HomeMy WebLinkAbout20210112Comments-Redacted.pdfEDWARD J. JEWELL
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-007 4
(208) 334-0314
IDAHO BAR NO. 10446
IN THE MATTER OF FALLS WATER
COMPANY'S APPLICATION FOR AN
ORDER AUTHORIZING INCREASES IN
THE COMPANY'S RATES AND CHARGES
FOR WATER SERVICE IN THE STATE OF
IDAHO
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Street Address for Express Mail:
1 1331 W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, D 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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cAsE NO. FLS-W-20-03
REDACTED COMMENTS OF
THE COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission comments as follows on Falls Water
Company' s Application.
BACKGROUND
On June 30,2020, Falls Water Company, Inc. ("Falls Water" or "Company") filed an
Application requesting authorization to raise the rates it charges for water service.
The Company is a wholly owned subsidiary of NW Natural Water Company, LLC ("NW
Natural Water"), which itself is a wholly owned subsidiary of NW Natural Holdings Company
("NW Natural Holdings"), which was created during a corporate rcorganization of Northwest
Natural Gas Company and its affiliates. As of December 31, 2019, the Company served 5,545
customers.
The Company states its proposed rate increase would increase Company revenues by
$344,175 (l9.l2%o). See Application at l. The Commission last approved an increase to the
Company's basic rates and charges in October 2O12. Order No. 32663.
REDACTED STAFF COMMENTS JANUARY IT,2O2II
On July 16,2020, the Commission issued a Notice of Application and Notice of
Suspension of Proposed Effective Date. Order No. 34725. The Commission suspended the
Company's proposed effective date of August 15,2020, for 30 days plus five months under Idaho
Code g 6l-622. See Id.
STAFF ANALYSIS
Overview
Staff recommends a total revenue requirement of $1,967,016 for an increase of $166,5gg,
ot 9.25Vo. This revenue requirement is based on a9.9%o Return on Equity ('.ROE,,) and a
hypothetical capital structure consisting of 45Vo debt and 55Vo equity for a Weighted Average
cost of capital ("WACC") of 6.9lvo applied to net rate base of $4,92g,979.
System Description
The Falls Water Company service area is located in Bonneville County, east of the city of
Idaho Falls and north of the city of Ammon. The Company provides services to 58 subdivisions.
At the end of 2019, the Company had 4,263 residential customers,4l multi-family customers, and
104 commercial customers.
The Company's water system consists of 8 wells with 9 total pumps, and a distribution
system providing domestic water to residents and commercial businesses. The Company has
been expanding its customer base and making regular improvements to its system, with an
additional $1.3 million in capital investmentsin2O2O.
Acquisition by Northwest Natural Water
The Commission approved the acquisition of Falls Water by NW Natural Water in Case
No. FLS-W-18-01. In its Application in that case, Falls Water said that it would continue to
operate in its current form, that the transaction would not cause an increase in rates, and that NW
Natural Water would work with Commission Staff regarding the details and timing of significant
capital improvements. 1
I See Case No. FLS-W-18-01, Applicarion at 4
REDACTED STAFF COMMENTS 2 JANUARY II,2O2L
REVENUE REQUIREMENT
Revenues
Staff recommends a total revenue requirement of $1,967,016 with a total expense
allowance, including taxes and depreciation, of g1,58 1,745. The Company,s test year revenue
included $1,792,318 in billed metered residential, commercial, and multi-family revenue, as well
as $4,518 in late fees, $5,080 in miscellaneous service revenue and a $1,4g9 reversal in accrued
revenue. Staff does not propose any adjustments to the Company's test year revenues.
Expense Adjustments
Labor Expenses
The Company proposed significant salary increases to its employees spanning three years
beginning in2020. The Company's pro forma labor adjustment represents 26Vo ofits total
requested increase in revenue requirement. If approved, labor expenses would increase by 40Vo of
the amounts currently included in the Company's rates. In response to Production Requests, the
Company justified the significant increases by claiming it would bring the Company,s wages in
line with similar positions at the municipal water system in nearby Idaho Falls. Staff doesn,t
support using this single point of comparison. The Idaho Falls Water system is significantly
larger and has more employees, so tying Falls Water salaries to positions in Idaho Falls is not a
fair comparison. Instead, Staff proposes looking at broader salary data.
