20100222Reply Comments.pdf

FALLS WA TERuc \IF
R, 'i '-" I .~,. COMPANY' ,. 4
2180 N Deborah Dr, Idaho Falls, Idaho 83401 Tel.: (208) 5iitff22 AM 8. 2Website: ww.fallswater.com Fax: [phone]~l~:.()
February 19, 2010 UTILlnES
Idaho Public Utilities Commission
472 West Washington Street
PO Box 83720
Boise, Idaho 83720-0074
Enclosed are eight (8) copies of the Company's reply to the Staffs Comments for case no. FLS-W-
09-1. Original signature pages wil follow in the maiL. Electronic version of the Excel files
referenced in the response and a pdf file of the reply comments were e-mailed to your office.
If you need anything else, please, let me know what you need.
Thank you,K.~~
K. Scott Bruce
General Manager
Falls Water Company, Inc.
Enclosures
K. Scott Bruce
Falls Water Company, Inc.
2180 N. Deborah Dr
Idaho Falls, ID 83401
TeL. [phone]
Fax [phone]
E-mail: scott1(ßfallswater.com
Representative for Falls Water Co., Inc.
'RECt:\\/\':
20 ì 0 FEB 19 PH 3: 5 l
BEFORE THE IDAHO PUBLIC UTILITIS COMMSSION
IN TH MATTER OF TH APPUCATION OF )
FALLS WATER COMPAN FORAN ORDER )
AUTHORIING INCREASES IN TH COMPAN'S )
RATES AN CHAGES FOR WATER SERVICE )
)
)
)
)
CASE NO. FLS-W-09-1
COMPAN'S REPLY TO
COMMNTS OF TH
COMMSION STAF
Comes now Falls Water Company and files the following reply to comments of the
Commision Staff dated February 11,2010.
OPERATIG EXPENSES
Rental Expense, Staff Adjustment (Staff Attachment No. A lie 34).
On pages 6 and 7 of the Sta Comments, the Sta adjusted the property rental expense for
the Company's offce/warhouse lease to include only the base rent and base additiona ret of the
intial year of the curent lease agreement. Sta fails to explai its rational for why the escalators
are unacceptable.
The Company's previous offce space lease, which was not with an afliated company,
had escalators in it. The origina lease agreement wa for two year 2004 and 2005. A single
year lease was entered into for 2006. Another single year lease was entered into for 2007. 2008
was month to month using the prior leases renta fees.
The Company's previous monthy lease payments to DASH Buildig, for the lease at
1770 Sabin Drive Idao Falls, Idao were as follows:
1
COMPANY REPLY TO STAFF COMMENTS FEBRUARY 19,2010
2004 2005 2006 2007 2008
Monthly Rent $881.00 $920.00 $970.00 $990.00 $990.00
% Change in Monthy Rent 4.43%5.43%2.06%0.00%
The Company's curent lease for 2180 Nort Debora Drive Idao Falls, Idao, is a four
year leas. A schedule of the monthy renta payments factorig in the anua escalations in the
lease are shown below:
2009 2010 2011 2012
Monthy Rent $2,700.00 $2,800.00 $2,900.00 $3,000.00
Utilties/Operating Costs $ 610.00 $ 671.00 $ 738.10 $ 811.91
Tota Rent Payment $3,310.00 $3,471.00 $3,638.10 $3,811.91
% Change in Monthy Rent 4.86%4.81%4.78%
The escalation percentage of the curent offce/warehouse lease is comparable to the
escalation percentage of the former offce space lease. All of the former renta agreement for the
Company's office at 1770 Sabin Drve was included in the rates for recovery from customers.
Therefore, the company submits that its curent offce/waehouse lease, including the escalators,
is reasonable and should be included in the rates that it recovers from its customers.
The Company requests the offce and warhouse rent costs included for recovery from
customers is $43,684 for Offce Rent Costs. Company's adjustment is an increase in expenses of
$3,964, as shown on Exhibit 11, line 34.
