docs.cpuc.ca.gov€¦ · web viewtsvu-g, a class d water utility, has requested authority under...

Date of Issuance 1/14/2011

DWA/RSK/PTL/MML/jlj

DIVISION OF WATER AND AUDITS RESOLUTION NO. W-4860

Water and Sewer Advisory Branch January 13, 2011

R E S O L U T I O N

(RES. W-4860), TAHOE SWISS VILLAGE UTILITIES, INC. - GLENRIDGE DISTRICT (TSVU-G). ORDER AUTHORIZING A GENERAL RATE INCREASE (GRC), PRODUCING ADDITIONAL ANNUAL REVENUE OF $2,412 OR 9.54% FOR TEST YEAR (TY) 2010.

SUMMARY

By Advice Letter (AL) 19, filed on April 28, 2010, TSVU-G seeks to increase its rates for water service to recover increased operating expenses and earn an adequate return on its plant investment. For TY 2010, this Resolution grants an increase in gross annual revenues of $2,412 or 9.54%, over current rates, which is estimated to provide a rate of return of 13.00%. BACKGROUND

TSVU-G, a Class D water utility, has requested authority under Rule 7.6.2 of General Order 96-B (GO 96-B), Water Industry Rule 7.3.3(5), and Section 454 of the Public Utilities Code to increase its water rates by $5,073 or 20.06% for TY 2010. The purpose of the rate increase is to recover increased operating expenses and to provide an adequate rate of return. TSVU-G’s request shows 2010 gross revenues of $25,285 at current rates, increasing to $30,359 at proposed rates. TSVU-G’s request was based on a rate of return of 9.09%, with a request to increase to 12.75% at a subsequent rate base offset.

The present rates became effective on July 17, 2010, by Res. W-4653, which authorized a rate base offset increase of $2,407 or 12.77%. The last GRC for TSVU-G was granted on July 8, 2004, pursuant to Res. W-4484, which granted an increase in revenues of $2,823 or 16.67%.

TSVU-G serves approximately 45 customers in Glenridge Park Subdivision and vicinity, located about one-forth mile north of Meeks Bay in El Dorado County. The TSVU-G system is supplied from a single well with a capacity of 50 gallons per minute. The system has one storage tank with a capacity of 100,000 gallons. TSVU-G’s distribution system consists of 8,915 feet of mains ranging from 4- to 6-inch.

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Resolution W-4860 January 13, 2011TSVU-G/AL 19/RSK/PTL/MML/jlj

NOTICE AND PROTEST

AL 19 was served on April 28, 2010, in accordance with GO 96-B, including on adjacent utilities and persons on the general service list. On June 1, 2010 a notice of the proposed rate increase was mailed to each customer and to the general service list. Three customer letters or emails were timely received and the utility responded. The written comments objected to the size of the increase. The company’s response to the letters listed several expense areas that have recently increased.

An informal public meeting was held on Thursday, August 12, 2010, at 6:00 PM at the Rideout Community Center located in Tahoe City, CA. Two customers attended the meeting. The Division of Water and Audits (Division) staff explained the Commission procedures, while TSVU-G representatives cited justification for the proposed rate increase. The customers expressed concern over the size of the increase.

In setting rates in this resolution, we have balanced the financial requirements of TSVU-G with the rate concerns of its customers.

DISCUSSION

The Division made an independent analysis of TSVU-G’s operations. Appendix A shows TSVU-G’s and the Division’s estimated summary of earnings at present and proposed rates for TY 2010 and the Division’s recommended rates for TY 2010. The Division informed TSVU-G of how the methodologies and escalation rates it used differed from those used in TSVU-G’s request. TSVU-G is now in agreement with the Division’s recommended revenue requirement, shown in Appendix A, and the Division’s recommended rates, shown in Appendix B. The Division recommends that the Commission approve the rate increases and resulting rates shown in Appendix B. The Division’s estimate of TSVU-G’s operating expenses, excluding purchased power and other volume related expenses, is based on data from years 2007-2009. For estimating purchased power costs, the Division determined 2009 annual usage and applied the Sierra Pacific Power Company’s rates that became effective January 1, 2010. The quantities used to calculate purchased power are found in Appendix D. For estimating other volume related expenses, the Division used data from 2009 and adjusted for inflation. The Division used current actual costs for test year insurance and employee benefits. For estimating all other expense categories Division escalated and averaged using factors from the June 30, 2010 escalation memorandum from the Division of Ratepayer Advocates.

