HomeMy WebLinkAbout20230201Comments.pdfCOMPANY’S REPLY COMMENTS PAGE 1 OF 19
Leslie Abrams-Rayner General Manager
Gem State Water Company, LLC
P.O. Box 3388 Coeur d’Alene, ID 83816 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
ITS
CASE NO. GSW-W-22-01
COMPANY’S REPLY TO THE COMMENTS OF
THE COMMISSION STAFF
Gem State Water Company, LLC (“Gem State Water” or “Company”), provides the
following reply to the Comments of the Commission Staff of the Idaho Public Utilities
Commission (“Staff”).
GENERAL COMMENTS
In the past several years, Gem State Water has acquired a number of small water systems
that were in various states of disrepair. After years of minimal maintenance, investment and
management under prior ownership, many of these systems were out of compliance with health
regulations and posed significant safety and reliability risks to customers. The Company is working
towards bringing these systems into compliance with regulatory requirements and, eventually, up to
par with current best practices in the industry. As Staff notes, “many system deficiencies have been
corrected by the Company since it assumed ownership.” Staff Comments at 3. However, Gem
State Water agrees that the work is far from over: “All of the systems will require substantial future
investments to become fully compliant and reliable.” Staff Comments at 3.
Staff and Gem State Water share the goal of bringing these systems into compliance with
regulations, increasing reliability, and implementing industry best practices. To accomplish this
goal, and to support additional acquisitions within the State, the Company must be able to obtain
RECEIVED
2023 January 31, 3:36PM
IDAHO PUBLIC
UTILITIES COMMISSION
COMPANY’S REPLY COMMENTS PAGE 2 OF 19
reasonable rates, supported by the type of information and operations that are found in the water
utility industry.
Gem State Water appreciates the work Staff has put into this proceeding, and is thankful
for Staff’s cooperation throughout the case. That said, Gem State Water respectfully disagrees
with many of Staff’s proposed adjustments.
Staff makes the following recommended adjustments in its comments.1 Areas of
agreement between Gem State Water and Staff are noted. Areas of disagreement are then
discussed in more detail in the following section.
STAFF’S PROPOSALS
1. Allocation. Staff allocated its adjustments over the different water systems using the
number of customers for each system. Staff Comments at 4. Gem State Water agrees that this is the appropriate method to allocate expenses.2 However, later in the comments, Staff uses this method to allocate a capital asset. Staff Comments at 11. Gem State Water did not propose, and does not agree, that this method should be used to allocate capital assets.
This is discussed in more detail below.
2. Revenue Requirement. Staff recommends a total revenue requirement of $682,248 (Staff Comments at 4), which is approximately $294,000 less than requested by Gem State Water. Staff’s proposed reduction in revenue requirement includes the following:
a. Salary. Staff recommends reducing overtime pay, an adjustment to actual salaries, reducing the workers’ compensation premium calculation, and adjusting the Company’s 401(k) matching expense to the actual expenses incurred during the test year. Staff Comments at 5. The Company agrees with the proposed adjustment to
overtime pay, but does not agree with the other adjustments.
b. Lease. Staff proposes to reduce the rental property and equipment expense account by $27,408, the difference in the pro forma lease amount requested and the actual lease amount. Staff Comments at 7. The Company agrees with this adjustment.
1 Staff did not recommend any adjustments to the Company’s proposals regarding non-recurring charges (see Staff
Comments at 20-21), and the Company agrees with that resolution. 2 Gem State Water notes that Pelican Point Water Company (“Pelican Point”) has 515 customers and Gem State Infrastructure (“GSI”) has 47 customers; these numbers are inverted in Staff’s analysis. Staff Comments at 4. In addition, the Lynnwood Estates system has 24 customers rather than 47 customers as stated by Staff. Id.
COMPANY’S REPLY COMMENTS PAGE 3 OF 19
c. Water Testing. Staff proposes to increase the Company’s water testing expenses by $3,741. Staff Comments at 7. The Company agrees with this adjustment.
d. Depreciation. Staff proposes to reduce depreciation expense from $114,917 to $67,187 with three adjustments. Staff Comments at 7 and 11. The Company agrees with two of Staff’s proposals: 1) to extend the depreciable lives of certain plant assets to better align with National Association of Regulatory Utility
Commissioners (“NARUC “) guidance and 2) with lowering depreciation expense
to reflect moving certain pumps from plant to materials and supplies. The two agreed-upon adjustments amount to a $42,460 reduction in depreciation expense. The Company does not agree with the third adjustment of $5,270 regarding the Company vehicle (see Staff Comments at 11).
e. Miscellaneous Expense. Staff proposes to remove certain expenses from the Company’s revenue requirement, asserting that these expenses purportedly were associated with the Pelican Point water system, which is in Washington. Staff Comments at 7-8. The Company does not agree with this adjustment.
f. Geographic Information System (“GIS”). Staff recommends adjusting GIS-related expenses by capitalizing $8,101 of Operator 1’s salary, insurance benefits, worker’s compensation premium, and payroll taxes, and recovering that amount after the GIS project is complete and functional. Staff Comments at 8. The
Company agrees with this adjustment.
g. Gross Revenue Conversion Factor. Staff recommends using the current rates for the Commission assessment and the current tax rate. Staff Comments at 8-9. The Company agrees with this adjustment as applied to determine final revenue
requirement.
3. Rate Base. Staff proposes to reduce plant-in-service by $275,107 and to reduce accumulated depreciation by $1,118. The Company does not agree with most of the adjustments that make up this proposed reduction.
a. Prudency of Capital Projects. Staff proposes to remove $182,464 from rate base, in part because Staff indicates that some investments were not adequately described. Staff Comments at 9-10. The Company does not agree with these adjustments.
b. Company Vehicle. Staff proposes to remove $9,058 from the purchase price of a recently acquired Company vehicle, and allocate the allowable cost of the vehicle across different systems using the number of customers of each system. Staff Comments at 10-11. The Company does not agree with these adjustments.
c. Well Pump Depreciation Adjustment. Staff proposes to reduce plant-in-service by $55,753 and add $55,753 to the materials and supplies inventory account, and to
COMPANY’S REPLY COMMENTS PAGE 4 OF 19
reduce depreciation expense by $2,230 and add $1,118 in accumulated depreciation. Staff Comments at 11. The Company agrees with these adjustments.
d. Contributions in Aid of Construction (“CIAC”). Staff proposes to add a total of $243,300 to CIAC and place $6,889 in total amortization expense in Account 407, which would reduce depreciation expense by $6,889. Staff Comments at 12. The Company disagrees with these adjustments.
e. Working Capital. Staff proposes working capital of $69,726, based on the 1/8 method. Staff Comments at 12-13. The Company agrees with this recommendation as to the methodology, which should be applied to the final expenses as proposed by the Company in these Reply Comments and, therefore,
produce a higher working capital amount than proposed by Staff.
