20250130Direct S. Bruce_Exhibits.pdf

RECEIVED
Thursday, January 30, 2025
IDAHO PUBLIC
UTILITIES COMMISSION
Preston N. Carter, ISB No. 8462
Megann E. Meier, ISB No. 11948
GIVENS PURSLEY LLP
601 West Bannock Street
P.O. Box 2720
Boise, Idaho 83701-2720
Office: [phone]
Fax: [phone]
[e-mail]
[e-mail]@givenspursley.com
Attorneys for Falls Water Co., Inc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION Case No. FLS-W-24-02
OF FALLS WATER CO., INC. FOR THE
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR WATER SERVICE
IN THE STATE OF IDAHO
DIRECT TESTIMONY OF K. SCOTT BRUCE
FOR FALLS WATER CO., INC.
JANUARY 30,2025

I Q. Please state your name and business address.
2 A. My name is Kevin Scott Bruce, 2180 North Deborah Drive, Idaho Falls, Idaho 83401.
3 Q. How long have you been with Falls Water Company?
4 A. I have been employed by Falls Water Co., Inc. ("Falls Water" or"Company") since May
5 1999.
6 Q. Briefly describe your responsibilities during your tenure at the Company.
7 A. In May 1999, 1 was hired to perform accounting duties. In 2004, I became the General
8 Manager of the Company, a position I still hold today. I have been involved in rate cases
9 for the Company since 2000.
10 Q. In connection with the Company's current application for an increase in rates and
1 1 charges,what is the scope of your testimony?
12 A. My testimony includes an explanation of the capital additions and the proforma
13 adjustments to the operation and maintenance expenditures. I will also testify regarding
14 the major reasons for the requested rate relief in this application; provide an overview of
15 capital projects and operating expenses; provide an update on compliance items from the
16 stipulation and settlement from the last rate case; and present the other witness.
17 Q. Please identify the other witness who will testify on behalf of the Company and the
18 topics that witness will address.
19 A. Mr. Matthew Rowell, Manager of Water Rates and Regulatory Affairs for NW Natural,
20 will testify regarding the calculations to support revenue requirement, rate design and the
21 proposed consolidation of rates, shared services, return on equity, the weighted average
22 cost of capital, and related issues.
23
BRUCE, Di
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Falls Water Co., Inc.

I Q. What exhibits are you sponsoring to support your testimony?
2 A. I am sponsoring the following exhibits to support my testimony:
3 • Exhibit 1 Rate Base
4 • Exhibit 2 Proforma of Operating Expenses (except for the Shared Services
5 adjustment, Exhibit 2(H),which is addressed by Company witness Rowell)
6 Q. When was the last rate case for the Company?
7 A. The last rate case for the Company, FLS-W-23-01,was resolved through a stipulation
8 and settlement approved by the Commission on December 14, 2023 in Order No. 36027.
9 Q. Since the last rate case, has the Company continued to invest in utility plant in
10 service?
11 A. Yes. The Company has made investments in utility plant in service since the last rate case
12 of roughly$5,563,000. The following are investments since the last rate case:
13 • Land for Storage Tank of$80,000, put in service December 31, 2023.
14 • Well Structure Improvements of$1,689,000, including Booster Pump Station and
15 site improvements,put in service on December 31, 2023; Security Fencing at
16 2180 N Deborah Dr of$61,000 put in service June 19, 2024; other Well Structure
17 and Improvements of$10,500 put in service November 30, 2024. Wellhouse at
18 Taylor Mountain Well 2 for$265,000 put in service on August 14, 2023.
19 Security fencing for Falls Water's Well 10 for$30,000 put in service on August
20 29, 2024.
21 • Generator auto transfer switch for Well 10 of$17,000 on March 18, 2024;
22 Generator for Main Well Field of$160,000 on September 1, 2024. Generator for
23 Taylor Mountain Well 2 for $32,500 put in service on August 14, 2023.
BRUCE, Di
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Falls Water Co., Inc.

