20260226Final_Order_No_36948.pdf

Office of the Secretary
Service Date
February 26,2026
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF CAPITOL WATER ) CASE NO. CAP-W-25-02
CORPORATION'S APPLICATION FOR )
AUTHORITY TO INCREASE ITS RATES ) ORDER NO. 36948
AND CHARGES FOR WATER SERVICE IN )
THE STATE OF IDAHO )
On August 14, 2025, Capitol Water Corporation("Company") applied to the Idaho Public
Utilities Commission("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 a Notice of Suspension
suspending the Company's proposed effective date. The city of Boise City ("City") intervened.
Order No. 36789.
On November 6, 2025, the Commission issued a Notice of Modified Procedure setting
written comment deadlines, a Notice of Public Workshop, and a Notice of Customer Hearing.
Order No. 36837. Commission Staff("Staff') and the City filed comments. The Commission also
received four public comments. No Company customers attended the January 22, 2026, customer
hearing. The Company filed reply comments.
Having reviewed the record,we issue this Final Order authorizing the Company to increase
its rates as described below and directing the Company to implement remedial measures to address
recordkeeping concerns, also described below.
THE APPLICATION
The Company is a Commission-regulated water corporation serving 2,536 residential and
276 commercial customers in a service territory located in the city of Boise in Ada County, Idaho.
Application at 1. The Company's current rates were set in Case No. CAP-W-24-01. Id.
The Company sought to increase customer rates through an across-the-board 6.004%
increase to its base tariff rates for water service. Id. The proposed rate increase was designed to
recover costs associated with several significant capital improvement projects the Company
completed since its last rate case went into effect, accumulated depreciation, and working capital
ORDER NO. 36948 1

associated with the rate case expenses.Id. at 2. The Company's annual revenue would increase by
$49,447 if the proposed increase was approved. Id. at 3.
The Company intended to notify its customers of the proposed rate increase by inserting a
written notice in each customer's bill mailed on August 31, 2025, and via a similar notice issued
as a press release and posted on the Company's website. Id. Copies of the notices were included
with the Application.Id.
STAFF COMMENTS
Staff reviewed the Company's Application,supporting exhibits,and responses to discovery
requests. Staff Comments at 2. Staff also audited the Company's expenses and toured the water
system.Id. Based on its review, Staff recommended the Commission allow a revenue requirement
increase of$36,275 or 4.4%. Id. Staff s recommended revenue requirement is based on a 10.08%
rate of return. Id. Staff supported the Company's request to increase all billing components by an
equal percentage.Id. at 7.
Staffs recommendation included an increase of $264,362 to plant in-service ("PIS")
$8,477 less than the Company's request.Id. at 2-3. This amount reflected Staff s belief that several
plant additions included in the Application were either misclassified or lacked sufficient
documentation in the form of supporting invoices or receipts. Id. at 3. Additional Staff-
recommended deductions to the Company's requested PIS included: installation costs for the
vacant portion of a subdivided lot for which the Company collected no advance, and therefore
from which the Company has not begun earning revenue through service;pumping equipment and
well painting where the actual cost was lower than the firm bid price included in the Application;
and a double-counted transfer switch for a generator.Id. at 4-6.
Staff also recalculated the accumulated depreciation using its proposed PIS adjustments
and actual values as of December 31, 2025. Id. at 6. Based on its calculation, Staff recommended
a$94,537 increase to accumulated depreciation, resulting in a decrease to the Company's revenue
requirement.Id.
According to Staff, the Company's requested additional working capital of $969 was
improperly based on rate case expenditures classified as operating expenses. Staff therefore
recommended removing the requested additional working capital from the Company's rate base.
Id.
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Additionally, Staff recommended adjustments to the expenses for which the Company is
allowed to recover.Id. at 7. Staff believed the Commission should reduce the Company's requested
depreciation expense associated with plant additions placed in service during 2024 and 2025,with
pro forma plant through December 2025, by $607. Staff also believed the Commission should
increase the Company's requested recoverable expenses related to its rate case by $2,035, based
on additional expenses identified and supported through the Company's responses to Staff s
discovery requests. Id.
Though Staff expressed a general concern about using billing determinants (based on
customer counts and water consumption) from a prior rate case, because of the recency of the
Company's last general rate case (rates went into effect on January 1, 2025) and its confined,
developed service territory, Staff believed the proposal was reasonable in this instance. Id. at 8.
However, Staff believed the Company should be required to use billing determinants
corresponding to the test year in its next rate case. Id.
Following its analysis, Staff recommended the Commission issue an order(1) authorizing
a revenue requirement of$859,867(representing an increase of$36,275, or 4.4%); (2) authorizing
a new rate base of$169,824; (3) directing the Company to submit an action plan for improving its
recordkeeping process as a compliance filing within 90 days of the order; (4) approving Staff s
proposed rate design, as detailed in Attachment E to Staffs Comments; (5)directing the Company
to use billing determinants corresponding with the test year in its next general rate case filing; (6)
directing the Company to submit a compliance filing containing updated tariffs consistent with the
order; and (7) directing the Company to collaborate with Staff to ensure customer documentation
complies with the Utility Customer Relation Rules within 60 days of the order. Id. at 9-10.
INTERVENOR COMMENTS
The City filed comments expressing support for Staffs recommendations. City Comments
at 2. The City shared Staff s concerns about the Company's recordkeeping and supplemented
Staff s recommendation of an action plan compliance filing by suggesting the Commission require
the Company periodically submit its records for review.Id.
PUBLIC COMMENTS
Of the four public comments received by the Commission, three were supportive of the
Company's proposed rate increase.These comments generally expressed a belief that the requested
increase was modest in relation to the service provided by the Company. One comment concerned
ORDER NO. 36948 3

