20230202Comments.pdf

CHRIS BURDIN O
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE,IDAHO 83720-0074 Si N
[phone]
IDAHO BAR NO.981
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 FALLS WATER CO.,)INC.'S APPLICATION FOR DEFERRAL OF )CASE NO.FLS-W-22-01
CERTAIN COSTS )
)COMMENTS OF THE
)COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission,by and through its Attorneyof
record,Chris Burdin,Deputy AttorneyGeneral,submits the followingcomments.
BACKGROUND
On October 31,2022,Falls Water Co.,Inc.("Falls Water"or "Company")filed an
application ("Application")with the Idaho Public Utilities Commission ("Commission")
requesting authorization to defer costs associated with groundwater mitigation so that Falls Water
may advocate for the recovery of those costs in a future rate case.
Falls Water is a regulatedwater company that serves approximately 6,400 customers within
its service territory near Idaho Falls,Idaho,pursuant to Certificate of Public Convenience and
Necessity No.236,and owns certain water rights,under which Falls Water is allowed to pump
groundwater from its wells to serve its customers.Falls Water is located within the Bonneville-
STAFF COMMENTS 1 FEBRUARY 2,2023
Jefferson Ground Water District ("District"),which is a member of an entity known as the Idaho
Ground Water Appropriators,Inc.("IGWA").
In 2016,IGWA entered into a Stipulated Mitigation Plan ("MitigationPlan")with an entity
known as the Surface Water Coalition ("SWC").The MitigationPlan provided a framework for
administrating groundwater rights,including Falls Water's groundwater rights,in a manner
designed to decrease conflict between water users.As a result of the MitigationPlan,groundwater
users within the District were required to decrease groundwater production by approximately
18,000 acre-feet.The Company states that in 2022,the cumulative growth on the system,drought
conditions,and the actions of other members of the District were such that incurringmitigation
fees was necessary for Falls Water to pump sufficient water to meet customer demand.The precise
amount of mitigation fees is not known at this time,but the Company expects the fees to be
material considering Falls Water's overall operations.
STAFF ANALYSIS
Commission Staff ("Staff')reviewed the Company's Application,supporting documents,
responses to Production Requests,and the proposed accounting treatment.Staff believes the
Company's request is reasonable based on the extraordinary circumstances of the special
assessment fees.Staff recommends the Commission approve the Company's Application to defer
costs associated with mitigation and fees assessed by the District into a regulatory asset account
until its next general rate case.At that time,the prudence of the expenses incurred,and the recovery
method will be determined.
Customer Growth
As part of the District,the Company is required to adhere to its 2010-2014 average baseline
water production level of 3,732.2 acre-feet for the MitigationPlan.The Company's baseline
includes the Company's recent acquisitions of Taylor Mountain and Morning View,and it
anticipates Honey-Bee Acres baseline of 19.44-acre feet will be added to the baseline.Response
to Production Request No.9.The Company claims its customer base has "grown by 40%"since
2014;therefore,the customer demand for water has increased.Application at 3.The Company
estimates that 2022 total production will be approximately 5,257 acre-feet.Response to Production
Request,Attachment 1.
Staff reviewed the Company's water production and customer usage data since 2016 and
notes the Company has experienced significant growth to its system since baselines were
STAFF COMMENTS 2 FEBRUARY 2,2023
established for the MitigationPlan.The Company averaged an additional 230 new connections
each year since 2016,with the biggest increase in Residential customers on 1-inch meters.Staff is
concerned that as the Company continues to grow,the Company's baseline will not adequately
reflect additional customer growth based on the current MitigationPlan.Staff encourages the
Company to explore updates to the Mitigation Plan that will accurately reflect a reasonable
baseline water production level based on the Company's current system production and will allow
for customer growth on the system.
MitigationEfforts
The Company stated that in 2020 and 2021 it failed to meet the water reduction
requirements described in the MitigationPlan.In May of 2022,the District initiated a special
assessmenti that provides for a fee of $100 per acre-feet used over the Company's 2010-2014
baseline.In response to the District's special assessment,the Company stated it has "pursued the
purchase of additional water rights;it has urged its customers to conserve water;it has explored
the possibility of leasing water rights from the water bank;and it has explored changing its rate
structure to encourage conservation."Application at 4.Additionally,the Company used its
communications system,RAVE,to alert customers by text message,voice message,and email to
conserve water on June 27,2022.The Company also sent out bill stuffers and put a message on
the Company website notifying customers of the drought conditions and recommendations on how
to conserve water.As a result,the Company saw a 3.1%decrease in water production from 2021
to 2022.
Staff believes the Company adequately alerted customers of the need to conserve water
due to drought conditions,but notes that the Company did not mention special assessment fees
due to increased water production over its allotted baseline.Staff encourages more transparency
between the Company and its customers about the special assessment fee and believes it would be
beneficial for customers to know how customer bills could be impacted by increased water usage.
Additionally,Staff is concerned that the Company will continue to face assessment fees due to the
Company's baseline not adequately reflecting customer growth in the MitigationPlan.Staff
IdahoCode §42-5232 gives the District authority to levy a special assessment against a District member due to
excess water use based on an agreed mitigation plan.
STAFF COMMENTS 3 FEBRUARY 2,2023
encourages the Company to explore all mitigation efforts includingrate design,purchasing water
leasing rights,and continuingto encourage its customers to conserve water.
