STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor
PUBLIC UTILITIES COMMISSION
505 VAN NESS AVENUE
SAN FRANCISCO, CA 94102-3298
October 21, 2009 Draft Resolution W-4802
Agenda ID #8962
TO: All Interested Parties
Enclosed is draft Resolution W-4802 of the Division of Water and Audits. It will be on the Commission's November 20, 2009 agenda. The Commission may then act on this Resolution or it may postpone action until later.
When the Commission acts on the draft resolution, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare a different resolution. Only when the Commission acts does the resolution become binding on the parties.
Parties to this matter may file comments on this draft resolution. An original and 2 copies of the comments, with a certificate of service, should be submitted to:
Division of Water and Audits, Third Floor
Attention: Moises Chavez
California Public Utilities Commission
505 Van Ness Avenue
San Francisco, CA 94102
Parties may submit comments on or before November 10, 2009. The date of submission is the date the comments are received by the Division of Water and Audits. Parties must serve a copy of their comments to the utility on the same date that the comments are submitted to the Division of Water and Audits.
Comments shall be limited to five pages in length plus a subject index listing the recommended changes to the draft resolution, a table of authorities and appendix setting forth the proposed findings and ordering paragraphs.
Comments shall focus on factual, legal or technical errors in the draft resolution, and shall make specific reference to the record or applicable law. Comments which fail to do so will be accorded no weight and are not to be submitted.
Persons interested in comments of parties may write to Moises Chavez or telephone him at (415) 703-2805.
/s/ RAMI KAHLON
Rami Kahlon, Director
Division of Water and Audits
Enclosures: Draft Resolution W-4802
Certificate of Service
Service List
DRAFT
WATER/RSK/PTL/MCV/jlj AGENDA ITEM #8962
PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
DIVISION OF WATER AND AUDITS RESOLUTION NO. W-4802
Water and Sewer Advisory Branch November 20, 2009
(RES. W-4802), ROGINA WATER COMPANY (Rogina). ORDER AUTHORIZING A GENERAL RATE INCREASE PRODUCING ADDITIONAL ANNUAL REVENUE OF $99,155 OR 16.24% IN TEST YEAR 2009.
__________________________________________________________
SUMMARY
By Draft Advice Letter filed on January 8, 2009, Rogina, a Class C water utility, seeks to increase its rates for water service to recover increased operating expenses and earn an adequate return on its plant investment. Rogina requested to increase its water revenues for Test Year (TY) 2009 by $107,397 or 18.28%. The Division of Water and Audits (DWA) accepted this draft advice letter as complete for filing on February 5, 2009.
For TY 2009, this resolution grants an increase in gross annual revenues of $99,155 or 16.24%. The gross annual revenues were estimated to provide an Operational Rate of Margin (ROM) of 23%.
This resolution also adds $116,106 into rate base for plant improvements that were authorized by Commission Res. W-4620, and $5,680 for valves (2 flow, 1 altitude, and 1 pressure valves) installed by Rogina in 2007.
In addition, this resolution grants Rogina authority to establish: 1) a water conservation memorandum account to track any revenue under or over collections that may result from instituting water conservation measures in its service territory; and 2) a memorandum account to track environmental consulting costs associated with the environmental studies required by California Environmental Quality Act (CEQA) for Rogina's water rights application with the State Water Resources Control Board (SWRCB.)
BACKGROUND
Rogina is a California corporation currently providing service to 980 metered rate residential customers, 11 irrigation customers, and 3 private fire protection customers. Rogina's service area is located in the town of Talmage and vicinity, a suburban area three miles east of the city of Ukiah, in Mendocino County.
Rogina has requested authority under General Order 96-B, Water Industry Rule 7.3.3(5), and Section 454 of the Public Utilities Code to increase its revenues by $107,397 or 18.28% in 2009.
The present rates were established on February 7, 2009, by approval of AL 53, which authorized a 4.1% Consumer Price Index for 2009.
DWA's estimated present-rate gross revenues for 2009 are $610,495. DWA's estimated revenues for TY 2009 are $709,650 at DWA's recommended rates.
Rogina's last general rate increase was granted on March 2, 2006, pursuant to Res.
