20260115Staff Comments.pdf

RECEIVED
January 15, 2026
JEFFREY R. LOLL IDAHO PUBLIC
DEPUTY ATTORNEY GENERAL UTILITIES COMMISSION
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83702
[phone]
IDAHO BAR NO. 11675
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF CAPITOL WATER )
CORPORATION'S APPLICATION FOR ) CASE NO. CAP-W-25-02
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR WATER SERVICE IN )
THE STATE OF IDAHO ) COMMENTS OF THE
COMMISSION STAFF
COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission
("Commission"), by and through its attorney of record, Jeffrey R. Loll, Deputy Attorney
General, submits the following comments.
BACKGROUND
On August 14, 2025, Capitol Water Corporation ("Company") applied to the
Commission requesting authority to increase its base tariff rates for water service in the State of
Idaho by 6.004%, effective September 1, 2025 ("Application").
On September 3, 2025, the Commission issued a Notice of Application, a Notice of
Intervention Deadline establishing a 21-day intervention period and Notice of Suspension
suspending the Company's proposed effective date. The Commission granted intervenor status
to the City of Boise through an order issued on October 6, 2025. On October 7, 2025, the
Commission issued a Notice of Parties.
STAFF COMMENTS 1 JANUARY 15, 2026

STAFF ANALYSIS
Staff reviewed the Company's Application, exhibits, workpapers, and responses to
production requests. Staff also conducted an on-site audit to review the Company's expenses,
internal controls, and toured the Company's water system. Based on its review, Staff
recommends that the Commission establish a revenue requirement of$859,867, as shown on
Attachment A, Line No. 21. This revenue requirement is based on an overall rate of return of
10.08% and is $13,171 less than the Company's request, for an increase of 4.4%to the
Company's annual revenues.
Revenue Requirement
The Company requested an increase in annual revenues of$49,446, or 6.0%, using a
2024 test year. Staff reviewed all components of the revenue requirement and recommends an
increase of$36,275 or 4.4% as outlined in Attachment A.
Summary of Rate Base Components
Staff calculated a net rate base on which the Company should earn a return of$169,824,
which is a decrease of$97,449 from the Company's proposed net rate base of$267,273. The
Company used its currently authorized rate of return of 10.08%, as approved in its last general
rate case. Staff s calculations are shown in Attachment B, Line Nos. 42-81, and the related
adjustments are discussed in greater detail below.
Plant-in-Service
Staff evaluated the timing, level, and prudence of plant-in-service ("PIS") included in the
Application. The Company filed its Application on August 14, 2025,using a test year ending
December 31, 2024. The Company proposed incremental plant through August 11, 2025, and
proforma for the remainder of 2025, resulting in a total of$272,839 of additional PIS.
Application at 3.
Staff reviewed all investments included in the amount requested for recovery based on
four criteria: (1) whether the assets will likely be used and useful by the rate effective date; (2)
whether the project cost included for recovery is known and measurable; (3)whether the project
has a justifiable need, and(4) whether the project was incurred at a reasonable cost. Based on its
STAFF COMMENTS 2 JANUARY 15, 2026

review, Staff recommends adjusting the Company's PIS to year end December 31, 2025, for a
total PIS of$264,362, which is $8,477 less than Company's PIS proposal.
In the Company's last general rate case, Case No. CAP-W-24-01, Staff recommended
that the Company begin maintaining additional documentation to support plant investments,
including receipts and invoices. Staff reviewed the Company's plant additions made since its
last general rate case, as well as the proforma plant proposed in the Application. For several plant
additions, documentation was limited to summary entries, statements, or explanations, without
supporting invoices or receipts. Staff discovered several capital expenditures that were mis-
classified. Accordingly, Staff recommends that the Company improve its recordkeeping for plant
investments and submit a compliance filing that includes an action plan to improve its record
keeping process within 90 days.
Misclassified and Missing Documentation Adjustments
During Staffs review of PIS additions for years 2024 and 2025, Staff discovered that the
Company misclassified capital expenditures and continues to have missing documentation. In
response to Staff Production Request No. 12, the Company stated that it"capitalizes items when
the total cost exceeds $400, including labor and materials." Staff identified several capitalized
expenditures that should have been expensed. Additionally, in response to Staff Production
Request Nos. 3 and 14 and during the on-site audit, the Company could not provide sufficient
documentation for certain capitalized purchases. Without documentation Staff is unable to
determine if the capitalized expenses are prudent. Lastly, capital expenditures must be properly
recorded to accurately calculate depreciation expense. As a result, Staff has reduced PIS for
misclassified and missing documentation by $4,527. See Attachment D.
Meters (Account#334) in Year 2024
The Company requested recovery for a capital addition of$2,512 to the Meters account
in year 2024. However, the excavation work of$1,068 was incorrectly recorded in the Meters
account and should have been recorded in the Services account. See the Company's response to
Staff Production Request No. 17. Staff recommends that $1,068 be adjusted from the Meters
Account No. 334 and reclassified to the Services Account No. 333. This adjustment had no
impact to PIS; however, it reduced accumulated depreciation due to the different depreciable
STAFF COMMENTS 3 JANUARY 15, 2026

