SWC Rate Case Application Exhibit Instructions.pdf

SWC Case Instructions Main.doc 1
SWC CASE APPLICATION AND EXHIBIT INSTRUCTIONS
INTRODUCTION
The owners and operators of small water companies often do not possess the
knowledge and expertise necessary to file an Application with the Idaho Public
Utilities Commission (Commission) to change rates for water service to their
customers. Included with these instructions are a sample Application, sample
customer notice, a set of exhibits and sample Supplemental Schedules the
owner/operator may use for this purpose.
Use of the enclosed exhibits and samples does not guarantee that the rates the
company is requesting will be approved by the Commission. The Commission
Staff (Staff) will review the Application, audit the books and records of the water
system, review consumer complaint records and make its own recommendation
to the Commission regarding the rates and charges of the water system.
Interested customers or customer groups may also formally intervene in the case
or offer comments regarding the Application. A workshop or formal hearing may
be conducted or the Application may be processed under modified procedure
without hearing. If a hearing is scheduled, it will be open to the public and
conducted in the vicinity of your service area in order that you and any of your
customers will not be unduly inconvenienced. The Idaho Public Utilities
Commissioners will weigh the evidence presented to them and make a
determination regarding the appropriate rates for the water system.
APPLICATION
The attached sample Application is in a legal format designed to cover all of the
required information. Complete the Application by inserting the required
information where indicated by underlined parenthetical examples. The case
number indicated at the top right of the first page will be assigned by the
Commission Secretary when the Application is received by the Commission. You
will be informed of the case number; all further correspondence regarding the
case must be referenced to this number. The requested effective date indicated
on page 2 of the Application must be at least 30 days after the date the
Application is filed with the Commission. Any officer or employee of the company
may represent the company before the Idaho Public Utilities Commission. Legal
counsel, though not required, may be retained to represent the company and
may expedite processing of the Application.
An Original and seven (7) copies of the completed Application and attachments
identified as exhibits should be filed with:
Idaho Public Utilities Commission
PO Box 83720
Boise, Idaho 82720-0074
Attn: Secretary
Two (2) copies of the workpapers and supplemental schedules must also be
included with the Application when it is filed.
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Upon recommendation from Staff, the Commission may determine that modified
procedure is appropriate for the case. In this instance, a shorter less formal
process with a workshop only and no formal hearing will be used.
In the event the case is not handled under modified procedure and proceeds to a
formal hearing, you will be required to provide written testimony in support of
the Application. The Commission Staff will provide you with a sample copy of the
required format for the testimony if it is required.
EXHIBITS AND ATTACHMENTS
Exhibit No. 1, Schedule A provides the detail of your plant in service accounts. It
is constructed in the same format as page 5 of your annual report to the
Commission. You may not have investments in all of the plant accounts
identified on this exhibit. Column (A) of this exhibit should match the annual
report filed for the year used as the test period in your Application.
In Column (B) you may adjust the actual test year balances for known changes
that have occurred subsequent to the end of the test year or will occur within
one (1) year of the test year-end. It is incumbent upon you to provide
workpapers showing the development of the adjustments and provide proof that
the changes have or will occur within the one (1) year period.
You must provide the detail of each adjustment in the workpapers and provide a
summation workpaper of all the changes. The summation of the adjustments
should be entered in Column (B) of this exhibit.
Column (C) is the adjusted test year balance of the plant in service accounts. It
is simply the summation of Columns (A) and (B). The totals on line 29 should be
entered on line 1 of Exhibit No. 1, Schedule C.
Exhibit No. 1, Schedule B provides the detail of your accumulated depreciation
accounts. It is constructed in the same format as page 6 of your annual report
to the Commission. You may not have any depreciable investment for some of
the accounts identified on this exhibit. Column (A) of this exhibit should match
the annual report filed with the Commission for the year used as the test period
in your Application.
In Column (B) you should adjust the actual test year balances for additional
depreciation that will be recognized in the twelve months following the end of the
test period including any additions to the plant in service accounts recognized on
Exhibit No. 1, Schedule A, Column (B).
You must provide the detail of each adjustment in the workpapers and provide a
summation workpaper of all the changes. The summation of the adjustments
should be entered in Column (B) of this exhibit.
