20250304Decision Memo.pdf

DECISION MEMORANDUM
TO: COMMISSIONER LODGE
COMMISSIONER HAMMOND
COMMISSIONER HARDIE
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM: JOSEPH TERRY, COMMISSION STAFF MEMBER
CHRIS BURDIN,DEPUTY ATTORNEY GENERAL
DATE: MARCH 4, 2025
RE: IN THE MATTER OF STONERIDGE WATER COMPANY'S
APPLICATION TO INCREASE RATES AND MODIFY RULES AND
REGULATIONS; CASE NO. SWS-W-06-01.
In Order No. 30342 the Commission authorized CDS StoneRidge Utilities, LLC
("Company") to collect a surcharge as part of a Department of Environmental Quality Phase I
Loan ("loan") used to connect the Happy Valley Ranchos customers to the Company's original
water system. This surcharge was initially ordered to be paid by the Happy Valley Ranchos
customers at $16.83 per month per customer for five years and then reduced to $14.03 per month
per customer for the next 15 years. Order No. 30342.
However, due to an oversight on the Company's part, the surcharge was not reduced as
originally ordered. On March 13, 2015, the Commission issued Order No. 33249 ordering the
Company to reduce the Surcharge to $14.03. The Commission authorized the Company to collect
the remainder amount of $183,329.88 from the Happy Valley Ranchos Customers, and the
Commission estimated that this would be completed in September of 2025. Order No. 33249.
STAFF REVIEW
Staff has completed a review of the surcharge and discovered that the amount ordered to
be collected would be completely collected earlier than expected. Instead of being completely
collected in September of 2025, it will be fully collected after the April 2025 billing. This is due
to customer growth in the Happy Valley Ranchos. In its orders, the Commission assumed there
would be 101 customers for the entire duration of the collection of the surcharge time; however,
DECISION MEMORANDUM - 1 - MARCH 4, 2025

over the years the number of customers has grown to 115. Staff notified the Company of this
review and conclusion on January 21, 2025.
There were some limits to the Staff review. The Company did not have any customer
billing data from 2015 to 2018. Staff used the Commission estimated customer numbers for those
years. In response to Staffs audit request in this matter, the Company stated that it did not have
billing data before 2022. Staff used production request responses from Case No. SWS-W-24-01
for the billing data from 2019 to 2021. Finally, for collections in 2025, Staff assumed the same
collection as December of 2024.
COMPANY RESPONSE
The Company responded to Staffs review with a letter to the Commission Secretary on
January 27, 2025. (Attachment A). The Company raised some concerns that it wished to be
addressed. The Company calculated that the monthly payment for the loan should have been
$16,876.27 on an annual basis,as opposed to the Commission stated payment of$17,002 annually.
Additionally,the Company stated that when the surcharge is completed,there will still be a balance
on the loan. The Company was unsure why the surcharge was not set up for the full length of the
loan and does not know where the money is to come from to pay the loan.
STAFF REPLY
With respect to the Company's calculation of a different monthly payment, Staff reviewed
the calculation through the PMT function in Excel as well as a Goal Seek method to establish the
amount that would amortize the loan at the stated 2% interest rate to zero in 20 years. Both
methods calculated a payment of$17,001.57, an amount within a rounding error from the payment
the Commission used for this loan. Staff was not able to verify how the Company calculated the
payment amount indicated in its letter.
With respect to the Company's claim that there will be a remaining balance on the loan,
Staff created a schedule(Attachment B)that shows the collection from the surcharge on an annual
basis as well as the payments required for the loan. The surcharge started 18 months before the
first payment was due on the loan. This created an excess balance of collected surcharge funds of
over $30k before the first payment of$17,002 was due. Following the schedule, in every year
except for 2019 and 2020 the surcharge funds collected have exceeded the payment owed on the
loan, and if those funds had been kept in a separate account,that account would have a balance of
approximately $62k in at this point. That means that at this point the Happy Valley Ranchos
DECISION MEMORANDUM - 2 - MARCH 4, 2025

