20260304Reply Comments.pdf

RECEIVED
March 4, 2026
IDAHO PUBLIC
Jennifer Reinhardt-Tessmer (ISB 7432) UTILITIES COMMISSION
Jacob Matt (ISB 12482)
KIRTON MCCONKIE
1100 W. Idaho St., Ste. 930
Boise, ID 83702
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]
Attorneys for Dry Creek Water Company LLC
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION ) CASE NO. DRY-W-25-01
OF DRY CREEK WATER COMPANY )
LLC FOR A GENERAL RATE CASE ) DRY CREEK WATER COMPANY'S
REPLY COMMENTS
Dry Creek Water Company ("Dry Creek" or "Company"), by and through its
counsel of record, Kirton McConkie, hereby respectfully submits to the Idaho Public
Utilities Commission (the "IPUC" or "Commission") Reply Comments in the above-
captioned proceeding.
I. Introduction
Dry Creek appreciates Staff's thorough review and constructive analysis. The
Company narrows its reply to three central issues: (1) revenue requirement
considerations; (2) rate base used-and-useful recognition with a defined path to full
recovery; and (3) rate design and revenue stability.'
' Though not a central issue, as a clarification to the record regarding public notice, Dry Creek notes that
it issued a limited press release to the Idaho Statesman only after specifically conferring with Staff
counsel, who agreed that this narrow distribution was appropriate in light of the Company's size and
customer base.
DRY CREEK WATER COMPANY'S REPLY COMMENTS - 1

II. Reply Comments
A. Revenue Requirement: Agreement with Considerations.
Dry Creek is in general agreement with Staff's total recommended revenue
requirement of$1 ,024,038. The recommended level of revenue produces results
consistent with the Company's requested 6% annual increase over three years and
provides sufficient recovery to maintain safe and reliable service. While the Company
has identified individual adjustments2 that it may wish to revisit in a future proceeding, it
does not seek modification in this case given the overall agreement on the total revenue
requirement. The Company reserves the right to address those individual components
in a future rate case as appropriate.
B. Rate Base: Agreement with Structured Escalation to Full Recovery
Dry Creek is in general agreement with Staff's analysis and methodology for
determining Plant in Service (PIS) and the exclusion of excess capacity in certain
production assets (Well No. 3, storage tank, pipeline, and Booster Station No. 1) from
rate base, provided that the Company can recover prudently incurred costs as the
system reaches full utilization.
Dry Creek appreciates Staff's recognition that portions of Well No. 3, the storage
tank, the transmission pipeline, and Booster Pump Station #1 are presently used
and useful. The tank is actively used for equalization to comply with the 5 cfs
instantaneous diversion limit and provides system resiliency. Booster Pump Station #1
has been constructed, commissioned, and is required to maintain pressure and fire-flow
compliance in the upper pressure zone. These facilities are integrated components of
the operating system and provide equalization, redundancy, fire-flow capability, and
'- Examples include, but are not limited to, the income tax rate applied, the reclassification of Materials and
Supplies to Plant in Service, the net-to-gross multiplier, and the normalization of legal expenses.
DRY CREEK WATER COMPANY'S REPLY COMMENTS - 2

