20251203Staff Comments.pdf

RECEIVED
December 03, 2025
ADAM TRIPLETT IDAHO PUBLIC
DEPUTY ATTORNEY GENERAL UTILITIES COMMISSION
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83702
[phone]
IDAHO BAR NO. 10221
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF CAPITOL WATER )
CORPORATION'S APPLICATION TO ) CASE NO. CAP-W-25-03
CHANGE ITS SCHEDULE NO. 3— )
PURCHASED POWER ADJUSTMENT RATE )
COMMENTS OF THE
COMMISSION STAFF
COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission
("Commission"), by and through its attorney of record, Adam Triplett, Deputy Attorney General,
submits the following comments.
BACKGROUND
On October 23, 2025, Capitol Water Corporation("Company") applied for authority to
change its Schedule No. 3 -Purchased Power Cost Adjustment("Schedule No. 3"or"PPCA")
rate to recover the electricity costs that exceeded what it collected in rates ("Application"). The
Company requested that the Application be processed by Modified Procedure and that the tariff
changes become effective on or after January 1, 2026, or go into effect at about the same time as
the new rates in Case No. CAP-W-25-02, depending on the processing time for each case.
The Company stated that its base power expenses were established in Order No. 30762,
which set power consumption at 1,454,401 kilowatt-hours with 5.190 average cost. This created
a benchmark of$75,483.41 "for determining the incremental cost of power used to calculate the
PPCA rate." Application at 1. While initially approving a three-year average, in Case No. CAP-
STAFF COMMENTS 1 DECEMBER 3, 2025

W-17-01, the Commission later adopted 12-month power costs. Order No 33876. In 2024,
actual costs were $113,416, exceeding the amount embedded in base rates by $37,933, and
$10,507 more than the current PPCA rate of 3.33%will recover.
In its Application, the Company requested approval of a new PPCA rate of 4.61% (using
current rates) with the actual PPCA rate to be determined at the conclusion of Case No. CAP-W-
25-02, with an effective date on or after January 1, 2026. Id. at 3.
STAFF ANALYSIS
Staff verified that the calculation of the PPCA rate is accurate and that the Company
prudently incurred the electricity cost to provide water service to its customers in 2024. Staff
recommends the Commission approve the Company's proposed 4.61%PPCA rate, with an
effective date of January 1, 2026. In addition, Staff recommends the Commission order the
Company to: (1)provide a clean copy of Schedule No. 3 with the 4.61%PPCA rate with the
Commission approved effective date through a compliance filing; (2) to submit a compliance
filing to update the PPCA rate after the conclusion of Case No. CAP-W-25-02 using the
authorized base rate revenue; and(3) track the amount of PPCA revenue that is collected each
month starting January 1, 2026, and report this information in the Company's PPCA filing each
year.
Staff s review includes the following:
1. The current methodology and its applicability to current operations;
2. An audit of the inputs and the calculation of the PPCA rate;
3. The customer impact of the new PPCA rate;
4. The prudence of electricity cost incurred to pump water over the last year; and
5. A review of the Company's customer notifications.
PPCA Methodology
In Order No. 33876, Case No. CAP-W-17-01, the Commission approved modifications to
simplify the PPCA methodology. The Company takes the difference between its actual annual
power expense with the power cost embedded in the Company's base rates that are authorized
during the annual deferral period. The difference or"true-up" amount is the amount the
Company needs to credit or surcharge customers so that customers pay no more or no less than
STAFF COMMENTS 2 DECEMBER 3, 2025

actual power cost and is used to calculate the PPCA rate. The PPCA rate is represented as a
percentage of the true-up amount relative to the amount of revenue embedded in base rates
authorized during the collection period. This allows the Company to apply the PPCA rate to the
base rate revenue charged to customers during the collection period—thereby collecting or
refunding the difference in power costs that occurred during the deferral period. Costs related to
late payment fees, franchise fees, or fees not related to the cost of delivered water are excluded
from the calculation.
Staff believes that accuracy of the true-up amount collected using this simplified method
depends on two assumptions: (1) The service territory and each consumer count must not
experience significant change, and(2) The annual deferral and collection periods must be
consistent from year to year.
Effective Date and Rate Case
The Company has requested the new PPCA rate be effective on or after January 1, 2026,
or go into effect at about the same time as the new rates in Case No. CAP-W-25-02, depending
on the processing time for each case. Application at 1-2. Staff recommends the effective date
for the proposed 4.61% PPCA rate in this case be January 1, 2026, and the PPCA rate be updated
through a compliance filing at the conclusion of the Company's currently filed general rate case,
Case No. CAP-W-25-02, using the new authorized base rate revenue.
Staff believes this recommendation is the best course of action because it would maintain
a calendar year true-up and collection period based on the previous change to the PPCA rate.
The effective date for the general rate case has been suspended for thirty days and five months
from September 1, 2025, with new authorized base rates to occur at the end of the first quarter of
2026. Staff does not believe delaying the effective date for the PPCA rate to match the effective
date for the general rate case is necessary. Staff believes maintaining a calendar year true-up and
collection period eliminates confusion and more accurately collects electricity costs. If the
Commission authorizes a change to base rate revenue in the general rate case, the Company
should update the PPCA at the conclusion of Case No. CAP-W-25-02 using the new authorized
base rate revenue through a compliance filing in this case. The Company will also need to
bifurcate power cost embedded in its 2026 base revenue if the embedded power costs are
changed in the general rate case based on the effective date of the new base rates matched to
STAFF COMMENTS 3 DECEMBER 3, 2025