Electric Power Costs
Company concurs with Staffs assessment of the Company's power cost adjustment.
Water testing Cost Adjustment
Company concur with Stas adjustment of its water testig costs.
RATE BASE
Staf proposes a rate base of $1,442,759. The Company taes exception to the Stas rate
base adjustments as discussed below. Revisions to rate base and revenue requirements will be
addressed followig the discussion of the adjustments.
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COMPANY REPLY TO STAFF COMMNTS FEBRUARY 19,2010
Staff Adjustment to Engineerig Consulting Fees from Staff Comments pages 11 and 12
Staffs adjustment is based on its belief that the tasks pedormed by Schiess and Associates
and East-Central Idao Plang & Development Association (ECIPDA) durg the bid processes
for Well No.9 were duplication of effort.
Schiess & Associates and ECIPDA's efforts in the bid process for Well NO.9 may appear to
duplicate efforts in their scopes of work, but they are pedorming different taks pertg to the
engineering or techncal support of the bid process on the one had and the adinistrtive support
durg the biddig phae on the other had. Exhbit 10 is a letter from Wiliam Teuscher of the
Deparent of Environmenta Quality (DEQ), the fuding agency for the Well No.9 project,
which explais the separation of tasks.
DEQ understads that the engieer and ECIPDA did not duplicate effort. As the fuding
agency, DEQ would not have approved disburement ofloan monies to pay the chages if they
felt that the two companes were duplicating taks.
Company feels that ECIPDA did not provide duplication of simlar servce already provided
by Schiess & Associates, but rather each company provided specific servces durg the bid
process and worked in concert with eah other to ensure that the bid process met all of the
requirements set out by the fuding agency, DEQ. Company proposes tht the cost of $8,000
paid to ECIPDA be included in the rate base as shown on Exhbit 12, line 2. The adjustment also
requires an increase to depreciation expens of $273.87 as shown on Exhbit 11, line 51.
Staff Adjustment to Land Acquisition Cost from Staff Comments pages 12 and 13
Stain its comments beginng at page 12 discusses the $160,000 land acquisition costs
associated with Well NO.9. Sta determed that the cost was reasonable. However, Sta
eliminated one-half the purchase price of $80,000 frm rate base as plant held for futue use.
Staffs rational was that the property was acquired for the dual purose of constrcting both a
well and a storage reservoir. Staff deterned that although the well has been completed, the
reservoir has not and one-half the purchase price represents an investment that is not used and
3
COMPANY REPLY TO STAFF COMMNTS FEBRUARY 19,2010
usefuL. Applicant takes exception to the elimnation of this investment from rate base without an
equa and commensurate adjusent to Applicants Contrbutions in aid of constrction account.
Ths propery was purchaed using fuds contrbuted to the Company by thrd par property
developers.
In Case No. FLS- W -07 -01 Applicat in its reply to Sta comments addressed the issue of
these contrbutions as follows:
"Falls Water Company is unque among reguated water companes in Idaho.
Falls Water is unaware of any other regulated water company that collects a contrbution
in aid of constrction from developers to pay for futue source of supply and storage
assets required to meet growth on the system resulting from the development activities.
Most water companes accept the contrbution of a completed asset (well and/or
reservoir) from a developer who has constrcted such facilties as a par of the property
development project. United Water Company in Boise collects no contrbution for these
facilties but rather uses its retaed earngs, debt or additional investor fuds to
constrt these facilties thus increasing its investment in plant in servce (rate base). All
companes accept or will accept contrbutions of transmission and distrbution piping,
customer services, meters and fire hydrants. All such contrbutions are simultaeous with
the addition of a new asset (plant in service, or rate base)
Falls Water Company is one of the larger reguated water companes in the stte
and is in an area that is grwing rapidly. Unlike United water in Boise, Falls Water
Company is a small independent company with few owners. Falls Water Company does
not have access to the capita markets of United Water and other ver large utilty
companes. Hence the contrbution in aid of constrction the Compay is authorized to
collect for futue source of supply and storage needs resulting from new development in
the area.
