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Home My WebLink About20150831UWI to Staff 127,129.pdf(208) 343-7s00 (208) 336-69111(For) McDevitt & Miller LLPLawyers ii.l f,,irrl P.O. Box 25il-83701, I i I ! Boiser ldaho 83702 August 31,2015 Chas. F. McDevitt DeanJ. floe) Millet Celeste IL Millet Via llaad Delivery JeanJewell, Secreary Idaho Public Utilities Commission 472W.I7ashington St. Boise,Idaho 83720 Re: UWI-\[-15-01 Deat Ms. Jewell: Enclosed fot filing, please find afl odginal and three (3) copies of United'lVatet I&ho, Inc.'s Second Response to the Commission Staffs Sixth Production Request Nos. 727 and,729. Kindly return a file samped copy to me. Very Truly Yours, McDevitt & Millet LLP Ur)l\lll- Dean]. Miller DJM/hh Cc: United lVater Idaho, Inc. ORIGINAL Dean J. Miller (lSB No. 1968) McDEVITT & MILLER LLP 420 West Bannock Street P.O. Box 2564.83701 Boise, lD 83702 Tel: 208.343.7500 Fax 208.336.6912 i oe@mcdevitt-m il ler. com Aftomey for United Water ldaho, lnc. IN THE MATTER OF THE APPLICATION OF UNITED WATER IDAHO INC. FOR AUTHORITY TO INCREASE ITS MTES AND CHARGES FOR WATER SERVICE IN THE STATE OF IDAHO i:i] ?: l0 Case No. UW-W-15-01 UNITED WATER IDAHO INC.'S SECOND RESPONSE TO SIXTH PRODUCTION REQUEST OF THE COMMISSION STAFF ?tii LU,;31 1..ilr-ll BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION United Water ldaho lnc., ("United Wate/') by and through its undersigned attorneys, hereby submits its Second Response to the Commission Staffs Sixth Production Request Nos. 127 and 129. DATED this -3IL day of August, 2015. UNITED WATER IDAHO !NC.'S SECOND RESPONSE TO SIXTH PRODUCTION REQUEST OF THE cotuilr,ilsstoN STAFF - ,| J) Miller(lSB No. 1968) Attomey for United Water ldaho, lnc. CERTIFICATE OF SERVICE I hereby certiff that on tne jfOay of August, 2015,1 caused to be served, via the method(s) indicated below, true and correct copies of the foregoing document, upon: Jean Jewe!!, Secretary ldaho Public Utilities Commission 47 2 W est Wash i ngton Street P.O. Box 83720 Boise, lD 83720-0A74 iiewel l@puc. state. id. us Donald L. Howell, ll Daphne Huang Deputy Attorney General ldaho Public Utilities Commission P.O. Box 83720 Boise, ldaho 83720-007 4 don. howell@puc. idaho.sov daphne. huanq@puc. idaho.oov Brad M. Purdy Attorney at Law 2019 N. 17th Street Boise, lD 83702 bmpurdv@hotmail.com Hand Delivered U.S. Mail Fax Fed. Express Email Hand Delivered U.S. Mail Fax Fed. Express Email Hand Delivered U.S. Mail Fax Fed. Express Email ,lt ) IJ L. {-I l tJ i i & UNITED WATER IDAHO INC.'S SECOND RESPONSE TO SIXTH PRODUCTION REQUEST OF THE COMTUIISSION STAFF.2 UNITED WATER IDAHO INC. cAsE uwt-w-l5-01 SIXTH PRODUCTION REQUEST OF THE COMMISSION STAFF Preparer/Sponsoring Witness: Kevin Doherty REQUEST NO. 127: The following questions pertain to Pro-Forma Tax Depreciation: 1. Please provide the underlying calculation of Pro-Forma Tax Depreciation - State and Pro-Forma Tax Depreciation - Federal filed in Exhibit No. 11, Schedule 8, Line Nos. 10 and 15. 2. Please provide the underlying calculation of Pro-Forma Tax Depreciation - State and Pro-Forma Tax Depreciation Federal contained within the response to Production Request No. 69 Exhibit No. 11, Schedule 8, Line Nos. 10 and 15. Please explain and reconcile these differences. RESPONSE NO. 127: Please refer to Attachment 1 for the underlying calculation of Pro-Forma Tax Depreciation for both Federal and State. Please refer to Attachment 2 for the calculations shown in the response to Production Request 69. As shown on Attachment 2, the same Pro-Forma Tax Depreciation calculations were used as in the rate case filing, but were reduced to only 4 months (from August - November 2015) as the ADIT Balance was also updated from December 31,2014 to July 31,2015 reducing the "roll-forward" of ADIT from 12 months to 4 months. UNITED WATER IDAHO INC. cAsE uwl-w-l5-01 SIXTH PRODUCTION REQUEST OF THE COMMISSION STAFF Preparer/Sponsoring Witness: Kevin Doherty REQUEST NO. {29: Please provide a description of the method by which AFUDC is calculated and applied. Please include copies of any related policies and procedures. RESPONSE NO. 129: Please refer to the attached AFUDC Policy. POLICY NUMBER AND NAME Policy #0101 - Allowance for Funds Used During Construction AFUDC PURPOSE To establish adequate and uniform procedures over United Wate/s calculation of Allowance for Funds Utilized During Construction (AFUDC). SGOPE This policy applies to all Regulated Companies throughout United Water lnc. and its subsidiaries. GENERAL It is the policy of United Water to include in the cost of