HomeMy WebLinkAbout20080501Application.pdfATLANTA POWER COMPANY INC.
11140 CHICKEN DINER ROAD\
CALDWELL, IDAHO 83406
RECEIVED
MAY - I PM~: 18
iDAhO Fliô..IC
UTILITIES COMMISSION
May 1,2008
Idaho Public Utilties Commission
P.O. Box 82720
Boise, Idaho 83720-0074
ATL-E-08-02
ATTENTION COMMISSION SECRETARY AND HEAD LEGAL SECRETARY
Enclosed is an original and seven (7) copies of an application requesting a genera rate
increase in Atlanta Power Company's basic taff rates for electrc service together with a
request for an emergency surchage. Also enclosed is a computer disk containig the
Application, exhbits and work papers in electronic format.
Atlanta Power Company requests that the Commission process ths Application under the
Commission's Rules of Modifed Procedure.
Sincerely,~~Israel Ray
President
Israel Ray
Atlanta Power Company, Inc.
11140 Chicken Dinner Rd.
Caldwell, 10 83406
Tel. (208) 459-7007
Fax (208) 459-7014
Representative for Atlanta Power Company, Inc.
RECEIVED
MA Y - I PM ~: I 8
/DAhv rvodi.
UTILITIES COMMISSION
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )ATLANTA POWER COMPANY )
FOR AN ORDER AUTHORIZING INCREASES IN)
THE COMPANY'S RATES AND CHARGES FOR)
t=~WA'Eft SERVICE IN THE STATE OF IDAHO )
CASE NO. ATL-E"(8-2
APPLICATION
COMES NOW Atlanta Power Company Inc., ("Atlanta Powet', "Applicant"
or "Company") and hereby makes application to the Idaho Public Utilities
Commission (Commission) for an Order approving revisions to Applicant's
schedules of rates and charges for electric service in the State of Idaho to
become effective with service provided on and after June 1, 2008. Applicant is
requesting the Commissions authorization to increase the electric rates it
charges its customers by approximately 60.62%. In addition, Applicant is
requesting authorization to implement, on June 1, 2008, a temporary emergency
surcharge of 54.2%. The surcharge is necessary to amortize debt the Company
incurred to pay extraordinary cots the Company experienced in the year 2007
due to the failure of its hydroelectric turbine.
GENERAL
Applicant is a public utility electric corporation within the meaning of the
Idaho Public Utility Law, is duly organized and existing under the laws of the
State of Idaho and is engaged in coducting a general electric service business
in and about the community of Atlanta, Elmore County, Idaho, having its principal
office and place of business at 11140 Chicken Dinner Road, Caldwell, Idaho. A
copy of Applicant's Articles of Incorporation together with all amendments to date
is on file with the Commission. Applicant's current Certificate of Convenience
and Necessity is Certifcate No. 236. Currently the Company provides electric
service to approximately 75 residential and commercial customers.
Application
ATL-E-08-02
1
EMERgENCY SURCHARGE
By Order No. 30417 dated August 29,2007 in Case No. ATL-E-07-1, the
Idaho Public Utilities authorized the Company to defer on its accounting records
the extraordinary costs incurred in the year 2007 associated with the failure of
Atlanta's hydroelectric turbine. That order recognized that the Company would
be filng additional applications seeking recovery of the deferred extraordinary
costs. Applicant requests that the Commission take offcial notice of that case
and incorporate by reference the record of that case in this case.
By Order No. 30511 dated March 3, 2008 in Case No. ATL-E-08-1, the
Idaho Public Utilities Commission authorized the Company to incur debt in the
amount of $110,000. The order recognized the need for the Company to
acquire cash to pay the extraordinary costs deferred pursuant to Order No.
30417. Applicant requests that the Commission take offcial notice of that case
and incorporate by reference the record of that case in this case. As noted in
Order No. 30511 at page 3, the Staff of the Idaho Public Utilities Commission
(Staff pointed out to the Commission that the Company does not have sufficient
cash flow to meet its payment obligations associated with the two notes
approved by the order.