Stahas eliminated from rate base the Companes investment of $272,500.00 in
its new well #9 tht will be in service in mid 2008. Simultaeously, Stahas included
the fuds invested in this futue asset in the "Contrbutions in Aid of Constrction"
Account tht is a rate base deduction. In effect, the Stahere has "double dipped" the
Company's rate base investments. The asset is not recogned in rate base while the
contrbuted fuds invested in the asset ar used to reduce the company's investment in
other assets. Ths is an inappropriate takg of the Company's investments. Staffhas
also used additiona developer contrbutions for source of supply and storage to reduce
the Compay's rate base by $166,100.87. These contrbutions ar intended to be used for
futue development of source of supply and storage facilties. The Company treats these
contrbuted fuds as dedicated fuds for futue constrction of source of supply and
storage facilties. They are considered contrbutions held for futue use, an offset to
propert held for futue use. They are not used to meet curent cash flow needs for
operating expenses or constrct other asset improvements. The purose of these
developer contrbutions is to avoid rate shock in the futue when large investments in
wells and reservoirs are placed in service to meet new demands on the water system
caused by growth. Sta s approach arificially suppresses curent rates to existing
customers and insures futue rate shock to all customers when a new water source or
4
COMPANY REPLY TO STAFF COMMENTS FEBRUARY 19,2010
storage asset is placed in servce without the benefit of an additiona contrbution in aid
of constrction offset. In the meantime, Falls Water Company is precluded from earng
a fai, just and reasonable retu on investor fuds used to constrct faculties that are
curently used and usefu to provide service to our customers.
The Commission should reject the Stas proposed rate base adjusents in their
entirety." (Reply Comments at Page 3&4)
The Commission in its findings in Order No. 30484 beginng at Page 9 addressed the
Company's arguents as follows:
"We fuer find the Company's "double counting" arguent is unpersuaive.
Stas accounting adjustments are in compliance with the appropriate accounting
stadads in the USOA. Account 271 (Contrbutions in Aid of Constrction) provides
that ths account shal include: "Any amount or item of money, servces or propert
received by a utilty, from any person or governenta agency, any portion of which is
provided at no cost to the utilty, which represents an addition or trsfer to the capita of
the utilty, and which is utilized to offet the acquisition, improvement or constrction
costs of the utilty's property. facilities or equipment used to provide utilty services to the
public. " (emphais added) The $272,500 reresenting Well No. 9 costs is appropriately
classified as "plant held for futue use. "The fuds used to acqui these assets (the lot
for Well No.9 and the down payment for water rights) come from Account 271
(Contrbutions in Aid of Construction). Consequently, the Staffha made two accounting
adjustments but it does not constitute inppropriate accounting or double countig under
the USOA. In essence, the contrbutions requie one accounting entr and plant held for
futue use requies the second accountig entr. When Well NO.9 comes online, the
Company cares the burden of showing the reasonable and prudent costs associated with
Well NO.9 should be included in rate base." (Order 30484 at Page 9)
The Commssion's own quote from the Uniform System of Accounts (USOA) (identified
above with the added emphais) quaifies the defition of a contrbution to be related to an asset
".. .used to provide utilty serices to the public," Obviously, if an asset is considered to be plant
held for futue use, not used and usefu to provide utility servce, the contrbution used for the
purchae of such asset should also be considered "held for futue use" and not used to dilute the
Company's investment in "used and usefu" assets.
