3. Issues Posed for Rulemaking
As set out in the August 21, 2009, Assigned Commissioner's Ruling and Scoping Memo, the issues within the scope of this proceeding are:
1. Whether the D.06-03-015 rules pertaining to the accounting and ratemaking treatment for state government grant-funded plant apply or ought to be extended to local and federal government grant-funded plant.
2. Whether new plant (replacing contaminated plant) funded by government loans should be included in rate base and earn a rate of return or be recorded as CIAC.
a. Should it matter whether the loan is interest-bearing or interest free, or whether the loan is short-term or long-term?
3. Whether new plant (replacing contaminated plant) funded by proceeds from damage awards, settlements, government order or insurance should be included in rate base and earn a rate of return or be recorded as CIAC.
4. Whether new plant (replacing contaminated plant) funded by government loan or proceeds from damage awards, settlements, government order or insurance should be valued at the residual book value of the contaminated plant or at the actual replacement cost, if the new plant is placed in rate base.
a. If the new plant is valued at the actual replacement cost, should ratepayers pay a rate of return on the difference between the residual book value and the actual replacement cost?
b. If less than the actual replacement cost is included in the rate base, how should the reduction be reflected in the utility's accounts?
5. Whether the net amount of proceeds from damage awards, settlements, government order or insurance should be shared between ratepayers and shareholders after the contaminated plant is replaced and all recoverable costs (e.g., legal and replacement costs) have been determined.
a. If shared, how should the proceeds be divided and on the bases of what criteria?
b. Should it matter who paid what amounts in pursuit of the proceeds?
6. How, if at all, should past decisions of the Commission inform or influence the resolution of the foregoing issues?
In summary, the Commission's intention here is to address the "ratemaking consequences" of an investor-owned water utility's receipt of any "asset of value" (other than state government grants)13 "intended to remediate or compensate for actual or threatened contamination of water supplies" available or used "to provide public utility water service."14
13 As noted in the OIR commencing this proceeding, R.09-03-014, at 3-4, state government grants were addressed by D.06-03-015 in an earlier rulemaking proceeding, R.04-09-002.
14 The quoted portions of this statement come from page 2 of the Opening Comments of CWA in Response to Order Instituting Rulemaking, filed June 1, 2009, in this proceeding. We have deviated from CWA's generic scoping suggestion by excluding state government grant proceeds, a subject covered in D.06-03-015, from the reach of this rulemaking.