In Table No. 1 below, Staff provides a comparison of the annual wage increase granted by
Falls Water from 2016 to 2020 to the annual salary increases awarded to employees of Idaho Falls
Water, City of Eagle Water, and other investor-owned utilities operating in Idaho. Staff also
included wage increases from the Bureau of Labor Statistics ("BLS") and the State of Idaho to
provide additional data points for a more accurate comparison to the broader workforce. The
Company's annual percentage increases for each historic year as well as 2020 and2O2l were
equal to or larger than any other single-year percentage increase from the broader proxy group.
Falls Water wages increases were equal to or greater than other Idaho investor owned utility
comparisons in Table No. 1 for every year.
REDACTED STAFF COMMENTS JANUARY II,2O2I3
Table No. 1: Annual salarv increase comparisons
Utility
Falls Water
Avista (Electric & Gas)
Suez
Idaho Power
PacifiCorp
City of Idaho Falls Water
City of Eagle Water
BLS - High End
State of Idaho
2016 2017 2018 2019 2020
IIII I
2%o
2Vo
2Vo
37o
3Vo
ZVo
ZVo
3Vo
ZVo
2Vo
2%o
3Vo
3Vo
ZVo
ZVo
3Vo
2021 (planned)r
I
Ir
I
IVo
2Vo
2Vo
0VoxRedacted information was provided as Confidential.
Staff acknowledges that the Company's salaries have historically been lower than other
water systems, both investor-owned and municipal systems. However, since its last general rate
case in 2012, the Company has awarded salary increases greater than those awarded by other
utilities or the broader workforce in general. Prior to 2o20,the enhanced increases compared to
the proxy group represent a gradual approach to increasing wages, which Staff supports.
However, Staff proposes eliminating the Company's proposed salary increases for 2020,202I,
and2022, and keeping the Company's recovery at its actual labor expense for 2019. The
Company's proposed increases in2O2O and beyond are excessive at a time when many of the
company's customers may be facing financial hardship due to the ongoing covlD-19 pandemic.
Staff s proposal represents a 4 percent average annual increase from the Company,s last rate case.
This adjustment reduces employee salaries by $79,747, employee benefits by $3,g72, and payroll
taxes by $6,143. These reductions are shown in Attachment A, Column B.
Training
The Company's training expenses increased significantly in its 2019 test year, more than
tripling the expenses in the two previous years combined. The Company sent employees to a
conference in Sun Valley and corporate training in Portland. The Company said that NW Natural
Water's policy is to increase training for staff beyond the minimum certification required to
continue operations. Staff appreciates the extra training provided to employees and understands
the value it provides to the Company's operations, but the increase is unwarranted given the travel
restrictions due to the COVID-19 pandemic and the ability to participate in virtual training
REDACTED STAFF COMMENTS 4 JANUARY II,2O2I
opportunities. Staff proposes to use the average of the 2018 and 2Ol9 training expense, which
reduces the expense by $2,983, from $6,994 to $4,001. Staffls proposal allows the Company to
recover training expenses greater than what it has historically incurred while recognizing that
many utilities have decreased their training and travel budgets due to the current pandemic. This
adjustment is shown in Attachment A, Column C.
Meter Reading Savings
In Case No. FLS-W-12-0L, the Commission ordered special accounting treatment related
to the Company installing meters with radio transmitters. The Commission ordered the Company
to set aside $8,315 annually into a special plant reserve fund for infrastructure projects. The
$8,315 was from operational savings due to installing meters with radio transmitters, which could
be read remotely and save the Company labor and fuel expense. Additionally, the Commission
required the company to put the depreciation expense for the meters, almost $27,000 per year,
into the special plant reserve fund.2 The Company properly funded the special plant reserve fund
since the previous rate case. The Company is requesting to capture the operational savings in its
operating expenses as those savings would be embedded in the Company's new revenue
requirement. Because the operational savings will be embedded in the new revenue requirement,
there would be no additional savings to fund the special plant reserve account. The Company
proposes to increase its test year expenses by $8,315 to continue to fund the special plant reserve
account in compliance with Order No. 32663.
Staff proposes eliminating the $8,315 operational expense as well as the contribution into
the special plant reserve account. The Company has had eight years of incorporating the
efficiencies from the new meters into its operations, so the operational savings identified in
Case No. FLS-W-12-01 no longer reflect the Company's business practices. Staff recommends
the Company continue to fund the special plant reserve account with the depreciation expense
associated with advanced meters. This adjustment is shown in Attachment A, Column C.
