Case No. UWI-W-04-04, Order No. 29871

September 20, 2005

Contact: Gene Fadness (208) 334-0339




Commission denies most of United Water petition


Boise – The Idaho Public Utilities Commission today denied most of United Water’s petition to reconsider its Aug. 3 decision allowing the company a 7.68 percent rate increase. When United Water originally filed its case in November 2004, it sought a 22 percent increase, though it later revised that down to 18 percent.


However, today’s order does allow two adjustments related to revenue from a water rights lease and a carrying charge calculation that, when combined, increase United Water’s originally approved $2.43 million revenue requirement by another $116,090. That brings the total rate increase up from 7.68 percent to 8.08 percent.


The commission’s modification will add about 20 cents per month to the average United Water customer’s bill. The original 7.68 percent increase, which was effective Aug. 2, increased an average customer’s bill by about $2.07 per month.


United Water Idaho, Inc., serves about 75,400 customers in Ada and Canyon counties.


The commission declined to reconsider the major issue in the case, which was the different methods used by commission staff and United Water to determine rate base, the utility’s capital investment from which rates are calculated. In its petition for reconsideration, United Water claimed the commission’s use of an averaged rate base over 13 months rather than a year-end rate base, which the company advocates, results in a rate base that is $13.3 million less than the commission allowed. The company claims the allowed rate base is insufficient for the company to earn up to its allowed rate of return. 


The company used a year-end rate base calculation, including all new plant added during or after the rate case’s “test year” as if the new plant was in use during the entire year. When determining rates for regulated utilities, the commission uses a test year, a 12-month period intended to accurately reflect expenses and revenues for future years during which the new rates are effective. Ideally, abnormal and one-time expenses and revenues should not be included in a test year.


United Water filed its case with a test year ending July 31, 2004, and also proposed to include investments that occurred after the end of the test year through May 31, 2005. Commission staff proposed, and the commission accepted with some modification, a 13-month average methodology, that would more accurately reflect a typical month’s expenses and revenue. The commission said that including plant investment not yet completed accounts for only the expenses the company incurs – which increase rates for customers – while not counting the increased revenue and decreased expense that new plant provides, which can decrease rates for customers. Further, the commission said, plant investment has to be “known and measurable,” before it can be recovered from customers. Including plant investment too far into the future makes it difficult to accurately measure those expenses.


The commission did allow investment for the recently completed $28 million Columbia Water Treatment Plant and associated facilities in the test year as if it had been in place the entire year. However, it allowed plant investment made only through March 31, 2005, as opposed to the company’s requested May 31 and use of the average method reduces its cost. “It is unfair to ratepayers to include the full costs of new plant without also including some adjustments to revenue or expenses, recognizing the plant will provide some benefit to customers along with its costs,” the commission said.


The commission granted the company’s request to reconsider its calculation or the revenue the company would earn from its decision to lease its Initial Butte water rights. The commission also said it erred in not including a 1 percent carrying charge in the final calculations of revenue requirement. Together, those adjustments result in the additional $116,090 in revenue requirement allowed the company.


The commission denied reconsideration on several other matters regarding costs related to pension expense, an early retirement plan, an enhanced severance package, water quality testing, rate case expense, deferred power costs and business insurance expense.


The adjusted rate increase of 8.08 percent becomes effective three days after the company files updated tariffs with the commission.


The commission’s order is final. Aggrieved parties can appeal the order to the Idaho Supreme Court.


A full text of the commission’s order, along with other documents related to this case, are available on the commission’s Web site at Click on “File Room” and then on “Water Cases” and scroll down to Case No. UWI-W-04-04.