The Commission's Order No. 30484 went on to stte:
"The Company is correct that the $ 1 66, 1 00 impact fee contrbutions will normally
be used to defry the costs of "futue development of source of supply and storage
facilties. The Company treats these contrbuted fuds as dedicated fuds for futu
constrction of source of supply and storage facilities." However, the Company is not
correct in its statement that these contrbutions operate as "an offset to proper held for
futue us." These contrbutions/impact fees represent capita "contrbuted" by developers
"at no cost to the utilty. See supra defintion of Account 271 at page 9. The contrbutions
5
COMPANY REPLY TO STAFF COMMNTS FEBRUARY 19,2010
are not provided by the shareholders so including the contrbutions in rate base and
earing the overall rate of retu is not appropriate." (Order No. 30484 at Page 10)
The Commission's order reognzes tht these impact fees (contrbutions) will be use to
defray the cost of futue development of source of supply and storage facilties. The languge in
the order sounds as though the Commission thought applicat was seeking an opportty to ear
a retu on the value of the contrbutions. Indeed what applicant was seeking was an opportty
to ear a retu on the real asset used and usefu in providing servce to customers, undiluted by
contrbutions reserved for the futue acquisition of assets required to meet futu customer
requirements.
The Commission's order was silent regarding applicants arguent that Stas
recommendations arificially suppress curent rates and ensure futue rate shock. In the interest of
clarfying the effect of Stas recommendation to eliminate the value of an asset held for futu
use without a commensurte elimination of the contrbutions used to acquire the asset, Applicant
attaches Exhbit No. 14 to these reply comments. That exhbit is a simplified hypthetical
example of the effect on the Company over a 4 year period. The Exhbit shows tht the
Company's revenues, and therefore eargs, are suppressed for several year until such time as
an asset is constrcted utilzing the contrbuted fuds. The first several years, Customers bils are
arficially reduced while contrbutions are collected then a large increase is required once the new
asset is placed in service. The income lost by the Company durg the period is gone forever and
canot be recovered. Ths obviously demonstrates a reguatory takng of the Company's
property.
Falls Water proposes that the Commssion recognze tht Contrbutions received by the
Company for futu constrction of source of supply property and equipment should not be used
to reduce the value of existig used and usefu plant in servce. Applicant fuer proposes that
contrbuted fuds received by the Company for future constrction will be placed in a separate
ban saving account and interest eared on the fuds be recognzed as additional contrbutions to
benefit customers when new source of supply plant is constrcted using the fuds.
Revised Revenue Requirement Based on Adjustments to Operations Expenses and Rate
Base
6
COMPANY REPLY TO STAFF COMMNTS FEBRUARY 19,2010
Company's adjustments to increase rental propert expense $3,964.04 (shown on Exhbit 11,
line 34) and to increase depreciation expense $273.87 (shown on Exhbit 11, line 51) increase the
net loss resultig from operations frm Stas comments of($3,070.52) to ($7,308.42) as shown
on Exhbit 11, line 64.
Company's calcultion of rate base includes an adjustment to increase Plant in Servce
account 304 - Well Strctus & Improvements for $8,000 (shown on Exhibit 12, line 2); an
adjustment to increae Accumulated Depreciation of $133.33 (shown on Exhbit 12, line 14); an
adjustment to decrease Gross Contrbutions in Aid of Constrction to offset Stas deduction of
~ the purchase price of Well No. 9 lot, which was purhased with CIAC fuds, of $80,000
(shown on Exhibit 12, line 18); and an increase in workig capita of $459.51 (shown on Exhbit
12, line 21), resulting in a proposed rate base of$1,531,120.82 (shown on Exhbit 12, line 22).
Company proposes a revenue requirement of$1,103,568.19 as shown on the calculation of
revenue requirement Exhbit 13, line 15.
RATE DESIGN
Company recognzes the rationa of Stas rate design based on meter size. However,
concerns have suraced about hidden costs to the company and its customers should the meter size
rate design be accepted.
A number of the residential customers, who instaled 1" meters year ago, did so at the
time because it saved them money in the long ru. By instling a larger meter, they would be
able to save money on the instalation of their lawn irrgation system by havig to instal fewer
sprinker zones. These customers may have chosen not to have a larger meter instaled if they
proposed rate design ha been in place at the time they constrcted their home or chose to intal
a larger meter.