4. Rate of Return. Staff proposes a Return on Equity (“ROE”) of 9.5%, using a hypothetical capital structure of 55% equity/45% debt. This results in a weighted average cost of capital of 7.41%. Staff Comments at 13-16. The Company does not agree with Staff’s
proposed ROE.
5. Rate Design. The Company agrees with Staff’s proposals regarding rate design and will work with staff to implement them on the final revenue requirement. See Staff Comments at 16-20.3
AREAS OF DISAGREEMENT – DETAILED DISCUSSION
1. Response to Recommendation No. 2 – Revenue requirement.
Salary – Employee Time and Hiring Availability.4 Staff proposed to entirely remove the
expense associated with a part-time seasonal employee because 1) the Company was not able to
hire for this position in the summer of 2022 and 2) a significant part of this employee’s
responsibility is to read meters, so the need for the employee purportedly will decrease as radio-
read meters are installed. Staff Comments at 6.
3 Staff recommends that “the irrigation rates for current irrigation customers be approved as filed and only be applied during the spring and summer months.” Staff Comments at 16. The Company interprets “the spring and summer
months” to mean the period between April 1 and September 30, which will be easier to administer than the April 15th through October 15th period referenced in the Company’s response to Staff’s data request GSW-W-22-01 IPUC DR 31
(which is Attachment 1 to these Reply Comments, for ease of reference). 4 Gem State Water agrees with a certain Staff proposal related to salaries, as noted above. The agreed-upon adjustment amounts to $3,932, which reflects the decrease from 40 to 30 hours for a part-time office administrative assistant ($3,653) plus the associated decrease in payroll taxes ($279).
COMPANY’S REPLY COMMENTS PAGE 5 OF 19
The Company does not agree with this adjustment. It is true that the Company was not
able to hire this position for the summer of 2022. This was due to the unusually tight labor market,
and the Company’s relatively low wages.5 The Company needs to fill this position in the summer
of 2023 (i.e., within a few months of new rates becoming effective), as the work that would have
been done by this employee in the summer of 2022 was largely deferred but still needs to be
accomplished. Part of this employee’s time will be spent reading meters. But only a part. The
employee is also needed to perform safety functions such as confined space entry, to perform team
lifts as necessary for maintenance, to serve as a climbing spotter as another employee climbs
elevated storage tanks, to perform maintenance on the Company’s grounds, to perform
maintenance for meter access, to perform valve exercising, and for other similar tasks. Without a
part-time seasonal employee, these tasks are either not done or are performed by the existing field
worker, which pulls that existing field worker away from other responsibilities.
As the need for meter-reading decreases over time, the Company anticipates that the other
job responsibilities will grow to a corresponding degree. Accordingly, Gem State Water requests
that the salary and insurance benefits for a part-time, seasonal worker be included as the Company
proposed in the Application.
Workers’ Compensation Premium. Staff proposed to adjust workers’ compensation rates
such that the rate for field workers does not apply to office employees. Staff Comments at 6. The
Company agrees with that particular adjustment. Staff also removed workers’ compensation
premiums for the part-time seasonal employee and the overtime adjustment. (This is not
5 This presents a sort of chicken-and-egg problem: small water companies are often unable to hire or retain employees
due to their low wages, which is partly driven by an inability to secure the rates necessary to provide competitive pay. If the Company’s inability to hire is then used as justification to further reduce rates, this perpetuates rather than resolves the underlying problem. As the Commission has recognized, “[a]ttracting and retaining skilled employees will be to the long-term benefit of customers.” Order No. 34925.
COMPANY’S REPLY COMMENTS PAGE 6 OF 19
specifically discussed in the body of Staff’s comments, but is part of the calculation shown in the
attachment to Staff’s calculations.) The Company requests that workers’ compensation for this
employee be included at the rate for field workers; this position involves field work and is needed
for the reasons set forth above. Therefore, the Company agrees with $884 of Staff’s adjustment, as
shown in Confidential Attachment 2 to these Reply Comments.
401(k) Match Contributions. As noted above, the Company generally agrees with Staff’s
approach to allow recovery of 401(k) contributions (see Staff Comments at 6), but disagrees with
Staff’s $4,685 reduction to payroll expense. As shown on Confidential Attachment 3 to these
Reply Comments, employees’ actual 401(k) contributions are roughly 3.8% of payroll. The
Company therefore requests $9,083 in 401(k) contributions, to reflect the actual contribution rate
rather than the $9,561 requested in the Application, which results in a $478 reduction to payroll
expense.
Depreciation expense. Staff proposed three adjustments to depreciation expense (Staff
Comments at 7 and 11), which reduce the proposed Company depreciation expense of $114,917 to
$67,187, or a reduction of $47,730.
As noted above, the Company agrees with two of these adjustments: 1) to extend the
depreciable lives of certain plant assets to better align with NARUC guidance, and 2) to move two
pumps from plant-in-service to materials and supplies. The agreed-upon adjustments reduce
depreciation expense by $42,460 and increase accumulated depreciation by $1,118.
