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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 ATL-E-OS-Qi At l a n t a P o w e r C o m p a n y Re s u l t s o f O p e r a t i o n s 1 R e v e n u e s (A ) (B ) (C ) (D ) (E ) (F ) Re v e n u e Co r r e c t at 2 0 0 7 Pe r P U C R e p o r t No r m a l i z e 20 0 7 In t e r e s t Cu s t o m e r Pr o F o r m a At 1 2 / 3 1 / 2 0 0 6 La b o r C o s t s De p r & Am o r 1 Ex p e n s e Le v e l 20 0 6 $ 67 , 9 3 7 $ 45 2 $ 68 , 3 8 9 Op e r a t i n g E x p e n s e s : 2 P o w e r G e n e r a t i o n - L a b o r 3 P o w e r G e n e r a t i o n - M a t e r i a l s & S u p p l i e s 4 G e n e r a l O f f i c e r s S a l a r i e s 5 G e n e r a l O f f i c e L a b o r 6 G e n e r a l O f f i c e S u p p l i e s & E x p e n s e 7 R e n t a l E x p e n s e s 8 F u e l E x p e n s e s 9 L i c e n s e s , d u e s a n d f e e s 10 I n s u r a n c e 11 P r o f e s s i o n a l F e e s 12 B a n k C h a r g e s 13 T r a v e l & L o d g i n g 14 T o t a l O p e r a t i n g E x p e n s e s 15 D e p r e c i a t i o n E x p e n s e ( n e t C I A C o f A m o r t ) 16 P r o p e r t T a x e s 17 T o t a l E x p e n s e s 18 N e t O p e r a t i n g I n c o m e 19 I n t e r e s t E x p e n s e 20 N e t I n c o m e $ 9, 9 9 0 4, 4 6 2 21 , 6 0 0 2 8 , 8 0 0 4, 2 0 0 4 , 2 0 0 48 5 4 8 5 4, 1 5 0 4 , 1 5 0 3, 1 1 1 3 , 1 1 1 21 1 2 1 1 2, 2 7 8 2 , 2 7 8 4, 3 1 9 4 , 3 1 9 ro r o 2, 1 5 8 2 , 1 5 8 38 , 4 3 4 $ 2 5 , 8 0 0 $ - $ - $ - $ 6 4 , 2 3 4 13 , 9 6 9 2 , 8 1 3 1 6 , 7 8 2 3, 8 3 6 3 , 8 3 6 56 , 2 3 9 $ 2 5 , 8 0 0 $ 2 , 8 1 3 $ - $ - $ 8 4 , 8 5 2 11 , 6 9 8 $ ( 2 5 , 8 0 0 ) $ ( 2 , 8 1 3 ) $ - $ 4 5 2 $ ( 1 6 , 4 6 3 ) 9, 0 1 2 2 1 2 2 4 1 1 , 2 3 6 2, 6 8 6 $ ( 2 5 , 8 0 0 ) $ ( 2 , 8 1 3 ) $ ( 2 , 2 2 4 ) $ 4 5 2 $ ( 2 7 , 6 9 9 ) 9, 9 9 0 4, 4 6 2 7, 2 0 0 i $$ ~~ i : : i _ . i: g ; Oz CD 0 6' '" ' " 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