20231214Final_Order_No_36027.pdf

ORDER NO. 36027 1

Office of the Secretary
Service Date
December 14, 2023
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION
OF FALLS WATER CO., INC., FOR
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR WATER SERVICE IN
THE STATE OF IDAHO
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CASE NO. FLS-W-23-01

ORDER NO. 36027

On May 12, 2023, Falls Water Co., Inc., (“Company”) applied to the Idaho Public Utilities
Commission (“Commission”) for authorization to raise the rates it charges for water service. The
Company filed a corrected Application on May 15, 2023 (“Application”). The Company requested
to increase its revenue requirement by about $1.174 million—an approximate 47.3 percent
increase in revenue collected in varying amounts from customers served in three different, but
related systems: Falls Water, Morning View, and Taylor Mountain.
On October 27, 2023, the Company filed a Stipulation and Settlement (“Proposed
Settlement”) and Motion to Approve Stipulation and Settlement. The Proposed Settlement was
signed by the Commission Staff (“Staff”) and the Company (collectively, the “Parties”)—the only
parties in the case. The terms of the Proposed Settlement would result in a $714,562 increase to
the revenue requirement, or approximately 28.8 percent.
Having reviewed the record in this case, including the Proposed Settlement, we now issue
this Final Order approving the Proposed Settlement, as filed.
PROCEDURAL BACKGROUND
On June 5, 2023, the Commission issued a Notice of Application, Notice of Suspension of
Proposed Effective Date, and Notice of Intervention Deadline.1 Order No. 35806.
On August 2, 2023, the Commission issued a Notice of Modified Procedure and scheduled
a virtual public workshop. Order No. 35872.
On September 7, 2023, the Commission scheduled a customer hearing for October 23,
2023. Order No. 35914.
On October 13, 2023, the Commission issued a Notice of Amended Comment Deadline
moving the public comment deadline to October 26, 2023. Order No 35960.

1 Order No. 35806 suspended the Company’s proposed effective date for five months opposed to the standard 30 days
plus five months as allowed under Idaho Code § 61-622(4).
ORDER NO. 36027 2

On October 20, 2023, the Commission issued a Notice of Vacated Customer Hearing and
a Notice of Continued Suspension changing the suspended effective date until December 15, 2023,
and vacating the established customer hearing until a later one could be scheduled. Order No.
35963.
On October 30, 2023, the Commission issued an Order vacating the public comment and
Company reply deadlines. Order No. 35975.
On November 7, 2023, the Commission issued an Order that noticed the Proposed
Settlement, scheduled a customer hearing, and established public comment and Company reply
deadlines. Order No. 35988. Staff and the Company filed comments in support of the Proposed
Settlement. Several customers also filed comments opposing the Company’s proposed rate
increase.
BACKGROUND
The Company is a Commission-regulated water corporation that provides service to the
area north of the City of Ammon, northeast of the City of Idaho Falls. The Company currently
serves approximately 6,510 residential and commercial customers in Bonneville County, Idaho.
The Company provides service under Amended Certificate of Public Convenience No. 236. The
Company’s most recent general rate case was in 2020 in Case No. FLS-W-20-03.
THE APPLICATION
The Company proposes a revenue increase of approximately $1,174,000, representing a
47.3 percent increase. The Company submitted proposed Schedule Nos. 1, 2, and 3 setting forth
the proposed changes to be made to customers rates. See Attachment 1 to Application. The
Company represents the average customer bill for each customer type would change as follows:
ORDER NO. 36027 3

The Company represents that the proposed rate of return under the proposed revised rates
and charges is 7.71 percent.
The Company represents that the revenue realized under its presently authorized rates
produces a rate of return of approximately -0.67 percent based on an adjusted test year ending
December 31, 2022. The Company states that it seeks additional revenues to recover increased
operating expenses and costs associated with plant additions, and to produce a fair rate of return.
The Company proposes to “consolidate the rates for former Morning View and Taylor
Mountain system customers into a single ratemaking area” and would replace the Company’s
current Schedule Nos. 4, 5, 6, and 7.
The Company proposes to “increase tiered rates for three different usage bands” and have
a “separate rate for secondary irrigation systems.” Application at 3.
THE PROPOSED SETTLEMENT
The Parties agree that the Company should be allowed to recover $3,199,665 in total
revenue requirement. If approved, this is an increase of approximately $714,562, or approximately
28.8 percent. The Parties agree that the revenue requirement includes a total rate base of
$9,589,322 and a Return on Equity (“ROE”) of 9.7 percent.
ORDER NO. 36027 4

