20081219final_order_no_30704.pdf

Office of the Secretary
Service Date
December 19, 2008
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 ELECTRIC SERVICE IN THE STATE
OF IDAHO
ORDER NO. 30704
CASE NO. ATL-08-
On May 1 , 2008, Atlanta Power Company (Atlanta Power; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) requesting authority to
increase its revenue requirement to $109 849 and to change the way customers are billed for
electric consumption. The Company also requested authorization to implement an emergency
surcharge of 54.20% to recover extraordinary costs incurred in 2007 associated with the failure
of the Company s hydroelectric turbine. Atlanta Power operates pursuant to Certificate of
Convenience and Necessity No. 300. The Company is located in Elmore County and provides
electric service to approximately 75 residential and commercial customers in Atlanta.
On May 20, 2008, the Commission issued a Notice of the Company s Application.
On May 29 2008 , the Commission established an expedited schedule to process the Company
request for an emergency surcharge. On June 27, 2008, the Commission in Order No. 30578
approved an emergency 33.6% surcharge. On July 18, 2008, the Commission established
scheduling for the Company s general rate case. On August 9 2008, the Company submitted an
amended revenue requirement of$113 045 (a 55% increase). Atlanta Exh. 12. The Commission
in this Order revisits the surcharge portion of the Company s Application and addresses the
Company s request for a general rate increase.
The parties of record in this case are Atlanta Power, Commission Staff and Greene
Tree, Inc., the Company s largest commercial customer. After reviewing and considering the
filings of record, the comments and~ recommendations of the parties, the transcript of public
testimony and the written comments of customers, the Commission in this Order establishes an
$83 680 annual revenue requirement for Atlanta Power, authorizes the Company to increase the
base rates for all customers by 14.55%, and approves an adjusted 28.9% surcharge. The monthly
rates and surcharge for an average Schedule 1 residential customer with monthly usage not
exceeding the 500 kWh allowance will increase from $108.21 to $119.60. The rates approved in
ORDER NO. 30704
this Order are set forth in Appendix A. All approved changes in rates and charges are effective
for service rendered on or after January 1 , 2009. The Commission in this Order further directs
changes in the Company s recordkeeping, requires improvements in customer notification
establishes a returned check charge and late payment fee; and, to stabilize revenue, approves a
reconnection charge equivalent to approximately four times the monthly customer charge.
SURCHARGE
Background - Emergency Surcharge
Atlanta Power in its Application requested that the Commission declare an
emergency and approve a surcharge on existing rates of 54.2% for an effective date of June 1
2008. In reply comments, the Company amended its surcharge request to 39.15%.
By way of background, Atlanta Power states the following:
By Order No. 30417 dated August 29 2007 in Case No. ATL-07-, the
Idaho Public Utilities Commission authorized the Company to defer on its
accounting records the extraordinary costs incurred in the year 2007
associated with the failure of Atlanta Power s hydroelectric turbine. That
Order recognized that the Company would be filing additional
applications seeking recovery of the deferred extraordinary costs.
By Order No. 30511 dated March 3 , 2008 in Case No. ATL-08-, 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.
On May 29, 2008, the Commission established an expedited schedule to process the
Company s request for an emergency surcharge. The Commission made a preliminary rIDding
that the Company s request for emergency surcharge could be processed under Modified
Procedure. IDAPA 31.01.01.201-204. A June 5, 2008 deadline was established for Commission
Staff to file axeport and recommendation, a June 11 2008 deadline was established for customer
comments and Company reply, and a June 12 2008 Boise hearing date was set for the purpose of
taking public comment and testimony.
The Commission reviewed and considered the Company s request for an emergency
surcharge, the comments and recommendations of Commission Staff, the written comments and
testimony of customers, and the Company s reply comments. Based upon our review of the
ORDER NO. 30704
record, we continued to find it reasonable to process the Company s emergency surcharge
request under Modified Procedure. IDAP A 31.01.01.204.
In Order No. 30511 , the Commission stated that the planned expenditures funded by
the proceeds of the promissory notes authorized in Case No. ATL-08-01 ($100 000 and
$10 000) were not to be used to establish customer rates until the Commission determined the
prudency of each item in the Company s next general rate case and authorized for each item
found prudent a recovery amount. Order No. 30511 , p. 4.
On June 27, 2008, in Order No. 30578 the Commission, finding that repayment on the
promissory notes had already begun and that exigent circumstances existed, approved an
emergency 33.6% surcharge for the Company with modifications and conditions. In the Order
we stated that we would revisit the emergency surcharge portion of the Company s Application
in our consideration of the Company s accompanying request for a general rate increase. In this
Order we review the Company s surcharge application and the underlying prudency of the
related expenditures and loans.
Surcharge Discussion and Findings
We base our review and continued consideration of the Company s surcharge request
upon the record established in this case and upon the related record and Orders entered in Case
N os. A TL- E-07 -01 (authorization to defer extraordinary expenses) and A TL- E-08-0 1
(conditional authorization to execute promissory notes). Atlanta Power requested an emergency
surcharge (a percentage of existing rates) to generate revenue to meet repayment obligations on
authorized debt associated with the 2007 failure of the Company s hydroelectric turbine and to
meet other costs and obligations. The requested surcharge is comprised of three elements: (1) a
$100 000 loan - Eric Alberdi; (2) a $10 000 loan - Greene Tree, Inc.; and (3) an $18 808 owner
loan.
In its. Application, Atlanta Power requested a temporary. surcharge on current rates of
54.2% for the first year and 38.71 % for an additional six years. Staff recommended approval of
a 31.2% temporary emergency increase to all tariff rates (except the Schedule 4 "new customer
connection charge ) and meter testing charges (General Rules - Regulations and Rates 8tf15 -
Service and Limitations). In reply comments, the Company amended its surcharge request to
39.15%. In Order No. 30578, we authorized an emergency surcharge of33.6%. In this Order, as
discussed and detailed below, we approve an adjusted surcharge of 28., a surcharge to be
ORDER NO. 30704
applied in the same manner and with the same exclusions.The primary reason for the
percentage change in the surcharge is that the base rate to which it is applied has increased
through this Order.
Extraordinary Deferred Costs 2007 Turbine Failure
In assessing the prudence of the Company s expenses related to the 2007 turbine
failure we start from the Company s Exhibit 1 in Case No. ATL-08-01. As reflected in that
Exhibit 1 , the deferred cost related to the turbine failure identified by the Company totaled
$114 926. It is from that starting point that Staff proposes adjustments removing non-turbine-
related costs to arrive at its adjusted extraordinary deferred cost figure of $107 831. Staff
Report, pp. 6-8. As a protocol, Staff allowed 60% of lodging costs when the Company provided
a debit receipt or cancelled check with appropriate memo line for lodging although there were no
detailed receipts that identified the room rate, the length of stay, meals purchased and other
underlying details of the transaction. Without specific details of the transaction, Staff was unable
to determine whether all costs should be included in the case.
The Company in its reply to Staff's Report addresses Staff's exclusion of certain
costs proposed for surcharge recovery. The Company does not comment on Staff's exclusion of
800 in consulting fees related to preparation of the Company s Annual Report. Regarding
Staff's exclusion of $2 800 for maintenance and repair of a backup generator that Staff contends
was not "used and useful" and was subsequently replaced (Staff Report, p. 6), the Company
contends that its efforts at repair resulted from its attempt to minimize costs. Reply, p. 2, Item 1.
Despite the Company s efforts, the generator had to be replaced. The Company states that these
costs should be included in the cost of the replacement generator and depreciated over its life.
The Company notes that there is a partial offset to these costs in the calculations of contributions
in aid of construction. Reply, p. 3, item 3.
The Company in its reply also addresses Staff's removal of $500 in concrete costs for
improving a building because the generator was not housed in that building. The building was
owned not by Atlanta Power but by Middle ForkIBoise LLC, another company of Israel Ray.
Instead, Staff included this $500 as part of rental costs for the lot to store Company equipment.
Staff Report, pp. 6, 14. The Company represents the building will be used as a site for generator
storage. The Company contends that the cost of concrete should be treated as a leasehold
improvement to accommodate the Company s diesel generator. This expense, the Company
ORDER NO. 30704
states further, does not include the cost of transport or labor to mix and install 6.6 cubic yards of
concrete. These labor costs, the Company states, should be included in plant in service as well as
owner s equity. Reply, p. 3. The Commission is informed that the Company presented three
cancelled checks written in 2007 as $845 labor for pouring a concrete pad inside a' building
owned by Middle Fork/Boise LLC. Two ofthe three canceled checks do not contain information
on the check memo line regarding the services provided for payment. The third canceled check'
memo line describes the cost as for repairs and does not match the purpose stated (pouring
concrete) for the cost. We find it reasonable to exclude these costs.
The Commission finds Staff's adjustments reasonable and is not persuaded in this
instance by the Company s management prudence argument. The test of whether the property is
used and useful in rendering service applied by Staff in determining authorized surcharge
expenses is a standard that is supported by accounting and regulatory practice and is a reasonable
guide to determine whether expense recovery should be allowed.
