20250829Final_Order_No_36745.pdf

Office of the Secretary
Service Date
August 29,2025
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF FALLS WATER CO., ) CASE NO. FLS-W-24-02
INC.'S APPLICATION FOR AN ORDER )
AUTHORIZING INCREASES IN THE ) ORDER NO. 36745
COMPANY'S RATES AND CHARGES FOR )
WATER SERVICE IN THE STATE OF )
IDAHO )
On January 30,2025,Falls Water Company,Inc. ("Company") applied to increase its rates
and charges for water service in Idaho ("Application") by $899,493 or 25.02%. The Company
requested a March 1, 2025, effective date for new rates.
On February 18, 2025, the Commission issued a Notice of Application and a Notice of
Intervention Deadline, setting a deadline for interested parties to intervene. Order No. 36468. No
parties petitioned to intervene.The Commission also suspended the Company's proposed effective
date for five months and 30 days, consistent with Idaho Code § 61-622(4).
On April 15, 2025, the Commission issued a Notice of Modified Procedure, establishing
public comment and Company reply deadlines. Order No. 36542. The Commission also set a
virtual public workshop and customer hearing. Id. Commission Staff("Staff') filed comments to
which the Company replied.
On July 10,2025,the Commission held a customer hearing. Eight customers testified. One
hundred and twenty-four other public comments were filed.
Having reviewed the record in this case,we issue this Final Order authorizing the Company
to raise its rates as described herein. Additionally, we direct the Company to take the steps
described below to, among other things, address the unexplained water loss discovered during this
general rate case.
BACKGROUND
Falls Water is a Commission-regulated water corporation that provides service to the area
north of the City of Ammon, northeast of the City of Idaho Falls, and currently serves
approximately 6,833 residential and commercial customers in Bonneville County, Idaho. The
Company provides service under Amended Certificate of Public Convenience No. 236. The
Company's most recent general rate case was Case No. FLS-W-23-01.
ORDER NO. 36745 1

THE APPLICATION
According to the Company,it will experience a net operating deficiency of$658,867 under
existing rates based on an adjusted base test year ending September 24, 2024. To avert this, the
Company seeks to increase the revenue collected through rates by approximately $899,493, or
25.02%. The Company proposes collecting this increased revenue with the tariffs that consolidate
the Falls Water and Taylor Mountain water systems, believing that it will benefit the customer
service and business practices for each system. If approved as filed,the Application would produce
an expected Rate of Return ("ROR") of about 7.960/o-resulting from a 45%/55% debt/equity
structure, a 10.20%Return on Equity("ROE"), and a 5.22%cost of debt. The Company also seeks
to increase its hookup fees for certain classes of customers in amounts ranging from $25 to $495,
depending upon the size of the connection being hooked up.
STAFF COMMENTS
After reviewing the Company's application, documents, responses, and financial records,
Staff recommended that the Commission approve a revenue increase of$284,333, which would
raise the total annual revenue to $3,587,713. This proposed revenue requirement is based upon a
ROE of 9.7% applied to a net rate base of$15,017,145. Staff supported the Company's proposed
consolidation of the rates for its three water systems into one schedule. Despite largely agreeing
with the proposed reductions in water allotments under the Company's the three-tiered rate
structure, Staff recommended slightly more water for the lowest tier, higher rates for the highest
tier, and keeping the monthly minimum charges for all customers essentially the same.
I. System Description
Falls Water Company operates three water systems: Falls Water("FW"), Taylor Mountain
("TM"), and Morning View ("MV"), serving about 6,800 residential and commercial customers
in total. The FW system serves areas east of Idaho Falls and north of Ammon in Bonneville
County, Idaho, with nine wells, five wellhouses with backup generators, and a two-million-gallon
storage reservoir. The MV system serves an area southeast of Rigby in Jefferson County, Idaho,
and has one active well and backup generator. The TM system serves an area south of Idaho Falls
in Bonneville County and includes two production wells with one backup generator. Neither the
MV system nor the TM system have storage reservoirs or booster pumps. Each system distributes
water through pipes ranging from 2 to 12 inches in diameter, made from various materials, and
ORDER NO. 36745 2

delivered using service meters from 5/8 inch to 4 inches,with 98%of customers using 3/4-inch or
1-inch meters. Only the FW system chlorinates its water, using a mix of solid and liquid chlorine.
II. System Reliability
Staff concluded that the Company's water systems are safe and reliable. After reviewing
recent Idaho Department of Environmental Quality ("IDEQ") sanitary surveys, Staff found no
major issues or deficiencies affecting system reliability. There were also no customer complaints
in 2023 or 2024 relating reliability concerns.
A. Current Capacity and Demands
Staff reviewed facility plans for all three water systems and determined that each system
has enough total pumping capacity to meet current maximum daily demand ("MDD"). However,
the MV and TM systems may have insufficient firm capacity to meet MDD if their largest well
fails. Staff found that the MV system, with only one active well, has zero firm capacity and an
MDD of 277 gallons per minute ("GPM"). The TM system's firm capacity drops to 215 GPM
when its largest well is offline, which is below its MDD of 309 GPM. According to state
regulations, systems must meet MDD even if their largest water source is out of service.
Staff also noted that the TM system may lack sufficient pumping capacity to meet both
MDD and fire flow ("FF") needs. Bonneville County requires at least 1,500 GPM for fire
suppression. The MV system has no fire hydrants, so fire flow was not considered in its analysis.
Staff summarized its findings on pumping capacity and MDD in Table 1. IDEQ might investigate
these issues in future sanitary surveys.
B. Projected Future Growth and Demands
From 2020 to 2024,the Company saw an average annual growth of about 4.7%and expects
this trend to continue. Based on this growth rate and the Company's facility plan, Staff estimated
future equivalent residential units ("ERUs") and associated water demands—MDD, average daily
demand ("ADD"), and peak hourly demand—through 2040 for the FW system. Staff found that
while the FW system's current firm capacity (10,300 GPM) sufficient to meet the projected 2025
MDD (9,479 GPM), it may be insufficient for the projected 2030 MDD of 11,926 GPM.
Staff also reviewed the facility plans for both the MV and TM systems and compared future
demand projections with current capacities. The MV system does not expect growth, but the TM
system could reach up to 500 ERUs at full buildout. As noted earlier, both systems currently lack
ORDER NO. 36745 3

the capacity to meet their existing MDDs277 GPM for MV and 309 GPM for TM. Additionally,
the TM system may not be able to meet its projected full buildout MDD of 762 GPM.
C. Unexplained Water Loss
Staff found that among the Company's three systems, MV had the highest average annual
water loss in 2024around 42% a 5.5% increase from the 2022 estimate in the Company's last
general rate case. In contrast, TM's water loss dropped by 38.8%, and FW saw a slight 5.5%
reduction. While FW and TM showed improvements following the Company's mitigation plan,
Staff considered MV's water loss critically high. Staff recommended the Company continue
identifying the causes of water loss—such as leaks, unmetered connections, or unauthorized
hydrant use—and maintain the meter replacement program to demonstrate further system-wide
water loss reduction in its next general rate case.
D. Meter Accuracy Testing Program
The Company reported that its meter replacement program was less effective than
expected.Although about 250 meters were replaced during 2024,only 12 were tested for accuracy.
The Company intended to test five different meter models,but test results indicate only one model
was tested. Additionally, the tests were supposed to cover low, medium, and high flow rates, but
only one type of test was performed,with no flow type specified. The Company explained that the
full testing setup for all flow categories is still under construction.
Of the 12 tested meters, only one met the manufacturer's accuracy standard (f1.5%), but
Staff considered the sample size too small to draw reliable conclusions. Despite this,the Company
plans to continue the meter replacement program through 2030. Staff recommended that, in the
next general rate case, the Company include detailed test data such as the test date, meter make
and model, ID number, register manufacture date, results for each flow rate, weighted average
calculations, and overall accuracy.
III.Revenue Requirement
As stated, the Company requested an $899,493, or 25.02%, increase in annual revenues.
Based on 30 recommended adjustments detailed in Attachment B to its comments, Staff
recommended a smaller increase of$284,333.
IV.Rate of Return
The Company requested an overall ROR of 7.96%, based on a capital structure of 45%
debt at a cost of 5.22% and 55% equity at 10.2%. Staff recommended accepting the proposed
ORDER NO. 36745 4

