20260226Staff Comments.pdf

RECEIVED
February 26, 2026
ERIKA K. MELANSON IDAHO PUBLIC
DEPUTY ATTORNEY GENERAL UTILITIES COMMISSION
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83702
[phone]
IDAHO BAR NO. 11560
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE INVESTIGATION )
INTO BEAR CLAW WATER SYSTEM, LLC'S ) CASE NO. BCW-W-25-02
RATES AND CHARGES FOR SERVICE )
COMMENTS OF THE
COMMISSION STAFF
COMMISSION STAFF ("STAFF") OF the Idaho Public Utilities Commission
("Commission"), by and through its attorney of record, Erika K. Melanson, Deputy Attorney
General, submits the following comments.
BACKGROUND
On July 14, 2025, Bear Claw Water System, LLC ("Company") applied to the
Commission requesting a Certificate of Public Convenience and Necessity ("CPCN") to provide
water service within the Bear Claw Subdivision in Bonner County, near Clark Fork, Idaho.
On October 9, 2025, the Commission issued Order No. 36799, granting the Company's
request for a CPCN and directing Staff to open a separate docket to evaluate whether the
Company's interim rates are fair,just, and reasonable.
Case No. BCW-W-25-02 was opened on October 9, 2025, to investigate the rates and
charges of the Company.
STAFF COMMENTS 1 FEBRUARY 26, 2026

STAFF ANALYSIS
Staff performed an audit of the Company's operating expenses and plant-in-service
("PIS") for the 12-month period ending September 31, 2025, to inform its revenue requirement
calculation. Staff evaluated the Company's expenses by reviewing invoices, bank statements,
the general ledger, and responses to Staff s production requests. Using this information, Staff
developed a revenue requirement, PIS list, and depreciation schedule.
Based on its investigation, Staff believes that the Company's current rate of$50/month
does not provide the Company with sufficient revenue to recover its operating expenses and
provide a reasonable opportunity for it to earn a return on the capital investments in the system.
In a general rate case where revenue requirement and rate design undergo additional scrutiny,
Staff may propose different adjustments and methods for recovery of costs. However, for the
purpose of this initial investigation, Staff recommends the Commission acknowledge that the
Company's current rate may provide revenues less than necessary for continued operation of the
system.
System Description
The Company's water system is located east of the City of Clark Fork, in Bonner County,
Idaho. The water system has one well that is powered by one 10 horsepower pump, with an
approximate pumping capacity of 35 gallons per minute. The wellhouse is equipped with a flow
meter, pressure gauge, and a water chlorination system. The Company's water system consists
of an approximately 50,000-gallon concrete water storage reservoir. The reservoir's water level
is governed by a float switch that signals the well pump to control water flow to the reservoir.
The stored water is then distributed to the system via gravity through the distribution system
piping that includes 2, 4, and 6-inch polyvinyl chloride pipes. The Company currently serves 24
residential lots with a total maximum capacity of 44 connections within the Bear Claw
Subdivision. The connections are unmetered and the customers are charged a flat monthly rate.
The Company has a Notice of Moratorium on Connections, effective on October 27, 2021, and
the Company cannot add new connections to the system without the approval from the Coeur
D'Alene ("CDA") office of the Idaho Department of Environmental Quality ("IDEQ").
STAFF COMMENTS 2 FEBRUARY 26, 2026

System Reliability
According to Staff's review of the Company's Application, the IDEQ sanitary survey
("Survey"), and responses to Staff s Production Requests, the Company's water system can
provide safe and reliable water service to its customers. Based on its assessment, Staff
recommends the Company :
1. Provide a copy of the facility plan to the Commission when available;
2. Communicate with Idaho Department of Water Resources ("IDWR") about its water
rights prior to development of a second well; and
3. Record and maintain periodic water pressure data, at least monthly.
IDEQ Sanitary Survey
Staff reviewed the Company's latest Survey and believes the system is operating in
compliance with the Idaho Rules for Public Drinking Water Systems. There are no outstanding
sanitary issues or significant deficiencies that impede system reliability. However, the Survey
notes that the Company cannot add any new connections to the system without approval from the
IDEQ office at CDA. The Survey further asserts that the Company needs to drill a second well
to serve any additional customers. Application—Exhibit No. G. According to the Survey, the
Company is currently in process of developing its facility plan. Upon completion and submission
of the facility plan to IDEQ, Staff recommends the Company provide a copy to the Commission.
Water Rights
Staff compared the Company's annual water production with its available water rights.
Staff believes the Company has sufficient water rights to serve water to its current customers
given the current state of the system. However, Staff believes the available water rights may not
be sufficient if the Company plans to drill a second well to serve additional customers. Staff
believes the Company should communicate with the IDWR and verify its water rights before it
plans to construct the second well.
The Company currently has an available water right volume of 31.5 annual acre-feet at a
diversion rate of 0.05 cubic feet per second, which is equivalent to 10,264,307 gallons per year.
STAFF COMMENTS 3 FEBRUARY 26, 2026