$100,000 Loan Eric Alberdi
The Commission s review of the executed note filed in Case No. ATL-08-
confmns that the $100 000 loan made by Eric Alberdi is for a term of seven years at an interest
rate of 14% per annum with monthly payments in the amount of $1 874 (first installment due
May 1 , 2008). The loan documentation is comprised of a Promissory Note dated April 1 , 2008
and a Lock Box and Security Agreement dated April 9, 2008. In Case No. ATL-08-, we
stated that the $100 000 promissory note interest rate of 14% was not to be used to establish the
Company s revenue requirement or customer rates (Order No. 30511 , p. 4).Staff in its
emergency surcharge comments recommended the use of a 12% interest rate, a return on the
equity component of capital structure approved by the Commission to calculate the emergency
surcharge for other small companies. The monthly payment of principal and interest for a seven-
year 12% note is $1 765. Staff Comments, p. 3.
In its reply to Staff comments, the Company recommended that the actual carrying
costs of the Alberdi note be used for the temporary surcharge, contending that any interest
adjustment should be addressed in the Company s general rate case and that the Company was
not able to acquire loan funds at a more reasonable rate. The Company further argued that its
owners should not be made to subsidize the carrying costs of this note. Company Reply
(6/11/08), pp. 1 , 2. The Commission agreed with the Company and found it reasonable for
ORDER NO. 30704
purposes of emergency surcharge calculation to include the actual carrying costs of the $100 000
note. In our emergency surcharge Order, we reserved the right in the general rate case to assess
the continued reasonableness of the 14% interest rate and consider arguments regarding the
recovery of same from customers. Order No. 30578, pp. 3
In revisiting the Alberdi note, we acknowledge fIrst that we authorized the Company
to enter into two loan obligations totaling $110 000 to pay extraordinary costs associated with
the 2007 failure of the Company s hydroelectric turbine. Case No. ATL-08-, Order No.
3051l. Our approval was conditional upon a future general rate case prudency review and
adjustment (including refund) for authorized recovery. We find that the Alberdi note funds were
used for authorized purposes related to the Company s 2007 turbine failure. We find that the
Company s promissory note with Alberdi is secured only by a Lockbox Agreement and the
personal guarantee of Israel Ray, with Alberdi foregoing any right to enforce the note with liens
attachments or levies against the physical assets of the Company except cash. Alberdi Note 8tf3a.
The Company acquired the note pursuant to a privately negotiated arrangement. The Company
contends that it could not obtain a better rate in the marketplace. Company Reply (6/1l/08), p. 1;
Reply (10/3/08), pp. 2-, item 2.
We have no way to test this representation or to evaluate other specific loan options
available to the Company if it were prepared to offer the security of a dedicated revenue stream
or surcharge. Staff contends that financing similar to that recently provided Eagle Water
Company ($110 000 loan December 2007 at Index + 2% or 9.5%) may have been available to
Atlanta Power. Staff Report, pp. 7-8. Staff in its comments in the ATL-08-01 case
recommended that the 14% stated interest rate on the Alberdi note not be utilized to establish
rates. Staff asserted then, and reasserts now, that the Company s return on equity rate before
reduction should be the maximum rate allowed as a debt cost for ratemaking purposes. Staff
Comments, p. 3; Staff Report, p. 7. We determine that it is appropriate to use a 12% interest rate
for calculating the authorized loan recovery amount and surcharge 12% being the return on
equity that we authorize in this case and would have applied if the turbine-related plant
investment in this case had been financed by owner funds. Twelve percent (12%) is also the
equity component of the capital structure authorized for other small companies under our
jurisdiction.
ORDER NO. 30704
The monthly payment of principal and interest for a $100 000 seven-year 12% note is
765. Considering the other components of the adjusted surcharge that we discuss and approve
below, the $109 monthly difference in the 14% interest rate used for calculating the temporary
emergency surcharge, and the 12% surcharge we approve in this Order, is offset in the new rate
and recovery period rather than establishing a refund.
$10 000 Loan Greene Tree, Inc.
The $10 000 loan, made by Greene Tree, Inc., a customer of Atlanta Power, is for a
term of one year at a rate of 10.75% with loan repayment accomplished through monthly billing
credits of $882.65 for that customer. The loan documentation filed in Case No. ATL-08-
consists of an Agreement dated March 18, 2008. The Company in its Application proposed to
recover this loan from customers over a one-year period. Repayment had already begun at the
time of the Company s Application filing in this case. Staff in its emergency surcharge
comments recommended a seven-year surcharge recovery period for this loan at a higher 12%
interest rate. The higher interest rate of 12%, Staff contends, recognizes a longer (seven-year)
term. Staff Comments, p. 4. In reply comments, the Company stated it would accept Staff's
adjustment. Company Reply (6/11/08), p. 2. We acknowledge that in Order No. 30511 we
authorized the Company to enter into a $10 000 loan obligation. We find that the funds were
used for authorized purposes related to the Company s 2007 turbine failure. We continue to find
the surcharge amount proposed by Staff and agreed to by the Company to be reasonable. The
monthly payment of principal and interest for a $10 000 seven-year note is $177.
$18 808 Owner s Funds
According to the Company s workpapers, the $110 000 loaned Atlanta Power was
essentially to pay the owner for wages the Company deferred in 2007 and to pay Ray Bros. Seed
another company of the owner, for costs associated with the turbine failure. Staff Report, pp. 6
. 7. The Company has requested interest on those deferred wages and other payments. In its
Application, Atlanta Power requested $332 per month to recover owner loans in the amount of
$18 808 over seven years at 12% interest as part of its proposed emergency surcharge. In our
emergency surcharge Order, we excluded the recovery of amounts owing to the owner. We
deferred recovery consideration of this $18 808 until the general rate case.
The owner loans identified by the Company include three months of deferred wages
January through March 2008 ($5,400), other turbine replacement costs exceeding the
ORDER NO. 30704
$110 000 in loans received from third parties (approximately $5 000) and related interest on said
amounts (approximately $5 000). Management also deferred wages in 2007 to provide funding
for the Company to meet its extraordinary costs. Staff recommends that the three months of
deferred wages in January through March 2008 be treated as an owner s contribution that can be
repaid through Company operations when funding is available. Staff Report, p. 8. The wages
deferred in 2007 have been repaid through the Alberdi and Greene promissory notes. Staff in its
surcharge calculations recommends recovery of $4 164 interest due the owner. Staff calculated
interest based upon the dates the extraordinary costs were paid. Interest was calculated through
March 31, 2008, because the loans were finalized in March and April 2008. The monthly
payment of principal and interest for a $4 164 seven-year note is $73 per month. Staff Report
pp. 7, 8, Tables 1 and 2.
In Case No. ATL-08-01 (Order No. 30511), we found that the Company s owners
were to be solely responsible for repayment of any portion of the notes ($100 000 and $10 000)
that might be disallowed in a future rate proceeding. Order No. 30511 , p. 4. The Company
contends that disallowing recognition of funds loaned to the Company by its owner deprives the
owner of the recovery of his costs and adversely affects the Company s already poor cash flow.
Company Reply (6/11/08), p. 3. In this Order we recognize the owner advances used to remedy
the turbine failure and provide the Company with interest calculated and based upon the dates
the extraordinary costs were paid.
Surcharge Recovery Calculation
Staff, in its emergency surcharge recovery calculation, proposed two adjustments to
the Company s rate design data: (1) Staff proposed use of calendar year 2007 numbers of bills
applied to 2006 average use per customer by rate schedule. Staff Comments, p. 6. This adjusts
for anomalous usage during the time in 2007 when the hydroelectric system was unavailable and
standby diesel generation. was available only on a limited basis. This adjustment increases kWh
usage by 27 669 which is a 13% increase over 2006 amounts. The Company did not object to
this approach and we found the adjustment reasonable. We continue to fmd the adjustment
reasonable.
(2) Staff also recommended in the emergency surcharge recovery calculation to add
two additional electric customers to the billing data and to impute revenue attributable to them in
calculation of the required surcharge - i., adding the Company s owner to Schedule 3
ORDER NO. 30704
(Seasonal Residential) and adding the home of the Company s two onsite employees to Schedule
1 (Permanent Residential). The Company opposed this adjustment citing Commission language
in Atlanta Power Case No. ATL-93-, Order No. 24925, addressing the provision of power
from surplus hydro capacity as compensation for something received. Were its employees
required to pay an electric bill, the Company states that their effective compensation would be
reduced and a wage increase would be required. Regarding the second customer that Staff adds
it does not make sense, the Company states, to charge itself electric energy rates that would
simply become operating costs on the other side of the income statement.
We deferred consideration of Staff's argument to add two customers in revenue and
rate design calculations until the general rate case.We find that Staff has abandoned its
argument in its general rate case filing. We find the Company s reasoning to be persuasive. We
will not make this adjustment in surcharge calculations.