lives of the Meters account and the Services Account. Staff also adjusted depreciation expense
to reflect the revised depreciable life.
Services (Account# 333) in Year 2024
The Company requested recovery of$16,515 recorded in the Services account in 2024.
The total includes construction costs of$6,222 for three new water connections to a subdivided
lot off of Holbrook Avenue. See Company's response to Staff Production Request No. 9.
Section 9.3 of General Rules &Regulations for Small Water Utilities in the Company's Tariff
states:
Where a service connection is desired for premises on which there is no permanent
structure,the Company will install a service connection to said premises only upon
payment by the applicant of the estimated cost of said service connection. If within
a period of five (5) years from the installation of said service connection a
permanent structure is erected on the premises, the Company will refund, with
interest, the difference between any approved new Customer charges in effect at
the time of connection, and the applicant's advance.
In short, this treatment allows the cost of these connections to be recovered through base rates
when service to the customer begins earning revenue.
However, the connections were installed without following the Company's tariff and were
constructed without collecting an advance payment from the applicant. See general ledger
entries in Company's response to Staff Production Request No. 2. Two of those connections
have houses constructed and according to the tariff, the Company should have refunded the
advances to the applicant, thus allowing the costs to be included in rate base. Regardless of the
tariff violation, the net amount included in rate base for the two connections would be the same,
and the Company should recover the costs associated with those two connections.
However, the third lot is vacant without a permanent structure. The Company is unable to
estimate when a house will be built on the vacant lot and when the remaining connection will be
in service. If the Company had followed the tariff and collected an advance for this connection,
the advance would offset the cost of the connection and reduce the Company's rate base. Since
the advance was never collected, Staff recommends that $2,074, or one-third of the total
installation costs for the three new connections be removed from the Company's request,
reducing PIS by $2,074.
STAFF COMMENTS 4 JANUARY 15, 2026

Pumping Equipment (Account#311) in Year 2025
The Company requested to recover$32,311 for the Pumping Equipment account for
2025. The cost includes a solenoid valve replacement and a 150-horsepower variable frequency
drive to comply with Idaho Power Company requirements. Staff believes the cost is a firm,
competitive price from a reliable vendor with a long relationship with the Company, and that the
price for the solenoid valve was lower than prices found elsewhere. However, based on invoices
provided in the Company's response to Staff Production Request No. 7, the actual cost was
$31,411, which is $900 less than the requested cost. Staff recommends that the $900 difference
be adjusted from PIS.
Wells (Account#307) During 2025 Pro Forma Period
The Company requested to recover$2,500 for the painting cost for Well No. 6. Even
though, as noted in the Application, the requested cost is a firm bid price, the actual cost was
$2,350, which is lower than the cost requested for recovery in the Company's Application. Staff
believes that the Company prudently incurred the cost of the well-painting project and
recommends that the $150 difference be adjusted from PIS.
Power Generation Equipment (Account#310)During 2025 Pro Forma Period
The Company requested to recover$57,938 for Power Generation Equipment during the
2025 proforma period. This generation equipment was identified as needed to provide reliable
service in the Sanitary Survey conducted by the Idaho Department of Environmental Quality on
April 1, 2024. The total requested cost in the Application consists of the quoted cost of$56,438
for a generator at Well No.7 and the estimated cost for the installation of a $1,500 concrete pad
for the generator.
The Company has completed the construction and installation of the generator. However,
after reviewing the invoices provided by the Company, Staff verified that the Company did not
request sales tax for the generator purchase and that the actual cost for the generator and concrete
pad are $61,069 and$1,892, respectively. See the Company's response to Staff Production
Request No. 22. However, Staff believes that the generator cost of$61,069 includes $5,848 cost
for a transfer switch, which was also included separately in Account 310 of the general ledger for
2025 and should be removed for recovery to ensure the Company does not double-recover the
STAFF COMMENTS 5 JANUARY 15, 2026

