20250707Reply Comments.pdf

RECEIVED
July 07, 2025
IDAHO PUBLIC
UTILITIES COMMISSION
Preston N. Carter, ISB No. 8462
GIVENS PURSLEY LLP
601 West Bannock Street
P.O. Box 2720
Boise, Idaho 83701-2720
[phone]
[e-mail]
18971071.4[13988.23]
Attorneys for Gem State Water Company, LLC
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION Case No. GSW-W-24-01
OF GEM STATE WATER COMPANY,
LLC. FOR THE AUTHORITY TO GEM STATE WATER COMPANY,LLC's
INCREASE ITS RATES AND CHARGES REPLY COMMENTS
FOR WATER SERVICE IN THE STATE OF
IDAHO
Gem State Water Company, LLC (Gem State Water, Applicant, or Company) submits the
following comments in reply to the comments filed by the Idaho Public Utilities Commission
Staff.
GENERAL COMMENTS
Gem State Water has worked diligently to continue improvements to its rural water
systems in northern Idaho, and appreciates Staff s efforts throughout this case. Gem State Water
does not object to the majority of Staffs proposed adjustments. Gem State Water does
respectfully disagree with the proposed adjustments to salary expenses and certain parts of the
depreciation expense adjustment. Gem State Water's position on reply is summarized in Exhibit
1, and revised proposed rates based on this position are attached as Exhibit 2.
REPLY COMMENTS PAGE I OF 5

REPLY COMMENTS
1. Salaries
The Company proposed a 10% salary increase for employees. In its comments, Staff
proposed allowing a 5% increase based on Staff s conclusion that data from the Bureau of Labor
Statistics indicated an average salary-growth rate of 5.59% for similar occupations between the
years of 2022 to 2023 and 2021 to 2023. Staff Comments at 18. Staffs proposed adjustment
would decrease salary expenses by $17,141.
The Company does not agree with this adjustment for several reasons. First, employment
at Gem State Water is uniquely challenging. Gem State Water consists of several rural water
systems scattered throughout a large area, rather than a consolidated urban system. Most or all
field service requires a significant drive. In many instances, it is not possible to access service
points by vehicle, so a significant walk or hike is also necessary. Gem State Water's three field
employees must cover this entire territory; one of them is on call nearly around-the-clock.
In addition, Gem State Water's systems were not centrally planned, and documentation on
their layout is often lacking. Employees often rely upon institutional knowledge regarding the
system, as well as the best methods to access various parts of the systems.
Gem State Water's managerial and office positions are also challenging. Its employees
must issue around 1,000 bills per month and field customer calls and inquiries throughout its
extensive service territory. Regulations, testing, and other regulatory requirements are extensive,
as they must be completed for each of Gem State Water's systems rather than a single, unified
system. And, due to Gem State Water's small staff, employees must cover for one another when
one staff member is sick or out of the office. In short, employment at Gem State Water is
significantly more taxing than the nationwide average position.
REPLY COMMENTS PAGE 2 OF 5

