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HomeMy WebLinkAbout20250306Comments.pdf RECEIVED March 6, 2025 IDAHO PUBLIC CHRIS BURDIN UTILITIES COMMISSION DEPUTY ATTORNEY GENERAL IDAHO PUBLIC UTILITIES COMMISSION PO BOX 83720 BOISE, IDAHO 83720-0074 (208) 334-0314 IDAHO BAR NO. 9810 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 ASPEN CREEK ) WATER CO.,INC.'S APPLICATION TO ) CASE NO. ASP-W-24-03 INCREASE ITS RATES AND CHARGES FOR ) WATER SERVICE IN THE STATE OF ) IDAHO ) COMMENTS OF THE COMMISSION STAFF COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission ("Commission"), by and through its Attorney of record, Chris Burdin, Deputy Attorney General, submits the following comments. BACKGROUND On August 26, 2024, Aspen Creek Water Co. Inc, ("Company") applied for authority to increase its rates and non-recurring charges. The Company seeks to increase the rate for water service to $134.00 per month. The Company included Exhibits 1-4 to support its Application. On September 4, 2024, the Company filed additional documents that are required for a rate case. The Company requested that new rates become effective May 1, 2025. On September 13, 2024, the Commission issued Order No. 36324 noticing the Company's Application and setting a period for interested persons to intervene. No party intervened. STAFF COMMENTS 1 MARCH 6, 2025 The Company is a regulated water corporation serving 73 unmetered customers in the Aspen Creek Estates and Aspen Creek Meadows subdivisions in Fish Haven, Idaho in Bear Lake County. The Company's rates have not changed since its tariff was first approved in 2002. The Company operates under certificate of public convenience and necessity("CPCN")No. 403. The Company received authority to amend its CPCN No. 403 that extended the boundary to allow it to serve an additional customer. See Case No. ASP-W-24-02. STAFF ANALYSIS Staff reviewed the Company's Application, exhibits, workpapers, and responses to Production Requests. Staff also conducted audits of the Company's financial records, processes, and internal controls. Based on its review, Staff recommends that the Commission establish a revenue requirement of$54,459, or an increase of$25,549 as shown on Attachment A, Line 13. This revenue requirement is $62,879 less than the Company's request, and results in an increase of 88%to the Company's annual revenues based on a return on equity("ROE") of 11%. System Description The Company's water system is located west of the City of Fish Haven, in Bear Lake County, Idaho. The water system has two wells, with only one well ("Loveland Well") supplying water to the system using a 40 horsepower("HP") capacity pump. The water system also utilizes a I I5,000-gallon concrete water storage reservoir. The Loveland Well pumps water to the storage reservoir. The reservoir's water level is controlled by a level monitoring telemetry system and stored water flows from the reservoir to the main distribution system driven by gravity. Currently, the water system does not have any auxiliary power. The distribution system piping includes 6-inch and 8-inch Polyvinyl Chloride ("PVC")pipes. The Company currently serves 73 connected lots with a total maximum capacity of 132 connections, including 59 vacant lots. The Company anticipates growth if vacant lot owners decide to build homes and expand into its amended service territory. The customer connections include meters and meter pits; however, the Company does not monitor individual consumption using these meters, and the customers are charged a flat monthly fee for water usage. The Company is presently in the process of building a new wellhouse for the inactive well (Gentle Ben well) and connecting both wells together to satisfy the requirements of Idaho Department of Environmental Quality STAFF COMMENTS 2 MARCH 6, 2025 ("IDEQ") in providing a redundant water source. The Company's water system is summarized in Table No. 1. Table No. 1: Aspen Creek Water System Summary System Components Capacity 1 active well: 350-ft deep steel case (Loveland Well); Water Source(s) 1 active pump: 40 HP; 1 inactive well: 350-ft deep steel case (Gentle Ben Well); 1 inactive pump: 40 HP Booster Pump(s) None Storage Reservoir(s) 1 Reservoir: 115,000 Gallons Distribution System Gravity-fed Distribution Piping 6-inch and 8-inch PVC Water Treatment/Chlorination None Reliability of Water System According to Staff s review, Staff believes that the Company's water system is capable of providing reliable and safe water to its customers. Staffs assessment is based on the lack of system reliability issues and absence of customer complaints for the past five years. Staff assessed the Company's latest IDEQ Sanitary Survey 2020 and believes there are no outstanding sanitary issues or significant deficiencies that impede system reliability. Additionally, Staff discovered there are no existing consumer complaints related to water pressure or reliability issues from 2020 through 2024. Water Rights Staff reviewed the Company's available water rights and believes the rights are sufficient to provide water service to the Company's customers. Staff verified the Company's two available active water rights. With both combined, the Company has a total diversion rate of 0.84 cubic feet per second("CFS") and total volume of 149.10 acre-feet per annum ("AFA") available for municipal usage. Response to Production Request No. 29. The Company's current water rights are summarized in Table No. 2. STAFF COMMENTS 3 MARCH 6, 2025 Table No. 2: Summary of the Company's Active Water Rights Water Right No. Beneficial Use Diversion Rate (CFS) Volume (AFA) 11-7021 Municipal 0.42 73.5 11-7436 Municipal 0.42 75.6 REVENUE REQUIREMENT The Company requested a revenue requirement of$117,384, an increase in annual revenues of$88,428, or 306%. Staff reviewed all components of the revenue requirement and recommends an annual revenue requirement of$54,459, which is an increase of$25,549, or 88% as outlined in Attachment A. Each component is discussed in greater detail below. Net to Gross Multiplier The Company calculated a net-to-gross multiplier of 134.65%. The multiplier is the amount the net operating income deficiency must be multiplied by in order to account for revenue contingent items, such as taxes, and assessment fees. The Company used a