Applicant has determined that its toan repayment obligations including
loans from the Company's owners, require monthly payments of $3,088.66 per
month for the first twelve (12) months and $2,206.01 per month for an additional
seventy-two (72) months. To fully recover these repayment obligations over the
term of the notes requires a surcharge on current rates of 54.2% for the first year
and 38.71 % for the remaining six (6) years or a surcharge of 33.74% for the first
year and 24.1 % for the remaining six (6) years at the tariff rates proposed in this
Application. Exhibit NO.7 included with this application presents a summary of
the effects on rates proposed in this application. Exhibit NO.8 included with this
application is the proposed surcharge tariff.
Applicant believes it has demonstrated a financial emergency and
therefore, requests that the Commission declare an emergency and approve a
surcharge on existing rates of 54.2% effective June 1, 2008.
GENERAL RATE CASE
Applicant is requesting an increase in its electric rate schedules to
increase revenues by 60.62%. The Company's current rates were approved by
Commission Order NO.24925 effective June 15, 1993. Nearly fifteen (15) years
have elapsed since those rates were established. Escalating those rates to
produce the rates proposed in this application produces an annual growth rate of
only 3.2%.
Application
ATL-E-08-02
2
The Company is proposing to increase its Schedule1 permanent
residential base rate from $81.00 to $83.00 (2.4%) per month, its commodity rate
from $0.05 to $0.10 (100%) per kilowatt hour and eliminate the 500 KWh
allowance currently included in the base rate. The Company proposes to
increase the Schedule 2 permanent commercial base rate from $144.00 to
$165.00 (14.6%) per month, the commodity rate from $0.18 to $0.20 (11.1%) per
kilowatt hour and eliminate the 500 KWh allowance currently included in the base
rate. The Company proposes to eliminate the Schedule 3 seasonal tariff and bil
these customers as Schedule 1 or Schedule 2 customers. The Company must
maintain and operate its system year round in order to provide the service
customers expect during the system peak periods. Most of the Company's
normal operating costs are fixed and do not vary with increased energy demand
on the system. Eliminating the seasonal rate schedule makes all similarly
situated customers subject to the same tariff and equalizes their rates. The
effect is to increase the seasonal residential base rate from $35.00 to $83.00
(135%) and reduce the commodity charge by 52.4% from $0.21 to $0.10 per
kilowatt hour. There currently is no commodity allowance in the Schedule 3 base
rate. Seasonal commercial customers would realize an increase in the base rate
from $65.00 per month to $165.00 per month (153.8%) and a decrease in the
commodity rate of $0.01 from $0.21 to $0.20 (4.3%). It should be noted that
there are no commercial customers being served under this schedule at this
time. There currently is no commodity allowance in the S3C base rate.
The Company proposes to modify the language in its rule 12(B) to clarify
that the $10.00 per month charge approved by the Commission and included in
the Company's Rule 128 is only for temporary connections of recreational types
of vehicles (campers, motor homes and trailers) connected to the service of a
regular customer's electrical connection. All such piggy-back connections served
through another customers meter for a period of greater than 30 days annually
wil be treated as an additional residential or commercial service. The effect of
this clarification in language is to increase the charge for such a connection from
$10.00 to $82.00 (820%) per month if connected to a residential service and to
$165.00 (1,650%) if connected to a commercial service. Exhibit No.5, page 5 is
a marked-up copy of the Company's current tariff sheet showing the proposed
changes.
Applicant is proposing to change its reconnection charge for residential
customers who voluntarily or involuntarily disconnec from the system for a
period of more than thirt (30) days from $200.00 to $335.00 (approximately four
(4) times the monthly base rate). Similarly, the Company proposes to change the
reconnection charge for commercial customers who voluntarily or involuntarily
disconnect from the system for a period of more than thirt (30) days from
$200.00 to $660.00 (approximately four (4) times the monthly base rate). These
changes are necessary to discourage customers from seasonally disconnecting
from the system causing a loss of revenue to the Company resulting in upward
pressure on rates to keep the Company viable.