Application—Exhibit No. J.1 In comparison, the Company produced approximately 2,101,600
gallons of water in a 12-month period during Nov 2024—Oct 2025, which is lower than the
annual available water right. Company's Response to Staff Production Request No. 7—Exhibit
E.
Staff also reviewed a memorandum from the IDWR dated August 08, 1997, which states
that the existing water right permit will not cover the entire subdivision at full build-out (44
home connections and 12 acres of irrigation) and would not authorize diversion from more than
one well. Application, Exhibit No. J,page 26-28. Thus, Staff recommends that the Company
consult with IDWR about its water rights prior to development of a second well.
System Pressure
According to the Company's Response to Staff s Production Request No. 11, the average
monthly system pressure is 63 psi, which satisfies the IDEQ's requirement of a minimum 40 psi
systemic pressure.2 The Company does not maintain any historical pressure data. Staff believes
it is critical for the Company to periodically record pressure data in the future to identify any
events related to depressurization, system leaks, and to maintain overall system reliability. Staff
recommends that the Company record and retain pressure data at least monthly.
Revenue Requirement
Based on its initial review of the Company's data, Staff calculated a revenue requirement
of$14,875 prior to any adjustments. After reviewing each component and proposing
adjustments outlined below, Staff re-calculated an annual revenue requirement of$24,734. Each
component is discussed below.
Rate Base
Rate base represents the amount invested by the Company into the system that is eligible
to earn a return. Rate base includes PIS and cash working capital, offset by accumulated
depreciation and any contributions in aid of construction, or contributed capital. Staff calculated
' 1 acre-feet volume is equivalent to approximately 325,851 gallons.
2 Idaho Administrative Code,IDAPA 58.01.08 Section 552.01.
STAFF COMMENTS 4 FEBRUARY 26, 2026

a net rate base of$29,264, which includes net PIS of$27,707 and working capital of$1,557.
Attachment B, Column C, Lines 25-27.
Plant-in-Service
The Company made an additional investment of$19,375 for pumping equipment in the
water system during the test year ending September 30, 2025. During Staff s review of receipts
and general ledger entries, Staff identified an additional $8,631 in services for the repair of an
emergency water leak in October 2025. Since the work was completed and the assets were used
and useful, Staff included this amount in PIS.
For purposes of its analysis, Staff capitalized pump costs and services and depreciated
them over a 25-year life and 35-year life, respectively,using the straight-line method.
Staff calculated total additional plant-in-service of$28,006. Attachment B, Column C,
Line 19.
Accumulated Depreciation
Accumulated depreciation represents the total amount of depreciation expense that should
have been recorded since assets were placed in service. The Company reported no accumulated
depreciation. To estimate an appropriate balance, Staff calculated accumulated depreciation
using each asset's annual depreciation expense and years the asset has been in service. Based on
this analysis, Staff calculated accumulated depreciation balance of$299. Attachment B, Column
B, Line 20.
Working Capital
Working capital represents the amount of funds necessary to support the day-to-day
operations of the Company prior to being paid for services rendered. Working Capital is a
component of rate base. Staff calculated a working capital allowance of$1,557, which is
calculated using the one-eighth method. Attachment B, Column B, Line 26.
Rate of Return
The Company has no authorized or reported debt. Therefore, the return on equity
("ROE") serves as the Company's overall rate of return. Consistent with other small water
STAFF COMMENTS 5 FEBRUARY 26, 2026

utilities in recent general rate cases, Staff calculated the revenue requirement using an ROE of 11
percent.
For purposes of this investigation, Staff treated recent investments into the utility's water
system as equity.
Revenues
For the 12-month test period ending September 30, 2025, the Company reported total
revenues of$12,150 from residential customers. See Attachment B, Column A, Lines 1-3.
In the Company's Response to Staff Production Request Nos. 2, 3, 7, and 8, the Company
stated that no formal billings are sent, residents' water usage is not metered, and customers
voluntarily pay$50 per month. Staff calculated annual revenue of$14,400 based on all 24
residents paying $50 per month, which is $2,250 more than collected during the test year.
Operating Expense
For the test year ending September 30, 2025, the Company reported total operating
expenses of$12,053. These expenses include professional fees, repairs and maintenance,
utilities, and other general operating expenses. Staff recommends that the Company continue to
retain and maintain all invoices supporting its expenses for use in future filings.
Staff conducted a detailed review of the Company's expenses and assigned them to
appropriate accounts. Staff believes the test year expenses are generally prudent and reasonable,
subject to the adjustments described below.
Staff calculated a total operating expense of$18,895, or an increase of$6,841, over the
Company's reported amount. Attachment B, Columns B and C, Line 17.
Purchase Power
Staff calculated a total annual electricity expense of$1,663 to be included in Staffs
revenue requirement. This amount was determined by examining the Company's power bills
over 12 months from November 2024 through October 2025. Company's Response to Staff
Production Request No. 6, Exhibit D.
STAFF COMMENTS 6 FEBRUARY 26, 2026