Shared Services Expense
The Company included$79,225 in shared services allocation in its pro forma adjustments
for NW Natural Water expenses allocated to Falls Water. This amount was calculated based on a
2 See Order No. 32663, page l1
REDACTED STAFF COMMENTS JANUARY TI,2O2I5
weighted average of 2019 actual and,2O2O estimated expenses from NW Natural Water that were
assigned to Falls Water. It includes several corporate services shared by NW Natural Water
subsidiaries and a corporate 27.5 percent administrative charge in accordance with a NW Natural
Holdings cost allocation manual filed with regulators in Oregon and Washington. Staff has
reviewed the allocation manual and believes that some of the services provided do not directly
benefit Falls Water customers. Staff recommends removing the corporate administrative charge
and the shared services charge for expense categories that don't offset other Falls Water expenses,
specifically accounting, corporate communications, HR/payroll, and information services. These
services were provided by Falls Water employees prior to the acquisition by NW Natural Water.
Including these expenses in the revenue requirement would increase customer rates without
providing any additional benefit. However, Staff recommends allowing some shared services as
operating expenses that Staff believes provide a benefit to Falls Water customers, specifically
executives, legal, regulatory affairs, risk and land, tax, and treasury. Table No. 2 below provides
a summary of the Shared Services pro forma request from the Company and Staff,s proposed
adjustment.3
3 The Company's Application lists a$79,225 expense due to an ..immaterial difference,,adjustment the Companymade to its total shared services cost of $18 in 2019 and $76 in2o2o. Table No. 2 shows u $2 diff"r"nce from theCompany's Application.
REDACTED STAFF COMMENTS 6 IANUARY II,2O2I
Company
2019 2020
11,019 24,569
56,096 55,099
lI,l4I 10,99610,443 9,56711,227 33,201
0 25,000
13,105 51,269
10,731 7,793
7,744 7,9039,145 6,21739,676 63,663
0 97,000
0 355,001-18 -76I79,2gg l47,0gl32.5Vo I3.4Vo
58,259 100.191
79,225
Difference
Over 2 years
(35,587)
0
(22,027)
(20,010)
0
(25,000)
0
0
0
0
(102,339)
(97,000)
(188,126)
94
(489,996\
Staff
Expense
Accounting
Executives
Corporate communications
HR, Payroll
Legal
Information Services
Rates & Regulatory Affairs
Risk and land
Tax
Treasury
Corporate 27.5Vo admin charge
lndirect Common Allocation Costs
NW Natural Water new 2020 jobs
NW Natural Water rounding
Total Shared Services Cost
Falls Water allocation
Shared services expense
Average of 2019 &.2020
2019
0
56,096
0
0
I1,227
0
13,105
lo,73l
7,744
9,r45
0
0
0
0
l0g,03g
32.5Vo
35,104
2020
0
55,099
0
0
33,20I
0
51,269
7,793
7,903
6,21',7
0
0
166,975
0
329,356
13.4Vo
44.035
39,570
(79.326\
(39,655)
In its Application to purchase Falls Water in Case No. FLS-W-18-01, NW Natural Water
stated that the transaction would not cause an increase to rates.a This is the Company,s first rate
case since the acquisition and Falls Water is proposing to include expenses that either don,t
directly benefit customers or duplicate existing expenses. Removing the expenses listed above
and shown in Table No. 2 reduces the company's shared Service expenses to $39,570, a decrease
of $39,655 from the Application. This adjustment is shown in Attachment A, Column C.
Taxes
Several of Staff s proposed adjustments increase the Company's property tax and income
tax burdens. Staff accepts the Company's methods for calculating its tax burden.
The Company proposes setting its property tax expense at I.16To of net plant in service.
Given the proposed increases to plant in service as discussed later in these comments, Staff
a See Case No. FLS-W-18-01, Application, page 3
REDACTED STAFF COMMENTS 7 JANUARY TI,2O2I
recommends increasing the Company's property tax expense by $356. This adjustment is shown
in Attachment A, line 4J, Column D.
