20211206Final_Order_No_35249.pdf

ORDER NO. 35249 1
Office of the Secretary
Service Date
December 6, 2021
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF FALLS WATER
COMPANY INC’S. APPLICATION FOR
AUTHORITY TO INCUR DEBT TO
ACQUIRE REAL PROPERTY
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CASE NO. FLS-W-21-02

ORDER NO. 35249

On November 5, 2021, Falls Water Company Inc. (“Company”) applied to the
Commission requesting authority to incur up to $691,500 in debt to buy real property consisting
of an office, warehouse, and storage yard. See Idaho Code § 61-901 et seq. The Company currently
leases the real property it proposes to purchase with the funds from the debt issuance. The
Company requested the Commission issue its final decision by December 13, 2021.
The Company plans to close on the real estate transaction by year end 2021, although
it may be able to close in the first quarter of 2022.
The Company published a notice of the Application in the Post Register on November
19, 2021. The Company paid the filing fee required under Idaho Code § 61-905 on November 22,
2021. On November 22, 2021, the Company also filed a Statement of Public Notice and Proof of
Publication with the Commission noting that it had published notice in the Post Register which
serves Bonneville County, Idaho.
Based on our review of the record, we approve the Company’s Application to incur
debt as noted below.
THE APPLICATION
The Company asks for authority to incur $691,500 of debt to purchase real property.
The debt consists of a 15-year loan with an interest rate of 0.90% APR for the first 12 months,
2.99% APR for years 2 through 10, and 6.50% APR for years 11 through 15. The Company’s
Application included a letter from Zions Bank indicating its willingness to finance the real property
purchase.
The Company seeks to incur the loan to finance the purchase of real property in Idaho
Falls, Idaho. The real property consists of two lots that the company currently leases. One of the
lots houses the Company’s main office building. The other lot is vacant and provides space to store
equipment and other material.
ORDER NO. 35249 2
Earlier this year, as the Company’s most recent lease approached expiration, the
Company learned that should it renew the lease its monthly payments would increase to $5,500.
The lease also provided the Company with an option to purchase the property, which it has
exercised. The Company’s monthly payments on the loan will be less than the $5,500 it would
otherwise pay under a new lease.
The total purchase price of the property is $922,000.00, of which the Company will
pay a 25% down payment—or $230,500—leaving a principal balance of $691,500.
STAFF REVIEW AND RECOMMENDATION
Staff recommended the Commission authorize the Company to incur up to $691,500 in
debt to purchase the real property it currently leases for its offices and storage. Staff also
recommended the Commission require the Company to file its final loan documents with the
amount borrowed and all other terms within seven days of closing.
Staff reviewed the Company’s Application and 2020 Annual Report, and confirmed
that the Company paid the fees required under Idaho Code § 61-901 et seq.
Staff noted the Company did not submit financial statements with its Application but
did not believe this should disqualify the Application because substitute financial documents were
available. Staff believed that Company could meet cashflow requirements to cover the debt
payments based on its 2020 Annual Report filed in Case No. FLS-W-20-03. Staff noted that the
current lease payment on the building was $3,496 per month, but that it would increase to $5,500
per month if the Company continued to lease and the Company’s debt service payments would be
less than $5,500 per month.
Staff discussed the terms of the loan and amount the Company would borrow compared
to the amount listed in Zions Bank’s Indication of Interest due to the Company’s 25.00% down
payment. Staff noted the tiers of interest over the life of the loan. Staff discussed the difference in
rates between Zions Bank’s Indication of Interest and the Company’s Application for years 11-15
wherein the Application stated the rate would be 6.50% and the Indication of Interest said it would
be the five-year U.S. Treasury plus 2.00%. The Company clarified the 6.50% listed in the
Application was a worst-case scenario.
Staff did not believe the new debt would affect the Company’s capital structure
significantly. Staff noted this debt issuance would not impact the Company’s Commission
approved capital structure or weighted average debt interest rate of 3.50% for the first ten years.