a belief that the Idaho Department of Environmental Quality had previously found a contaminant
in the Company's water system, and the commenter inquired as to whether the rate increase would
help address the issue.
COMPANY REPLY COMMENTS
The Company filed brief reply comments in which it expressed its general agreement with
Staff s recommendations. Company Reply Comments at 1. The Company also stated that it would
use billing determinants corresponding with the test year in its next general rate case but noted that
doing so would likely increase its rate case expenses.Id. at 2.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over this matter and the issues in this case under Title 61
of the Idaho Code. The Commission regulates "public utilities," including "water corporations"
that serve the public, or some portion thereof, for compensation.Idaho Code §§ 61-125, -129, and
-501. The Commission,upon finding that the rates charged by a public utility". . . are insufficient
. . . shall 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.
In a general rate case, the Company's "revenue requirement and every component of it,
both rate base and expense, are at issue." IDAPA 31.01.01.124.01. "The Commission may grant,
deny, or modify the revenue requirement requested and may find a revenue requirement different
from that proposed by any party is just, fair, and reasonable."Id. The Company's retail rates and
charges,both recurring and non-recurring, are at issue, and every component of every existing and
proposed rate and charge is at issue. IDAPA 31.01.01.124.02. "The Commission may approve,
reject, or modify the rates and charges proposed and may find that rates and charges different from
those proposed by any party are just, fair, and reasonable."Id.
Based on the record before us, the Commission authorizes a 4.4% increase to the
Company's base tariff rates for water service. These rates shall be based on a $859,867 revenue
requirement, a rate base of$169,824, and a 10.08%rate of return. We also approve the rate design
detailed in Attachment E to Staff s Comments.
Though the Commission is satisfied that the billing determinants used by the Company
closely resemble the current customer base due to the developed nature of the Company's territory
and recently approved rates, we expect the Company to use billing determinants corresponding
with the test year in its next general rate case. While the Commission understands and appreciates
ORDER NO. 36948 4

the Company's attempt to spare rate case expenses, matching the test year's revenue requirement
components with accurate customer counts and water consumption data is a critical element of
ensuring fair,just, and reasonable rates for customers.
Additionally, to address continued concerns regarding the Company's recordkeeping
practices,1 we direct the Company to submit an action plan for improving its recordkeeping process
as a compliance filing within 90 days of this Order. We believe this will move the Company in the
appropriate direction in lieu of requiring the Company to periodically submit records to ensure
adherence to the action plan, as recommended by the City.
Finally,to ensure the Company's customer documentation(i.e. summary of rules,summary
of rates,notices,etc.),complies with the Utility Customer Relation Rules,we instruct the Company
and Staff to conduct a review of such documentation within 60 days of this Order.
ORDER
IT IS HEREBY ORDERED that the Company is permitted to increase its rates and charges
as described above.
IT IS FURTHER ORDERED that the Company must submit tariffs in compliance with the
rates and charges identified herein within 30 days of the service date of this Order.
IT IS FURTHER ORDERED that the Company must submit an action plan for improving
its recordkeeping process as a compliance filing within 90 days of the service date of this Order.
IT IS FURTHER ORDERED that the Company shall collaborate with Staff to ensure
customer documentation complies with the Utility Customer Relation Rules within 60 days of the
service date of this Order.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within 21 days of the service date of this Order. Within 7 days after any person
has petitioned for reconsideration, any other person may cross-petition for reconsideration. See
Idaho Code § 61-626.
' Staff's comments in the Company's most recent general rate case expressed concerns regarding the sufficiency of
documentation regarding plant investments. Case No. CAP-W-24-01,Staff Comments at 5 Staff's comments in this
case noted missing invoices and misclassified capital expenditures related to plant investments. Staff Comments at
3.
ORDER NO. 36948 5

DONE by order of the Idaho Public Utilities Commission at Boise, Idaho this 26 h day of
February 2026.
G
EDWARD LODGE, PR „ DENT
jr7�'- �4�
JO R. HAMMOND JR., COMMISSIONER
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DAYN HAKDIE, COMMISSIONER
ATTEST:
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o nchez
Commission Secretary
I:\Legal\WATER\CAP-W-25-02_GRC\orders\CAP W2502_FO_j I.docx
ORDER NO. 36948 6