customers have paid more than the payments due to the loan. Those excess collections are then to
be used to cover the payments until the loan is fully paid off in 2028.
There are four reasons that the surcharge did not perfectly coincide with the loan term.
First, the initial payments were higher for the first five years in order to assist the Company to
abide with the loan provision that requires the borrower to have a reserve fund consisting of one
year's payments. That in and of itself would cause a one-year mismatch between loan payments
and surcharge collection. Second, the Company did not change the surcharge from $16.83 to
$14.03 at the appropriate time and collected excess funds from the customers. This increased that
mismatch by several months. Third, the surcharge began in June of 2007, but payments on the
loan did not begin until 2009. This increased the mismatch by 18 months. Finally, because the
recovery assumed a constant customer number, customer growth increased the recovery and
increased the mismatch between the loan and the surcharge.
STAFF RECOMMENDATION
Staff recommends the Commission order the Company to cease collections of the
surcharge to the Happy Valley Ranchos customers after the April 2025 billing cycle.
COMMISSION DECISION
Does the Commission wish order the Company to cease collections of the surcharge to the
Happy Valley Ranchos customers after the April 2025 billing cycle?
OMW4 (2
seph Terry
ommission Staff
I:\Uti1ity\UDMEM0S\SWS-W-06-01 Decision Memo.docx
DECISION MEMORANDUM - 3 - MARCH 4, 2025

i
STONER[DGE
CDs StoneRidge Utilities,LLC
P.O.Box 298
Blanchard,ID 83804
Ph(208)437-3148 Extn.4
SENT By:Email
January 27,2025
Monica Barrios-Sanchez
Commission Secretary
Idaho Public Utilities Commission
11331 W.Chinden Blva
Bldg,8, Ste. 201-A
Boise, ID 83714
RE:Audit Request NO. 1 Happy Valley Rancho Loan Surcharge Review
We have reviewed your work on the Surcharge for Happy Valley Rancho customers and have a couple of
questions we would appreciate your feedback on.
1. The two loans—Phase 1 HVR Surcharge Loan of$278,000 and Phase 2 All Customers Loan
$1150,457. Both loans were 20-year terms and 2%annual interest. In 2018 DEQ combined the
remaining balances of these two loans into one loan.Today the outstanding balance on the loan
as of 1/1/2025 was$104,005.43 before the accrued interest was added for 2024.
2, In ORDER NO. 30342 on page 14 there is a table showing the schedule for the loan surcharge
calculation as well as the calculation for the Monthly Reserve Payment Calculation.
In the Phase 1 Loan-Principal Loan table,the calculated annual payment on the S278,000 loan
amount over 20 years a 2%is shown as$17,002.00/annually or$1,416/Monthly and$14.03/Customer
(assume 101 customers). This payment amount according to our calculations should be
$1,406.36/month and SI6,876.27 annually. Can someone at IPUC confirm this difference?
This Loan was amortized over 20 years,but with the reserve funds collected in advance for the last
year payment,it would have been paid off in 19 years or in June of 2026. Now it is scheduled to pay
off at the end of March 2025 But we will owe DEQ over S52,000 in principal after the last payment on
the Surcharge Phase 1 loan. That remaining balance will now have to be paid by all the customers
for about 2 years longer. We are wondering where those funds are going to come from and why was
the Surcharge loan not set up to pay its share of the DEQ Loan until both Phases were paid in full.
3. In reviewing the ORDERS on this case, we came across a statement that contradicts a Statement
made on our current rate case we would like to have this discrepancy explained by IPUC Staff.
Attachment A
Case No. SWS-W-06-01
Decision Memorandum
DECISION MEMORANDUM - 4 - MARCH 4, 2025

