20260407Final_Order_No_36996.pdf

Office of the Secretary
Service Date
April 7,2026
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE INVESTIGATION ) CASE NO. BCW-W-25-02
INTO BEAR CLAW WATER SYSTEM,LLC'S )
RATES AND CHARGES FOR SERVICE )
ORDER NO. 36996
On July 14,2025,Bear Claw Water System,LLC("Company")applied to the Idaho Public
Utilities Commission ("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 ("Application").
On October 9, 2025, the Commission issued Order No. 36799, granting the Company's
request for a CPCN and directing Commission Staff("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.
On February 10, 2026, the Commission issued a Notice of Application and Notice of
Modified Procedure,establishing deadlines for public comments,and for the Company to file reply
comments. Order No. 36935.
Based on our review of the record, the Commission now issues this Final Order
conditionally approving the Company's current rates.
Staff conducted an audit of the Company's operating expenses and plant-in-service("PIS")
for the twelve-month period ending September 30, 2025, to support the development of a revenue
requirement calculation. Staff Comments at 2. As part of the review, Staff evaluated the
Company's financial records, including invoices, bank statements, the general ledger, and
responses to Staff production requests. Id. Based on its investigation, Staff believed that the
Company's current monthly rate of$50 per customer did not generate sufficient revenue to cover
operating expenses or provide the Company a reasonable opportunity to earn a return on its capital
investments. Id. While additional scrutiny and adjustments could occur in a future general rate
ORDER NO. 36996 1

case, Staff concluded for purposes of the initial investigation that the current rate likely produces
revenues below the level necessary for the continued operation of the system.Id.
The Company's water system,located east of Clark Fork in Bonner County,Idaho,consists
of a single well with a 10-horsepower pump and an approximate capacity of 35 gallons per minute.
Id. The system serves 24 unmetered residential lots in the Bear Claw Subdivision,with a maximum
capacity of 44 connections.Id. The system is subject to a Moratorium on New Connections issued
by the Idaho Department of Environmental Quality ("IDEQ") on October 27, 2021, requiring
agency approval before additional connections can be added.Id.
Staff s review of the Company's Application, the IDEQ sanitary survey, and responses to
production requests indicated that the water system is capable of providing safe and reliable service
to its current customers and was operating in compliance with the Idaho Rules for Public Drinking
Water Systems. Id. at 3. The sanitary survey reported no significant deficiencies affecting system
reliability but confirmed that new connections could not be added without IDEQ approval and that
a second well would be required to serve additional customers.Id. The Company was in the process
of developing a facility plan to address these requirements. Id. Staff recommended that the
Company provide a copy of the completed facility plan to the Commission when available,
communicate with the Idaho Department of Water Resources("IDWR")regarding its water rights
before developing a second well, and begin recording and maintaining periodic system pressure
data, at least monthly, to monitor system performance and detect potential issues such as leaks or
depressurization events.Id.
Staff also reviewed the Company's water production relative to its available water rights.
Id. During the period from November 2024 through October 2025, the system produced
approximately 2.1 million gallons, which was within the available water right. Id. at 4. However,
a memorandum from IDWR dated August 8, 1997, indicated that the existing permit would not
cover the subdivision at full build-out and would not authorize diversion from more than one well.
Id. Accordingly, Staff recommended that the Company consult with IDWR before pursuing
development of a second well.Id.
Based on its financial review, Staff initially calculated a revenue requirement of$14,875
prior to adjustments. Id. After reviewing individual components and applying recommended
adjustments, Staff recalculated the Company's annual revenue requirement to be$24,734.Id. Staff
ORDER NO. 36996 2

