Proponent's Explanation of Why the Settlement is in the Public Interest

At the hearings on November 1, 2000, the ALJ asked the parties to explain why the settlement is in the public interest. Their responses are summarized as follows:

Applicant:

One of the obligations of the Commission is to make sure that utilities remain economically viable. It is in the ratepayers' interest to be served by a capable, competent and viable utility that is following the standard practices expected of Class A water utilities.

A high percentage of this case is related to return on investment. The Commission has an obligation to allow Applicant the opportunity to earn a reasonable return on the capital investment that it has made for the provision of adequate service to its customers.

This is a highly capital-intensive business, made all the more so by legislation dealing with clean water and environmental issues. All water utilities are faced with very high cost investment. Applicant in particular is faced with 100-year-old infrastructure that is in constant need of upgrading and replacement to meet current standards. Applicant also has a construction program that spreads standard maintenance over time so as to avoid rate shock.

An additional factor is that non-capital expenses increase over time and need to be recovered.

The Commission has created a three-year rate cycle for water utilities to apply to recover their increases in costs. This application is within that standard cycle.

RRB:

The utilities the Commission regulates are entitled to an opportunity to recover through their rates any prudently incurred expenses and a fair return on investment. RRB has concluded that the rates proposed in the settlement reflect Applicant's prudently incurred expenses as well as a fair return on investment. The increase in rates proposed in the settlement is necessary in order to maintain the level of service that Applicant has provided to its customers.