6. Disputed Issues

DRA prepared two written reports on the results of its analysis of Suburban's application (both reports were received as exhibits at the EH). The first, the "Report on the Results of Operations of Suburban Water Systems" (Suburban Report), focused on Suburban; and, the second, the "Report on the Southwest Water Company/Utility Group Costs of Suburban Water Systems" (Southwest Report), focused on the parent company Southwest. Most of the settled issues were included in the Suburban Report, while most of the unsettled issues were included in Southwest Report. The disputed issues (those not settled) of both reports are outlined below:

Affiliate Transaction Rules

DRA recommends Affiliate Transaction Rules be adopted for Suburban.

Utility Group and Parent Company Allocations

Four-Factor Allocation Methodology

Taxes:

Domestic Production Activities Deduction

Project Cornerstone

DRA objects to the use now of a Tier-3 Advice Letter for approval.

Suburban Expenses

New positions (4); Payroll; and, Medical and Dental Insurance

Suburban Revenues

The RHP; and, Water Service Revenue

Rate Base

Working Cash

Utility Group Expenses

Computer Costs

Southwest Expenses

Payroll and Benefits

Regular Payroll; Payroll Taxes; Employee Welfare; Worker's Compensation; Pension Expenses; Statements of Financial Accounting Standards (SFAS) No. 123 - Compensation Expense; and, Employee Stock Purchase Plan (ESPP) - Compensation Expense.

Public Company Costs

Legal Fees; Audit/Accounting Expenses; Annual Report; Annual Meeting - 10-K Filings; Shareholder Relations; and, Financial Public Relations

Office Rent and Expenses

Computer and Information Technology (IT) Services Fees; Machine Rental; Rent; and, Property Taxes

General/Administrative Expenses

Insurance; Broker's Fees; Tax Deductible Travel and Entertainment; Outside Services; and, Recruiting

Other Expenses

Line of Credit Fees