20251230Decision Memo.pdf

DECISION MEMORANDUM
TO: COMMISSIONER LODGE
COMMISSIONER HAMMOND
COMMISSIONER HARDIE
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM: JOSEPH TERRY,AUDITOR 3
JEFF LOLL, DEPUTY ATTORNEY GENERAL
DATE: DECEMBER 30, 2025
RE: IN THE MATTER OF THE APPLICATION OF CDS STONERIDGE
UTILITIES,LLC FOR AUTHORIZATION TO BORROW FUNDS TO
MAKE WATER SYSTEM IMPROVEMENTS; CASE NO. SWS-W-25-03.
On December 12, 2025, CDS StoneRidge Utilities, LLC ("Company") applied for
authority to borrow $183,861 in debt to install a backup power system for the Company's wells.
The Company submitted the calculated filing fee of$120.75 on December 18, 2025. In addition,
the Company included a press release, a customer notice, balance sheet, the relevant section of
the latest sanitary survey, project quote, and loan term sheet from Washington Trust Bank with
the application.
STAFF ANALYSIS
The proposed debt meets the requirement under Idaho Code §61-901. The debt has a
term exceeding one year and is for the acquisition of property; for the construction, completion,
extension, or improvement of its facilities; for the improvement or maintenance of its service or
refinancing of its current obligations. The filing complies with the IDAPA 31.01.01.141 except
for a proposed Commission Order as required in IDAPA 31.01.01.141.07. Staff believes that an
exception to this requirement, as per IDAPA 31.01.01.013, would be reasonable in this instance.
The purpose of the loan is to finance the installation of a backup power system for the
Company's wells. The Company provided documentation which includes a section of its Idaho
Department of Environmental Quality ("IDEQ") sanitary survey describing the need for a
backup power system, a vendor quote for the generator installation totaling $183,861, and the
DECISION MEMORANDUM - 1 - DECEMBER 30, 2025

loan term sheet from Washington Trust Bank dated December 4, 2025. The loan terms reflect a
five-year maturity at the five-year Treasury Constant Maturity plus 3.5%, for an estimated
interest rate of 7.12%. Staff requests that the final loan documents be filed when available.
Staff notes that the issuance of the debt will materially change the Company's capital
structure, increasing the debt ratio from 32.1%to 59.45%, and could affect the Company's
overall rate of return. Staff believes that a full evaluation of the Company's capital structure and
return should be addressed in the Company's pending general rate case. (Case No. SWS-25-02)
The issuance of debt could have a significant impact on the Company's overall rate of return.
Staff finds that the proposed debt issuance creates a significant mismatch between
expected useful life of the generator and the term of the loan. While the generator is expected to
have a useful life of approximately 15-to-20 years, the loan has a five-year term. Under standard
ratemaking treatment, loan repayment is supported through depreciation expense and return on
rate base over the asset's useful life. Because of the shortened loan terms, Staff estimates that the
Company could experience material cash flow shortfalls, with monthly deficits of up to $1,797
and a cumulative shortfall of$95,573. Given the Company's approved revenue requirement of
approximately of$307,000, Staff believes these cash flow impacts could be significant.
Staff identified several potential mechanisms that could mitigate these issues, including
partial equity infusion, extended loan terms, financing with a balloon payment, or accelerated
recovery of the asset through ratemaking mechanisms. However, each option carries limitations
or additional risk, and accelerated recovery would more appropriately be evaluated in a general
rate case. Accordingly, Staff recommends that the ratemaking issues should be addressed in the
Company's pending general rate case (Case No. SWS-W-25-02), rather than in this proceeding.
Staff acknowledges the challenges associated with financing a project of this magnitude and
commends the Company for its efforts to comply with the IDEQ's requirements.
STAFF RECOMMENDATION
Staff recommends that the Commission authorize the Company to borrow up to $183,861
in debt.
Staff further recommends the Commission require the Company to file with the
Commission copies of the final loan documents, including the amount borrowed and all other
terms of the loan, within seven days of those documents becoming available.
DECISION MEMORANDUM - 2 - DECEMBER 30, 2025

COMMISSION DECISION
Does the Commission wish to authorize the Company to borrow up to $183,861 in debt?
Does the Commission wish to require the Company to file with the Commission the final
loan documents, including the amount borrowed and all other terms of the loan, within seven
days of those documents becoming available?
4(2��
JoVeph Terry
Auditor 3
I:\Uti1ity\UDMEM0S\SWS-W-25-03 Decision Memo.docx
DECISION MEMORANDUM - 3 - DECEMBER 30, 2025