wildfire resiliency. They provide present operational and public-safety value, not
speculative future capacity. Specifically, the storage tank and booster infrastructure
support sustained flow and pressure stability during fire events, where peak demand
and system stress can occur simultaneously. The booster station supplies fire hydrants
on the southwestern perimeter of the community to support wildfire protection from that
direction.3
While the Company maintains that the assets are used and useful today, it
agrees that staged recognition may be appropriate in a growth-oriented system and
proposes adopting Staff's recommended percentages as an initial baseline, with
proportional recognition tied to customer growth. A structured escalation mechanism
provides the Commission and the Company with a predictable framework for
recognizing prudently incurred backbone investment as growth materializes. Absent that
framework, partial recognition could leave the timing of recovery for the remaining plant
uncertain and subject to repeated future proceedings.
Commission precedent endorses gradualism and mitigation of rate shock to
balance affordability with utility financial integrity; a structured escalation plan furthers
these objectives. See Re Idaho Power Co., Order No. 24806, Case No. IPC-E-92-25
(Idaho P.U.C. March 29, 1993) ("A rate adjustment mechanism based upon specific
criteria eliminates the need for the Commission to engage in subjective evaluations as
to the overall financial need of [the company] on an infrequent basis. A [power cost
adjustment] will provide consistency and predictability."); In the Matter of the Application
of Intermountain Gas Co., Order No. 33757, Case No. 33757 (Idaho P.U.C. Apr. 28,
2017) ("The Commission uses its authority to fashion fair and reasonable rates that not
3 The 2021 Goose Fire was located in this general vicinity and was proximate to Dry Creek Ranch.
DRY CREEK WATER COMPANY'S REPLY COMMENTS - 3

only provide the utility a fair return and generally follow cost-of-service study results, but
also avoid dramatic and sudden increases which can lead to rate shock."); In re Idaho
Power Co., Order No. 36892, Case No. IPC-E-25-16, at 11-12 (Idaho P.U.C. Dec. 30,
2025); In re Intermountain Gas Co., Order No. 36889, Case No. INT-G-25-02, at 5-6
(Idaho P.U.C. Dec. 30, 2025); see also Arizona Corp. Comm'n, Decision No. 79647,
Docket No. AU-OOOOOA-23-0012 (Dec. 31, 2024) (Adopting formula rate plan policy
allowing annual rate adjustments through pre-established formula in between rate cases
for purposes of rate stability, timely cost recovery, and administrative efficiency).
The Company proposes the Excess Capacity Recovery Mechanism attached to
these Reply Comments as Attachment A and incorporated herein by reference. Under
the proposal, recovery occurs automatically and transparently as new connections are
added, reflecting updated used-and-useful percentages without requiring future general
rate cases for these specific assets. This approach is consistent with gradual
recognition designed to limit customer rate base shock while preserving regulatory
objectives of affordability, stability, and just and reasonable rates. See Order No. 24806;
Order No. 36892 at 12; Order No. 36889 at 6; Indus. Customers of Idaho Power v.
Idaho Pub. Utilities Comm'n, 134 Idaho 285, 1 P.3d 786 (2000) ("Idaho law permits the
Commission to authorize a rate change in some instances without conducting a general
ratemaking proceeding."). The Company requests a start date of January 1, 2029, for
the Excess Capacity Recovery Mechanism in order to limit the immediate rate increase
to the Company's requested 6% annual increase over the next three years.
Growth adjustment is limited to the pre-approved capital already reviewed in this
case. Given the current stage of development of the community and the water system,
implementation of the escalation schedule at this time may reasonably involve initial
assumptions that are not perfectly aligned but can be refined as growth continues
DRY CREEK WATER COMPANY'S REPLY COMMENTS - 4

and additional data becomes available. With respect to Booster Pump Station #1, Dry
Creek views the current 10% used-and-useful allocation as a practical, though
imperfect, starting point. Staff's recommended allocation is based on the percentage
of existing lots presently located within the booster station's immediate service area,
while the associated costs are allocated across the entire customer base. As discussed
previously, Dry Creek disagrees in principle with this methodology because a significant
portion of the facility, particularly its fire protection capacity, benefits the entire
community and exceeds a 10% functional allocation.
Nevertheless, in the interest of practical implementation, the Company proposes
adopting Staff's recommended used-and-useful allocations as an initial baseline, with
future recognition increasing proportionally based on the number of new customers
added to the community per year. This approach provides administrative simplicity
while allowing recovery to fairly and objectively track system growth over time. Similarly,
the proposed schedule for full recovery of prudently incurred costs for Well No. 3, the
pipeline to the storage tank, and the storage tank is based on the number of new
customers added per year, rather than a percentage of capacity.
Accordingly, Dry Creek requests that as additional customers are connected and
additional portions of the identified capital facilities become used and useful in providing
service, Dry Creek shall be permitted to include such incremental plant in service in rate
base upon filing an annual compliance report demonstrating the increase in customers
served and corresponding useful percentage. Depreciation on incremental plant shall
commence prospectively upon inclusion in rate base to correspond with the recovery of
invested capital over its useful life, tied to service to customers. Staff's proposal
mitigates immediate rate shock to customers while preserving the utility's ability to fully
recover prudently incurred costs on assets with excess capacity and reflects a practical
DRY CREEK WATER COMPANY'S REPLY COMMENTS - 5

