XII. Main Office Expense

Main office expense consists of a four-factor allocation of Park's data processing and other general office expense allocated to AVR and other subsidiaries. Differences between AVR and ORA estimates are summarized in the following table.

YEAR 2003 YEAR 2004

(Dollars in Thousands)

Items	AVR	ORA	Difference	AVR	ORA	Difference
Main Office Expense	$871	$719	$152	$896	$726	$170

The differences are due to estimating methodology. AVR used total main office cost estimates adopted for Park's Central Basin Division test year 2002 in D.01-03-078 as a base and escalated that approved cost to its test year 2003 by adding the difference between 2001 and 2002 expenses. AVR used this same method for its 2004 test year estimate.

ORA used the same 2002 base that AVR used. However, ORA escalated that cost based on its labor escalation factors to reach its test year estimates.¹⁸ ORA subsequently clarified that it excluded bonuses, a cost-of-living factor, and a 10% pay increase from its base prior to applying its escalation factors. ORA derived these payroll adjustments from "current payroll data furnished by the utility instead of using the adopted payroll expense."¹⁹

It has been the Commission's policy to allow water utilities with multiple districts to file a main office rate case on a three-year cycle.²⁰ To the extent that such estimate remains valid, use of the adopted Central Basis Division main office estimate escalated to the test years is a reasonable estimating method, as used by AVR. Although ORA adjusted the previously adopted main office base to exclude bonuses, a cost-of-living factor, and 10% pay increase, it did so without any knowledge of whether those costs were included in the adopted base.²¹ Absent evidence that those costs were included, there is no basis to consider adopting ORA's estimate. AVR's $870,900 test year 2003 and $896,000 test year 2004 main office expense are reasonable and should be adopted.