20241230Final_Order_No_36437.pdf

Office of the Secretary
Service Date
December 30,2024
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF CAPITOL WATER ) CASE NO. CAP-W-24-02
CORPORATION'S APPLICATION TO )
CHANGE ITS SCHEDULE NO. 3 )
PURCHASED POWER COST ADJUSTMENT ) ORDER NO. 36437
RATE )
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 2023
electricity costs that exceeded what it collected in rates that year ("Application"). The Company
filed supporting documents concurrent with its Application and requested that the Application be
processed by Modified Procedure and that the tariff changes become effective by December 1,
2024.1
On November 13, 2024, the Commission issued a Notice of Application and Notice of
Modified Procedure. Order No. 36391. Commission Staff("Staff") filed comments to which the
Company replied. No other comments were received.
Having reviewed the record, the Commission now issues this Order approving new PPCA
rates, effective January 1, 2025.
THE APPLICATION
The Company stated that its base rates were approved in Commission Order No. 30762,
which established power consumption at 1,454,401 kilowatt-hours ("kWh") with an average cost
of 5.190 per kWh. 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 12-month power costs. In
2023, actual power costs reached $102,919, exceeding the amount collected through embedded
base rates by$27,436 but falling $1,957 below current PPCA recovery.
The Company stated that it intended to adjust its PPCA rate from 4.51% to 4.21% (based
on the Company's rates as of the filing of its Application). However, with possible rate changes
' Because a final order in the Company's pending general rate case (Case No. CAP-W-24-01)provided information
that was necessary for Staff's analysis, it was not feasible for a final order to be issued in this case by December 1,
2024. Staff communicated these concerns to the Company. Staff's general timeline for comment deadlines was also
discussed with the Company—which raised no objection.
ORDER NO. 36437 1

that may occur in December 2024 due to the Company's general rate case (Case No. CAP-W-24-
01),the Company(initially)requested implementing new PPCA rates simultaneously with the new
rates established in the general rate case. The revised rate would divide the $27,436 incremental
costs by the new base revenue established in Case No. CAP-W-24-01. The Company planned to
notify customers of its proposal in November 2024 through bills and newspaper releases.
The Company stated that its system relies on seven wells. Well No. 1 remains on standby,
and Well No. 2 is inoperative. Well Nos. 3 and 6 serve summer needs, with Well No. 6 handling
Aquifer Storage Recovery("ASR").Well Nos. 5 and 7 provided year-round service with Well No.
7 also serving as the source for the ASR well (Well No. 6). Well No. 4 maintains summer standby
status and does not typically run during winter months. Daily monitoring ensured efficient
operations.
STAFF COMMENTS
After examining the Application, Staff agreed that 2023 power costs exceeded embedded
costs by $27,436. Staff recommended reducing the PPCA rate from 4.51% to 3.34%, effective
January 1, 2025. This recommendation depended on revenue approvals in Case No. CAP-W-24-
01. Staff suggested requiring a compliance filing if different revenue was authorized, plus
submission of an updated tariff reflecting approved rates.
PPCA Methodology
Staff stated that the Commission had approved methodology modifications to simplify the
PPCA in 2017 in Order No. 33876. The new process involves comparing actual annual power cost
expenses to those collected through embedded base rates during the annual deferral period and
creating a true-up amount based on the difference. This true-up amount represents what needs to
be credited or surcharged so customers pay actual power costs. The PPCA rate expresses this
difference as a percentage of base rate revenue relative to the revenues the Company collects
through embedded base rates.
Revenue Stability
Staff explained that accurate cost recovery required actual revenue to closely match
assumed base rates, since the simplified method used by the Company to calculate the PPCA
lacked reconciliation processes. Staff recommended monthly PPCA revenue tracking beginning
January 1, 2025, with results reported in annual filings to determine if any adjustment is needed.
ORDER NO. 36437 2