Some of the residential customer who have meters larger than the stdad %" meter may
request that their larger meter be replaced with a standad %" meter. The company incurs the cost
of a new meter in addition to the old meter being put in inventory. There will also be costs for
7
COMPANY REPLY TO STAFF COMMNTS FEBRUARY 19,2010
retrofitting the meter pit connections to accommodate the instalation of the smaller meter. Five
residential customers have 1 W'meters instaled curently. At least thee of these customers do
not have need for the excess flow available with the larger meter and may make this request.
Seventy-four residential customers have 1" meters and could request to have the meter size
chaged. The question is also raised as to how ths would affect the connection fees paid to the
company by the customers. Wil refuds be due the customer? Wil any par of the costs for
chagig out the meter be the respnsibilty of the customer? Is it necessar for the Company to
chage the meter size upon the customer's request? The Compay would ask the Commssion to
consider the above concerns and should the new rate design be approved, the Company asks for
direction on how to respond to the customer request to downsize the meter.
The Company noted in the Stas proposed rate design that the minium volumes included in
the minimum charges for each meter size were not rounded to the nearst thousand gallons. The
meters in the system all read in thousands of gallons not hundreds of gallons. The mium
volume included with a minimum charge should be listed in thousds of gallons.
The Company curently has only 3.89% of its meters that are larger than %". Tht is 145
meters total that are larger th %". The Company's analysis of the Stas proposed rate design
change has been limted by the short response time to prepare its reply. The response time ha
been limited to four days because of the long holiday weekend for Presidents Day, Febru 15,
2010. The Company requests that any change in rate design be deferred until a futue rate case to
allow the Company an opportty to properly analyze the impacts of the propose rate design on
its customers and itself.
Other Water System Operational Issues
The Company concur with Stas comments regardig its water system operation issues.
Returned Check Charges
Company concurs with Staffs comments. Company plans to discontinue use of the outside
collection agency curently used to collect retued checks once the Commssion's final order is
released.
8
COMPANY REPLY TO STAFF COMMNTS FEBRUARY 19,2010
Late Payment Charge
Company concurs with Staffs comments. Company curently uses a third par service to
print and mail its monthly bilings. The Company will bil the late payment charges as it prepares
the bilings file that is sent to its third pary printer.
Company Documentation
Company concurs with Staff comments and will correct its documents and policies to conform
totheUCRR.
The Company has always had staff available to tu water service on after 7:00 pm. In cases
of medical emergency or accidental disconnection, Company's staffhas gone out to tur on water
even if the time is afer 7:00 pm. In all cases water service has been restored within the twenty-
four (24) hours after the utility's conditions are satisfied for which services were terminated.
Respectfully submitted this 19th Day of Febru 2010.
K~~
Falls Water Company
K. Scott Bruce, General Manager
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9
COMPANY REPLY TO STAFF COMMENTS FEBRUARY 19,2010
. STATE OF IDAHO
DEPARTMENT OF
ENVIRONMENTAL QUALITY
OO"Nort skiki-;õ-;~~B:¡;~' FaiiS-:~ho 834; (208) s2w6:0i-C. L "Butch" Otr, GovernrToni Hardsty, Direor
February 16,2010
Scott Bruce
Falls Water Company
1770 Sabin Dr.
Idaho Falls, 10 83406
Re: Falls Water Company: Consultants Contractual Clarification (SRF # DW 9913)
Dear Mr. Bruce
The Deparent of Environmental Quality (DEQ) has provided the following to help alleviate any
concern for the two consultats' contracted work and taks pertning to the bidding taks each
provided for the project. It might appear to be duplicated scopes of work, however they are actually
different taks provided pertaining to the engineering or technical support during the bidding process
and the other task of administrative support during the bidding phase. The following is a break down
oftypical taks provides during a project by the Engineer and the Administrator.