capital structure but adjusting the cost of debt to 4.7% and ROE to 9.7%, resulting in a lower
overall ROR of 7.45%.
A. Cost of Debt
The Company based its proposed 5.22%cost of debt on the weighted average of long-term
debt from Northwest Natural Holding Co. ("NWN")Water credit agreements and term loans listed
in NWN's 2023 10-K report. Staff reviewed NWN's 2024 10-K and recommended updating the
debt data to reflect 2024 figures and to include only NWN Water term loans. Consequently, Staff
recommended a reduced cost of debt of 4.7%,which lowered the revenue requirement by$50,872.
B. Return on Equity
The Company requested an ROE of 10.2%, based on a proxy group of seven comparable
companies and three ROE calculation methods: Comparable Earnings, Discounted Cash Flow
("DCF"), and Capital Asset Pricing Model ("CAPM"). Staff performed its own analysis using
updated market data as of May 29, 2025, and calculated DCF and CAPM ranges using a proxy
group of eight companies. Staff's proxy group included the same companies used by the Company,
with the addition of H2O America, which Staff found to be comparable to others in the group.'
Staff also considered company-specific factors and prior Commission orders in its evaluation.
i. Discounted Cash Flow
The DCF method is based on the idea that a utility's ROE equals the present value of
expected future dividends. It is calculated by adding the dividend yield to the projected growth
rate. Applying this method to its proxy group, Staff calculated an ROE range of 8.05%to 11.38%,
with an average of 9.08%.
ii. Capital Asset Pricing Model
The CAPM calculates ROE by adding the risk-free rate to the market risk premium. The
risk-free rate represents a guaranteed return investment, like a U.S. Treasury bond. The market
risk premium is found by multiplying the stock's beta—measuring its volatility relative to the
market—by the expected market return. Based on this method, Staff calculated an ROE range of
7.55%to 11.83% for the proxy group, with an average of 10.27%.
iii. Company Factors and Prior Commission Order
In Order No. 36027, the Commission approved a balancing account to cover groundwater
mitigation costs. These costs,which arise from overproduction of water, are unpredictable and can
' The full proxy group Staff selected is shown in Table No. 5 in Staff s comments.
ORDER NO. 36745 5

be significant. The balancing account helps limit the Company's financial risk from these
expenses. Because this mechanism reduces the Company's overall risk, Staff believed it supports
keeping ROE levels lower rather than increasing them.
iv. Summary of ROE
Staff calculated its recommended ROE by combining the DCF and CAPM method ranges,
resulting in a range of 7.55%to 11.83% and an average ROE of 9.68%. Considering this analysis
and the existence of a balancing account that reduces the Company's financial risk, Staff
recommends a ROE of 9.7%. This recommendation results in a $59,223 reduction to the revenue
requirement.
V. Net-to-Gross Multiplier
The Company proposed a net-to-gross multiplier of 136.52% to ensure it collects enough
revenue to cover bad debt, regulatory fees, and income taxes. This multiplier adjusts the revenue
requirement so the Company can meet these obligations while maintaining its requested earnings.
Staff updated the multiplier by removing bank service fees, applying the updated regulatory
assessment rate, and using the new 2025 Idaho corporate tax rate. As a result, Staff recommends a
revised multiplier of 134.674%.
A. Bank Service Fees
The Company proposed including bank service fees in the net-to-gross multiplier at
0.009%. However, as these fees vary annually and are not tied to a fixed percentage of revenue,
they should not be included in the multiplier. Additionally, in Order Nos. 34925 and 36027, the
Commission directed the Company to exclude bank service fees from the multiplier. Consistent
with these orders, Staff recommended removing the fees from the revenue requirement, resulting
in a $7,173 decrease.
B. Regulatory Assessment Fees
The Company included regulatory fees in the net-to-gross multiplier at 0.2529%.However,
Order No. 36545 updated the Commission's regulatory assessment fee to 0.2223%. Staff
recommended using the updated rate, which resulted in a $246 decrease to the revenue
requirement.
ORDER NO. 36745 6

C. State Income Tax Rate
The Company included state income taxes in the net-to-gross multiplier at 5.695%.
However, Idaho's state income tax rate was reduced to 5.3% in 2025. Staff recommended using
the updated 5.3%rate, which results in a$3,291 decrease to the revenue requirement.
VI.Rate Base
The Company proposed a rate base of $15,924,094, which includes plant-in-service
("PIS") and cash working capital, offset by accumulated depreciation and contributions in aid of
construction ("CIAC"). Staff reviewed all rate base components, including recent PIS additions,
accumulated depreciation, CIAC and its amortization, deferred tax assets, and cash working
capital. Based on this review, Staff recommended reducing the rate base by$906,948,resulting in
a revised rate base of$15,017,145.
A. Plant-In-Service
Staff reviewed the capital additions proposed for recovery, applying the following four
criteria: (1) whether the assets are expected to be used and useful by the rate effective date; (2)
whether project costs are known and measurable; (3)whether there is a clear need for the project;
and (4) whether the costs are reasonable and represent the least-cost option among alternatives.
Based on this analysis, Staff recommends a PIS balance of $19,796,791, reflecting seven
adjustments that reduce PIS by $399,295.
i. Company Updated Plant-In-Service
The Company's initially requested a PIS balance of $18,516,936 in the Application. In
response to Staff s production requests, the Company reported a slightly lower balance of
$18,488,213. The difference is due to Account 334 — Meters. Staff recommended adjusting the
PIS balance to reflect the updated amount for Account 334 as reported in the Company's response.
This results in a$28,723 reduction to PIS and a $2,882 decrease to the revenue requirement.
ii. Water Rights
The Company included a proforma PIS increase of$354,750 for the purchase of additional
water rights. However, the Company provided invoices to Staff totaling $356,059. Staff
recommended adjusting the PIS to reflect the actual documented amount, resulting in a $1,309
increase to PIS and a$131 increase to the revenue requirement.
ORDER NO. 36745 7

