Rates – Water Utility – Compliance Filing
In this decision, the AUC considered a compliance filing from Blazer Water Systems Ltd. (Blazer”) addressing all of the determinations and directions of the AUC in Decision 22319-D01-2018. In AUC Decision 22319-D01-2018, the AUC considered Blazer’s 2019 to 2020 general rate application (“GRA”). The AUC found Blazer complied with its directions, as set out below.
AUC Directions
Bearspaw Village Water Co-Operative and Blueridge Rise Reserve Funds (Direction 1)
In paragraph 70 of Decision 22319-D01-2018, the AUC directed Blazer to provide the calculation of its $30 per month contingency fund amount for Bearspaw Village Water Co-Operative (“BPV”) and Blueridge Rise (“BRR”) and provide an explanation of why this amount should be approved. The AUC accepted Blazer’s submission that it was administering the two reserve funds on behalf of BPV and BRR without additional cost to customers and that the $30 per month reserve fund was reasonable for maintenance of the BPV and BRR systems.
Opening Rate Base (Direction 6)
In paragraph 133 of Decision 22319-D01-2018, the AUC directed Blazer to update Schedule 12 of its financial model to reflect the actual net book value (“NBV”) as of December 31, 2018. The AUC confirmed that Blazer had included an updated Schedule 12 in its financial model to reflect the actual NBV as of December 31, 2018.
Gifted Capital for Connection of BPV Water System (Direction 7)
In paragraph 135 of Decision 22319-D01-2018, the AUC directed Blazer to make corrections to certain data in Schedule 11 and Schedule 13 of its financial model, to properly account for $0.264 million that was gifted capital for the connection of the BPV water system to Blazer’s system. The AUC confirmed that the $0.264 million had been removed from Blazer’s invested capital in Schedule 11 and that the amount was properly included as gifted capital in Schedule 13.
Updated Actual and Forecast Capital Additions for River Intake Replacement (Direction 8)
In paragraph 148 of Decision 22319-D01-2018, the AUC directed Blazer to update its actual costs to date and forecast costs related to its capital additions for its river intake replacement project. The AUC found that Blazer’s proposal to amend its capital plan to delay the originally proposed river intake improvements was reasonable.
Forecast Capital Additions – Contingency Allowance (Directions 9-10)
In paragraphs 151 and 152 of Decision 22319-D01-2018, the AUC directed Blazer to exclude any capital amounts for contingency allowance against unexpected works. The AUC confirmed that Blazer had removed these amounts.
Depreciation Expense of $0.150 Million Investment in BPV and BRR System Connections (Directions 15-16)
In paragraphs 172 and 173 of Decision 22319-D01-2018, the AUC directed Blazer to include a separate asset of $0.150 million for its investment in the BPV/BRR connection to the Blazer water system. The AUC further directed Blazer to calculate the opening NBV of this asset as of January 1, 2019. The AUC also directed Blazer to calculate the depreciation expense associated with the $0.150 million for 2019 and 2020. The AUC accepted Blazer’s reasoning for allocating the $0.150 million proportionally across eight assets associated with the water treatment plant expansion. The AUC confirmed that Blazer correctly updated the opening NBV of the assets and that the depreciation for the $0.150 million was calculated as 3.93 percent of the depreciation expense for the water treatment plant expansion assets.
Depreciation (Directions 11-14 and 18)
In paragraph 163 of Decision 22319-D01-2018, the AUC directed Blazer to use the half-year rule for capital additions in 2019 and 2020. In paragraph 165, the AUC directed Blazer to adopt the straight-line basis of calculating depreciation. In paragraph 166, the AUC directed Blazer to calculate the deprecation for its capital assets as of December 31, 2018, based on the remaining expected life, their NBV as of December 31, 2018, and the depreciation rates approved in Table 8 of Decision 22319-D01-2018. In paragraph 167, the AUC directed Blazer to calculate the depreciation for any capital additions using the Table 8 depreciation rates and the half-year rule. The AUC confirmed that Blazer had correctly implemented the half-year rule and straight-line depreciation for its capital additions, and calculated the depreciation expense based on the remaining life of its assets and the depreciation rates approved in Table 8 of Decision 22319-D01-2018.
Cost of Debt, Return on Equity and Deemed Debt Equity Ratio (Direction 19)
In paragraph 188 of Decision 22319-D01-2018, the AUC directed Blazer to calculate, and show separately, return on debt with an interest rate of 4.0 percent, return on equity of 8.50 percent, a deemed equity ratio of 40 percent and a deemed debt ratio of 60 percent, for each of 2019 and 2020. The AUC confirmed that Blazer had included in Schedule 1.3 of its financial model the return on equity, the return on debt interest rate, and debt and equity ratios.
Blazer Subsidy (Direction 20)
In paragraph 203 of Decision 22319-D01-2018, the AUC directed Blazer to update its subsidy amount based on foregoing a percentage of its depreciation and return, whereby that percentage is calculated by dividing the forecast number of homes for the year by 1,250. The AUC concluded that Blazer had updated its subsidy amount by calculating the subsidy based on the number of forecast homes divided by 1,250.
Allocation of Depreciation on Capital Additions to BPV and BRR Connection (Direction 17)
In paragraph 174 of Decision 22319-D01-2018, the AUC directed Blazer to allocate any capital additions made subsequent to the water treatment plant expansion assets on the basis of water consumption. Blazer stated that there had been no capital additions to these assets since their addition to rate base, and no additions are forecast during the test period. The AUC confirmed that Blazer had not made any capital additions to these assets based on the information filed on the record.