Task 1 Provide bid documents:
The Engineer (Shiess Associates) prepares bid documents and the plans and technical
specifications. Engineer prepares invitation to bid, bid schedule and construction contracts, Bid
Bond and Performance Bond forms. This task is technical in nature.
Project Administrator (ECIPDA) prepares the fuding agency specification inserts and makes
sure that the DEQ requirements are inserted and all other funding requirements are established.
They are usually responsible for seeing that the Certificate of segregated facilties, WBEIMBE,
Subcontractors forms and Certificate Regarding Lobbing forms are inserted into the solicitation
for bids. All MBE / WBE and Civil rights goals arc listed in the specification documents along
with any wage determinations or rates. This task iii administrative in nature.
Task 2 Answer contractor questions:
The Engineer answers phone calls regarding questions from contractor or suppliers that are
technical in nature that are directed to the plans and technical specifications.
The Administrator answers phone calls regarding questions from contractor or suppliers r others
that pertin to regulator requirements paricularly Contractor licensing requirements, funding,
project budget, MBEIWBE and disadvantage business goals and requirements and other labor
laws such as Equal Opportunity Employment opportunities for the pr~jects.
Exhibit 10 Pg. 1 of 3
Cas No. FLS-W-09-1
Company Reply
02/19/2010
Task 3: Isfue and coordinate addeildgms
The Engineer will issue any addendums required pertining to the technical spcitications and
plans.
The Administrator wil coordinate with the fuding agcy and the engineer and provide
information to the engineer to include agency requirement modifications to be included in any
addendum.
Task 4: Evaluate bids & Dreeare reommenClatns
The Engineer will evaluate the bids based on price and completeness pertining to each item of
work identified in the actu bid schedule. The engineer wil verify that all bid bonds and
performance bonds ar propely submitted with correct dates and signatue and wil verify the
authenticity of the bond submitted. The wil evaluate the bid for correctness and that all amounts
bid for each item are added correctly. The engineer then coordinates with the administrator and
the issues recommendation to the City for award of contracts.
The Administrator wil evaluate all agency forms required to be submitted at the time of bid
which are not technical in nature, but pens to regulator funding reuirements. The wil check
the Contractors Debar Lis of the appaent low bidder to assure that they have not been debared
from working on such projects and contrts. They will also check t see that the contractor ha the
appropriate public works license to perform the work. The wil also verfy that all subcontractors
have ben identified by law and that the proper subcontrctor form work is provided at the time of
bid. The administrator will seek iheapproval ofDEQ or the regulator agencies approval of the
award of contract.
Task 5: Prepar contracts, Notice of Awards and other agency forms
The Engineer will prepare and issue Notice of Award to the contractor and make sure all
contracts are sent to the contractor for signature and will verify that all bonds are in place and that
they are dated properly according to dates reflecting the payment and performance bond. They
then pass contrcts on to the City for signatue and prepare the Notice to Proceed.
The Administrator taes signed contrcts and sends to the fuding or regulator agency for their
concurrence and signature and approval of the contracts before the Notice to Proceed can be
executed. Admnistrator prepars all agency forms required for all subcontractors to issue at the
preconstruction conference for subcontractor to execute.
Task 6: Pre Bi4Meetinp and PBconstruetiqn Meetings
The Engineer wil meet with the owner to make recommendation to award and then again to have
contracts signed. Then the engineer will meet with all paries for the preconstrction conference to
review contrctal obligations for all paies and work to be performed. The line of authority is
established for each pary with aU key persnnel identified. The Notice to Proceed is issued.
Exhibit 10 Pg. 2of3
Cas No. FLS-W-09-1
Company Reply
02/19/2010
The Administnitor wil address all labor requirments and forms needing to be submitted after
the bid by contractors for MBE/WBE and disadvantage business requirements and see that all
EEO requirements are addressed and meet by the contractor. Admnistrator will meet with all
paries at the per constrction conference to go over these items. The administrator wil also
coordinate the times for the monthly pay requests and wil coordinate with the engineer with all
pay requests submitted to the owner and agencies.