Attached as Exhibit A is from SWS-06-01 ORDER NO. 30342 Page 7.
"Repairs to a water system are costs that should be included in annual operations and
maintenance expenses and are not to be considered a capital improvement.Only capital
improvements are included in the rate base. Therefore, Staff removed this amount from the
Company's rate Base."
Also attached as Exhibit B is from Case SWS-W-24-01 ORDER NO. 36407 Page 9
-Capo lvAring Repairs and ROWA&
Staff Comments
Staff recommended that three expenses incurred in 2023 be removed as expenses and
instead be placed into plant in service. Two of the expenses were for water main repairs and
the third was for pump repairs. This would lower the maintenance expense by S17,451 and
increase plant in service by the same amount_ The result of this reclassification would increase
the depreciation expense by S534 in the test year.
CompanyR oiv
The Company argued against capitalizing repairs in an aging system-comparing it to "putting
makeup on a dying pig." Reply Comments at 22. The Company contended these minor fixes
(less than 1.5% of total plant value for 2023) would be discarded during eventual system
replacement. The Company preferred treating repairs as operating expenses to track system
health and guide planning. The Company thus requested that$17,451 continue to be classified
as repair and rebuild expenses.
Commission Decision
The Commission finds that costs for repairs and maintenance that extend the life of a system
are appropriately capitalized and eligible to earn a return as part of the Company's rate base.
The Company's argument that the entire system will have to be replaced at the same time is at
this time uncertain based on the record_ Water systems routinely replace leaking pipes, which
�n turn extends the life of the system as a whole. Staff's recommendation was well-reasoned in
this case and followed established accounting principles. After the system, or sections of the
system, islare replaced,the Commission will review the associated expenses for prudency, but
such actions are not before the Commission at this time. As rt stands, booking the expenses to
plant in service is reasonable and consistent with our past decisions, WRONG! See cfv6eti- Q`%4 C.",
We firip these two IPUC,,statements to be 100% in opposition to each other from both Staff and the
Comfnissioners in 20QI vs 2024! We would like IPUC to explain what has changed between 2007 and
2021 in regard to es `;`,dished accounting principles and whatever else IPUC believes justifies the 180
degr �vot on this i ue!
Flea e'I us know It; ou have any other questions.
i
Sinc I
I
.Chan upiah, anaging Member
CDS StoneRidge Utilities, LLC
Attachment A
Case No. SWS-W-06-01
Decision Memorandum
DECISION MEMORANDUM - 5 - MARCH 4, 2025

HVRLoan
Loan Amount $ 278,000.00
Interest rate 2%
Payment Amount $17,001.57
Difference
Between
Beginning Ending Payment Funning
Loan Loan and Total of
Year Balance Interest PMT Balance Collection Surcharge Difference
2007 - - - - 10,098.00 (10,098.00) 10,098.00
2008 - - - - 20,599.92 (20,599.92) 30,697.92
2009 278,000.00 5,560.00 17,001.57 266,558.43 20,397.96 (3,396.39) 34,094.31
2010 266,558.43 5,331.17 17,001.57 254,888.03 20,801.88 (3,800.31) 37,894.62
2011 254,888.03 5,097.76 17,001.57 242,984.23 21,609.72 (4,608.15) 42,502.78
2012 242,984.23 4,859.68 17,001.57 230,842.34 21,407.76 (4,406.19) 46,908.97
2013 230,842.34 4,616.85 17,001.57 218,457.62 21,609.72 (4,608.15) 51,517.12
2014 218,457.62 4,369.15 17,001.57 205,825.21 20,801.88 (3,800.31) 55,317.43
2015 205,825.21 4,116.50 17,001.57 192,940.14 17,004.36 (2.79) 55,320.23
2016 192,940.14 3,858.80 17,001.57 179,797.38 17,004.36 (2.79) 55,323.02
2017 179,797.38 3,595.95 17,001.57 166,391.76 17,004.36 (2.79) 55,325.81
2018 166,391.76 3,327.84 17,001.57 152,718.03 17,004.36 (2.79) 55,328.60
2019 152,718.03 3,054.36 17,001.57 138,770.82 16,498.78 502.79 54,825.82
2020 138,770.82 2,775.42 17,001.57 124,544.67 15,853.89 1,147.68 53,678.14
2021 124,544.67 2,490.89 17,001.57 110,033.99 18,323.18 (1,321.61) 54,999.75
2022 110,033.99 2,200.68 17,001.57 95,233.11 19,333.34 (2,331.77) 57,331.52
2023 95,233.11 1,904.66 17,001.57 80,136.20 19,389.46 (2,387.89) 59,719.42
2024 80,136.20 1,602.72 17,001.57 64,737.36 19,543.79 (2,542.22) 62,261.64
2025 64,737.36 1,294.75 17,001.57 49,030.54 6,453.80 10,547.77 51,713.87
2026 49,030.54 980.61 17,001.57 33,009.58 - 17,001.57 34,712.30
2027 33,009.58 660.19 17,001.57 16,668.20 - 17,001.57 17,710.73
2028 16,668.20 333.36 17,001.57 0.00 - 17,001.57 709.17
Attachment B
Case No. SWS-W-06-01
Decision Memorandum
DECISION MEMORANDUM - 6 - MARCH 4, 2025