20230512Direct Aird_Exhibits.PDF

Preston N. Carter, ISB No. 8462
Morgan D. Goodin, ISB No. 11184
GIVENS PURSLEY LLP
601 West Bannock Street
P.O. Box 2720
Boise, Idaho 83701-2720
Office: [phone]
Fax: [phone]
[e-mail]
[e-mail]

Attorneys for Falls Water Co., Inc.

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF FALLS WATER CO., INC. FOR THE
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR WATER SERVICE
IN THE STATE OF IDAHO

Case No. FLS-W-23-01

DIRECT TESTIMONY OF JEREMY AIRD
FOR FALLS WATER CO., INC.
RECEIVED
2023 May 12, 2:02PM
IDAHO PUBLIC
UTILITIES COMMISSION
RECEIVED
2023 May 12, 2:02PM
IDAHO PUBLIC
UTILITIES COMMISSION
AIRD, Di
Page 1 of 4
Falls Water Co., Inc.
Q. Please state, your name, occupation, and business address. 1
A. My name is Jeremy Aird. I am the Director of Accounting and Finance for NW Natural 2
Water Company, LLC (“NW Natural Water”). My business address is 250 SW Taylor 3
Street, Portland OR 97204. 4
Q. How long have you been with NW Natural Water? 5
A. I have been with the Company since April 2020. 6
Q. Please summarize your educational background and qualifications. 7
A. I have received my Bachelor of Arts degree in Accounting from Southern Oregon 8
University in 1997. I also completed the Energizing Leadership program at ESADE 9
Business School (Spain) in 2015. 10
Q. What experience did you have prior to joining NW Natural Water? 11
A. My work experience started with two years in public accounting, during which I earned 12
my CPA license. I then worked for six years with a national automotive group, followed 13
by 15 years in the renewable energy industry where I held multiple roles of increasing 14
responsibility and ultimately was promoted to become the Senior Director for the CEO’s 15
office. I then joined NW Natural Water in 2020. The following table provides additional 16
details: 17
AIRD, Di
Page 2 of 4
Falls Water Co., Inc.
1
Q. Briefly describe your responsibilities during your tenure at the Company. 2
A. I have responsibility for financial accounting and reporting, budgeting, and forecasting 3
for NW Natural Water. I also provide support in regulatory matters as it pertains to 4
financial information and regulatory filings. 5
Q. In connection with the Company’s current application for an increase in rates and 6
charges, what is the scope of your testimony? 7
A. My testimony primarily relates to shared services; I will make myself available to support 8
other financial questions that may arise. 9
Q. What exhibits are used to support your testimony? 10
A. The following exhibits accompany my testimony: 11
Exhibit 2 Proforma of Operating Expenses, Column (E) Shared Services Cost. 12
Exhibit No. 2 – G, which provides additional information regarding Column (E). 13
Q. Please explain, generally, the approach used to allocate costs to Falls Water Co., Inc. 14
(“Falls Water” or the “Company”). 15
A. Generally, Falls Water’s parent companies, which includes NW Natural Water, attempt to 16
directly assign costs to Falls Water and other subsidiaries for which the services are being 17
performed. Costs that cannot be directly assigned are allocated to the subsidiaries using 18
the NW Natural Cost Allocation Manual. 19
AIRD, Di
Page 3 of 4
Falls Water Co., Inc.
As shown in Exhibit 2, Column (E) Shared Services Cost Adjustment, and 1
explained further in Exhibit No. 2 – G, Falls Water is allocated shared services from 2
Northwest Natural Gas Company dba NW Natural (“NW Natural”) and NW Natural 3
Water. This reflects the fact that, currently, some shared services—such as corporate 4
communications, legal, purchasing, and tax—are provided by NW Natural, while others 5
—such as accounting, insurance, and third-party legal—are provided by NW Natural 6
Water. We anticipate that, as NW Natural Water acquires additional companies, more 7
shared services will be provided by NW Natural Water. 8
This is the same allocation methodology that is used with NW Natural Water’s 9
subsidiaries in Washington and Oregon; the methodology has been approved by both the 10
Washington Utilities and Transportation Commission and Public Utility Commission of 11
Oregon in prior proceedings to allocate shared services costs. 12
Q. Is Falls Water seeking to recover more or less in shared services costs than it 13
actually incurred in 2022? 14
A. Less. As discussed below, in 2022 NW Natural Water acquired a regulated water and 15
wastewater system in Yuma, Arizona. This decreased the amount of shared services costs 16
allocated to Falls Water, and as such the Company is seeking to recover in this rate case 17
less than the actual costs for shared services that it incurred in 2022. 18
Q. Has the Company provided information regarding the shared services allocated to 19
Falls Water? 20
A. Yes. Exhibit No. 2 – G provides additional information related to shared services. This 21
exhibit demonstrates the components of the shared services that are being allocated to 22
Falls Water, including the entity whose shared services are being allocated, a description 23
AIRD, Di
Page 4 of 4
Falls Water Co., Inc.
and amount of the cost, and the allocation percentage used. The Company would be 1
happy to discuss its allocation methodology, and components of the shared services being 2
allocated, with Staff during the proceeding. 3
Q. Do allocated shared service costs benefit Falls Water customers? 4
A. Yes. The services that are allocated to Falls Water include services such as accounting, 5
corporate communications, human resources, and legal services. These are back-office 6
functions that every company must provide to continue to serve customers. If Falls 7
Water’s parent companies did not perform these functions, then Falls Water would have 8
to perform them directly at higher costs. In addition, by participating in shared services, 9
Falls Water is able to leverage the economies of scale experienced by its parent 10
companies. 11
For example, Falls Water is seeking to recover less costs in shared services in this 12
proceeding than its actual shared services costs during 2022. This decrease in shared 13
services cost is enabled by NW Natural Water’s acquisition of a water and wastewater 14
system in Yuma, Arizona. Through this acquisition, NW Natural Water was able to 15
allocate its shared services costs over more systems, which reduces the allocation 16
percentage to be charged to Falls Water. 17
Q. Does this conclude your direct testimony? 18
A. Yes. 19
Preston N. Carter, ISB No. 8462
Morgan D. Goodin, ISB No. 11184
GIVENS PURSLEY LLP
601 West Bannock Street
P.O. Box 2720
Boise, Idaho 83701-2720
Office: [phone]
Fax: [phone]
[e-mail]
[e-mail]