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The Division examined TSVU-G’s rate base calculation. TSVU-G has not yet made the planned test year capital additions included in its request so the Division excluded them from its recommendation.

TSVU-G requested a 9.09% rate of return, increasing to 12.75% at the first rate base offset, in order to limit the size of this general rate increase and lessen its impact on ratepayers. With the Division’s lower estimate of expenses this approach is not necessary. The current range recommended for rate of return for a Class D utility is 12.50% to 13.50% 1. The Division has based its recommendation on the midpoint of this range, 13.00%. In Decision (D.) 92-03-093 effective April 30, 1992, the Commission adopted the Return on Margin (ROM) ratemaking as an alternate to the Return on Net Investment (Rate Base) method for calculating net revenue for Class C and Class D Utilities and required the Division to recommend the method that produces the higher net revenue result. The Division found that using the 23.03% rate of margin currently allowed2 would result in net revenue lower than the $4,775 calculated using rate of return on rate base method. Therefore, Division recommends revenues using the 13.00% rate of return.

TSVU-G’s rate structure consists of four schedules: 1AR, General Metered Service; 2AR, Annual Residential Flat Rate Service; 3AR, Measured Service for Trucks, and 4AR, Private Fire Protection Service. The charge for a one inch connection in the current flat rate tariff does not conform to standard service size ratio charges: The Division proposal corrects this discrepancy. As a result, customers with a one inch connection will experience a slightly larger increase than those with a ¾ inch connection. Currently no customers received service under the metered tariff. The Division’s proposed meter rates conform to the meter size ratios and Commission policy regarding recovery of fixed costs in the service charge. The rates proposed by the Division are shown in Appendix B. At the recommended rates, the increase in revenue will be $2,412 or 9.54% for TY 2010.

At the Division’s recommended rates shown in Appendix B, a 3/4-inch annual flat rate residential customer’s bill will increase from $519.97 to $569.37 an increase of $49.40 or 9.50%. Customers with a 1-inch connection will see a 10.45% increase. A comparison of customer bills at present and recommended rates is shown in Appendix C. The adopted quantities and tax calculations are shown in Appendix D.

1This recommendation is set forth in a March 1, 2010 memorandum to the Commission entitled Rates of Return and Rates of Margin for Class C and Class D Water Utilities.2 Id.

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COMPLIANCE

The utility has been filing annual reports as required.

TSVU-G needs to file a Tier 1 advice letter within 30 days from the effective date of this resolution revising the following forms and rules in its tariff book to meet the current Commission standards: Title Page and Schedule UF.

COMMENTS

Public Utilities Code Section 311(g) (1) provides that resolutions generally must be served on all parties and subject to at least 30 days public review and comment prior to a vote of the Commission.

Accordingly, this draft Resolution was mailed to the utility and protestants and made available for public comment on December 14, 2010. No comments were received.

FINDINGS

1. TSVU-G has requested authority to increase its water rates by $5,073 or 20.06% for TY 2010.

2. AL 19 was served in accordance with General Order 96-B on April 28, 2010. On June 1, 2010, a notice of the proposed rate increase was mailed to each customer and to the general service list.

3. In reviewing TSVU-G’s request, the Division made an independent analysis of TSVU-G’s operations.

4. The Division used the Sierra Pacific Power Company’s power rates that became effective January 1, 2010 to estimate purchased power costs.

5. The Division used 2009 data, adjusted for inflation, to estimate the other volume related expenses.

6. The Division used current actual costs to estimate test year insurance and employee benefits.

7. For estimating all other expense categories, Division escalated and averaged using factors from the June 30, 2010 escalation memorandum from the Division of Ratepayer Advocates.

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8. The Division’s recommended summary of earnings (Appendix A) are reasonable and should be adopted.

9. The rates recommended by the Division (Appendix B) are reasonable and should be adopted.

10.The quantities (Appendix D) used to develop the Division’s recommendations are reasonable and should be adopted.

11.The Division informed TSVU-G of how the methodologies and escalation rates it used differed from those used in TSVU-G’s request. TSVU-G now agrees with the Division’s recommended revenue requirement.

12. For TY 2010, it is appropriate to grant TSVU-G an increase in gross annual revenues of $2,412 or 9.54%, which is estimated to provide a rate of return of 13.00%.

13.TSVU-G should be ordered to file a Tier 1 advice letter within 30 days from the effective date of this resolution revising the following forms and rules in its tariff book to meet the current commission standards: Title Page and Schedule UF.