The Parties agreed to the following adjustments to determine the revenue requirement2 for
the Proposed Settlement:
Adjustment
Revenue
Requirement
Impact ($)
Company Initial Application 1,174,356
a. Gross Revenue Multiplier (17,397)
b. Change Interest on Debt (34,464)
c. Change ROE to 9.7% (37,944)
d. Water Assessment to Actuals (64,268)
e. Water Mitigation Amortization (34,517)
f. Rate Case Amortization to 3 Years (31,746)
g. Amortization Expense Reclass (2,234)
h. Update Depreciation Rates (75,637)
i. Proforma Plant in Service Removal (90,692)
j. Proforma Plant Accumulated Depreciation 2,379
k. Proforma Depreciation Expense (16,933)
l. Proforma Plant to Actual Cost 1,173
m. Restricted Stock Unit Benefit (29,437)
n. Employee Bonuses (11,071)
o. Actual 401k Expense (4,876)
p. Seasonal Employee (9,754)
q. Normalize Purchase Power (2,376)
Agreed Revenue Requirement 714,562

The Parties agreed the Company will update its depreciation rates (adjustment h).
The Parties agreed to rate design wherein the basic charges for the Taylor Mountain and
Falls Water systems will be consolidated by meter size, and basic charges for the Morning View
water system will be separated by acre size regardless of meter size. Taylor Mountain and Falls
Water basic charges each increased 20 percent from Falls Water current basic charges and Morning
View’s basic charges reduced $5 for each lot size. The rate design is included as Exhibit No. 3 to
the Proposed Settlement. The Parties also agreed to move towards consolidation of the three water
systems, each system will have the same volumetric rates of $0.64 and $1.439 per 1,000 gallons
for second and third block allotted usage, respectively. All systems will share a three-block tier
structure.

2 These adjustments are discussed in further detail on pages 3-6 of the Proposed Settlement.
ORDER NO. 36027 5

The Parties agreed to include the Equal Pay Plan option which will allow customers to
“flatten” their monthly bills by using an estimate of annual consumption spread over the following
year to create levelized payments.
The Parties agree that the Company will provide facility plans for the Morning View and
Taylor Mountain systems to Staff by February 1, 2024.
The Parties agree that the Company will develop plans to identify root causes of water
losses and related mitigation measures to address them and provide them to Staff, no later than
June 1, 2024.
The Parties agree that the Company will develop plans to implement a meter accuracy
testing program and provide them to Staff, no later than June 1, 2024.
The Parties believe that the Proposed Settlement represents a fair, just, and reasonable
compromise of the positions of the Parties in this case, and that the Proposed Settlement is in the
public interest.
THE COMMENTS
1. Staff comments
Staff filed comments in support of the Proposed Settlement and recommended the
Commission approve it as filed. Staff opined that the Proposed Settlement offers the Company an
opportunity to recover the costs it incurs to serve customers plus a reasonable return on its
prudently incurred investments. Staff noted that the Proposed Settlement would result in the
Company’s revenue requirement increasing by 28.8 percent. Staff’s comments were broken into
three sections: (1) revenue requirement; (2) rate design; and (3) customer relations.
a. Revenue Requirement
Per the Proposed Settlement, the Company’s total revenue requirement would increase by
$714,562, or 28.8 percent, to $3,199,665. The new revenue requirement would be based upon a
rate base of $9,589,322 and a 9.7 percent ROE. To achieve this, the Parties agreed to several
adjustments based on the Company’s Application. Staff discussed the adjustments to the revenue
requirement in its comments, which are depicted in the above table under “The Proposed
Settlement” heading.
Staff discussed the groundwater mitigation fees and deferral amortization for water
pumped beyond what the Company’s water rights permit. Staff noted that in 2022, the Bonneville-
Jefferson Ground Water District (“District”) levied an assessment of $100 for each acre-foot
ORDER NO. 36027 6