The Company calculated its income tax expense by starting with its net ordinary income
and subtracting its depreciation expense, property and payroll taxes, regulatory fees, and interest
expense. The result is then multiplied by a composite state and federal composite tax rate for a
calculated income tax expense. Given that Staff is proposing several decreases to the operating
expenses, an increase to depreciation expense, and a decrease to net rate base, the Company,s
income tax expense would increase by $37,287. This adjustment is shown in Attachment A,
line 50, Column C.
RATE BASE
Plant in Service
Plant additions
Since its last rate case, the Company's net plant in service, including its 2020 pro forma
adjustments, has increased from 92.4 million to approximately $5 million. Two of the largest
projects were the new well approved in Case No. FLS-W-I7-0I and the multiple phases of its
Lincoln Road waterline replacement and relocation project that coincided with roadwork
performed by Bonneville County. Staff reviewed all expenditures associated with the new well
and Lincoln Road project and found they were recorded properly in the Company's plant in
service accounts.
The Company reported the expected cost of several projects added in 2020 in Exhibit
No. 1 of the Application. These include several additions and replacements that were in the
Company's Drinking Water Capital Facilities Plan, a new GPS mapping and inventory system,
and improvements at existing wells. See Application at 3-4. The Company provided Staff with
invoices and receipts for the actual expenditures on all 2O2O plantadditions, which were $30,71g
higher than expected. This difference is a 2 percent increase above the $1.3 million in additions
in2020. Staff supports allowing the actual costs incurred, and its associated depreciation expense
of $766 to be included in plant in service. This adjustment is shown in Attachment A, Column D.
REDACTED STAFF COMMENTS JANUARY II,2O2I8
Use of special plant reserve fund
In Case No. FLS-W-12-01, the Commission ordered the Company to create a special plant
reserve fund "to finance infrastructure projects like trunk line improvements, storage tank and
booster stations, and replacing old water lines." Order No. 32663 at l l. The fund was created
after the Company installed meters with radio transmitters at an expense of $674,024 without
seeking prudency approval from the Commission. The Company funds this account with the
depreciation expense from the radio meters and an annual operational savings resulting from the
advanced meters. The Commission considered not allowing the new meters into rate base, but it
did not want to jeopardize the Company's financial integrity and acknowledged that the meters,
while costly, would ultimately benefit customers. The Company has used this fund once,
withdrawing almost $170,000 to pay for a portion of a new well authorized by the Commission in
Case No. FLS-W-17-01. The fund accrues approximately $27,000 per year and as of July l,
2020, the balance in the fund was $96,149.
The Company is proposing large plant additions in this case, again without seeking a
prudency determination from the Commission prior to beginning work, aside from the new well.
The Company also has not proposed using the special plant reserve fund. Since the fund was
intended for infrastructure projects, Staff believes the Company should deplete the fund once
more. Staff also recommends that a $100,000 contribution from the special plant reserve fund
should be treated as a contribution in aid of construction ("CIAC"), which would be a reduction to
plant in service. This treatment is consistent with Commission Order No. 33863 in Case No.
FLS-W-17-01, in which the Commission ruled another contribution from the fund should be
treated as a CIAC. In that order, the Commission wrote "if the annual savings are not removed
from the rate base calculation, the Company would earn a return on investments not funded by the
Company, but by customers." Order No. 33863 at 4. This treatment would provide some relief to
customers and be a more productive use of the assets in the special plant reserve fund. This
adjustment is shown in Attachment A, Column E.
Working capital
Staff supports the Company's use of the 45-day or one-eighth method for working capital,
using one-eighth of the Company's operating expenses to determine adequate working capital.
Given Staff's proposed adjustments to operating expenses, working capital should be reduced by
$16,822, as shown in line 8 of Attachment B.
REDACTED STAFF COMMENTS JANUARY II,2O2I9
Rate of return and capital structure
The Company requested to maintain its approved ROE of l0.5%o from its last general rate
case, Case No. FLS-W-12-01. However, Falls Water is now a subsidiary of NW Natural
Holdings, which should improve the Company's access to capital. This improved access should
lower the necessary ROE in this rate case. Capital costs have also declined since the 10.5% ROE
was authorized. Other NW Natural Holdings utilities have ROE's lower than Falls Water. For
example, NW Natural Holding's approved ROE for its natural gas utility is l\Vo in Washington
and9.4%o in Oregon. As another comparison, the Commission has recently awarded ROEs of
9.5Vo to other Idaho investor-owned utilities (Avista Utilities in 2OI9 and Intermountain Gas
Company in2017). Staff recommends lowering the Company's ROE to 9.9Vo,which results in a
WACC of 6.9lvo. StaffsproposedWACC of 6.9lVo iscomparabletoNWNaruralHolding's
weighted cost of capital for its oregon natural gas utility, which is 6.97vo.