Application
ATL-E-08-02
3
Applicant is proposing to add new fees that are not currently approved by
the Commission. The Company requests that the Commission approve a new
$20.00 fee to reprocess and collect for checks returned by any bank for any
reason. The Company also requests that the Commission authorize Applicant to
charge late fees of 12% per annum (1% per month) on past due accunts.
Exhibit No. 5 page 4 is a marked-up copy of the Company's current
Schedule 4 showing the changes proposed for connection, reconnection,
returned check and late fees.
Applicant is requesting this Application be proæssed under the
Commissions Rules of Modified Procedure. Applicnt further requests an Order
of the Commission authorizing the new rates be effective June 1, 2008.
Enclosed, with this Application, are Exhibit Numbers 1 through 9 in
support of the increase in basic electric revenue requested. Applicant is
proposing the year 2006 as the test year in this case adjusted to normalize the
test year for known and measurable changes that have occurred. The Company
is proposing this test year as more indicative of the Company's normal
operations than the more recent 2007 year in which the Company experienced
extraordinary cost.
RATE BASE
Exhibit No. 1 presents the Company's calculation of rate base. Column
(A) presents the balances of the Company's accounts at December 31, 2006. In
Column (8) on lines 1 and 5 additions to the Company's plant in service accounts
have been added to recognize the additions to these accounts during the year
2007. On lines 8 in Column (B) additional accumulated depreciation has been
recognized for the year 2007 including the depreciation on new plant placed in
serviæ during the year. On line 9 an addition to the Company's contributions in
aid of construction account to recognize the recovery of a majority of the new
investment through the surcharge discussed above. On line 10, Column (B),
amortization of the contributions has been adjusted consistent with the
depreciation adjustment. On line 13, Column (B), the Company's working capital
has been increased to recognize increased operation and maintenance that wil
be explained later in the discussion of the Company's results of operations,
Exhibit NO.2. As shown on line 14 of Column (8) of this exhibit, the Company's
rate base has decreased by $3,634.00 sinæ the end of 2006. The rate base
shown in Column (C) on line 14 of $143,921.00 is used by the Company in this
application to determine its revenue requirement.
RESULTS OF OPERATIONS
Exhibit No. 2 presents the Company's Results of Operations adjusted for
known and measurable changes. Column (A) of the exhibit presents the actual
recorded results on the Company's books for the year 2006. These actual
Application
ATL-E-08-02
4
results are adjusted in Columns (B) through (E) to develop the adjusted results
shown in Column (F) that is used to determine the Company's revenue
requirement on Exhibit NO.4.
The adjustment shown in Column (B) of Exhibit NO.2 adjusts labor costs
to normalized levels. Line 4 of Column (B) adjusts General Offcers salary to
$2,400.00 per month. Due to cash flow constraints only $7,200.00 was actually
paid during the test year. Line 5 of Column (B) recognizes the $350.00 per
month the Company pays for customer accounting, biling, collection and banking
service. During the test year, these costs were included in Power Generating
Labor but, due to timing differences, were not fully recorded. These adjustments
decrease the Company's test year income by $25,800 shown on line 18.
Column (C) of this exhibit adjusts the Company's Depreciation and
Amortization expense by $2,813.00 to recognize the level of expense in the year
2007 due to additions to plant in service and contributions in aid of construction.
Column (D) of Exhibit NO.2 does not affect the Company's Net Operating
Income but is presnted here for the Commissions information. The adjustment
recognizes corrections to the Company's interest expense for the test year.