determined a net rate base of$29,264, consisting of$27,707 in net PIS and $1,557 in working
capital, with accumulated depreciation estimated at $299. Id. at 4-5. The Company had no
authorized debt; therefore, Staff applied an 11 percent return on equity consistent with other small
water utilities. Id. at 5-6. Staff also identified additional plant investments made during the test
year, including $19,375 for pumping equipment and $8,631 for emergency water leak repairs
completed in October 2025,both of which were included in PIS and depreciated using the straight-
line method over estimated useful lives. Id. at 5.
During the test year, the Company reported $12,150 in total revenue from residential
customers. Id. at 6. Because residents were not formally billed and payments were made
voluntarily, Staff calculated potential annual revenue of$14,400 if all 24 customers paid the $50
monthly charge. Id. The Company reported operating expenses of $12,053, which included
professional fees, repairs and maintenance, utilities, and other general expenses. Id. After review
and reclassification of certain costs, Staff calculated adjusted operating expenses of$18,895. Id.
Adjustments included estimated electricity expenses of $1,663 based on power bills, chlorine
chemical expenses of$738 based on reported usage, and $476 in well house breaker repair costs
classified as operations and maintenance. Id. at 6-7.
Professional service expenses were also evaluated. Id. at 7-8. The Company reported
$23,639 in professional fees, including engineering services associated with preparation of a
facility plan required by IDEQ.Id. at 7. Staff determined that the $16,036 cost of the facility plan
provided a long-term benefit and should not be recovered in a single year. Id. at 8. Instead, Staff
amortized the cost over three years and included only the annual amortization expense of$5,345
in the revenue requirement.Id. After adjustments, Staff calculated $7,603 in professional fees for
the test year.Id.
Based on these calculations, Staff believed that the Company's current revenues were
insufficient to meet its calculated revenue requirement, as test-year revenues of approximately
$14,878 were $9,858 below the required level of $24,734. Id. at 9. By Staffs calculation, the
current flat rate of$50 per customer was likely inadequate to support safe and reliable system
operation while providing the Company an opportunity to earn a reasonable return. Id. Staff
recommended that the Company continue improving its financial recordkeeping, issue monthly
ORDER NO. 36996 3

bills to customers, ensure payment collection from all users, maintain compliance with IDEQ
requirements, and consider filing a general rate case for a more comprehensive review of rates.Id.
Staff also recommended that the Company update and file a tariff consistent with the Utility
Customer Relations Rules and include approved non-recurring charges. Id. at 10. Recommended
charges included a $20 return-check fee consistent with Idaho Code § 28-22-105, a $50
reconnection fee for service restoration following non-payment, and a late payment charge of one
percent per month on unpaid balances.Id. at 10-11. Staff did not recommend establishing a hookup
fee at this time due to the existing moratorium on new connections but suggested the Company
consider doing so once a second well is installed and system capacity increases.Id. at 11. Finally,
Staff recommended that the Commission acknowledge that the current rate may be insufficient for
continued system operation and direct the Company to submit a compliance filing that includes an
updated tariff and a Summary of Rules consistent with regulatory requirements.Id.
PUBLIC COMMENTS
The Commission received four customer comments regarding the evaluation into the
Company's rates and charges. The comments expressed concerns over the lack of billing
statements,the lack of transparency on how the system is being maintained,the lack of investment
into the water system, and water outages are caused by equipment failure. Customers also
discussed the issue of the IDEQ moratorium and the desire to have a second well installed.
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's regulatory authority extends to the service rates charged by public
utilities. Specifically, upon finding that the rates charged by a public utility are "unjust,
unreasonable, discriminatory, or in any way in violation of any provision of law, or that such rates
. . . are insufficient"the Commission must"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;see
also Idaho Code § 61-503.
ORDER NO. 36996 4

However, this authority over rates is not unlimited. Public utilities are entitled to a
reasonable rate of return on prudent investments. "[A] public utility is entitled to such rates as will
permit it to earn a return on the value of the property which it employs for the convenience of the
public, equal to the return generally being made at the same time and in the same general part of
the country on investments and other business undertakings which are attended by corresponding
risks and uncertainties." Utah Power & Light Co. v. Idaho Public Utilities Comm'n, 105 Idaho
822, 827 (1983). The Commission has the power and the duty to set rates of return within a"broad
zone of reasonableness."Intermountain Gas Co. v. Idaho Public Utilities Comm'n, 97 Idaho 113,
128 (1975). "The main elements in fixing reasonable rates for service rendered by[a]public utility
are the cost of rendering service on an economical and efficient basis, fair return to the utility on
its property used and useful in such service and fairness to consumers."Application of Pacific Tel.
& Tel. Co., 71 Idaho 476, 480-81 (1951).
The Commission has reviewed the record in this case, including Staffs audit and
evaluation of the Company's operations, PIS, and financial condition for the twelve-month period
ending September 30,2025.Based on the record,the Commission finds Staff s analysis reasonable
for purposes of this investigation. We agree that the Company's current flat monthly rate of$50
per customer likely does not generate sufficient revenue to recover reasonable operating expenses
or provide the Company a fair opportunity to earn a return on its investment. Staff s calculated
adjusted annual revenue requirement and estimated annual revenues result in a shortfall.While the
Commission does not establish rates in this proceeding, we find that the Company's existing rates
and charges may be inadequate to support the continued provision of safe and reliable service.
Accordingly, the Commission approves the Company's interim rates but acknowledges the
potential insufficiency of the Company's current rates and encourages the Company to file a
general rate case application in the near future to allow for a comprehensive review of its rates,
charges, and revenue requirement. If the Company does not file such an application within two(2)
years of the date of this Order, the Commission finds it reasonable to direct Staff to initiate an
investigation into the Company's rates and charges to determine whether they are just,reasonable,
and sufficient.
While the Company's system is currently capable of providing safe and reliable service to
its existing customers, the system remains subject to an IDEQ imposed moratorium on new
ORDER NO. 36996 5

