20231031Final_Order_No_35978.pdf

ORDER NO. 35978 1

Office of the Secretary
Service Date
October 31, 2023
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF KOOTENAI HEIGHTS
WATER SYSYEMS’ APPLICATION FOR
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR WATER SERVICE IN
THE STATE OF IDAHO
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CASE NO. KHW-W-23-01

ORDER NO. 35978

On March 28, 2023, Kootenai Heights Water System (“Company”) applied to the Idaho
Public Utilities Commission (“Commission”) for authorization to increase its rates and charges for
water service (“Application”). The Company requested a May 1, 2023, effective date. The
Company also filed a supplemental exhibit on March 29, 2023.
On April 14, 2023, the Commission issued a Notice of Application, Notice of Intervention
Deadline, and Notice of Suspension of Proposed Effective Date. Order No. 35741. No parties
intervened.
On August 2, 2023, the Commission issued a Notice of Virtual Public Workshop and
Notice of Modified Procedure setting deadlines for public and Commission Staff (“Staff”)
comments and the Company’s reply. Order No. 35871. Staff and one member of the public filed
the only comments in this case.
The Commission issued a Notice of Customer Hearing scheduling a customer hearing on
October 18, 2023. Order No. 35953. The Commission held a public hearing on October 18, 2023,
in Sandpoint, Idaho where three members of the public attended but chose not to testify.
Having reviewed the record in this case, the Commission issues this Order authorizing the
Company’s rate increase as discussed below.
APPLICATION
The Company is a water corporation serving 11 residential customers in and around the
city of Kootenai in Bonner County, Idaho.
The Company requested that its residential monthly flat rate increase from $38.50 to
$57.65—a 49.74% increase. The Company stated that this increase was necessary to cover the
expenses of the system to ensure safe and reliable water service.
The Company filed a spreadsheet with supporting information on March 29, 2023.

ORDER NO. 35978 2

COMMENTS
a. Public Comment
On June 1, 2023, the Commission received one comment. The commentor opposed the
proposed rate increase. The comment outlined concerns about the underlying costs that would
justify the rate increase and argued that the information provided did not justify the Company’s
proposal.
b. Staff’s Comment
i. Staff Analysis
Staff reviewed the materials provided by the Company and recommended a revenue
increase of $2,442, or 47.35%, for a total revenue requirement of $7,600. This is based on a Return
on Equity (“ROE”) of 11% applied to a $851 rate base.
Staff stated that the system had 11 customers with an 8-inch well. Staff noted that the most
recent Sanitary Survey found the Company’s system had no significant deficiencies and was in
compliance with the Idaho Rules for Public Drinking Water Systems. Staff Comments at 2.1
Customers are billed on a flat rate as the system is unmetered. The Company has three operating
expense accounts: Contract Services Professional, Purchased Power, and Miscellaneous.
The Company contracts with a third party, Water Systems Management, Inc.
(“Management Company”), to manage the system. The Company incurred $5,819 in total Contract
Services Professional Expenses from the Management Company in the 2022 test year. Staff
reviewed these expenses and believed that they were prudently incurred.
The Company listed $788 in Purchased Power Expenses in the 2022 test year. Staff
reviewed the Company’s electricity invoices for 2020, 2021, and 2022 and confirmed that all
Purchased Power Expenses for the 2022 test year were accurate.
Staff noted that the $200 Miscellaneous expenses for the Company arose primarily from
purchasing office supplies. Staff stated that these expenses were reasonable and should be
recoverable.
ii. Rate Base
The Company has not added any new plant in service to its rate base since its last rate case
in 2007. Accordingly, the Company’s Application listed a “Net Plant in Service of $26,327 and
Working Capital of $851.” Staff Comments at 3. The Company’s “Net Plant in Service balance