In its Application, the Company requested adjusting its actual capital structure of I\Vo
debt and 9OVo equrity to a hypothetical capital structure of 457o debt and 55Vo equity. Staff
supports the Company's proposed capital structure because it fairly represents an appropriate
capital structure of investor-owned utilities.
C alculation of Revenue Re quirement
Staff recommends a revenue requirement of $1,967,016, which is a9.257o increase in
billed revenue. The calculations for the revenue requirement are shown in Attachment D-
Revenue Requirement. Staff also recommends a total rate base of $4,928,979, as shown in
Attachment B-Rate Base Calculation. Staff's recommended rate base includes Net Plant in
Service of $4,780,529 and working capital of 9148,450.
Staff recommends one change to the Company's proposed gross up factor, which is used
to increase the revenue requirement to account for revenue dependent charges, such as taxes and
regulatory fees. The Company included bank service charges in its calculation of the gross up
factor. Staff recommends removing the Company's bank service charge fee, which is based on
transaction fees from the Company's vendor, Xpress Bill Pay. Staff reviewed the Company's
contract and fee schedule with Xpress Bill Pay. The Company's fees to Xpress Bill Pay are
assessed per transaction, such as each time a customer pays a bill with a credit card or ACH
transfer, rather than on the amount of the transaction. Because the fees are not dependent on the
Company's revenue, and an increase in the Company's revenue requirement does not necessarily
REDACTED STAFF COMMENTS 10 JANUARY II,2O2I
increase the fees due to its vendor, it is not appropriate to include the fees in the gross up factor.
This removal of bank service fees reduces the gross up factor by 2.8percent, as shown in
Attachment D,line 20.
RATE DESIGN
To achieve recovery of Staff s proposed $1,967,016 revenue requirement, Staff proposes
the rates presented below in Table No. 3:
Table No.3: StaffRate Desisn Proposal
Staff proposes that the rate increase be recovered entirely through the commodity (usage)
component, without changing the meter size-based monthly charges and their associated water
allotments. Staff s proposal, which increases the commodity rate by ZO.OVo,significantly
increases the proportion of revenues recovered volumetrically, from aroun d 29 .6Vo of revenues to
33.6Vo- Increasing volumetric-based recovery helps discourage water waste by sending a price
signal that each additional gallon of water used imposes an additional cost on the system. For
example, pumps help move water through the system and more gallons of water pumped means
REDACTED STAFF COMMENTS 1l JANUARY TI,2O2I
Meter Size
(Inches)Current Rate Company
Proposed
Percent
Change from
Current
Staff
Proposed
Percent
Change from
Current
sle or3l+in.
$17 .75 for up
to 12,000
gallmo.
$18.75 for up
to 12,000
gallmo.
5.6Vo
$17.75 for up
to 12,000
gaUmo.
0.0%o
1in.
$25.00 for up
to 17,000
gallmo.
$26.41for up
to 17,000
gallmo.
5.6Vo
$25.00 for up
to 17,000
gallmo.
0.OVo
1.5 in.
$32.25 for up
to 22,000
gaUmo.
$34.07 for up
to 22,000
gaUmo.
5.6Vo
$32.25 for up
to 22,000
gaUmo.
0.O7o
2 in.
$41.00 for up
to 28,000
gallmo.
43.31for up
to 28,000
gallmo.
5.6Vo
$41.00 for up
to 28,000
gaUmo.
0.07o
4 in.
$13.25 for up
to 49,000
gallmo.
$77.38 for up
to 49,000
gallmo.
5.6Vo
$73.25 for up
to 49,000 O.0Vo
Commodity
Rate per
1,000 eal.
$0.689 $0.9s7 38.9Vo $0.827 20.O%o
more electricity use and higher costs. Taking a longer-term view, more water use can challenge a
capacity-constrained system's ability to meet water demand at certain times. Increased water use
may eventually necessitate capital expenditure to replace and expand the water system.
