Rate Base
Telephone Plant In Service (TPIS):
CD conducted a review of Ponderosa's Rate Base components, which include TPIS, Telephone Plant-under-Construction (TPUC), Materials and Supplies (M&S), Working Cash, Deferred Taxes, and Customer Deposits. CD calculated Ponderosa's total company TPIS average balance for five years (2002 to 2007) to be $89,728,320. CD's total company TPIS average balance for test year 2009 for this rate case is $92,505,193, which is approximately 3.09% higher than the 5-year average.
On October 29, 2008, in response CD's follow-up email to the October 22nd meeting, Ponderosa sent CD a revised Construction Program listing for 2008, 2009 and 2010. After reviewing this new listing, CD accepted all the projects for 2008, with the exception of an $8,000 conference room video equipment project (#O07726). CD's position is that this equipment will not benefit Ponderosa's ratepayers directly and CHCF-A funds should not be used to fund this type of purchase/project. CD's allowed 2008 projects total $6,606,388. Also in response to this new information provided by the company, CD accepted projects on Ponderosa's new 2009 schedule totaling $9,049,780, but disallowed other 2009 projects which totaled $2,070,455. CD has determined that these disallowed 2009 projects are not necessary at this time and should be deferred by the company to a later date. CD did not consider Ponderosa's 2010 projects for this GRC.
Customer Operations Building
During CD's field inspection, CD Staff discovered that Ponderosa's customer operations building in O'Neals appeared to be only 50% occupied. Under the rate case concept of "used and useful9," CD reduced Ponderosa's building TPIS account by 30% for this rate case.
At the October 22nd meeting, Ponderosa told CD that they would supply CD with more information about the current usage of the customer operations building. On October 29, 2008, Ponderosa informed CD that the building was currently 63% occupied. With this new information, CD disallowed 30%, or $507,278, of the book value of the customer operations building from rate base. If this building becomes increasingly utilized by Ponderosa by the time of its next GRC filing, CD will consider increasing the amount of this TPIS account.
Company Vehicles
CD requested information relating to the vehicles that Ponderosa uses in its operation. From the list received from Ponderosa, CD disallowed $37,100 of TPIS book value of a 2004 Lincoln Towncar, and a 2005 Ford Expedition, as Ponderosa reported that these were personal use vehicles.
Telephone Plant-Under-Construction (TPUC):
CD reviewed 6 years of Ponderosa's actual Telephone Plant-Under-Construction (TPUC) percentages (of TPUC to TPIS) and removed 2005 since it was unusually low and 2006 as it was unusually high. Ponderosa took the actual beginning balance of TPUC for 2007, then estimated the ending TCUC balance for 2007 and averaged those two amounts to arrive at the TPUC for 2007. They continued with this method for 2008 and 2009. CD feels Ponderosa's method relies too much on estimation of future project amounts, and would prove not to be very accurate. CD averaged 2002, 2003, 2004 and 2007, and arrived at a TPUC percentage of 3.34%. CD then used this percentage multiplied by the average TPIC for 2009, to come up with total company TPUC of $3,087,697, which is approximately 5.9% lower than Ponderosa's 2009 estimate of $3,281,100.
Materials and Supply (M&S):
CD reviewed Ponderosa's recorded 6 years (2002-2007) Materials and Supplies (M&S) amounts and calculated the ratio of the M&S amounts to the recorded average TPIS for those years. The M&S ratio ranged from .002316 to .003805, and the average was .003221. CD then applied this average of .003221 to its average 2009 total company TPIS balance of $92,446,011 to arrive at a 2009 total company M&S amount of $297,676. CD recommends that the 2009 total company M&S of $297,676 be included in rate base.
Working Cash:
Both Ponderosa and CD used the simplified method described in the CPUC's Standard Practice U-16 to arrive at the Working Cash estimate. CD used Ponderosa's 49.16% ratio of toll revenue to total revenue to calculate the total company Working Cash estimate of $1,215,057, for test year 2009. Ponderosa's 2009 intrastate Working Cash estimate of $1,310,208 is $95,151, or 7.83% higher, than CD's due to differences in estimated revenues and expenses.
Deferred Taxes:
For Total Company Deferred Taxes, CD reviewed Ponderosa's recorded 6 years (2002-2007) Deferred Taxes amounts and calculated the ratio of the Deferred Taxes amounts to the recorded average TPIS for those years. The Deferred Taxes ratio ranged from <0.00438> to <0.01696>, and the average was <0.01097>. CD then applied this average of <0 .01097> to its average 2009 TPIS balance of $92,505,193 to arrive at a 2009 Deferred Taxes amount of <$1,014,782>. Ponderosa's method took the actual beginning balance of Deferred Taxes for 2008, then estimated the ending balance for 2008 and averaged those two amounts to arrive at the average TPUC for 2008. Ponderosa continued with this method to reach the 2009 Deferred Taxes amount of <$279,499>. CD believes Ponderosa's method relied too much on estimation of future project amounts, and would prove not to be very accurate. CD recommends that the 2009 Total Company Deferred Taxes of <$1,014,782> be included in rate base.
Customer Deposits:
Ponderosa used the most recent balance of customer deposits for the test year. CD accepts this methodology as reasonable and reflective of current conditions since the amount of customer deposits depends on credit conditions and the number of new customers added. The balance carries forward from one year to the next with new deposits added and some existing deposits refunded. CD accepts Ponderosa's Customer Deposit amount at present rates of <$10,964>.
Depreciation Expense:
CD used its average TPIS for 2009 and Ponderosa's current depreciation rates to calculate 2009 total company Depreciation Expense of $7,968,625. Ponderosa's calculation of total company Depreciation Expense was $7,942,640. Both Ponderosa and CD applied the same depreciation rates which had been previously approved by the Commission. Differences between CD's and Ponderosa's depreciation expense calculations are due to differences in their estimated Telephone Plant-in-Service (TPIS) balances for 2009.
9 A concept used by utility regulators to determine whether an asset should be included in the utility's rate base. This concept requires that an asset currently provide a needed service to customers.
