8. Discounted Cash Flow (DCF) and Revenue Requirement Analyses of Alternatives

1. The analyses fail to include cash flows from revenues collected from ratepayers, and the analyses compute the revenue requirement for each alternative for the first year rate increase only but should compute the NPV of revenue requirements over the life of each alternative;

2. The DCF analysis of Alternative 2 inappropriately assumes that shareholders will get the proceeds from the sale of the Replacement Facility at the end of its useful life, thereby understating the actual cost of Alternative 2;

3. The DCF analysis of Alternative 2 should be based on the $6.7 million purchase price of the Replacement Facility and not the portion of the purchase price ($3.795 million) that SJWC seeks to recover in this Application;

4. The DCF analysis of Alternative 2 should not include income that SJWC assumes it will receive from leasing excess space in the Replacement Facility that will not be dedicated to public utility service;

5. The revenue requirement analysis applies the incorrect net-to-gross (NTG) multiplier, thereby artificially increasing the requested revenue requirement;

6. The revenue requirement analysis should calculate depreciation based on gross plant but erroneously calculates depreciation based on net plant;

7. The DCF analysis of Alternative 2 fails to escalate the lease payments for a new downtown Main Office building and 1265 South Bascom Avenue building after the 10th year;

8. The analyses fail to reflect the deferral of taxes allowed under the Internal Revenue Code resulting from the exchange of property.

8.1. Computation of the NPV of Revenue Requirements for each Alternative

8.2. Proceeds from the Eventual Sale of Facilities

8.3. Purchase Price of the Replacement Facility

8.4. Income from Leasing Excess Space in the Replacement Facility

8.5. Net-to-Gross (NTG) Multiplier

8.6. Calculating Depreciation on Plant

8.7. Escalation of Lease Payments

8.8. Deferral of Taxes

8.9. Summary of Revisions to the DCF Analyses and Resulting Revenue Requirements

77 Exh. DRA-1, p. 13. DRA Opening Brief, p. 6.

78 Exh. SJWC-4, p. 3.

79 SJWC Opening Brief, p. 13.

80 Exh. SJWC-1, Stein, p. 8.

81 TR 219:25 - 220:8.

82 DRA Opening Brief, pp. 6-7.

83 Exh. SJWC-5, p. 3.

84 See Exh. SJWC-1, Stein Exhibit 12, p. 36.

85 See Exh. SJWC-1, Stein Exhibit 10B, p. 30.

86 Exh. SJWC-4, pp. 1-2.

87 TR 198:8 - 199:19.

88 TR 375:2-9. DRA Opening Brief, pp. 7-9.

89 Exh. SJWC-5, pp. 1-2.

90 See Exh. SJWC-8, Net-to-Gross Multiplier Calculation (p. 2), and Example - Calculation of Net-to-Gross Multiplier (p. 4).

91 SP U-3-SM, Section A.1, p. 1.

92 For example, Res. W-4556 authorized Great Oaks Water Company (Great Oaks) to file its GRC by advice letter pursuant to U-3-SM as an experiment. Other Class A water companies must seek a waiver for similar authority. (Res. W-4556, p. 6.)

93 DRA Opening Brief, p. 9.

94 TR 247:19-24.

95 SJWC April 15, 2008 Response to ALJ Rulings, SJWC Rate Impact 10 Scenarios, Scenario 9 Alternative 2 Tab, Cell F51.

96 DRA Opening Brief, p. 10.

97 TR 246:10-11; 248:10-15.

98 Exh. SJWC-1, Stein Exhibit 2, pp. 3, 4, 16. Stein Exhibits 6 and 7, pp. 13-18. Exh. SJWC-1, Stein Exhibit 10A, pp. 25-27. Exh. SJWC-1, Stein Exhibit 11, pp. 31-33.

99 Exh. DRA-1, Attachment A.

100 Exh. DRA-10, Attachment E.

101 Exh. DRA-1, and Exh. DRA-10 do not include lease payments for the Base Case.

102 Exh. SJWC-1, Stein, pp. 31-33.

103 Internal Revenue Code Title 26, Subtitle A, Chapter 1, Subchapter O, Part III, § 1031 (Exchange of property held for productive use or investment).

104 DRA Opening Brief, pp. 9-10.

105 TR 244:11-246:4.

106 Exh. SJWC-5, p. 4. TR 245:19-246:4.

107 Although Alternative 1 includes capital costs for improvements to SJWC facilities located at 1221, 1251 and 1265 South Bascom Avenue, the capital costs and the returns on the investment for the purchase of the Replacement Facility and the purchase of 1265 South Bascom Avenue are not present in Alternative 1, which assumes that facilities will be leased.

108 Opening Comments of DRA on Proposed Decision of ALJ Smith, p. 9.

Previous PageTop Of PageNext PageGo To First Page