Second,Northern Idaho has experienced significant growth in both population and cost of
living. The cost of living in the Coeur d'Alene area, for example, is 26% higher than the national
average. See Cost of Living Information for Coeur d'Alene, Idaho, Economic Research Institute,
available at https://www.erieri.com/cost-of-living/united-states/idaho/coeur-dalene. Housing costs
are particularly high, making it difficult to attract and retain quality employees.
Third, wages for positions at competing utilities are better than Gem State Water's wages.
Public-sector competitors, such as the City of Coeur d'Alene,provide significantly better benefits
and a less stressful working environment. See https://www.cdaid.org/files/HR/Water -_Copy.pdf
(wages); https://www.cdaid.org/32/departments/hr/summary-of-benefits (benefits). What's more,
for all but one of the positions in question, the City of Coeur d'Alene's salary is higher than the
comparable Gem State Water position after the 10% increase.
Fourth, Staff does not employ a sound methodology for recommending a 5% increase. It
appears that Staff simply"averages the averages" of nationwide data for positions with similar
titles, without taking into account company-specific factors, including job responsibilities, cost of
living, local salaries, and other factors. Staff s "average of averages" is actually 5.59%which is
rounded down to 5%without explanation. Rounding down the average of averages does not
provide a sufficient or well-reasoned basis for selecting a 5%wage increase.
Also, Staff appears to have been focused only on the percentage increase and not on the
actual level of wages. What is important is that the level of wages needs to be competitive with
similar local opportunities (such as City of Coeur d'Alene). The percentage increase needed to get
to a competitive wage level may be high simply because the old wage level was too low.
Attracting and retaining high-quality employees is important to ensure continuing high-
quality service to customers. A 10% increase is justified and reasonable. A 5% increase,by
contrast, will result in the Company falling further behind its competitors, making it even more
REPLY COMMENTS PAGE 3 OF 5

difficult to catch up in the future. The Company requests that the Commission approve the
requested 10% salary increase (and reject Staffs proposed $17,141 adjustment).
2. Depreciation Rates
Staff has recommended that Gem State Water's depreciation rates be standardized by
NARUC account and has recommended revised depreciation rates for many of Gem State Water's
assets. The Company agrees with most of Staffs depreciation rate adjustments, with two minor
exceptions.
First, Staff recommends a 25-year life for account 311 "Pumping Equipment." The
NARUC recommended lives for account 311 are 20 years for"Pumping Equipment" (i.e., the
actual pumps) and 25 years for"Other Pumping Plant" (both are included in account 311.) Gem
State Water's experience is that pumps' lives tend to be closer to 20 years than to 25 years. Since
pumps are the largest component of the 311 account, the Company recommends using a 20-year
life for account 311.
Second, Staff assigns 10 or 20 year lives to items in account 340 "Office Furniture and
Equipment."Most items in that account are computer hardware and software. Under GAAP,
software would generally have a 3-year life and hardware a 5- or 7-year life. The Company
believes it is unrealistic to expect laptops and similar items to last 10 years. For this reason, the
Company recommends a life of 5 years for account 340.
Dated: July 7, 2025.
GIVENS PURSLEY LLP
By Preston N. Carter
Preston N. Carter
Givens Pursley LLP
Attorneys for Gem State Water Company, LLC
REPLY COMMENTS PAGE 4 OF 5

CERTIFICATE OF SERVICE
I hereby certify that on July 7, 2025, I caused to be served a true and correct copy of the
foregoing document to the person(s) listed below by the method indicated:
Monica Barrios-Sanchez ® Email
Commission Secretary ❑ U.S. Mail
Idaho Public Utilities Commission ❑ Fax
P.O. Box 83720 ❑ Hand Delivery
Boise, Idaho 83720-0074
monica.barriossanchez&puc.idaho.gov
Preston N. Carter
Preston N. Carter
REPLY COMMENTS PAGE 5 OF 5

GEM STATE WATER COMPANY
Exhibit 1 to Reply Comments
Revenue Requirement Comparison
Company Original Staff Company Reply
Request Recommended Recommended
1 Rate Base $ 3,813,776 $ 3,774,729 $ 3,776,659
2 Required Rate of Return 7.96% 7.51% 7.51%
3 Net Operating Income Requirement $ 303,538 $ 283,293 $ 283,438
4 Net Operating Income Realized $ (145,019) $ 12,850 $ (24,674)
5 Net Operating Income Deficiency $ 448,557 $ 270,443 $ 308,112
6 Net Operating Income Deficiency 448,557 270,443 308,112
7 Gross up Factor 1.345668 1.339644 1.339644
8 Total Incremental Revenue Requirement $ 603,609.33 $ 362,297.95 $ 412,760.96
9 Revenues at existing rates $ 763,610 $ 763,610 $ 763,610
10 Total Revenue Requirement $ 1,367,219 $ 1,125,908 $ 1,176,371
11 Percent Increase Required 79.0% 47.4% 54.1%