I • Storage tank booster pump station at Well 9 —Pumping equipment and
2 supervisory control and data acquisition("SCADA") of$507,000 on December
3 31, 2023.
4 • Variable Frequency Drive for Well 4 of$34,000 on July 1, 2024.
5 • SCADA upgrade of$104,300 on August 1, 2024.
6 • Chlorine Pump for Well 9 of$2,500 on August 15, 2024.
7 • Two Million Gallon Storage Tank of$1,840,200 on December 31, 2023.
8 • Replacement of Service Lines for Falls Water system of$94,200 through October
9 10, 2024; Storage Tank water mains of$361,200 on December 31, 2023;
10 Replacement of service lines for Taylor Mountain system of$6,200 through
I I August 25, 2024; Replacement of service line for Momingview system of$1,600
12 through August 21, 2024.
13 • Replacement of Fire Hydrants for Falls Water system of$24,600 through October
14 10, 2024.
15 • Arc Flash Study of$6,800 on November 23, 2023; Taylor Mountain Facilities
16 Plan Study of$31,600 on December 27, 2023; Morningview Facilities Plan Study
17 of$17,000 on December 27, 2023.
18 • Miscellaneous Information Technology upgrades of$94,250 through November
19 8, 2024.
20 • Miscellaneous Office Equipment of$340 through June 14, 2024.
21 • Miscellaneous Small Tools of$3,800 through August 13, 2024; Mueller
22 Echologics—Leak Detector of$21,920 on January 30, 2024; Big Shot& Squeeze
BRUCE, Di
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Falls Water Co., Inc.

I Tools to pull pipe of$6,400 on February 26, 2024; Full Mask Safety gear for
2 confined spaces of$2,300 on August 8, 2024.
3 • 2023 Doosan Forklift and Lift Platform of$36,200 on January 9, 2024; Allied
4 Hoe pack for Backhoe of$10,600 on May 22, 2024.
5 • Replace Tension Spring on Overhead door of$4,100 on March 18, 2024.
6 • Additional Meters net of contributions in aid of construction of$6,986 through
7 September 30, 2024.
8 Q. Are these plant additions used and useful in providing service to the Company's
9 customers?
10 A. Yes, the completion dates are noted above and these plant additions are used and useful
11 by the Company in providing service to its customers.
12 Q. Please discuss,in general terms,the capital additions planned to be placed in service
13 from October 1, 2024 through May 31,2025.
14 A. The following adjustments made to plant for items expected to be in service on May 31,
15 2025 are described below and can be found in Exhibit 1 (Rate Base). These adjustments
16 are separate from the components of utility plant in service discussed above, which are in
17 service as of the date this testimony is filed.
18 Water Rights are being purchased to assist the Company in complying with
19 Bonneville-Jefferson Groundwater District's ("Groundwater District")mitigation plan.
20 This reduces the Company's over production of water so the Groundwater District can be
21 in compliance with the current agreement with the Idaho Department of Water Resources
22 ("IDWR"). The purchase of 21.5 acres of water rights is expected to be finalized March
23 30, 2025, for$354,750.
BRUCE, Di
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Falls Water Co., Inc.

I Replacement Well No. 4 for Morninaview Well Nos. 1 and 2 will provide source
2 redundancy for the Morningview system. Wells 1 and 2 are shallow wells and have had
3 issues with excessive mud in the water and rocks being pulled into the pump. A new well
4 will be drilled with new mainlines in and out of the wellhouse along with a new variable
5 speed drive and generator for$305,000. The project will also include a submersible
6 pump for$30,000. A sand separator will be installed for$15,000. The total project is
7 expected to be completed about February 15, 2025, for$350,000. The Company sought,
8 and received Commission pre-approval for this project, in FLS-W-24-01,by Order No.
9 36203 issued June 5, 2024.
10 Booster Pump Motor for booster pump station in Falls Water system was removed
11 from the assets, repaired on July 23, 2024, and placed in inventory. The value of the
12 pump motor is ($28,000).
13 Meter replacement in Falls Water system will replace six hundred old meters
14 during the spring of 2025. The project is part of the Company's plan to reduce water loss
15 due to old and inaccurate meters. The project is expected to be completed by May 15,
16 2025, for$221,700.
17 Flow meter replacements at Well 5 and Well 2 to replace mechanical flow meters
18 with magnetic flow meters as required by IDWR. The project will be completed by
19 January 31, 2025, for $13,000.
20 Fire hydrant replacement at 3995 Farnsworth Lane was completed on October 1,
21 2024, for $5,040.
22 Laptop replacements (3) and Uninterruptible Power Supply (UPS) Battery
23 Backup will be acquired by May 15, 2025, for$12,298.
BRUCE, Di
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Falls Water Co., Inc.