actual power cost for the two time periods within the 2026 calendar year in the Company's 2027
PPCA filing.
In this case, the Company provided a redlined copy of Schedule No. 3 in Exhibit No. 2
that includes the proposed 4.61% PPCA rate with an effective date of January 1, 2026. If the
Commission approves the rate as filed, the Company should submit a clean version of Schedule
No. 3 through a compliance filing with the Commission approved effective date.
PPCA Revenue Tracking
In Case No. CAP-W-24-02, Staff had concerns with the accuracy of the revenue collected
under the simplified PPCA rate method and recommended the Company track the amount of
PPCA revenue that is collected each month and report this information in the Company's PPCA
filing each year. Staff continues to have concerns with the potential accuracy of the revenue
collected through the PPCA and recommends the Commission order the Company to track the
amount of PPCA revenue that is collected each month starting January 1, 2026, and report this
information in the Company's PPCA filing each year.
In Commission Order No. 36437, the Commission declined to grant Staff s
recommendation on PPCA revenue tracking and reporting, along with recommendations related
to deferral period, filing deadline, and revenue collected in 2024, noting the Company's concern
about unnecessary administrative burden. In Staff Production Request No. 3, Staff asked the
Company the date the Company implemented its new billing software and to describe the
capability of the software to report monthly PPCA revenue received by the Company. The
Company responded with the following:
The Company began implementation of the Muni-Link customer billing system on
January 29, 2025. The Muni-Link billing system, as well as the legacy billing
system, both have the capability to separately state, by month and customer class,
the PPCA revenue. However,per the Errata to Order No. 36437 dated January 15,
2025, the Company was not ordered to "work with Staff to monitor the tracking of
the amount of PPCA revenue."
Based on the response, the Company already has the capability to track the PPCA
revenue on a monthly basis. Staff believes it would not be an unnecessary burden for the
Company to report monthly PPCA revenue in the Company's PPCA filing each year. This
STAFF COMMENTS 4 DECEMBER 3, 2025

information would allow Staff to track the amount of actual PPCA revenue being collected and
evaluate if any adjustments are necessary to the PPCA method in the future.
PPCA Calculation
Staff calculated the new PPCA rate to be 4.61%using the base rate revenue approved in
Case No. CAP-W-24-01. This results in a 1.28% increase relative to the current 3.33% PPCA
rate. Under the old rate, the Company would have collected about $27,426 from the surcharge
during the 2026 collection period. Under the new rate, customers will be surcharged about
$37,933 during the same period, resulting in$10,507 increased revenue. The new rate is a result
of actual power cost of$113,416 compared to $75,483 of power costs embedded in base rates
during the 2024 deferral period. Staff s calculations are illustrated in Table No. 1 below.
Table No. 1: PPCA Calculation
No. Category Value Calculation
1 Base Revenue in Case No. CAP-W-24-01 $823,592 -
2 Actual Power Cost from 2024 $113,416 -
3 Power Cost Embedded in 2024 Base Revenue $75,483 -
4 Incremental Cost $37,933 Line 2—Line 3
5 PPCA Required 4.61% Line 4/Line 1
6 Current PPCA 3.33% -
7 Incremental Change in PPCA 1.28% Line 5—Line 6
8 Incremental Revenue Produced by required PPCA $37,933 Line 5 x line 1
9 Incremental Revenue Produced by Current PPCA $27,426 Line 6 x Line 1
10 Increase or(Decrease)from Current Charges $10,507 Line 8—Line 9
Rate Impact
With the new PPCA rate, the monthly bill for an unmetered customer with a 3/4- inch
service line would increase by $0.43 for May through September,) and increase by$0.19 in all
other months.2 This calculation is based on the current base rate and current PPCA rate of
' $0.43=($14.75+$18.70) x 3.33%—($14.75+$18.70) x 4.61%.
2$0.19=$14.75 x 3.33%—$14.75 x 4.61%.
STAFF COMMENTS 5 DECEMBER 3, 2025

