20231025Comments of the Commission Staff.pdf

MICHAEL DUVAL El
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720 8 CBOISE,IDAHO 83720-0074 DMMISSION
[phone]
IDAHO BAR NO.11714
Street Address for Express Mail:
11331 W CHINDEN BLVD,BLDG 8,SUITE 201-A
BOISE,ID 83714
Attorneyfor the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF CAPITOL WATER )CASE NO.CAP-W-23-01
CORPORATION'S APPLICATION TO )CHANGE ITS SCHEDULE NO.3 )PURCHASED POWER COST ADJUSTMENT )COMMENTS OF THE
RATE )COMMISSION STAFF
COMMISSION STAFF ("STAFF")OF the Idaho Public Utilities Commission,by and
throughits Attorneyof record,Michael Duval,Deputy AttorneyGeneral,submits the following
comments.
BACKGROUND
On September 1,2023,Capitol Water Corporation ("Company")applied for authorityto
change its Schedule No.3 -Purchased Power Cost Adjustment ("PPCA")rate to recover the
electricity costs that exceeded what it collected throughrates.The Company requested its
Applicationbe processed by Modified Procedure and that the tariff changes become effective
November 15,2022.
The Company's Schedule No.3 PPCA rate provides a mechanism for the Company to
recover its cost of electricitypurchased from Idaho Power Company.The Commission approved
the Company's current base rates in 2009 in Order No.30762 in Case No.CAP-W-08-02.At
STAFF COMMENTS 1 OCTOBER 25,2023
that time,a three-year average of 1,454,401 kilowatt hours ("kWh")of consumption was
established.The average cost to the Company was 5.19¢per kWh for a total cost of $75,483.41.
The Commission later replaced the three-year model with an average that was based on the most
recent twelve-month period available.
The Company stated that the actual power cost for calendar year 2022 was $104,877-
$29,394 more than the cost embedded in the Company's base rates.It is also $11,665 more than
the current Schedule No.3 rate of 2.72%.Based on its calculations,the Company seeks to
increase the Schedule No.3 PPCA rate from 2.72%to 4.51%to recover these additional power
costs.
The Company's Applicationincludes attached supporting materials showing its proposed
changes to Schedule No.3 and the underlyingdata that the Company used in its calculations.
STAFF ANALYSIS
Staff believes that the calculation of the PPCA rate is accurate and that the Company
prudentlyincurred the electricitycost to provide water service to its customers over the past year.
However,Staff recommends the Company investigate and identify the root cause of the reduced
efficiency of Well No.5.Staff is concerned that this could cause customer's costs to increase if
not addressed.
Staff's review included the following:
1.The current methodology and its applicability to current operations;
2.An audit of the inputs and the calculation of the PPCA rate;
3.The customer impact of the new PPCA rate;
4.The prudence of electricity cost incurred to pump water over the last year;and
5.A review of the Company's customer notifications.
PPCA Methodology
In Order No.33876,Case No.CAP-W-17-01,the Commission approved modifications to
simplify the PPCA methodology.The Company compares its actual charges for electricity
directly from Idaho Power to the energy cost embedded in base rates.The difference becomes
the new PPCA balance to include in rates.By using this approach,PPCA filings are completed
in-house without the need for a consultant.Only the costs related to the supply of metered
STAFF COMMENTS 2 OCTOBER 25,2023
energy are used in the calculation of the PPCA.Costs related to late payment fees or services
beyond the delivery of metered energy are excluded from the calculation.
The current methodology can maintain its simplicity and remain accurate without a true-
up as long as the number of customers remains stable over time.The number of customers
continues to be stable and is not expected to change in the future due to a service territory with
little room for growth.
PPCA Adjustment
Staff reviewed the Company's Application and supporting documents,and recommends
the Commission approve the proposed 4.51%PPCA rate,which is a 1.79%increase from the
current PPCA rate of 2.72%.This is $29,394 more than the $75,483 cost of electricity embedded
in the Company base rates.Staff verified that the calculations in the Application and workpapers
are correct and that actual power costs incurred in 2022 were $104,877.
Customer Impact
With the proposed increase in the PPCA rate,an unmetered residential customer may see
an increase between $0.51 and $0.59 for the months of May throughSeptember,and an increase
between $0.23 and $0.30 in all other months.Metered customers will see an increase of 1.79%.
The PPCA rate is applied to customer bills after charges have been accumulated and is presented
as a single line charge.However,the PPCA rate does not apply to City of Boise franchise fees,
and Department of Environmental Quality fees.