iii. Service Line Replacements
The Company included a proforma PIS increase of$52,000 for service line replacements.
However, the Company's discovery response showed actual costs totaled $29,814 with no
additional costs reported as of April 2025. Staff recommended adjusting the PIS to reflect the
actual amount,resulting in a$22,186 reduction and a$2,801 decrease to the revenue requirement.
iv. Backup Generators for Well No. 5 & Office Building
The Company included a proforma PIS increase of$155,000 for backup generators at Well
No. 5 and its office building. However, delivery was delayed until August 2025, and Staff found
it unlikely the generators will be installed and in use by the September 1, 2025 rate effective date.
Staff also noted installation costs are not yet known. Therefore, Staff recommended removing the
$155,000 from PIS, resulting in a$23,590 decrease to the revenue requirement.
B. Accumulated Depreciation
Staff reviewed the Company's accumulated depreciation calculations and recommended a
revised balance of $3,396,942. This reflects seven adjustments totaling $559,573, as described
below.
i. Company Updated Accumulated Depreciation
The Company proposed an accumulated depreciation balance of $2,805,335 as of
September 30, 2024. However, the Company's discovery responses indicated a slightly higher
balance of $2,807,424. Staff recommended using the updated amount, increasing accumulated
depreciation by $2,089, which results in a $210 decrease to the revenue requirement.
ii. Accumulated Depreciation Updated to August 31, 2025
The Company's accumulated depreciation calculations extended only through September
30,2024. As proforma PIS is included for recovery, Staff recommended updating the accumulated
depreciation to reflect the period through the proposed rate effective date of September 1, 2025.
This resulted in a $564,973 increase to accumulated depreciation and a $56,685 reduction to the
revenue requirement.
iii. Project-Specific Accumulated Depreciation
The Company included six months of accumulated depreciation to calculate pro forma PIS
additions. Staff agreed this method is reasonable, as it avoids the need to adjust depreciation for
each project's actual in-service date. Additionally, as the total proforma accumulated depreciation
is relatively small, any such adjustments would have minimal impact. Based on Staff s
ORDER NO. 36745 8

recommended PIS adjustments—including Replacement Well No. 4, Falls Water Meter
Replacements,Backhoe& Skid Steer, Service Line Replacements, and Backup Generators—Staff
recommended a $7,489 decrease to accumulated depreciation using the half-year method.
C. Contributions in Aid of Construction
The Company reported CIAC at $2,806,099 as of September 30, 2024. However, its
discovery responses showed a slightly lower amount of $2,786,624 for the same date. Staff
recommended adjusting CIAC to the lower amount,resulting in a$19,475 reduction to CIAC and
a$1,954 increase to the revenue requirement.
D. Accumulated Amortizations of CIAC
The Company reported accumulated amortization of CIAC at $1,009,922 as of September
30, 2024. However, the Company's discovery responses showed a lower amount of $997,192.
Staff recommended adjusting to the lower figure, resulting in a $12,730 decrease to accumulated
amortization of CIAC and a$1,277 decrease to the revenue requirement.
Additionally, the Company calculated accumulated amortization of CIAC through
September 30, 2024. Staff recommended updating this to reflect the period through the proposed
rate effective date of September 1, 2025. This results in an $82,164 increase to accumulated
amortization of CIAC and an$8,244 increase to the revenue requirement.
E. Working Capital
The Company proposed a cash working capital balance of$287,563 using the one-eighth
method. Staff recommended a lower working capital balance of $250,574 based on Staff s
proposed operating expense figures. This reduces working capital by $36,898 and decreases the
revenue requirement by $3,711.
VII.Revenue
The Company included$11,772 from Other Water Sales in its revenue.Because these sales
include unpredictable items like hookup and late fees, Staff recommended removing Other Water
Sales from the revenue requirement. This resulted in a $15,853 increase to the revenue
requirement.
VIII. Expenses
Staff recommended eleven adjustments to the Company's proposed expenses. Each
proposed adjustment is described below.
ORDER NO. 36745 9

A. Employee Wage Increases
The Company requested a 10% increase in employee wages, citing retention and hiring
needs. They supported this with national wage data and comparisons to City of Idaho Falls Water
employee wages. However, Staff found the national data misleading because wages in Idaho Falls
are generally lower due to cheaper cost of living. The Company also compared wages to the City
of Idaho Falls pay scale but did so only by longevity without considering performance or other
factors, making this comparison incomplete.
Using Idaho-specific wage data from May 2024, Staff analyzed where current wages fall
compared to Idaho averages with no increase, a 3% increase, and the requested 10%. Staff
concluded that a 3% raise would place most employees between the 25th and 75th percentiles of
Idaho wages,with 60% above the median—which Staff believed is sufficient to retain employees.
Additionally, a 1.7%regional inflation rate supports a modest increase rather than 10%. Staff also
found the Company double-counted bonus expenses in both the bonus and admin labor accounts
and corrected this. In summary, Staff recommended a 3% wage increase and removal of the
duplicated bonus expense, resulting in a $76,139 decrease to the revenue requirement.
B. Seasonal Labor
The Company included a 10% increase for seasonal employee wages, applied to 1,040
hours of seasonal labor. However, Staff found that actual seasonal hours worked were only
reported for 2023 and 2024, averaging 706 hours. To avoid double counting, Staff calculated this
adjustment separately and recommended a 3%wage increase applied to the 706-hour average. This
results in a seasonal wage-related decrease to the revenue requirement of$9,549.
C. Capitalized Labor
The Company offset labor expense by including a capitalized labor contra-expense to
exclude capitalized labor from test year labor costs, ensuring it's only counted as part of PIS
additions for capital projects and avoiding double recovery. The Company used 8% of proforma
field labor for this calculation. Staff calculated the actual capital labor percentage at 9.7% by
dividing capital labor by field labor from the test year and applied this to Staff s recommended
field labor expense to update the capital labor amount. Staff recommended using the 9.7% rate,
which decreases the revenue requirement by $8,327.
ORDER NO. 36745 10

D. Bonus Expense
The Company requested a bonus expense based on financial and customer growth metrics.
Staff s discussions with the Company revealed that 55%of bonuses relate to financial targets(40%
net income, 15% customer growth), which increase Company revenue and net income. The
remaining 45% are tied to customer service and reliability metrics. Staff recommended removing
the portion tied to financial metrics, as these don't directly benefit customers. This reduced the
revenue requirement by $7,454.
E. Payroll Taxes
The Company adjusted payroll taxes based on test year tax liability and projected labor
expense increases. It calculated payroll taxes by applying the 7.65% employer FICA tax rate to
total labor costs. Staff used the same 7.65% rate applied to its adjusted labor expense to update
payroll tax liability. Accordingly, Staff recommended a revenue requirement decrease of$6,555.
F. Power Expenses
The Company requested $393,495 for electricity expenses. Staff recommended $338,444
based on a five-year average water production and adjusted electricity rates from the Company's
provider, PacifiCorp. Staff calculated the $/gallon electricity cost for each system using 2024 data
and accounted for recent rate increases approved in Commission Order Nos. 36452 and 36500.
After applying these rate adjustments, Staffs total annualized electricity expense is $338,444,
resulting in a revenue requirement decrease of$74,139.
G. Chemical Expenses
The Company requested $9,942 for chemical expenses related to chlorine used in water
treatment. Staff calculated an annual chemical expense of $7,890 by converting solid chlorine
usage to an equivalent liquid chlorine amount, then averaging the cost per gallon based on five
years of data (2020-2024). This method accounted for both solid and liquid chlorine purchases
and dosage requirements. Accordingly, Staff recommended reducing the revenue requirement by
$2,764.
H. Water Mitigation Amortization
The Company included an annual deferral amortization expense of$119,691 related to fees
from the Bonneville-Jefferson County Ground Water District for water production exceeding the
Company's rights. Order No. 36027 authorized a balancing account for such expenses and set a
two-year amortization period starting December 2023, with monthly charges totaling $21,416
ORDER NO. 36745 11