THEREFORE IT IS ORDERED THAT:

1. Authority is granted under Public Utilities Code Section 454 to Tahoe Swiss Village Utility, Inc., to file a supplemental advice letter with the revised rate schedules attached to this Resolution as Appendix B and concurrently cancel its presently effective rate Schedules 1AR, Annual Metered Service; 2AR, Annual Residential Flat Rate Service; 3AR, Measured Service for Trucks; and 4AR, Private Fire Protection Service. The effective date of the revised schedules shall be five days after the date of filing.

2. The quantities (Appendix D) used to develop the Division’s recommendations are adopted.

3. Tahoe Swiss Village Utility, Inc. is ordered to file a Tier 1 advice letter within 30 days from the effective date of this resolution revising the following forms and rules in its tariff book to meet the current Commission standards: Title Page and Schedule UF.

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4. This Resolution is effective today.

I certify that the foregoing Resolution was duly introduced, passed, and adopted at a conference of the Public Utilities Commission of the State of California held on January 13, 2011; the following Commissioners voting favorably thereon:

/s/ PAUL CLANON Paul ClanonExecutive Director

MICHAEL R. PEEVEYPresident

TIMOTHY ALAN SIMONNANCY E. RYAN

Commissioners

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APPENDIX ATahoe Swiss Village Utilities, Inc. - Glenridge District

SUMMARY OF EARNINGSTest Year 2010

Utility Estimated Branch Estimated

ItemPresent Rates

Requested Rates

Present Rates

Requested Rates

Recommended Rates

OPERATING REVENUES

Flat Rates $25,285 $30,359 $25,285 $30,359 $27,697 Total Revenue $25,285 $30,359 $25,285 $30,359 $27,697

OPERATING EXPENSES

Purchased Power $2,360 $2,360 $2,269 $2,269 $2,269Other Volume Related Expenses $40 $40 $42 $42 $42Employee Labor $1,550 $1,550 $1,567 $1,567 $1,567Materials $250 $250 $262 $262 $262Contract Work $1,250 $1,250 $1,110 $1,110 $1,110Transportation $911 $911 $913 $913 $913Other Plant Maintenance $51 $51 $51 $51 $51Office Salaries $1,200 $1,200 $500 $500 $500Management Salaries $4,800 $4,800 $4,800 $4,800 $4,800Employee Benefits $1,437 $1,437 $1,437 $1,437 $1,437Uncollectibles $0 $0 $0 $0 $0Office Services & Rental $480 $480 $480 $480 $480Office Supplies and Exp $990 $990 $947 $947 $947Professional Services $325 $325 $273 $273 $273Insurance $1,835 $1,835 $1,835 $1,835 $1,835Regulatory Comm Exp $200 $200 $208 $208 $208General Expenses $250 $250 $206 $206 $206 Subtotal $17,929 $17,929 $16,900 $16,900 $16,900

Depreciation Expense $2,796 $2,796 $2,808 $2,808 $2,808Taxes other than income $1,571 $1,571 $1,571 $1,571 $1,571State Income Tax $0 $0 $800 $803 $800Federal Income Tax $4,343 $4,460 $481 $1,242 $843 Total Deductions $26,638 $26,756 $22,560 $23,323 $22,922

NET REVENUE -$1,354 $3,602 $2,725 $7,036 $4,775

RATE BASE

Average Plant $112,137 $112,137 $112,047 $112,047 $112,047Average Depreciation Reserve $72,816 $72,816 $75,618 $75,618 $75,618

Net Plant $39,321 $39,321 $36,429 $36,429 $36,429

Less Advances $0 $0 $0 $0 $0Contributions $0 $0 $0 $0 $0Materials and Supplies $300 $300 $300 $300 $300

Rate Base $39,621 $39,621 $36,729 $36,729 $36,729

RATE OF RETURN -3.42% 9.09% 7.42% 19.16% 13.00%

(END OF APPENDIX A)


APPENDIX BTahoe Swiss Village Utilities, Inc. - Glenridge District

SCHEDULE NO. 1ARANNUAL GENERAL METERED SERVICE

APPLICABILITY

Applicable to all water service furnished on a metered basis.

TERRITORY

Glenridge Park Subdivision, and vicinity, located about one-fourth mile north of Meeks Bay, El Dorado Placer County.

RATESPer Meter

Quantity Rate Per Month

Per 100 cu. ft. $ 0.85 (I)

Per MeterService Charge: Per Year

For 3/4-inch meters $ 505.19 (I)For 1-inch meters $ 841.98 |For 1-1/2-inch meters $1,683.95 |For 2-inch meters $2,694.32 (I)

The Service Charge is a readiness-to-serve charge which is applicable to all metered service and to which is added the monthly charge computed at the Quantity Rate.

