the potential effect by showing the amount of over- or under-collection that can occur
given differences in rate revenue collected compared to revenue assumed in base rates as
reflected in Table No. 1. For example, if the PPCA is 4% and the base rate revenue collected is
$854,408, which is 4%more than the base revenue assumed in the PPCA rate, an overcollection
of$1,314 would occur. In contrast, if the revenue collected is $788,684, 4% less than base
revenue assumed, the Company would under collect the same amount.
Table No. 1: Potential Effect of Collected Revenue and PPCA
Rate Revenue Difference
Collected from Base PPCA 1% PPCA 2% PPCA 3% PPCA 4% PPCA 5%
Revenue
$ 870,839 6.00% (493) (986) (1,479) (1,972) (2,465)
$854,408 4.00% (329) (657) (986) (1,314) (1,643)
$ 837,977 2.00% (164) (329) (493) (657) (822)
$ 821,546 0.00% - - - - -
Base Revenue
$ 805,115 -2.00% 164 329 493 657 822
$ 788,684 -4.00% 329 657 986 1,314 1,643
$ 772,253 -6.00% 493 986 1,479 1,972 2,465
Because of the potential for the over or under collections, Staff recommends the
Company track the amount of PPCA revenue that is collected each month starting January 1,
2025, and reported in the Company's annual PPCA filings each to determine if an adjustment is
warranted.
STAFF COMMENTS 4 DECEMBER 5, 2024

Consistent Deferral and Collection Periods
Staff believes it is important that the deferral and collection periods remain the same each
year. This will remove any inaccuracies that would occur due to varying time windows. Staff
recommends that the Company maintain the calendar year as the deferral period and it work with
Staff to determine a consistent filing deadline and collection period each year moving forward.
The Company filed last year's PPCA rate update on September 1, 2023, with an effective
date of November 15, 2023. In this case, to coincide with the timing of a final order in its
general rate case, Case No. CAP-W-24-01, the Company filed for an effective date"on or about
December 1 [2024]." Application at 3. Staff understands the Company's rationale because to
calculate the new rate for the upcoming collection period, it requires an authorized amount of
revenue to calculate the updated PPCA rate. However, this could result in an additional month of
collections at the current 4.51%PPCA rate.
Because of the uncertainty when the authorized revenue from the general rate case would
be available to calculate the new rate, Staff met with the Company and agreed to delay the
effective date to January 1, 2025. However, this will cause an overcollection to occur due to the
delays and the use of incorrect PPCA rates. Staff recommends the Company work with Staff to
determine an appropriate method to determine an adjustment for the difference in next year's
PPCA filing. In addition, Staff recommends that the Company track the amount of PPCA
revenue collected for November and December 2024, to facilitate the calculation of an
adjustment.
PPCA Calculation
Staff calculated the new PPCA rate to be 3.34%, assuming that Staff s recommended
revenue and embedded power cost is approved by the Commission in Case No. CAP-W-24-01.
This results in a 1.17%reduction relative to the current 4.51%PPCA rate. Under the old rate,
the Company would have collected about $37,048 from the surcharge during the 2025 collection
period. Under the new rate, customers will be surcharged about $27,346 during the same period,
resulting in $9,616 less revenue. The new rate is a result of actual power cost of$102,919
compared to $75,483 of power costs embedded in base rates during the 2023 deferral period.
Staffs calculations are illustrated in Table No. 2 below.
STAFF COMMENTS 5 DECEMBER 5, 2024

Table No. 2: PPCA Calculation
No. Category Value Calculation
1 Base Revenue in Case No. CAP-W-24-01 $821,546 -
2 Actual Power Cost from 2023 $102,919 -
3 Power Cost Embedded in 2023 Base Revenue $75,483 -
4 Incremental Cost $27,436 Line 2—Line 3
5 PPCA Required 3.34% Line 4/Line 1
6 Current PPCA 4.51% -
7 Incremental Change in PPCA -1.17% Line 5—Line 6
8 Incremental Revenue Produced by required PPCA $27,436 Line 5 x Line 1
9 Incremental Revenue Produced by Current PPCA $37,052 Line 6 x Line 1
10 Increase or (Decrease) from Current Charges -$9,616 Line 8—Line 9
Rate Impact
With the new PPCA rate, the monthly bill for an unmetered customer with a 3/4-inch
service line would decrease by $0.182 for May through September and decrease by $0.083 in all
other months. This calculation is based on the current base rate and current PPCA rate of 4.51%,
and the base rate from the pending general rate case, CAP-W-24-01 and the proposed 3.34%
PPCA rate in this case. For customers with other sizes of service line, the monthly bills will be
decreased using the same calculation methodology.
For metered customers, the customer bills will slightly decrease as well and the impact
will vary with the service line size and water usage volume. These bill calculations exclude
other recurring charges such as franchise taxes and Idaho Department of Environmental Quality
fees.
Again, this calculation assumes that the Staff s proposed tariff rate recommendation in
Case No. CAP-W-24-01 is approved by the Commission.
2$0.18 = ($12.65 + $16.05) x 4.51%- ($14.70 + $18.70) x 3.34%
3 $0.08 = $12.65x4.51%-$14.70x3.34%
STAFF COMMENTS 6 DECEMBER 5, 2024

