20221027Gem State to Staff 47-53.pdf

i([CEIVED
?[?? 0rT 2? filt il; 59(} ** ttoturol'
Rates 6i Resulatory Affairs ,,.,iiijil*#rf,hl8*,0*GSW-W-22-01
Gem State Water Company, LLC Application for an Order Authorizing an lncrease in its
Rates and Charges for Water Service
Data Request Response
Request No.: GSW-W-22-01 IPUC DR 47
47: Please provide all supporting documentation for each of the Company's purchases
listed below. Please ensure this response includes invoices, cost benefit analysis,
alternatives proposed, justification, and benefits received.
$tt.a O&ld A(Mt l@frOtskrto Lpam Atuit tmDiltff
Irl
tYx
Loair
lUrlrlolt l, Oh.r tlFr I iar fsrair L.( ti4 lL9!l .,t.r ,. rr,, .I,,r,., ..r i , r-,.+,, ,d
oi
ZUrQf trl to..r?mr.na taDF d
tia t p{.rI
lol &plonl,il e'ltn!o. tFrod
XFFlrGrd mtOt
lT,tadF klo.xron r. ptuo 9/21/I
Oloerlcr .n PDr ,/ V, I
Or.@d ar ,6p a d l&br brcl r,
tar Ei penpa.id dd b.dr lp
ilrrirl
Daqfi rga lti I l/Uaem/.tr,Bdt
OarlE ir.lt 6 tstu.. lyrqrl
tnaif,rn{ Ot ku ,,
Ptoarrr }lb{ tl rrue |l(r}rs
Cdn{^td ttilttv !ot!t.^t tn( lc(rjl,
llldl(-iltrw
ulvlore ,uo./rryDro ,,lrorcr'rD ,ll,lr2lrl,tt rI
Fo.., Puvrght tldF.nr
t6r 3 Othb tlufr tlqrrs,al
aocr l6!r.f fasFart
?'.trl I Orrrnb l/bq 3 k4sd(r
Oltrc ,silrw and fqerE^t
O{tr.. tfr( .r!, [qtl9ent
lomrGr666q*p1*6
(rt,.r ,@16 r|{ laepmil
tX6At oolt r0Etm liM|tmb
tq8) padrlormmilMb
t,ll, Fort xodt6 imilila(!
tr.lla SlMterff{ncdr
tvrylo!
rr.I,0/r@l
!lc
I'7
?d?r CrErai@lqrln.t
l,lvmlo tl) t.ts! 3 oil4b u.,.i I A.c!ba.t
UUn, f, $rr,lr
lu.nl
lu..{l
tao.t
lr.fo ,o* rwarrir rm.tm^ttll6t pd xe(!u6 nnttmntr
16la, Erxslrl6imrt&ilr
,10 tr9 co.t .cir!t6 6*ttmdr
l atl ,6t xirt,io MttEilt
a7 ICt Dort xluilDa ri-iladr
l..Ll \r rpr ,, rit.. .{r,...,r,r. .. r- , t, r I
llt,O!, .\,.rrr,,t r,t- j..!,ri(:.1. o. ,_\ !,- ^n,,..d
glID porl rcEt6 nnlffilr
16@ portlsrtrGrmm.lt
9.gn Fr! xcaoton tGttfraGt!
f,08 Ffl xorEr6n a@{66rt
I
rl
w
GSr t/lf,,ro& tt)rl/rr/rD ,r)ryll}/lolr iloDlrvml t o
l: ll ll Lb. totE.o
Response:
The supporting documentation for the listed purchases can be found in GSW-W-22-01
IPUC DR 47 Attachmenfs 7 - 14 and are referenced below.
The following notes provide clarification to the items:
a
a
GSW.W.22.O1 IPUC DR 47
NWN Response
Page2ol4
Spirit Lake East, Account No. 339 Other Plant & Misc Equipment investment of
$1 1,931 was made prior to Gem State Water's acquisition of the system and the
supporting detail is not available.
Lynnwood Estates, Account No. 311 Power Pumping Equipment investment of
$19,638 was made by prior owner at the time of Gem State Water's acquisition of
the system and the supporting detail is not available. This investment in a well
pump was necessary to maintain reliability.
Lynnwood Estates, Account No. 331 Trans. & Distrib. Mains & Accessories
investment of $10,000 was a deposit in line extension work. The contract can be
found in GSW-W-22-01 IPUC DR 47 Attachment 11.The water main was
relocated due to utility easements.
