12. Five-year Average
One consistent difference for several forecast items is the use of a five-year average. Apple Valley proposed to use 2000 - 2004 where ORA has used the older 1999 - 2003 period. When forecasting using an historical trend, we believe that the most recent record, subject to an opportunity to review the accuracy and reasonableness of the latest year, is the most appropriate record period. ORA was not consistent in using 1999 - 2003. For example, it used the earlier five years for Customer - Other expenses, but used the later five years for Maintenance - Other.41 Apple Valley had to prepare its application before closing the books for 2004. Thus it had to start with older 2003 data. This problem was specifically anticipated in the rate case plan:
The temptation to wait for additional historical data, i.e., updates, upon which to base a forecasted test year cannot be indulged when we face a statutory requirement for getting rates in place by a specific date. Any rate case plan requires a data collection termination date; otherwise, no rate case with a forecasted test year would ever be completed. For this reason, our Rate Case Plans have always included a limitation on updates. In this RCP, we have set the general limitation date as the filing of the application for all parties. We will allow two exceptions to this limitation: (1) updates of recorded data, and (2) with the approval of the Principal Hearing Officer based on standards set out in the Appendix. (D.04-06-018, pp. 9-10.)
Apple Valley reasonably up-dated its filing with 2004 recorded data in conformance with the rate case plan. Park (Apple Valley's parent) and ORA specifically considered this issue in the rulemaking leading to the rate case plan.
Park contends that this information can be conveniently supplied in a February update to its January applications. Similarly, ORA seeks the right to use updated amounts in its reports, which follow the utility's application by a few months. (D.04-06-018, p. 9.)
We will adopt all forecasts that are up-dated to a 2000 - 2004 five year average and reject ORA's forecasts that rely on a 1999 - 2003 average. As a result, a number of unresolved issues in the Comparison Exhibit (Ex. 20) are now resolved.
1. Maintenance Other Expense (Ex. 20, p. 7)
2. Clearing Other Expense - Maintenance (Ex. 20, p. 7)
3. Outside Services - Maintenance (Ex. 20, p. 8)
4. Clearing Other Expenses - Main Office (Ex. 20, p. 8)
41 Ex. 13, pp. 6-7, Apple Valley's rebuttal shows this and other examples.