pumped beyond the Company’s baseline. The Company had proposed to defer $275,000 for these
fees in its Application, but the District’s levy imposed a smaller actual water mitigation fee on the
Company—$148,136. The Parties agreed that the actual, not proposed, levy would be amortized
over two years. This decreased the revenue requirement by $64,268. The Parties further agreed
that the Company would establish a balancing account to place future water mitigation fees in and
established a baseline for future water mitigation fees of $182,920 to account for growth of the
customer base and possible higher assessment fees.
The Parties agreed to adjust the Company’s depreciation rates so they would be more
closely aligned with the National Association of Regulatory Utility Commissioners’ Depreciation
Practices for Small Water Utilities. This practice results in separate depreciation rates for each
account instead of depreciating assets on a project-by-project basis as the Company was doing.
The depreciation rate modernization adjustment decreased the revenue requirement by $75,637.
The Parties agreed to remove proforma capital projects that had not been completed when
the parties entered the Proposed Settlement. Consistent with the Commission’s practices, the
Parties agreed to remove these from plant in service since they are not yet used and useful. This
adjustment decreased the revenue requirement by $105,246.
Staff’s comments also discussed in greater detail the gross revenue multiplier, interest on
debt rate case expense amortization, amortization expense reclassification, proforma plant to actual
costs, restricted stock unit benefits, employee bonuses, actual 401k expenses, seasonal employees,
and normalizing purchased power.
b. Rate Design
If approved, the Proposed Settlement would result in increased consolidation for rates of
the three water systems that comprise Falls Water Company. The three systems will have the same
volumetric rate—$0.64 and $1.49 per 1,000 gallons for the second and third blocks, respectively.
Additionally, the basic charge for Taylor Mountain and Falls Water will be consolidated by meter
size and for Morning View, the basic charge will be separated by acre size. This change will shift
the revenue recovery slightly between the basic charge and volumetric charge. Revenue recovery
will change from 65.6 percent to 61.6 percent in the basic charge, and from 35.4 percent to 38.4
percent in the volumetric charge. Staff supported this because the move shifts revenue recovery to
the volumetric charge and will help promote water conservation. This is significant because Staff
believed the Company will face large assessment dues from the District if it continues to grow as
ORDER NO. 36027 7

it has recently. Staff hoped the shift to revenue collections in the volumetric charge would send
signals to customers to conserve water.
Staff also discussed the new tariff for secondary irrigation systems which contemplates
providing canal water from the Progressive Irrigation District and should aide the Company’s
groundwater mitigation efforts. Though secondary irrigation is not in place yet, the proposed rate
structure for unmetered secondary irrigation water is $16.85 per month. This will be available to
new development. The monthly rate will be subject to review when customers begin to take service
under the tariff.
The Parties also agreed the Company would complete and provide several plans in the first
half of 2024, including: (1) providing facility plans for the Morning View and Taylor Mountain
systems;3 (2) developing plans for understanding the cause of water loss and related mitigation
measures; and (3) developing plans to implement a meter accuracy testing program.
c. Customer Relations
Staff discussed the Equal Pay Plan that would allow participating customers to levelize
their bills by establishing a monthly bill based on their previous 12 months’ billing history. These
plans would be reviewed and updated annually and are like plans offered by several other
Commission-regulated utilities. At the end of each plan period, customers would have the ability
to pay any negative balance that accrued based on actual consumption differing from the historical
baseline or carry the balance forward into the next plan period. If a negative balance exceeds 25
percent at the end of the plan period, the account will have to be made current to enter a new plan.
2. Company reply comments
The Company filed reply comments recommending the Commission approve the Proposed
Settlement without change, effective December 15, 2023. The Company argued that the Proposed
Settlement is in the public interest and will result in fair, just, and reasonable rates if approved.
The Company supported this assertion by noting that: (1) the Proposed Settlement represents a
compromise of the requests made in the Application and was reached in an efficient manner; (2)
several issues beyond the Company’s Application were resolved, including developments of
several plans that will benefit customers and the Company; and (3) the Proposed Settlement
consolidates rate schedules or moves towards full consolidation. Regarding the consolidation of
rate schedules, the Company noted the basic charge for Taylor Mountain and Falls Water

3 The Company has already completed a facility plan for the Falls Water system.
ORDER NO. 36027 8

customers would increase by 20 percent while the basic charge for Morning View customers would
decrease by $5 for each lot size.
3. Customer comments
The Commission received 39 customer comments. These comments almost exclusively
opposed the Company’s proposed increases. While not every customer opposed a small rate
increase, for the commentors who filed comments, the main reason for opposing the proposed rate
increase was the proposed magnitude. Customers provided several additional reasons or ideas to
mitigate the need to raise rates including: not making the increase apply to seniors, increasing the
hook-up charge to be closer to municipal hook-up fees, spreading the increase over multiple years
or a requiring a stay out, regrouping customers (i.e. residential homes with yards v. trailer courts),
and making development pay for the added costs of development. Customers consistently cited
the inflationary pressure from other facets of life as factors putting pressure on their finances. Only
one comment was filed after the Proposed Settlement was filed and it did not address the Proposed
Settlement.
COMMISSION JURISDICTION
This Commission has jurisdiction over “every corporation or person, their lessees, trustees,
receivers or trustees, appointed by any court whatsoever, owning, controlling, operating or
managing any water system for compensation within this state.” Idaho Code § 61-125. A “water
corporation” as defined in Idaho Code § 61-125 is a “public utility” as defined by Idaho Code §
61-129. Public utilities are “subject to the jurisdiction, control and regulation of the commission
and to the provisions of [The Public Utilities Law].” This Commission is “vested with power and
jurisdiction to supervise and regulate every public utility in the state and to do all things necessary
to carry out the spirit and intent of [The Public Utilities Law].” Idaho Code § 61-501. The
Commission, upon finding that the rates charged by a public utility are “unjust, unreasonable,
discriminatory, or in any wise in violation of any provision of law, or that such rates . . . are
insufficient . . . shall determine the just, reasonable or sufficient rates . . . to be thereafter observed
and in force and shall fix the same by order . . . .” Idaho Code § 61-502; see also Idaho Code §
61-503.
Public utilities are entitled to a reasonable rate of return on prudent investments. “[A]
public utility is entitled to such rates as will permit it to earn a return on the value of the property
which it employs for the convenience of the public, equal to the return generally being made at the
ORDER NO. 36027 9