cost of the transfer switch. Staff recommends that the Company recover$55,220 for the
generator and$1,892 for the concrete pad, reducing the proforma PIS by $826.
Accumulated Depreciation
With the proposed adjustments to PIS and using actuals as of December 31, 2025, Staff
also adjusted the associated accumulated depreciation. Accumulated depreciation is the
accumulation of annual depreciation expense over the useful life of an asset and is used to offset
PIS. Based on the Company's plant additions completed through December 31, 2025, and an
additional year of depreciation expense on plant already in service, Staff recommends an
increase to accumulated depreciation of$94,537. Staff s recommendations result in a decrease
to the Company's revenue requirement, as shown in Attachment B, Line No. 72.
Working,Capital
The Company used the one-eighth method to calculate its requested adjustment for
additional working capital of$969. The one-eighth method is calculated by dividing the annual
operating expenses by eight. This value is then included in rate base, which will allow for a
return on working capital. Staff agrees that the one-eighth method is an appropriate way to
determine working capital given the Company's size. However, the Company's calculation
includes amortized rate case expenses. Rate case expenses are not operating expense, similar to
depreciation expense, and should not be included in the working capital calculation. Because
Staff removed rate case expenses from the Company's operating expenses, working capital must
be adjusted accordingly. Based on Staff s removal of rate case expenses, Staff reduced working
capital by $969.
Expenses
The Company's Application states that its filing is limited in scope. Application at 2.
The Company is not proposing changes to its operating expenses, only its amortized rate case
expenses and depreciation expense. Staff conducted a thorough review of each expense the
Company is requesting to be included for recovery, which are described in detail below.
STAFF COMMENTS 6 JANUARY 15, 2026

Depreciation Expense
In its Application, the Company included additional depreciation expense of$10,542
associated with plant additions placed in service during 2024 and 2025, as well as proforma plant
through September 2025. After evaluating the Company's additional depreciable assets, Staff
recalculated the Company's annual depreciation expense for all plant additions in 2024, plant
placed in service through September 30, 2025, and Staff's recommended 2025 proforma plant
through December 31, 2025. Based on this review, Staff recommends additional depreciation
expense of$9,935, or a decrease of$607 from the Company's proposal. Staff s recommendation
is a decrease to the Company's revenue requirement as shown in Attachment C, Column F, Line
Nos. 23 and 26.
Rate Case Expenses
The Company included$7,750 in rate case expenses related to the general rate case and
requested recovery using a three-year amortization period, consistent with its prior general rate
case. The Company later issued a supplemental response to Staff Production Request No. 3 that
included an additional $2,035 of rate case expenses related to customer notices, envelopes,
postage, and mailing services. Staff recommends that the additional costs be included because
they are non-recurring and related to this general rate case. Staff further recommends that the
total rate case expenses be amortized over a three-year period. This adjustment results in an
increase to the Company's revenue requirement of$678, as shown in Attachment B, Line No.
22.
RATE DESIGN
The Company did not propose any changes to its current rate design in its Application.
The Company proposed to increase all rates for monthly water service by 6%, consistent with its
requested revenue requirement increase. Application at 1. The equal percentage increase is also
consistent with the method employed in the Company's prior general rate case, Case No. CAP-
W-24-01, in which the Commission ordered an equal percentage increase to all billing
components. Order No. 36427 at 14.
Staff supports the Company's request to increase all billing components by an equal
percentage, as it results in all customers seeing equal percentage increases to their bills. Staff
STAFF COMMENTS 7 JANUARY 15, 2026