Lynnwood Estates, Account No. 311 Power Pumping Equipment investment of
$9,212for a new well pump and motor invoice can be found in GSW-W-22-01
IPUC DR 47 Attachment 7.The replacement of the well pump and motor was
necessary to maintain reliability and therefore a cosUbenefit analysis was not
conducted, and no alternatives were identified.
Lynnwood Estates, Account No. 311 Power Pumping Equipment investment of
$17 ,214 for mainline relocation services is comprised of the $1 1,444 shown in
the contract provided as GSW-W-22-01 IPUC DR 47 Attachmenf 7 plus the $714
and $5,056 shown in the invoices attached as GSW-W-22-O1-IPUC DR 47
Attachment 12. The water main was relocated due to utility easements.
Diamond Bar, Account No. 311 Power Pumping Equipment investment of
$18,956 invoice for booster pump replacement can be found at GSW-W-22-01
IPUC DR 47 Aftachmenf 4. This investment in the booster was necessary to
maintain reliability and therefore a cosUbenefit analysis was not conducted, and
no alternatives were identified.
Diamond Bar, Account No. 311 Power Pumping Equipment investment of
$27,660 invoice for pump and motor back up can be found at GSW-W-22-01
IPUC DR 47 Aftachment 6. This investment in the pump and motor back up was
necessary to maintain reliability and therefore a cosUbenefit analysis was not
conducted, and no alternatives were identified.
Diamond Bar, Account No. 311 Power Pumping Equipment investment of
$28,093 invoice for emergency standby well system equipment for pump and
motor back up can be found at GSW-W-22-01 IPUC DR 47 Attachment 8. This
investment in the well and motor backup was necessary to maintain reliability
and therefore a cosUbenefit analysis was not conducted, and no alternatives
were identified.
Diamond Bar, Account 311 investment of $26,1 46.78 for Bitterroot acquisition net
book value of assets. See detail on GSW-W-22-01 IPUC DR 47 Attachment 13.
o
o
a
a
a
o
a
o
a
a
a
a
GSW-W.22.01 IPUC DR 47
NWN Response
Page 3 of4
Diamond Bar, Account No. 310 Power Generation Equipment investment of
$18,038 invoice for backup up generation receptacle installation can be found at
GSW-W-22-01 IPUC DR 47 Aftachmenf 2. This investment in the booster was
necessary to maintain reliability and therefore no a cosUbenefit analysis was not
conducted, and no alternatives were identified.
Diamond Bar, Account No. 307 Wells investment of $310,339 invoices for a well
can be found at GSW-W-22-01 IPUC DR 47 Attachment 10.The well was
necessary to provide reliable backup of water production required by the IDEQ,
referenced in the Company's response to GSW-W-22-01 IPUC DR 37 and
highlighted in the sanitary survey provided as GSW-W-22-01 IPUC DR 47
Attachment 11 .
Diamond Bar, Account No. 307 Wells investment of $5,491 is an item listed for
Diamond Bar but instead is for the Bitterroot system facilities plan. The invoice
for facilities plans investment can be found al GSW-W-22-01 IPUC DR 47
Aftachmenf 3. This investment was necessary to plan for system needs and
capital investments.
Diamond Bar, Account No. 307 Wells investment of $47,108 invoice for a well
can be found at GSW-W-22-01 IPUC DR 47 Attachmenf 5. This investment in
electric with variable frequency drive (VFD) and controls for well and boosters
was necessary to maintain reliability and therefore a cosUbenefit analysis was
not conducted, and no alternatives were identified.
The two items for Bar Circle "S" for Account No. 331 for Trans. & Distrib. Mains &
Accessories in the amount ol $14,342 and Account No. 307, Well Investment
$138,037 were made prior to the acquisition of the system by the prior owner
(i.e., the owner before Gem State Water) and the supporting details are not
available.
Gem State Water, Account No. 340 Office Furniture and Equipment investment
of $10,608 for acquisition of billing software from Continental Utility Solutions,
lnc. (CUSI) was necessary to accurately bill customers and accept electronic
payments.
Gem State Water, Account No. 340 Office Furniture and Equipment investment
of $57,200 for standard firewall, switch and wireless access points along with the
software that controls these devices for 15,600 and SCADA systems of 41,600.
The work paper detail to support this item can be found in GSW-W-22-01 IPUC
DR 47 Aftachment 14, onlab 2020.
Gem State Water, Account No. 310 Power Generation Equipment investment of
$26,000 for backup generator invoice can be found at GSW-W-22-01 IPUC DR
47 Attachment 9. This investment in backup generator was necessary to
maintain reliability and therefore a cosUbenefit analysis was not conducted, and
no alternatives were identified.
o
o
o
a
a
GSW-W.22.01 IPUC DR 47
NWN Response
Page 4 ol 4
Gem State Water, Account No. 340 Office Furniture and Equipment investment
of $9,607 for external lT contractors. This work was for standard firewall, switch
and wireless access points along with the software that controls these devices.