previous Commission assessment rate of 0.19820%. Staff updated the Commission assessment rate to the current rate of 0.2127%. With the updated inputs, Staff calculates a multiplier of 134.68% as illustrated in Attachment A, Line 10. In the test year, the Company reported an income deficiency. It is understood that an entity is not subject to taxes on an operating loss. In determining the revenue requirement, the Company is permitted to recover an additional amount to offset the reported operating loss. However, it is important to note that the full net-to-gross multiplier should not be applied to the additional revenue necessary to overcome the loss, as the Company will not incur tax liability on the losses. Instead, only one component—Commission assessment fee—should be applied to the revenue deficiency necessary to overcome the operating loss. Staff calculated a multiplier of 100.21%, as detailed in Attachment A, Line 7. Staff recommends that the 100.21%multiplier be applied to the revenue deficiency associated with overcoming the operating loss, and for any excess above the reported loss, a multiplier of 134.68% should be applied. STAFF COMMENTS 4 MARCH 6, 2025 Rate Base Rate base represents the amount invested by the Company into the system which is eligible to earn a return. Rate base is the plant-in-service ("PIS") amount and cash working capital, offset by accumulated depreciation and any contributions in aid of construction ("CIAC"), or contributed capital. Staff recommends a rate base of$109,007, which includes net plant-in-service of$278,324, net CIAC of$172,813, and working capital of$3,496. Attachment B, Column C, Lines 24-35. Plant-in-Service PIS represents the original cost of all assets used to provide water service to customers. The Company's financial statements indicate that most assets have been fully depreciated, resulting in a zero book value. However, in 2022, the Company began investing in new capital improvements to its water system, including $27,795 for the installation of a new communication system to enable remote monitoring of its wells. In 2023, the Company recorded bonus depreciation for income tax purposes of 80% of total cost as allowed by IRS Publication 946 for certain qualified property. The Company recorded $22,580 in depreciation expense associated with the communication system in 2023. For regulatory accounting used to establish rates, the depreciation expense should be ratable over the useful life of the equipment, matching the recovery period to the benefits being received by the investment. Staff corrects the Company's depreciation expense for ratemaking purposes and uses an 18-year depreciable life, resulting in an annual depreciation expense of$1,554, which is $21,026 less than proposed by the Company. Accepting the Company's proposed depreciation expense, which is attributed to this single asset, would lead to a negative rate base and could potentially cause additional harm to the Company if not properly accounted for. Additionally, in 2023, the Company purchased a pump for$9,730. Rather than capitalizing the cost of this asset, the Company recorded it as an expense. Because the pump will provide service for longer than one year, generally accepted accounting principles require the investment to be capitalized and depreciated over its estimated useful life. To ensure accurate accounting, Staff recommends that this expenditure be capitalized and depreciated in accordance with regulatory accounting standards. STAFF COMMENTS 5 MARCH 6, 2025 In its Application, the Company requested $122,037 in capital investments for assets expected to be in-service and used and useful by the time new rates take effect. After reviewing the Company's filings and supporting documentation, Staff recommends including an additional $21,874 in PIS as prudently incurred costs. The additional investment includes the purchase of a pressure reducing valve ("PRV"), construction of a well house, and connection of a customer to the system at a cost exceeding the $1,000 connection fee. The PRV and well-house costs exceeded the initial estimate. Staff has reviewed invoices and the Company's procurement process and believes the Company made reasonable efforts to control costs and minimize customer impacts. However, the Company must ensure proper accounting for each asset and apply depreciation lives consistent with Staff s recommendations, as outlined in Attachment C, Column D. In total, Staff recommends an additional $31,604 in PIS and that all other investments be deemed prudently incurred. This results in a total PIS balance of$652,457. Attachment C, Column C, Line 21. Accumulated Depreciation Accumulated Depreciation is the total amount of depreciation expense that should have been recorded against the Company's assets over time. The Company reported zero accumulated depreciation. Staff used the Company's reported financials, each asset's annual depreciation expense, and the amount of time since each asset went into service to calculate accumulated depreciation. Staff recommends an accumulated depreciation of$374,133. Attachment C, Column H, Line 21. Contributions in Aid of Construction In review of the Company's financials, the Company reported its assets as Contributions in Aid of Construction("CIAC"). When the Company received its CPCN in 2002, the Commission did not order the Company to consider its current investments in the system as contributed capital, or CIAC. In utility regulation, when a utility receives capital to install an asset, it is booked to its appropriate plant expense account and offset by an entry to CIAC. The asset is then depreciated and the CIAC is amortized over the life of the asset. This is done when an asset's life nears its STAFF COMMENTS 6 MARCH 6, 2025 end, so the utility is not carrying a negative balance on its financials. To avoid this, Staff recalculated depreciation expense,plant balances, CIAC balances, and CIAC amortization expense. The accumulated amortization of CIAC was recalculated using each asset's depreciable life and the amount of time since each asset went into service to calculate accumulated amortization expense. In addition to the Company's request for$42,000 in CIAO, Staff recommends a CIAC of $482,191, an accumulated CIAC of$368,377, for a net CIAC of$113,813. Attachment