($6,172 amortization plus $15,243 baseline revenue). When new rates become effective in
September 2025, the Company will have collected $449,729, resulting in a negative balance of
$301,593. Adding 2024 and 2025 assessment fees of$297,923 results in a negative balance of
$3,670.
Staff also supported keeping the balancing account and the $182,920 baseline to protect
the Company and customers, since further assessment fees from overproduction are likely, and
without this mechanism,the Company could face significant losses. However, Staff recommended
amortizing this balance over two years,with an annual negative amortization of$1,835. This leads
to an adjustment of$121,526, reducing the revenue requirement by$163,664.
L Shared Services
The Company adjusted its shared services expense based on the 2025 budget compared to
the actual test year expense. The Company calculated its portion using the "Massachusetts
Method,"which allocates costs based on a weighted average of Falls Water's net plant, revenues,
and employee count compared to all NWN subsidiaries. Staff agreed with this allocation method,
but believed the budgeted amounts are not known and measurable. Therefore, Staff recommended
using the actual test year expense instead, resulting in a revenue requirement decrease of$35,903.
J. Bad Debt
The Company made two bad-debt adjustments linked to its proforma revenue changes. The
first was based on multiplying the test year bad debt percentage by the revenue increase from
updated customer counts. The second adjusted that amount further by the requested revenue
increase percentage. Staff recommended keeping only the first adjustment and removing the
second, which lowers the revenue requirement by $5,274.
K. Rate Case Expense Amortization
The Company included a rate case expense recovery with a proposed three-year
amortization period. Staff agreed with the three-year timeframe, matching the expected timing of
the next rate case. The Company projected $30,000 in expenses but has only received $12,735 in
invoices as of June 15,2025. Staff recommended amortizing the actual incurred expense over three
years, which reduces the revenue requirement by $7,751.
IX.Rate Design
The Company's current metered water rates have a different structure for MV customers
compared to FW and TM customers. Staff reviewed the Company's proposal to unify these rates
ORDER NO. 36745 12

into a single schedule, including changes to monthly minimum charges,usage blocks, commodity
rates, and the resulting bill impacts. Details on each part of the proposed rate design are discussed
below.
A. Rate Consolidation
The Company proposes consolidating the rates for its three water systems into a single
schedule. To support this,the Company cited Commission Order No. 36027 from its last rate case.
Staff supported the Company's proposal and recommended consolidating all rates into a
single schedule. Currently, MV customers are charged a monthly minimum based on lot size—
often double the amount paid by FW and TM customers for similar service. The Company's
proposal to shift all customers to a meter-size-based minimum charge would reduce MV minimum
charges by 20% to 56%. MV customers make up only 2% of the total customer base, so the
resulting revenue shift would have a minimal impact on other customers' bills.
B. Monthly Minimum Charges
Despite supporting the alignment of minimum charges for all customers based on meter
size, Staff did not support the Company's proposed 25% increase to those charges. Instead, Staff
recommended keeping the monthly minimum charge at FW levels, aside from minor rounding
adjustments. This approach shifts more revenue recovery to the commodity charges, providing
customers with stronger price signals to conserve water.2 Staff s recommended minimum charge
recovers 55.5% of the total recommended revenue requirement. Staff believed this to be an
appropriate level for a utility the size of Falls Water.
C. Block Volumes
The current rate structure uses a three-tier block design, where customers pay higher rates
as their water usage increases. The Company has proposed reducing the number of gallons
included in each block to encourage conservation. For example, the first block for 3/4-inch meter
customers would be reduced from 8,000 to 5,000 gallons.
Staff generally supported the Company's proposal to lower block volumes, as it gives
customers greater control over their bills and promotes water conservation. However, Staff
recommended a slight modification: setting the first block volume for 5/8-inch and 3/4-inch
2 Staff noted that the Company has incurred fees in recent years due to overproduction and is investing in new water
rights to meet increasing demand—costs that ultimately affect all customers.Encouraging conservation helps reduce
the need for such expenditures.
ORDER NO. 36745 13

customers at 6,000 gallons instead of the proposed 5,000. This adjustment softens the bill impact
for these customers while still aligning with the Company's overall strategy, reflecting a 2,000-
gallon reduction that is consistent with reductions for larger meter sizes.
D. Commodity Rates
The final aspect of rate design Staff reviewed was the price relationship between the second
and third block commodity rates. Because the first block is included in the monthly minimum
charge, its effective rate is $0.00. Currently, the third block rate is 2.25 times the second block
rate. The Company proposed lowering this ratio to 1.5, aiming to shift revenue away from third
block users and toward more moderate users for better revenue stability.
Staff acknowledged the Company's goal but recommended a third block rate set at
approximately 2.0 times the second block rate. This maintains stronger conservation signals and
ensures more equitable billing between high- and low-usage customers, while still providing the
Company with improved revenue balance.
E. Bill Impacts
Staff analyzed the billing impacts of the Company's and Staff s proposals. Under the
Company's proposal, the highest usage customers would receive the lowest percentage increases,
mostly driven by flattening the difference between Block 2 and Block 3 rates. Staff s proposal
results in more even percentage increases among the various customers and keeps a stronger price
signal to conserve on a system facing large expenses for overproduction of water. Under Staffs
proposal, holding the monthly minimum charge near current rates means that most customers may
face little to no increase in their bills during months when water consumption is low. Collecting
the increase in revenue requirement through higher commodity rates means that customers may
face larger percentage increases in their bills during summer months than the overall system
increase.
Consolidating rates into one schedule results in a decrease to MV customers' bills under
most usage scenarios. Under its recommended rate design, Staff calculated that spreading the
reduced revenue from legacy MV customers to all other customers would result in a$0.53 monthly
increase to bill amounts. Staff believed this amount does not adversely impact existing FW and
TM customers. More importantly, rate consolidation results in all users with the same meter size
paying the same amounts for their water.
ORDER NO. 36745 14

X. Hookup Charges
The Company proposed updated hookup charges for new customers, but Staff found part
of the proposal unreasonable. Specifically, Staff recommended updating Section No. 3—Hookup
Charges of Schedule No. 2 using Staff s estimated connection fees. To calculate these fees, Staff
reviewed hookup data from 2022 to 2024, material costs, and labor needed for each meter size.
The Company confirmed that hookups are done in-house and typically require one hour of labor.
Staff used an average labor rate of$27.84 per hour and noted recent increases in material costs for
3/4", 1.5", and 2" meters. Staff recommended charges are listed in the following Table:
Xleter Size Current Charge Company Proposal Staff Estimation
3/4-inch $500 $52 5 $525
1-inch $600 $600 $600
1.5-inch $930 $1,425 $1,150
2-inch $1,205 $1,675 $1,450
>2-inch Cost of materials and installation labor
XI.Customer Notification and Press Release
The Company submitted a press release and customer notice with its Application on
January 30, 2025. The notice was sent as a billing insert in February 2025. The number of public
comments submitted through the Commission's website and email suggests that customers were
properly notified and had the opportunity to participate in the case.
XII. Public Customer Workshop
A virtual public workshop was held on May 28, 2025. One customer and one Company
representative attended. The customer left during Staffs presentation, and no questions were
asked.
XIII. Further Staff Recommendations
In addition to the revenue adjustments and rate design recommendations outlined above,
Staff proposed three further recommendations.
A. Future Rate Case Filings
As the Company's revenues are expected to exceed $4 million, Staff recommended the
Company begin following the regulatory requirements for large water utilities. To support this
ORDER NO. 36745 15