Based on the foregoing, the Commission finds it reasonable to calculate a surcharge
to recover the following monthly cash flow requirements:
Promissory Note 1
Promissory Note 2
Owner s Funds (Interest)
Total Monthly Recovery
Approximate Annual Total
$100 000 (7 yrs
(q)
12%)
$10 000 (7 yrs
(q)
12%)
$ 4 164 (7 yrs
(q)
12%)
765. OO/month
$ 177.00/month
$ 73.00/month
0 15.00/month
$24 180.00/year
Both Company and Staff propose an equal percentage surcharge. The monthly surcharge that we
find reasonable is a 28.9% uniform percentage increase applied to all tariff rates except the
Schedule 4 "new customer connection charge" and meter testing charges (General Rules -
Regulations and Rates 8tf 15 - Service and Limitations) which by this Order are moved to
Schedule 4. The surcharge is not to be included in the general base rates of customers. Instead
it. will be a separate line item charge on each customer s bill. The Company is to maintain a
monthly record of surcharge payments and provide a status accounting of the surcharge with its
Annual Report filing.
GENERAL RATE CASE
Background
Atlanta Power in its May 1 , 2008 Application requested authority to increase its
annual base electric revenues to $109 849 and proposed numerous changes in the way it bills
ORDER NO. 30704
customers for electric consumption. Appl. Exh. 4. In its initial Application, the Company
proposed to eliminate the 500 kilowatt-hour (kWh) monthly allowance in tariff Schedules 1
(Permanent Residential) and 2 (Permanent Commercial) and to charge customers for all monthly
kilowatt-hour usage. The Company also proposed to eliminate its Seasonal (Weekend or Part-
Time Use) rate schedule (Schedule 3) for residential and commercial customers and to move
those customers to Schedules 1 and 2. In an amended filing on August 8, 2008, the Company in
response to customer opposition withdrew its proposal to eliminate the kilowatt-hour allowance
and seasonal schedules. To recover additional rate case expense the Company increased its
proposed annual revenue requirement to $113 045 , a 55% increase over current adjusted revenue
($73 051 ).Atlanta Exh. 12.The Company s current base rates were approved by the
Commission in 1993 in Case No. ATL-93-, Order No. 24925.
Apart from the Company, the intervenor, Greene Tree, Inc., and Commission Staff
were the only formal parties to participate in this case. On September l8, 2008, after performing
its audit and holding a public workshop for Atlanta Power customers, Staff filed its Report and
Recommendations. Staff recommends that the Company s annual revenue requirement be
increased to $76 770, an average increase in rates of 5.09%. Staff Report, p. 20.
On October 3 , 2008 , Greene Tree and Atlanta Power filed reply comments to Staff's
Report. The Company in its reply stands by its Amended Application and provides specific
rebuttal to some of Staff's proposed adjustments. The Company characterizes Staff's
recommendations in this case as punitive and unrealistic. Company Reply, pp. 1 , 2. Greene
Tree in its reply accepts Staff's pro forma adjustments and recommends that the Commission
adopt a rate design that equalizes the energy charges for residential and commercial customers.
Greene Comments, p. 6.
The Commission in this Order establishes an $83 680 annual revenue requirement for
Atlanta Power and authorizes the Company to increase base rates for all customers by 14.55%.
See Appendix D. The rates we approve are set forth in Appendix A. Our related findings are set
out below.
Test Year
Because of the Company s turbine failure in 2007, Atlanta Power and Staff agree that
2007 is not typical of normal operations. The Company proposes and Staff agrees that a test
ORDER NO. 30704
year ending December 31 , 2006 be used as the basis for the Company s general rate case.
Application, p. 4; Staff Report, pp. 4, 5.
We find:
The Commission finds use of a 2006 test year to be reasonable for purposes of this
case.
Capital Structure/Rate of Return
The Company proposes to use the capital structure reported to the Commission in its
2006 Annual Report, with corrections. Atlanta Exh. 3. The Company is requesting a 12% return
on the equity component of its capital structure. The equity return requested by the Company, it
states, is equal to the return the Commission has allowed for other small utility companies under
its jurisdiction and recognizes the risk associated with a small utility company. The overall rate
of return requested (including a 2004 Alberdi note at 14%) is 12.2%. Application, p. 6; Exh. 3.
Staff proposes an 11 % return on equity until the Company has made needed fmancial
and organizational improvements. Once the Company has made those improvements, Staff
agrees that a 12% return on equity would be reasonable. Staff Report, p. 11; Report Atch. C.
Staff further recommends that the Company s unreduced return on equity be the maximum rate
allowed on debt for ratemaking purposes. The Company views Staff's return on equity
recommendations as punitive. Reply, p. 4.
We find:
Based on our review of the record, we adopt the proposed capital structure shown
below. We find the Company s argument regarding return on equity to be reasonable. Our
disallowance of expense in this case should provide all the incentive needed for the Company to
retain competent consultants and improve its financial recordkeeping.We further find
reasonable, however, Staff's proposal to cap the authorized debt rate recovery for the Alberdi
promissory note at 12%. Twelve percent (12%) is the return on equity that we approve in this
case and is the maximum rate we find reasonable to allow as debt cost for ratemaking purposes.
ORDER NO. 30704
WEIGHTED COST OF CAPITAL
Common Stock
Retained Earnings
Additional Paid-In Capital
Owner s Equity
Notes Payable - Others
Alberdi 2004 loan
Zimmerman loan
Israel Ray loans
Overall Capital
Rate Base
Corrected
Total
at 12/31/06
$144 171
($91 704)
$15 276
$67 743
$54 428
$18 956
$19 723
$160 850
Weight
Weighted
CostRate
42.12%12%05%
33.84%12%06%
11.78%10%1.18%
12.26%10%1.23%
100.00%11.52%
Atlanta Power uses a pro forma rate base of $143 921 in its revenue requirement
calculations. Application, p. 4; Atlanta Exh. 1.
Staff proposes a pro forma rate base of $118 011. Staff Report, pp. 9-11; Atch. A. In
its calculation, Staff removes costs that it contends should not have been capitalized, were not
supported by original cost documentation and did not improve buildings owned by the
Company. Staff Report, p. 9.
The Commission accepts Staff's rate base calculations with adjustments for
additional and supplemental documentation submitted by the Company as set forth and
described in greater detail below. In accepting Staff's adjustments we acknowledge a regulatory
responsibility to customers to hold the utility to a businesslike standard in maintaining its
accounting and business records and to require adequate and sufficient records and receipts as a
condition of authorizing expense recovery. The resultant rate base we approve is $119 871. See
Appendix B.
Plant in Service
Staff reduced plant in service by approximately $11 000. This included removing
000 identified as fencing costs in the Company s case that Staff had determined were actually
monthly labor for maintenance of the system. These costs were included by Staff, to the extent
they were documented, under operating expenses. The reduction was partially offset by a $1 000
increase in plant in service not included in the Company s case. Staff's adjustment also includes
removing approximately $3 000 for maintenance and repair of a generator that was subsequently
ORDER NO. 30704
replaced; removing $500 for cement used to improve a building on a lot owned by Middle
ForkIBoise LLC, another company of Israel Ray, Atlanta Power s owner; and removing
approximately $3 000 for costs not supported by original cost documentation. Staff Report, p. 9.
The Company in its reply addresses Staff's removal of the generator repair (Reply, p.
, item 3) and cement costs (Reply, p. 3, item 5) from plant in service. Atlanta Power contends
that Staff's generator repair adjustment penalizes the Company for trying to maintain service at
the lowest possible cost. This cement purchase, it argues, should be treated as a leasehold
improvement to accommodate the Company s diesel generator.
Regarding Staff's adjustment removing $3 000 in costs not sufficiently supported by
original cost documentation, the Company states that even though original receipts cannot be
located, documentation in the form of cancelled checks and bank debit card records do exist.
Payments were made to the contract mail carrier for Atlanta and to vendors such as Platte
Electric and Graybar Electric. Reply, p. 3, item 4. Atlanta Power argues that Staff should give
the benefit of the doubt to the Company that these documented expenses were indeed for the
electric system. Reply, p. 3.
After the filing of Staff's Report , the Commission was informed that the Company
has presented invoices and returned checks (with a completed memo line consistent with the
activity/cost recorded) that support an addition to total plant in service in the amount of $1 785
($1 695 electric plant in service; $89 tools and shop equipment).
We find:
The Commission accepts Staff's plant in servIce adjustments as reasonable and
further finds it reasonable to increase total plant in service by $1 785 to reflect additional
documented plant. The total plant in service we approve for rate base treatment is $479 689.
Contributions in Aid of Construction (CIAC)
Staff revised the Company s CIAC calculation to reflect that the Alberdi .and Greene
loan proceeds authorized in Case No. ATL-08-01 would first be applied to assets, then to
deferred expenses and finally to interest. Deferred expenses and interest, Staff contends, are
arguably equity infusions from the owner. As such they would be repaid last. Staff Report
, p.