B, Column C, Lines 27-29 and Attachment C, Columns I-K. Connection Charges In Case No. ASP-W-24-01, Investigation into Aspen Creek Water Company's Billing Practices, the Commission issued Order No. 36196, directing Staff to investigate the Company's billing practices, specifically its $1,000 connection fee. Staff observed that the Company had charged amounts exceeding $5,000 per new connection. On September 23, 2024, the Commission issued Order No. 36325, authorizing Staff to further review and correct the billing and connection fee issues identified. Idaho Administrative ("IDAPA") Code 31.21.01.203.03.b stipulates that, "[i]f the time when a billing problem began can be reasonably determined and the utility determines the customer was overcharged, the corrected billings will go back to that time, but not to exceed three (3)years from the time the billing problem occurred." Since 2003, the Company had charged more than $1,000 for new connections. However, following discussions with the Company in 2024, the Company has corrected its practices and began charging the authorized rate. In this case, the Company has requested an adjustment to its connection fees, which Staff will address separately. In 2022, 2023, and 2024, the Company over-collected on its connection charges, totaling $59,000 more than authorized. Due to the potential public interest implications, Staff presents two options for consideration. The first option is for the Company to repay the entire amount, which is approximately 3 times the Company's current annual revenue from water sales. Staff does not recommend this option, as it could result in a long-term negative financial impact on the Company. The Company's current rate generates $21,900 annually, which would cover only 36% of the total over collected amount. Under Staff s recommended revenue requirement, an STAFF COMMENTS 7 MARCH 6, 2025 additional $25,549 would be provided,bringing the total to $54,459. Despite this, the total amount would still not be sufficient to cover the entire repayment. Staff s concern with requiring full repayment is that the Company would not have sufficient funds to cover its operating expenses or further investment in the system, and it could potentially lead to insolvency. Staff recommends recording the entire $59,000 as CIAC. The Company has utilized the funds to update its water system, including the installation of a new pump, a PRV, and a well house. Treating this amount as CIAC allows the customers to benefit from the improvements made to the system. This option reduces the revenue requirement by$11,697 and softens the rate increase by $13.35 per month. Additionally, by treating the funds as CIAO, the Company would amortize the amount using its composite depreciation rate of 5%, equating to $2,950 annually. This amortization will mitigate the continued negative financial impact on the Company. Attachment B, Column C, Line 30. Working,Capital Working capital is the amount needed to fund the day-to-day operations of the Company. This amount is typically considered an advance of funds by the owners prior to amounts being recovered through customers' bills. Working Capital may be considered a component of rate base and eligible to earn a return. Staff recommends a working capital allowance of$3,660, which is calculated using the one-eighth method. Attachment B, Column C, Line 34. Rate of Return The Company requested a rate of return of 11%. Staff recommends a ROE of 11%. In Order Nos. 35973, 35978, and 36012, similar water utilities were authorized a 11% ROE. This ROE is the same as the overall rate of return since there is no authorized debt. Revenues Staff reviewed the Company's flat rate charges that determine the amount of revenue produced in the test year for revenue requirement purposes. Staff believes that revenues have been miscalculated. Prior to Case No. ASP-W-24-01 opening of an investigation into Company's billing practices, Staff was not aware that the Company was billing customers that owned vacant lots. STAFF COMMENTS 8 MARCH 6, 2025 The Company reported that 62 customers paid an annual rate of$120. The Company used the additional revenues to help fund the daily operations of the water system. Per IDAPA 31.21.01.203.03b, the Company would be expected to return $22,320. Staff believes doing so may not be in the public interest and may put the Company in a shortage of funds to maintain its system and provide reliable service. Although Staff recommends treating the over-collection of connection charges as CIAC, Staff recommends a different approach for the vacant lot charges. Staff recommends that the Company hold the amount as a credit, which is to be applied against future connection charges when those customers connect to the system. For example, a customer who has owned a vacant lot,paid$120 for three years, and then connects a structure to the water system, would receive a $360 credit towards the authorized connection charges. A single customer would not have more than a $360 credit, unless it owns more than one lot. Staff believes this is a fair compromise as the Company has been working diligently with Staff in providing information and discussing issues regarding billing, credits, and proper accounting of expenses. Further, Staff recommends the Company provide a report to Staff that provides the customers that may be impacted and the total dollar amount each may receive as a credit. Operating Expenses In 2023, the Company reported an operating expense of$77,020. Staff recommends a total operating expense of$38,266, which is a reduction of$38,754. Staff made specific adjustments to the Company's expenses which are discussed in greater detail below. Attachment B, Column C, Lines 3 through 22. Labor Operations & Maintenance The Company included$10,000 in pro forma labor, which was calculated using an operator hourly rate of$52 for sixteen hours a month. Staff recommends using an operator hourly rate of$32. According to the Idaho Department of Labor Employment Survey, water operators in the 90th percentile earn an hourly rate above $30 an hour.' The Company operator performs tasks such as: meter reading, water sampling, routine maintenance, well pump 'Idaho DOL Occupation Employment and Wages Survey:https:Hlmi.idaho.gov/data-tools/oews/ STAFF COMMENTS 9 MARCH 6, 2025 