Ryerson Comment Dec.

Background

Hillview is a Class C Water Utility (i.e., one having fewer than 2000 customers) that serves portions of Oakhurst and its environs. Hillview currently serves 1,312 customers who consume, on average, 221 hundred cubic feet of water per year.

Hillview received authority for its most recent general rate increase in 1994. Its present rates have been in effect since May 6, 1995, when the Commission authorized an increase based upon the Consumer Price Index. The company has requested authority to increase its revenue by $101,328, or 13%, to produce a return on ratebase of 13%.¹ Hillview claims this increase is needed in order to provide adequate revenues to maintain service and allow a fair rate of return on investment.

After analyzing Hillview's most recently revised request, ORA recommended a return on equity of 12.75%, which would provide a return on Hillview's ratebase of 10.67%. ORA believed that with this rate of return Hillview would generate 14.10% more revenue than needed, and accordingly recommended that its rates be reduced by this amount. The reason for the striking difference in the parties' positions is explained below.

¹ Hillview first submitted this request informally for Test Year (TY) 1999 in a form referred to as a "draft advice letter" by the Water Division. Following the negotiation of an unrelated settlement proposal that is still under consideration by the Commission, Hillview submitted a revised draft advice letter on January 28, 2000, to update its request to TY 2000. Hillview is required to request this increase under the umbrella of this enforcement proceeding by Ordering Paragraph 7 of our Order Instituting Investigation: Paragraph 7 specifies that any proposals to increase rates or charges submitted on behalf of Hillview must be consolidated with this proceeding. Consistent with this requirement, in our order we are formally consolidating the present request for rate relief with I.97-07-018.