I Backhoe Replacement and Skid Steer will be purchased by January 31, 2025, for
2 $230,000.
3 Replacement of Service Lines will be installed by May 15, 2025, for $52,000.
4 Reroute Mainline on Iona Road Bridge Crossings to accommodate Bonneville
5 County widening Iona Road between Ammon Road and 45th East will be completed by
6 April 30, 2025, for $100,000.
7 Backup Generators for Well 5 and the Company's office building will be
8 completed by May 31, 2025, for$155,000.
9 Security Fencing and paving=projects will be completed by April 30, 2025, for a
10 total project cost of$98,591. The projects will include security fencing at the main well
11 field, automatic gate openers at Well 5 and the Company's office,paving at gate opening
12 at Well 5 and the Company office, and paving at Taylor Mountain Well 1.
13 Replace meters at Mornin view system to improve accuracy of meter readings
14 and reduce water loss. The project will be completed for $74,000 by April 30, 2025.
15 Repair Dump Truck Oil Leak and Rear End Differential to increase the useful life
16 of the 2007 Peterbilt dump truck for$10,000 by February 28, 2025.
17 Replace Overhead Garage Door Spring at office for $1,952, completed November
18 30, 2024.
19 Q. Will these plant additions be in service by the end of the proforma test year of May
20 31, 2025?
21 A. Yes, the completion dates are indicated above.
22 Q. Will the plant additions be used and useful in providing service to the Company's
23 customers?
BRUCE, Di
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Falls Water Co., Inc.

I A. Yes. These additions are or will be used and useful in providing service to the Company's
2 customers by the end of the test year, as previously described.
3 Q. Please describe the various known and measurable adjustments made to operating
4 expenses.
5 A. In Exhibit 2 (Proforma of Operating Expenses), the following adjustments were included:
6 Column(B) Revenue Adjustment (See Testimony of Matthew Rowell)
7 Column(C) Increased Labor Cost
8 Column(D)Utility Costs
9 Column(E) Miscellaneous Operating Costs and Shared Services
10 Column(F) Depreciation Expense and Property Tax
1 1 Colum(G) Income Tax
12 Q. Please describe the adjustments found in Column (C) related to labor costs.
13 A. The following accounts were adjusted:
14 Account 601.2—Bonus Expense increased $719. The bonus is based on
15 performance and is a percentage of the employee's base wage.
16 Account 601.5 —Labor Field increased $40,505 due to annual wage increases for
17 existing field staff.
18 Account 601.8 —Labor Office increased$12,756 due to annual wage increases for
19 existing office staff.
20 Account 601.9—Admin - Labor increased $16,702 due to annual wage increases
21 for existing administration staff.
22 Account 602—Capitalized Labor decreased $4,203 due to fewer capital projects
23 that the field staff will be working on.
BRUCE, Di
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Falls Water Co., Inc.

I Account 604—Employee Benefits increased$10,514 because of increases in
2 employee wages.
3 Account 408.12—Payroll Taxes increased$6,430 because of increases in
4 employee wages.
5 Q. Please describe the adjustments found in Column (D) related to utility costs.
6 A. The following accounts were adjusted:
7 Account 615 - Electrical Power proposed increase of$57,773 calculated by
8 averaging the prior three years of power usage and factoring in proposed rate increases
9 of 19.9%to 20.5%rate increase for the tariff schedules used by the Company from
10 Rocky Mountain Power Case No. PAC-E-24-04.
11 Q. Please describe the adjustments found in Column (E) related to Miscellaneous costs
12 and Shared Services.
13 Account 618 —Chemicals increases by $8,256. The calculation for the amount of
14 liquid chlorine needed to chlorinate the Falls Water system is shown in Exhibit 2 (C)
15 Chem.
16 Account 620.7—Postage increase of$7,385 is because of an increase in postage
17 costs for mailing customer statements.
18 Account 635 —Testing increase of$7,119 caused by increased cost of by IAS
19 EnviroChem laboratory.
20 Account 636.7—Data Processing increases $7,057 because of new software
21 subscription fees for the upgraded Ignition SCADA software and SCADA alarm
22 notification.
BRUCE, Di
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Falls Water Co., Inc.