(continued)



SCHEDULE NO. 1ARANNUAL GENERAL METERED SERVICE

(continued)

SPECIAL CONDITIONS (continued)

1. The annual service charge applies to service during the 12-month period commencing January 1 and is due in advance. If a permanent resident of the area has been a customer of the utility for at least 12 months, he may elect, at the beginning of the calendar year, to pay prorated service charges in advance at intervals of less than one year (monthly, bimonthly, or quarterly) in accordance with the utility’s established billing periods. (T)

2. The established billing cycle for water is monthly. The billing cycle may be at longer intervals during winter season.

(N)

3. The opening bill for metered service, except on conversion from flat rate service, shall be the established annual service charge for the service. Where initial service is established after the first day of any year, the portion of such annual charge applicable to the current year shall be determined by multiplying the annual charge by one three-hundred-sixty-fifth (1/365) of the number of days remaining in the calendar year. The balance of the payment of the initial annual charge shall be credited against the charges for the succeeding annual period. If service is not continued for at least one year after the date of initial service, no refund of the initial annual charges shall be due the customer.

(D)

4. All bills are subject to the reimbursement fee set forth on Schedule No. UF.



SCHEDULE NO. 2ARANNUAL RESIDENTIAL FLAT RATE SERVICE

APPLICABILITY

Applicable to all flat rate residential water service furnished on an annual basis.

TERRITORY


RATESPer Service Connection Per Year

For a single-family residential unit,3/4-inch size, including premises $569.37(I)

For each additional single familyresidential unit on the same premisesand served from the same 3/4-inch serviceconnection $470.63 (I)

For a single-family residential unit,1-inch size, including premises $948.95 (I)

For each additional single familyresidential unit on the same premisesand served from the same 1-inch serviceconnection $784.39 (I)

SPECIAL CONDITIONS

1. The above flat rates apply to a service connection no larger than one inch in diameter.

2. All service not covered by the above classification shall be furnished only on a metered basis.

3. For service covered by the above classification, if the utility so elects, a meter shall be installed and service provided under Schedule No. 1AR, Annual Metered Service, effective as of the first day of the following calendar month. Where the flat rate charge for a period has been paid in advance, refund of the prorated difference between such flat rate payment and the minimum metered charge for the same period shall be made on or about that day.

(continued)



SCHEDULE NO. 2ARANNUAL RESIDENTIAL FLAT RATE SERVICE

(continued)


4. The annual flat rate charge applies to service during the 12-month period commencing January 1 and is due in advance payable in two equal installments. If a permanent resident of the area has been a customer of the utility for at least 12 months, he may elect, at the beginning of the calendar year, to pay prorated flat rate charges in advance at intervals of less than one year (monthly, bimonthly, or quarterly) in accordance with the utility’s established billing periods.

5. The established billing cycle is every six months.

6. The opening bill for flat rate service shall be the established annual flat rate charge for the service. Where initial service is established after the first day of any year, the portion of such annual charge applicable to the current year shall be determined by multiplying the annual charge by one three-hundred-sixty-fifth (1/365) of the number of days remaining in the calendar year. The balance of the payment of the initial annual charge shall be credited against the charges for the succeeding annual period. If service is not continued for at least one year after the date of initial service, no refund of the initial annual charges shall be due the customer.

(D)




SCHEDULE NO. 3ARMEASURED SERVICE FOR TRUCKS

APPLICABILITY

Applicable to all tank truck sales.

TERRITORY


RATES

Quantity Rate

Per 100 cu.ft $2.90 (I)

Service Charge

Per day of service rendered $10.24 (I)

SPECIAL CONDITIONS




SCHEDULE NO. 4ARPRIVATE FIRE PROTECTION SERVICE

APPLICABILITY

Applicable to water service furnished for private fire systems and to private fire hydrants.

TERRITORY


RATE Per Month

For each inch of diameter of service connection $ 10.41 (I)

SPECIAL CONDITIONS

1. The facilities for service connection to a privately-owned fire protection system will be installed by the utility or under the utility’s direction and the cost paid by the applicant. Such cost will not be subject to refund. The facilities paid for will be the sole property of the applicant.

2. The minimum diameter for the private service connection will be 4 inches. The maximum diameter will not be larger than the diameter of the water main to which the service is connected.