Attorneys for Falls Water Co., Inc.

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF FALLS WATER CO., INC. FOR THE
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR WATER SERVICE
IN THE STATE OF IDAHO

Case No. FLS-W-23-01

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
EXHIBIT 2 TO ACCOMPANY THE
DIRECT TESTIMONY OF JEREMY AIRD
(A)(B)(C)(D)(E)(F)(G)(H)
Calendar Year Adjustment for Labor Miscellaneous Shared Services Depreciation
January 1, 2022 Non-Recurring Costs Operating Costs Costs Property Tax Adjusted
December 31, 2022 Items Adjustment Adjustment Adjustement Adjustment Totals Witness
Ordinary Income/Expense
Income
400 · Operating Revenue
1 461.1 · Metered Residential 2,356,048 2,356,048
2 461.2 · Commercial Revenue 120,051 120,051
3 462 - Fire Protection Revenue - -
464 - Other Water Sales Revenue 9,004 9,004
4 470 · Late Payment Fee Revenues - -
5 471 · Misc Service Revenues - -
6 Total 400 · Operating Revenue 2,485,103 - - - - 2,485,103
7 414 · Gain (Loss) on Property 11,939 (11,939) -
8 Total Income 2,497,042 (11,939) - - - 2,485,103
9 Expense
10 601.5 · Labor Field 368,625 44,169 412,794 Scott Bruce
11 601.8 · Labor Office 91,140 1,311 92,451 Scott Bruce
12 601.9 · Admin - Labor 159,857 (40,875) 118,981 Scott Bruce
13 602 · Payroll Expense Contra Account (57,299) 5,553 (51,745) Scott Bruce
14 604 · Employee Benefits 212,762 (28,007) 184,755 Scott Bruce
15 610 · Purchased Water 155,098 (11,178) 143,920 Scott Bruce
16 615 · Electrical Power 273,174 4,494 277,668 Scott Bruce
17 618 · Chemicals 2,065 9,311 11,375 Scott Bruce
18 620.2 · Source M&S 24,231 24,231 Scott Bruce
19 620.6 · Distribution M&S 16,838 16,838 Scott Bruce
20 620.7 · Postage 30,620 1,325 31,945 Scott Bruce
21 620.8 · Office 39,039 39,039 Scott Bruce
22 620.81 · Telephone Expense 14,076 607 14,683 Scott Bruce
23 620.82 · Bank service charges 39,909 1,261 41,170 Scott Bruce
24 620.83 · Office Utilites Expense 6,044 (1,548) 4,496 Scott Bruce
25 631.1 · Engineering 7,625 7,625 Scott Bruce
26 631.2 · Accounting 3,385 5,585 8,970 Scott Bruce
27 631.3 - Attorney 1,485 1,485 Scott Bruce
28 631.4 · Payroll Services 10,224 5,056 15,280 Scott Bruce
29 634.1 - NWN Shared Services 223,718 (34,156) 189,562 Jeremy Aird
30 635 · Testing 24,135 2,593 26,728 Scott Bruce
31 636.2 · Source Contract Repairs - - - Scott Bruce
32 636.3 · Trash 1,059 167 1,226 Scott Bruce
33 636.4 · Outsourced Bad Debt Collection - - Scott Bruce
34 636.6 · Distribution Contract Repairs 2,300 (2,300) - Scott Bruce
35 636.7 · Data Processing 97,569 (9,313) 88,257 Scott Bruce
36 636.8 - Contract Service - Consulting 400 (400) - Scott Bruce
37 641 · Rental of Property 21,045 (21,045) - Scott Bruce