I Account 670 • Bad Debt Expense increased$4,261, which is the percentage of
2 bad debt for the test year calculated on the proposed revenue increase.
3 Account 634.1 —NWN Shared Services is discussed in the testimony of Matthew
4 Rowell.
5 Q. Please describe the adjustments found in Column (F) for Depreciation and Property
6 Tax.
7 A. Account 403 —Depreciation increases $64,067 because of rate base additions between
8 September 30, 2024 and May 31, 2025.
9 Q. Please describe the adjustments found in Column (G) for Income Tax Expense.
10 A. Account 680—Income Tax Expense decrease of$58,030 because of proforma
11 adjustments.
12 Q. Has the Company submitted the plans identified in the Stipulation and Settlement
13 in the last rate case?
14 A. Yes. In the Stipulation and Settlement in Case No. FLS-W-23-01, the Company agreed to
15 provide facility plans for the Morningview and Taylor Mountain systems to Commission
16 Staff by February 1, 2024. These facility plans were provided prior to that date.
17 The Company also agreed to develop and submit two other plans: a plan to
18 identify and mitigate the root causes of water loss, and a plan to implement a meter
19 accuracy testing program. Both these plans were developed and submitted to Commission
20 Staff before the deadline in the Stipulation and Settlement. The Company is working to
21 implement the measures identified in these plans.
22 Q. Do you have updated balancing account information for the water right mitigation
23 balancing account addressed in the last rate case?
BRUCE, Di
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Falls Water Co., Inc.

I A. Yes. As of December 31, 2024, the balance of the account is $305,052. The Groundwater
2 District billed the Company in 2023 for overproduction in 2022. The Groundwater
3 District did not bill the Company for overproduction in 2023. The Company anticipates
4 that the Groundwater District will bill it for overproduction in 2024, and that the bill will
5 be provided in the first or second quarter of 2025. Falls Water anticipates that the bill will
6 be similar in amount to the bill related to overproduction in 2022. Based on the
7 anticipated volume of over-pumping and increased cost of renting or leasing water for
8 mitigation, the Company anticipates that mitigation costs for 2024 overproduction will be
9 greater than in 2022. The Company seeks recovery of mitigation fees consistent with the
10 settlement in the last rate case,but acknowledges that the amount may need to be
1 1 adjusted depending on the Groundwater District's billing for 2024 overproduction.
12 Q. Does the Company propose to continue the use of the balancing account?
13 A. Yes. The balancing account provides an efficient and transparent way of addressing costs
14 for water-rights mitigation. The Company proposes to continue the balancing account
15 until such the water-rights mitigation structure changes, in which case the Company will
16 approach the Commission with a proposal to address the new structure.
17 Q. Since the last rate case, have there been developments regarding groundwater
18 mitigation?
19 A. Yes. In 2024, the Idaho Department of Water Resources ("IDWR") issued an order that,
20 if implemented, would have curtailed the use of certain junior groundwater rights.
21 Afterwards, members of the surface water coalition, which generally hold senior water
22 rights, and a number of groundwater districts entered into a stipulation and settlement
23 agreement that included conservation and mitigation measures. This agreement prevented
BRUCE, Di
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Falls Water Co., Inc.