The work paper detai! to support this item can be found in GSW-W-22-01 IPUC
DR 47 Attachment 14, on tab 2021 rows (a) and (g).
Gem State Water, Account No. 340 Office Furniture and Equipment investment
of $36,088 for CUSI billing software was for website redesign involved in design,
development, and testing of the new site, dynamic forms, and application
integration; and standard network software for standard firewall, switch and
wireless access points along with the software that controls these devices. The
work paper detailto support this item can be found in GSW-W-22-01 IPUC DR
47 Aftachment 14, on tab 2021 rows (b), (h) and (k).
llW lloturol'
Rates & Regulatory Affairs
GSW-W-22-01
Gem State Water Company, LLC Application for an Order Authorizing an lncrease in its
Rates and Charges for Water Service
Data Request Response
Request No.: GSW-W-22-01 IPUC DR 48
48. Following up to the Company's Response to Production Request No. 8, please
provide a list of prices for each of the chemicals and substances tested for, in your
water systems, for the 9-year well testing cycle.
Response:
The prices for the chemicals and substances tested for in the 9-year well testing cycle
are as follows:
.u
couFoRM ocR)25.00
TOTAL HALOACETIC ACID (HM5) and TTHM 295.00
PBCU LCR - LTAD COPPER 40.00
GLYPHOSATE 17s.00
SIMAZINE 275.00
PICLORAM 2,+D 195.00
sool loc - sooIUM 25.m
ZARS ARSENTC (100s)25.00
ZNO3 NITRATE 25.00
ZNO2 NITRITE 25.m
AI.fA RADS - GRGS AI,PHA 10s.00
URAN RADS. URANIUM 55.m
VOCS VOCS. GROUP 160.00
R226 RADS - RADIUM 226 130.00
R2:I8 RADS - RADIUM 228 120.00
ZFLU IOC - FLUORIDE 2s.00
ZIOC IOCS. PHASE 2 AND 5 210.00
llW lloturof
Rates & Regulatory Affairs
GSW-W-22-01
Gem State Water Company, LLC Application for an Order Authorizing an lncrease in its
Rates and Charges for Water Service
Data Request Response
Request No.: GSW-W-22-01 IPUC DR 49
49: Please provide any analysis the Company has performed related to the requested
10.2% ROE.
Resoonse:
The Company's requested 10.2o/o return on equity (ROE) is the same percentage as the
Commission approved in the recent rate case of Gem State Water's affiliate, Falls
Water, in Order No. 34925. ln that order, the Commission found the 10.2o/o ROE fair,
just and reasonable, and provided the following explanation:
Obtaining capital at befter rafes r.s a benefit of having an
established and professional parent company such as
NW Natural Holdings. lt is one of the benefits we
anticipated when the acquisition of Falls Water was
approved. /f is a/so appropriate for this benefit to flow
through to customers. The appropriate point of
comparison to determine the authorized ROE for
smaller water companies r's frsf to other water
companies, while also acknowledging Falls Watels
operating and financial benefits from its parent
organization. The busrness model utilized by NW
Natural Water Company when acquiring small water
companies in ldaho is a model we want to encourage
for providing safe and reliable seruice to water
cusfomers at reasonable rates. We find that a 10.2%
ROE appropriately balances this smaller water utility's
need to earn a fair return on ifs property used and
useful in providing water seruice while maintaining fair
rates for cusfomers.
The Company also notes that Veolia Water filed its most recent rate case on September
30,2022,VEO-W-22-02, and its expert consultant is recommending a 10.8% ROE
(Walker, pp. 6 and 36). Gem State Water's 1O.2o/o requested ROE is within the range of
reasonableness, especially given its smaller size compared with Veolia Water. The
o
GSW-W-22.01 IPUC DR 49
NWN Response
Page2of 2
Company could have hired an expert ROE consultant for this rate case but decided that
it was more in the public interest to not incur such rate case expense to be amortized
over a period of time and recovered from customers.
A final consideration is that while Gem State Water has no long-term debt, the
Company is proposing a more balanced hypothetical capital structure of 55% equity /
45% debt (i.e., the same hypothetica! capital structure that the Commission adopted for
Falls Water in Order No. 34925), and that concession merits adopting an ROE at the
top end of any range.