construction all indirect costs associated with construction. Allowance for Funds Used During Construction (AFUDC) is a credit to income and can include both the cost of borrowed funds and a return on equity funds attributable to plant under construction. AFUDC (should be included in construction costs as a recognition of the economic cost of temporarily unproductive capital. GUIDELINES AFUDC will be computed on all eligible capital expenditures. Eligible capital expenditures are defined as construction projects with net expenditures (total project cost, net of amounts recorded as advances and contributions) which are in excess of $50,000 with a construction period exceeding thirty days. The net capital expenditure to date on which to calculate AFUDC is arrived at by taking the CWP balance less i.e., total costs, less accruals, advances and contributions, and the equity gross-up portion of previously recorded AFUDC, at one twelfth of the prescribed annual rate, unless otherwise determined by applicable regulatory requirements for eligible projects from the CWIP ledger. No AFUDC shall be computed on (i) direct purchases (i.e. equipment and vehicles purchased and immediately placed in service as a unit) (ii) any portion of a project for which an advance or contribution has been received or (iii) blanket work orders. a) The calculation of AFUDC will begin when the net expenditure recorded on the construction system exceeds $50,000 and will continue until the project is placed in service. b) The first month's calculations will use the prior month's ending balance. The last month's calculation will use the balance at the time the project is placed in service. All charges transferred to the Construction System from Preliminary Survey or Deferred Debits (where they accumulated pending approval of the capital expenditure) may have AFUDC computed on them retroactively as determined by applicable regulatory requirements with the written approval of the Regulatory Business Department and the Regulated Controller. Normally, AFUDC will cease at the date an eligible project is placed in service. However in certain situations, utility companies may be allowed to continue to calculate AFUDC until such time as the project is included in rate base, if prior and specific approval is received from the applicable Regulatory Commission. Continuing to calculate AFUDC after a project is in service should only be done with prior written aoproval of the Regulatory Business Department and the Regulated Controller. The amount of AFUDC shall be compounded as determined by the requirements of the applicable regulatory body. Any amount of income tax gross-up included in the associated rate shall not be compounded. RATE The applicable AFUDC rate shall recalculated at least annually based upon the actual capital structure and shall utilize the cost of long term and short term (if applicable) debt as of the applicable period end and the return on equity most recently awarded the Company and stated by the appropriate regulatory body. Such recalculation shall not apply if prohibited by the jurisdictional regulatory commission. The rate to be used by each utility to calculate AFUDC shall be determined in compliance with applicable regulatory requirements. This rate can include both long term debt, short term debt, and equity components, lf applicable, the equity portion is to be grossed up for the effect of Federal and State income tax, in compliance with SFAS 109, paragraph 253 and recorded as a regulatory asset identical to and offset by the applicable ADIT Liability created as a result of compliance with the above referenced accounting standard. The regulatory asset and associated ADIT liability shall be amortized over the same period. \Men a new rate award is received by the utility, the new rate of return on equity should be used on all subsequent and applicable AFUDC calculations as determined in compliance with applicable regulatory requirements. All AFUDC rate changes or changes in the application methodology require the written approval of the Regulatory Business Department and the Regulated Controller before any change will be made in the Asset management system. Changes resulting from inputs to the formula can also affect the applicable rates. For example, if the state tax rate changes, there should be a change in the AFUDC rate calculated to be pre- tax. The same would be true for federal rates. CONTACT Any questions concerning this policy can be directed to the Regulated Controller: William. Becker@unitedwater.com and the Regulated Business Department.