same time and in the same general part of the country on investments and other business
undertakings which are attended by corresponding risks and uncertainties.” Utah Power & Light
Co. v. Idaho Public Utilities Comm’n, 105 Idaho 822, 827 (1983). The Commission has the power
and the duty to set rates of return within a “broad zone of reasonableness.” Intermountain Gas Co.
v. Idaho Public Utilities Comm’n, 97 Idaho 113, 128 (1975). “The main elements in fixing
reasonable rates for service rendered by [a] public utility are the cost of rendering service on an
economical and efficient basis, fair return to the utility on its property used and useful in such
service and fairness to consumers.” Application of Pacific Tel. & Tel. Co., 71 Idaho 476, 480-81
(1951).
COMMISSION DISCUSSION AND FINDINGS
Under our statutory authority, we have reviewed the record in this case, including the
Company’s Application, Proposed Settlement, public comments, Staff comments, and the
Company’s comments. Based on that review, we approve a new, total revenue requirement for
the Company of $3,199,665. A schedule summarizing the Commission’s decision regarding the
new rates and charges is attached as Attachment 1. The Company’s new rates shall go into effect
December 15, 2023.
We appreciate the Parties working together to deliver a Proposed Settlement that balances
the needs of customers to receive safe and reliable water service at reasonable rates and for the
Company to earn a reasonable return on its prudently incurred investment. While we are always
sensitive to any rate increases and the impact these increases have on customers, we also must
ensure that we have healthy utilities in Idaho that can offer services to customers. We find the
Proposed Settlement results in fair, just, and reasonable rates by balancing the interest of both
customers and the Company.
We find the revenue requirement included in the Proposed Settlement will allow the
Company to meet its obligations to provide safe and reliable water service to customers.
Importantly it will help mitigate the impact of future levies assessed by the District with the
creation of a balancing account for levy expenses. Relatedly, we look forward to seeing how the
new tariff option for secondary irrigation might decrease the need for groundwater as customers
who can begin taking service of canal water for irrigation.
We support the move towards increased consolidation of rates for the Falls Water, Morning
View, and Taylor Mountain water systems. This is a move towards ensuring customers are treated
ORDER NO. 36027 10

more equitably in rates and that customers are receiving appropriate price signals. We encourage
the Company to continue working towards consolidation of the three water systems. We also
support the slight shift from the basic charge to the volumetric charge. We agree with Staff that
this shift can encourage water conservation which might in turn help reduce the levies assessed by
the District in the future.
The Company’s Equal Pay Plan will provide an additional payment option for customers
who seek less fluctuation in their water bills. We appreciate the Company’s desire to offer this
option to customers and believe the proposed mechanism will protect non-participating customers
and the Company from the possible adverse effects of any customers running large negative
balances.
Finally, we are encouraged by the plans the Company has agreed to develop and provide
Staff. These plans will help ensure efficiency in the way the Company’s systems are managed,
operated, and maintained and that customers are charged accurately for their water consumption.
Additionally, understanding the causes of water loss can help the Company reduce the amount of
water it pumps and therefore reduce the impact of the District’s levies. We anticipate these plans
will provide benefits for the Company and customers.
ORDER
IT IS HEREBY ORDERED that the Proposed Settlement is approved, without
modification, with rates to be effective December 15, 2023.
IT IS FURTHER ORDERED that the Company shall develop the agreed upon plans by the
dates listed in the Proposed Settlement.
IT IS FURTHER ORDERED that the additions to Schedule No. 3—Equal Pay Plan and
Secondary Irrigation Rate—are approved.
IT IS FURTHER ORDERED that the Company shall file conforming tariffs within 15 days
of the service date of this Order as a compliance filing.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date upon this Order regarding 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. 36027 11

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 14th day of
December 2023.

ERIC ANDERSON, PRESIDENT

JOHN R. HAMMOND JR., COMMISSIONER

EDWARD LODGE, COMMISSIONER
ATTEST:

Monica Barrios-Sanchez
Interim Commission Secretary

I:\Legal\WATER\FLS-W-23-01\orders\FLSW2301_final_dh.docx

ORDER NO. 36027 12

ATTACHMENT 1