W-4587, which authorized a rate increase of $97,531 or 20.17%, resulting in a rate of margin of 24%.
In October 5, 2006, Rogina received Commission authority, per Res. W-4620, to secure a loan in the amount of $400,000 to finance the construction and improvement of Rogina's water distribution system.
NOTICE AND PUBLIC MEETING
A notice of the proposed rate increase was mailed to each customer on February 25, 2009. The DWA received four letters in opposition to the rate increase. Rogina responded promptly to the letters and shared its response with the DWA. The Commission's Consumers Affairs Branch has not received any complaints in the last twelve months.
A public meeting was held on April 7, 2009, at the County Office of Education, located at 2240 Old River Road in Ukiah, and was attended by three customers. The Commission Staff explained the process of the rate increase for Class C water utilities and Rogina's representatives explained the reasons for the rate increase. The rest of the meeting consisted of comments and questions by the customers.
DISCUSSION
SUMMARY OF EARNINGS
The DWA made an independent analysis of Rogina's operations. Appendix A shows Rogina's and DWA's estimated summary of earnings at present, requested, and recommended rates for TY 2009. Rogina agrees with DWA's estimated expenses as shown in the Summary of Earnings in Appendix A, including the recommended revenue requirement and rates in Appendix B.
The DWA's general approach for estimating Rogina's operating expenses, excluding purchased power, insurance, taxes other than income, uncollectibles, and salaries, is based on taking the average of the past three years' (2006 - 2008) recorded expenses, and applying the most current monthly escalation factor from the Global Insight U.S. Economic Outlook. The monthly escalation factor for labor and non-labor is provided by the Division of Ratepayer Advocates from the Global Insight U.S. Economic Outlook for 2008 through 2012. DWA used the escalation factor published for the month of June, 2009 which was estimated at -5.3% for non-labor expenses and 3.8% for labor expenses.
In general, Rogina also utilized a similar approach as DWA to estimate their TY 2009 expenses. Rogina however used 2005 through 2007 recorded expenses and added a 4.1% inflation rate per year for 2008 and 2009.
The DWA reviewed Rogina's operating revenues and expenses including purchased power and water, materials, contract work, laboratory services (water testing), other plant maintenance, management salaries, office service and rentals, office supplies and expenses, professional services, insurance, regulatory commission expenses, depreciation, and taxes other than income. The major differences between DWA's and Rogina's expense figures were the following: (1) Other Volume Related Expenses, (2) Office Service and Rentals; (3) Office Supplies and Expenses; and (4) General Expense Accounts. Rogina however has accepted DWA's figures. Staff verified the operating expenses by reviewing supporting documents for substantiation and accuracy, and included the amounts that were deemed reasonable and prudent.
On July 24, 2009, Rogina requested authority to establish a memorandum account to track costs for hiring a consultant to conduct the necessary environmental studies required by the CEQA for Rogina's water rights application with the SWRCB to secure water for its present and future customers from Russian River. Rogina provided a letter from SWRCB detailing the CEQA compliance requirements that Rogina will need to comply with before SWRCB can proceed with their application. Rogina's cost estimate for the CEQA studies is between $20,000 and $30,000. DWA finds that Rogina's
memorandum account request meets the Commission five-prong test set-forth in Standard Practice U-27-W1, and recommends granting Rogina's request.
RATE BASE
In Res. W-4620, Rogina received Commission authority to secure a loan in the amount of $400,000 to finance the construction and improvement of plant, which included:
1) $60,000 for the construction of a new water well and related pumping facilities in the Talmage Area ($30,000 for a 200-foot deep water well, $22,500 for new pump and $7,500 for new pump house);
2) $270,000 for the installation of a new 400,000 gallon tank and removal of an existing 143,000 gallon concrete tank, and site preparation for installation of the new tank.
3) $16,000 for the installation of 120 - 5/8 x 3/4-inch meters, 52 - 1-inch new meters, and one 8-inch meter;
4) $17,000 for the installation of one fire hydrant and replacement of 636 feet of 4-inch, 6-inch, and 8-inch water mains ($6,000 for one fire hydrant and $11,000 for the water mains); and
5) $37,000 in contingency funds for increases in actual costs of materials and supplies.