Staff’s third proposed adjustment would reduce the value of Gem State Water’s new truck
by $9,058, and allocate 33% of the vehicle’s reduced value to Pelican Point and 3% of the
vehicle’s reduced value to GSI. Staff Comments at 11. The Company disagrees with this two-part
adjustment, as explained in more detail below in the section related to rate base. As applied to
COMPANY’S REPLY COMMENTS PAGE 7 OF 19
depreciation, the Company would agree to allocate 3% of the vehicle’s value to Pelican Point (see
footnote 2 of the Company’s Reply Comments regarding the appropriate percentage), which would
reduce the depreciation expense proposed by the Company by $374, rather than Staff’s proposed
reduction of $5,270.
Miscellaneous expenses. Staff proposes removing $40,749 from miscellaneous expenses,
based on Staff’s understanding that these expenses were a double-counting of expenses for the
Pelican Point water system in Washington. Staff Comments at 7-8.
There appears to have been a miscommunication on this point. These expenses were
double-counted as to Pelican Point, and therefore need to be included as expenses for Gem State
Water. Stated another way, Gem State Water erroneously charged approximately $80,000 in
certain overhead expenses to the Pelican Point water system. Gem State Water should have
charged approximately half of this—$40,749—to Gem State Water. When it discovered this error,
the Company removed half of the total charge from Pelican Point and moved it to Gem State
Water. The $40,749 included within Gem State Water’s expense does not reflect a charge to Gem
State Water customers for expenses associated with the Washington system; it properly reflects a
charge to Gem State Water customers for expenses associated with the Gem State Water system.
Please see Attachment 4 to these Reply Comments for the transaction-level detail, which shows the
original double-booking to Pelican Point and the reversal of half of the total charge. Details were
provided in the Company’s textual response to Staff’s Production Request No. 55, which is
provided as Attachment 5 to these Reply Comments.
2. Response to Recommendation No. 3 – Rate Base.
Staff proposes to reduce Plant-in-Service by $275,107 and to remove $1,118 from
accumulated depreciation. Staff Comments at 9. From the Company’s perspective, this is a major
COMPANY’S REPLY COMMENTS PAGE 8 OF 19
adjustment: it amounts to over 20% of the net Plant-in-Service. Large inappropriate reductions to
rate base—particularly when combined with a low ROE and a hypothetical capital structure that
does not reflect the actual 100% equity structure of the Company—calls into question the
economic viability of operating or acquiring small water systems within the State. Specific areas
of disagreement are noted below.
Prudency of Capital Projects. Staff proposes removing $182,464 of the capital
investments made since the last rate cases in 2010 for the Bar Circle “S” system and 2013 for the
Spirit Lake East system but before Gem State Water’s acquisition of those systems, based upon
lack of documentation of certain investments. Staff Comments at 9-10. In many instances, prior
owners did not operate the systems as they should have. This includes prior owners’ failure to
retain documentation of certain capital investments. The Company recognizes that prior owners
did not retain documentation that the Company will maintain from this point forward. But the
Company submits that it should not be punished for the mishaps of prior owners.
All that said, after receiving Staff’s Comments, Ms. Abrams-Rayner spent hours contacting
all the pump and drilling contractors in the area, identified the contractors that performed the work
in 2010, 2016 and 2017, and successfully obtained documents, including invoices, that verify and
support the capital investments for the Bar Circle “S” system. These documents are summarized
on the first page of Attachment 6 to these Reply Comments, and the invoices and related
documents are provided in the subsequent pages of Attachment 6 to these Reply Comments. To
explain in a bit more detail, for the Bar Circle “S” system, Staff proposed removing $162,310 (see
Staff Comments at 9-10) due to lack of invoices for investments made before Gem State Water’s
acquisition of that system. Gem State Water has obtained the invoices, included within
COMPANY’S REPLY COMMENTS PAGE 9 OF 19
Attachment 6 to these Reply Comments, that amount to $166,518 invoiced for the well, backup
generator and other related assets.
Despite similar best efforts by Ms. Abrams-Rayner, Gem State Water has not been able to
track down the invoices supporting the Spirit Lake East system investments totaling the $20,155
proposed to be disallowed by Staff (see Staff Comments at 10). For the reasons provided earlier in
this section of its Reply Comments, Gem State Water respectfully asks that it should not be
punished for legacy mistakes.
Gem State submits that all of the investments proposed to be disallowed by Staff are
adequately supported given the unique circumstances of this case, and understands that recovery of
future capital investments will need to be—and will be—supported by documentation consistent
with best practices in the water utility industry.
Company Vehicle. Staff proposes to reduce the price of a Company vehicle by $9,058,
based on three truck prices from Edmunds and Carfax. Staff Comments at 10-11. The Company
does not agree.
First, Staff’s proposal is based upon the initial invoice amount. The final purchase price
included a cash discount of $1,402.6 The Company agrees that the price of the vehicle should be
decreased by this amount.
Second, the cost of the vehicle included an extended warranty and service contract. The
Company submits that these costs (i.e., $2,660 for the service contract and $4,475 for the extended
warranty) are reasonable to protect the value of the asset and not overpay for future services of the
6 This cash discount was offered when the Company picked up the vehicle, which occurred after the Company filed the Application in this case. The final price of the vehicle is noted on the receipt attached as Attachment 7 to these Reply Comments, which was also provided in response to a production request. The receipt also identifies the costs of the extended warranty and the service contract and includes the cash discount of roughly $1,400.
COMPANY’S REPLY COMMENTS PAGE 10 OF 19
truck. The extended warranty and service contract are not reflected in the prices of the vehicles
identified by Staff online.
Third, the online search was not conducted in a way to find comparable prices. The
Company purchased its truck in May 2022. Staff’s online searches appear to have occurred in
October or November 2022.7 The online search appears to have identified vehicles as far away as
Salida, Colorado and Tacoma, Washington, rather than local listings. Staff does not state how
many listings were reviewed, and whether the identified listings reflect the lowest prices, average
prices, or other information that would be needed to truly determine whether the listings can be
used as a reliable indicator of value.
Finally, the listings do not contain sufficient information to identify the condition of the
vehicle. Simply put, three internet listing, conducted six months after the actual transaction, in
different geographical areas, during the volatile used-vehicle market in 2022, do not accurately
reflect the price of the used vehicle that was purchased. The Company paid a fair price for the
vehicle at the time and place it was purchased, using the information known and available to it at
the time. The Company was able to secure a favorable discount on price at the time of purchase
(compared to the initial quote used in the Application) and therefore the amount should only be
adjusted by $1,402 to reflect actual cost.
