20101105Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KEMPTON
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
LEG AL
WORKING FILE
FROM:TERRI CARLOCK
DATE:NOVEMBER 5, 2010
RE:ANNUAL DETERMINATION OF THE INTEREST RATES ON
DEPOSITS COLLECTED FROM CUSTOMERS FOR THE CALENDAR
YEAR 2011. CASE NO. GNR-10-01.
Every year the Commission sets the interest rate to be paid on customer deposits for the
next calendar year. Rule 106 of the of the Customer Relations Rules for Gas, Electric and Water
Utilities provides: "the Commission will determine the twelve-month average interest rate for
one-year Treasury Bills for the previous November 1 through October 31 , round that rate to the
nearest whole percent... (IDAP A 31.21.01.106 and IDAP A 31.41.01.104). This average
interest rate is 0.33% as shown on Attachment A. However, Staff believes zero is not a "whole
percent" interest rate, therefore Staff recommends the rate be set at 1 %, as is currently the 2010
rate.
Rule 9 of the Customer Relations Rules for Gas, Electric and Water Utilities allows the
Commission on its own motion to approve a deviation of the rule in unusual circumstances
(Exemption from Rules , IDAP A 31.21.01.009). Staff believes the current low interest rates
represent an unusual situation. Fairness supports the belief that payment of zero interest is not
the intent behind the rule stating "interest will be payable on all deposited amounts.Id. The
chart on Attachment B shows the interest rates since 1990 and the Order numbers approving
those rates.
COMMISSION DECISION
What interest rate should be paid on deposits collected from customers for the calendar
year 2011?
J~ ~~cR
Terri Carlock
u/tcarlocl AnnDetIntRaes 11-20 1 O. TC
ONE-YEAR TREASURY RATES
Week Ended Rate %Week Ended Rate %
11/6/2009 5/7/2010
11/13/2009 5/14/2010
11/20/2009 5/21/2010
11/27/2009 5/28/2010
12/4/2009 6/4/2010
12/11/2009 6/11/2010
12/18/2009 6/18/2010
12/24/2009 6/25/2010
12/31/2009 7/2/2010
1/8/2010 7/9/2010
1/15/2010 7/16/2010
1/22/2010 7/23/2010
1/29/2010 7/30/2010
2/5/2010 8/6/2010
2/12/2010 8/13/2010
2/19/2010 8/20/2010
2/26/2010 8/27/2010
3/5/2010 9/3/2010
3/12/2010 9/10/2010
3/19/2010 9/17/2010
3/26/2010 9/24/2010
4/2/2010 10/1/2010
4/9/2010 10/8/2010
4/16/2010 10/15/2010
4/23/2010 10/22/2010
4/30/2010 10/29/2010
AVERAGE 33 %
Source: Federal Reserve Treasury Rates
One-Year Constant Maturities
ATTACHMENT A
Interest Rates on Deposits
Calendar Year
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Interest Rate Order No.
22836
23425
23971
24578
25242
25788
26233
26681
27248
27828
28234
28575
28896
29158
29386
29653
29932
30200
30469
30692
30965
ATTACHMENT B