3. If a main of adequate size to serve a private fire protection system in addition to all other normal service does not exist adjacent to the premises to be served, then a new main from the nearest existing main of adequate capacity will be installed by the utility and the cost paid by the applicant. Such cost will not be subject to refund. The main where located in the public right-of-way or utility easement will be the sole property of the utility.

(continued)




(continued)


4. Service hereunder is for private fire protection systems to which no connections other than fire protection purposes are allowed and which are regularly inspected by the underwriters having jurisdiction and maintained to the satisfaction of the utility. The service connection facilities are subject to the control of the utility, with right to alter, repair, replace and the right to remove upon discontinuance of service. The customer is required to maintain, repair, and to provide for the required periodic inspection of system. Failure to comply with this provision may be grounds for the utility’s discontinuance of the service to the premises without liability to the utility.

5. The service connection will include the installation of a detector check valve with meter or other similar device acceptable to the utility for protection against theft, leakage, or waste of water. If the utility and its duly authorized agents have the right of access to and within the premises for all purposes related to said facility, the requirement for a detector check valve and meter may be waived.

6. For water delivered for other than fire protection purposes, charges will be made therefore under Schedule No. 1AR, Annual General Metered Service. Unauthorized use of water from the private fire service may be grounds for the utility’s discontinuance of the service to the premises without liability to the utility.

7. The utility will supply only such water at such pressure as may be available at any time as a result of the normal operation of the utility system.

8. No structure except by written approval and authorization of the utility will be built over the facilities to serve private fire service and the customer will maintain and safeguard the area occupied by these facilities from traffic and other hazardous conditions. The customer will be responsible for any damage to the facilities.

(continued)




(continued)


9. Subject to the approval of the utility, any change in the location or construction of the facilities to serve private fire service as may be requested by public authority or the customer will be made by the utility following payment to the utility for the entire cost of such change.

10. The customer shall indemnify the utility and save it harmless against any and all claims arising out of service under this schedule and shall further agree to make no claims against the utility for any loss or damage resulting from service under this schedule. Section 774 of the Public Utilities Code limits the liability of the utility resulting from a claim regarding adequacy of pressure or supply for fire protection service.

11. The customer shall be responsible for the periodic testing of any backflow prevention devices as required by public authority or the utility. Any repair or replacement of such devices or of any other facilities installed to provide private fire service shall be done at the customer’s expense. Any refusal to comply with the above requirements may be grounds for the utility’s discontinuing private fire service without liability to the utility.


(END OF APPENDIX B)


APPENDIX C

TAHOE SWISS VILLAGE UTILITIES, INC. – GLENRIDGE DISTRICT

COMPARISON OF RATES TEST YEAR 2010

Tariff RatesRecommended

IncreaseTariff Description Current Recommended Dollars Percentage

Annual 3/4-inch$519.9

7 $569.37 $49.40 9.50%

Annual Additional Unit 3/4$429.8

0 $470.63 $40.83 9.50%

Annual 1-inch$859.1

3 $948.95 $89.82 10.45%

Annual Additional Unit 1$715.6

5 $784.39 $68.74 9.60%Monthly Private Fire Protection (per inch) $9.50 $10.40 $0.90 9.50%

(END OF APPENDIX C)


APPENDIX D

TAHOE SWISS VILLAGE UTILITIES, INC. - GLENRIDGE DISTRICT

ADOPTED QUANTITIESTEST YEAR 2010

Expenses:

1. Purchased power (Electric)Vendor Sierra Pacific Power Company

Schedule A-1, Rate Code E50Effective Date January 1, 2010Number of Meters 1Customer Charge per Meter $12.10 Energy Charge per kWh $0.12617 Adopted Usage kWh 16,829Total Cost $2,268.51 Composite Energy Cost ($/kWh) $0.13480

2. Water Sales 4,640 Ccf

3. Number of Service Connections:

Flat Rate Unit

Average Number of Customers (bills per year)

3/4-inch 421-inch 3

Additional Unit 3/4-inch 0Additional Unit 1-inch 0

Private Fire Protection (inches per year) 90

4. Tax calculation:

Line State FederalNo. Item Tax Tax

1. Operating Revenue $27,697 $27,697

2. O & M Expenses $16,900 $16,9003. Taxes Other Than Income $1,571 $1,5714. Depreciation $2,808 $2,8085. Interest Expense $0 $0

6. Taxable Income for State Tax $6,4177. State Tax $800

8. Taxable Income for FIT $5,6179. Federal Income Tax $84310. Total Income Tax $1,643

California Corporate Franchise Rate 8.84%

Federal Income Tax Rate 15%

(END OF APPENDIX D)

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