transition, Staff recommended the Commission direct the Company to meet with Staff to establish
future rate case practices.
B. Tariff Language
Staff recommended the Commission direct the Company to revise its tariff for clarity. In
Schedule No. 1, the commodity charge is currently shown as a price per gallon, though customers
are billed per 1,000 gallons. Staff recommended correcting this to avoid confusion. For Schedule
No. 3, which covers secondary irrigation service, Staff found that the Company had no current
customers served under this schedule, but noted that future use is expected. Staff recommended
adding language to define secondary irrigation and specify the applicable months for the monthly
charge.
C. Cost of Service
Staff recommended the Company include a cost-of-service analysis for secondary
irrigation customers in its next rate case to ensure the monthly charge adequately covers the cost
of providing that service.
COMPANY REPLY COMMENTS
The Company accepted many of Staff s proposed adjustments to the Company's proposed
revenue requirement, expenses,rate base, and rate design. However, the Company disagreed with
some of Staffs proposed adjustments. The Company's objections to Staffs proposed adjustments
are described separately below.
I. Return on Equity
The Company opposed Staffs recommended ROE of 9.7%. Based upon an updated
analysis attached to its reply comments as Exhibits 7a through 7h, the Company believes an ROE
of 11.03 % is justifiable. Despite this, the Company proposed an ROE of 9.95%, reflecting the
average of Staffs 9.7% recommendation and the Company's original proposal of 10.2%. The
Company believed this was a reasonable compromise based on the evidence presented in the case.
II. Replacement of Well No. 4
Staff recommended allowing recovery of the $212,422 actually spent through May 28,
2025, on the MV Replacement Well—rather than the Company's original estimate of$305,000.
However, the Company asserted that it spent an additional $151,434 between May 28, 2025, and
July 24,2025,bringing the total cost of the well replacement to$363,856. The Company requested
ORDER NO. 36745 16

that this full amount be included in rate base, consistent with supporting invoices provided in its
second supplemental response to Staff s Production Request No. 81.
III.Falls Water System Meter Replacements
Staff recommended reducing the cost of the meter replacement project to $173,679, down
from the Company's proposed $221,700. In its Second Supplemental Response to Data Request
No. 82, the Company included updated installation costs and added a hydrant meter that was
initially omitted. This updated information supports a revised total cost of$174,839, which the
Company now requests be included in rate base.
IV.Employee Wage Increases
The Company requested approval of its proposed 10% wage increase, arguing it is
necessary to correct years of below-market compensation and maintain competitiveness in a
growing service territory. The Company argued that Staffs recommendation of only a 3%increase
leaves 40%of its employees below median wages,which it believed is inadequate for a workforce
delivering essential and technical services.
The Company also challenged Staff s reliance on the 1.7% CPI increase from May 2024
to May 2025 as justification for its recommended 3%wage increase. The Company noted that this
limited view omitted the 26% CPI increase since 2020, during which employee wages have not
kept pace. According to the Company, one purpose of the proposed 10% increase is to restore
employees' purchasing power after years of inflation.
The Company further emphasized that its employee's wages will remain below or close to
those of the City of Idaho Falls—its closest competitor for talent—even after the proposed
increase. Additionally, the Company noted that the City offers pension benefits, which the
Company does not. As most water utilities included in BLS data are municipal and offer pensions,
Falls Water employees effectively receive lower total compensation even if wages are equal. The
Company reasoned that this supports its argument for higher base pay.
The Company also challenged Staffs assertion that bonus expenses were double-counted,
allegedly without providing clear evidence or a specific dollar amount.
Staff also claimed the Company double-counted bonus expenses but did not provide clear
evidence or a specific dollar amount. The Company reviewed its records and found no double-
counting. Accordingly, the Company requested approval of its full proposed salary expense,
including the 10%wage increase.
ORDER NO. 36745 17

V. Capitalized Labor
Staff recommended increasing the capitalized labor contra expense to reflect 9.7% of
proforma plant, representing labor costs for employees working on capital projects. These labor
costs are removed from operating expenses and instead included in rate base. Staff based its 9.7%
figure on 2024 data. The Company used 8%,arguing that fewer labor hours will be spent on capital
projects in 2025.
The Company contended that, although Staff increased the labor contra expense, it did not
make a corresponding increase to proforma plant to reflect the added capitalized labor. The
Company reasoned that, without this offset, the adjustment improperly lowers the Company's
revenue requirement. Accordingly,the Company asserted that Staffs capitalized labor adjustment
should be rejected.
VI.Bonus Expenses
Staff reduced the Company's bonus expense—arguing that 55% of the bonus is tied to net
income and growth metrics, which Staff believed primarily benefit the Company rather than
customers. Only the remaining 45% is tied to customer service and reliability.
The Company disagreed with Staff s rationale for reducing its proposed bonus expenses.
Specifically, the Company asserted that improving net income between rate cases typically
involves controlling costsa clear customer benefit in future rate settings. Additionally, customer
growth generates more revenue without raising rates, which can reduce the need for future
increases. The Company reasoned that these metrics benefit customers and, therefore, requested
that the full proposed bonus expense be approved.
VIL Payroll Taxes
The Company opposes Staffs proposed payroll tax adjustment because it reflects Staffs
other wage-related adjustments. Because the Company disagreed with most of Staffs wage
recommendations, it also disagreed with the resulting payroll tax adjustment.
VIII. Power Expenses
The Company argued that Staffs power expense adjustment, which relies on a five-year
average to normalize costs, has several defects. First, the Company asserted that Staff double-
counted waste production, artificially lowering the normalized expense.
Second, the Company argued that Staff erred by excluding 2024 from the average
production calculation for being unusually high. However, the Company asserted that production
ORDER NO. 36745 18

in early 2025 has surpassed 2024 levels, indicating that 2024 is not an outlier but reflects a new
normal. Additionally, the Company reasoned that lower usage in 2022 and 2023 was due to
drought conditions and customer conservation efforts, making those years less representative of
typical operations.
Furthermore, the Company observed that two new booster pumps were installed in late
2023,leading to a permanent increase in power usage that cannot be normalized out. The Company
also challenged Staff s reliance on Rocky Mountain Power's rate impact using general percentage
increases, asserting that it does not reflect actual billing impacts under the utility's rate design.
Instead, the Company applied the IPUC-approved rates directly to its test year usage, resulting in
a revised power expense of$388,494 $5,000 less than originally proposed. Consequently, the
Company requested the Commission adopt its revised power cost, which reflect actual usage and
rates, rather than Staffs larger proposed reduction of$74,139.
IX.Water Mitigation Amortization
The Company asserted that Staff appeared to have unintentionally excluded $182,920 in
recoverable expenses that should be included in the revenue requirement. Specifically, despite
supporting retention of the balancing account and the $182,920 baseline to protect the Company
and customers, Staffs revenue-requirement calculations omitted the baseline amount.
Additionally, Staffs proposed adjustment seems to rely on a different calculation of the deferral
account balance than the Company's.
The Company noted that Staff has agreed to meet with the Company to review the
balancing account for water mitigation amortization, including reconciling the current balance.
Following this meeting, the Company will submit a compliance filing in the coming months to
provide an updated and agreed-upon balance.
X. Bad Debt
The Company adjusted bad debt to reflect increased revenues from both the 2023 rate case
and the current rate request. As the test year includes only part of 2023, the Company annualized
revenue to reflect 2024 rates across the full test year, resulting in a $638 bad debt adjustment. An
additional $3,916 was added to reflect the higher revenues requested in this case. Staff
recommended rejecting the second adjustment. However, the Company contended adjustments to
bad debt based on anticipated revenue increases are a standard practice in ratemaking and,
therefore, Staffs recommendation to exclude it should be rejected.
ORDER NO. 36745 19