I curtailment in 2024, and will prevent curtailment in the future so long as the parties
2 comply with the agreement. The Bonneville-Jefferson Groundwater District, which Falls
3 Water is a member of, is a party to that 2024 stipulation and settlement agreement.
4 Q. Will the 2024 stipulation and settlement impact the way groundwater mitigation is
5 implemented within the Bonneville-Jefferson Groundwater District?
6 A. Yes. The agreement is complex,but it is my understanding that the 2024 stipulation and
7 settlement increased the conservation requirements for each groundwater district, and
8 altered the method used to calculate whether the conservation requirements are met. The
9 Groundwater District has not yet determined or communicated to its members how it will
10 implement the agreement. It is anticipated that mitigation costs will increase, in part due
1 1 to increased cost of renting and leasing water on the market.
12 Q. Has Falls Water attempted to proactively address groundwater mitigation?
13 A. Yes. In November 2024, Falls Water filed with IDWR a mitigation plan that is specific to
14 the Company. Falls Water believes that this mitigation plan suits its circumstances as a
15 regulated water provider. The proposed mitigation plan is subject to IDWR's
16 administrative procedures, consideration, and approval. If approved, Falls Water believes
17 that the proposed mitigation plan will meet mitigation requirements and avoid
18 curtailment in a manner that is more cost-effective, and more appropriate to Falls Water's
19 circumstances, than through membership in the Bonneville-Jefferson Groundwater
20 District.
21 Q. Does the Company propose any additional changes to its tariffs?
22 A. Yes. The Company proposes changes to the Hookup Charges in Schedule No. 2 Non-
23 Recurring Charges. The Hookup Charges have remained unchanged since 2008.
BRUCE, Di
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Falls Water Co., Inc.

I Increased costs of metering equipment currently exceed the existing charges. The
2 Company proposes the following increases:
Meter Size of New Connection Current Charge Proposed Charge
3/a"Meter $500.00 $525.00
1"Meter $600.00 $600.00
1 1/2"Meter $930.00 $1,425.00
2"Meter $1,205.00 $1,675.00
Greater than 2"meter Cost of Materials and
Installation Labor
3
4 Q. Does this conclude your Direct Testimony?
5 A. Yes.
BRUCE, Di
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Falls Water Co., Inc.

Preston N. Carter, ISB No. 8462
GIVENS PURSLEY LLP
601 West Bannock Street
P.O. Box 2720
Boise, Idaho 83701-2720
Office: [phone]
Fax: [phone]
[e-mail]
18762334.1 [13988-221
Attorneys for Falls Water Co., Inc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION Case No. FLS-W-24-02
OF FALLS WATER CO., INC. FOR THE
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR WATER SERVICE
IN THE STATE OF IDAHO
EXHIBITS TO ACCOMPANY THE
DIRECT TESTIMONY OF SCOTT BRUCE
JANUARY 30,2025

FALLS WATER CO., INC.
CASE No. FLS-W-24-02
Exhibit 1 — Rate Base

EXHIBIT 1
FALLS WATER COMPANY
EXHIBIT 1
Rate Base
Test Year End 9/30/2024
(A) (R) (S)
FY Ended
September 30, Total Post Test Total Gross Plant in
Plant in Service 2024 Year Assets Service
1 303 Land &Land Rights 2,346,675 354,750 2,701,425
2 304 Well Structures& Improvements 3,080,965 98,591 3,179,556
3 307 Wells 683,008 305,000 988,008
4 310 Generators 467,894 155,000 622,894
5 311 Pumps&Accessories 1,479,679 2,000 1,481,679
6 320 Purification Systems 51,608 15,000 66,608
7 320 Separators-Chlorinators 29,793 - 29,793
8 330 Tanks 1,840,224 - 1,840,224
9 331 Water Mains 4,398,878 152,000 4,550,878
10 334 Meters 2,206,135 295,700 2,501,835
11 334 Meters-Flow Meters 47,625 13,000 60,625
12 335 Hydrants 82,832 5,040 87,872
13 339 Other Plant and Misc Equip 155,825 1,952 157,777
14 340 Office Equipment 353,716 12,298 366,014
15 340 Office Equipment-Other 20,577 - 20,577
16 341 Transportation Equipment 290,960 10,000 300,960
17 343 Tools& Equipment 144,537 - 144,537
18 345 Power Operated Equipment 174,728 230,000 404,728
19 348 Other Intangible Plant 661,275 - 661,275
20
21 Total Plant in Service 18,516,936 1,650,330 20,167,266
22
23 Less Accumulated Depreciation (2,805,335) (32,034) (2,837,369)
24 Net Plant in Service 15,711,601 17,329,897
25
26 Less Contributions in Ad of Construction
27 Gross Contributions(9/30/20024) 2,806,099 2,806,099
28 Less Accumulated Amortization (9/30/2024) (1,009,922) (1,009,922)
29 Net Contributions in Aid of Construction 1,796,177 1,796,177
30
31 Deferred Tax Asset/(Liability) 102,811
32 Working Capital (1/8 of Operation and Maintenance Expense) 287,563
33
34 Total Rate Base 15,924,094
Case No.FLS-W-24-02
Exhibit No. 1
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FALLS WATER CO., INC.
CASE No. FLS-W-24-02
Exhibit 2 — Income Statement