For TY 2009, Rogina estimated $398,153 in plant additions which included most of the plant improvements indicated above, and requested to include 50%, or $189,761 of these plant additions in rate base as part of this GRC. DWA reviewed Rogina's request and recommends including only $116,106 in plant additions in rate base for plant that is in service and disallowing the inclusion of the remainder plant until it is placed in service. The $116,106 in plant is for the following items: $85,071 for the new water well; $12,900 for 120 - 5/8 x ¾-inch and 52 - 1-inch meters; $15,429 for 636 feet of 4-inch, 6-inch, and 8-inch water mains; and $2,706 for one fire hydrant. The $85,071 for the water well and the $15,429 includes using $32,571 and $4,429 from the authorized contingency fund, respectively, which exhausts the authorized $37,000 in contingency funds.
Rogina reports that the testing of the soil and engineering for the installation of the new 400,000 gallon storage tank has been completed and that it plans to complete the installation of the tank in 2009. DWA recommends, that once the new water storage
tank is placed in service, Rogina should file rate base offset Advice Letter, to request the inclusion of this plant into rate base and in rates.
Separate from the projects improvements authorized in Res. W-4620, Rogina in 2007 installed two flow valves, an altitude valve and a pressure flow valve at a cost of $5,680. Rogina seeks to include this amount in rate base in this GRC. DWA finds Rogina's request reasonable and recommends approving Rogina's request.
COST OF CAPITAL
In Decision (D.) 92-03-093 the Commission adopted the ROM method for ratemaking as an alternative to the Rate of Return (ROR) method for Class C and Class D water utilities. Therefore, to determine the authorized rate of return and revenues for Rogina, DWA calculated Rogina's revenues using both the ROR and ROM methods.2 Under most situations for Class C water utilities with relatively low rate base, the Commission's policy is to recommend the method that produces the higher revenues.
The DWA annually updates the recommended rates for the ROR and ROM methods for Class C water utilities and for 2009 the recommended rates are as follows:
Rates of Return (ROR) |
Rates of Margin | |
Class C |
12.00% to 13.00% |
23% |
DWA computed Rogina's revenues using both methods and the ROM at the recommended rate of 23% produced the higher revenues. The revenues using the ROM at 23% resulted in $709,650 compared to $645,250 using the ROR method with a rate of 12.50%. DWA therefore recommends using the ROM method for computing Rogina's revenue requirement. Appendix A provides a complete breakdown of revenues by category.
RATE DESIGN
Rogina's current rate structure consists of three rate schedules: 1, General Metered Service; 3M, Irrigation Service; and 4, Private Fire Protection Service.
Per Commission Decision (D.) 86-06-064, Class C water utilities can collect up to 65% of their fixed costs in the service charge portion of their rate design. Fixed costs include all
operating expenses not related to the production of water. Fixed costs are all water system operating expenses less: (1) purchased water; (2) purchased power; (3) uncollectibles; (4) other volume related expenses; and (5) income and franchise taxes. By following this rate design criteria, DWA recommends the following cost allocation for TY 2009:
Service Charge Revenue: $ 317,952
Quantity Charge Revenue: $ 367,281
Other Revenue: $ 24,417
Total Revenue Test Year 2009: $ 709,650
Based on the rate design criteria prescribed by D.86-06-64 and Standard Practice U-7-W3, DWA computed the recommended rates and schedules in Appendix B.
Due to water conservation measures being instituted by Russian River Flood Control District (RRFCD) and Water Conservation District (WCID) in the area, Rogina has asked its customers to reduce their water usage by 30%. For the rate design, Rogina requested that DWA reduce the TY 2009 annual water consumption estimate by 30%, or 78,207 cubic hundred feet (One Ccf is equal to 100 cubic feet) for computing the TY 2009 rates.
DWA's assessment is that a 30% reduction in water consumption may be unrealistic and difficult to sustain over time, based on the water conservation targets (3 to 6% reduction over a GRC cycle) set by the Commission for the Class A water utilities in Order Instituting Investigation (OII 07-01-022.) DWA instead recommends reducing Rogina's water consumption estimate for TY 2009 by 15%, as a compromise, to minimize any impacts to Rogina's commodity revenues that may result from customers significantly reducing their water usage. DWA therefore recommends an annual water consumption estimate of 221,587 Ccf for computing Rogina's TY 2009 rates.