calculated rates based on its recommended revenue requirement of$859,867. Staff s
recommended revenue requirement results in an increase to present rates of 4.4%. Rates are
shown on Staff Attachment E -Rates and Bill Impacts. Due to rounding of billing component
amounts, not all customers would see identical percentage increases in their bills.
Billing Determinants
The Company used the customer counts and water consumption ("billing determinants")
from its 2024 general rate case in determining its requested rates in this case. Company response
to Staff Production Request No. 7. Staff expresses its concern with utilizing billing determinants
from a prior rate case to calculate rates in the present case. However, Staff believes that using
the Company's proposed billing determinants in this case is reasonable due to the Company's
confined service territory and the recency of its last rate case. The Company's service territory
consists primarily of established residential neighborhoods in a fixed geographic area, providing
little opportunity for short-term customer growth. Additionally, Staff reviewed 2025 customer
counts for August through October 2025 provided by the Company and believes the Company's
proposed billing determinants accurately represent its current customer base. Company
responses to Staff Production Requests Nos. 5 and 6.
Staff stresses the importance of matching a test year's revenue requirement components,
such as expenses and plant in service with the test year's billing determinants that are used to
calculate rates. Because of this, Staff recommends that the Commission order the Company to
file billing determinants that correspond to the test year in its next general rate case.
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 the customer's August 31, 2025, billing statement. The Company sent a press release to the
Idaho Statesman and the Idaho Business Review at the time the Application was filed on August
14, 2025.
STAFF COMMENTS 8 JANUARY 15, 2026

Customer Workshop
The Commission provided public notification for a customer workshop through a
November 7, 2025, news release. A virtual public workshop was held for customers on
Thursday, December 11, 2025,beginning at 6:00 pm MDT. No one attended the workshop.
Customer Hearing
The Commission scheduled a virtual and in person customer hearing for Thursday,
January 22, 2026, at 4:30 pm MDT in the Commission hearing room at 11331 W. Chinden
Blvd., Building 8, Suite 201-A, Boise. Public notification for the hearing was provided through
a November 7, 2025, news release.
Customer Comments
The Commission scheduled a public comment deadline for January 15, 2026. As of
Thursday, January 15, 2026, the Commission has received four(4) comments. Three customers
are in favor of the Company's request, and one customer expressed concerns over affording
another rate increase.
Company Documentation
Staff recommends that the Company submit a revised tariff reflecting rate changes within
30 days of the final order. In addition, Staff recommends after this case and Case No. CAP-W-
25-03 are final, the Company and Staff review customer documentation, i.e. summary of rules,
summary of rates, notices, etc., to bring them into compliance and to ensure they still meet the
requirements set in the Utility Customer Relation Rules (IDAPA 31.21.01).
STAFF RECOMMENDATION
Staff recommends that the Commission:
1. Authorize a Revenue Requirement of$859,867;
2. Authorize a Rate Base amount of$169,824;
3. Order the Company to improve its record keeping process and submit its action
plan as a compliance filing within 90 days;
4. Authorize Staff s proposed rates shown in Staff Attachment E;
STAFF COMMENTS 9 JANUARY 15, 2026

5. Order the Company to submit updated test year billing determinants with its next
general rate case filing;
6. Order the Company to submit a compliance filing with updated tariffs based on
the final authorized rates after the conclusion of Case No. CAP-W-25-02; and
7. Order the Company to work with Staff to complete a review of customer
documentation, i.e. summary of rules, summary of rates, notices, etc., within 60
days of a Final Order.
Respectfully submitted this 15th day of January 2026.
1
Jeffrey R- Loll
Deputy Attorney General
I:\Utility\UMISC\COMMENTS\CAP-W-25-02 Comments.doex
STAFF COMMENTS 10 JANUARY 15, 2026

CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 151h DAY OF JANUARY 2026,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF , IN CASE
NO. CAP-W-25-02, BY E-MAILING A COPY THEREOF, TO THE FOLLOWING:
H. ROBERT PRICE KATHY STOCKTON, CONSULTANT
PRESIDENT CAPITOL WATER CORPORATION
CAPITOL WATER CORPORATION 2626 ELDORADO
2626 ELDORADO BOISE, ID 83704
BOISE, ID 83704 E-MAIL: waterconsultantkls(d),gmail.com
E-MAIL: info(kcapitolwatercorp.com
Boise City:
Mary R. Grant
Deputy City Attorney
Boise City Attorney's Office
P.O. Box 500
Boise, ID 83701-0500
mmgrant&cityofboise.org
boi secityattomey(a,cityof boi se.org
Steve Hubble
Climate Action Senior Manager
shubble(&,cityofboise.org
Robin Lee-Beusan
Water Resources Program Coordinator
rleebeusanAcityof Boise.org
PATRICIA JORDA , SECRETARY
CERTIFICATE OF SERVICE