Column (C) is the adjusted test year balance of the accumulated depreciation
accounts. It is simply the summation of Columns (A) and (B). The totals on line
26 should be entered on line 2 of Exhibit No. 1, Schedule C.
Exhibit No. 1, Schedule C is the calculation of the rate base used to determine
your total revenue requirement. The rate base is the investment in system
assets reduced by accumulated depreciation, advances and contributions for
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construction received from customers or developers plus an allowance for
working capital. The working capital allowance may not always be allowed if it
can be shown that your cash flow lag on payment to creditors and employees
exceeds your cash flow lead time on prepayments by analyzing the source and
Application of funds shown on your balance sheet. Generally small companies
will qualify for this allowance. The Commission Staff will always perform an
analysis of your balance sheet to determine if this allowance is appropriate.
Staff’s calculation will be provided to you before any decision is made by the
Commissioners.
Lines 1 and 2 of this exhibit were developed on Exhibit No. 1, Schedules A and B
and should be carried forward to this schedule.
Column (A), lines 4 through 8 and line 10 should match the annual report filed with
the Commission for the test period. References are provided to show you where to
find the appropriate numbers in your annual report. Line 9, working capital
(discussed above) cannot be calculated until you have completed Exhibit No. 2,
Schedule B.
In Column (B) you may adjust the actual test year balances for known changes
that have occurred subsequent to the end of the test year or will occur within
one (1) year of the test year-end. It is incumbent upon you to provide
workpapers showing the development of the adjustments and provide proof that
the changes have or will occur within the one (1) year period.
Column (C) is simply the test year balances adjusted for the known changes
identified in Column (B).
Lines 4 and 6 of this schedule should be blank unless you have purchased
another water system at a price greater than its net book value AND the
Commission has approved the purchase price and authorized you to record an
acquisition adjustment for the premium paid. If you are requesting Commission
approval of such a transaction at this time you must provide an explanation of
the transaction in your Application and provide workpapers showing the detail of
the acquisition.
The totals on line 11 are the summation of lines 3, 4, 5, 9 and 10 less lines 6, 7
and 8. The total amounts on line 11 should be entered on Exhibit No. 4, line 1.
Exhibit No. 2, Schedule A, Column (A) of this revenue exhibit should be taken
from page 3, lines 1 through 11 of your annual report to the Commission for the
test period. If the DEQ fees are not billed separately to your customers but are
included in your base rates, do not enter anything on line 9. If hookup or
connection fees are treated as contributions in aid of construction, do not include
them on line 10. If the Commission has authorized the collection of any special
surcharges dedicated for a special purpose, include the amount of the surcharges
collected during the test period in Column (A) and then eliminate them in Column
(B). Make sure you make an offsetting adjustment either to plant in service
(Exhibit No. 1, Schedule A) or Operating Expenses (Exhibit No. 2, Schedule B),
whichever is appropriate.
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In Column (B) you may adjust the actual test year balances for known changes
that have occurred subsequent to the end of the test year or will occur within
one (1) year of the test year-end. It is incumbent upon you to provide
workpapers showing the development of the adjustments and provide proof that
the changes have or will occur within the one (1) year period.
If you have made adjustment to other exhibits to recognize changes due to
growth, you must make adjustments on this exhibit to recognize that growth.
Your workpapers must show how you developed the adjustments.
The totals developed on line 12 of this exhibit should be carried forward to line 1
of Exhibit No. 2, Schedule C.
Exhibit No. 2, Schedule B presents the detail of operating expenses. This
schedule is presented in the same format as page 3 of your annual report to the
Commission and the amounts in Column (A) should match the annual report for
the test period. As with the previous schedules, Column (B) is for the purpose of
adjusting the test period for known changes. If any other schedule has been
adjusted to recognize growth, this schedule must also be adjusted for changes in
expenses caused by that growth. Your workpapers must provide the details of
how the adjustments were developed.
The totals shown on line 22 should be carried forward to line 2 of Exhibit No. 2,
Schedule C.
Exhibit No. 2, Schedule C is the income statement for your company. It is
presented in the same format as page 4 of the annual report to the Commission.
Column (A) of this schedule should match the annual report filed with the
Commission for the test period. As with previous schedules, Column (B) is for
the purpose of adjusting the test year data for known and measurable changes.