Both the Company's rate proposal and Staff's proposal significantly increase the
proportion of revenues recovered volumetrically. As shown above in Table No. 3, the Company
proposed a much larger percentage increase to commodity rates than to the minimum monthly
tates (38.97o to commodity rates vs 5.6Vo to the minimum monthly rates). The Company's
proposed rates would result in 35.6Vo of the revenue requirement recovered volumetrically
through the commodity rate. The Company's proposal results in a higher volumetric recovery
percentage than Staff s proposal (35.6Vo vs33.67o). While Staff commends the Company's
efforts to increase the level of volumetric recovery in this case, Staff favors its proposed rate
changes that limits the volumetric recovery percentage to 33.6Vo.
If Staff used the Company's volumetric proportion of 35.6Vo along with Staff s
recommended revenue requirement, the monthly meter charges would actually decrease. Staff
believes that a rate design with lower monthly meter charges (and consequently a higher
commodity charge) significantly reduces the likelihood that the Company could recover the
revenue requirement approved in this case. Also, lower monthly meter charges could result in
more cash flow variance throughout the year. Revenue in the lowest water-use months may
decline, which could expand the disparity between costs and revenue in these months. Finally,
lower monthly meter charges and a higher commodity charge would increase the variance in bill
impacts among customers, with lower-use customers seeing bill decreases, while larger-use
customers seeing relatively larger bill increases. Staff s rate design tempers the level of
volumetric recovery in this case.
Bill comparisons for customers with 5/s and3lt -inch meters are shown in Table No. 4.
Customers with s/s and3/+-inch meters represent around 78Vo ofthe Company's customers.
REDACTED STAFF COMMENTS 12 JANUARY II,2O2I
Table No.4: Bill Comparison - s/s angl lr-inch meter
Bill comparisons for customers with l-inch meters are shown in Table No. 5. Customers
with l-inch meters represent almost zlvo of system customers.
CUSTOMER RELATIONS
April 20,2020, Boil Water Advisory
In April 2020, the Company's water system was affected by low pressure caused by the
failure of a check valve at a well site. The Company contacted the Commission and corrected the
problem, restoring full service in about 30 minutes. The Company followed Idaho Department of
Environmental Quality ("IDEQ") requirements by notifying customers and filed the appropriate
notices with IDEQ.
The Company issued a Boil Water Advisory, disinfected the system, and tested for
coliform contamination. A Boil Water Advisory is a precautionary measure issued when there is
a loss of pressure but no known contamination whereas a Boil Water Notice is issued when there
is known contamination. Either notice must be issued within 24 hours of the event pursuant to
IDEQ rules. As a result of customer complaints regarding the notification process, the Company
purchased a mass notification program that would allow the Company to notify customers quickly
REDACTED STAFF COMMENTS 13 JANUARY II,2O2I
Monthly
Usage
(1,000 eal.)
Current Rate Company
Proposed
Percent
Change from
Current
Staff
Proposed
Percent
Change from
Current
0 $17.7s $18.75 5.6Vo $17.7s 0.O7o
15 $19.82 $2r.62 9.IVo $20.23 2.l%o
25 $26.71 $31.19 16.87o $28.s0 6.7clo
50 $43.93 $ss.12 25.5Vo $49.18 II.9Vo
75 $61.16 $79.04 29.2Vo $69.8s 14.27o
100 $78.38 $102.97 3L4Vo $90.53 15.5Vo
Monthly
Usage
(1,000 eal.)
Current Rate Company
Proposed
Percent
Change from
Current
Staff
Proposed
Percent
Change from
Current
0 $2s.00 $26.4r 5.6Vo $2s.00 o.lvo
15 $25.00 $26.4r 5,6Vo $2s.00 0.lVo
25 $30.51 $34.06 ll.6Vo $31.62 3.6Vo
50 $47.74 $s7.99 2l.5Vo $s2.29 9.5Vo
75 $64.e6 $81.91 26.lVo $72.97 12.3Vo
100 $82.19 $10s.84 28.8Vo $93.64 13.97o
should problems such as low-pressure or outages occur in the future. The same system will be
implemented for all water systems operated by Falls Water and Gem State Water Company,
which is also owned by NW Natural Water. The Company did not include the cost of its system
in this rate case.