38 642 · Rental of Equipment - - Scott Bruce
39 645 - Lease Rent Exp - Interest 1,021 (120) 901 Scott Bruce
40 646 - Lease Rent Exp - Depreciation 4,705 120 4,825 Scott Bruce
41 650 · Transportation Expense 56,582 56,582 Scott Bruce
42 656 · Insurance Expense 75,885 22,633 98,517 Scott Bruce
43 656.10 · Insurance Contra Acct (900) (900) Scott Bruce
44 656.1 · Workers Compensation Ins - - Scott Bruce
45 660 · Advertising Expense 111 111 Scott Bruce
46 668.1 · Water District Fees - - Scott Bruce
47 666 · Rate Case Amortization - 184,500 184,500 Adam Rue
48 670 · Bad Debt Expense 13,008 13,008 Scott Bruce
49 675.1 · Training Expenses 4,093 4,093 Scott Bruce
50 675.2 · Dues & Publications 4,719 4,719 Scott Bruce
51 675.4 · IDHW Fee Expense 19,216 767 19,982 Scott Bruce
52 675.9 - 2012 MXU Proj Mtr Reader Lbr - -
53 Total Expense 1,947,563 - (17,849) 192,513 - 2,088,071
Falls Water Co., Inc
Exhibit 2 - Proforma Results of Operations
Case No. FLS-W-23-01
J. Aird, Falls Water
Exhibit No. 2 - Column E Only
Page 1 of 2
(A)(B)(C)(D)(E)(F)(G)(H)
Calendar Year Adjustment for Labor Miscellaneous Shared Services Depreciation
January 1, 2022 Non-Recurring Costs Operating Costs Costs Property Tax Adjusted
December 31, 2022 Items Adjustment Adjustment Adjustement Adjustment Totals Witness
Falls Water Co., Inc
Exhibit 2 - Proforma Results of Operations
54 Net Ordinary Income 549,479 (11,939) 17,849 (192,513) - 397,032
55 Other Income/Expense
56 Other Income
57 419 · Interest Earned 165 (165) -
58 421 · Non-Utility Income 5,648 (5,648) -
59 Total Other Income 5,813 (5,813) - - - -
60 Other Expense
61 403 · Depreciation Expense 340,232 130,718 470,950
62 408 · Taxes
63 408.11 · Property Taxes 66,681 (23,469) 43,211
64 408.12 · Payroll Taxes 52,097 (1,177) 50,920
65 408.5 · Payroll Taxes - Contra Account (5,001) (5,001)
66 Total 408 · Taxes 113,777 - (1,177) - (23,469) 89,130
67 Income Taxes 6,048 (99,477)
68 408.10 · Regulatory Fee 5,147 5,147
69 426 · Misc. Non-Utility Expenses 1,527 (1,527) -
70 426.1 · Donations - Tax Deductible 800 (800) -
71 427.3 · Interest Expense 28,417 (28,417) -
72 Total Other Expense 495,948 (30,744) (1,177) - 107,249 465,750
73 Net Other Income (490,135) 24,931 1,177 - (107,249) (465,750)
74 Net Income 59,344 12,992 19,026 (192,513) (107,249) (68,718)
Net before int & Tax (173,196)
Interest (cost of debt (cap struct) * rate base)215,661
Net before Tax (388,857)
Tax (99,477)
Case No. FLS-W-23-01
J. Aird, Falls Water
Exhibit No. 2 - Column E Only
Page 2 of 2
CONFIDENTIAL
EXHIBIT NO.2-G TO TESTIMONY OF
JEREMY AIRD
FILED CONFIDENTIALLY UNDER
SEPARATE COVER
CASE NO.FLS-W-23-01
Case No. FLS-W-23-01
J. Aird, Falls Water
Confidential Exhibit No. 2-G
Page 1 of 1