EXHIBIT 2
FALLS STATE WATER COMPANY
EXHIBIT 2
Income Statement
Test Year End 9/30/2024
(A) (B) (C) (D) (E) (F) (G) (H)
Test Year 2024 Rate Increased Miscellaneous Depreciation Income Rate Case
12 Months Ending Increase Labor Utility Cost Operating Costs Expense Tax Expense Adjusted
913012024 Costs &Shared Services Expense Totals
Revenue
1 461 Metered Water Service $ 3,430,308 153,073 3,583,381
2 464 Other Water Sales 11,772 11,772
3 Total Revenue 3,442,080 3,595,153
4
5
6 Expenses
7 408.1 Regulatory Fee $ 5,658 5,658
8 601.2 601.2-Bonus Expense 11,580 719 12,299
9 601.5 601.5-Labor Field 435,250 40,505 475,755
10 601.8 601.8-Labor Office 96,028 12,756 108,784
11 601.9 601.9-Admin-Labor 125,680 16,702 142,382
12 602 602-Capitalized Labor (42,263) 4,203 (38,060)
13 604 604-Employee Benefits 139,333 10,514 149,847
14 615 615-Electrical Power 335,722 57,773 393,495
15 618 618-Chemicals 1,686 8,256 9,942
16 620.2 620.2-Source M&S 20,766 20,766
17 620.5 620.5-Safety 1,449 1,449
18 620.6 620.6-Distribution M&S 17,505 17,505
19 620.7 620.7-Postage 39,476 7,385 46,861
20 620.8 620.8-Office 38,141 38,141
21 620.81-Telephone Expense 12,664 12,664
22 620.82-Bank service charges 32,435 32,435
23 620.83-Office Utilites Expense 4,686 4,686
24 631.1-Engineering 9,753 9,753
25 631.3-Attorney 12,606 12,606
26 631.4 631.4-Payroll Services 16,212 16,212
27 634.1 634.1-NWN Shared Services 233,520 27,402 260,921
28 635 635-Testing 15,869 7,119 22,988
29 636.3-Trash 1,662 1,662
30 636.4-Outsourced Bad Debt Collection 144 144
31 636.7-Data Processing 152,103 7,057 159,160
32 642-Rental of Equipment 1,224 1,224
33 645-Lease Rent Exp-Interest 809 809
34 646-Lease Rent Exp-Depreciation 4,917 4,917
35 650-Transportation Expense 44,905 44,905
36 656 656-Insurance Expense 104,885 104,885
37 656.1 656.10-Capitalized Labor Insurance (614) (614)
38 666 Amortization of Rate Case Expense - 10,000 10,000
39 670 670-Bad Debt Expense 14,347 638 3,916 18,901
40 675.1 675.1-Training Expenses 3,075 3,075
41 675.2 675.2-Dues&Publications 4,763 4,763
42 675.2 675.4-IDHW Fee Expense 20,085 20,085
43 675.5 675.5-Deferral Amortization 119,691 119,691
44 408.12 408.12-Payroll Taxes 52,401 6,430 58,831
45 408.5 408.5 Capitalized LaborPayroll Taxes (3,365) (3,365)
46 408.11 408.11-Property Taxes 40,406 40,406
47 680 680 Income Tax Expense 114,005 (33,753) 80,252
48 403 Depreciation Expense(Net)" 501,393 64,067 565,460
49 Total Expenses 2,734,933 2,986,622
50
51 Operating Income 707,147 608,531
Case No.FLS-W-24-02
Exhibit No.2
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