Rogina also requests authority to establish a water conservation memorandum account to track any revenue under or over collections that may result from instituting water conservation measures. DWA finds that Rogina's memorandum account request meets the Commission's five-prong test established by D.08-03-020 and Standard Practice U-27-W, and therefore recommends granting Rogina's request.
At the DWA's recommended rates, shown in Appendix B, the monthly bill for a residential customer with a 5/8 x ¾-inch meter that uses 10 Ccf will increase by $6.91 from $27.76 to $34.67 or 24.9% in 2009. A more detailed bill comparison for the present and recommended rates is shown in Appendix C.
COMPLIANCE
There are no outstanding Commission orders requiring system improvements. Rogina has been filing annual reports as required.
According to the Department of Public Health, the utility currently meets all applicable water quality standards.
The DWA found that Rogina needs to update the title page in its tariff book.
COMMENTS
Public Utilities Code Section 311(g) (1) provides that resolutions generally must be served on all parties and subject to at least 30 days public review and comment prior to a vote of the Commission. _____________ comments were received.
FINDINGS
1. Rogina agrees with DWA's estimated expenses as shown in the Summary of Earnings in Appendix A, including the recommended revenue requirement and rates in Appendix B.
2. DWA's recommended summary of earnings (Appendix A) is reasonable and should be adopted.
3. Rogina requests authority to establish a memorandum account to track costs for hiring a consultant to conduct the necessary environmental studies required by the CEQA for Rogina's water rights application with the SWRCB to secure water for its present and future customers from Russian River.
4. DWA finds that Rogina's memorandum account request meets the Commission five-prong test established by D.08-03-020 and Standard Practice U-27-W, and recommends granting Rogina's request.
5. Resolution W-4620 granted Rogina authority to secure a loan in the amount of $400,000 to finance the construction and improvement of plant.
6. For TY 2009 Rogina estimated $398,153 in plant additions which included several of the plant improvements authorized in Res. W-4620, and requested to include of 50%, or $189,761 of these plant additions in rate base.
7. DWA reviewed Rogina's request and recommends granting Rogina authority to include only $116,106 in plant additions in rate base for plant that is already in service and disallowing the remainder plant until it is placed in service.
8. Rogina should file rate base offset advice letter, to request the inclusion of additional plant authorized in Res. W-4620 in rate base and rates, once that plant is in placed in service.
9. Separate from the projects improvements authorized in Res. W-4620, Rogina is authorized to include in rate base $5,680 for two flow valves, an altitude valve and a pressure flow valve Rogina installed in 2007.
10. The rates recommended by DWA (Appendix B) are reasonable and should be adopted.
11. Due to water conservation measures being instituted in the area, Rogina requested that its customers reduce their water usage by 30%.
12. Rogina requested that DWA reduce the TY 2009 annual water consumption estimate by 30%, or 78,207 cubic hundred feet (Ccf) for computing the TY 2009 rates.
13. DWA recommends reducing Rogina's water consumption estimate for TY 2009 by 15%, as a compromise, to minimize any impacts to Rogina's commodity revenues that may result from customers significantly reducing their water usage.
14. DWA recommends an annual water consumption estimate of 221,587 Ccf for computing Rogina's TY 2009 rates.
15. The quantities (Appendix D) used to develop the DWA's recommendations are reasonable and should be adopted.
16. Rogina requests authority to establish a water conservation memorandum account to track any revenue under or over collections that may result from instituting water conservation measures.
17. DWA finds that Rogina's memorandum account request meets the Commission's five-prong test established by D.08-03-020 and in Standard Practice U-27-W, and recommends granting Rogina's request.
18. At the DWA's recommended rates, shown in Appendix B, the monthly bill for a residential customer with a 5/8 x ¾-inch meter that uses 10 Ccf will increase by $6.91 from $27.76 to $34.67 or 24.9% in 2009.
