20. Customer Information System Software

SCWC included in its 2004 GO capital budget approximately $5.4 million to replace its Customer Information System (CIS) software. SCWC states that the current system is becoming increasingly more costly to operate and less capable of meeting SCWC's needs.

ORA recommends denial of the $5,412,500 CIS funding on the grounds that it had not been properly justified by SCWC. ORA stated that it was not opposed to the replacement of a legacy system with a modern cost effective system. However, the two-sentence justification given for such a large outlay was not sufficient to demonstrate the cost effectiveness of the new system and other efficiencies to be realized. In its rebuttal, SCWC provided additional information that attempted to describe the problem and the steps to put a new system in place, together with a breakdown of the expected costs to complete. However, SCWC did not provide a cost-benefit analysis that would show the savings in operating efficiencies.

As discussed below, we will not incorporate the company's proposed CIS project in the revenue requirement for this GRC cycle.

20.1. Discussion

We will not include this project in rates at this time because SCWC has not quantified savings associated with the project. By SCWC's own description of the problems with the current CIS, there should be significant savings and efficiencies with a new system, thereby producing savings for the ratepayers, but it has not produced any information to confirm or quantify that proposition. Without that information, it is impossible to develop an opinion on the overall benefits of the project compared to costs and to incorporate appropriate savings in expense or capital forecasts.

This decision to exclude this project at this time does not prohibit SCWC from proceeding with the project at its own risk. If it proceeds on its own, neither the costs nor savings associated with a new CIS would be in rates. That situation would continue until SCWC requests inclusion of the project in a future GRC capital budget and that request is granted. In making any such request, SCWC should address all aspects of the project, including costs, allocation of costs to affiliates and savings.

This issue has also raised a concern regarding SCWC's burden in justifying its request. With the application, SCWC submitted testimony, which included a very brief description of the need for this particular project. After ORA recommended the project be rejected for lack of justification, SCWC provided a more detailed justification in rebuttal testimony. A project of this magnitude, which is in excess of $5 million, requires more attention than what was given by the utility in initially justifying its proposed budgets. Providing the basic justification in rebuttal is unfair, since parties are not generally given the opportunity to respond to rebuttal with testimony of their own. ⁵⁵ In this case, rebuttal was issued on May 1, 2003 and hearings began on May 12, 2003. The timeframe to conduct discovery on rebuttal, even for the purpose of cross-examination, was limited. When the utility has the evidentiary burden, we caution against the use of rebuttal testimony to provide the basic justification. As a matter of fairness, we must seriously consider either striking such testimony or extending the proceeding, at the utility's risk, to allow for responsive testimony from the other parties.