System Efficiency
Staff investigated the pump efficiency of each well, defined as annual water production
measured in gallons ("gal") divided by annual power consumption measured in kilowatt-hours
("kWh") for the last three years to ensure that the power costs have been incurred prudently as
shown in Table No. 3. Based on its investigation, Staff recommends that Well No. 4 require
rehabilitation work, if the recent bearing failure was not the cause of the drop in efficiency.
Table No. 3: Pump Efficiency in Each Well for Last Three Years
Pump Efficiency Well No. 3 Well No. 4 Well No. 5 Well No. 6 Well No. 7
[gal/kWh]
2021 320.10 498.33 496.15 513.67 729.75
2022 286.54 425.98 336.32 514.48 704.33
2023 278.82 361.45 399.47 535.88 696.57
Pump efficiency typically decreases with usage due to the clogging of screens. However,
in early spring of 2023, the Company cleaned and rehabilitated Well No. 5, as noted in Case No.
CAP-W-24-01. Pump efficiency in Well No. 5 increased from 336.32 [gal/kWh] to 399.47
[gal/kWh].
Through Staff s analysis in this case, it found that a significant and consistent decrease in
the pump efficiency of Well No. 4. However, the pump efficiency Staff calculated may not be
representative of actual pump efficiency. Electricity for this pump included about 1,080 kWh to
3,160 kWh of fixed power for lighting and metering equipment each month over the whole year
but Well No. 4 only produced water during the summer months from June through October.
STAFF COMMENTS 7 DECEMBER 5, 2024

600.0 —
500.0
L
_ 400.0
m
U
u
c 300.0
v
u
L
w
r 200.0
a ❑2021
100.0 p 2022
®2023
July August September
Figure No. 1: Pump Efficiency of Well No. 4 in Summer Season From 2021 Through 2023
To more accurately analyze the pump efficiency of Well No. 4, and reduce the effect of
fixed power usage, Staff investigated the pump efficiency when water production was high(e.g.,
July, August, and September). Even though the power consumption in these months also have
fixed power consumption, the power consumption for the pump's operation is much higher with
high water demand. Staff believes the pump efficiency is more accurate by minimizing the
effect of fixed power consumption. Figure No. 1 presents the pump efficiency in Well No. 4 for
June, July, and August over the last three years. It shows that efficiency decreased by 10 to 15%
over three years.
However, the pump bearings in Well No. 4 were repaired due to leakage in 2024. Staff is
not sure whether the leakage was the cause for the efficiency to decrease. Thus, Staff
recommends the Company observe the efficiency of Well No. 4. If the efficiency continues to
decrease, it should be cleaned and rehabilitated.
CUSTOMER NOTICE AND PRESS RELEASE
The Company's press release and customer notice were included with its Application,
which was filed on October 9, 2024. Staff reviewed both documents and determined they do not
meet the requirements of Rule 125 of the Commission's Rules of Procedure. See IDAPA
31.01.01.125. The notice and press release do not make it clear that this is a proposed decrease
STAFF COMMENTS 8 DECEMBER 5, 2024

and available for public review as required by Rule 125.0l.c. In addition, neither notice
mentions the option to subscribe to the RSS feed as required by Rule 125.0l.d.
The press release was sent to The Idaho Statesman and the Idaho Business Review
newspapers on 10/15/2024. The customer notice is scheduled to be included with bills mailed to
customers beginning December 1, 2024. This will not provide customers with a reasonable
opportunity to file timely comments with the Commission by the December 5, 2025, comment
deadline. Because the PPCA results in a reduction for customers, it is less likely that customers
will object to the proposed changes. However, customers should have the opportunity to file
comments and have those comments considered by the Commission. Staff recommends that the
Commission consider late filed comments from customers. As of December 5, 2024, no
comments have been filed.
STAFF RECOMMENDATION
Staff recommends the Commission approve Staff s proposed 3.34%PPCA rate, with an
effective date of January 1, 2025, conditioned on whether Staffs recommended revenue in Case
No. CAP-W-24-01 is authorized by the Commission. If the Commission authorizes a different
revenue, Staff recommends the Commission order the Company to submit a compliance filing to
update the PPCA rate using the authorized base rate revenue, and regardless of the rate that is
authorized, the Company file a conforming tariff with the approved PPCA rate.
Staff also recommends the Commission direct the Company to:
1. Maintain a set deferral period using the calendar year, and the Company work with
Staff to determine a consistent filing deadline and collection period each year moving
forward;
2. Track the amount of PPCA revenue that is collected each month starting January 1,
2025, and reported in the Company's PPCA filings each year;
3. Track the amount of PPCA revenue collected for November and December 2024, to
facilitate the calculation of an adjustment due to the delay in the effective date of this
year's PPCA and work with Staff to calculate an adjustment to the actual power cost
in next year's filing to adjust for over collections;
4. Focus on Well No. 4 for the next cleaning and rehabilitation, if the leakage repair in
2024 did not rectify poor pump efficiency; and
STAFF COMMENTS 9 DECEMBER 5, 2024

5. Review its customer notices with Staff prior to submitting future PPCA applications
and send them with sufficient time to allow customers to file comments for the case.
Respectfully submitted this 5th day of December 2024.
Michael Duval
Deputy Attorney General
Technical Staff: Seungjae Lee
Leena Gilman
Jolene Bossard
1:\Utility\UMISC\COMMENTS\CAP-W-24-02 Conunents.doex
STAFF COMMENTS 10 DECEMBER 5, 2024

CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS DAY OF DECEMBER 2024,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF , IN CASE
NO. CAP-W-24-02, BY E-MAILING A COPY THEREOF, TO THE FOLLOWING:
ROBERT PRICE
PRESIDENT
CAPITOL WATER CORP
2626 ELDORADO
BOISE ID 83704
E-MAIL: infokcapitolwatercorp.com
PATRICIA JORDAN, SE ETARY
CERTIFICATE OF SERVICE