8. Office Equipment

According to Alco, it has a total request of $945,600 for "Other Equipment - Plant Account" for years 2010 through 2012. (Alco Opening Brief at 17.) If Alco were authorized to acquire all the equipment and software it is seeking it would add $367,200 to rate base in test year 2010; $377,600 in escalation year 2011; and, $200,800 in escalation year 2012.

The first major addition is $578,400 worth of equipment that Alco argues it must acquire to replace existing equipment to meet its legal obligations under the California Air Resources Board rules. (Alco Opening Brief at 17.) The second major item in Alco's very large request is water infrastructure locating and mapping software and hardware (infrastructure mapping) at a cost of $100,000 (Transcript at 172 - 173, and Ex. A-13.) The third major component is $588,700 in 2010 and $30,000 in 2011 for office equipment.35

We are concerned by DRA's use of a trend when faced with such significant, unique, and severable items, which should be specifically examined. In fact we set aside submission in response to DRA's October 15, 2010 motion in order to consider further information and Alco's response on possible changes to the California Air Resources Board rules which might affect Alco's asserted need for new diesel equipment. Alco responded to DRA on October 28, 2010 and DRA was allowed to reply on November 2, 2010. We will consider these three major components separately, thus we implicitly reject DRA's use of a five-year trend in this instance.

To comply with California Air Resources Board regulations, Alco argues that it must acquire a new portable air compressor, two backhoe loaders and a wheel loader at a total cost of $578,400. (Alco Opening Brief at 15.) Alco requested, and we grant, judicial notice of Title 13, Art. 4.8, Chap. 9, §§ 2449 through 2449.3 which Alco asserts to mandate acquiring this new equipment. This new equipment is "cleaner" than Alco's existing equipment and Alco believes that the California Air Resources Board would otherwise impose significant fines for the use of its older, non-compliant equipment.

DRA filed a motion to reopen the record to admit new information: that the California Air Resources Board was likely to revise the rules cited by, and relied upon by Alco. The motion was granted and Alco filed a timely response. Alco argues that there is uncertainty over the whether the California Air Resources Board will adopt different regulations.

We are very concerned about the significant rate impact this new equipment would engender in addition to the already substantial increases granted elsewhere in this decision and in the settlement agreement also adopted herein. Alco makes further argument that the new equipment is necessary to support the construction and maintenance programs adopted elsewhere in this decision and in the settlement agreement also adopted herein. We are not persuaded the new equipment is necessary solely for the construction and maintenance programs and we therefore will not adopt the proposed equipment budget at this time.

We are equally concerned that the California Air Resources Board could subsequently enforce Title 13, Art. 4.8, Chap. 9, §§ 2449 through 2449.3 or some new regulation, and Alco could then be subject to large fines for using its then non-compliant equipment. We therefore will allow Alco to timely file a motion to reopen this proceeding for the sole purpose of seeking rate recovery for this new cleaner diesel equipment when it can demonstrate that it must in fact replace the existing equipment in order to comply with California Air Resources Board rules. This will be an expeditious means to avoid the expense and time of a new application, allow the use of the existing record, supplemented with any additional information on California Air Resources Board enforcement, and allow DRA an opportunity to examine Alco's up dated justification for acquiring the new equipment.

Alco advances two arguments for its proposed infrastructure mapping system: first, that California Government Code Sections 4216 through 4216.9 require Alco to be able to identify and promptly disclose the location of its facilities so that other construction, for example, will not accidently damage the water system; and secondly, Alco's Monterey County Franchise Agreement creates the need for Alco to accurately map and identify its system and individual elements of its system. (Alco Opening Brief at 16 - 17.) DRA argues it does not oppose the system per se, only that Alco should acquire it within the forecast non-specific budget proposed by DRA. (DRA Reply Brief at 19.) We have already indicated that we reject DRA's blanket forecast given the detailed specific requests proposed by Alco. We therefore find Alco was persuasive and we will adopt the forecast of $100,000 for an infrastructure mapping system. We will allow Alco to file an advice letter to put the revenue requirement associated with the infrastructure mapping system into rates only upon its actual purchase and installation and when its becomes used and useful, subject to a cap of the forecast cost of $100,000.

DRA does not address specific allowances of these and other items but instead proposes an annual budget of $45,156 in 2010, $46,150 in 2011, and $47,304 in 2012 for the Office Equipment Plant Account which is equal to two times Alco's escalated five-year historical average expenditure, and a total of $138,610. (DRA Opening Brief at 22, and Ex. D-1, Table 7-L.) We find DRA's approach to be unreasonable because it substitutes a mathematical trend for an analysis of the specific request. If we were examining a relatively unchanging, ongoing task such as meter testing, trending may be a reasonable approach. But in this instance, Alco has cited numerous specific changes involving large equipment purchases, new software, etc., and a trend does not adequately answer the basic questions of "what is new" and "why is it needed?"

The rate case plan for water companies requires the utility to specifically identify any large or new requests so that parties may be readily aware and the Commission will specifically consider them. Alco's special request # 5 is a substantial request for new computers, software, a telephone system, and a substantial new customer information system. (Alco Opening Brief at 18 - 19.) Alco points out the current computer equipment is quite old and runs on an out-of-date operating system, and the current customer information system software cannot be supported because its vendor is out of business. Alco further notes the old phone system is no longer supported either and will not work with a new customer information system to digitally record calls.

We agree with Alco that it needs new equipment. We will therefore allow Alco to spend up to $618,700 (the sum of $588,700 forecast in 2010 and $30,000 in 2011) and recover in rate the related revenue requirement on the actual amount spent. Alco may file an advice letter quarterly to adjust rates to reflect the actual plant additions to date, up to the $618,700 cap.

35 The extensive list includes (19) Computers, Servers, Work Stations; (1) CDP 540 Backup; (1) NSA 5000 Firewall; (2) 48" Port Switches; (1) Digital Telephone System; (2) Server Cabinets; (3) Server Battery Backup; (1) Rack Hardware; (1) Electrical Hardware/Cable; (2) 60" HD Monitors; Installation Cost; (1) HP designerjet T1120 HD MFP; Customer Care/ Billing System (CIS); and Accounting System Upgrade. (Alco Opening Brief 18, citing to Ex. A-3, Schedule 26A, at 5 & 6.)

Previous PageTop Of PageNext PageGo To First Page