and forward-looking regulatory perspective. This framework supports gradual,
transparent rate adjustments aligned with actual system utilization, ensuring customers
are treated fairly today, while maintaining the financial integrity necessary to serve
future growth.
C. Rate Design — Company's Proposed Structure is Appropriate and
Preferred
Dry Creek respectfully disagrees with Staff's proposed seasonal two-block rate
structure and continues to support a flatter rate design consisting of uniform fixed
monthly per meter charges and a uniform year-round volumetric rate.
In evaluating rate design, Dry Creek relied on guidance from the American Water
Works Association Manual of Water Supply Practices regarding the establishment of
rate policy priorities, which include balancing conservation and efficient use with
revenue sufficiency, rate and revenue stability, affordability, and customer impact. See
Am. Water Works Ass'n, Manual M1: Principles of Water Rates, Fees, and Charges (7th
ed. 2017) ("Revenue stability and predictability" are core objectives of rate-making).
Commission precedent similarly prioritizes rate stability and avoidance of undue rate
shock in rate design. See, e.g., Order No. 33757; Order No. 36892; Order No. 36889.
Because conservation and demand management are effectively addressed
through the Company's separate conservation program and system infrastructure,
revenue stability and customer impact are among Dry Creek's primary rate-setting
priorities. Revenue stability is particularly important given the system's predominantly
fixed cost structure, where most expenses do not fluctuate with seasonal changes in
water use. Irrigation represents approximately 86 percent of total system demand;
therefore, seasonal variation in customer water bills and Company revenue is inherent.
Staff's tiered and seasonal block rates would amplify customer bill volatility and reduce
Company revenue stability, increasing the risk of under-collection during winter months
DRY CREEK WATER COMPANY'S REPLY COMMENTS - 6

when usage (and volumetric recovery) is lowest. See Order No. 36892 at 12 (noting
maintenance of existing residential service charges as part of a balanced resolution that
considers rate stability and customer impacts); see also Order No. 36889 at 5-6 (finding
settlement "appropriately balances customers' desires for a smaller rate increase" with
utility financial integrity). Seasonal structures can also make revenue recovery
dependent on weather variability and other unpredictable factors; this is a mismatch to
the Company's fixed cost structure and could lead to structural revenue instability. Table
1 presents Staff's and Dry Creek's proposed rates.
Table 1 —Proposed Rate Structures(Side-by-Side).
Category Year 1 — Year 1 — Year 2 — Year 2 — Year 3 — Year 3 —
Staff Company Staff Company Staff Company
Summer Block 0-7,000 gal Uniform rate 0-7,000 gal Uniform rate 0-7,000 gal Uniform rate
Thresholds (Block 1); (no blocks) (Block 1); (no blocks) (Block 1); (no blocks)
>7,000 (Block >7,000(Block >7,000(Block
2) 2) 2)
Usage— $2.92 $2.12 $3.10 $2.62 $3.28 $2.77
Summer Block 2
(per 1,000 gal)
Usage— $1.46 $2.12 $1.55 $2.62 $1.64 $2.77
Summer Block 1
(per 1,000 gal)
Usage— $1.46 $2.12 $1.55 $2.62 $1.64 $2.77
Non-Summer
(per 1,000 gal)
Monthly Fixed $52.51 $50.35 $55.68 $53.35 $59.05 $56.50
Charge
(Residential, 1"
meter)
Monthly Fixed $34.30 $50.35 $36.38 $53.35 $38.58 $56.50
Charge
(Residential,
0.75" meter)
DRY CREEK WATER COMPANY'S REPLY COMMENTS - 7

