20180525Report - Spirit Lake East Water.pdf

KARL T. KLEIN
DEPUTY ATTORNEY GENERAL
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5156
Street Address for Express Mail:
472W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Staff of the
Idaho Public Utilities Commission
IN THE MATTER OF THE INVESTIGATION
INTO THE IMPACT OF FEDERAL TAX CODE
REVISIONS ON UTILITY COSTS AND
RATEMAKING
RECEIVED
?018 riAy 25 AH 9: 37
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. GNR.U.18-01
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REPORT OF THE
COMMISSION STAFF RE:
SPIRIT LAKE EAST WATER
COMPANY
The Staff of the Idaho Public Utilities Commission submits this report about the impact
of the federal Tax Cuts and Jobs Act of 2017 (the "TCJA") on Spirit Lake East Water Company
(the "Compdny"), as directed by Order No. 33965.
BACKGROUND
On December 22,2017, the President signed the TCJA into law. Effective January 1,
2018, The TCJA decreased the federal corporate tax rate from35%oto 2l%o. In response, the
Commission opened this multi-utility case to investigate whether to adjust the rates of certain
utilities that benefit from the reduced tax rate. See Order No. 33965. The Commission directed
all rate-regulated utilities----except for small water companies with less than 200 customers, and
the small electric utility, Atlanta Power-to immediately account for the tax benefits as a
regulatory liability, and to report on how the tax changes affected them, and how resulting
benefits could be passed on to customers. See id. at l-2.
ISTAFF COMMENTS MAY 25,2018
The Company filed a response on March 30,2018, stating that it recorded a $20,993.62
operating loss in 2017, and thus receives no benefit from the TCJA.
STAFF ANALYSIS
Staff has reviewed the Company's response and additional information requested from
the Company, and confirmed that the Company's operating losses mean the Company will not
benefit from the TCJA.
The Company's annual report was unavailable at the time of Staff s review. Staff thus
reviewed the Company's2077 fiscal year income statement. Staff noted that the Company's
reported operating loss omits depreciation expense. In the Company's last general rate case
(Case No. SPL-W-13-01), the Commission-approved revenue requirement included $20,395 of
depreciation expense. Though depreciation expense may vary from year to year, any
depreciation expense would increase the Company's reported operating loss. Thus, the
Company's reported operating loss might be understated. Additionally, upon review of the
Company's income statement, Staff noted it contains some expense accounts that should be
scrutinized in a general rate case. These include Account 426Misc. Non-Utility Expense for
$1,599.62, and Ask Accountant Account for $202.40. If Staff were to propose removing these
expenses from the Company's revenue requirement in the next general rate case, that adjustment
would decrease the Company's operating loss reported here. But removing those expenses
would not eliminate the Company's reported operating loss especially if, as noted above, the
Company's reported operating loss is understated to the extent it omits depreciation expense.
Because the Company reported a net operating loss, it will not pay income tax and the
TCJA's decreased tax rate would not benefit the Company.
STAFF RECOMMENDATION
Staff recommends that the Commission acknowledge that the Company reported net
operating loss and thus does not receive any benefit from the TCJA. Additionally, Staff
recommends the Commission close this case as it relates to the Spirit Lake East Water Company.
2STAFF COMMENTS MAY 25,2018
--+l\Respectfullysubmittedthis L 5' t day of May 2018.
1u </-
Karl T. Klein
Deputy Attomey General
Technical Staff: Joe Terry
STAFF COMMENTS MAY 25,2018J
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 25TH DAY OF MAY 2018,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF TO
SPIRIT LAKE EAST WATER COMPANY'S TAX REPORT, IN CASE NO. GNR-U-
18-01, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
SPIRIT LAKE EAST WATER
LESLIE RAYNER DIRECTOR
PO BOX 3388
COEUR D'ALENE ID 83816
CE,RTIFICATE OF SERVICE
I /tu-bSECRETARY