10. Atlanta Power disagrees. The Company contends that first claim on available cash from the
long-term loans should go to deferred wages and salaries, and then to material suppliers and
short-term creditors. This, it states, is the proper order of claim. Reply, pp. 3 , item 6.
ORDER NO. 30704
We find:
The Commission accepts Staff's adjustments and Staff's proposed order for applying
loan proceeds. The Company proposes what is essentially a bankruptcy order of retirement.
This is not a bankruptcy. The CIAC that we approve for rate base is ($95 443). The related
amortization is $4 326.
Accumulated Depreciation and Depreciation Expense
While depreciation is an element of rate base, there is no disputed issue regarding
depreciation in this case. The Commission notes that after the filing of Staff's Report the
Company filed additional invoices and other documentation sufficiently supporting costs in its
Application. The accumulated depreciation related to the $1 785 increase in plant supported by
additional documentation is $415. The calculation of depreciation is arithmetic and dependent
upon plant in service and CIAC. The accumulated depreciation figure we reflect in rate base is
($274 756). The depreciation expense related to the $1 785 increase in plant is $276.
Inventory
Included in the Company s filing is $7 000 for inventory of materials and supplies.
Atlanta Exh. 1. Staff reports that the Company has stated that "current management has no
records or knowledge of the purchases recorded to this account." Further, the Company states
that "as the inventory is use~ up, replacement materials and supplies are either capitalized or
expensed as they are purchased.Staff Report, p. 10. Staff removed the $7 000 from the
Company s proposed rate base. The Company did not reply to this adjustment.
We find:
The Commission finds that the Company is not able to provide sufficient
documentation on the amount included as inventory and finds it reasonable to exclude same
from rate base.
Working Capital
Working capital provides funds to pay expenses until customer revenues are received.
The Company and Staff agree that one-eighth (118) of annual operating expenses (45 days)
should be included in rate base. Staff Report, pp. 10, 11.
The Commission notes that after the filing of Staff's Report the Company filed
additional documentation sufficiently supporting more costs reflected in its Application. The
ORDER NO. 30704
working capital (rate base) increase related to increases in operating expenses supported by
additional documentation is $490 for a total working capital allowance of $6 055.
We find:
The amount of working capital is an arithmetic calculation based on the operating
expenses we approve in our revenue requirement determination. We fmd it reasonable to
calculate working capital as a one-eighth (1/8) percentage of annual operating expenses.
Results of Operations - Revenues and Expenses
Revenues
Atlanta Power in its Application identified $68 389 in pro forma 2006 revenue.
Atlanta Exh. 2. In its amended Application, the Company increased test year revenues by
662 to reflect the known and measurable change of growth in the number of customers that
occurred between 2006 and 2007. Atlanta Exh. 12. Staff agrees with the resultant $73 051 pro
forma revenue amount.
We find:
The Commission acknowledges that the Company and Staff have agreed to an
adjusted pro forma revenue amount of $73 051 and accepts this calculation as reasonable for
ratemaking purposes.
Operating Expenses
The Company in its Application identified twelve (12) operating expense categories
and with pro forma adjustments for known and measurable changes calculated total operating
expenses of $64 234. Atlanta Exh. 2.
Staff proposed negative adjustments in eight (8) of the twelve (12) expense categories
and calculated total operating expenses of$44 521 , a difference of$19 713. The Company in its
reply disagrees with Staff's adjustments.
We find:
The Commission s findings in many of the following expense categories share a
common theme, a denial of full recovery because of inadequate and insufficient documentation
by the Company. The extent of this recordkeeping deficiency is of such magnitude that we
devote a later section of this Order to a discussion of recordkeeping. The Company states in
reply comments that recovery of expenses is necessary because the owner cannot afford to
continue operating the utility as a very expensive hobby. Reply, p. 9. We deny full recovery
ORDER NO. 30704
because the owner does not account for its utility operations and expenses in a businesslike
manner. As regulators, we cannot lower our accounting standards and requirements - they are
established by statute and rule. It is the Company that must raise its accounting practices.
The Commission in this Order approves total operating expenses of $48 436. See
Appendix C. We find it reasonable to accept the expense amounts in the undisputed categories.
A discussion of the disputed adjustments follows:
Labor
A. Power Generation - Labor.Atlanta Power requests $9 990 annually for power
generation labor. Atlanta Exh. 2. Staff reduced Power Generation Labor by $250 and included
740 annually for monthly maintenance and extra duties. Staff Report, p. 12. The
Commission is informed that since the filing of Staff's Report , the Company provided a canceled
check for $170. The memo line of the check did not identify what services were provided for
that payment.
We find:
The Commission accepts Staff's adjustment to reduce labor to reflect costs
documented by the Company and because of incomplete documentation adds only 60% of the
$170 for a power generation labor total of$9 842.
B. General Office - Labor. Atlanta Power requests $4 200 annually for general
office labor. Staff does not contest this expense. The Company in its reply identifies costs not
included in its initial and amended rate case filings for an additional part-time contract employee
the owner s daughter, in 2007 and 2008 for general office costs above those being provided by
the contract employee who performs customer accounting functions. The owner s daughter
provides services that would otherwise be done by an independent accountant to maintain the
Company s accounting records. In addition, she does a multitude of other tasks including
correspondence and negotiating agreements with governmental agencies. In 2007 and 2008 to
October 3, 2008, the Company contends that the total compensation for this contract employee
was $4 787. Company Reply, p. 4.
We find:
The Commission approves a general office labor total of $4 200. We make further
findings regarding accounting costs below in the professional services section of this Order.
ORDER NO. 30704
C. General Officer s Salaries . Atlanta Power requests $28 800 annually for general
officer s salaries. The Company s request includes an increase in monthly pay for management
from $1 800 to $2 400 a month, or $7 200 annually. Application, p. 5. Staff reduced the
Company s request by $7 200, including $21 600 annually for management salaries at the $1 800
per month rate established during and after the test year. The Company, Staff states, estimated
normal duties in 2006 2007 and 2008 at 500 hours per year. However, no time sheets or logs are
maintained to document this estimate. Staff Report, p. 13.
The Company identified the 500 hours per year as "normal" duties of the president.
The Company states the president and general manager provides additional benefits to Atlanta
Power through use of a shop, shop tools and equipment owned by an affiliated company. The
Company claims 300 hours spent in 2006 working with the Environmental Protection Agency
and 150 hours fabricating gates in the shop mentioned previously. These services, if priced at
$58 per hour and billed to the Company, it states, would be $26 100. The Company additionally
notes that it is currently working with other federal agencies on utility-related matters (U.S. Fish
and Wildlife Service and U.S. Forest Service) and that its president has spent enumerable hours
working on this rate case. All these hours, the Company states, are in addition to "normal
general duties." Company Reply, pp. 4, 5.
We find:
The Commission accepts Staff's general officer salary adjustment as reasonable and
approves a general officer s salary total of $21 600. We find any further award to be
unsupported by sufficient documentation.
Materials and Supplies
Atlanta Power requests $4,462 annually for power generation materials and supplies.
Atlanta Exh. 2. Staff reduced materials and supplies expense by $2 138 for costs that were
unsupported by jnvoices. Staff Report, p. 13. Since the filing of Staff's Report , the Company
documented $1 612 of these costs. The Company states it has gotten the message it must retain
and file its receipts in a businesslike manner.The Company states that the Staff and
Commission must realize that materials and supplies expenses must be incurred to keep the
system in its present or better condition. Company Reply, p. 5.
ORDER NO. 30704
We find:
The Commission accepts Staff's materials and supplies adjustment and finds it
reasonable to increase the amount by $1 612 to match additional supporting documentation for a
materials and supplies total of $3 936.
Fuel
Atlanta Power requests recovery of $3 111 annually for fuel expense. Atlanta Exh. 2.
Staff reduced fuel expenses by $1 485 for costs that were unsupported by detailed receipts. Staff
Report, p. 13. The Company in reply claims it made a conservative estimate that on average the
president and general manager makes at least 20 trips to and from Atlanta per year (230 miles
round trip) and would produce a calculated fuel allowance (at $.505/mile IRS) of $2 323; and
$232 to $467 for a second vehicle to make trips two to four times per year. The Company also
claims $1 260 in other fuel costs for two line trucks, a backhoe and the diesel generator. The
Company identifies local trips to meet with regulatory agencies, legal and financial professionals
at three trips per month (40 miles/trip) for a further allowance of $727. The Company contends
that a reasonable allowance for inclusion in this case exceeds $3 800, $700 more than claimed by
the Company. Company Reply, p. 6. No further documentation was provided by the Company
to support these fuel costs.
We find:
The Commission accepts Staff's adjustment for fuel expense and approves a fuel
expense total of$I 626. Without sufficient documentation the Company cannot expect recovery.
Vehicle logs and fuel receipts should be part of the documentation for these expenses.
