980617.docx

M E M O R A N D U M
TO:COMMISSIONER HANSEN
COMMISSIONER NELSON
COMMISSIONER SMITH
MYRNA WALTERS
STEPHANIE MILLER
SCOTT WOODBURY
TERRI CARLOCK
GEORGE FINK
WORKING FILE
FROM:BOB SMITH
DATE:JUNE 17, 1998
SUBJECT:MCGUIRE ESTATES WATER CO. RATE CASE NO. MCG-W-98-1
At yesterday’s decision meeting the Commission was made aware of a major repair to the Company’s well that occurred subsequent to the 1997 test year.  Staff estimated the cost of the repair at $3,000.  The Commission indicated it would like to recognize this repair if the actual cost could be verified.
I have received facsimile copies of the invoices the Company has paid to complete the repairs.  The total cost was $2,988.09. Of this amount, $2,156.93 was paid to R.C. Worst Co. to pull the pump, replace a bad check valve and reinstall the pump.  To pull the pump, part of the well house had to be dismantled.  An additional $831.16 was paid to Mr. Jim Meyers to repair and re-roof the portion of the well house that was dismantled.
The capitalized cost of the repair ($2,988.09) if recognized in this case would increase the Company’s revenue requirement by $648 calculated as follows:
Additional Rate Base$2,988
Rate of Returnx    12%
Additional Operating Income$   359
Gross-up for Income Taxx   1.25
Pre-Tax income requirement$    449
Depreciation Expense (15 Yr life)$   199
Total Additional Revenue Req.$    648
This amount compares with the $650 revenue requirement Scott Woodbury brought to your attention during the decision meeting.  The rates mentioned during the meeting of $14.75 base rate plus a commodity charge of $0.56 per 1,000 gallons in excess of 10,000 per month are therefore still appropriate and should provide the Company’s total revenue requirement of $16,733.
RES:u\bsmith\wpfiles\mcquire\postdec.mem