Because the Company's rate increase will take effect in late spring or early
summer—just as seasonal irrigation demand begins to rise—customer perception may
be significantly influenced by the blocked summer rates. For residential customers with
1" meters in particular, the timing could create a sense of rate shock: their July 2026 bill
is likely to be approximately 54% higher than their July 2025 bill, even though the
approved base rate adjustment is only 6%. This seasonal usage effect may overshadow
the modest nature of the underlying increase. The Commission has expressly endorsed
gradualism to avoid undue rate shock and align recovery with affordability and stability
considerations. See, e.g., Order No. 36889 at 6 (approving a settlement that reduced
the requested increase to "protect[] customers from an unduly burdensome rate
increase"); see also Order No. 36892 at 12 (finding the settlement "limit[s] bill impacts"
by, among other things, maintaining certain service charges).
Bill Volatility
Customer bill volatility is an important consideration in evaluating rate design,
particularly in systems characterized by significant seasonal irrigation demand. See
Water Works Ass'n, Manual M1, p. 132 ("Implementing seasonal rates can place
revenue stability at risk, depending on the differential in the peak-season rate and
customer response to the higher rate."). Because Dry Creek does not operate a
separate irrigation system and serves predominantly large residential lots, customer
usage naturally fluctuates between winter and peak summer months. Rate structures
that amplify these seasonal patterns can result in substantial variation in monthly bills,
which may create budgeting challenges for customers and distort perceptions of rate
increases. Idaho Commission orders recognize the need to mitigate rate shock and
promote rate stability while ensuring utilities recover prudently incurred costs through
just and reasonable rates. See, e.g., Order No. 33757, Order No. 36892 at 11-12;
DRY CREEK WATER COMPANY'S REPLY COMMENTS - 8

Order No. 36889 at 5-6. Staff's proposed rates result in significant bill variability—
approximately 3x for residential customers with %" meters and nearly 4x for those with
1" meters. In comparison, the Company's proposed rate structure results in
approximately 2x seasonal bill variability for all residential customers. Figure 1
illustrates this difference in residential customer bill volatility.
Residential Customer Bill Volatility
$250.00
$200.00
0o
v
$150.00
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$100.00
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——— 3/4"Residential-Staff Proposed Rates t 1"Residential-Staff Proposed Rates
All Residential-Company Proposed Rates
Figure 1. Bill Volatility for Residential Customers.
The Company's proposed structure preserves a conservation signal because
customers still pay more when they use more water. However, it avoids the extreme
volatility created by a seasonal block structure. Under Staff's proposed summer
threshold, the overwhelming majority of customers fall into the higher block for most of
the irrigation season. When the lower block is largely unattainable, the upper tier
effectively becomes a flat operative rate while still imposing greater volatility.
DRY CREEK WATER COMPANY'S REPLY COMMENTS - 9