This schedule must be adjusted for any adjustments made to previous schedules
that would have an effect on any of the items shown on this schedule. For
example, a change to plant in service shown on Exhibit No. 1, Schedule (A)
would affect depreciation expense line 3 on this exhibit. You must include
workpapers showing the development of each adjustment.
If you eliminated DEQ fees billed separately to customers from your revenues on
Exhibit No. 2, Schedule A you must also eliminate the fees paid by you to the
DEQ on line 9A of this schedule.
The net income developed on line 32 of this schedule should be carried forward to
Exhibit No. 4, line 4.
Exhibit No. 3 develops your weighted cost of capital also referred to as the
required rate of return (ROR). The ROR is composed of the weighted cost of
your debt and the investment you have made (equity) in the water system.
Line 1 is the amount of investment the owners have made in the company. Line
2, retained earnings, is composed of the amount of earning realized in past
periods that have not been paid out to the owners and have been reinvested in
the company.
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The common equity amount on line 1, Column (A) should match the amount
shown in your annual report to the Commission for the test year at page 8, line 8
less the amounts shown on lines 4 and 5 of the annual report page.
The retained earnings amount shown on line 2, Column (A) should match the
sum of lines 4 and 5, page 8 of the annual report to the Commission.
The short-term debt amount shown on line 4, Column (A) should match the
amount shown on line 13, page 8 of the annual report.
The long-term debt amount shown on line 5, Column (A) should match the sum
of the amounts shown on lines 9 and l1, page 8 of the annual report to the
Commission.
If you will be incurring additional debt or investing additional owner capital to
provide for expansion or improvement to the system and have made
adjustments to the plant in service (Exhibit No. 1, Schedule A), you may
recognize these additional capital sources on this exhibit but you must provide a
workpaper showing the development of the adjustments.
If you have debt instruments (bonds or notes) that are due within the 12 months
following the end of the test period, you may adjust this exhibit to recognize the
debt retirement or rollover. You must provide a workpaper showing the
development of the adjustments.
Column (B) of Exhibit No. 3 calculates the weight (% of total) of each component
of your total capital. The percentage is calculated by dividing the amounts
shown on lines 3, 4 and 5 by the total amount shown on line 6 of Column (A).
Column (C) is the cost to the company of each capital component expressed as a
percentage. For example, you have a 20-year note (long-term) payable to your
bank at an interest rate of 8% per annum. Your cost for this capital source is the
indicated 8% interest rate. If you have more than one outstanding note of each
type of debt, you must submit a workpaper showing the calculation of the
weighted cost of all the outstanding notes. If you have been authorized to
impose a special surcharge to pay one or more of these notes, do not include the
notes in these calculations.
The cost of common equity, line 3, is the rate of return you believe is reasonable
for you, as owners, to earn on your investment in the company. You must
provide a workpaper showing why this return is reasonable and support the
return with a comparison of returns you could earn on comparable investments
with similar risks.
Column (D) is the weighted cost of each capital component. It is calculated by
multiplying the ratio percentage (Column (B)) by the cost (Column (C)).
The sum of the weighted costs, lines 3, 4 and 5, Column (D) produces the total
weighted cost of capital or ROR on line 7, Column (D). This amount should be
carried forward to Exhibit No. 4, line 2, Columns (A) and (C).
Exhibit No. 4 is the calculation of your required revenue requirement and the
deficiency, if any, that you want to recover through the rate increase.
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The rate base, line 1 was developed on Exhibit No. 1, Schedule C. The rate of
return, line 2, was developed on Exhibit No. 3. The income required to produce
the required rate of return, line 3, is calculated by multiplying line 1 by line 2.
The income realized, line 4, was developed on Exhibit No. 2, Schedule C and is
subtracted from line 3 to produce the income deficience shown on line 5. The
amount on line 5, Column (C) is the amount of the rate increase necessary to
achieve the required rate of return.

Commission staff has created a Model Tariff for use by small water companies.
This model should be incorporated by the company as part of the rate case
process. All recurring and non-recurring charges should be included in Rate
Schedules at the front of the tariff. The Rules and Regulations section of the
Model Tariff is approved as written by the Commission. Changes to the rules and
regulations or supplemental rules and regulations for which the company seeks
approval should be included in Paragraph 14.
The Uniform Main Extension Rule has also been approved by the Commission as
written. Changes to the rules or supplemental rules should be submitted for
approval.