maintenance, and other necessary tasks. Using Staff s recommended rate results in a calculated labor—operations and maintenance expense of$6,144, which is a$3,856 less than the Company's request. In future general rate case filings, the Company will need to continue to keep records and timesheets for all labor hours worked on the water system if it wishes to increase recovery for labor expenses. Labor—Customer Accounts The Company requested $1,000 in pro forma labor—customer accounts. The Company representative performs tasks such as: bookkeeping, customer phone calls,billing, and other necessary tasks. During review, the Company reported$2,500 in Contract Services— Professional which was for the same tasks as outlined. Staff recommends keeping the expense in Contract Services—Professional and setting the amount to $2,500 and remove the $1,000 in labor—customer accounts. Purchased Power Staff determined the annualized electricity expense of$11,554 to be included in the revenue requirement. Staff determined this amount by calculating the $/Gallon electricity costs and multiplying it with the normalized water consumption amount over the period of three years from 2022—2024. In its calculation of annualized electricity expense, Staff also took into consideration the latest approved rate increase of the Company's electric service provider, PacifiCorp. Staff discovered that the Company does not meter its customers, so Staff used water production data to estimate normalized water consumption. Staff reviewed the Company's water production for the period of 2022—2024 and identified that the Company provided 10 months (January—October) of production data for 2024. To properly estimate 12 months of water production, Staff multiplied the 10 months production amount by a factor of 1.2.2 Response to Production Request Nos. 17 and 27. Hence, Staff computed the annualized water consumption by performing an arithmetic average over three years. 2 Water pumped in 10 months(January—October)of 2024= 11,422,900 Gallons. Estimated amount of water pumped in 12 months of 2024= 11,422,900X (12,10)= 13,707,500 Gallons. STAFF COMMENTS 10 MARCH 6, 2025 Normalized Water consumption=(14,542,400+ 15,632,100 + 13,707,500) -3 = = 14,627,300 Gallons. (Equation No. 1) Staff then used this normalized consumption amount to calculate the $/Gallon electricity cost using the 2024 total electricity costs. Response to Production Request No. 18. $/Gallon= $9,183.57=13,707,500= $0.000670. (Equation No. 2) Staff reviewed the Company's power bills and determined its rates are charged under PacifiCorp's Schedule No. 6—Secondary Voltage tariff. According to the settlement stipulation published in PacifiCorp's latest general rate case (PAC-E-24-04) and approved by Commission Order No. 36452, Schedule No. 6 rates were authorized for an overall 17.9% increase, effective January 1, 2025. Staff believes the Company's request is reasonable to receive recovery under the increased rates. Thus, Staff proposes the adjusted $/Gallon amount as shown in Equation No. 3. Adjusted $/Gallon $0.000670 X 117.9% $0.00078989. (Equation No. 3) Finally, Staff calculated the annualized electricity expenses utilizing the adjusted $/Gallon amount and normalized consumption as derived in Equation Nos. 1 and 3. Annualized Electricity Expense = $0.00078989 X14,627,300 = $11,554. Staff s calculations on the Company's annualized electricity expenses are summarized in Table No. 3. STAFF COMMENTS 11 MARCH 6, 2025 Table No. 3: Annualized Electricity Expenses Year Water Pumped (in Gallons) Electricity Cost($) 2022 14,542,400 9,449.38 2023 15,632,100 10,149.67 2024 13,707,500 9,183.57 Normalized Water Consumption(in Gallons) 14,627,300 $/Gallon(2024) $0.00067 Adjusted$/Gallon(2024) $0.00079 Annualized Electricity Expense $11,554 Staff s calculated annual electricity expense of$11,554 is $190 less than the amount proposed by the Company. Chemicals Staff believes the Company's proposed chemical expense included in the revenue requirement is unreasonable. As of December 31, 2024, the Company did not purchase chemicals and they are currently not needed for its water system. Therefore, Staff recommends removal of the $500 included in the Company's Application for chemical expense. Materials & Supplies—Operations &Maintenance The Company included materials and supplies expenses of$10,255 in its Application. During Staff s audit, Staff discovered two expenses that should have been classified as capital assets. Staffs adjustment reclassifies these capital expenses, which include a new pump and pump installation of$8,330, and the cost of installing a new meter of$1,790, for a total adjustment of$10,120. Contract Services—Professional The Company included$5,759 for contract services of external professionals for services such as bookkeeping, accounting, engineering, or technical expertise. In 2023, the Company purchased a pump and had to hire an engineer to perform some technical work. As discussed in STAFF COMMENTS 12 MARCH 6, 2025 sections "plant-in-service" and"materials and supplies," Staff recommended this pump be capitalized. Staff further recommends the engineering fee of$1,400 associated with the installation of the pump be included as a capital expense. Additionally, the Company booked its water testing labor costs to the owner in this account. As stated previously, labor—operations and maintenance adjustment, Staff recommends the labor include water testing labor costs. Thus, Staff recommends removing the labor cost of$1,200, as it is already being captured. After Staff s adjustments, the account includes the costs of bookkeeping fees, accounting fees, and other fees for a total of$3,159. Miscellaneous Expenses The Company included$4,569 in Miscellaneous Expenses in its Application. These include expenses for water operator training courses,postage expenses, and State of Idaho business renewal fees. To ensure proper classification and accuracy, Staff reclassified inventory items, which consist of meter and meter pits of$654, a DEQ fee of$330, and removal of a one- time HOA payment of$480, for a total adjustment of$1,464. Depreciation Expense The Company included a depreciation expense of$22,580. After evaluating the Company's depreciable assets and adjusting its plant-in-service accounts, Staff adjusted the depreciable expenses