DEQ feels that there are separate and distinct taks that each consultat provides during the bid
phase of the project and that ther is no duplication in effort. If you have any questions regarding
ths letter or if we can be of fuer assistane, please call me at [phone]
Sincerely,1:t!~
Water Quality Engineer
Idaho Falls Regional Offce
Exhibit 10 Pg. 3 on
Cas No. FLS-W-09-1
Company Reply
02/19/2010
FALl WATER CO., INC.
Prorma Result of Operations
A 8 CStCopan,CoIIPnfaAdusmePnformOrd" IncinpeInc
40 . Opni Revnu
1 46 . Unme Re $22.947.31 $22.947.31
2 461. . Me Reidntial $939.230.56 $939.230.56
3 461.2 . Comerdl Renu $32.074.68 $32.074.68
4 474. Otr Ut Renu $2.79.00 $2.79.00
5 Tot 40 . Opetlii Reue $99.042.55 $997.042.55641 . Gain (Lo) on Pr $$
7 Totllncme $997.042.55 $997,042.558Exns
9 60.5 . Labo FI $173.620.31 $173.620.31
10 60.7 . La Me Recl $3.707.25 $3.70.25
11 60.8 . La Of $55.227.60 $55.227.60
12 60.9 . Admin. Labor $109.60.08 $109.60.08U60 . Empl Bene $n.801.22 $n.801.22
14 610. Pu Wat $U12.00 $1.112.00
15 615 . Elel "-$126.621.61 $126.621.1
16 618 . Cheicls $7.432.n $7.432.n
17 62.2 . So Mas $17,920.77 $17.920.77
18 62.6' Dlsn Ma $63,677.49 $63.677.49
19 62.7' Po..$17,055.60 $17,055.60
20 62.8 . Of $31,64.03 $31.64.03
21 62.8 . Tel Ex $12.96.01 $12.96.01
22 62.8 . Bank se ct $3,89.01 $3.829.01
Z3 62 . Of Ut Exns $2.34.79 $2,34.79
24 631. . Encnelne $1.620.00 $1.620.00
ZS 632 . Acnt $2,785.00 $2.78.0026631A . Pay5e $3.34.50 $3.34.50
27 63. Testi $3.995.00 $3.995.00
Z8 63 . So Cont Reir $839.58 $839.58
29 63 . Tra $1.039.57 $1.039.57
30 63 . 0U Bad De Con $269.79 $269.79
31 636 . Disbuion Cora Reir $28,055.57 $28.055.57
32 637. Da i-na $4,227.50 $4.227.50
33 636. . Co Serv . Co $$34 64 . Rent of Pnpe $39.nO.00 $3.96.04 $43.68.04
35 64 . Rent of Eqnt $20.70.60 $20.70.60
36 65 . Trapon Ex $32.98.78 $32.98.78
37 65.1_ Ex $15.318.00 $15.318.00
38 65. Wo Compeio Ins $10.222.20 $10.222.20
39 66 . Ad Ex $3.521.82 $3,521.82
40 66 . Ra Case Am $510-00 $510.00
41 670. Ba De Ex $13.612.33 $13.612.33
4Z 675.2 . Du . Publiti $968.00 $96.00
43 675.4' IDH Fee Exns $10.987.97 $10.987.97
44 Totl Exns $89.269.69 $89.233.73
45 Ne Onna" Inc 102,772.86 98.80.8246 Otr Incmens
47 Ot Inme
48 42 . NoIIt Inc $4.80.00 $4.80.00
49 Totl Othe Inme $4,80.00 $4.80.00
50 Otr Exns
51 40 . De Exns $64,353.91 $273.87 $64.627.78
52 40'T_
53 4011. Pr Taxe $16.766.01 $16.766.01
54 4012 . Payll T_$29.50.46 $29,503.46
55 40.10. Fe Inc Tax $$56 40.11' st Incme Tax $20.00 $20.00
57 TotI40'T_$46.289.47 $46.289.47sa4010 . Rela Fe
59 4Z . MI NoUtIt Exns
60 421 . o-ns . Tax De
61
62 Total Ot Expe 110.643.38 110.917.25
63 Net Ot Inc (105.843.38)(106.117.25)64 Ne Inc (3.0752)(7,3Al)
Exhibit 11
Cas No. FLS-W-09-1
Company Reply
0211912010
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f6i-
FALLS WATER CO., INC.