Prudence of Electricity Cost
To determine if the Company prudentlyincurred the electricitycost to serve its
customers,Staff assessed water pumping efficiency (gallon/kWh)across the Company's five
production wells.Since last year,average system-level pump efficiency in 2022 decreased from
560 to 503 gal/kWh,which is a 10.2%reduction compared to 2021.Of all production wells,
Well No.5 experiencedthe largest change,a 32%decrease in pumping efficiency compared to
2021.
Examining the historical trend,Staff discovered that Well No.5 is demonstrating
consistent decline in efficiency starting in 2020.Staff is concerned by the significant decrease in
STAFF COMMENTS 3 OCTOBER 25,2023
pumping efficiency that has occurred since the Company's previous PPCA Case No.CAP-W-
22-01.Because the PPCA mechanism passes electrical costs directlyto customers,there is no
financial incentive for the Company to use electricity efficiently.Therefore,Staff recommends
the Company investigate and identify the root cause of reduced efficiency of Well No.5 and
notify the Commission with a plan of action to mitigate this issue by March 2024.
Staff calculated the pumping efficiency of each well on a gallon per kilowatt-hour
(gallon/kWh)basis to ensure that power costs have been incurred prudentlyover the PPCA
period.Staff reviewed the Company's water production for five different wells.'Well Nos.5
and 7 are the Company's primary production wells that produced water throughout2022.Well
Nos.3,4,and 6 produced water only during summer months,from May to October 2022.Staff
considered the water production in each well and divided each by its respective electricity usage
during those production months.By applying this approach to the whole system,Staff was also
able to determine system-level efficiency.Staff then compared the results to prior years to
determine historical trends.Table No.1 compares the Company's water pumping efficiency for
three years from 2020 through2022.
Table No.1:Historical Water PumpingEfficiency Comparison.
Efficiency Efficiency Efficiency
(GallkWh)(GallkWh)(GallkWh)%Change in
2020 2021 2022 2022 from 2021
Well #3 318 320 299.7 (6.4)
Well #4 398 498 478.4 (3.9)
Well #5 557 496 336.3 (32.2)
Well #6 533 514 556.6 8.3
Well #7 744 730 704.3 (3.5)
System 584 560 503 (10.2)
At the system-level,Staff calculated that the Company pumped 8.1%less water in 2022
compared to 2021.Because of the reduction in water consumption,Staff expected a
correspondingreduction in electricityconsumption (kWh).However,in 2022,electricity
consumption increased by 2.3%compared to 2021.
Company Response to Production Request No.3.
STAFF COMMENTS 4 OCTOBER 25,2023
To drill down into reasons for reduced system efficiency,Staff analyzed Well No.5,
which demonstrated the worst pumping efficiency in 2022 compared to the Company's other
wells.Compared to 2021,Well No.5 experiencedmore than a 32%decline in efficiency in
2022.Additionally,it produced 19%less water while using 19%more energy and over a three-
year period,and its efficiency has been consistently declining since 2020.Staff believes that the
Company needs to take prompt action to identify the root cause of Well No.5's consistent
decline in efficiency and determine a least cost solution to mitigate the cause.The efficiencies of
the remaining wells appear stable and raise no concerns.
CUSTOMER NOTIFICATION
The Company filed its customer notice and press release with its Application.Staff
reviewed the documents and determined that they met the requirements of Rule 125 of the
Commission's Rules of Procedure.(IDAPA 31.01.01.125).The customer notice was included
with customers'October 1,2022,billing statements.
The Company sent a press release to the Idaho Statesman and the Idaho Business Review
at the time the Application was filed on September 1,2023.
As of Wednesday,October 25th,2023,the Commission has not received any comments.
STAFF RECOMMENDATION
Staff recommends that the Commission:
1.Authorize an overall 4.51%PPCA;
2.Accept the Company's updated Schedule No.3 -Other Recurring and Non-
recurring charges as filed;and
3.Direct the Company to investigate and identify the root cause of reduced
efficiencyof Well No.5 and notify the Commission with the least cost solution to
mitigate this issue by March 2024.
STAFF COMMENTS 5 OCTOBER 25,2023
Respectfully submitted this 25th day of October 2023.
Michael Duval '
Deputy AttorneyGeneral
Technical Staff:Shubhra Deb Paul
Travis Culbertson
Laura Conilogue
Jolene Bossard
i:umisc/comments/CAP-W-23-01 Comments
STAFF COMMENTS 6 OCTOBER 25,2023
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 25th DAY OF OCTOBER 2023,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF TO
CAPITAL WATER CORPORATION,IN CASE NO.CAP-W-23-01,BY E-MAILING
A COPY THEREOF,TO THE FOLLOWING:
ROBERT PRICE
PRESIDENT
CAPITOL WATER CORP
2626 ELDORADO
BOISE ID 83704
E-MAIL:[e-mail]
SECRETARY
CERTIFICATE OF SERVICE