Chemicals
Staff calculated a total annual chemical expense of$738 to be included in Staff s revenue
requirement. This expense amount was determined by using the approximate chlorine purchased
amount provided in the Company's Response to Staffs Production Request No. 10. The
Company did not provide any invoices for Chlorine purchase. Although this expense amount is
satisfactory for purposes of validating the Company's current rates, Staff recommends the
Company retain all itemized invoices for Chlorine purchases moving forward to ensure fair
recovery of incurred chemical costs in future general rate cases.
Materials and Supplies—Operations and Maintenance
Staff identified$476 in costs related to the well house breaker. After reviewing the
supporting invoices, Staff determined the costs were necessary and prudent and should be
expensed to operations and maintenance account.
Materials and Supplies—Administrative and General
During Staffs review of the general ledger, expenses in the amount of$60 were found to
be for Company checks and should be expensed to the Materials and Supplies—Administrative
and General account.
Contract Services—Professional Fees
Contract Services—Professional Fees include payments to individuals or entities
contracted by the Company to perform various services. During the test year, the Company
reported $23,639 in expenses that Staff believes should be classified as professional fees,
including services provided by accountants, engineers, and water operators.
In November 2021, the IDEQ sent a Notice of Moratorium on connections to the
Company. The Company has exceeded the allowable connections for one source per the Idaho
Rules for Public Drinking Water Systems (IDAPA 58.01.11.501.17) and will need to drill a
second well. The Company had retained an engineering firm to prepare a facility plan required
by the IDEQ. The facility plan is necessary for the Company to proceed with water system
upgrades and to remain in compliance with the IDEQ requirements. During the test year, the
Company spent $16,036 for this service; however, it would not be appropriate to recover the full
STAFF COMMENTS 7 FEBRUARY 26, 2026

cost in a single year. Staff amortized the facility plan over three (3) years and included only the
annual amortization amount as a recoverable expense.
Staff removed $16,036 related to a facility plan prepared for the Company. This amount
should not be included in Contract Services—Professional Fees because it provides a long-term
benefit to the system and is more appropriately treated as an amortization expense.
With the removal of the facility plan cost, Staff calculates Contract Services—
Professional Fees of$7,603 for the test year.
Contract Services— Water Testing
Staff reviewed all invoices related to water testing for the test year ending September 30,
2025. The Company reported$420 in receipts for water testing expenses. Staff believes the
$420 is reasonable and should be included in Contract Services—Water Testing.
Insurance
The Company provided documentation supporting its insurance premiums for the water
system. Staff reviewed the documentation and believes the insurance expense reasonable for
inclusion in the revenue requirement. Thus, Staff included$1,499 for insurance expense for the
test year.
Additional Expenses
Staff included $792 in property tax expense in the test year. Staff also included the
regulatory amortization expense of the facility plan. Staff's proposal to amortize the $16,036
cost of the facility plan over three years, results in an annual amortization expense of$5,345.
The facility plan, prepared by 7B Engineering, was required by the IDEQ before the
Company could proceed with drilling a second well. Although the plan has been completed and
paid for, it has not been submitted to the IDEQ for approval. Given that facility plans are not
recurring expenses but provide long-term benefit to the water system and its customers, Staff
believes it is appropriate to amortize the cost over a three-year period.
Staff believes the $6,137 is reasonable and should be included in revenue requirement.
STAFF COMMENTS 8 FEBRUARY 26, 2026