HOA Rate Shock
When the HOA was the water utility billing entity, it did not charge itself a per-
meter rate. The Company's rate structure contemplated a gradual phase-in of
$15/meter/month for the immediate rate case. Staff's proposal does not include a
phased-in approach and will result in an estimated increase of nearly $60,000 in the
HOA's 2026 water bill. The HOA established its 2026 budget in December based on
the Company's notice advising of a 6% annual increase over three years and has
already begun billing accordingly. The HOA cannot absorb a material reallocation of
rate design or cost recovery mid-budget year.
Unlike most water utilities, Dry Creek serves the same customer base as the
HOA membership. As a result, reducing certain customers' monthly base rates while
increasing the HOA's water bill does not meaningfully shift the overall payment burden.
Any savings a resident realizes on their individual base rate would be offset through
higher HOA dues. Instead of providing true relief, this approach simply reallocates costs
and unnecessarily disrupts the HOA's financial planning. Including the HOA's meters in
the Company's proposed flat rate structure would mitigate the effect of Staff's tiered
meter rate structure.
Staff's Proposed Rates Provide Limited Additional Conservation Effect
Dry Creek maintains an active conservation program targeted toward irrigation
use that is both effective and ongoing. Unlike a one-time rate increase, the program
relies on continuous monitoring, regular customer engagement, and real-time usage
oversight to ensure sustained water savings over time. This proactive approach
produces longer-lasting conservation outcomes by actively managing irrigation demand
rather than relying solely on price signals to influence behavior. Key components
include:
DRY CREEK WATER COMPANY'S REPLY COMMENTS - 10

• All landscape areas are equipped with programmable sprinkler
systems. The builder has developed guidance for consumers with specific, easy-to-
understand system settings including avoiding system peak hours. The guidance
document is posted next to the sprinkler controls in every new home and is frequently
requested by the Company's water customers.
• Most large customers have reduced their irrigated area by integrating
native areas, xeriscaping, or hard scaping.
• The HOA is a collaborative conservation partner. They have invested
in software to remotely control settings at each common lot. The Company worked with
the HOA in commissioning the software and ensured that irrigation of the common lots
is minimized during system-wide peak hours.
• Dry Creek's meter reading software was customized to
automatically generate a weekly report that identifies leaks, high use customers and
common lots for individual communications.
Dry Creek Ranch also implements non-irrigation water sustainability initiatives,
including:
• All homes are new and equipped with water saving features. The average
in-home use is 62.5 gpd/person compared to 75 gpd/person for the Treasure Valley and
the national average of 80-100 gpd/person.
• The Company's water delivery system itself manages peak constraints
through operational controls and equalization storage.
• Water used in Dry Creek Ranch remains within Dry Creek Ranch.
Irrigation water, less evapotranspiration, percolates back into the local aquifer. Indoor
water use is treated at the community's private wastewater treatment facility, and the
effluent is discharged back to the aquifer through on-site rapid infiltration basins. By
contrast, most wastewater treatment plants discharge treated effluent to surface waters
that ultimately flow to the ocean, resulting in a net export of water from the local basin.
Revenue Stability/Cash Flow
Revenue stability is important because Dry Creek's cost structure does not
fluctuate seasonally with increased irrigation use. Most of the Company's operating
DRY CREEK WATER COMPANY'S REPLY COMMENTS - 11

expenses and staffing costs are consistent from month to month, but repairs and
maintenance, taxes and equipment purchases tend to occur in peaks during low
revenue months. Under Staff's proposal, projected winter revenues are
approximately $36,000 per month, while summer revenues approach $137,000 per
month. Concentrating revenue recovery into peak irrigation months creates structural
cash-flow risk unrelated to conservation performance. Commission precedent
underscores that rate design should prudently balance affordability with the utility's
financial integrity and rate stability—objectives the Company's proposed structure
advances. See In the Matter of the Application of Falls Water Co. Inc., Case No. FLS-
W-23-01, Order No. 36027 (Dec. 14, 2023) (approving a rate increase settlement that
"balances the needs of customers to receive safe and reliable water service at
reasonable rates and for the Company to earn a reasonable return on its prudently
incurred investment."); Order No. 36892 at 12; Order No. 36889 at 5-6; Water Works
Ass'n, Manual M, p. 132.
Revenue Stability
$160,000.00
$140,000.00
$120,000.00
$100,000.00
$80,000.00
$60,000.00 ••�' +
$40,000.00
$20,000.00
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2026 Revenue-Staff Proposed Rates •••F•••2025 Company Operating Costs
Figure 2. Staff Proposed 2026 Revenue and Dry Creek 2025 Operating Costs
DRY CREEK WATER COMPANY'S REPLY COMMENTS - 12