Customer notice and press release
The Company's Application included a copy of the notice it mailed to customers at the
end of June 2020 as a separate mailing and a copy of the news release that was sent to the post
Register in Idaho Falls on June 30, 2020. The customer notice and news release detailed the
percentage increase for various sizes of connection, which the Company calculated using
customers' actual usage to determine percentage increases. The additional detail showing the
effects for each meter size are helpful, allowing customers to see the effect on their bill. The
detailed increase is the average increase for each meter size. Staff recognizes the Company
efforts in calculating the effect of the proposed rate increase on customers, which more than
satisfies the Commission's Rules of Procedure, (IDAPA 31.01.01). Rule 125 states that the
notice shall give the proposed overall percentage change from current rates and the proposed
percentage increase in revenue for each major customer class.
The Commission provided public notification for a customer workshop through a
December 18,2020 news release. The virtual workshop was held on January 5,202I.
Customer Relations
The Commission received three public comments regarding this case, as of January g,
202I. All were concerned with the size of the rate increase the Company requested.
Since January 1,20L8, the Commission has received 28 complaints and inquiries about the
Company, 22 of which were about the April 2o,2ozo Boil water Advisory.
STAFF RECOMMENDATIONS
Based on Staff s audit and analysis of the Company's Application and system, Staff
recommends an annual revenue requirement of $1,967,016, consisting of a rate base of
$4,928,979, a ROE of 9.9Vo, and a WACC of 6.9lVo. Staff recommends the Company collect its
revenue with the metered rate design proposed by Staff in Table No. 3.
REDACTED STAFF COMMENTS l4 JANUARY TI,2O2I
Additionally, Staff recommends the Company discontinue its $8,315 contribution from
operational savings to the special plant reserve fund, as those savings would now be embedded in
the Company's new revenue requirement.
Respectfully submitted this 1lrH day of January 2021.
s>Lt
Edward J. Jewell
Deputy Attorney General
Technical Staff: Brad Iverson-Long
Travis Culbertson
Bentley Erdwurm
Chris Hecht
Michael Morrison
i :umisc/commentyfl sw20.3ejblmmtncdebecwh comments
REDACTED STAFF COMMENTS 15 JANUARY II,2O2I
Falls Water Co.
Adjustments Summary
Fts-w-20-{13
Company Staff
2020 Special Plant
Additions Reserve Fund
DE
2019 CY
A
Labor Expenses Recommendation
cAcct s
1 461.1
2 461.2
3 461.5
4 461.6
5 470
6 477
7 400
Revenues
Residential
Commercial
Multiple Family
Accrued Revenue
Late Payment Fee
Misc Service Revenues
Total Operating Revenue
1,680,913
72,000
39,405
(1,489)
4,518
5,080
1,680,913
72,O00
39,40s
(1,489)
4,518
5,080t,8w,427 t,8@,427
Operating Expenses
8 501.5
9 601.8
10 601.9
11 604
L2 670
13 615
14 618
15 520.2
76 520.6
L7 620.7
18 620.8
19 520.81
20 620.82
21 520.83
22 63t.1
23 631.4
24 63s
25 636.3
26 636.4
27 636.6
z8 636.7
29 64t
30 542
31 64s
32 646
33 5s0
34 5s6
35 6s0.1
36 E6o
37 666
38 670
39 675.1
4A 67s.2
47 57s.4
42 575.9
43
44
45
Labor Field
Labor Office
Admin - Labor
Employee Benefits
Purchased Water
Electrical Power
Chemicals
Source M&5
Distribution M&S
Postage
Office
Telephone Expense
Bank service charges
Office Utilites Expense
Engineering
Payroll Services
Testing
Trash
Outsourced Bad Debt Collection
Distribution Contract Repairs
Data Processing
Rental of Property
Rental of Equipment
Lease Rent Exp - lnterest
Lease Rent Exp - Depreciation
Transportation Expense
lnsurance Expense
Workers Compensation lns
Advertising Expense
Rate Case Amortization
Bad Debt Expense
Training Expenses
Dues & Publications
IDHW Fee Expense
2012 MXU Proj Mtr Reader Lbr
Shared Services Allocation
Total Operating Expense
Net Ordinary lncome
Other Expense
403 Depreciation Expense
408.11 . Property Taxes
408.12 . Payroll Taxes
Total Taxes
lncome Taxes
Regulatory Fee
Misc. Non-Utility Expenses
Donations - Tax Deductible
lnterest Expense
Total Other Expense
Net lncome
366,265
77,266
727,635
87,679
3,300
L98,777
5,921
16,793
33,876
27,688
41,910
14,473
35,349
4,720
77,234
836
5,877
964
724
600
11,983
2,200
292
7,845
40,107
35,390
5L,2L7
(s0,9s4)
(16,495)
112,2981
(3,872].