TravellLodging Expenses
Atlanta Power requests recovery of $2 158 annually for travel and lodging expenses.
Atlanta Exh. 2. Staff reduced travel and lodging expenses by $1 319 for costs unsupported by
invoices and/or that were not supported by detailed invoices. Staff allowed 60% of lodging costs
when the Company provided a debit transaction receipt although there were no detailed receipts
that would identify the room rate, length of stay, meals purchased and other underlying details of
the transaction. Staff Report, pp. 13 , 14. Staff questions whether the magnitude of expenses
claimed is representative of expenses on a going-forward basis. Staff notes further that the
Atlanta establishment related to the lodging costs (Beaver Lodge) is no longer open to the public
ORDER NO. 30704
and as a result, management is staying in a recreational vehicle on a lot owned by one of his
other companies. Staff Report, p. 14.
When asked about work that was performed requiring overnight stays in Atlanta, the
Company responded that
Israel Ray does not maintain time sheets or log books of work performed.
Israel Ray travels to Atlanta to perform his duties not only as president of the
Corporation but to perform a multitude of repair, rebuild, maintenance and
emergency tasks to maintain the electric system. It is not possible to identify
the specific purpose of each of the visits to the service area two years after the
fact.
Staff Report, p. 5.
The Company states that the extraordinary duties required of management, above and
beyond "normal" operation and maintenance, fluctuate from year to year. In this regard, the
extra hours identified in the test year, it contends, are not unusual. Israel Ray has transported his
personal motor home to Atlanta. Noting that homes in the Atlanta area rent for $1 000 per
month or over $30 per day, the Company calculates an equivalent lodging cost of $1 800 per
year based upon 20 trips and 3 overnight stays for each trip. In addition, using the frugal State
meal and incidental daily expense allowance of $30 for 20 trips of 3 to 5 days would produce an
annual expense of $2 400 (30x20x4). Together these meal and lodging costs would be $4 200
per year, far in excess of the $2 158 claimed by the Company in this case. Company Reply, pp.
Since the filing of Staff's Report , the Commission is informed that a report from
Atlanta Power s meal and lodging vendor details trips to Atlanta during 2007 as requiring 14
overnight stays for $1 971 and approximately $921 for meals. Based upon another report, the
total overnight trips excluding trips possibly related to the turbine failure would be 10 trips
averaging 1.4 nights each. This listing identifies meals per trip and meal costs per stay vary and
are under the full-day per diem rate for some trips and over for others. This remains true if an
additional day s per 'diem is added to each overnight stay.
We fmd:
The Commission finds the information provided by the Company and vendor
regarding travel and lodging expense to be contradictory. Total lodging, if the vendor records
are accurate, is considerably less than the Company s estimate. The Company is unable to
ORDER NO. 30704
identify whether these trips were for maintenance which would be ongoing or rebuilds that
should be capitalized and not expensed. The Beaver Lodge is no longer open to the public.
lodging costs are considered recovered through lot rental expenses below, the $839
recommended by Staff equates to almost 30 days of meals and incidental expenses at the State of
Idaho, SBEX Policy No. 442-, maximum per diem rate. The Company, we find, has not
provided sufficient documentation to support its full expense claim. We find Staff's adjustment
for travel and lodging expenses to be reasonable and we approve a travel and lodging expense
totalof$839.
Rental Expenses
Atlanta Power requests recovery of $4 150 annually for rental expense on an
equipment lot that Israel Ray, the owner, rents for Atlanta Power from Middle ForkIBoise LLC
another of his companies. Atlanta Exh. 2. Staff reduced rental expenses by $3 077 to $1 073.
Staff proposes a treatment of the lot similar to that of property owned by the Company. Staff
calculated rental expenses using the proposed overall return on investment and the assessed
value of the 3/4 acre property estimated to be used for storing Atlanta Power s equipment
backup diesel generator and the owner s motor home. Included in Staff's calculation are the
costs of cement for a slab poured partially in one ofthe buildings on the lot. Staff Report, p. 14.
The Company states that the purchase of the lot by Middle F orkIBoise LLC was to
avoid the potential liability issues for Atlanta Power regarding hazardous materials on the site, a
former mill site for the Monarch Mining Company. The property owned by Middle Fork/Boise
is a 3,81-acre parcel of ground. The Company states that the usable part of the property is the
valuable part of the property and that much of the remaining property is unusable and
unbuildable due to steep slopes and heavy winter snowfall. The Company claims the property
has an assessed valuation of $45 339. The Company calculates a return on the entire acreage
owned stating that a fair monthly rental value would be $536.18 per month, an amount greater
than the $4 150 included in its case. Company Reply, p. 7.
We fmd:
This is an affiliate transaction. We fmd that the Company has failed to meet its
burden of demonstrating the reasonableness of its agreement with Middle ForkIBoise LLC. Our
Supreme Court has ruled that transactions between affiliated companies are to be subject to close
scrutiny and the utility has the burden of proving the reasonableness of its affiliated transactions.
ORDER NO. 30704
General Telephone of the Northwest v. Idaho PUC 109 Idaho 942, 712 P.2d 651 (1986); Boise
Water Corporation v. Idaho PUC 97 Idaho 832, 555 P.2d 163 (1976). The same standard
should apply to transactions between the utility and entities owned or controlled by its owner.
Israel Ray has a fiduciary duty to the Company and a transaction with another company affiliated
with Mr. Ray deserves close scrutiny. Under this standard, the Company cannot simply rely on
the fact that a transaction occurred. The Commission finds Staff's rental expense adjustment and
method of calculating rental expense to be reasonable, adds to it $87 associated with lot expense
as the difference in return on equity between Staff's proposed 11 % and the 12% we approve in
this Order, and approves a rental expense total of $1 160.
Insurance
Atlanta Power requests recovery of $2 278 annually for insurance. Atlanta Exh. 2.
Staff reduced insurance expenses by $775 to $1 503 to match the most recent premiums
documented by the Company. Staff Report, p. 14. The Company in reply stated it has and can
provide additional documentation to show that the annual auto insurance premiums are $1 288
and liability premiums are $1 082 for a total of $2 370. Company Reply, p. 7. The Commission
is informed that since the filing of Staff's Report , the Company has provided only documentation
supporting an additional $700 of insurance document processing and brokerage fees.
We find:
The Commission accepts Staff's insurance adjustment and finds it reasonable to
increase the amount by $700 to match additional Company-provided supporting documentation
for an insurance total of $2 203.
Professional Fees
Atlanta Power requests recovery of $4 319 annually for professional fees. Atlanta
Exh. 2. Staff removed $4 319 professional fees for accounting that were, according to the
Company, mostly incurred before 2006. Staffinc1uded $850 of professional fees for preparation
of annual reports based upon consultant expenses to prepare accounting data and annual reports
for 2004, 2005 , and 2006. Staff Report, pp. 14, 15. Atlanta Power notes that subsequent to
filing this case, the Company incurred costs for preparation of its 2005, 2006 and 2007 tax
returns. Subsequent to the filing of Staff's Report , the Company provided a tax preparer
statement documenting tax preparation of the Company s returns. The Company contends that
ORDER NO. 30704
two times the 2007 tax preparation fees of $750 or $1 500 per year is a more realistic allowance
for financial reporting purposes. Company Reply, pp. 7, 8.
The Commission is informed that the Company has presented returned checks written
in 2007 and 2008 to Anna Ray, a related party and part-time contract employee, for negotiations
on a pending Fish Ladder Agreement and for bookkeeping costs. The Company identified
787 in total compensation paid to this contract employee during 2007 and 2008 to handle
accounting, general correspondence and negotiate agreements with governmental agencies.
Atlanta Reply, p. 4. Per Staff's review of the canceled checks with the return memo lines
550 is associated with bookkeeping and $2 238 with a fish ladder agreement. Per direction
from the owner, his daughter caught up the Company s books and entered data for 2004, 2005
2006 2007 and 2008. The two checks for bookkeeping were written mid-2007 and November
2007. Staff has calculated an annual $665 cost for this data entry on a going-forward basis
(dividing the bookkeeping payments by the number of months' data entry (3 years 10 months)
and multiplying by 12). This brings the accounting total to $2 265 ($750 for taxes, $850 for
annual report preparation and $665 for data entry).
The Company characterizes Staff's professional fee adjustments as arbitrary. Atlanta
Power notes that Staff did not include any allowance for legal fees. The Company states that
legal fees have exceeded tens of thousands of dollars in the past. Many of these costs, it states
have been absorbed personally by the owner of the Company and do not appear on the books and
records of the Company. Reply, p. 7. The Company concedes that it did not incur legal
expenses in the test year but contends that it is not unreasonable to assume that the Company will
incur such costs in the future. The Company contends that it incurred $929 in legal fees in 2004
and $3 113 in 2005. The Company states further that it incurred several thousand dollars oflegal
expense in 2007 and 2008. The Company believes that an additional allowance of $2 000 per
year for legal services should be added to the case. Company Reply, p. 8.