The Company's proposed flat structure aligns fixed costs with fixed recovery,
reduces extreme seasonal swings, improves predictability for customers and the HOA,
and reflects the system's predominantly fixed cost profile. Dry Creek firmly maintains
that this is the appropriate rate design for this system, as it accurately reflects
operational realities while preserving reasonable conservation incentives.
III. Conclusion
Dry Creek agrees with Staff's overall revenue requirement and recognizes the
balance Staff has attempted to strike between customer protection and utility financial
stability. The issues raised in these Reply Comments are aimed at ensuring clarity,
predictability, and fairness in implementation. To that end, Dry Creek respectfully
requests the following:
1. The Commission approve Dry Creek's flat rate structure that balances
conservation with revenue stability and minimizes rate shock; and
2. While Dry Creek agrees that staged used-and-useful recognition may be
appropriate, it requests adoption of its proposed Excess Capacity Recovery
Mechanism to ensure a clear and predictable path for full recovery of
backbone assets as customer growth occurs.
The Company appreciates the Commission's consideration of these Reply
Comments.
Respectfully Submitted this 4th day of March, 2026.
/s/Jennifer Reinhardt-Tessmer
Jennifer Reinhardt-Tessmer
Attorneys for Dry Creek Water Company LLC
DRY CREEK WATER COMPANY'S REPLY COMMENTS - 13

CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 4th day of March, 2026, 1 served the foregoing
document upon the following named parties by the method indicated below, and
addressed to the following:
Commission Secretary ❑ U.S. Mail
Idaho Public Utilities Commission ® Email
P.O. Box 83720
❑ Hand Delivery
Boise, ID 83720-0074
[e-mail] El Overnight Mail
❑ Facsimile
/s/ Madison Hyland
Madison Hyland
Legal Assistant for Kirton McConkie
Counsel for Dry Creek Water Co., LLC
DRY CREEK WATER COMPANY'S REPLY COMMENTS - 14

ATTACHMENT A
EXCESS CAPACITY RECOVERY MECHANISM
Narrative Explanation of the Excess Capacity Recovery Mechanism Dry Creek Water Company
LLC Case No. DRY-W-25-01 Submitted for Review by Commission Staff
Dry Creek Water Company LLC ("Company") proposes the Excess Capacity Recovery
Mechanism detailed in the below worksheet. The mechanism defers recovery of the disallowed
net plant until it becomes used and useful; recovery occurs automatically and transparently as
new connections are added, without requiring future general rate cases for these specific
assets. The Company provides the following narrative explanation of the below worksheet.
The worksheet is organized into four parts:
Part I — Initial Excess Net Plant in Plant Held for Future Use (PHFU) (Account 107) This
section establishes the baseline disallowed plant eligible for deferral, using Staffs adjustments
from Attachment B and related schedules. The total disallowed net plant is $3,209,517 (gross
plant $10,650,870 less accumulated depreciation $1,182,092 and net CIAC $4,489,456,
resulting in net PIS of$4,979,322, with Staffs allowed portion of$1,769,805 subtracted). Annual
depreciation on this amount ($181,996) is suspended while the plant remains in NARUC
Account 107 (Plant Held for Future Use).
The PHFU amount is sub-allocated by asset for accurate tracking and future reclassification,
with each component booked to separate subaccounts (e.g., 107.1 for Well No. 3, 107.2 for
Storage Tank, 107.3 for Pipeline, 107.4 for Booster Station No. 1):
• Well No. 3 (incl. pump): $705,957 (22%)
• Storage Tank: $871,425 (27%)
• Pipeline: $608,178 (19%)
• Booster Station No. 1: $1,023,956 (32%)
These percentages are derived from the proportional gross costs in Attachment B.
Part II — Calculation Components for Per-Future-Customer Formula This part computes the
per-customer values used in the annual recovery formula. Future customers are calculated as
1,161 (1,889 total build-out lots minus 728 existing). The excess net plant ($3,209,517) is
divided by 1,161 to yield approximately $2,764 net plant per future customer.
Return is calculated at 11% ROE pre-gross-up ($304 per customer), then grossed-up using
Staffs net-to-gross factor of 1.3396 ($407). Annual depreciation per customer is $157 (total
suspended depreciation $181,996 _ 1,161). Incremental O&M costs related to customer growth
(power $45,742, chemicals $10,461, contractual/billing $80,930) add $195 per customer.
The total annual recovery per added customer is $759 (gross return + depreciation + O&M).
Part III — Example: Recovery for 70 New Connections (End-of-Year Trigger) This section
demonstrates the mechanism's implementation from an accounting and regulatory perspective.
For an example of 70 new active connections added in a calendar year:
• Incremental revenue to collect: $53,104 (70 x $759).
DRY CREEK WATER COMPANY'S REPLY COMMENTS - 15