Consistent Deferral and Collection Periods
Staff emphasized maintaining consistent deferral and collection periods each year to avoid
timing-related inaccuracies. While several previous PPCAs took effect in mid-November, the
Company sought to align this PPCA with its general rate case for December 1, 2024. Staff needed
the Commission-authorized revenue amount from the Company's general rate case, Case No.
CAP-W-24-01, to calculate the updated rate.
After discussions, Staff and the Company agreed to delay implementation until January 1,
2025, recognizing this would result in overcollection due to extended use of the 4.51% rate
currently in effect. Staff recommended developing an adjustment method for the next PPCA filing
and tracking November-December 2024 PPCA revenue to facilitate necessary adjustments.
PPCA Calculation
Staff calculated a reduced PPCA rate of 3.34%, down from 4.51% (a decrease of 1.17%),
pending Commission approval of its proposed revenue requirement in Case No. CAP-W-24-01.
This change would lower surcharge collection from $37,048 to $27,346 during 2025, reducing
revenue by $9,616. The adjustment reflected 2023's actual power costs of $102,919 versus
embedded costs of$75,483 in base rates. Using Staff s proposed PPCA rate, the average 3/4"-inch
customer would see a $0.18 decrease from May through September, and a $0.08 decrease for all
other months.
System Efficiency
Staff analyzed three years of pump efficiency by measuring water production against
power consumption.Well No.4 showed concerning efficiency drops,but analysis was complicated
by year-round fixed power usage despite seasonal operation. Of note, Well No. 5's rehabilitation
in early 2023 had improved its efficiency from 336.32 to 399.47 gallons per kilowatt-hour,
demonstrating the benefits of maintenance.
To better assess Well No. 4's performance, Staff focused on peak production months when
operational power significantly exceeded fixed consumption. This revealed 10-15% efficiency
decline over three years. While bearing repairs in 2024 might have addressed the issue, Staff
recommended monitoring Well No. 4's performance for potential rehabilitation.
Customer Notice and Press Release
Staff stated that the Company filed a customer notice and press release with its Application.
Staff also explained that the Company sent a press release to the Idaho Statesman and the Idaho
ORDER NO. 36437 3

Business Review. The notices lacked clarity about the proposed decrease and public review
options and omitted certain feed subscription information. Furthermore, press releases went to
newspapers in October and customer notices weren't scheduled until December 1, 2024, leaving
insufficient time for comments before the December 5, 2024, deadline. Though the proposed
decrease makes customer objections unlikely, Staff recommended accepting late comments. No
comments had been received by December 5, 2024.
COMPANY REPLY
With the exception of recommendation No. 5, the Company did not agree with Staff s
recommendations. The analysis of each recommendation the Company disagreed with can be
found below.
Recommendation No. 1
The Company noted that it had maintained calendar year deferral periods since Order No.
33876 (which was intended to simplify the PPCA). The Company noted that previously filings
occurred in September with November 15 effective dates,and that the current filing simply aligned
with an anticipated effective date of new rates in general rate case. However, the Company
expressed willingness to establish consistent filing dates and collection periods, suggesting
January through December for future cycles.
Recommendation No. 2
The Company objected to Staffs recommended method for tracking of monthly PPCA
revenue from January 1, 2025. The Company argued this would complicate the newly simplified
PPCA method. The Company distinguished its PPCA from Idaho Power's power cost
adjustment—noting the PPCA lacks true-up mechanisms and interest components. The Company
emphasized that its PPCA fluctuated yearly based on power consumption and is not a refund.
The Company noted its recent rate case(Case No. CAP-W-24-01)would better align future
PPCAs with base rates. The Company stated that it expected smaller future adjustments due to
more frequent rate case filings which would ensure more accurate embedded power costs included
in rates. The Company found Staffs revenue stability analysis lacked transparency and argued
that, though Staff s examples did show a minimal impact, the largest collection variance was
$2,465.
The Company expressed concern about adding complexity to the simplified method and
indicated it would request interest components if true-up mechanisms were mandated.
ORDER NO. 36437 4