We find:
Included in professional fees are accounting and legal services. While it is reasonable
to expect that the Company would incur legal expenses on an ongoing basis, we are unable to
authorize recovery of same based on speculation and without sufficient documentation. The
Company provided documentation only for accounting services. We find Staff's adjustment in
ORDER NO. 30704
this case to be reasonable, add to it $1 415 for additional documented accounting expense and
approve a professional fee total of $2 265.
Other Expenses
Depreciation Expense (net of Contributions in Aid of Construction Amortization)
Atlanta Power requests recovery of $16 782 annually in depreciation expense. Staff
has increased accumulated depreciation to reflect $1 700 salvage value realized by the Company
for sale of copper in 2006, and has revised depreciation expense and the amortization of
Contributions in Aid of Construction to reflect the change in Plant in Service reducing
depreciation expense by $2 586. Staff Report, pp. 10, 15.
We fmd:
The Commission finds Staff's adjustments appropriate, and with other changes
approved in this Order increases depreciation expense by $277 for plant in service documented
after Staff's Report was filed and approves a depreciation expense total of $14,473.
Property Taxes
Atlanta Power requests recovery of $3 836 annually for property taxes. Atlanta Exh.
2. Staff has reduced property taxes by $2 261 to $1 576 per year to reflect the most recent
assessments provided by the Company. Staff Report, p. 14. The Company did not reply to this
adjustment.
We find:
The Commission accepts Staff's property tax adjustment as reasonable and approves
a property tax total of$I 576.
Rate Case Expenses
Staff reviewed rate case invoices submitted by the Company for this case and
excluded items not associated with the surcharge and general rate case expenses (including late
fees). Because these costs are associated with two cases, the surcharge (seven-year recovery)
and the general rate case (generally three-year amortizations), Staff amortized these costs
($12 854) over five years. A five-year amortization (after gross-up) recovers $3 287 each year
for rate case expenses. Staff believes that these rate case costs are higher than normal due to the
substandard recordkeeping of the Company. Staff Report, p. 15; Atch. D.
ORDER NO. 30704
Atlanta Power does not object to the costs Staff excluded from rate case expenses.
Staff's rate case costs include amounts through September 5 2008. Since that time, primarily to
analyze and respond to the Staff recommendations, the Company states it has incurred an
additional $2 507.50 of cost. Further additional costs will be incurred but the amount is
uncertain. The Company s current estimate of rate case costs is $17 500. Company Reply, p. 8.
Its previous estimate was $13 500 filed in its amended Application, Exhibit 12. Its original
estimate was $6 000. Application, p. 6.
The Company objects to a five-year amortization of rate case costs. The bottom line
at issue, it states, is the revenue the Company must collect to be viable and how those revenues
should be collected. The Company claims the three-year amortization it proposed is a more
realistic time period. Company Reply, pp. 8, 9.
Should the Commission accept the recommendations of Staff, Atlanta Power states it
will find it necessary to immediately begin preparing a new general rate case application. The
owners simply are not willing and cannot afford to continue operating this Company as a very
expensive hobby. Company Reply, p. 9.
We find:
The Commission, after reviewing the entirety of the record in this case, finds Staff's
calculated rate case costs through September 5, 2008 and proposed five-year amortization to be
reasonable. We add the additional $2 507 of rate case expense the Company has incurred since
that date. We cannot provide recovery for other estimated and undocumented expense. A five-
year amortization (after gross-up) for the $15 361 we approve recovers $3 928 each year for rate
case expenses. The resultant revenue requirement we establish is $83 680. See Appendix D.
Rate Design
Recurring Rates Tariff Schedules , 2 and
Company Proposal
Atlanta Power in its amended Application calculates an amended revenue
requirement of $113 045, a 55% increase over its $73 051 total adjusted revenue figure. The
Company proposes to recover its revenue requirement increase (55%) on a non-uniform basis
(Schedule 1 - 39% revenue increase; Schedule 2 - 64% revenue increase; Schedule 3 - 60%
revenue increase). Atlanta Exh. 12. The Company provides no explanation or justification for
its rate design.
ORDER NO. 30704
In its amended filing (Exhibit 12) the Company proposes the following rate design:
Current Rates Atlanta Proposed Rates
Schedule 1 (Permanent Residential
Customer Charge $81.00 $112.
Energy Charge 05/kWh 08/kWh
kWh Allowance 500 kWh/month 500 kWh/month
Schedule 2 (Permanent Commercial)
Customer Charge $144.$200.
Energy Charge $. 18/kWh 32/kWh
kWh Allowance 500 kWh/month 500 kWh/month
Schedule 3 (Seasonal)
Residential
Customer Charge $35.$45.
Energy Charge 21/kWh 50/kWh
Commercial (the Company has no seasonal Schedule 3 customers)
Customer Charge $65.(no proposal)
Energy Charge $.21/kWh
Staff Proposal
Staff notes that a class cost-of-service study and coincident peak demand information
is not available in this case for allocation of costs to customer classes. What is known, however
Staff states, is that the Company (an isolated utility off the electric grid) has no transmission
costs and that generation costs for the utility have a large fixed-cost component and a relatively
small variable-cost component because all system generation is provided by hydropower.
Report, p. 16.
Staff recommends an equal percentage revenue allocation and equal percentage
mcreases to all rates.An across-the-board uniform percentage increase, Staff contends
maintains the rate relationships among the customer classes and requires no customer class to
pay more than the average increase. Staff Report, p. 1 6;' Atch. F, Col. (t).
Greene Tree Proposal
Greene Tree proposes that permanent commercial and residential customer class
energy rates be the same. Greene Comments, p. 2. Under current rates, the energy charge for
permanent residential customers is $.05/kWh and $.18/kWh for permanent commercial
customers. Stating that there is no difference in the cost of providing a kilowatt-hour of energy
to customers of either class, Greene Tree suggests that the size of the current disparity (nearly
ORDER NO. 30704
four times) may constitute discrimination. Citing Idaho Code ~ 61-315 (Discrimination and
Preference Prohibited); Grindstone Butte Mutual Canal Co. v. Idaho Public Utilities
Commission 102 Idaho 175 at 180, 627 P.2d 804 (1981) for a listing of relevant considerations
that may justify a difference in rate treatment. Greene Comments, p. 4. Greene Tree currently
has installed diesel generation capacity to serve its own load and suggests that there is an
unspecified cost above which it may choose to self-generate. Greene Comments, p. 6.
Commission Findings
The calculated revenue requirement we establish above for Atlanta Power is $83 680.
See Appendices C and D. The Commission has considered the rate design proposals of the
parties and the discrimination argument of Greene Tree. On the record developed in this case
we find the uniform percentage increase method recommended by Staff to be the fairest and
most reasonable means of recovering the Company s revenue requirement. The calculated
increase required is 14.55%.See Appendix D.Greene Tree s argument that the rates of
commercial customers are almost four times that charged the residential customers at first blush
appears to have merit.The rate schedules for customers, however, have more than one
component. They consist of three components: (1) a customer charge, (2) a kilowatt-hour
allowance, and (3) an energy rate for usage exceeding the allowance. Based on our analysis
billing data, kWh usage and revenue in this case, we find that the average cost per kilowatt-hour
for residential and commercial customers is comparable.Atlanta Power makes a similar
argument in its Reply to Greene Comments, p. 2; Exh. 13. This result is a consequence of
residential customers not exceeding the monthly usage allowance. Commercial customers, on
the other hand, routinely exceed the allowance. At present rates the Company calculates that the
commercial class of customers excluding Greene Tree s Pinnacle Peaks Lodge uses three times
the average energy used by residential customers. Pinnacle Peaks Lodge uses eleven (11) times
more energy than the average residential customer. . Exh. 13.The chart below which
incorporates 2006 adjusted test year customer billing data, and the 14.55% revenue increase we
authorize in this Order reflects this equivalency.
ORDER NO. 30704
Tariff Rate 2006 2006 Present Revenue Ordered Percentage Average
Description Schedule No. of Sales Revenue Adjustments Revenue Change Rate
Bills Adjusted
Adjusted (kWh)
($)($)($)(%)
~/kWh
Pennanent
Residential 250 680 $20 738 017 $23 755 14.55%24.
Pennanent
Commercial 107 876 $23 523 423 $26 946 14.55%25.
Seasonal
Residential 590 765 $28 791 189 $32 980 14.55%85.
Seasonal
Commercial 00%
Total
Retail Sales 899 243 321 $73 051 $10 629 $83 680 14.55%34.4
The kWh adjustment is 2006 kWh/customer applied to 2007 customer count.
With increasing costs to recover and a small customer base of permanent and
seasonal customers, many with self-generation capability, Atlanta Power presents a regulatory
challenge in designing rates. This Commission owes a duty to both the Company and its
customers. Almost all customers object to the requested rate increase. A few state they will
disconnect if the requested rates are approved. If the rates we establish in this case result in
customers leaving the system, the fixed costs of the Company must be recovered from a smaller
customer base. As rates increase to recover those costs, more customers may drop off the system
and the viability of the utility is compromised. We can only hope, as Greene Tree so succinctly
states in its comments, that the availability of centrally supplied electric service continues to be
recognized by customers as contributing to the overall well-being and viability of the Atlanta
community. Greene Comments, p. 6.