315,311
60,77L
115,336
83,807
3,300
198,717
5,92L
t6,793
33,876
27,688
4L,910
14,4t3
35,349
4,720
tL,234
836
5,877
964
L24
600
11,983
2,200
292
1,845
40,707
35,390
51,277
159 159
5,796
6,984
860
16,635
8,315
79.225
(2,983)
5,796
4,001
860
16,535
39,570
(8,31s)
L,322,\75
478,252
(83,619)
83,619
(s0,9s3)
50,953
L,787,603
672,825
46 403
47 408.7
48 408.1
49 408
50
51 408.1
52 426
53 426.1
54 427.3
55
56
215,696
79,427
46,779
766
355
276,462
79,783
40,636(6,143)
126,206
15,501
4,474
(6,143)356 120,419
52,788
4,474
37,287
36L,876
t76,376
(6,143)
89,762
37,287
13,666
L,122
.1,7221
394,142
218,682
Plant in Service
Accumulated Depreciation
CIAC Gross Contributions
CIAC Accum. Amortization
Net Plant in Service
7,247,752
(485,38s)
12,L65,446)
253,6s6
4,850,577
30,718
1766l|
7,278,470
(485,151)
12,265,446!.
253,656
Attachment A
Case No. FLS-W-20-03
Staff Comments
0t/11121
57
58
59
60
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(100,000)
4,780,529
Attachment B
Case No. FLS-W-20-03
Staff Comments
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Attachment C
Case No. FLS-W-20_03
Staff Comments
0t/11/21
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Falls Water Co.
Revenue Requirement
Frs-w-20-03
L Rate Base
2 Required Rate of Return
3 Net Operating lncome Requirement
4 Net Operating lncome Realized
5 Net Operating lncome Deficiency
6 Gross up Factor (line 20)
7 Total lncremental Revenue Requirement
Company
Request
S 5,015,849
7.24%
Staff
Recommendation
S +,929,979
6sL%
S g63,oz2
s 115,376
s
s
340,469
2L8,682
S zq;,Gqa
1.3954
s 121,,787
L.3679
s 3qq,L75 s 155,588
8 Revenues at existing rates
9 Total Revenue Requirement
10 Percent lncrease Required
S r,goo,427
5 2,L44,602
79.72%
s
s
7,800,427
1,967,0L6
9.25%
Net to Gross Multiplier
L1 Total Gross Revenues
1.2 Less Uncollectibles
13 Less 2019 Regulatory Fees
14 Less Bank Service Charge Fees
15 Net Revenue
16 State lncome Tax Rate (6.925%l
17 Federal lncome Tax Base
18 Federal lncome Tax Rate (2t%)
19 Net Operating Revenue
1.000000
0.003219
0.002529
0.019634
1.000000
0.003219
0.002529
0.974618
0.067492
0.994252
0.058852
0.907726
0,190496
0.925400
0.L94334
0.715530 0.731065
20 Net lncome to Gross Revenue Multiplier 1.3954 L.3679
Attachment D
Case No. FLS-W-20-03
Staff Comments
0U11121
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS l1TH DAY OF JANUARY 2021,
SERVED THE FOREGOING REDACTED COMMENTS OF THE COMMISSION
STAFF IN CASE NO. FLS-W-20-03, BY E-MAILING A COPY THEREOF, TO THE
FOLLOWING:
K SCOTT BRUCE
FALLS WATER CO INC
2180 N DEBORAH DR
IDAHO FALLS ID 83401
E-MAIL: scottl @fallswater.com
(Redacted Comments)
ERIC W NELSEN
SR REGULATORY ATTORNEY
NW NATURAL
220 NW 2M AVE
PORTLAND OR 97209
E-MAIL: eric.nelsen@ nwnatural.com
(Confidential Comments)
SECRETARY
CERTIFICATE OF SERVICE