8. Earnings Test

For the earnings test used to justify step and attrition rate increases, ORA proposes a change whereby the weather-adjusted recorded sales per customer for Residential and Commercial customers would be used, instead of the adopted sales per customer, for the calculation of the revenues. ORA states that originally, the procedure was designed to normalize sales against sales changes due to weather variations. However, because of the difficulty and time involved in the weather normalization process, adopted sales quantity has been used and, in reality, weather normalization is not being done. Under ORA's proposal, when the utility is over-earning (the actual earnings are higher than the adopted earnings) because of inaccurate adopted sales, the step and attrition rate increases would be reduced or eliminated through the earnings test, protecting the ratepayers from unnecessary rate increases.

In response, SCWC asserts that under existing procedures, pro-forma revenues for residential and commercial customers are based on adopted sales per customer, not weather-adjusted recorded sales per customer, and that ORA's recommendation is inconsistent with long-standing procedures for the pro-forma earnings calculation. SCWC believes ORA is inappropriately attempting to use SCWC's GRC to implement changes to industry-wide policy.

This decision denies ORA's request and concludes that the issue would be more appropriately addressed in a generic proceeding where all affected utilities could participate.