Additionally, Staff proposes to allocate the reduced price of the truck to Pelican Point and
GSI based on the number of customers of each system. Staff Comments at 11. The Company
7 Staff does not state the date on which the internet searches were completed, but the provided screenshots indicate that the searches occurred in October or November 2022. The screenshot for Truck 1 states that a down payment “was $0
on October 19, 2022.” For Trucks 2 and 3, the graph that purports to show a “price drop” includes October and November 2022. The graphs also show significant price drops in recent months, further supporting the contention that the prices for used vehicles in October or November 2022, using nationwide internet quotes, does not equate to a reasonable price for local vehicles in May 2022.
COMPANY’S REPLY COMMENTS PAGE 11 OF 19
proposes this allocation for expenses, which is appropriate and a common practice in the industry.
However, allocation of capital assets should reflect the use of the capital asset. The vehicle was
purchased to support Gem State Water’s regulated operations. It has been overwhelmingly used
for that purpose and has made only four trips to Pelican Point and is not used for GSI.8 These four
trips were an anomaly that the Company does not expect to be routine in the future. All four trips
were completed by the Gem State Water employee who delivered chlorine to Pelican Point and
read meters while he was there. Chlorine is now being delivered directly to Pelican Point, so these
trips should not be necessary in the future.
That said, it is possible that sporadic trips to Pelican Point for other reasons could occur in
the future. The four trips to Pelican Point would amount to approximately 3% of the truck’s use to
benefit Pelican Point. The Company submits that the price of the vehicle should be allocated to
Gem State Water; however, out of recognition that trips to Pelican Point may sporadically occur,
would not object to allocation of 3% of the total vehicle price, which amounts to $2,615, to Pelican
Point. The Company intends this year to purchase an additional vehicle that will be primarily used
for GSI, which will limit incidental use of the vehicle at issue in this case by GSI or Pelican Point.
Contributions in Aid of Construction (CIAC). Staff proposes adjustments to CIAC of
$243,300, including $173,250 to the Bitterroot/Rickel Water system and $70,050 to Spirit Lake
East system. Staff Comments at 12. The Company disagrees with these adjustments to CIAC and
addresses the Bitterroot/Rickel Water system and Spirit Lake East system below.
8 Please see Confidential Attachment 8 to these Reply Comments for the time-card entries supporting those four trips to Pelican Point.
COMPANY’S REPLY COMMENTS PAGE 12 OF 19
Bitterroot/Rickel Water (CIAC)
The Bitterroot and Rickel Water systems were combined in 2018 under Order No. 34027
and acquired by Gem State Water in April 2020 under Order No. 34616. At the time of the
acquisition, and as reported in the 2020 Annual Report for combined Bitterroot/Rickel Water
system (please see Attachment 9 to these Reply Comments), the Net Utility Plant was $26,147 and
no CIAC was reflected. The net plant has further depreciated to $16,363 since Gem State Water’s
acquisition and represents the plant in the rate case application. Please see Attachment 10 to these
Reply Comments for further details.
Staff proposes that the Commission take the CIAC amounts from the 2018 Annual Report
and apply $173,250 of CIAC against $26,147 of Net Utility Plant (see Staff Comments at 12),
which would result in negative Net Utility Plant of $156,887 for the combined Bitterroot/Rickel
Water system. Staff does not state why it refers to the 2018 Annual Report, which reflects a large
amount of CIAC, rather than the 2020 Annual Report, which reflects none. Because these were
prior to the acquisition, the Company does not have insight into the different amounts in the annual
reports. Although there were CIAC amounts in prior annual reports filed by former owners, Gem
State Water believes that such CIAC amounts should not be reflected in this rate case and, if so
reflected, they should also include a reasonable amortization of the CIAC.
In addition, an adjustment that results in such a large negative rate base, for such a small
system, is unreasonable, punitive, and would have a large negative impact on the Company’s
overall return on this small water system. Under the circumstances, the Company submits that, at
most, it would be prudent and reasonable to offset rate base by the percentage of CIAC to rate
base, or 57%. This would result in net CIAC liability for the Bitterroot and Rickel Water systems
of $9,327.
COMPANY’S REPLY COMMENTS PAGE 13 OF 19
Spirit Lake East (CIAC)
Gem State Water acquired the Spirit Lake East system in July 2019 under Order No.
34372. The Net Plant in Service at the time of acquisition was $183,444. Staff proposes to impute
$70,050 in CIAC against Net Plant in Service. Staff Comments at 12. Spirit Lake East’s annual
reports from 1995 to 2014 show $70,050 in CIAC. However, the CIAC was removed in the 2015
Annual Report, as a result of the prior bookkeeper’s conversations with Staff and due to the lack of
documentation or explanation in that amount of CIAC. As with the combined Bitterroot/Rickel
Water systems, Staff proposes to take this CIAC amount from historical annual reports, without
amortizing it, and without explaining why it is appropriate to use the annual reports from the 1995-
2014 timeframe rather than the annual reports from the 2015-2022 timeframe. Without some
indication as to the accuracy of the CIAC amount, or indication that the 1995-2014 annual reports
are more accurate than the recent ones, the Company submits that it is not appropriate to adopt
$70,050 as the CIAC for the Spirit Lake East system’s current ratemaking purposes.
In addition, imputing the $70,050 against the Net Plant in Service would reduce Rate Base
by nearly 40% for that system. This would significantly impact the economics of that system.
At the very least, even if the Commission were to adopt CIAC from 1995-2014 annual
reports, the CIAC amounts need to be amortized. Based on the annual reports, it appears that the
CIAC amounts have not been amortized since 1995. If the Commission is inclined to include
some CIAC amount to offset net plant in service, the CIAC amount needs to be amortized.
Amortization calculations are attached as Attachment 10 to these Reply Comments and result in a
CIAC adjustment of $16,160 for the Spirit Lake East system.