Breach of the Mitigation Plan
Due to multiplemembers of IGWA failing to meet ground water production requirements
established in the MitigationPlan,on July 21,2022,the SWC filed the Surface Water Coalition 's
Notice ofSteering Committee Impasse/Request for Status Conference with the Idaho Department
of Water Resources ("IDWR").The IDWR's Director granted the request for a status conference
to be held on August 5,2022.On September 8,2022,IDWR issued the final order,Docket No.
CM-MP-2016-001,finding IGWA was in breach of the MitigationPlan and ordering IGWA to
supply SWC with an additional 30,000 acre-feet storage water in 2023,and an additional 15,000
acre-feet storage water in 2024;this is in addition to the existing production requirements in the
MitigationPlan.It has not yet been determined how IGWA will allocatethose requirements among
all participating ground water districts.Staff is concerned that the Company may be affected by
the Director's judgement regarding the issue of IGWA's breach of the MitigationPlan.Staff
recommends the Company update the Commission when the District has agreed upon specific
requirements from the Company due to the breach.
Mitigation Costs
The Company requests a deferral of costs arising from groundwater mitigation in 2022 and
"possibly other costs."Application at 4.The Company expects to receive an invoice in the first
quarter of 2023 for the special assessment fees.The Company estimates the special assessment
will be approximately $152,000 due to the Company pumping approximately 1,525 acre-feet over
the required baseline level.The Company also expects to include potential leased or purchased
water costs,legal fees,and costs of third-partyassistance in search of water rights as "other costs"
in the deferral.The Company estimates costs associated with conservationcommunication will be
$977 for 2022;however,it is unclear if the Company plans to include these as "other costs."
Estimated Cost to Customers
The expected 2022 special assessment of $152,472 would be a yearly cost of $24.10 per
customer,based on the current number of customers,without consideration of customer class.The
STAFF COMMENTS 4 FEBRUARY 2,2023
actual amount would differ based on the total amount deferred and how the deferral balance would
be recovered from customer classes in the next rate proceeding.
Deferral Request
On a case-by-case basis,the Commission has generally allowed deferred accounting
treatment for extraordinary and unusual expenses mandated by a regulatory or similar authority
that have a significant financial impact on the Company.Staff believesthe groundwatermitigation
expenses fall into this category.The District has mandated these costs through the MitigationPlan
implementation.The Company has yet to encounter these types of expenses before the current
circumstance.The Company does not know if these expenses will continue to occur or the timing
and amount of additional groundwater mitigation costs.Thus,these costs are extraordinary and
unusual in nature.If groundwater mitigation costs become a routine annual expense,prudent
mitigation costs should be included in customer rates in the Company's next general rate case.
A deferred accounting order does not constitute Commission approval to recover these
costs from the Company's customers.In this case,the granting of a deferral order does not limit
Staff's right to audit,question,or challenge the appropriateness,reasonableness,and prudence of
any cost to be deferred,as this sort of review is necessary to protect ratepayers.Staff expects the
Company to provide sufficiently detailed supporting documentation when it seeks recovery of
these costs in a subsequent filing.Therefore,Staff recommends the Company defer groundwater
mitigation costs into a regulatory asset account,with recovery of prudently incurred costs
determined in the Company's subsequent rate proceeding.
Absent an accounting order from the Commission,the Company would not be able to
recover these costs unless they were incurred during the Company's test year in a general rate case.
Staff believes that allowing the Company to defer otherwise unrecoverable costs provides a
sufficient benefit to the Company and,therefore,the Company should not be granted a carrying
charge on the regulatory asset account.
CUSTOMER COMMENTS
Rule 125 of the Commission's Rules and Procedure does not require customer notification
unless the Company requests a rate change.IDAPA 31.01.01.125.Because the Company is not
currentlyrequesting a change in rates,no customer notification is required.As of February 1,2023,
no customer comments have been filed.
STAFF COMMENTS 5 FEBRUARY 2,2023
Additionally,Staff recommends that the Company keep its customers appraisen of the
potential change in rates resulting from future groundwater mitigation efforts and the part that
customers with over-zealous watering habits play in the delicate balance between water usage and
overall customer rates.
STAFF RECOMMENDATIONS
Staff recommends the Commission issue an Order authorizing the Company to defer,without
interest,the special assessment fees and other costs associated with groundwater mitigation into a
regulatory asset account,with recovery subject to a prudency review in its next general rate case.
Additionally,Staff recommends the Commission order the Company to:
1.Provide more transparency between the Company and its customers over the special
assessment and the potential impact it may have on rates.
2.Update the Commission when the District has determined how the breach of Mitigation
Plan will impact the Company.
3.Continue and expand its mitigation efforts to explore all options.
Respectfully submitted this day of February 2023.
Chris Burdin
Deputy AttorneyGeneral
Technical Staff:Kathy Stockton
Kimberly Loskot
Laura Conilogue
Rick Keller
i:umisc/comments/flsw22.01 comments
STAFF COMMENTS 6 FEBRUARY 2,2023
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I HEREBY CERTIFY THAT I HAVE THIS 2ND DAY OF FEBRUARY 2023,SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF,INCASENO.FLS-W-22-01,BY E-MAILING A COPY THEREOF,TO THEFOLLOWING:
PRESTON N CARTER
MORGAN D GOODIN
GIVENS PURSLEY LLP
601 W BANNOCK ST
BOISE ID 83702
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