Operating Costs (Directions 3-4, 25-26)
In paragraph 92 of Decision 22319-D01-2018, the AUC directed Blazer to reduce to 80 percent the amount of the general manager’s salary allocated to Blazer’s revenue requirement. The AUC confirmed that Blazer included 80 percent of the general manager’s salary in its revenue requirement for the purposes of this compliance filing.
In paragraph 115 of Decision 22319-D01-2018, the AUC directed Blazer to explain the difference between the two different cost codes on the H2o Pro invoices, why the charges are split on the invoices, how the two amounts appearing on the invoices were derived and any potential consequences of not splitting the amounts. Blazer stated that its internal accounting reports split out the H2o Pro invoice charges into three separate amounts to maintain tracking of incremental increases in the monthly contract rate and that the amounts correspond to the rate prior to July 31, 2016, from August 2016 to August 2017, and after August 2017. The AUC accepted Blazer’s explanation.
In paragraph 232 of Decision 22319-D01-2018, the AUC directed Blazer to exclude any advertising expenditures from the advertising and promotion cost category, which Blazer described as “consumer relations.” The AUC also directed Blazer to provide a breakdown of the non-advertising expenditures, such as website maintenance, that will remain in the cost category. The AUC accepted Blazer’s explanation of what costs are included in this cost category and that no advertising expenses are included. The AUC found that Blazer’s proposed labelling of this cost category as “consumer relations” was reasonable because it reflected the costs included in this line item.
In paragraph 235 of Decision 22319-D01-2018, the AUC directed Blazer to establish separate general ledger accounts for bank charges and collection fees and to record the actual expenditures in the applicable account, starting in January 2019. The AUC acknowledged that because of the absence of collection charges and the renaming of the specific account to bank service charges, it was not necessary for Blazer to establish separate general ledger accounts for bank charges and collection fees.
Allocation of Operating Costs (Directions 5 and 23)
In paragraph 123 of Decision 22319-D01-2018, the AUC directed Blazer to change the customer base allocator to volume based and remove the time-of-use allocator from its operating and maintenance (“O&M”) cost schedules. The AUC accepted Blazer’s explanation that these costs increase as a function of the number of customers and acknowledged that treating Lynx Ridge as a single irrigation customer leads to a more reasonable allocation of costs between irrigation customers. The AUC accepted Blazer’s explanation as to why general and administrative costs allocation based on volumes would not be reasonable.
In paragraph 222 of Decision 22319-D01-2018, the AUC directed Blazer to allocate the materials supplies and maintenance at the raw water pump station and electricity – river pump house cost categories based on water consumption. The AUC confirmed these two cost categories are now allocated based on water consumption.
Certain O&M Costs Allocated to BPV and BRR (Direction 24)
In paragraph 231 of Decision 22319-D01-2018, the AUC directed Blazer to remove any costs that relate specifically to the BPV and BRR water systems for three O&M cost categories from its revenue requirement: (i) materials and maintenance for the distribution system; (ii) materials and maintenance of hydrants; and (iii) warranty expenses. The AUC acknowledged Blazer’s statement that the reserve funds had not been used to cover any costs that are included in its revenue requirement.
Capital Costs Allocators (Direction 27)
In paragraph 241 of Decision 22319-D01-2018, the AUC directed Blazer to replace its time-of-use allocator for capital costs with the consumption allocator. The AUC confirmed Blazer removed the time-of-use allocator for its capital costs and replaced it with an allocator based on water consumption.
Rate Design (Direction 28)
In paragraph 252 of Decision 22319-D01-2018, the AUC directed Blazer to design its potable water rates using average water consumption data specific to its two potable water rate classes and directed Blazer to update the average water consumption data using actuals for 2016. The AUC concluded that the allocation based on rate class specific average water consumption, updated for 2016 actuals, was now reflected in schedules 2.5, 3.3, 3.4 and 4D.
Terms and Conditions of Service (Directions 2, 21-22, 31-33)
In paragraphs 76, 288 and 290 of Decision 22319-D01-2018, the AUC directed Blazer to file consolidated terms and conditions of service. The AUC acknowledged that Blazer submitted consolidated terms and conditions.
In paragraph 204 of Decision 22319-D01-2018, the AUC directed Blazer to add a clause to its terms and conditions to include a capital costs recovery fee, called a “connection fee.” In paragraph 205, the AUC directed Blazer to indicate whether it intends to charge the connection fee to new customers who are not part of new developments but rather existing homes, and to include a proposal for how existing homes will be addressed. The AUC confirmed that the tie-in-fee had been included in the terms and conditions of service.
In paragraph 294 of Decision 22319-D01-2018, the AUC directed Blazer to make changes to its terms and conditions necessary to reflect the change of the Lynx Ridge Estates community to a single irrigation customer. The AUC confirmed that the required change had been made.
Other Directions (Directions 29-30)
In paragraph 277 of Decision 22319-D01-2018, the AUC directed Blazer to notify the AUC of any amendment to the Lynx Ridge Golf Course agreement or rates in its next GRA. Blazer confirmed that it would notify the AUC of any such changes.
In paragraph 283 of Decision 22319-D01-2018, the AUC directed Blazer to confirm that it had implemented a one-time credit or charge to customers to dispose of an existing deferral account balance related to a complaint. The AUC confirmed that the one-time credit or charge had been implemented.