Depreciation Expense
Since September 2024, when Mr. Spurgetis became the Successor Trustee of the James
White Trusts, the Company has invested in its water system and purchased assets in which Staff
has determined should be capitalized. Staff classified these expenses to PIS and calculated the
annual depreciation expense using the National Association of Regulatory Utility Commissioners
Depreciation Practices for Small Water Utilities average depreciable life of the asset accounts.
The Company should maintain records and calculate annual depreciation expense for each asset
as outlined in Staff s report. In total, Staff calculated a new depreciation expense of$299 on the
new assets added to the system as reflected in Attachment B (Column B, Line 13)to these
comments.
Rate Design
The Company's flat rate of$50 per customer has been in effect for several years prior to
being regulated. The previous Trustee did not provide any information or documentation as to
how or why this amount was determined. 3 In case BCW-W-25-01, Order No. 36799, the
Commission ordered the Company to maintain the $50 rate until a Staff evaluation could
determine if the interim rate is fair,just, and reasonable. Staff has completed its analysis of the
Company's financial records and believes that the current rate is insufficient to provide and
maintain a safe and reliable water system for the Bear Claw Subdivision.
Based on Staffs analysis, the Company's test year revenue requirement is $14,878,
which is $9,858 less than Staffs calculated revenue requirement of$24,734. See Attachment A,
Column A and C, Line 10. This indicates that current rates are not sufficient to recover the
Company's operating costs while earning a fair return on its investments. However, to fully
evaluate the current rates, the Company should continue to review its reported expenses to
ensure they are complete and accurate, issue monthly bills and collect water fees from all
residents receiving water, continue to comply with the IDEQ's requirements, and consider filing
a general rate case.
3 Prior to Spurgetis Law,James E White Trust was managed by US Bank.See Company's Response to Staff
Production Request No. 3.
STAFF COMMENTS 9 FEBRUARY 26, 2026

Tariff
In Order No. 36799, the Commission directed the Company and Staff to ensure
compliance with the Utility Customer Relation Rules (IDAPA 31.21.01.), including the
development and filing of an appropriate tariff. This work will be finalized through a
compliance filing following issuance of the Commission's Final Order in this case.
Staff also recommends that the Company update its tariff to include approved non-
recurring charges and a separate schedule for IDEQ fees. Non-recurring charges are fees that the
Company can enforce if the Commission deems them appropriate. Staff recommends adding a
return check charge, reconnection charge, and late payment charge. Staff will work with the
Company to ensure that the tariff reflects the non-recurring charges, if approved by the
Commission in its Final Order.
Staff further recommends that the Commission order the Company to submit a
compliance filing that includes: (1) a tariff that complies with IDAPA 31.21.01 and reflects any
approved rates and charges; and(2) an updated Summary of Rules.
Return Check Charge
Idaho Code § 28-22-105 allows a company to collect additional charges when a check
has not been honored,but the amount is not to exceed twenty dollars ($20.00) or the face amount
of the check, whichever is less. Consistent with the statute, Staff recommends setting a return
check charge fee when a payment has been returned for insufficient funds at $20.00.
Reconnection Charge
The Company does not have a reconnection fee for involuntarily service disconnections.
Staff recommends a $50.00 fee when reconnecting a customer due to non-payment. A
reconnection fee is appropriate following an involuntary disconnection of service. Staff believes
the amount is reasonable due to the unique area where the water system is located and the water
operator's travel time to perform the action(s).
STAFF COMMENTS 10 FEBRUARY 26, 2026

Late Payment Charge
Staff supports a late payment charge to encourage prompt payment of bills. A one
percent (I%)per month has previously been allowed to utilities. The late payment charge of one
percent monthly is to be applied to any unpaid balance at the time of the next billing cycle.
Hookup Fees
Staff does not recommend a hookup fee at this time. Currently, the Company is not
authorized to connect additional customers to its water system. However, when the Company
installs a new well, as required to lift the IDEQ's moratorium, the Company should consider
filing a case to establish a proper hookup fee.
Customer Comments
On February 10, 2026, the Commission scheduled a public comment deadline of
February 26, 2026. As of February 26, 2026, the Commission has received four customer
comments regarding the Company's application. In summary, each comment outlines how the
Company does not send out monthly bills, the lack of investment into the water system is not
customers fault, and water outages are caused by equipment failure. Customers also discuss the
issue of the IDEQ moratorium.
STAFF RECOMMENDATION
Staff recommends the Commission acknowledge that the Company's current rate may
not provide sufficient revenue for the continued operation of the system. Staff also recommends
the Commission order the Company to work with Staff to file a compliance filing that includes a
tariff and a Summary of Rules.
Respectfully submitted this 26th day of February 2026.
Erika K. Mclanson
Deputy Attorney General
Technical Staff: Leena Gilman
I:\Utility\UMISC\COMMENTS\BCW-W-25-02 Comments.docx
STAFF COMMENTS I I FEBRUARY 26, 2026

CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 26th DAY OF FEBRUARY 2026,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. BCW-W-25-02, BY EMAILING A COPY THEREOF TO THE FOLLOWING:
Bear Claw Water System,LLC
COURTNEY B. WHITTEN
WINSTON & CASHATT
601 W. RIVERSIDE, SUITE 1900
SPOKANE, WA 99201
E-MAIL: cbw&winstoncashatt.com
Re q,
PATRICIA JORDA9, SECRETARY
CERTIFICATE OF SERVICE