• Net plant reclassified from PHFU to PIS: $193,511 (70 x $2,764), pro-rated to the asset
sub-accounts:
o Well No. 3 (incl. pump): $42,564
o Storage Tank: $52,541
o Pipeline: $36,669
o Booster Station No. 1: $61,737
• Depreciation activated: $10,973 (70 x $157), beginning in the following year on the
reclassified amounts, using remaining useful life (forward from activation date, based on
the original in-service date of the assets).
The reclassified net plant is moved from Account 107 subaccounts (e.g., 107.1 for Well No. 3) to
dedicated "Extra Capacity Recovery" PIS subaccounts (e.g., one per asset: 303.1 for Well No. 3
Extra Capacity Recovery, 303.2 for Storage Tank Extra Capacity Recovery, 303.3 for Pipeline
Extra Capacity Recovery, 303.4 for Booster Station No. 1 Extra Capacity Recovery). Each year
the mechanism is implemented, a new set of four PIS subaccounts will be created to track that
year's reclassifications separately, ensuring auditability and preventing commingling.
Part IV— Rate Surcharge Calculation Per Bill This part calculates the customer-facing
surcharge to recover the incremental revenue without affecting base rates. In the 70-connection
example, $53,104 revenue is divided by 9,576 year-end bills (existing + new connections x 12
months), resulting in a fixed monthly surcharge of approximately $5.55 per bill. This surcharge is
tracked separately on customer bills (e.g., as "Extra Capacity Recovery Adjustment") to ensure
transparency and prevent commingling with base rates.
Annual Presentation Procedure At the end of each calendar year, Dry Creek Water will file a
compliance report with the Commission by March 1 of the following year, detailing:
• Number of new active connections added during the year.
• Incremental revenue to be collected via the surcharge (new connections x $759 per
customer).
• Net plant amounts reclassified from PHFU subaccounts (107.1-107.4) to new "Extra
Capacity Recovery" PIS subaccounts (e.g., 303.1-303.4 for that year).
• Updated PHFU balances by subaccount after reclassifications.
• Proposed surcharge amount per bill for the upcoming year (incremental revenue
estimated bills).
The Company proposes that the Commission Staff review the filing within 30 days, with the new
surcharge implemented by May 1 or June 1 (or as soon thereafter as the Commission may
direct), acknowledging that the exact filing procedure, review timeline, and implementation date
will be established by the Commission.
Five-Year Reset Provision After five years from the effective date of the Commission's Order,
Dry Creek Water will file a general rate case to reset the mechanism. This filing will include an
evaluation of growth projections, remaining PHFU balances, and any needed updates (e.g.,
revised per-customer amounts based on updated costs or utilization). The reset ensures the
mechanism remains equitable and aligned with actual system development.
DRY CREEK WATER COMPANY'S REPLY COMMENTS - 16