of each plant account. Further, Staff ensured the depreciable rates align with National Association of Regulatory Utility Commissioners Depreciation Manual for Small Water Utilities. Consistent with Staff adjustments to PIS, Staff re-calculated the Company's annual depreciation expense for all plants as of December 31, 2024. Staff recommends a depreciation expense of$10,667. Attachment B, Column C, Line 15 and Attachment C, Column E, Line 21. Amortization Expense In response to Staffs Production Request No. 26, the Company reported certain plant assets as CIAC. To ensure the Company does not experience a negative rate base once these STAFF COMMENTS 13 MARCH 6, 2025 assets are fully depreciated, Staff recalculated the Company's plant assets, accumulated depreciation, CIAC, and CIAC amortization expense. In utility regulation, when a utility receives capital to install an asset, the cost is recorded in the appropriate plant account and offset by an entry to CIAC. The asset is then depreciated, and the CIAC is amortized over the same straight-line life. This practice ensures that as an asset reaches the end of its useful life and the utility does not carry a negative balance on its financial statements. To maintain accurate plant balances, Staff recalculated depreciation expense, plant balances, CIAC, and the related CIAC amortization expense. Staff determined that an amortization expense of$7,536 is reasonable, allowing the Company to appropriately amortize its CIAC while maintaining a positive rate base. Attachment B, Column C, Line 16, and Attachment C, Column K, Line 21. RATE DESIGN Staff recommends that the Commission accept the Company's proposed rate design of a fixed non-metered rate, while adjusting the rate to meet Staff s recommended revenue requirement of$54,459. This would result in a monthly rate for connected customers of$62.17.3 Staffs calculation of the monthly customer charge is shown in Attachment D. Staff analyzed alternative rate designs for the Company's system, including inclining block rates and seasonal rates. Due to the lack of data to support a commodity rate, Staff believes a fixed non-metered rate provides the most revenue stability for the Company. Historically, the Company has not read customer meters and cannot provide customer consumption data. Company response to Production Request No. 17. Without any data of water delivered to customers, Staff is unable to calculate commodity charges that would result in the Company's revenue requirement. Because of the Company's small size, Staff places a high degree of importance on revenue stability and supports the continuation of the Company's current rate design at this time. Numerous customer comments raised concerns about vacation rentals and customers only using their homes in the summertime. Because of this, Staff recommends that the Commission 3 Prior to 2025,the Company billed customers annually.The Company changed to monthly billing in January 2025. STAFF COMMENTS 14 MARCH 6, 2025 direct the Company to begin reading customer meters.4 Consumption data can be used to inform a commodity rate in a future general rate case, which in turn can improve cost-based recovery, reduce subsidization among customers, and address any seasonal usage costs to the Company. Additionally, reading customer meters can also benefit with leak detection within the system, as comparisons between water pumped from source wells and water delivered to customers can be made. If monthly meter reads are unfeasible to the Company, Staff believes it is reasonable for the Company to read customer meters and record consumption according to Table No. 4 below. The meter reading schedule below can help to determine the high amount of seasonal occupancy and peak summer usage. Table No. 4—Staff Proposed Meter Reading Schedule Time Period Customers Purpose June - September All Obtain consumption data during peak Read Monthly occupancy and water use. October-May All Obtain consumption data during winter Read Once off-peak season TARIFF New Connection Charges The Company proposed connection charges for new customers to physically connect to the Company's water system. Staff believes that the Company's proposed connection charges are not reasonable. Based on Staff s review of the Application and the Company's responses to its Production Requests, Staff recommends: 1. The Non-Recurring Charges section of the Company's Tariff be modified to allow for itemized New Connection Charges based on Staffs recommended connection fees schedule as provided in Attachment E; 2. Allowing Customers the option to directly contract necessary horizontal boring ("horizontal boring" or"boring") work to establish service if work is completed by 4 In its Response to Production Request No. 39,the Company stated that 12 customers reside at their properties on a year-round basis. The remainder are seasonal or part-time residents,with occupancy primarily from Memorial Day to Labor Day. STAFF COMMENTS 15 MARCH 6, 2025 the Company's approved contractors and the work is approved through a Company inspection; and 3. Obtaining and retaining contractor quotes, invoices, and other cost records of all future new connections broken down by individual installation categories (i.e., Pit Setter, Meter Installation, and Tap Main Line, Pit Setter and Meter Installation Only, etc.), and further broken down by labor(hours and labor rate), material cost(cost of individual components), and equipment cost(hours and cost per hour). During the discovery process,5 to have a complete understanding of the actual costs incurred by the Company, Staff requested the Company provide detailed information about the body of work done for different categories of installations, and breakdown of costs for each category that were included in the Application. Staff s definitions for various installation categories are given below: Customer: A person or entity who receives water service from the Company. Install Meter and Turn on Water Only: Includes the materials and labor costs necessary for meter installation, and to turn on Customer's water service. Pit Setter and Meter Only: Includes the materials and labor costs necessary to install the Pit Setter(with enclosure), meter installation, and to turn on Customer's water service. Pit Setter and Meter and Tap Main Line: Includes the materials and labor costs necessary to install the Pit Setter(with enclosure), for connection to the Company's main, meter installation, and to turn on Customer's water service. Excavation or Horizontal Boring Across Road: This includes extraordinary circumstances that are not typically encountered when adding a new connection to the system. This may include excavation or horizontal boring across road to connect the water main to the Customer. Staff was able to determine the following recommended new connection fee schedule as demonstrated in Table No. 5 from the limited cost information provided by the Company: 5 First and Second Production Request of the Commission Staff to Aspen Creek Water Company;Request Nos.20— 22 and 34—38. STAFF COMMENTS 16 MARCH 6, 2025 Table No. 5: Comparison between Company and Staff Proposed New Connection Fees Item Category Company Staff Remarks No. Proposal Proposal 1. Pit Setter, Meter, Tap Main Line+ $7,505 - Staff proposes to Excavation or Horizontal Boring remove this item Across Road from tariff 2. Pit Setter, Meter Installation, and Tap Main $3,005 $2,500 Line 3. Pit Setter and Meter Installation Only $2,655 $2,150 4. Install Meter and Turn on Water Only? $500 $400 5. Horizontal Boring Adder $2,000 Staff proposes including this adder item in the tariff Staff s proposed new connection fees are based on costs of labor, vehicle or equipment rental, transportation, etc., bid proposals from two different material suppliers, and estimation quotes for installations (Item Nos. 1 and 2 in Table No. 5: Comparison between Company and Staff Proposed New Connection Fees from two different contractors). For materials cost estimation, Staff utilized the prices provided in the Peterson Plumbing and Supply's proposal due to reasonableness of the costs. In addition, Staff used both in-house hourly labor rates (Item No. 4), and contractor rates for labor, equipment, mobilization, etc. (Dirthead Services' quote for Item Nos. 2 and 3). Response to Production Request Nos. 21-22 and 35-37. Staff identified that the contractor Dirthead Services ("Dirthead") is one of the developer entities of the Company, and Dirthead installed a vast majority of the Company's water system. The Company recognized this perceived conflict of interest, and it is willing to seek the most affordable way to maintain its water system to serve its customers. Response to Production Request No. 38. Staff understands the Company's objective in this regard and is not concerned as long as the Company ensures safe and reliable water service to the customers at fair and reasonable rates. 6 The Company proposed this category of installations will be performed by contractors. Response to Staff Production Request No.22. The Company proposed this category of installations will be performed by Company's in-house labor. Response to Staff Production Request No.22. STAFF COMMENTS 17 MARCH 6, 2025 The Company provided only one cost estimate of$4,500 to perform boring (Item No. 1), from a 3rd party contractor, Double Diamond. Staff also requested the Company provide a detailed itemized breakdown of the quoted costs including, but not limited to,parts, materials, labor, transportation, etc., to justify the costs, and to ensure customers are not overcharged. The Company did not provide the necessary detailed and comprehensive information to justify the estimated costs of boring. Response to Production Request No. 36. As a result, it was challenging for Staff to determine a reasonable estimate for the costs of Item No. 1 that includes horizontal boring across road. To ensure fair, reasonable new connection fees, Staff proposes Item No. 1 be removed from the Company's new connections tariff, and a new category, "Horizontal Boring Adder" (Item No. 5)be included to the tariff, instead. Staff determined that a maximum $2,000 is reasonable for the Company to charge for boring (considering up to 50 linear feet of boring across road) and 3rd party installations. Staff s estimate is based on a boring rate of$10-$30 per linear foot,8 while considering any variation of terrain and necessary transportation. Additionally, Staff believes the customer should be given the option to find their own contractor (more feasible alternative based on availability) for boring purposes only. Customer Option to Directly Contract Horizontal Boring Services Staff recommends that customers be given the option allowing them to perform necessary boring to connect to the Company's water system using Company approved contractors at the customer's own expense. However, Staff believes the Company is responsible for final inspection of the boring prior to backfilling the excavation for all such connections and further recommends that the Company work with Staff to develop the specific language that should be added to the Tariff. The Company must perform necessary inspections to maintain adequate control over their water system and to ensure safe, reliable water service to customers. It is the Company's responsibility to ensure each connection is constructed in a manner that meets applicable State and Federal rules and laws and uses sound engineering practices. 8"How much does directional boring cost per foot?"Visit at:https://homeguide.com/costs/directional-boring-cost. STAFF COMMENTS 18 MARCH 6, 2025 Proposed Updates to Tariff Staff believes the Company's existing tariff needs to be updated and/or revised depending on the Commission's final decisions in this case. This includes: 1. Updating the New Connection Charges in Non-Recurring Charges Schedule; 2. Removing the "Pit Setter, Meter, Tap Main Line+Excavation or Horizontal Boring Across Road," adding a new category "Horizontal Boring Adder"to the tariff, and including language that captures Staff s recommended charges for"Horizontal Boring Adder;" and 3. Adding language that would allow customers to directly contract horizontal boring work on their own to establish water service while maintaining Company oversight. Staff recommends that once a final order in this case has been issued by the Commission, the Company should collaborate with Staff to determine changes that need to be made to the Company's tariffs and then submit its updated tariff through a compliance filing within 30 days for approval by the Commission. Reconnection Charges