COMPANY’S REPLY COMMENTS PAGE 14 OF 19
Summary of CIAC
The Company’s position is to reject the Staff CIAC recommendations. As an alternative to
rejecting these positions, the Company would request imputing a reasonable level of accumulated
amortization of the CIAC to reflect amortization as far back as the Company has been able to
document the CIAC. Therefore, the Company would apply a CIAC of $173,250 for the
Bitterroot/Rickel system, partially offset by $163,923 accumulated amortization, for a net Rate
Base impact of $7,036, and would apply a CIAC of $70,050 for the Spirit Lake East system,
partially offset by $53,890 of accumulated amortization, for a net Rate Base impact of $16,160.
The Company would accept the annual amortization of $6,889 of Other Amortization Expense if
amortization of CIAC is imputed for the systems.
3. Response to Recommendation No. 4 – Rate of Return.
Staff proposes a range of return on equity (ROE) from 4.75% to 9.89% and recommends an
ROE of 9.5%.9 Staff further recommends applying this ROE to the hypothetical capital structure
proposed by the Company, which is 45% debt/55% equity. (The Company is, in fact, 100%
equity.) This would result in a weighted average cost of capital of 7.41%.
The Company disagrees with the proposed ROE and the methodology used to derive it.
Much can be said of Staff’s analysis. Gem State Water is particularly concerned with Staff’s
reference to the ROE that Gem State Water’s affiliated out-of-state natural gas utility, Northwest
Natural Gas Company, dba NW Natural (“NW Natural”), settled on in its last two Oregon gas rate
cases. It is not clear to Gem State Water that Oregon gas rate cases provide an appropriate guide
for an ROE authorized by this Commission.
9 Staff recommended an ROE of 9.9% in the most recent rate case for Falls Water Company. See Staff Comments in Case No. FLS-W-20-03 at p. 10 (filed June 30, 2020). This is somewhat puzzling—Gem State Water is significantly smaller than Falls Water Company, which would support a higher ROE rather than a lower one.
COMPANY’S REPLY COMMENTS PAGE 15 OF 19
Second, NW Natural is a large natural gas company. The two cases cited by Staff resolved
natural gas rate cases. And the ROE for those cases was only one component of those large natural
gas rate cases. The ROE found in a settlement of an Oregon rate case, for a large natural gas
company, is not a proper guide for the ROE of a small water company in Idaho. Rather, Gem
State Water should—and, arguably, must—be treated similar to other small water companies in
Idaho.10
Third, the Commission recently decided that it was not proper to base the ROE for an Idaho
small water company on ROEs for out-of-state natural gas utilities. “The appropriate point of
comparison to determine the authorized ROE for smaller water companies is first to other water
companies, while also acknowledging Falls Water’s operating and financial benefits from its
parent company.” Order No. 34925 at 5.
The Commission has consistently determined that ROEs of between 11% and 12% are
appropriate for small water companies in Idaho. See Case No. GPW-W-017-01, Order No. 33910
at 8 (Oct. 13, 2017) (approving 11% return on equity on the basis that it “reflects a fair return in
line with similar utilities.”); Case No. DIA-W-15-01, Order No. 33578 at 11 (Aug. 29, 2016) (“We
find the agreed 12% rate of return to be fair and just and consistent with that which we have
allowed in other small water company cases, and thus approve it.”); Case No. SPL-W-13-01,
Order No. 32904 at 8 (Oct. 11, 2013) (“The Commission finds that a 12% return on equity and
11.42% overall rate of return is fair, just and reasonable return for the Company. This ruling is
entirely consistent with past Commission precedent for small water companies and particularly for
10 The Commission cannot discriminate against utilities based on the ownership status of their parent companies. See In re PacifiCorp, Case NO. PAC-E-99-1, Order No. 28213 (1999) (noting that the U.S. Constitution’s Commerce Clause and treaties “prohibit discriminat[ion] against service providers who are citizens of other states or foreign countries”).
COMPANY’S REPLY COMMENTS PAGE 16 OF 19
water systems comparable to Spirit Lake.” (citing Case TRH-W-10-01, Order No. 32152; BCS-W-
09-02, Order No. 30970; and Case No. CCH-W-12-01, Order No. 32662)); Case No. TRH-W-13-
01, Order No. 32958 at 4, 10 (Dec. 21, 2013) (authorizing 12% return on equity for small water
company, based in part on Staff’s recommendation that “the 12% return on equity (ROE) is
consistent with the Commission-authorized ROE for many small water companies”).
The Commission has also recognized the benefits of NW Natural Water’s acquisition of
small water companies: “The business model utilized by NW Natural Water Company when
acquiring small water companies in Idaho is a model we want to encourage for providing safe and
reliable service to water customers at reasonable rates. We find that a 10.2% ROE appropriately
balances this smaller water utility’s need to earn a fair return on its property used and useful in
providing water service while maintaining fair rates for customers.” Order No. 34925 at 5.
The Company also notes that Veolia Water Idaho (“Veolia Water”) filed its most recent
rate case on September 30, 2022, VEO-W-22-02, and its expert consultant is recommending a
10.8% ROE. See Direct Testimony of Harold Walker, III at p. 36, Case No VEO-W-22-02. Gem
State Water’s requested ROE of 10.2% is within the range of reasonableness, especially given its
smaller size compared with Veolia Water. Gem State Water could have hired an expert ROE
consultant for this rate case, but decided that it was more in the public interest to not incur such
rate case expense to be amortized over a period of time and recovered from customers. Staff states
that Gem State Water’s calculation of ROE is “limited.” Staff Comments at p. 13. It is true that
Gem State Water did not hire an outside consultant to provide testimony on ROE. This is
consistent with Gem State Water’s attention to restraining costs. The Commission has not
indicated that hiring a consultant for ROE is required for small water companies, and it does not
COMPANY’S REPLY COMMENTS PAGE 17 OF 19
appear that Staff has done so in other cases. Gem State Water submits that it has properly
supported its request for ROE based upon Order No. 34925.