Non-Recurring Charges and Fees
Rule 12b (Limitation of Use) Temporary Connections
The Company proposes to modify the language in Rule 12b (Limitation of Use) of its
General Rules and Regulations to clarify that the $10 per month charge approved by the
Commission is for temporary connections only of recreational types of vehicles (campers, motor
homes and trailers) connected to the service of a regular customer s electrical connection. All
such piggyback connections served through another customer s meter for a period greater than
ORDER NO. 30704
30 days annually under the Company s proposal will be treated as additional residential or
commercial service. The effect of this clarification and language is to increase the charge for
such a connection from $10 to $82 (820%) per month if connected to a residential service and to
$165 (1,650%) if connected to a commercial service. Application, p. 3.
Staff does not address this change.
We find:
The Commission finds that the Company-proposed modification to its Rule 12b
(Limitation of Use) language provides clarification and notice to customers that the temporary
connection rule cannot be used for other than its intended purpose without consequence. We
find the change reasonable and direct the Company to submit a conforming rule change.
Schedule Other Miscellaneous Charges
Reconnection Charges
Atlanta Power proposes to change its tariff Schedule 4 Reconnection Charges for
residential customers who voluntarily or involuntarily disconnect from the system for a period of
more than 30 days from $200 to $335 (approximately 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 30 days from
$200 to $660 (approximately 4 times the monthly base rate). These changes, the Company
contends, are necessary to discourage customers from seasonally disconnecting from the system
causing a loss of revenue to the Company and resulting in upward pressure on rates.
Application, p. 3.
Staff supports a change to the Reconnection Charge and proposes a residential
Reconnection Charge of $340 and a commercial Reconnection Charge of $600, approximately
four times the monthly customer charge. Staff Report, p. 17.
We find: .
The Commission finds the proposed change in the Company s reconnectioncharge to
be a reasonable means of maintaining a uniform customer base, fixed-cost recovery and revenue
stability. The change is justified as a means of addressing the seasonal/permanent nature of the
Company s customer base and the revenue requirement necessary for the continued viability of
the utility. We find it reasonable to approve the change and direct the Company to submit a
conforming Schedule 4 tariff sheet with its proposed rates.
ORDER NO. 30704
Atlanta also proposes to add new fees to Schedule 4 that are not currently approved
by the Commission:
Returned Check Charge
The Company requests that the Commission approve a new $20 fee to
reprocess and collect for checks returned by any bank for any reason.
Late Payment Fee
The Company also requests that the Commission authorize it to collect
late fees of 12% per annum (1% per month) on past-due accounts.
Application, p. 4.
Staff recommends the returned check charge and late payment fee be approved. Staff
Report, p. 19.
We find:
The Commission finds the proposed returned check charge and late payment fee to be
reasonable revenue collection tools, finds it reasonable to approve same and directs the
Company to submit a conforming Schedule 4 tariff sheet.
Staff recommends also that the following charges previously approved by the
Commission and presently included in the Company s General Rules and Regulations be moved
to Schedule 4:
$10 monthly charge for additional temporary connections to a meter
$25 meter test fee
Staff Report, p. 19.
We find:
The Commission fmds this proposed relocation of the temporary connection charge
and testing fee to Schedule 4 to be a reasonable administrative change and directs the Company
to submit a conforming Schedule 4 t~ff sheet.
Recordkeeping
Staff recommends that the Company establish a recordkeeping system to document
its business costs. Such documentation, it states, should be obtained and/or prepared
contemporaneously with the underlying cost event, should be sufficiently detailed to allow one
to evaluate the reasonableness ofthe costs, and should be easily retrievable. Staff Report, p. 5.
ORDER NO. 30704
We agree with this recommendation. In this case the Company has sought recovery
of some expenses for which no invoices were provided. In some instances it provided only
cancelled checks and/or bank statements (documenting debit transactions). Cancelled checks
and debit transactions may provide documentation that a payment occurred but do not
necessarily establish that a payment was for the Company rather than a personal cost or a cost
related to other businesses owned by Israel Ray, the Company s owner. The Company
recordkeeping, we note, is the cause for many of the disputed items in the Company s revenue
requirement calculation and caused continuing updates of numbers as the Company provided
additional information.
The Company s existing base rates were approved in 1993 in Case No. ATL-93-
Order No. 24925. In that Order we stated "great improvement is needed in the preparation and
retention of adequate source documentation." Order No. 24925, p. 12. The Company in that
case agreed to maintain and carry forward a proper set of books and to implement the
accounting, recordkeeping, and documentation changes recommended by Staff. In the '93 case
we cited the following language from our 1988 Order No. 22167 in Atlanta Power Case No. U-
1147-
If this attempt by the Company to support its figures (management and
director fees) reveals anything, it is that its business practice and associated
recordkeeping could be vastly improved. Atlanta must operate the utility as a
business and keep proper and contemporaneous records. Expenses must be
properly substantiated. Order No. 22167, p. 7.
Order No. 24925, p. 13. We found the Company s accounting procedures in 1993 to be little
different than they were in 1988. Sadly the same is true today.
As noted by Staff, Israel Ray has been a stockholder in Atlanta Power Company since
its formation in 1982. The Company was managed by Lynn Stevenson until his death in
September 2003. Since that time IsraeLRay has managed the system. Staff Report, p. 2. In this
case remarkably, the Company contends that "Staff should give the benefit of the doubt to the
Company." Company Reply, p. 3. As an expression of contriteness, it states "the Company has
gotten the message it must retain and file its receipts in a businesslike manner." Company
Reply, p. 5. In 1988, we found it unacceptable to allow the Company to dispense with records
and leave ratepayers subject to the "trust me" representations of utility management. Order No.
ORDER NO. 30704
22167, p. 7.Such a position by the Company is no more acceptable today under new
management.
Atlanta Power has made great progress in improving physical plant and system
reliability. Idaho Code 9 61-302 (Maintenance of Adequate Service). We noted as much in an
investigation docket that we closed in 2005. Case No. ATL-03-, Order No. 29706. Staff
makes a similar observation in this case stating "the electric system in Atlanta is in the best
condition that it has been in since Atlanta Power Company was formed.Staff Report, p. 2.
Improvements or excellence in one area, however, do not excuse failings in another. Similar
improvement must be made in the accounting and financial areas. We direct the Company to
implement the Staff-recommended changes.
Annual Reports
The Company, Staff notes, submitted Annual Reports for 2004, 2005, and 2006 on
September 5 , 2007. Staff recommends that the Company complete the 2007 Annual Report and
file it no later than December 31 , 2008 and that it file its 2008 Annual Report when due on April
, 2009. Staff Report, pp. 5, 6. The Company reply does not respond to this
recommendation.
In our 1993 Atlanta Power Order, we noted that the Company was negligent in the
timely filing of its Annual Reports. We reminded the Company that Annual Reports are required
by Idaho statute (Idaho Code 9 61-405). Order No. 24925, p. 13. The Company s failure to file
timely Annual Reports and comply with Commission Orders prevents the Commission from
effectively performing its supervisory and regulatory oversight functions. In 1993, we declined
to impose sanctions. The Company, albeit under new management today, continues to flout this
legal requirement. We direct the Company to file its 2007 Annual Report by year-end and
thereafter to comply with the April 15 statutory deadline.
Customer Relations and Information Rules
The Utility Customer Relations Rules (UCRR), IDAP A 31.21.01.000 et seq.includes
utility requirements for billing documentation. Atlanta Power bills customers on a monthly
basis. Commission Staff in its Report indicates that the billing sample submitted by Atlanta
Power indicates a service period and billing date but does not indicate a due date as required by
Rule 202., UCRR. Staff recommends that the Company update its billing statements to
ORDER NO. 30704
include a specific due date so that it is clear to customers when a bill payment is due. Staff
Report, p. 18.
Rule 103 of the Utility Customer Information Rules (UCIR), IDAP A 31.21.02.000
seq. requires a utility billing statement to include a comparison of the current month's usage with
the same period of time the prior year. Staff notes in its Report that the Company s billing
sample does not include the required information. Staff recommends that the Company update
its statement to include the comparison. Alternatively, Staff states that the Company can ask for
an exemption from this requirement if compliance poses a hardship. Staff Report, p. 18.
Staff notes that the Company rarely turns off customers for non-payment, but when it
is necessary, it contacts the customer by telephone and a letter before service is disconnected.
The Company did not provide a sample of the letter it mails to customers. Staff recommends
that the Company work with Staff to establish a protocol to be used before disconnecting a
customer and the wording and format for the initial and final notices required by Rules 304 and
305 of the UCRR.