,.,{f} rw roturol'
Rates & Regulatory Affairs
GSW-W-22-01
Gem State Water Company, LLC Application for an Order Authorizing an Increase in its
Rates and Charges for Water Service
Data Reouest Response
Request No.: GSW-W-22-01 IPUC DR 50
50. Please provide the Moody's, Standard and Poor's, and Fitch credit rating for
Northwest Natural.
Response:
Gem State Water objects to this request as not relevant to Gem State Wate/s general
rate case. Notwithstanding that objection, Gem State Water responds as follows: The
following table summarizes NW Natural's current credit ratings for S&P and Moody's
(NW Natural is not rated by Fitch):
Commercial paper (short-term debt)
Senior secured (long-term debt)
Senior unsecured (long-term debt)
Corporate credit rating
Ratings or.rtlook Stable
The above credit ratings and ratings outlook are dependent upon a number of factors,
both qualitative and quantitative, and are subject to change at any time. The disclosure
of or reference to these credit ratings is not a recommendation to buy, sell or hold NW
Holdings or NW Natural securities. Each rating should be evaluated independently of
any other rating.
A-1
AA.
nla
A+
P-2
A2
Baal
nla
Stable
S&P Moody's
,^Q) rw roturorY
Rates & Regulatory Affairs
GSW-W-22-01
Gem State Water Company, LLC Application for an Order Authorizing an lncrease in its
Rates and Charges for Water Service
Data Reouest Resoonse
Request No.: GSW-W-22-01 IPUC DR 51
51. Please provide a list of all debt Gem State Water has issued. Please include
the date of issue, amount, term of each loan, and interest rate.
Response:
Gem State Water has issued two Promissory Notes, as follows:
Bitterroot Promissory Note
Date of issuance: April2020
Amount: $174,000
Term: 15 years
lnterest Rate: 5%
Happy Valley Promissory Note
Date of issuance: Apri!2020
Amount: $24,000
Term: 15 years
lnterest Rate: 5%
,4,{p xw }loturol'
Rates & Regulatory Affairs
GSW-W-22-01
Gem State Water Company, LLC Application for an Order Authorizing an lncrease in its
Rates and Charges for Water Service
Data Request Response
Request No.: GSW-W-22-01 IPUC DR 52
52. Following up with Production Request No. 1, please provide the general ledger
for 2019 and 2020. Please reconcile the general ledger with the Company's annual
reports for those years.
Response:
We have extracted the general ledger detailto excel (GSW-W-22-01 IPUC DR 52
Attachment 1) and included a reconciliation to the annual report. ln the reconciliation
process we decided that it would be beneficial to have more commonality between the
Falls Water and Gem State Water accounting structure. To standardize the chart of
accounts between the two entities Falls Water was used for the standard structure.
When this was done by our regional accounting resource, it was not simply re-
numbering, but also moving balances as well.
ln addition to accounting changes, we do also make other accounting changes to go
from a GAAP external reporting view to a Regulatory view. For example, Goodwill
recognized under GAAP accounting is removed as it should not be part of rate base,
and therefore reduces equity by removing it. Additionally, we clear allAccumulated
Depreciation and recognize net PP&E as the asset for Day 1 accounting, however we
gross the assets back up to maintain the regulatory balances rolled fonrvard from the
last rate case.
Lastly, items like lncome taxes expense are calculated by our tax team. These
expenses or benefits are layered on to the Gem State Water results as part of the
consolidation process but are not recorded within QuickBooks. We are working to
improve this process, so that in the future all activity will be recorded by Gem State
Water.
Given these complexities we are happy to set up time to review these files together and
answer any questions.
,1L,{f) ttw lloturol'
Rates & Regulatory Affairs
GSW-W-22-01
Gem State Water Company, LLC Application for an Order Authorizing an lncrease in its
Rates and Charges for Water Service
Data Request Resoonse
Request No.: GSW-W-22-01 IPUC DR 53
53. Please explain the approval procedures for acquiring plant-in- service items
to ensure projects were done at least cost and provide the following information for each
of the items listed in the table below.
a. lnvoices with description and purpose for each item;
b. The justification for the acquisition including a cosUbenefit analysis;
c. Whether the item went out for competitive bid;
d. lf went out for bid, please provide all documentation including a copy of the
Request for Proposal/Quote, all bids/quotes received, and analysis performed by the
Company to select the short list and winning bid.
lhtc Nuu lirac
l0t Tre!