One final note: Staff states that the proposed hypothetical capital structure “does not
justify special treatment in the ROE calculation.” Staff Comments at 13. Gem State Water does
not suggest as much. The Commission’s orders with respect to small water companies would
suggest that an ROE of 11-12% is warranted, and that this return could be based upon the true
capital structure of 100% equity. The Company raises the hypothetical capital structure simply to
note that the Company’s request—10.2% ROE with a hypothetical capital structure—is
reasonable, and indeed quite modest. This is not determinative, but it is relevant.
Gem State Water respectfully submits that the approach taken by the Commission in Order
No. 34925 should be taken here, and that the ROE for Gem State Water should be 10.2%. A
10.2% ROE is fair to both the Company’s investors and its customers and will enable the
Company to successfully operate and attract capital. Gem State Water believes that, if anything, it
should receive a slightly higher ROE due to Gem State Water’s smaller size and upward
movement in interest rates in recent months and years. However, Gem State Water would not
object to an ROE of 10.2%, and to applying this ROE to the proposed hypothetical capital
structure.
SUMMARY
Below is a table summarizing Staff’s proposals and the Company responses for the convenience of
the Commission. The numbers reflected in the Staff Adj refer to (reductions) or additions to the
Application; the numbers in the Company Response reflect the agreement with (reductions) or
additions, “TBD” for flow through adjustments that depend on other contested positions, or blank
for proposing to maintain the Company’s original position in the Application.
COMPANY’S REPLY COMMENTS PAGE 18 OF 19
CONCLUSION
For these reasons, Gem State respectfully requests that the Commission approve an
increase to rates and charges consistent with the Company’s costs as set forth above.
DATED January 31, 2023.
Gem State Water Company
By Leslie Abrams-Rayner General Manager Eric Nelsen Senior Regulatory Attorney NW Natural Representing Gem State Water Company
Note Item Staff Adj
Company
Response Comment
1 Salary Overtime (6,255) (6,255)
2 Employee Time (lower hours and reduced FTE)(27,169) (3,653)
3 Insurance Expense (related to reduced FTE)(8,568) -
4 Workers Comp (1,660) (884)
5 401(k) Match (4,685) (478)
6 Geographic Information System ("GIS")(7,657) (7,657)
7 Payroll Tax (3,028) TBD Flow through of other adjustments
8 Lease (27,408) (27,408)
9 Water Testing 3,741 3,741
10 Depreciation (align with NARUC rates)(40,230) (40,230)
11 Depreciation (move from Plant in Service to M&S)(2,230) (2,230)
12 Depreciation (Vehicle cost)(5,270) (374)
13 Depreciation (Annual Amortization)(6,889) - Note CIAC section for alternative position
14 Miscellaneous Expense (40,749) -
15 Gross Revenue Conversion Factor (1,066) TBD Flow through of other adjustments
16 Rate Base (Prudency of Capital Projects)(182,466) (20,155)
17 Rate Base (Company Vehicle)(36,888) (2,615)
18 Rate Base ("CIAC")(243,300) - Note CIAC section for alternative position
19 Rate Base (Working Capital)(15,051) TBD Flow through of other adjustments
20 ROE (3,684) TBD Flow through of other adjustments
COMPANY’S REPLY COMMENTS PAGE 19 OF 19
CERTIFICATE OF SERVICE
I certify that on January 31, 2023, a true and correct copy of the foregoing was served upon
all parties of record in this proceeding via electronic mail as indicated below: Commission Staff Via Electronic Mail
Idaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg. 8, Suite 201-A Boise, ID 83714
/s/
Eric W. Nelsen
Rates & Regulatory Affairs
GSW-W-22-01
Gem State Water Company, LLC Application for an Order Authorizing an Increase in its
Rates and Charges for Water Service
Data Request Response
Request No.: GSW-W-22-01 IPUC DR 31
31.Please answer the following questions regarding irrigation meters:
a.Who installs the irrigation meters (original connection)?
b.Who maintains the irrigation meters?
c.Who tests to insure accurate readings?
d.What months are they in-use?
Response:
a.There are no records as to whom initially installed the irrigation meters (original
connection). Gem State Water is requiring the new connections to purchase meters
and the Company installs them. Meter loops and infrastructure were preinstalled by
the Company at Diamond Bar.
b.The irrigation meters are maintained by Gem State Water staff.
c.The irrigation meters are tested by Gem State Water staff to ensure accuracy.
d.The irrigation meters are installed and activated April 15th and turned off/removed
October 15th.
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 1 / Page 1 of 1
CONFIDENTIAL
ATTACHMENT NO. 2 TO THE COMPANY’S
REPLY TO THE COMMENTS OF THE
COMMISSION STAFF
ATTACHMENT FILED UNDER SEPARATE COVER
CASE NO. GSW-W-22-01
CONFIDENTIAL
ATTACHMENT NO. 3 TO THE COMPANY’S
REPLY TO THE COMMENTS OF THE
COMMISSION STAFF
ATTACHMENT FILED UNDER SEPARATE COVER
CASE NO. GSW-W-22-01
Gem State Water Company, Company Response to Staff Report, Attachment 4
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 4 / Page 1 of 1
Rates & Regulatory Affairs
GSW-W-22-01
Gem State Water Company, LLC Application for an Order Authorizing an Increase in its
Rates and Charges for Water Service
Data Request Response
Request No.: GSW-W-22-01 IPUC DR 55
55. Please provide supporting documentation for every expense booked to
the miscellaneous expense account for the test year. Please include invoices,
workpapers, journal entries, and any additional documentation to support these
expenses.
Response:
The transaction level details of the Account 675 Miscellaneous Expense are provided in
GSW-W-22-01 IPUC DR 55 Attachment 1.
Account Amount Type Description
699 Overhead
Allocation
$40,749.32 Journal
Entry
Allocation of overhead costs to
Pelican Point (PP) was
inadvertently recorded twice. See
GSW-W-22-01 IPUC DR 55
Attachment 2 (first charge is
shown on rows 4-67 and the
duplicate is shown on rows 70 –
133). The duplicate charge was
then reversed against account 699
instead of all the credits in the
journal entry.