During the years 2004 through 2006, the Company made no payments on
several loans and did not accrue interest payable. On other loans the Company
recorded the entire loan payment as interest expense. These errors have been
corrected in this Application. The detail of the corrections is available for the
Staffs review in the electronic work papers supplied with this Application. The
corrections also affect the Company's capital structure and have been
recognized on Exhibit NO.3 to calculate the Company's required return on rate
base.
Exhibit No. 2 Column (E) adjusts the Company's revenues to the level of
customers served in the year 2007.
Column (F) of Exhibit NO.2 presents the Company's proforma operating
results for use in this case. The loss of $16,463.00 shown on line 19 is used to
determine the revenue deficiency calculated on Exhibit NO.4.
COST OF CAPITAL
Exhibit NO.3 presents the Company's capital structure and calculation of
the weighted cost of capital at December 31, 2006. Column (A) presents the
capital structure as reported to the Commission in the Company's 2006 Annual
Report. In Column (B), corrections to the capital structure have been made to
correct the loan errors discussed earlier. Column (C) presents the Company's
corrected capital structure. The weight of each component of capitol is shown in
Column (D) and when multiplied by the cost of each component shown in
Column (E) produces the weighted cost of each component shown in Column
(F).
Application
ATL-E-08-02
5
The Company is requesting a return on the equity component of its capital
structure of 12%. This equity return is equal to the retum the Commission has
allowed for other small utility companies under its jurisdiction and recognizes risk
associated with a small utilty company.
The overall rate of return on the Company's rate base of 12.2% is shown
in Column (F) at line 8. This return is used on Exhibit NO.4 to calculate the
Company's revenue requirement.
REVENUE REQUIREMENT
Exhibit NO.4 presents the calculation of the Company's revenue
requirement. Line 1 is the $143,921.00 rate base from Exhibit NO.1. The rate
base is multiplied by the 12.2% rate of return from Exhibit No. 3 to produce the
net operating income requirement of $17,552.00 shown on line 3. Line 4 shows
the test year net operating loss developed on Exhibit NO.2. When this loss is
added to the net operating income requirement, a net operating income
deficiency of $34,015.00 results as shown on line 5.
The deficiency must be grossed up to recgnize the effect of income taxes
and revenue sensitive fees. The realized loss portion of the deficiency however
is not subject to the effect of taxes. Therefore this income defciency translates
dollar for dollar to a revenue deficiency of $16,463 as shown on line 6.
The remainder of the income deficiency ($17,552.00) is tax sensitive and
must be grossed-up to recognize the effect of taxes on incremental revenues.
The tax gross-up factor of 1.2785 is calculated on lines 20 through 28 of this
exhibit and is shown on line 8. Applying this factor to the $17,552.00 portion of
the operating income deficiency produces an additional revenue requirement of
$22,441.00 as shown on line 9. The taxable and non-taxable revenue
requirements when added together produce a total revenue deficiency of
$38,904.00 as shown on line 10.
The Applicant estimates it wil incur rate case expenses associated with
the filing of this case of about $6,000.00. These actual costs will be provided to
the Commission when they are known. The Company proposes to amortize
these costs over a three year period. Lines 11 through 15 show the effect on the
Company's revenue requirement is an additional $2,557.00 bringing the total
incremental revenue requirement to $41,461.00 shown on line 16. When
compared to the normalized revenue of $68,389.00 this represents an increase
in required revenues of 60.62% as shown on line 19.
TARRIFS
Exhibit NO.5, a five (5) page exhibit, is a marked-up copy of the
Company's current tariffs showing the proposed changes in rates and charges.
Application
ATL-E-08-02
6
Exhibit No.6, a five (5) page exhibit is composed of the Company's new
proposed tariff sheets.
NOTICE TO CUSTOMERS
The Company's customers are being notified of this Application through an insert
in their May, 2008 utility biling. Simultaneous with the filing of this case, a news
release is being sent to the Idaho Statesman, the Idaho Business Review, the
Mountain Home News and the Idaho World newspapers. The Content of the
customer notice and the news release are identicaL. A copy of the customer
notice is included with this Application as Exhibit No.9.
