Rate Base

The proposed purchase price of $77,500 was arrived at through negotiation. Jay Gardner, et al. have agreed that the rate base for future ratemaking will be based on the recorded net plant. Exhibit G to the application lists the 2003 year-end net plant at $8,426. However, the Water Division's preliminary review suggests that depreciation may be overstated. Therefore, Water Division recommends that a detailed depreciation study be undertaken at the time of the next general rate case. The difference between the purchase price and the recorded rate base will be recorded as acquisition cost in the books and will be amortized below the line. Since the purchase price will have no effect on rate base, this criterion for ratepayer indifference is satisfied.