XI.Rate Case Expense Amortization
The Company requests that the total legal expense of$20,136.50 be amortized over three
years, resulting in an annual amount of$6,712 included in rates. To support this, the Company
noted that, as of July 30, 2025, it had received $18,136.50 in legal invoices for this rate case, as
shown in its supplemental responses to Staff s Production Request No. 87. Furthermore, the
Company anticipates an additional$2,000 in legal costs for final filings and review before an order
is issued.
XII. Working Capital
The Company is requesting a working capital allowance of $259,907, which is derived
from its recommended adjusted expenses.
XIII. Cost of Service
The Company did not expressly oppose Staffs recommendation for a cost of service study
for secondary irrigation customers. However,the Company has yet to determine whether a reliable
cost-of-service analysis can be performed for secondary irrigation customers. If it has sufficient
data,the Company agreed to complete and submit the analysis with its next rate case. If sufficient
data is unavailable, the Company stated that it will explain what steps were taken to evaluate the
feasibility of the analysis and justify why it could not be completed.
PUBLIC COMMENTS/TESTIMONY
As of June 16, 2025, the Commission received 113 comments. Of those, 102 opposed the
proposed rate increases. Customers raised concerns about the size of the increase, the reduced
water volume included in the base charge, and the overall economic climate,particularly for those
on fixed incomes. Many questioned the timing of the request, given a recent rate increase, and
asked for more justification. Some comments criticized the Company's status as a publicly traded
entity, arguing that shareholder profits were being prioritized over customer needs. Others cited
service issues, including low water pressure, boil water advisories, and the need for infrastructure
improvements.
Eight customers testified during the July 10, 2025, customer hearing. Many customers
echoed the concerns expressed in written comments described above. One customer put in
considerable personal effort to analyze the Company's requested rate increase. According to this
customer, his statistical analysis indicated that only a 6% rate increase could be justified. The
customer questioned the Company's corporate parent's apparent prioritization of acquiring new
ORDER NO. 36745 20

water systems, investing in those systems, and then increasing rates to cover the costs. The
customer also highlighted the significant seasonal variation in water use in East Idaho and
expressed concern about cost-driven reductions that could result from the Company's proposed
tiered block rates.
Additionally, the customer challenged the statistical analysis Staff and the Company
conducted to adjust the Company's ROE. Specifically, the customer questioned the omission of
any indication of the error range or confidence level in these analyses. The customer found this
especially concerning given the limited number of companies used to assess the Company's
financial risk. Based upon the customer's calculations, a ROR as low as 5.5% could be justified.
The customer concluded his testimony by noting the substantial unexplained water losses
the Company experienced. The customer believed this issue increased the likelihood the Company
will incur substantial assessment fees for exceeding its water rights. To address this issue, the
customer suggested a moratorium on new connections to this system until it can satisfy the demand
of its current customer base.
COMMISSION JURISDICTION
The Commission is "vested with power and jurisdiction to supervise and regulate every
public utility in the state and to do all things necessary to carry out the spirit and intent of[The
Public Utilities Law]."Idaho Code § 61-501. A "water corporation" as defined in Idaho Code §
61-125 is a"public utility" as defined by Idaho Code § 61-129. Accordingly, the Commission has
jurisdiction over "every corporation or person, their lessees, trustees, receivers or trustees,
appointed by any court whatsoever, owning, controlling, operating or managing any water system
for compensation within this state"Idaho Code § 61-125.
The Commission's regulatory authority extends to the service rates charged by public
utilities. Specifically, upon finding that the rates charged by a public utility are "unjust,
unreasonable, discriminatory, or in any wise in violation of any provision of law, or that such rates
. . . are insufficient"the Commission must"determine the just,reasonable or sufficient rates . . . to
be thereafter observed and in force and shall fix the same by order. . . ."Idaho Code § 61-502;see
also Idaho Code § 61-503.
However, this authority over rates is not unlimited. Public utilities are entitled to a
reasonable rate of return on prudent investments. "[A] public utility is entitled to such rates as will
permit it to earn a return on the value of the property which it employs for the convenience of the
ORDER NO. 36745 21

public, equal to the return generally being made at the same time and in the same general part of
the country on investments and other business undertakings which are attended by corresponding
risks and uncertainties." Utah Power & Light Co. v. Idaho Public Utilities Comm'n, 105 Idaho
822, 827 (1983). The Commission has the power and the duty to set rates of return within a"broad
zone of reasonableness."Intermountain Gas Co. v. Idaho Public Utilities Comm'n, 97 Idaho 113,
128 (1975). "The main elements in fixing reasonable rates for service rendered by [a]public utility
are the cost of rendering service on an economical and efficient basis, fair return to the utility on
its property used and useful in such service and fairness to consumers."Application of Pacific Tel.
& Tel. Co., 71 Idaho 476, 480-81 (1951).
COMMISSION DISCUSSION AND FINDINGS
Under our statutory authority, we have reviewed the record in this case, including the
Company's Application, public comments, Staff comments, customer testimony, and the
Company's reply comments. Based on this review, we approve a new, total revenue requirement
for the Company of$4,223,928. The Company shall satisfy this revenue requirement through the
single rate schedule set forth in this Order. Our decisions regarding the new rates and charges are
set forth in detail below. The Company's new rates shall go into effect on September 1, 2025.
I. Revenue Requirement
Our policy is to set a public utility's annual revenue requirement and rates using a historical
test year in which the utility's actual,booked costs and revenues are verified through auditing. See
e.g., Order No. 30342 at 8 (Case No. SWS-W-06-01). Based on our review of the record we find
there is no dispute on the use of a historical test year ending September 24, 2024, and that such a
2024 historical test year is reasonable and appropriate for this case. After establishing the test year,
pro forma adjustments are made to the actual test year data for all known and measurable changes
to the operating results of the test year. Id.
Using the above-described method, Staff recommended an overall revenue requirement of
$3,587,713. The Company did not object to Staff s recommended adjustments to the Company's
proposed Net-to-Gross Multiplier, cost of debt, and many of Staff s proposed adjustments to the
Company's proposed revenue requirement, expenses, rate base, and rate design. Based upon our
review of the record, we find the undisputed adjustments Staff recommended above fair,just, and
reasonable and reduce the Company's proposed revenue requirement accordingly. Our decision
on each of the adjustments the Company disputed is set forth below.
ORDER NO. 36745 22

A. Rate of Return
Evidence in the record indicates that an ROE from 7.55%to 11.83% is appropriate. Many
water utilities smaller than the Company have recently received a ROE of 11%. However, in a
recent case, we granted a 10.5% ROE to a water utility somewhat smaller than the Company,
reasoning that the underearning risk reduction provided by the utility's Purchased Power Cost
Adjustment justified a lower ROE. See Order No. 36427. We find it similarly just and reasonable
to authorize a ROE lower than 11% for the Company because of certain factors that mitigate its
risk. Specifically, the Company is a subsidiary of a corporate parent, Northwest Natural Holding
Co., that can access capital and expertise necessary to maintain the Company's water systems.
Additionally, the Company has a balancing account to cover assessment fees should it need to
divert more water than its water rights allow to meet customer demand. Accordingly, we find it
fair,just, and reasonable to allow the Company the opportunity to earn a 9.8%ROE and associated
ROR of 7.51%.
B. Rate Base
Staff recommended a rate base of $15,017,145. The Company largely agreed with this
recommendation, proposing a readjustment only to recover additional amounts spent on certain
projects up to July 24, 2025, and a corresponding readjustment to its working capital allowance.
Based upon our review of the record, we find it reasonable to grant the Company a rate base of
$15,048,936.
In reviewing the Application, Staff propounded Production Requests on the Company
seeking information about PIS balances through May 31, 2025. Staff based its proposed PIS
adjustments on the Company's responses. As noted, the Company largely accepted these
adjustments, opposing only those associated with a well replacement for the MV system and the
Company's meter replacement project. The Company's opposition to these two adjustments
resulted in associated readjustments to accumulated depreciation and working capital.
In its reply comments, the Company requested recovery of not only the amounts it spent
on the MV well replacement and meter replacement project through May 2025, as recommended
by Staff, but also additional amounts it allegedly spent through July 24, 2025. To support this
request, the Company provided invoices for this additional amount as supplemental responses to
Staffs production requests that accompanied its reply comments. Because these amounts were
ORDER NO. 36745 23