3.33%, and the proposed 4.61%PPCA rate in this case. For customers with other sizes of
service lines, the monthly bills will increase using the same calculation methodology.
For metered customers, the customer bills will increase by 1.28% and the impact will
vary with the service line size and water usage volume. These bill calculations exclude other
recurring charges such as franchise taxes and Idaho Department of Environmental Quality fees.
Prudence of Electricity Cost
To determine if the Company prudently incurred the electricity cost to serve its
customers, Staff assessed water pumping efficiency across the Company's five production wells.
Since last year, average system-level pump efficiency in 2024 increased from 517 to 535
gal/kWh, which is a 3.5% increase compared to 2023. Of all production wells, Well No. 5
experienced the largest change, a 15.1% increase in pumping efficiency compared to 2023.
Staff calculated the pumping efficiency of each well on a gallon per kilowatt-hour
(gallon/kWh)basis to ensure that power costs have been incurred prudently over the PPCA
period. Staff reviewed the Company's water production for five different wells. Well Nos. 5
and 7 are the Company's primary production wells that produced water throughout 2024. Well
Nos. 3, 4, and 6 generally only produced water from April through November 2024. Staff
considered the water production in each well and divided each by its respective electricity usage.
By applying this approach to the whole system, Staff was also able to determine system-level
efficiency. Staff then compared the results to prior years to determine historical trends. Table
No. 2 below compares the Company's water pumping efficiency for three years from 2022
through 2024.
Table No. 2: Pump Efficiency in Each Well for Last Three Years
Pump Efficiency[gal/kWh]
Year Well No.3 Well No.4 Well No.5 Well No.6 Well No.7 System
2022 286.54 425.98 336.32 514.48 704.33 489.43
2023 278.82 361.45 399.47 535.88 696.57 516.80
2024 276.91 411.77 459.92 533.98 706.28 534.96
At the system-level, Staff calculated that the Company pumped 14.2% more water in
2024 compared to 2023. Because of the increase in water consumption, Staff expected a
STAFF COMMENTS 6 DECEMBER 3, 2025

corresponding increase in electricity consumption (kWh). Electricity consumption increased by
10.3% compared to 2023.
In Case No. CAP-W-24-02, Staff had concerns with the decrease in efficiency in Well
No. 4 based on the comparison to previous years. In 2024, the Company made a repair to Well
No. 4 due to water leaking from a bearing. Response to Staff Production Request No. 1. In
2024, Well No. 4 increased efficiency by 13.9% compared to 2023. This increase in efficiency
reduces Staff concerns for Well No. 4; however, Staff encourages the Company to continue to
observe the efficiency of all its wells in the future.
CUSTOMER NOTICE AND PRESS RELEASE
The Company filed its customer notice and press release with its Application. Staff
reviewed the documents and determined that they met the requirements of Rule 125 of the
Commission's Rules of Procedure. (IDAPA 31.01.01.125). The customer notice was included
with customer's November 1, 2025, billing statements. The Company sent a press release to the
Idaho Statesman and the Idaho Business Review at the time the Application was filed on October
23, 2025. As of Wednesday, December 3, 2025, the Commission has not received any
comments.
STAFF RECOMMENDATION
Staff recommends that the Commission:
1. Authorize an overall 4.61%PPCA rate, with an effective date of January 1, 2026;
2. Order the Company to provide a clean copy of Schedule No. 3 with the 4.61% PPCA
rate and an effective date of January 1, 2026, through a compliance filing; and
3. Order the Company to submit a compliance filing to update the PPCA rate after the
conclusion of Case No. CAP-W-25-02 using the authorized base rate revenue.
4. Order the Company to track the amount of PPCA revenue that is collected each
month starting January 1, 2026, and report this information in the Company's PPCA
filing each year.
STAFF COMMENTS 7 DECEMBER 3, 2025

Respectfully submitted this 3rd day of December.
Adam Triplett
Deputy Attorney General
Technical Staff. Michael Eldred
Jolene Bossard
Leena Gilman
I:\Utility\UMISC\COMMENTS\CAP-W-25-03 Comments.docx
STAFF COMMENTS 8 DECEMBER 3, 2025

CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 3RD DAY OF DECEMBER 2025,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF , IN CASE
NO. CAP-W-25-03, BY E-MAILING A COPY THEREOF, TO THE FOLLOWING:
H. ROBERT PRICE
PRESIDENT
CAPITOL WATER CORPORATION
2626 ELDORADO
BOISE, ID 83704
E-MAIL: info(kcapitolwatercorp.com
PATRICIA JORD , SECRETARY
CERTIFICATE OF SERVICE