Accounting
Adjustment
($6,538.28) Deposit Largely offset from Acct. 426
below
620.82 Bank &
Vendor Fees
$7,080.36 Invoice & JE Bank, merchant services fees, and
vendor fees net of allocation to
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 5 / Page 1 of 2
GSW-W-22-01 IPUC DR 55
NWN Response
Page 2 of 2
Pelican Point and Gem State
Infrastructure
426
Uncategorized
$7,729.91 Invoice & JE Offset to adjustment above and
emergency generator set rental for
storm booked to uncategorized
expense.
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 5 / Page 2 of 2
Invoices
Recon of billings to the assets:
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 1 of 17
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 2 of 17
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 3 of 17
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 4 of 17
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 5 of 17
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 6 of 17
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 7 of 17
We are very thankful for your business and would appreciate a review on Google
54399 N. Old US Hwy 95
Athol, ID 83801
(208) 687-0798
info@horsleydrilling.com
www.horsleydrilling.com
I
B
Robert Turnipseed
Double T Estates, LLC
PO Box 1870
Hayden, ID 83835
S
Bar Circle "S" Water System
N. Circle "S" Trail
Rathdrum, ID 83858
I D T D E
2233 03/17/2016 $0.00 03/17/2016
03/17/2016
DESCRIPTION QTY/#OF
FEET
RATE/PER
FOOT
AMOUNT
0.00
14" Steel Casing Installed for Surface Seal 65 110.00 7,150.00
65' Surface Seal 1 3,100.00 3,100.00
10" Casing Installed 340 88.00 29,920.00
20' Stainless Steel Sand Screen, K-Packer, Head Pipe, Tail Pipe and Pulling
back of the 10" Steel Casing.
1 5,100.00 5,100.00
Idaho State Permit Tag # D0069915 1 200.00 200.00
PAYMENT 45,470.00
BALANCE DUE
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 8 of 17
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 9 of 17
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 10 of 17
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 11 of 17
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 12 of 17
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 13 of 17
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 14 of 17
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 15 of 17
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 16 of 17
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 6 / Page 17 of 17
Rates & Regulatory Affairs
GSW-W-22-01
Gem State Water Company, LLC Application for an Order Authorizing an Increase in its
Rates and Charges for Water Service
Data Request Response
Request No.: GSW-W-22-01 IPUC DR 62
62.Please provide supporting documentation for the truck purchased in 2022. Please
include in your response a copy of the invoice, the year, make and model, mileage, and
fuel type. Also include the intended use of the asset, estimated yearly mileage, and
primary users. Please include any cost benefit analysis for the truck.
Response:
See GSW-W-22-01 IPUC DR 62 Attachment 1 for the invoice for the 2022 truck
purchase in the amount of $85,746.94. The original estimate of $87,149.64 used in the
application is included as GSW-W-22-01 IPUC DR 62 Attachment 2.
The truck is diesel fuel and a 2019 Ford F-350 with 36,095 miles.
The considerations that went into the decision to purchase the truck were provided in
response to GSW-W-22-01 IPUC DR 3 and reflect the management decision to own the
utility truck rather than rely on employee reimbursements.
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 1 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 2 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 3 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 4 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 5 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 6 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 7 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 8 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 9 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 10 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 11 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 12 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 13 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 14 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 15 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 16 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 17 of 19
GSW-W-22-01 Gem State Water Reply Comments Attachment 7 / Page 18 of 19
Date:05/24/2022 9:58 AM
Salesperson: DanielForslofBradHathawaDanielForslofBradHathawaDanielForslofBradHathawaDanielForslofBradHathawa
Manager: PaulKloe ferPaulKloeferPaulKloeferPaulKloefer
FOR INTERNAL USE ONLY
BUSINESS NAME GemStateWaterGemStateWaterGemStateWaterGemStateWater Home Phone: (208 929-1045208929-1045208929-1045208929-1045
CONTACT LeslieandColeRa nerLeslieandColeRanerLeslieandColeRanerLeslieandColeRaner
Address :
719N7THST719N7THST719N7THST719N7THST
COEURDALENE,ID 83814-3034COEURDALENE,ID 83814-3034COEURDALENE,ID 83814-3034COEURDALENE,ID 83814-3034
KOOTENAICOKOOTENAICOKOOTENAICOKOOTENAICO
Work Phone: (208 667-0726208667-0726208667-0726208667-0726
E-Mail :leslie emstate-water.comleslieemstate-water.comleslieemstate-water.comleslieemstate-water.com Cell Phone: (208 929-1045208929-1045208929-1045208929-1045
VEHICLE
Stock # : 158091158091158091158091 New / Used :VIN : 1FT8W3DT1KEG172431FT8W3DT1KEG172431FT8W3DT1KEG172431FT8W3DT1KEG17243 Mileage : 35977359773597735977
Vehicle : 2019FordF-3502019FordF-3502019FordF-3502019FordF-350 Color : SILVERSILVERSILVERSILVER
Type : XL4x4SDCrewXL4x4SDCrewXL4x4SDCrewXL4x4SDCrew W3DW3DW3DW3D
TRADE IN
Payoff :VIN :Mileage :
Vehicle : Color :
Type :
Selling Price 74,995.00
COMMERCIAL WARRANTY 5 YR 5,495.00
COMMERCIAL MAINT 5 YR 1,935.00
Total Purchase 82,425.00
Trade Allowance
Trade Difference
Doc Fee 199.00
Tax 4,511.64
Non Tax Fees 14.00
Trade Payoff
Cash Deposit
Balance 87,149.64
Customer Approval: Management Approval:
By signing this authorization form, you certify that the above personal information is correct and accurate, and authorize the release of credit and
employment information. By signing above, I provide to the dealership and its affiliates consent to communicate with me about my vehicle or any
future vehicles using electronic, verbal and written communications including but not limited to eMail, text messaging, SMS, phone calls and direct
mail. Terms and Conditions subject to credit approval. For Information Only. This is not an offer or contract for sale.