I loflinan
30t t 2/t I j2021 l.\l'Mainlinc
30J o9 Tro)
lloffman
Purchasr
Mcno
Dcrtriptlol
Pump and
Motor
l.w
lvlainlinc
Relocstion
in sen icc
l.and and
l.and Rights
Dollrr
Anount
t2.054 8t
I 7.1 I 4.19
e.172.00
t0t
Pmpcrtp',
Phrl ud
09/03.?02 t
Itcm
I
b
c
d 09,01/:02 t Tnry
['loffman
07r I 3/102 I
r l,'31e02 t I l.I I _Sbsrc
d t't'
l21l I /10: I I l.l I _Sharcdn
0l l I -{i ll): I 5-11195
GSW.W.22-01 IPUC DR 53
NWN Response
Page 2 of 3
1.690.t0
I10.119..16
3{}.r
3{0.2
3.r3
l]2t IT
l-stxrr -
I lardllarc
r2.lr t]'
Lahor -
Subsite
8-10R,,7
l-ocator
16.088.O0
.-i
3.q{0 ([]
Response:
The approval procedures for acquiring plant-in-service items at the least cost is as
follows: For emergency response or regular O&M items we use our preferred vendors,
based on availability. Recently, this has involved locating vendors that are able to
provide service in light of supply chain issues impacting projects over the last few years.
For large projects, Gem State Water obtains three bids/quotes and uses the most cost
effective, while also considering experience and references.
lnvoices referenced in response below are provided in GSW-W-22-01IPUC DR 53
NWN Attachments 1 - 3 and in response to GSW-W-22-01 IPUC DR 47.
a. Troy Hoffman, Account No. 101 investment of $12,055 was for acquisition of the
system. This acquisition was reviewed by the IPUC and approved in Order No.
35108.
tlSA Blue
Ilool
3{t4 Punrp
Housc. Neu
Roof
7.0t 8.8_r
G 10J3480 It,lission
Conrnrunicari
ons LLC
Serr icc
paclagc
annual
rsrcsalsf
g)5
107 tlnircd
Cnrun Pump
und Drilling
Pmgrt'ss
Billing #l -
lnvoice
440925
47. t 08.25
s gt7
07108tr01 I .10025
I :,rl l,rl0l I DB Ncu
\l'qll
DB Ncn
\['ell in
sen'ice
t 2/20,2 r
I I 07/28801I309 40978 t lnited
Cnrwn Pump
and Drilling
Botrslcr
pump
ptnchase -
SLE
4..184.76
i 309 t:/l I ,201 I Dll tsooster DII ltoostcr
in sen,ice
7i ttrt
18.956.00
k 3t0 OEi I 9i201 I lSql D&J Criticsl
Pou'er
26.ffn.00
q.607.0r)
GSW.W.22.O1 IPUC DR 53
NWN Response
Page 3 of 3
b. Account No. 301 in the amount of $17,214, details related to the mainline
relocation were provided in GSW-W-22-01 IPUC DR 47 and in the Attachment 11
to that response.
c. Troy Hoffman, Account No. 101 investmentot $9,272 was for acquisition of the
system. This acquisition was reviewed by the IPUC and approved in Order No.
35108.
d. Troy Hoffman, Account No. 101 investment of $7,019 was for acquisition of the
system. This acquisition was reviewed by the IPUC and approved in Order No.
35108.
e. Account No. 305 invoice from Mission Communications, LLC $1,690 for service
package and annual renewal can be found in GSW-W-22-01 IPUC DR 53
Attachment 2. This item was incorrectly booked to plant instead of expense and
should be removed from Rate Base and added to expense.f. Account No. 307 investment in the amount of $47,108, details were provided in
GSW-W-22-01 IPUC DR 47 Attachment 5.
g. Account No. 307 investment in the amount of $310,339, details were provided in
GSW-W-22-01 IPUC DR 47 Attachment 10.
h. NAi. Account No. 309 invoice from United Crown Pump and Drilling for $4,485 related
to a booster pump purchase detail is provided in GSW-W-22-01 IPUC DR 53
Attachment 1. This investment was required to maintain reliability and therefore
no cost benefit analysis was performed.j. Account No. 309 investment in the amount of $18,956, details were provided in
GSW-W-22-01 IPUC DR 47 Attachment 4.
k. Account No. 310 investment in the amount of $26,000, details were provided in
GSW-W-22-01 IPUC DR 47 Attachment 9.
l. Account No. 340.1 investment in the amount of $9,607, details were provided in
GSW.W.22.O1 IPUC DR 47.
m. Account No. 340.1 investment in the amount of $36,088, details were provided in
GSW.W22.O1 IPUC DR 47.
n. Account No. 343 investment in the amount of $3,940, details were provided in
GSW-W-22-01 IPUC DR 53 Attachment 3.