CONTACT INFORMATION
Questions regarding this application should be addressed to:
Israel Ray
Atlanta Power Co.
11140 Chicken Dinner Rd.
Caldwell, Idaho 83406
Ph: (208) 459-7007
Robert E. Smith
2209 N. Bryson Rd.
Boise, Idaho 83713
Ph. (208) 761-9501
e-mail utiltyroup((yahoo.com
Please provide copies of all correspondence, notices and orders to the above
individuals.
Respectully submitted,~.
Isral Ray ~
President
Application
ATL-E-08-02
7
Atlanta Power Company
Rate Base
(A)(B)( C)
Per PUC Report 2007
At 12/31/2006 Additions Proforma
1 Electric Plant in Service 310,683 83,653 394,337
2 Land 8,145 8,145
3 FERC License 55,153 55,153
4 Vehicles 25,547 25,547
5 Tools and Shop Equipment 3,663 457 4,119
6 Offce Equipment 1,187 1,187
7 Total Plant in Service 404,377 84,110 488,487
8 Accumulated Depreciation (254,970)(20,888)(275,858)
9 Contributions in Aid of Construction (14,127)(74,188)(88,314)
10 Amortization of Contributions 471 4,106 4,577
11 Net Plant and Equipment 135,751 (6,859)128,892
12 Materials and Supplies Inventory 7,000 7,000
13 Cash Working Capital 4,804 3,225 8,029
14 Total Rate Base 147,556 (3,634)143,921
Exhibit 1
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ATLANTA POWER COMPANY
Weighted Cost of Capital
AT 12/31/2006
(A)(B)(e)(D)(E)(F)
Per PUC Correced Total Weight Rate Wtd
2006 Loans at 12/31/06 Cost
Report
1 Common Stock 144,171
2 Re~ined Earnings (91,704)
3 Addtonai Paid-In Capital 22,323
4 Net , wners Equity 74,790 (7,047)67,743 42.12%12%5.05%
Not~s Payable - Others
5 !Alberdi 2004 loan 57,000 (2,572)54,428 33.84%14%4.74%
6
I
Zimmerman loan 14,598 4,358 18,956 11.78%10%1.18%
7 Israel Ray loans 15,189 4,534 19,723 12.26%10%1.23%
i
8 Tota, Capital 160,850 100.00%12.20%
Exhibit No.3
ATL-E-08-02
Atlanta Power Company
Revenue Requirement
1 Rate Base
2 Rate of Return
3 Net Operating Income Required
4 Net Operating Income Realized
5 Net Operating Income Deficiency
6 Deficiency not Subject to Tax Gross-up Factor
7 Deficiency Subject to Tax Gross-up Factor
8 Gross-up Factor
9 Grossed-up Deficiency
10 Total Revenue Deficiency
11 Rate Case Expense Amortization
12 Total Expense
13 Three Year Amnortization
14 Tax Gross-up Factor
15 Gross Revenue Required
16 Total Gross Revenue Deficiency
17 Test Year Revenues at current rates
18 Total Gross Revenue Requirement19 Percent Increase
Gross-up Factor Calculation20 Gross Income21 PUC Fees22 Bad Debts
23 State Taxable24 State Tax ~ 8%
25 Federal Taxable
26 Federal Tax ~ 15%Rate27 Net After Tax28 Net to Gross Multiplier
$ 143,921
12.20%
$ 17,552
(16,463)
$ 34,015
$ 17,552
1.2785
6000
2000
1.278496
100.00%
0.25%
0.00%
99.75%
7.98%
92.02%
13.80%
78.22%
1.278496
$16,463
$
22,441
38,904
2,557
$ 41,461
68,389
109,849
60.62%
Exhibit NO.4
ATL-E-08-02