19. Rogina needs to update the Title Page in its tariff book.
THEREFORE IT IS ORDERED THAT:
1. Authority is granted under Public Utilities Code Section 454 to Rogina Water Company to file an advice letter incorporating the summary of earnings and the revised rate schedules attached to this resolution as Appendices A and B. The effective date of the revised schedules shall be five days after the date of filing.
2. Rogina Water Company is authorized to establish a memorandum account to track costs for hiring a consultant to conduct the necessary environmental studies required by the California Environmental Quality Act for Rogina's water rights application with the SWRCB. Rogina shall file a Tier 1 Advice Letter to establish this memorandum account.
3. Rogina Water Company is authorized to establish a water memorandum account to track revenue under and over collections associated with the implementation of water conservation measures. Rogina shall file a Tier 1 Advice Letter to establish this water conservation memorandum account.
4. The quantities (Appendix D) used to develop the Division of Water and Audits' recommendations are adopted.
5. Rogina Water Company shall update its Title Page in its tariff book.
6. This resolution is effective today.
I certify that the foregoing resolution was duly introduced, passed, and adopted at a conference of the Public Utilities Commission of the State of California held on November 20, 2009; the following Commissioners voting favorably thereon:
PAUL CLANON
Executive Director
APPENDIX B
Page 1 of 3
Rogina Water Company
Schedule No. 1
GENERAL METERED SERVICE
Test Year 2009
APPLICABILITY
Applicable to all metered water service.
TERRITORY
Talmage and vicinity, near Ukiah, Mendocino County.
RATES
Quantity Rates: Per Month
All water used per 100 cubic feet $ 1.658 (I)
Service Charge:
For 5/8 x ¾-inch meter $ 18.30 (I)
For 3/4-inch meter $ 27.50 (I)
For 1-inch meter $ 45.80 (I)
For 1-1/2-inch meter $ 91.60 (I)
For 2-inch meter $146.60 (I)
For 3-inch meter $ 274.90 (I)
For 4-inch meter $ 458.30 (I)
For 6-inch meter $ 916.20 (I)
The Service Charge is a readiness-to-serve charge which is applicable to all metered water service, and to which is added the monthly charge computed at the Quantity Rate.
SPECIAL CONDITIONS
1. A late charge will be imposed by Schedule No. LC.
2. In accordance with Section 2714 of the Public Utilities Code, if a tenant in a rental unit leaves owing the company, service to subsequent tenants in that unit will, at the company's option, be furnished on the account of the landlord or property owner.
3. All bills are subject to Reimbursement Fee set forth in Schedule No. UF.
APPENDIX B
Page 2 of 3
Rogina Water Company
Schedule No. 3M
IRRIGATION SERVICE
Test Year 2009
APPLICABILITY
Applicable to all metered water service.
TERRITORY
Talmage and vicinity, near Ukiah, Mendocino County.
RATES
Quantity Rates: Per Meter
Per Year
All water used per 100 cubic feet $ 1.1078 (I)
Service Charge:
For 1-1/2-inch meter $ 519.65 (I)
For 2-inch meter $ 708.57 (I)
For 3-inch meter $ 1,206.59 (I)
For 4-inch meter $ 1,665.23 (I)
For 6-inch meter $ 2,747.80 (I)
The Service Charge is a readiness-to-serve charge which is applicable to all metered water service, and to which is added the monthly charge computed at the Quantity Rate.
SPECIAL CONDITIONS
1. The annual service charge shall be payable prior to commencement of each irrigation year.
2. This service charge is secondary to domestic service and the utility must be given 24 hours notice before each irrigation. In the event that insufficient water is available for all irrigation users to be served at the same time, rotation of use may be required.
3. All bills are subject to Reimbursement Fee set forth in Schedule No. UF.
Rogina Water Company
Page 3 of 3
Schedule No. 4
PRIVATE FIRE PROTECTION SERVICE
Test Year 2009
APPLICABILITY
Applicable to all metered water service furnished for privately-owned fire protection systems.
TERRITORY
Talmage and vicinity, near Ukiah, Mendocino County.
RATES
Quantity Rates:
All water used per 100 cubic feet $ 1.355 (I)
Service Charge: Per Service Per Month
For each inch in diameter of service connection $4.17 (I)
SPECIAL CONDITIONS
1. The fire protection service connection shall be installed by the utility and the cost paid by the applicant. Such payment shall not be subject to refund.