1 See IDAPA 58.01.08.000 et seq.
ORDER NO. 35978 3

includes an offset for Contributions in Aid of Construction (“CIAC”) received from customer
hookup fees.” Staff Comments at 3-4. Staff reviewed these items and believed they were calculated
correctly. The Company’s working capital was calculated using the 1/8 method which is used by
other water utilities in the industry. Staff believed that the Company’s calculations were accurate.
iii. Rate of Return
Staff noted that the Company requested a 12% ROE. Staff recommended a 11% ROE to
be consistent with the Commission’s approved ROE in similarly situated small water rate cases.
See Order Nos. 33658 and 33910.
iv. Rate Design
The monthly rate is reached by dividing the annual revenue requirement by 11 (the number
of customers) and then again by 12 (to account for each month in a year). Staff proposed a monthly
flat rate of $57.58 using this method—which was only 7 cents less than the Company’s proposed
monthly flat rate of $57.65.
v. Customer Relations
Staff noted that it was not apparent from the Application that the Company had issued a
customer notice or press release. Staff explained that the Company later provided information
indicating it had complied with Commission Rule of Procedure 125 regarding customer notice.
IDAPA 31.01.01.125.
vi. Company Tariff
Staff discussed the Company’s current rate as well as the proposed rate discussed above
for Schedule 1. Regarding fees for late payment dealt with in Schedule 2, Staff suggested that the
Company replace its current $10.00 flat late payment fee with a Late Payment Charge equal to 1%
of the unpaid balance (to be accounted for on the next billing statement). Staff noted that this
treatment was consistent with late fees previously approved by the Commission.
vii. Staff Recommendations
Staff recommended the Commission approve the Company charging a monthly flat rate of
$57.58 based upon an annual revenue requirement of $7,600, a rate base of $851, and a ROE of
11%.
COMMISSION DISCUSSION AND FINDINGS
The Commission has jurisdiction over the Company and the issues in this case under Title
61 of the Idaho Code. Specifically, the Commission regulates “public utilities,” including “water
ORDER NO. 35978 4

corporations” that serve the public or some portion thereof for compensation. See Idaho Code §§
61-125, -129, and -501. The Commission, upon finding that the rates charged by a public utility
are “. . .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.
The Commission has reviewed the record and finds that the Company’s current monthly
rate of $38.50 is insufficient to meet its obligations to maintain safe and reliable service going
forward. Accordingly, the Commission finds that increasing the monthly flat rate to $57.58 with
an accompanying 11% ROE is fair, just, and reasonable. The Commission notes that Staff’s
recommendation was reached using practices and methods that have been consistently utilized by
Staff in other rate cases for small water companies. The Commission also finds that the Company
updating Rate Schedule No. 2 so that the fee for late payment is 1% of the unpaid balance (rather
than a flat fee of $10.00) is fair, just, and reasonable.
One public comment was filed at the onset of this case. The Commission finds that the data
and analysis provided by Staff adequately address the concerns voiced in that comment and justify
the increase that Staff has recommended. The Commission also notes that it received no written
comments or public testimony that opposed Staff’s recommendations during the respective
comment period or public hearing for this matter. The Commission finds that the Company’s
customers were sufficiently notified of the Company’s proposed rate increase and that the
Company complied with Rule of Procedure 125. IDAPA 31.01.01.125. Staff has noted that it is
willing to assist the Company in filing updated tariffs. The Commission approves the Company’s
rate increase as proposed by Staff for the reasons discussed above.
ORDER
IT IS HEREBY ORDERED that the Company is approved to charge a monthly flat rate of
$57.58 based upon an annual revenue requirement of $7,600, a rate base of $851, and a ROE of
11% effective November 1, 2023.
IT IS FURTHER ORDERED that the Company shall charge a fee equal to 1% of the unpaid
balance for late payments based upon an updated Rate Schedule No. 2 effective November 1, 2023.
IT IS FURTHER ORDERED that the Company shall file updated tariffs compliant with
the requirements discussed above within 28 days of the issuance of this Order.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date upon this Order regarding any
ORDER NO. 35978 5

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.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 31st day of
October 2023.

ERIC ANDERSON, PRESIDENT

JOHN R. HAMMOND JR., COMMISSIONER

EDWARD LODGE, COMMISSIONER
ATTEST:

Jan Noriyuki
Commission Secretary

I:\Legal\WATER\KHW-W-23-01 rates\orders\KHWW2301_Final_md.docx