for Voluntary Disconnections Exceeding3 0 Days The current Commission-approved tariff allows for a reconnection charge of$75 for customer disconnections exceeding 30 days. This is an amount equal to three times the monthly customer charge. Staff recommends that the reconnection charge be updated to an amount equal to three times the Commission-approved monthly customer charge in this case. With Staff s recommended rate increase and the Company's proposed switch from annual to monthly billing, Staff is concerned with the Company's revenue stability. Specifically, that seasonal customers facing the current reconnection charge may be induced to voluntarily disconnect from the system during periods of prolonged vacancy to avoid the monthly customer charge. Staff believes it is essential for all customers, whether year-round or seasonal, to pay the monthly customer charge. This allows for recovery of the year-round fixed costs that the Company incurs to operate and maintain the system for all customers. Given the high proportion of seasonal customers connected to the Company's system, voluntary disconnections could lead to revenue stability issues for the Company. STAFF COMMENTS 19 MARCH 6, 2025 CUSTOMER COMMENTS Staff has reviewed the written customer comments that were received by the Commission regarding this case. As of March 3, 2025, twenty-four comments have been received by staff. The comments are primarily from residential customers, all of which are opposed to the company's rate increase proposal. The top categories of comments comprise of the following: 1) The percentage increase is too high. (17 comments) 2) Customers want to limit the percentage increase. (13 comments) 3) Customers state that there is a lack of clarity with application. (9 comments) 4) customers believe they are paying for new development. (8 comments) 5) Water should be metered. (7 comments) 6) The cost of improvements is too high. (4 comments) 7) Connection charge is too high. (4 comments) CUSTOMER RELATIONS Customer Notice and Press Release On August 26, 2024, the Company sent the Commission an application requesting a rate increase for service and hookup fees. On September 4, 2024, the Company submitted a Customer Water Rate Increase Notification to Staff. Upon Staff review, the Company was advised that the notice did not meet the requirements set forth in Rule 125. Consumer Staff worked with the Company to ensure that billing information and customer notices complied with the requirements set forth in the Commission's Utility Customer Relations Rule (UCRR) and Utility Customer Information Rules (UCIR). The revised customer notice was received by the Commission on October 10, 2024, and was reviewed by Staff and approved. The company sent the Staff approved Customer Notice to customers on October 10, 2024, describing the proposed General Rate Case. Staff also notes that the Company submitted a copy of its bill statement, a seven-day disconnect notice, a 24-hour disconnect notice and a summary of rules. The Company has agreed to make changes that will bring its forms into compliance. Staff reviewed its complaint database and determined that there have not been any complaints regarding service or water quality issues. Staff did note three inquiries in January 2025 regarding the General Rate Case. STAFF COMMENTS 20 MARCH 6, 2025 The Commission provided public notification for a Customer Workshop through a January 10, 2025, news release. The Customer Workshop was held on February 26, 2025. At the Customer Workshop, there were 17 customers present. The customers' comments and questions presented at the hearing echoed those questions and concerns presented in customer comments submitted to the case record. On February 26, 2025, the Commission provided notification for a Public Customer Hearing, to be held Thursday, March 13, 2025, at the St. Charles City Hall at 4:00 p.m. STAFF RECOMMENDATION Staff Recommends the Commission: 1. Establish a revenue requirement of$54,459, which is an increase of$25,549 calculated using a ROE of 11%; 2. Approve a non-metered flat-rate of$62.17, Attachment D; 3. Approve a voluntary disconnection exceeding 30 days charge be an amount equal to three times the Commission-approved monthly flat-rate; 4. Approve the treatment of the over-collection of connection fees of$59,000 as CIAC; 5. Approve the treatment of vacant lot revenues from the last three years, if applicable, as a credit against a future connection fee; 6. Order the Company to provide a report to Staff that includes a list of customers and the total dollar amount each may receive as a credit against a future connection charge; 7. Direct the Company to begin reading customer meters monthly or per the schedule in Table No. 4; 8. Approve connection fees that are based on Staff s proposed New Connection Charges in Attachment E; 9. Order the Company to work with Staff to update the language in the tariff after the final order has been submitted and to submit the updated tariff to the Commission through a compliance filing within 30 days for Commission approval; and 10. Order the Company to obtain and retain contractor quotes, invoices, and other cost records of all future new customer connections broken down by individual installation categories (i.e., Pit Setter, Meter Installation, and Tap Main Line, Pit STAFF COMMENTS 21 MARCH 6, 2025 Setter and Meter Installation Only, etc.), and further broken down by labor(hours and labor rate), material cost(cost of individual components), and equipment cost (hours and cost per hour). Respectfully submitted this 6th day of March 2025. Chris Burdin Deputy Attorney General Technical Staff. Travis Culbertson I:\Utility\UMISC\COMMENTS\ASP-W-24-03 Comments.docx STAFF COMMENTS 22 MARCH 6, 2025 REVENUE REQUIREMENT (A) (B) (C) Company Staff Staff Application Adjustments (A+B) 1 Rate Base (Ex. 1, Sch C, line 11) 159,619 (50,449) 109,170 2 Required Rate of Return(Ex. 3, line 7) 11.00% 11.00% 3 Income Required(Line 1 x Line 2) 17,558 12,009 4 Income Realized(Ex. 2, Sch C, line 29) (48,110) 38,754 (9,356) 5 Income Deficiency(Line 3 less Line 4) 65,668 21,364 6 Net Operating Income Realized $ 9,356 7 Gross Up Factor 1.002127 8 Total Incremental Revenue Requirement 9,376 9 Net Operating Income Required $ 65,668 $ 12,009 10 Gross Up Factor 1.346594 1.346802 