2. The minimum diameter for fire protection service shall be four inches, and the maximum diameter shall not be more than the main to which the service is connected.
3. If a distribution main of adequate size to serve a private fire protection system in addition to all the other normal service does not exist in the street or alley adjacent to the premises to be served, then a service main from the nearest existing main of adequate capacity shall be installed by the utility and the cost paid by the applicant. Such payment shall not be subject to refund.
4. Service hereunder is for private fire protection systems to which no connection for other than fire protection purposes are allowed and which are regularly inspected by the underwriters having jurisdiction, are installed according to specifications of the utility, and are maintained to the satisfaction of the utility. The utility may install the standard detector type meter approved by the Board of Fire Underwriters for the protection against theft, leakage, or waste of water, and the cost paid by the applicant. Such payment shall not be subject to refund.
5. The utility undertakes to supply only such water at such pressure as may be available at any time through the normal operation of its system.
6. All bills are subject to Reimbursement Fee set forth in Schedule No. UF.
(END OF APPENDIX B)
APPENDIX C
Rogina Water Company
Comparison of Rates
Test Year 2009
(END OF APPENDIX C)
Appendix D
Rogina Water Company
Adopted Quantities
Test Year 2009
Purchased Power
Pacific Gas and Electric Company
Effective Date March 1, 2009
Schedule E-19S Metered Time-of-Use Service - Secondary
Total Customer/Meter Charge Rates per E-19S schedule
Meter Charge ($ per meter per day) $ 0.98563
Customer Charge $13.55236
Total Energy Rates ($ per kWh)
Peak summer $0.15553
Part-Peak summer $0.10556
Off-Peak summer $0.08506
Part-Peak winter $0.09348
Off-Peak winter $0.08189
Total kWh 630,200
Total Cost $110,100
Property Taxes $ 8,430
Service Connections
5/8 -inch by 3/4 inch 713
1 -inch 248
1 ½ -inch 13
2 - inch 6
Total 980
Irrigation customers 11
Private Fire Protection customers 3
Water Consumption 221,587 Ccf
Tax Calculations |
||||
2009 |
||||
Operating Revenues |
$709,650 |
|||
Expenses |
$462,370 |
|||
Depreciation |
$ 47,826 |
|||
Taxes other than Income |
$ 23,322 |
|||
Taxable Income for State |
$170,141 |
|||
State tax |
$ 15,040 |
|||
Taxable Income for Federal |
$155,101 |
|||
Federal tax |
$ 43,739 |
(END OF APPENDIX D)
CERTIFICATE OF SERVICE
I certify that I have by mail this day served a true copy of draft Resolution W-4802 on all parties in these filings or their attorneys as shown on the attached list.
Dated October 20, 2009, at San Francisco, California.
/s/ Josie L. Jones
JOSIE L. JONES
Parties should notify the Division of Water and Audits, Public Utilities Commission, 505 Van Ness Avenue, Room 3106, San Francisco, CA 94102, of any change of address to insure that they continue to receive documents. You must indicate the Resolution number of the service list on which your name appears.
SERVICE LIST
DRAFT RESOLUTION W-4802
James D. Colling 1170 Sanford Ranch Rd. Ukiah, CA 95482 |
Clifford Saake 1381 Ridgeview Ukiah, CA 95482 |
Jerry Harris 400 Vichy Hills Drive Ukiah, CA 95482 | ||
Raymond Gates 575 Vichy Hills Drive Ukiah, CA 95482 |
Samantha K. Burkey P. O. Box 1280 Ukiah, CA 95482 |
Daniel P. Rogina President Rogina Water Co., Inc. P. O. Box 310 Talmage CA 95481 | ||
1 1. Standard Practice for Processing Rate Offsets and Establishing and Amortizing Memorandum Accounts, pg. 10.
2 2. In the Rate of Margin Method, the utility's revenue requirement is defined as the sum of its operating and maintenance expenses, depreciation, income and other taxes, multiplied by the rate of margin (D.92-03-093, pg.11.)
3 3. Rate Design for Water and Sewer System Utilities Including Master Metered Facilities.