Rule 701 ofthe UCRR requires a utility to provide its customers on an annual basis a
copy of its Rule Summary. Staff states that it is willing to provide a sample copy of the Rule
Summary to the Company in electronic format. Staff recommends that the Company be required
to send a copy with its updated billing statement and on an annual basis thereafter to comply
with the Commission s rules.
Staff notes that it also discussed Third Party Notification, the Medical Certificate, the
Winter Payment Plan, and the Winter "Moratorium" with the Company. Staff and the Company
will work together on the protocol, and any necessary forms, consistent with Commission Rules
306, 307 and 308, UCRR.
We find:
The Commission finds that unless the Company requests an exemption, it must
comply with the requirements of the Commission-approved Utility Customer Relations Rules
IDAPA 31.21.01.000 et seq. and Utility Customer Information Rules, IDAPA 31.21.02.000
seq. We find it reasonable to require the Company to work with Staff to bring itself into
compliance within a reasonable time frame.
ORDER NO. 30704
Communication
Staff notes in its Report that utility communication with the customers, especially
regarding unplanned outages and planned outages involving system maintenance and repair
needs to be improved. Staff recommends that the Company obtain a dedicated telephone line
with an answering machine or voice mail with recorded message capability. Such capability
would allow Atlanta Power employees to avoid answering and responding to numerous calls
while they are working on restoring service. A recorded message could also provide all available
information about the outage and be updated when more information becomes available. Outage
messages would also allow customers or other interested persons to get information about
outages when they are not in Atlanta. Staff Report, pp. 18 and 19.
We find:
The Commission finds Staff's recommendation reasonable as a means of improving
utility customer communication. We find it reasonable to require the Company to implement the
Staff recommendation and to secure a dedicated telephone line with an answering machine or
voice mail with recorded message capability.
ULTIMATE FINDINGS OF FACT AND CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over Atlanta Power Company,
an electric utility, pursuant to Idaho Code ~~ 61-119 (Electrical Corporation) and 61-129 (Public
Utility). Atlanta Power operates pursuant to Certificate of Convenience and Necessity No. 300.
The Commission has jurisdiction over the issues raised in Case No. ATL-08-02 pursuant to
Idaho Code, Title 61 , and the Commission s Rules of Procedure, IDAPA 31.01.01.000 et seq.
Having fully reviewed the record in this proceeding, we find that the Company
existing rates are unreasonable and do not afford sufficient revenue to the Company. We
authorize an annual total revenue requirement for Atlanta Power of $83 680, a 14.55% uniform
percentage increase in base rates and an adjusted 28.9% surcharge. We conclude that the rates
and charges set in this Order are fair, just and reasonable. Idaho Code ~~ 61-502 and 61-622.
ORDER
In consideration of the foregoing and as more particularly described and qualified
above, IT IS HEREBY ORDERED and Atlanta Power Company is directed to submit amended
tariff schedules to reflect the Commission-approved rates and charges set forth above and in
Appendix A to this Order with an effective date of January 1 2009.
ORDER NO. 30704
IT IS FURTHER ORDERED and the Commission hereby approves an adjusted
temporary surcharge of 28.9% applied to all tariff rates (except the Schedule 4 "new customer
connection charge ) and meter testing charges (General Rules - Regulations and Rates 'tI15 -
Service and Limitations). Atlanta Power Company is directed to file an amended surcharge tariff
with an effective date of January 1 2009.
IT IS FURTHER ORDERED and Atlanta Power Company is directed to bill the
emergency surcharge as a separate line item on customers' bills and to maintain in a separate
account on its books a monthly record of surcharge payments. The Company is directed to
inform the Commission when the total amount to be recovered by the surcharge has been
collected and immediately request cancellation of the surcharge.
IT IS FURTHER ORDERED and the Company is directed to adopt, implement, and
utilize proper utility accounting procedures and recordkeeping, including, but not limited to, the
preparation and retention of adequate source documentation.
IT IS FURTHER ORDERED and the Company is directed to bring itself into
compliance with the requirements of Utility Customer Relations Rules (IDAPA 31 21.01.000
seq.and Utility Customer Information Rules (IDAP A 31.21.02.000 et seq.
IT IS FURTHER ORDERED and the Company is directed to file its 2007 Annual
Report by no later than December 31 , 2008 and to provide a status accounting of the surcharge
with its Annual Report filings.
IT IS FURTHER ORDERED and the Company is directed to obtain a dedicated
telephone line with an answering machine or voice mail with recorded message capability.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of 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.
ORDER NO. 30704
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this q -t"
day of December 2008.
MACK A. REDFORD, P
ARSHA H. SMITH, COMMISSIONER
ATTEST:
~tJ. fJ~je D. Jewel
Co mISSIOn Secretary
bls/O:A TL-O8-02 sw3
ORDER NO. 30704
ATlANTA POWER COMPANY
Case No. ATl-O8-
General Rate Case
Commission
Description Units Current Ordered
Rates Rates
(a)(b)(c)(d)(e)(f)
Residential (Permanent)Sl Customer Charge
($)
81.00 92.
Energy Charge ($/kWh)050 057
kWh Allowance (kWh)500 500
Revenue
($)
738 755
Increase over Current Rates
(%)
14.55%
Residential (Seasonal)S3 Customer Charge
($)
35.40.
Energy Charge ($/kWh)210 241
kWh Allowance (kWh)
Revenue
($)
791 980
Increase over Current Rates
(%)
14.55%
Commercial (Permanent)S2 Customer Charge
($)
144.164.
Energy Charge ($/kWh)180 206
kWh Allowance (kWh)500 500
Revenue
($)
523 946
Increase over Current Rates
(%)
14.55%
Commercial (Seasonal)S3 Customer Charge
($)
65.74.46
Energy Charge ($/kWh)210 241
kWh Allowance (kWh)
Revenue
($)
Increase over Current Rates
(%)
14.55%
Total Revenue
($)
051 680
Overall Increase
($)
629
Overall Increase
(%)
14.55%
Appendix A
Case No. ATL-08-
Order No. 30704
Atlanta Power Company
Calculation of Rate Base
Test Year Ended 12/31/2006
Commission Order No. 30704
Case No. ATL-08-
(A)(B)(C)
Line Company Staff Commission
No.Pro Forma Pro Forma Order
1 Electric Plant in Service $ 394 337 $ 384 297 $ 385,992
2 Land 145 145 145
3 FERC License 55,153 153 153
4 Vehicles 547 547 25,547
5 Tools and Shop Equipment 119 576 665
6 Office Equipment 187 187 187
7 Total Plant in Service $ 488,487 $ 477 904 $ 479 689
8 Accumulated Depreciation (275 858)(274 341)(274 756)
9 Contributions in Aid of Construction (88 315)(95,443)(95,443)
10 Amortization of Contributions 577 326 326
11 Net Plant and Equipment $ 128 891 $ 112,446 $ 113 817
12 Materials and Supplies Inventory 000
13 Cash Working Capital 029 565 055
14 Total Rate Base $ 143 920 $ 118 011 $ 119 871
Appendix B
Case No. ATL-O8-
Order No. 30704
Atlanta Power Company
Revenues and Expenses
Test Year Ended 12/31/2006
Commission Order No. 30704
Case No. A Tl-08-
(A)(B)(C)
Line Company Staff Commission
No.Pro Forma Pro Forma Order
1 Revenues 389 051 051
Operating Expenses:
Power Generation - labor 990 740 842
Power Generation - Materials and Supplies 4,462 324 936
General Officers Salaries 800 600 600
General Office labor 200 200 200
General Office Supplies and Expense 485 485 485
Rental Expenses 150 073 160
Fuel Expenses 111 626 626
Licenses , Dues and Fees 211 211 211
Insurance 278 503 203
Professional Fees 319 850 265
Bank Charges
Travel and lodging 158 839 839
Total Operating Expenses 234 521 48,436
15 Depreciation Expense 782 196 14,473
(net Cont. in Aid of Const. Amort.
16 Property Taxes 836 576 576
Total Expenses 852 292 64,485
Net Operating Income (16,463)759 566
Appendix C
Case No. ATL-08-
Order No. 30704
Atlanta Power Company
Calculation of Revenue Requirement and Percentage Increase in Revenue
Test Year Ended 12/31/2006
Commission Order No. 30704
Case No. ATL-08-
Line
No.
1 Rate Base
2 Rate of Return
3 Net Operating Income Required
4 Net Operating Income Realized
5 Net Operating Income Deficiency
$ 119,871
11.52%
$ 13 808
566
242
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
$ 5 242
278496
702
702
11 Rate Case Expense Amortization12 Total Expense13 5- Year Amortization14 Tax Gross-up Factor
15 Gross Revenue Required for Rate Case Costs
$ 15 361
072
278496
I Percent Increase
928
629
051
680
14.55%
16 Total Gross Revenue Deficiency
17 Test Year Revenues as Adjusted
18 Total Gross Revenue Requirement
Appendix D
Case No. ATL-08-
Order No. 30704