spent before its new rates will become effective, the Company requests that these additional
amounts be included in rate base.
We appreciate the Company's effort to provide more evidence to support its request for
additional rate base. However, since this information was submitted with the Company's reply
comments, Staff and other interested parties have not had a chance to review,verify, or respond to
it. Therefore, we find it fair, just, and reasonable to deny the Company's request to include the
amounts spent between May 28, 2025, and July 24, 2025, in the rate base at this time. The
Company may seek recovery of these amounts in its next general rate case. Consequently,we find
that the Company should be allowed to include $212,422 in rate base for the MV system well
replacement and $173,679 for its meter replacement program. Because we have denied the
Company's request for additional rate base, we also reject the Company's associated adjustments
to accumulated depreciation and working capital.
C. Expenses
The area of greatest dispute between the parties to this case is operating expenses. Staff
proposed eleven adjustments to the Company's proposed expenses. The Company accepted only
three. Specifically, the Company agreed to Staff s proposed changes to its annual chemical
expenses, its portion of shared services across all NWN subsidiaries, and its seasonal labor
expense. Our decision on the remaining disputed adjustments is set forth below.
i. Employee Wages
The Company seeks approval of a 10% wage increase for all employees, but Staff
recommended only a 3% increase and the removal of an expense for bonuses from the
administrative labor account. As stated, Staff found a smaller raise reasonable due to low short-
term inflation, stable retention of experienced employees, and the proposed raise pushing most
employees above Idaho's median income. The Company argued that a larger wage increase was
needed to offset years of wages lagging behind inflation and to match pay levels in the City of
Idaho Falls.
After reviewing the record and considering the parties' arguments, we find a 6% wage
increase for all the Company's employees to be fair,just, and reasonable. Although the consumer
price index increased by only 1.7%between May 2024 and May 2025, more significant inflation
has occurred over the last half decade. Additionally, although 3% raise would bring 60% of the
Company's employees above the Idaho median wage, some of the Company's competitors provide
ORDER NO. 36745 24

other benefits to their employees in addition to salary. For example, the City of Idaho Falls
provides retirement benefits to its employees in addition to their base salary. These factors militate
in favor of a wage increase higher than 3% for the Company's employees. Accordingly, we find
that authorizing a 6%wage increase will allow the Company to offer competitive wages to attract
and retain qualified employees.
We must also briefly address the double-counting issue that Staff identified in its
comments. Specifically, Staff noted that the Company had double-counted its bonus expense by
including it in both the bonus expense account and the administrative labor account. We agree that
the Company did double-count the bonus expense in the administrative labor account. The $5,535
amount double-counted should be removed.
ii. Seasonal Labor
Staff proposed lowering the Company's seasonal labor expense by reducing the work hours
from 1,040 to 706—the average hours worked in 2023 and 2024—and applying its proposed 3%
wage increase to that amount. The Company disagreed with the adjustment but did not contest it.
Although we find Staff s proposed reduction of work hours reasonable, we believe Staff s
proposed 3% wage increase is too low. Instead, we believe it fair,just, and reasonable to allow a
6%wage increase for seasonal labor for the same reasons we authorized a similar increase for the
Company's nonseasonal employees.
iii. Capitalized Labor
The Company disputed Staffs proposed adjustment to its capital labor expense, arguing
Staff erred by failing to adjust proforma plant when it added additional capitalized labor to the
expense contra account. We disagree. Additionally, the Company asserted that it anticipates
devoting fewer employee work hours to capital projects during 2025. However, the Company's
anticipated labor division for 2025 does not support departing from the actual labor expenses the
Company incurred during 2024. Accordingly, we find Staff s capital labor expense adjustment
fair,just, and reasonable.
iv. Bonus Expense
We find Staffs proposed adjustment to the Company's bonus expense due to the criteria
for awarding the bonuses to be fair,just, and reasonable. Only 45% of the metrics the Company
uses to award bonuses are customer service and reliability metrics, the remaining 55% are net
income and growth metrics. The Company's arguments to the contrary notwithstanding, we find
ORDER NO. 36745 25

that only the customer service metrics the Company uses to award bonuses have a sufficiently
direct benefit to customers to justify inclusion in rates.
v. Payroll Tax
The wage-related adjustment discussed above includes a component that flows through to
payroll tax. Staff calculated this by multiplying its total proposed labor expense by the employer
Federal Insurance Contributions Act ("FICA") tax rate of 7.65%. However, because we have not
accepted either Staffs or the Company's proposed labor expense, we also reject their proposed
payroll tax expense. The approved payroll tax expense is the total labor expense as approved above
multiplied by the 7.65%FICA tax rate.
vi. Power Expenses
In its reply comments, the Company proposed a purchased power expense of$388,494 for
electricity the Company obtains from Rocky Mountain Power ("RMP"). This amount is slightly
lower than the $393,495 requested in the Application, as that figure was based on rates RMP
proposed in its most recent rate case, which had not yet been approved. Staff recommended a
significantly lower purchased power expense of$338,444.
Much of the gap between Staff and the Company's recommendations stems from their
disagreement over how much water the Company will need to produce for customer demand. This
is significant as both parties used historical production data to calculate the Company's purchased
power expense. Staff asserted that 2024 was an atypically high production year while the Company
argued that 2023 and 2022 were drought years with unusually low production. To further support
its claim that 2024 was not an anomaly, the Company pointed out that its water production in the
first half of 2025 exceeded that of the same period in 2024.Additionally,the Company argued that
Staff s analysis overlooked the permanent increase in power usage from two new booster pumps
installed in 2023 and failed to properly account for RMP's rate design when calculating the
Company's normalized power bill.
In light of the conflicting evidence in the record and the overall trend of increasing demand,
we find the Company's $388,494 purchased power expense to be reasonable. However,we do not
reach this conclusion without reservation. We are particularly troubled by the significant increase
in unexplained water loss by the MV system during 2024. While the TM and FW systems saw
reductions in water loss, the MV system reported a 42% unexplained water lossan increase of
5.5% from the 2022 estimate presented in the Company's last general rate case. We find it
ORDER NO. 36745 26