GEM STATE WATER COMPANY
Exhibit 2 to Reply Comments
Proposed Rates Comparison
Gallons Included in Minimum Customer Charge
Minimum Customer Charge Commodity Rate:Per 1,000 Gallons Above Volume Included. (Allowance)
Company Staff and
Meter Size(Inches) Present Company Application Staff Company Reply Present Company Application Staff Company Reply Present Application Company Reply
STAFF RECOMMENDED
SCHEDULE 1
Bar Circle S and Spirit Lake 1 $ 35.00 $ 53.50 53% $ 46.00 31% $ 47.67 36% $ 2.52 $ 4.50 79% $4.17 65% $ 4.27 69% 7,500 5,000 7,500
Bar Circle S and Spirit Lake 1.5 $ 70.00 $ 107.00 53% $ 92.00 31% $ 95.34 36% $ 2.52 $ 4.50 79% $4.17 65% $ 4.27 69% 15,000 10,000 10,000
Bar Circle S and Spirit Lake 2 $ 112.00 $ 171.20 53% $147.00 31% $152.34 36% $ 2.52 $ 4.50 79% $4.17 65% $ 4.27 69% 30,000 20,000 20,000
Bitterroot and Rickel 1 $ 35.00 $ 53.50 53% $ 46.00 31% $ 47.67 36% $ 2.45 $ 4.50 84% $4.17 70% $ 4.27 74% 10,000 5,000 7,500
Troy Hoffman 1 $ 35.00 $ 53.50 53% $ 46.00 31% $ 47.67 36% $ 2.45 $ 4.50 84% $4.17 70% $ 4.27 74% 7,500 5,000 7,500
Diamond Bar Estates 1 $ 41.00 $ 53.50 30% $ 46.00 12% $ 47.67 16% $ 2.45 $ 4.50 84% $4.17 70% $ 4.27 74% 7,500 5,000 7,500
Diamond Bar Estates 2 $ 112.00 $ 171.20 53% $147.00 31% $152.34 36% $ 2.45 $ 4.50 84% $4.17 70% $ 4.27 74% 35,000 20,000 20,000
Diamond Bar Irrigation 1 $ 35.00 $ 53.50 53% $ 46.00 31% $ 47.67 36% $ 2.26 $ 4.50 99% $4.17 85% $ 4.27 89% 7,500 5,000 7,500
Diamond Bar Irrigation 1.5 $ 70.00 $ 107.00 53% $ 92.00 31% $ 95.34 36% $ 2.26 $ 4.50 99% $4.17 85% $ 4.27 89% 20,000 10,000 10,000
Diamond Bar Irrigation 2 $ 112.00 $ 171.20 53% $147.00 31% $152.34 36% $ 2.26 $ 4.50 99% $4.17 85% $ 4.27 89% 32,000 20,000 20,000
STAFF RECOMMENDED
SCHEDULE 2
Happy Valley 1 $ 35.00 $ 53.50 53% $ 46.00 31% $ 47.67 36% $ 1.45 $ 4.50 210% $4.17 188% $ 4.27 194% 15,000 5,000 15,000
Happy Valley 1.5 $ 70.00 $ 107.00 53% $ 92.00 31% $ 95.34 36% $ 1.45 $ 4.50 210% $4.17 188% $ 4.27 194% 15,000 10,000 15,000
Happy Valley 2 $ 112.00 $ 171.20 53% $147.00 31% $152.34 36% $ 1.45 $ 4.50 210% $4.17 188% $ 4.27 194% 30,000 20,000 20,000
Lynnwood 1 $ 35.00 $ 53.50 53% $ 46.00 31% $ 47.67 36% $ 2.45 $ 4.50 84% $4.17 70% $ 4.27 74% 15,000 5,000 15,000