Exhibit No. 5 is a copy of your existing residential tariff(s) showing the changes
you propose by drawing a line through existing rates, charges and language and
showing the proposed rates charges and language. Proposed tariffs that are new
should also be included.
A sample Exhibit No. 5 is included in the exhibit package.
Exhibit No. 6 is a copy of your existing commercial tariff(s) showing the changes
you propose by drawing a line through existing rates, charges and language and
showing the proposed rates charges and language. A sample Exhibit No. 6 is
included in the exhibit package. If you have no commercial tariff, include an
exhibit marked as Exhibit No. 6 that states "NO COMMERCIAL TARIFF".
Exhibit No. 7 is a copy of your proposed residential tariff with rates, charges and
language for which you are seeking Commission approval. A sample Exhibit No.
7 is included in the exhibit package.
Exhibit No. 8 is a copy of your proposed commercial tariff with rates, charges
and language for which you are seeking Commission approval. A sample Exhibit
No. 8 is included in the exhibit package. If you have no commercial tariff,
include an exhibit marked as Exhibit No. 8 that states "NO COMMERCIAL
TARIFF".
Exhibit No. 9 is a copy of the tariff form to be used to state either existing or
proposed non-recurring fees for such items as initial hook-up and reconnection.
If there are no recurring fees, an exhibit using this form should be included
stating “No Recurring Fees”.
Exhibit No. 10 is a copy of the notice you mailed directly to your customers
informing them of your Application to the Commission to increase your rates and
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charges and the similar notice published in the local newspaper. A sample
Exhibit No. 10 is included in the exhibit package.
FILE ONLY 2 COPIES OF THE FOLLOWING SUPPLEMENTAL SCHEDULES.
Supplemental Schedule 1 is a schedule of monthly water use by your customers.
You must indicate whether the data provided is in ccf (hundreds of cubic feet) or
000s of gallons. This schedule should be prepared on an individual customer
basis. Do not identify customers by name but retain enough detail in your
records to make it possible to identify a particular customer should it become
necessary. A sample Supplemental Schedule 1 is included in the exhibit
package. You may substitute copies of customer billings if it is more efficient. If
copies of bills are provided please block out the customer name. If you have no
metered customers insert a page identified as Supplemental Schedule 1 that
states "NO METERED CUSTOMERS".
Supplemental Schedule 2 is a schedule of monthly water pumped or delivered
into your system from every source for each month of the test period. You must
indicate whether the data is provided in ccf (hundreds of cubic feet) or 000s of
gallons. If you do not have flow meters on each source of supply, so indicate
and explain why such equipment has not been installed on your system. A
sample Supplemental Schedule 2 is included in the exhibit package.
Supplemental Schedule 3 is a schedule providing detailed information on each of
the company’s wells. A sample Supplemental Schedule 3 is included in the
exhibit package. Show the information for each existing well. If a new well is
under construction or anticipated to be constructed within 12 months of the end
of the test year, indicate the anticipated completion date and your best estimate
regarding the information requested on this schedule.
Supplemental Schedule 4 is a schedule providing detailed information on each of
the company’s storage reservoirs. A sample Supplemental Schedule 4 is included
in the exhibit package. Show the information for each existing reservoir. If a
new reservoir is under construction or anticipated to be constructed within 12
months of the end of the test period indicate the anticipated completion date and
your best estimate regarding the information requested on this schedule.

Commission staff has created a Model Tariff for use by small water companies.
This model should be incorporated by the company as part of the rate case
process. All recurring and non-recurring charges should be included in Rate
Schedules at the front of the tariff. The Rules and Regulations section of the
Model Tariff is approved as written by the Commission. Changes to the rules and
regulations or supplemental rules and regulations for which the company seeks
approval should be included in Paragraph 14.

The Uniform Main Extension Rule has also been approved by the Commission as
written. Changes to the rules or supplemental rules should be submitted for
approval.
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WORKPAPERS (FILE ONLY TWO COPIES)
Workpapers providing full details and explanations of any adjustments to the
actual test year data must be provided with reference to which exhibit(s) are
affected by the adjustments.
You may prepare the workpapers as you wish but complete detail regarding the
justification for the adjustments must be included. References to source
documentation must also be included. You may be required to provide copies of
referenced documentation if it is not included in your workpapers.