11 Total Incremental Revenue Requirement $ 88,428 $ 16,173 12 Revenues at Existing Rates $ 28,910 $ 28,910 13 Total Revenue Requirement $ 117,338 $ 54,459 14 Percent Increase Required 306% 88% 15 Total Gross Revenues 1.000000 1.000000 16 Less Regulatory Fees (percentage) 0.001982 0.002127 17 State Income Tax Rate 0.058 0.058000 0.058000 18 Total Expenses 0.059982 0.060127 19 Federal Income Tax Base 0.940018 0.939873 20 Federal Income Tax Rat, 0.21 0.197404 0.197373 21 Net Operating Revenue 0.742614 0.742500 22 Net Income to Gross Revenue Multiplier 1.346594 1.346802 Attachment A Case No.ASP-W-24-03 Staff Comments March 6,2025 RESULTS OF OPERATIONS WITH STAFF ADJUSTMENTS (A) (B) (C) Test Year STAFF ADJ STAFF 2023 TOTAL TOTAL Line Water Revenues 1 Unmetered $ 28,910 $ - $ 28,910 2 Total Revenues $ 28,910 $ - $ 28,910 Operating Expenses 3 Labor-Operations&Maintenance $ 10,000 $ (3,856) $ 6,144 4 Labor-Customer Accounts $ 1,000 $ (1,000) $ - 5 Purchased Power $ 11,744 $ (190) $ 11,554 6 Chemicals $ 500 $ (500) $ - 7 Materials&Supplies-Operation&Maintenance $ 10,255 $ (10,120) $ 135 8 Materials&Supplies-Admin&General $ 1,166 $ - $ 1,166 9 Contract Services-Professional $ 5,759 $ (2,600) $ 3,159 10 Contract Services-Water Testing(Monthly) $ 2,035 $ - $ 2,035 11 Transportation Expense $ 1,541 $ - $ 1,541 12 Insurance $ 437 $ - $ 437 13 Miscellaneous Expenses $ 4,569 $ (1,464) $ 3,105 14 TOTAL Operating Expenses $ 49,006 $ (19,730) $ 29,276 15 Depreciation Expense $ 22,580 $ (11,913) $ 10,667 16 Amortization Exp-CIAC $ - $ (7,536) $ (7,536) 17 IPUC Regulatory Fees $ - $ 94 $ 94 18 Property Taxes $ 345 $ - $ 345 19 Other Taxes(list) DEQ Fees $ - $ 330 $ 330 20 Federal Taxes $ 3,745 $ - $ 3,745 21 State of ID Taxes $ 1,344 $ - $ 1,344 22 TOTAL Expenses from Operations $ 77,020 $ (38,754) $ 38,266 23 Net Operating Income $ (48,110) $ 38,754 $ (9,356) Rate Base 24 Plant in Service $ 620,854 $ 31,603 $ 652,457 25 Accumulated Depreciation $ 425,361 $ (51,228) $ 374,133 26 Net Plant in Service $ 195,493 $ 82,831 $ 278,324 27 Contributed Capital $ 42,000 $ 440,191 $ 482,191 28 Accumulated Contributed Capital $ - $ 368,377 $ 368,377 29 Less Net Contributed Capital $ 42,000 $ 71,813 $ 113,813 30 Customer Hookup Fees $ - $ 59,000 $ 59,000 31 Accumulated Customer Hookup Fees $ - $ - $ - 32 Less Net Customer Hookup Fee-CIAC $ - $ 59,000 $ 59,000 33 Total Net Plant in Service $ 153,493 $ (47,982) $ 105,511 34 Add Working Capital(1/8 Operating Expenses) $ 6,126 $ (2,467) $ 3,660 35 Total Rate Base $ 159,619 $ (50,449) $ 109,170 36 Incremental Revenue Requirement $ 88,428 $ 25,549 Attachment B Case No.ASP-W-24-03 Staff Comments March 6,2025 PLANT-IN-SERVICE("PIS") DEPRECIATION ACCUMULATED DEPRECIATION CONTRIBUTIONS IN AID OF CONSTRUCTION("CIAC") (A) (B) (C) (D) (E) (F) (G) (H) (1) M (K) Application PIS Total Depreciable Annual Accumulated Acc Dep Total Total Total Accum. Annual Amort Line ACCT#DESCRIPTION ADJ PIS Life Dep.Exp. Dep.Exp. ADJ Acc Dep CIAC Amort CIAC CIAC 1 303 Land&Land Rights $ 10,000 $ - $ 10,000 0 $ - $ - $ - 2 304 Structures and Improvements $ 14,500 $ 14,500 35 $ - $ 14,500 $ 14,500 $ 14,500 $ 14,500 $ 3 304 New Structure and Improvements $ 68,655 $ (18,255) $ 50,400 35 $ 1,440 $ - $ 720 $ 720 4 305 Collecting&Impounding Reservoirs $ 90,000 $ 90,000 50 $ - $ 90,000 $ 90,000 $ 90,000 $ 90,000 $ 5 307 Wells $ 70,000 $ 70,000 30 $ - $ 70,000 $ 70,000 $ 70,000 $ 90,000 $ 6 307 Wells $ 73,380 $ 73,380 34 $ 2,140 $ 60,844 $(24,464) $ 36,380 $ 73,380 $ 36,380 $ 2,140 7 307 Wells $ 5,000 $ 5,000 34 $ 146 $ - $ 73 $ 73 8 309 Supply Mains $ 42,000 $ 42,000 44 $ 955 $ - $ 477 $ 477 $ 42,000 $ 477 $ 955 9 310 Power Generation Equipment $ 20,651 $ 20,651 22 $ - $ 20,651 $ 20,651 10 311 Power Pumping Equipment-New Pump $ 40,051 $ 40,051 19 $ - $ 40,051 $ 40,051 $ 40,051 $ 40,051 $ - 11 311 Power Pumping Equipment-New Pump $ - $ 9,730 $ 9,730 19 $ 512 $ - $ 768 $ 768 12 311 Power Pumping Equipment-New Pump $ - $ 44,506 $ 44,506 19 $ 2,342 $ - $ 1,171 $ 1,171 13 331 Trans.&Distrib.Mains&Accessories $ 70,650 $ 70,650 20 $ - $ 90,735 $(20,085) $ 70,650 $ 70,650 $ 70,650 $ - 14 331 Trans.&Distrib.Mains&Accessories $ 9,000 $ 9,000 44 $ 205 $ - $ 3,886 $ 3,886 $ 9,000 $ 3,886 $ 205 15 331 Trans.&Distrib.Mains&Accessories $ 56,610 $ 56,610 44 $ 1,287 $ $ 6,433 $ 6,433 $ 56,610 $ 6,433 $ 1,287 16 333 Services $ - $ - 20 $ - $ $ - $ - $ 59,000 $ - $ 2,950 17 334 Meters and Meter Installations $ 1,500 $ 1,500 23 $ $ 1,500 $ $ 1,500 $ 1,500 $ 1,500 $ - 18 334 Meters and Meter Installations $ 3,005 $ (1,000) $ 2,005 23 $ 87 $ - $ 44 $ 44 19 335 Hydrants $ 17,877 $ (3,377) $ 14,500 40 $ $ 14,500 $ $ 14,500 $ 14,500 $ 14,500 $ - 20 346 Communications Equipment $ 27,975 $ 27,975 18 $ 1,554 $ 22,580 $(20,251) $ 2,329 $ - 21 TOTAL PLANT-IN-SERVICE $ 620,854 $ 31,604 $ 652,457 $ 10,667 $ 425,361 $(51,228) $374,133 $541,191 $ 368,377 $ 7,536 Attachment C Case No. ASP-W-24-03 Staff Comments March 6, 2025 CUSTOMER RATES AND REVENUE APPLICATION STAFF RECOMMENDATION (A) (B) (C) (D) (E) (F) (G) (H) Staff No. of Present Revenue at Requested Requested No. of Recommended Staff Line Customers Rates Present Rates Rates Revenue Customers Rates Revenue 1 Residential 73 $ 25.00 $ 21,900 $ 134.00 $ 117,384 73 $ 62.17 $ 54,461 2 73 $ 21,900 73 3 Company Requested Revenue $ 117,384 Staff Recommended Revenue $ 549461 4 Company Reported Revenue $ 28,910 Staff Adj to Reported Revenue $ 28,910 5 Increase to Reported Revenue $ 88,474 Increase to Staffs Reported Revenue $ 25,551 6 Percentage Increase 306% Percentage Increase 88% Attachment D Case No. ASP-W-24-03 Staff Comments March 6, 2025 Attachment E Staff Proposed New Connection Fees NON-RECURRING CHARGES Connection Charges Connection Type Cost Install Meter and Turn on Water Only $400 Pit Setter and Meter Installation Only $2,150 Pit Setter, Meter Installation, and Tap Main Line $2,500 Horizontal Boring Adder $2,000 Attachment E Case No. ASP-W-24-03 Staff Comments March 6, 2025 CERTIFICATE OF SERVICE I HEREBY CERTIFY THAT I HAVE THIS_DAY OF MARCH 2O25, SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF , IN CASE NO. ASP-W-24-03, BY E-MAILING A COPY THEREOF, TO THE FOLLOWING: BART & KAMI McKINNON ASPEN CREEK WATER CO INC PO BOX 77 GARDEN CITY UT 84028 E-MAIL: aspencreekwaterco cr,gmail.com PATRICIA JORDAN, SECRETARY CERTIFICATE OF SERVICE