Recommendation No. 3
The Company opposed tracking late 2024 PPCA revenue collections for the reasons stated
above and noted that its original December 1, 2024, effective date request aligned with previous
practices. The Company emphasized the simplified methodology never required tracking over- or
under-collections, and the Commission had not previously mandated such monitoring. The
Company again noted that the delayed implementation in this case stemmed from timing
complications with its general rate case (Case No. CAP-W-24-01).
Recommendation No. 4
The Company corrected Staff s inaccurate account of the maintenance and repairs to Well
No. 4. The Company noted that Well No. 4's repairs involved bearing replacement and motor
maintenance—rather than leakage. The Company emphasized that its systematic approach to well
maintenance is based on overall system needs and cost constraints.
The Company challenged Staff s efficiency analysis,explaining how variable speed pumps
consumed power during idle periods without pumping water. The Company disputed Staffs claim
about inability to determine cost prudence—noting that it provided power bills and well logs with
each filing. The Company pointed out that Staff had not requested detailed discussions about
system operations in current or past cases and had proposed no power cost adjustments in the
ongoing rate case.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction and authority over the Company and the issues raised in
this case under Title 61 of the Idaho Code, specifically Idaho Code §§ 61-501, 61-502, and 61-
503. The PPCA allows the Company to adjust its rates to reflect changes in power supply costs
compared with the power costs collections embedded in rates. Order No. 30762. The Company's
power costs are determined by two factors: (1)the amount of electric power used; and(2) the rate
paid for electric power. This year, based on the data provided by the Company and analyzed by
Staff—as well as the new information from the Commission's decision in the Company's recent
rate case(Case No. CAP-W-24-01),the Commission finds it fair,just, and reasonable to adjust the
Schedule No. 3 PPCA rate from 4.51%to 3.33%
Staff recommended that the Company use a deferral period based on the calendar year,and
direct the Company to work with Staff to determine a consistent filing deadline; track the amount
of PPCA revenue that is collected each month starting January 1,2025,and report this information
ORDER NO. 36437 5

in the Company's PPCA filings each year; and track the amount of PPCA revenue collected for
November and December 2024. The Company argued that these suggested measures would
address problems that had already been solved with the Commission-approved simplified method
and were unreasonably difficult and costly to administer, or were otherwise unnecessary. The
Commission notes the Company's concern about unnecessary administrative burden and declines
to grant Staff s recommendation for these issues.
The Commission notes Staff s concerns and recommendation regarding Well No. 4's
efficiency. We agree that well efficiency is a crucial concern for small water companies like
Capitol Water, given that electricity costs represent a large percentage of the costs to serve
customers and these costs can increase due to well inefficiency. However, we are satisfied with
the Company's proactive actions in maintaining Well No. 4. Due to the actions described by the
Company on reply, the Commission does not see a need to order the Company to take further
mitigation measures related to Well No. 4 at this time. However, the Company should work with
Staff and monitor the efficiency of Well No. 4 to ensure that the issue does not require additional
remediation.
Staff recommended that the Commission order the Company to review its customer notices
with Staff prior to submitting future PPCA applications. Relatedly, Staff recommended that the
Commission order the Company to send these notices with sufficient time to allow customers to
file comments. The Company did not object to this request. The Commission finds this is
reasonable and orders the Company to comply accordingly, including with the Rules of Procedure
regarding notice to customers of pending rate changes.
Regarding the PPCA rate, we find that a PPCA rate of 3.33% is fair just and reasonable.
The Commission finds that this rate is the most appropriate because it incorporates the most current
information from the Company's recent general rate case. Because this adjusted rate is based on
updated information from Case No. CAP-W-24-01, the Company is directed to file updated tariffs
within 15 days. Therefore, the Commission approves a PPCA rate of 3.33% effective January 1,
2025.
ORDER
IT IS HEREBY ORDERED that the Commission approves adjusting the Company's
Schedule No. 3 PPCA rate from 4.51% to 3.33%, effective January 1, 2025. The Company must
file updated tariffs within 15 days of the service date of this Order.
ORDER NO. 36437 6

IT IS FURTHER ORDERED that the Company work with Staff to monitor the tracking of
the amount of PPCA revenue as well as the efficiency of Well No. 4.
IT IS FURTHER ORDERED that the Company will send its customer notices to Staff for
review before filing future PPCA applications to ensure compliance. Relatedly, the Company is
ordered to send these notices out with sufficient time to ensure that its customers have adequate
time to file comments.
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. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 301h day of
December 2024.
AA]t
ERIC AND RSON, PRESIDENT
6rR. HAMMOND JR., COMMISSIONER
G
EDWARD LODGE, COMMISSIONER
ATTEST:
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Commission Secret
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ORDER NO. 36437 7