PROPOSED EXCESS CAPACITY RECOVERY FORMULARY RATE-DRY CREEK WATER COMPANY
I.Initial Excess Net Plant in Plant Held for Future Use(PHFU)(Account 107)
Amount Annual Depr
Gross Cost As Disallowed Used&Useful on Plant Held
Asset Component For Future
Filed Plant Held for Plant Per Staff Use
Future Use
Suspended
Plant-In-Service $10,650,870 $3,545,819 $7,105,051 $181,996
Accumulated Depreciation ($1,182,092) ($336,302) ($845,790) $0
Net CIAC ($4,489,456) $0 ($4,489,456) $0
Total $4,9799322 $39209,517 $1,769,805 $181,996
Net Plant in Plant Held for Future Use(PHFU)Sub-account Allocations(Account 107) (1):
Well No.3(incl.Pump) 22% $705,957
Storage Tank 27% $8719425
Pipeline 19% $608178
Booster Station No.1 32% $1,0239956
Total 100% $3,2099517
II.Calculation Components for Per-Future-Customer Formula
1 Future Customers:1,889 total build-out-728 existing= 1,161
2 Net Plant per Future Customer:PHFU=1,161= $2,764
3 ROE per Customer(pre-gross-up):Net PHFU Per Cust x 11%ROE_ $304
4 Grossed-Up ROE per Customer:ROE x 1.3396 $407
5 PHFU Annual Depreciation per Customer: $157
6 Annual O&M Cost,Power,Chemicals,Contract Services(2) $195
7 Annual Recovery per Added Customer: Lines 4+5+6 $759
III.Example:Recovery for 70 New Connections(End-of-Year Trigger)
Assume new active connections added in a calendar year. 70 New Connects
Step Calculation per Annual Description
Customer Recovery
Incremental Revenue to Collect $759 $539130 Annual rate adjustment:New Connects x Annual Cost Per Customer
Net Plant to Reclassify-PHFU to PIS $2,764 $1939511 Removed from Account 107,allocated to PIS sub-accounts(below).
Depreciation(New Connect x Depr per Cust) $157 $109990 Starts in next year;using remaining life allocated net asset
Pro-Rated Reclassification to"Extra Capacity Recovery"Plant In Service(PIS)Sub Accounts
The total net plant value is moved from PHFU accounts and allocated by asset ratios and placed in dedicated PIS sub-accounts for tracking.Depreciation
resumes forward from PIS recovery date.
PHFU Sub-Account %of Total Reclassified Plant In Service Accounts
Amount
Well No.3(incl.Pump) 22% $42,564 Well No.3 Extra Capacity Recovery
Storage Tank 27% $52,541 Storage Tank Extra Capacity Recovery
Pipeline 19% $36,669 Pipeline Extra Capacity Recovery
Booster Station No.1 32% $61,737 Booster Station No.1 Extra Capacity Recovery
Total 100% $193,511
IV.Rate Surcharge Calculation Per Bill
Total Revenue Requirement Recaptured $53,130
Year End Bills X 12 9,576
Fixed Charge Increase $5.55
(1)Detail of Disallowed Plant
Gross Plt Accum Depr Net Plant Deur Exp
Pipeline $644,754 ($36,576) $608,178 ($18,288)
Well $854,431 ($148,474) $705,957 ($32,296)
Storage $914,409 ($42,984) $871,425 ($21,492)
Booster $1,132,225 ($108,269) $1,023,956 ($109,920)
Total $3,545,819 ($336,302) $3,209,517 ($181,996)
(2) Customer Growth Related O&M Staff Adjusted
Purchased Power $45,742
Chemicals $10,461
Contractual Services-Bi $24,950
Contractual Services-Oth $55,980
Total $137,133
Existing Active Custome 705
Per Customer Rate $195