GSW-W-22-01 Gem State Water Reply Comments
Attachment 7 / Page 19 of 19
CONFIDENTIAL
ATTACHMENT NO. 8 TO THE COMPANY’S
REPLY TO THE COMMENTS OF THE
COMMISSION STAFF
ATTACHMENT FILED UNDER SEPARATE COVER
CASE NO. GSW-W-22-01
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 9 / Page 1 of 1
Staffs Schedule
Company's 2021
Last Original Booked Staff Adj. Accum. CIAC Amort. Period Amort. Expense Years of Amort. Accum. Net CIAC
Average Rate Case Contributions CIAC to CIAC Amort. in years Schedule Since rate case Amort.12/31/2022
Troy Hoffman (12,859) (9,307) ‐‐35 367 12,859 ‐
2011 SLE (70,050) ‐(70,050) ‐35 2,001 10 20,014 (50,036) (50,036)
2001 2005/1997 BR/RW (173,250) ‐(173,250) 15,019 35 4,950 20 99,000 (74,250) (16,363)
(256,159) (9,307) (243,300) 15,019 7,319 131,873 (124,286) (66,399)
Tracking Back CIAC to oldest Annual Report we have:
1994 SLE ‐ 1994 Annual Report (64,850) 35 1,853 27 50,027 (14,823) 27.3%
1995 SLE ‐ 1995 Annual Report Additions (5,200) 35 149 26 3,863 (1,337)
SLE ‐ 1995 Annual Report Total (70,050) 35 2,001 53,890 (16,160)
Spirit Lake East & Lynnwood
7/31/19 7/31/19 2021 Proposed Staffs Adjusted Maximum Adjusted
Spirit Lake East Lynnwood Combined Test Year Staff Adj.Rate Base CIAC Adj Acquired Rate Base
Day 1:
Plant in Service 1,143,905 123,815 1,267,719 1,272,651 1,272,651 1,272,651
Accum. Deprec.(960,460) (77,255) (1,037,715) (1,072,725) (1,072,725) (1,072,725)
Net PP&E 183,444 46,559 230,004 199,926 ‐199,926 ‐ 199,926
CIAC ‐‐‐(70,050) (70,050) (70,050) (70,050)
Accum. Amort. CIAC ‐‐‐‐ 53,890 53,890
Net Plant in Service 183,444 46,559 230,004 199,926 (70,050) 129,876 (16,160) 183,766
Bitterroot & Happy Valley
7/31/19 7/31/19 2021 Proposed % of Staffs Adjusted CIAC Adjusted
Bitterroot Happy Valley Combined Test Year Staff Adj. Gross Plant Rate Base Adjustment Acquired Rate Base
Day 1:
Plant in Service 289,771 11,564 301,335 299,238 299,238 299,238
Accum. Deprec.(263,624) (11,565) (275,189) (282,875) (282,875) (282,875)
Net PP&E 26,147 (0) 26,147 16,363 ‐16,363 ‐ 16,363
CIAC ‐(173,250) ‐57% (173,250) (173,250) (173,250)
Accum. Amort. CIAC ‐‐ 163,923 163,923
Net Plant in Service 26,147 (0) 26,147 16,363 (173,250) (156,887) (9,327) ‐57%7,036
Combined
Day 1:
Plant in Service 1,433,675 135,379 1,569,054 1,571,889 ‐1,571,889 ‐ 1,571,889
Accum. Deprec.(1,224,084) (88,820) (1,312,904) (1,355,600) ‐(1,355,600) ‐ (1,355,600)
Net PP&E 209,591 46,559 256,150 216,289 ‐216,289 ‐ 216,289
CIAC ‐‐‐‐(243,300) (243,300) (243,300) (243,300)
Accum. Amort. CIAC ‐‐‐‐‐‐ 217,813 217,813
Net Plant in Service 209,591 46,559 256,150 216,289 (243,300) (27,011) (25,487) 190,802
In our diligence we looked at the previous few years of Annual Report filings with the IPUC. In those filings there was no CIAC listed, so none was recorded when we acquired these systems. Staff's proposed
adjustments go back to the last filed rate case CIAC position, gross. The schedule also reflects that these balances should be amortized over 35 years. The CIAC pre‐dates our ownership, but we did as much research as
we could to try to get a listing of the assets that were contributed as CIAC. This would allow us to ascertain if the asset is still part of rate base, or if it has been disposed of as well as aligning the amortization of the
CIAC Liability with the PP&E Asset. We have not been able track this listing down. The oldest annual report we have been able to track back to is 1994 where the system had $64,850 of CIAC and an additional $5,200
added in 2015 that together tie to Staff's proposed adjustment. We are not sure how much further the origination of all of the CIAC goes, but believe we should at a minimum amortize the balances from these start
dates. In doing so Staff's adjustment goes from $70,050 down to $16,160. We feel there is a very real chance this should have been amortized even further if we had documentation going back further, but
unfortunately do not have support to back this up, but feel like any adjustment greater than $16,160 for Spirit Lake & Lynnwood CIAC would be improper.
As previously outlined, for our purchase diligence we looked at the previous few years of Annual Report filings with the IPUC. In those filings there was no CIAC listed, so none was recorded when we acquired these
systems. Staff's proposed adjustments go back to the last filed rate case CIAC position, gross. The schedule also reflects that these balances should be amortized over 35 years. The CIAC pre‐dates our ownership, but
we did as much research as we could to try to get a listing of the assets that were contributed as CIAC. This would allow us to ascertain if the asset is still part of rate base, or if it has been disposed of as well as aligning
the amortization of the CIAC Liability with the PP&E Asset. We have not been able track this listing down. In the case of Bitterroot and Happy Valley, the initial book value recognized when we purchased the systems
was only $26,147. We have then amortized that balance to $16,363 for our test year filing of $16,363. If we used Staff's adjustment we would have negative rate base of $156,887, which would be unreasonable. We
would propose that if we are to recognize CIAC, since we don't have supporting schedules that we evaluate the CIAC balance as a proportion of the Gross Plant in Service [CIAC $173,250 / Plant $301,335 = 57%]. If we
then extrapolate and apply that percentage to our filed rate base acquired, it would show that the net CIAC liability should be $9,327.
A
B
C
D
D
C
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 10 / Page 1 of 2
Pictures of hard copies of annual reports found for Spirit Lake East:
A
B
GSW-W-22-01 Gem State Water Reply to Staff Comments Attachment 10 / Page 2 of 2