connections and will require additional infrastructure, including a second well, to accommodate
future growth. The Company has begun developing a facility plan to address these needs. The
Commission agrees with Staff that maintaining a current facility plan and coordinating with
relevant state agencies is necessary to ensure long-term system reliability and regulatory
compliance. Therefore, the Commission directs the Company to maintain its facility plan on file
with Staff and to provide updates as they become available.
The Commission also finds that the Company's billing and recordkeeping practices require
improvement. The record indicates that customers have not been consistently billed and that
payments have been made on a voluntary basis. The Commission emphasizes that public utilities
must implement consistent billing practices, ensure collection of approved rates and charges, and
maintain accurate and complete records of customer billing and payments. The Commission
therefore finds it appropriate to direct the Company to comply with all applicable rules governing
rate billing and collection and to maintain sufficient financial and operational records to
demonstrate compliance and support future review.
Finally, the Commission finds it reasonable and necessary to direct the Company to
formalize its rates, charges, and customer service practices through a compliance filing. The
Company shall work with Staff to prepare and submit a filing that includes a tariff clearly setting
forth all rates, charges, and non-recurring fees, as well as a Summary of Rules consistent with the
Utility Customer Relations Rules.This requirement will promote transparency,improve regulatory
compliance, and ensure that customers are adequately informed of the terms and conditions of
service.
Based on the foregoing, the Commission finds the above measures to be reasonable and
necessary to ensure that the Company continues to provide safe, adequate, and reliable service
while moving toward compliance with applicable regulatory requirements and cost-based
ratemaking principles.
ORDER
IT IS HEREBY ORDERED that the Company's interim rates are approved and the
Company is encouraged to file a general rate case application in the near future to allow for a
comprehensive review of its rates, charges, and revenue requirement.
ORDER NO. 36996 6

IT IS FURTHER ORDERED that if the Company does not file a rate case within two (2)
years of the date of this Order, Staff shall initiate an investigation into the Company's rates and
charges to determine whether they are just, reasonable, and sufficient.
IT IS FURTHER ORDERED that the Company shall maintain its facility plan on file with
Staff and to provide updates as they become available.
IT IS FURTHER ORDERED that the Company shall comply with all applicable rules
governing rate billing and collection and maintain sufficient financial and operational records.
IT IS FURTHER ORDERED that the Company shall work with Staff to prepare and submit
a compliance filing that includes a tariff clearly setting forth all rates, charges, and non-recurring
fees, as well as a Summary of Rules consistent with the Utility Customer Relations Rules.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order regarding any matter
decided in this Order. Within seven (7) days after any person has petitioned for reconsideration,
any other person may cross-petition for reconsideration. See Idaho Code § 61-626.
ORDER NO. 36996 7

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 7th day of
April, 2026.
G
EDWARD LODGE, PR „ DENT
/I,—- gt��
JO R. HAMMOND JR., COMMISSIONER
DAYN HAKDIE, COMMISSIONER
ATTEST:
I JJQOV�
MQ'ick BRTdo nchez
Commission Secretary
I:\Legal\WATER\BCW-W-25-02_investigation\orders\BCW W2502_final_em.docx
ORDER NO. 36996 8