ORDER NO. 35249 3
See Case No. FLS-W-20-03. Staff observed that the loan structure for years 11-15 would
potentially remain below the Commission approved debt interest rate if the U.S. Treasury Index
remains low.
Staff noted that the acquisition of Falls Water by N.W. Natural appeared to provide the
Company with better access to capital markets by comparing the rates in the Company’s
Application to recent Commission authorized debt issuances by Rocky Mountain Power and
Avista, which had similarly low interest rates.
Staff did not believe the Commission should issue a prudency determination on the real
property acquisition at this time contrary to the Company’s request. Staff believed the time
constraints imposed by Idaho Code § 61-904 did not allow for proper review and the Company’s
next general rate case would provide a better opportunity to fully review the prudency of the
Company’s purchase.
DISCUSSION AND FINDINGS
The Commission finds that the Company is an Idaho corporation, a water corporation
within the definition of Idaho Code § 61-125, and a public utility within the definition of Idaho
Code § 61-129. The Commission has jurisdiction over this Application under Idaho Code § 61-
901 et seq.
The Commission finds that the Company’s Application should be approved. The
Company’s Application reasonably conforms to Rules 141 through 150 of the Commission’s Rules
of Procedure (IDAPA 31.01.01.141-150), and the Company has paid all fees required by Idaho
Code § 61-905. Further, the proposed incurrence of debt is for a lawful purpose, is within the
Company’s corporate powers, and is compatible with the public interest.
We find that if the Company receives a loan in the amount it anticipates borrowing and
with the conditions it expects, then its capital structure approved in Case No. FLS-W-20-03 will
not be impacted.
The Company shall file with the Commission the loan documents (showing the amount
borrowed and all other terms of the loan) within seven days of those documents becoming available
to the Company.
The issuance of this Order authorizing the proposed financing does not constitute
Commission determination/approval of the type of financing or the related costs for ratemaking
ORDER NO. 35249 4
purposes, which determination the Commission expressly reserves until a future ratemaking
proceeding.
The Commission’s approval of the Company’s proposed debt incurrence is not an
approval of how the Company ultimately spends any funds obtained from the loan. The
Commission also does not have before it, and therefore does not determine, the effect of incurring
the debt on rates to be charged by the Company for water service to its consumers.
O R D E R
IT IS HEREBY ORDERED that the Company’s Application is granted. The Company
may incur up to $691,500 in debt under the terms and conditions and for the purposes set forth in
the Company’s Application and this Order.
IT IS FURTHER ORDERED that the Company shall file with the Commission the loan
documents (showing the amount borrowed and all other terms of the loan) within seven days of
those documents becoming available to the Company.
IT IS FURTHER ORDERED that the foregoing authorization to incur debt is without
prejudice to the regulatory authority of the Commission regarding rates, utility capital structure,
service accounts, valuation, estimates for determination of cost or any other matter which may
come before this Commission under its jurisdiction and authority as provided by law.
IT IS FURTHER ORDERED that nothing in this Order and no provisions of Chapter
9, Title 61, Idaho Code, or any act or deed done or performed in connection with this Order shall
be construed to obligate the State of Idaho to pay or guarantee, in any manner whatsoever, any
security authorized, issued, assumed, or guaranteed under Chapter 9, Title 61 Idaho Code.
IT IS FURTHER ORDERED that issuance of this Order does not constitute acceptance
of the Company’s exhibits or other material accompanying the Application for any purpose besides
issuing this Order.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order with regard to any
matter decided in this Order. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-
626.

ORDER NO. 35249 5
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 6th day
of December 2021.

__________________________________
PAUL KJELLANDER, PRESIDENT

__________________________________
KRISTINE RAPER, COMMISSIONER

__________________________________
ERIC ANDERSON, COMMISSIONER

ATTEST:

Jan Noriyuki
Commission Secretary

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