reasonable to direct the Company to continue investigating the root causes of water loss across its
systems. If the Company fails to identify the root cause of these water losses and demonstrate
improvement—should the losses prove to be real—an adjustment to its purchased power expense
may be warranted in the Company's next rate case to prevent customers from bearing the cost of
producing wasted water.
vii. Water Mitigation Amortization
Staff recommended keeping the existing baseline of$182,920 in the balancing account for
fees paid to the Bonneville-Jefferson County Ground Water District for water production
exceeding the Company's rights. However, Staff inadvertently omitted the baseline amount from
its revenue requirement calculations.While reviewing Staff s comments,the Company discovered
that it had failed to request this baseline amount in the Application, instead seeking only$119,691
in water mitigation fees.
We find it reasonable to keep the balancing account and the $182,920 baseline amount.
Considering the growth the Company has experienced in recent years additional assessment fees
from overproduction are likely. The balancing account and baseline amount protect both the
Company and its customers as without them, the Company could incur significant losses from
paying potentially unrecoverable assessment fees.
viii. Bad Debt
We find Staffs proposed bad debt adjustment to be reasonable. Bad debt is a component
of the Company's Net-to-Gross Multiplier. Thus, increased bad debt expense will be included in
the Net-to-Gross Multiplier. To avoid double counting, we reject the Company's proposed bad
debt expense adjustment based upon the revenue increase proposed in this case. This results in a
$3,916 adjustment.
ix. Rate Case Expense
Generally, utilities are allowed to recover actual, known, and measurable rate case
expenses that are reasonably and prudently incurred. See Order No. 33658. Based on the evidence
in the record, we find it reasonable to allow the Company to recover $18,136.50 in rate case
expenses amortized over three years. This represents the amount the Company incurred as of July
30, 2025.
The Company also requested recovery of an additional $2,000 rate case expenses that it
expects to incur before the proceeding concludes. However, the Company did not submit any
ORDER NO. 36745 27

supporting evidence to show that these future expenses will in fact occur. Accordingly, we find
that the additional $2,000 cannot be considered actual, known, or measurable at this time.
Furthermore, without knowing what the $2,000 would be used for, we cannot determine whether
those expenses would be reasonable or prudent. Therefore, we decline to include the$2,000 in the
amount approved for recovery.
x. Working Capital
Both Staff and the Company agree that the one-eighth method is the proper way to calculate
the Company's working capital allowance. Because we have not entirely accepted either party's
operating expense adjustments, we similarly do not accept their proposed working capital
allowances. Applying the one-eighth method to the operating expenses approved in this order, we
find it reasonable to grant the Company a working capital allowance of$282,364.
D. Rate Design
Based on our review of the record, we find it fair, just, and reasonable to approve the
Company's request to consolidate the rates for its three water systems into a single schedule. As
we have said in previous cases, this consolidation moves towards a more equitable treatment of
customers and provides customers with more appropriate price signals. Although this results in a
reduction in the minimum charge for customers served by the MV system, this will not
significantly increase the bills of other customers as the MV systems constitutes a relatively small
portion of the Company's total system. Accordingly, we approve the rate design in the following
table for the Company.
Each customer shall pay the base monthly charge associated with their meter size for the
block of water listed in the "Block 1" column below. After consuming that first block, customers
shall pay $0.83 for every thousand gallons for the block of water listed in the "Block 2" column.
After consuming this second block of water,customers shall pay$1.662 for every thousand gallons
of water consumed.
ORDER NO. 36745 28

Meter Size Base Monthly Charge Block 1* Block 2 Block 3
FIX & T111
5.8 inch $24.65 0 - 6,000 6,001 - 15,000 >15.000
3-4 inch $24.65 0 - 6,000 6,001 - 15,000 >15.000
1 inch $34.75 0 - 9,000 9,001 - 27,000 >27,000
1.5 inch $44.80 0 - 13,000 13,001 - 39,000 >39,000
2 inch $57.25 0 - 17,000 17,001 - 51,000 >51,000
3 inch $79 0 - 19,000 19.001 - 57,000 >57.000
4 inch $102.25 0 - 21,000 21,001 - 63,000 >63,000
6 inch $411 0 - 21,000 21,001 - 63,000 >63,000
Morning View
3-4 inch-Quarter Acr $24.65 0 - 6,000 6,001 - 15,000 >15.000
34 inch-Half Acre $24.65 0 - 6,000 6,001 - 15,000 >15,000
34 inch Acre $24.65 0 - 6,000 6,001 - 15,000 >15,000
1 inch-Quarter Acre $34.75 0 -9,000 9,001 - 27,000 >27,000
1 inch-Half Acre 1 $34.75 1 0 - 9,000 1 9,001 - 27,000 >27.000
1 inch-Acre 1 $34.75 1 0 - 9,000 1 9,001 - 27,000 >27,000
*Blocks are measured in gallons of water consumed.
II. Hook-up Charges
Staff and the Company agreed on the hook-up charges for 3/4-inch connections, 1-inch
connections, and connections greater than 2 inches. Based upon our review of the record, we find
these hook-up charges to be reasonable. Despite aligning on these smaller connections, Staff and
the Company differed as to the proper hook-up charge for 1.5-inch and 2-inch connections. Based
upon the record, we find Staff s proposed hook-up fees for these connections to be fair,just, and
reasonable.
III.Future Rate Case Filings
The Company's revenues are expected to exceed $4,000,000 before its next general rate
case. Accordingly, we find it reasonable to direct the Company to meet with Staff to discuss and
establish practices for future rate cases.
IV.Tariff Language
We agree with Staff that certain portions of the Company's tariff should be clarified.
Accordingly, we find it reasonable to direct the Company to make two revisions to its tariff. First,
as described above,the commodity charge under Schedule No. 1 is listed per gallon,but customers
are billed per 1,000 gallons. This should be reconciled to avoid confusion. Second, although there
ORDER NO. 36745 29

are currently no secondary irrigation service customers served under Schedule No. 3, a definition
for secondary irrigation that specifies the months during which the monthly charge applies should
be included in the tariff.
V. Cost of Service
The Company did not directly oppose Staff s recommendation that it incorporate a cost-
of-service analysis for secondary irrigation customers in its next rate case to ensure the monthly
charge accurately reflects the cost of providing the service. We find it reasonable to direct the
Company to perform such an analysis and include it in its next general rate case. If the Company
lacks sufficient data for such analysis, the Company must describe what was done to see if the
analysis was possible and explain why it couldn't be completed.
In sum,we find that the Company's existing rates, charges, and practices are unreasonable
to the extent described above,and that those rates do not afford sufficient revenue to the Company.
See Idaho Code §§ 61-501 and-502. We also find it fair,just, and reasonable for the Company to
change its rates, charges, and practices as described in this Order.
ORDER
IT IS HEREBY ORDERED that the Company is permitted to increase its rates and charges
as described above, effective September 1, 2025.
IT IS FURTHER ORDERED that the Company must submit tariffs that reflect the rates,
charges, and other requirements contain herein no later than 30 days from the service date of this
Order.
IT IS FURTHER ORDERED that the Company shall meet with Staff to discuss and
establish practices for future rate cases before filing its next general rate case.
IT IS FURTHER ORDERED that the Company shall perform a cost-of-service analysis
for secondary irrigation customers and include it in its next general rate case. If the Company lacks
sufficient data for such analysis, the Company must describe what was done to see if the analysis
was possible and explain why it couldn't be completed.
IT IS FURTHER ORDERED that the Company shall continue investigating the root causes
of water loss across its systems and take reasonable steps to mitigate such losses.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order about any matter
ORDER NO. 36745 30

decided in this Order. Within seven (7) days after any person has petitioned for reconsideration,
any other person may cross-petition for reconsideration. See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 29t" day of
August 2025.
G
Gv�
EDWARD LODGE,ZPR4EXEN7T
IN R. HAMMOND JR., COMMISSIONER
1
DAYN HA IE, COMMISSIONER
ATTEST:
I ,/JZQ,
Mo ica a s- chez
Commission Secretary
I:\Legal\WATER\FLS-W-24-02_GRC\orders\FLS W 2402_final_at.docx
ORDER NO. 36745 31