CALCUlATION OF REVENUE REQUIREMENT
1 Rate Base
2 Rate of Return
3 Net Operating Income Requirement
4 Net Operating Income Realized
5 Net Operating Income Deficiency
(A)
$1,531,120.82
4.74%
$72,624.88
(7,308.42)
$79,933.30
(B)(C)
Revenue Requirement Increase
6 Overcome Loss
7 Subject to Income Tax
8 Gross-up Factor
9 Revenue Increase Requirement
10 Total Revenue Increase Required
Non-Tax Taxable
$7,308.42
$72,624.88
102%129.81%
$7,451.15 $94,274.48
$101,725.64
$997,042.55
$4,800.00
1,001,842.55
10.15%
$1,103,568.19
$1,098,768.19
11 Operating Revenue
12 Other Revenue (Rental Income)
13 Adjusted Test Year Revenue
14 Percent Increas Required
15 Total Revenue Requirement
16 Revenue for Rate Design
Net to Gross Multiplier
Net Deficiency
Less Bad Debts ( percentage of Gross Revenue)
Less PUC Fees (percentage of Gross Revenue)
less Bank Service Charge Fees (percentage of Gross Revenue)
Taxable Amount
State Income Tax Rate (§ 7.6%
Federal Taxable
Federal Income Tax Rate (§15%
Net After Tax
100
1.3653%
0.1662%
0.3840%
98.0845%
7.4544%
90.6301%
13.5945%
77.0356%
Net Income to Gross Revenue Multiplier 129.81%
Gross-up Factor to overcome loss 102%
Exhibit 13
Case No. FLS-W-09.1
Company Reply
02/19/2010
Falls Water Company
Simplified Example of Lost Income
Due to Commission Treatment of Contributons Held for Future Constrction Prject
Assume Company is 100% Equit
Assume Equity and Investment in Rate Base are EquaL.
Assume that each year depreciaton is used to replace aging plant.Percent Percnt AccurnulateAsume Gross-up is 128%Change Change Lost
Revenue From Prior From Incme
Requirement Year Beginning to Co.
1 Beginning Equit and rae base are Equal ~$1,500,000
2 Return Require at 12%$180,000 $230,400 Beginning Beinning
Co. Collec cotributions for futue well
3 Year 1 Contrbuton $50,000
4 Rate Base Becomes $1,450,000
5 Return Required at 12%$174,000 $22.720 -3.33%-3.33%
6 Reductn in autoried rern $6,00 $6,000
7 Year 2 contrbution $50,000
8 Rate Base Becomes $1,400,000
9 Return Required at 12%$168,000 $215,040 -3.45%-6.67%
10 Reducton in autoried return $12,000 $18,000
11 Year 3 Contrbutn $50,000
12 Rat Base Becmes $1,350,000
13 Return Required at 12%$162,000 $207,360 -3.57%-10.00%
14 Reducion in autoried return $18,000 $36,000
15 Year 4 Contbuton $50,000
16 Rate Base Becomes $1,300,000
17 Return Required at 12%$156,000 $199,680 -3.70%-13.33%
18 Reducton in autoried return $24,000 $60.000
19 Year 5 New Well Constructed wi Contributons $200,000
20 Rate Base Become $1.500,000
21 Retrn Require at 12%$180,000 $230,400 15.38%0.00%22 Reduction in autorized return $$60,000
Exhibit 14
Cas No. FLS.W-09.1
Compay Reply
02/1912010